Aug 17, 2017

Is A Forum Selection Clause Enforceable?


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11/17/2008
Brian S. King
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Short answer: only if it is no more restrictive than ERISA’s venue provision. In Nicolas v. MCI Health and Welfare Plan No. 501, 453 F.Supp.2d 972 (E.D. Tex. 2006) William Nicolas asserted a claim for benefits under his employer’s long term disability plan. When his claim was denied, he filed suit where he lived and worked in Texas. But the disability plan documents stated that anyone bringing suit had to do so in either Washington D.C. or the county where MCI had its principal place of business, Loudoun County, Virginia. Immediately after filing suit, the disability plan moved to dismiss the case arguing the only proper place for the lawsuit was in Washington D.C. or Virginia. The trial court’s decision, which you can read here at the website library, denied the Plan’s motion. The problem for the Plan was that its argument ran afoul of ERISA’s express terms as to where a claim for benefits can be brought. ERISA specifically states that venue, the location for bringing suit, is proper in any one of three locations: 1) where the Plan is administered, 2) where the alleged breach of the Plan terms occurred, or 3) where the defendant resides or may be found. 29 U.S.C. §1132(e)(2). It was undisputed that the breach occurred and the Plan could be found in Texas. Granting the Plan’s motion to dismiss for improper venue would mean Nicolas would have to pursue his claim about 1,200 miles away. To resolve the conflict between the Plan venue selection provision and the terms of ERISA, the court examined the purposes of the statute. One of ERISA's reasons for being is to remove procedural obstacles that might otherwise deter plaintiffs from pursuing denials of claims. The court stated that it would enforce the language of ERISA plans only to the degree that it incorporates the minimum protections required by the statute. The court was also concerned about the practical effects of a ruling in the Plan’s favor. Enforcing the Plan’s forum selection clause “. . . would encourage a flood of new, non-negotiated ‘plans’ containing forum selection clauses. This floodgate of new plans would severely limit many potential plaintiffs from having ready access to the federal courts and thereby vitiate the congressional intent of enacting ERISA.”

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12 Comments to "Is A Forum Selection Clause Enforceable?"

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