Thursday, August 7, 2014

Venue Clauses are Unenforceable

Hello, dear readers!  Where have I been, you ask?  WORKING!  Plus, it's summer, and I'm a slacker when it's summer (Michigan had a rough winter, so pardon me for not wanting to be parked in front of a computer when the sun actually makes an appearance). 

But I just HAD to stop by and share my thoughts on something that's been popping up a lot in a few of my cases lately: venue clauses.

For the uninitiated, a venue clause allows the parties to choose where they want to battle it out in the event a dispute arises out of the contract.  It's no secret that disputes always arise.  So while this isn't sexy, it's incredibly important. 

The rule is very simple: the contract doesn't matter.

I know, right?  How can this be?

There are at least two instances that are relevant for our purposes where what the parties agreed to in their written document won't be enforced by a court.  One instance is where the non-compete is unreasonable.  We've covered this here.  There's more to be said about it, so maybe I'll come inside from the summer weather one of these days and actually write a bit about it.  But for today, all you need to know is that the whole "freedom to contact" thing doesn't work if the parties enter into a non-compete agreement that's unreasonable.

The same is true with respect to venue clauses.  In Michigan, there is a statute that provides where parties are to file lawsuits.  It basically says that a venue where either party resides is where the lawsuit should be filed.  Kind of makes sense, right?

So why is this important? 

In Michigan, it's important because we now have these nifty business courts.  Again, another topic for another day (apparently I will be busy in the coming weeks).  But as a practitioner in the business courts, I can do a little forum shopping, provided that the venue statute allows for it. 

Let me give you an example: I recently had a case where one party "resided" on the Western side of the state.  The other party (my client) "resided" in Southeastern Michigan - specifically, in a suburb called Bloomfield Hills, which is in Oakland County.  The venue clause in the agreement provided for lawsuits to be filed in Wayne County, which is where Detroit is located. 

I represented the plaintiff, who wanted to enforce a non-compete against a former employee.  Filing in Wayne County made no sense, despite what the parties agreed to and it wasn't proper to file there under the venue statute.  Michigan law says that the venue statute wins, which meant I got to file the case in western Michigan or in Oakland County.  I know the business court judges in Oakland County and I like them.  Plus the courthouse is ten minutes from my house.  So that's where I sued. 

It irritated the heck out of the defendant, because he would much rather litigate a case somewhere other than where my client resided.  He was doubly ticked when he realized that although the venue clause he agreed to was unenforceable, the personal jurisdiction clause was enforceable - and that clause stated that he agreed to be subject to personal jurisdiction in any court in the State of Michigan.                   

I feel like this post may raise more questions than provide answers, but know this: venue clauses are one more reason to ask a lawyer to get involved before anyone signs a non-compete agreement.  Trust me on this. 

Next time, I'll be doing a post on Michigan's Business Courts.  Here's a preview: I'm a huge fan.  But for now, I'm headed back outside.

Liza Favaro
Non-Compete Counsel

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