E-Alert Case Updates

Permissive Forum Selection Clauses Do Not Waive Right to Rely on Forum Defendant Rule

Larry Klayman v. Judicial Watch, Inc.
(May 4, 2016) United States District Court for the District of Columbia
by Matthew J. McCloskey, Associate
Semmes, Bowen & Semmes (www.semmes.com)

Available at: https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2015cv0214-10

In a recent opinion, the United States District Court for the District of Columbia concluded that: (1) the so-called “forum defendant rule,” codified at 28 U.S.C. § 1441(b)(2), was not jurisdictional and therefore could be waived; but (2) remand under the rule was nevertheless appropriate because the plaintiff had not waived his right to rely on the rule in executing a permissive forum selection clause.

In 2003, Plaintiff, Larry Klayman, entered into a severance agreement with Defendant, Judicial Watch, Inc., which contained a forum selection clause providing as follows:

The Parties consent to the jurisdiction and venue of any state or federal court located within the District of Columbia in any action or judicial proceeding brought to enforce, construe or interpret this Agreement or otherwise arising out of or relating to Klayman’s employment.

More than ten (10) years later, Plaintiff filed the instant lawsuit against Defendant in the District of Columbia Superior Court, alleging that Defendant defamed him in violation of the severance agreement. Defendant removed the case to federal court.

Plaintiff subsequently filed a motion to remand arguing: (1) that diversity jurisdiction was improper because the amount in controversy requirement had not been met; (2) removal was improper under the forum defendant rule because Defendant is a citizen of the forum state; and (3) Defendant waived its right to removal in the forum selection clause.

Judge Colleen Kollar-Kotelly, writing for the Court, granted Plaintiff’s motion. Initially, the Court rejected Plaintiff’s argument that the amount in controversy requirement had not been met. Because Plaintiff sought rescission of the contract, the value of the case was equal to the value of the contract. Because Plaintiff received $600,000 under the contract, the amount in controversy plainly exceeded $75,000.

The Court also rejected Plaintiff’s argument that the forum defendant rule functioned as a jurisdictional bar in this case. Although the Court of Appeals for the District of Columbia Circuit had not yet addressed this issue, the Court was persuaded by other decisions from the United States District Court for the District of Columbia holding that the forum defendant rule is non-jurisdictional. Because the rule thus can be waived, the resolution of the case would turn on Plaintiff’s waiver argument.

The Court therefore proceeded to analyze whether Defendant had waived its right to removal. In this regard, the Court noted that mandatory forum selection clauses generally do constitute a waiver of the right to removal, while permissive forum selection clauses generally do not. The Court analyzed the plain language of the forum selection clause and concluded that, because the clause merely expressed that the parties “consent[ed]” to jurisdiction in the District of Columbia, but did not require that the case be brought there, the clause was permissive in nature. Consequently, the Court concluded that that Defendant had not waived its right to removal.

Nevertheless, the Court stated that its conclusion that Defendant had not waived its right “does not necessarily mean that this case is properly heard by this Court.” Instead, the court was required to consider whether Plaintiff was entitled to rely on the forum defendant rule or whether, in agreeing to the forum selection clause, Plaintiff himself had waived his right to so. Applying the same standard that it applied to its analysis of whether Defendant waived its right to removal, the Court concluded that the permissive forum selection clause did not constitute a waiver of Plaintiff’s ability to rely on the forum defendant rule. Even though Plaintiff had expressly consented to jurisdiction in the United States District Court for the District of Columbia, the forum selection clause did not require that the case be brought in that Court, and Plaintiff was thus still entitled to assert defenses to federal jursidiction. As a result, and because Defendant was a citizen of the District of Columbia, Plaintiff was entitled to remand pursuant to 28 U.S.C. § 1441(b)(2).