Court of Appeals Addresses Requirements for Enforcement of Choice of Venue

Court of Appeals Addresses Requirements for Enforcement of Choice of Venue

      In a recent decision of the Kentucky Court of Appeals, it returned to the trial court for further findings its determination to enforce a choice of venue provision in a written contract.  Robinson v. Colorado Personnel Resources Inc., 2013 WL 5050489 (Ky. App. Sept. 13, 2013).  This opinion is designated as “Not To Be Published.”

      Robinson, a certified registered nurse anesthetist, entered into a one-year agreement with Colorado Personnel Resources (“CPR”).  Six months into the agreement, CPR terminated that agreement, and in response Robinson filed suit in Jefferson Circuit Court.  CPR, in turn, filed a motion to dismiss the action on the basis of a choice of forum provision in its agreement with Robinson, that provision providing:

The laws of the State of Colorado shall govern this agreement.  Any dispute arising under the term or execution of this agreement shall be submitted to arbitration in the State of Colorado pursuant to the laws of the State of Colorado.

      In response to CPR’s motion, the trial court entered an order pursuant to which it “declines to exercise jurisdiction in this matter as a result of the parties’ selection of forum, and that this action is thereby dismissed.”

      The Court of Appeals noted that Kentucky has adopted § 80 of the Restatement (Second) Conflict of Laws, it providing, inter alia, that a venue selection will be given effect unless it is unfair or unreasonable.  In reliance upon Prezocki v. Bullock Garages, Inc., 938 S.W.2d 888, 889 (Ky. 1997), it stated that the following will be applied in determining whether the venue clause is either unfair or unreasonable, namely:

·                    Inconvenience of the chosen forum;

·                    Disparity in bargaining power between the parties; and

·                    Whether Kentucky maintains more than a minimal interest in the dispute.

            In this instance, the Court of Appeals acknowledged that the trial court may have undertaken this analysis, but the record was silent as to whether or not it did so.  Signaling an apparent lack of concern with the substance of the decision and critiquing only its form, the Court of Appeals wrote:

While trial court likely reached the proper conclusion in dismissing the action, because it did not make the appropriate findings as to the reasonableness of the choice of forum provision in the parties’ agreement, we must reverse and remand for further proceedings. On remand, the trial court is directed to make findings on the record in conformity with Prudential [Resources Corp. v. Plunkett, 583 S.W.2d 97 (Ky. App. 1979)].

      At least two consequences need to be recognized.  First, in any contractual action, it appears that the party seeking enforcement of a choice of venue is going to be saddled with an affirmative burden to demonstrate the reasonableness of that provision.  This burden is only going to give rise to additional, likely unjustified, arguments by a counterparty who, for whatever reason, seeks to avoid the choice of venue.  Second, with respect to transactional attorneys, decisions of this nature, qualifying the effectiveness of a contractual provision upon an ex-post facts and circumstances analysis, make it more difficult to give legal opinions and other assurances as to the enforcement of agreements as written.