A “Layered Choice-of-Law” Appeal Involving a Forum Selection Clause

Collins v. Mary Kay, Inc., ___ F.3d ___ (3d Cir. 2017).  This opinion of the Third Circuit today, written by Judge Restrepo, answers what he called “a layered choice-of-law question:  what law governs the interpretation of a forum selection clause in a written agreement when that agreement also contains a choice-of-law clause?”  The court concluded that Texas law, which the choice of law clauses in both of the subject agreements made applicable, would apply, rather than the law of New Jersey, where plaintiff and members of a putative class worked as independent contractors for defendant, a Texas-based company.  The District Court had granted a defense motion to dismiss the case, which was brought in the District of New Jersey, on forum non conveniens grounds.  The Third Circuit affirmed that result.

The first item of business in an appellate opinion is often the standard of review.  Here, Judge Restrepo found the law “unsettled” as to the proper standard of review after Atlantic Marine Construction Co. v. U.S. District Court, 134 S.Ct. 568 (2013), which did not say what standard of review should apply.  It was not necessary to decide that issue, however, since Judge Restrepo found that even under de novo review, the most favorable standard for plaintiff, dismissal on forum non conveniens grounds was proper.

Plaintiff did not contend that the choice of law provisions were unenforceable.  Instead, she argued that her claim under the New Jersey Wage Payment Law, N.J.S.A. 34:11-4.1 et seq., the only claim that she brought, was outside the scope of those clauses.  In determining that scope issue, the District Court had applied federal common law.  Judge Restrepo ruled that that was improper.  As a “quintessentially substantive” issue, New Jersey state law was to govern the scope analysis, under the principles of Erie R. Co. v. Tompkins, 304 U.S. 64 (1938).  Judge Restrepo cited both prior Third Circuit authority and cases from other Circuits in support of that conclusion.

Despite that difference with the District Court, however, the ultimate result was the same: dismissal on forum non conveniens grounds.  As Judge Restrepo observed, New Jersey law will ordinarily uphold the choice of law to which parties agree.  Though there are exceptions– if the chosen state has no substantial relationship to the transaction or the parties, or if applying the chosen state’s law would be “contrary to a fundamental policy of a state which has a materially greater interest”– plaintiff did not satisfy them.  The parties had a substantial relationship to Texas, where defendant was headquartered, and plaintiff did not show that any fundamental policy of New Jersey was offended by the use of Texas law in any event.

From there, it was easy.  The forum selection clause imposed Texas law as to “any dispute or controversy … concerning any matter relating to [the] Agreement.”  Plaintiff argued that because hers was a statutory claim, rather than breach of contract, the clause did not cover it.  But Texas law holds that choice of law clauses are applied broadly, including to statutory claims.  Plaintiff’s claim was covered.  Judge Restrepo then applied the two relevant factors– “the availability of an adequate alternative forum where defendants are amenable to process and plaintiffs’ claims are cognizable,” and “relevant ‘public interest’ factors affecting the convenience of the forum”– and found that dismissal on forum non conveniens grounds was appropriate.