State of New Jersey v. Merrill Lynch & Co., Inc., 640 F.3d 545 (3d Cir. 2011). Does a forum selection clause providing that “exclusive jurisdiction … shall lie in the appropriate courts of the State [of] New Jersey” include the United States District Court for the District of New Jersey, or only state courts within New Jersey? A federal district judge determined that the latter reading was correct and remanded the case to state court. In an opinion by Judge Weis, the Third Circuit affirmed.
There were several reasons for this result. But the key reason was the “plain and ordinary meaning” of the words used in the forum selection clause. By using the phrase “appropriate courts of the State [of] New Jersey,” rather than “appropriate courts in the State [of] New Jersey,” the parties limited jurisdiction to state courts. Judge Weis cited cases from other Circuits that had so held. “In” a state expresses the parties’ intent “as a matter of geography, permitting jurisdiction in both the state and federal courts of the named state,” while “of” a state “connote[s] sovereignty,” limiting jurisdiction to the state courts of the named state.
The court found the forum selection clause unambiguous, and therefore rejected Merrill Lynch’s claim that because the State of New Jersey had drafted the clause, it should be construed against the State under the rule of contra proferentem (construction against the drafter). Besides, as Judge Weis noted, both parties were sophisticated and were represented by counsel in the negotiation of the agreement at issue, so that the contra proferentem rule was inapplicable in any event.
Finally, though the court did not place much emphasis on the drafting history of the forum selection clause since the panel found the clause to be clear, Judge Weis did note that Merrill Lynch’s proposed version provided that suits on the agreement “may only be brought in the United States District Court for the Southern District of New York or any New York State court sitting in … Manhattan.” That verbiage, if adopted, would have made clear that both federal and state courts could hear such a case. In contrast, the provision ultimately agreed to omitted any reference to federal courts. Had the parties intended to preserve Merrill Lynch’s proposal of federal jurisdiction, they would not have altered the proposed language to delete any reference to suing in a federal forum.