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Volume XXV, No. 13, July 31, 2013
From the Law Offices of Garan Lucow Miller, P.C.
From the Editor: Simeon R. Orlowski
Contractual “choice of law” provisions and “forum selection” provisions are usually–but not always–enforceable in Michigan
CONTRIBUTOR – DAVID M. SHAFER
Sometimes individuals or corporations include provisions in their written contracts concerning which state’s laws will apply to disputes that arise under the contract and which state’s courts will have personal jurisdiction over the parties in order to resolve such disputes. These provisions are called “choice of law” provisions and “forum selection” provisions, respectively. For example, a contract can include a provision stating that the law of the state of Michigan (or of some other state) will apply to disputes that arise under the contract, and that the parties to the contract agree that any disputes that arise under the contract will be decided only by a state court or a federal court located in the state of Michigan (or in some other state).
It might come as a surprise that, in Michigan, even when parties formally agree in writing to a “choice of law” provision or a “forum selection” provision, a court in Michigan is not necessarily required to enforce those written agreements.
It is true that Michigan law in general promotes the enforcement of freely made contractual agreements, and that Michigan’s public policy favors the enforcement of freely made contractual agreements. However, when it comes in particular to “choice of law” and “forum selection” provisions, Michigan law incorporates special rules that allow for some wiggle room in whether their enforcement by courts is absolutely mandated. Under certain limited circumstances, Michigan courts are able to avoid enforcing, or to ignore, such provisions.
Thus, in Michigan, even when a “choice of law” provision in a contract specifies which state’s law should be applied to any dispute, a court (either a Michigan state court or a federal court in Michigan sitting in diversity and therefore applying Michigan law) may ignore the parties’ “choice of law” provision if the court determines that (1) “the chosen state has no substantial relationship to the parties or the transaction” or that (2) “there is no reasonable basis for choosing that state’s law” or it would be “contrary to the fundamental policy of the state which has a materially greater interest than the chosen state.” Martino v Cottman Transmission Systems, Inc, 218 Mich App 54 (1996), quoting Restatement Conflict of Laws, 2d, § 187.
Moreover, in Michigan, even when a “forum selection” provision in a contract provides the only basis for personal jurisdiction to be a court in Michigan, a court need not enforce the “forum selection” provision unless all of the following factors are fulfilled: (1) the court has the power to entertain the action, (2) Michigan is a reasonably convenient place for a trial in the action, (3) the agreement was not obtained by misrepresentation or other unconscionable methods, and (4) the defendant was served with process as provided by the Michigan Court Rules. MCL 600.745(2); Lease Acceptance Corp v Adams, 272 Mich App 209 (2006).
Similarly, in Michigan, even when a “forum selection” provision in a contract provides as the only basis for personal jurisdiction to be a court in a state other than Michigan, but it is brought in a court of Michigan, the court need not enforce the “forum selection” provision if any one of the following factors is fulfilled: (1) the court is required by statute to entertain the action, (2) the plaintiff cannot secure effective relief in the other state for reasons other than delay in bringing the action, (3) the other state would be a substantially less convenient place for the trial of the action than Michigan, (4) the agreement was obtained by misrepresentation or other unconscionable methods, or (5) it would for some other reason be unfair or unreasonable to enforce the agreement. MCL 600.745(3); Turcheck v Amerifund Financial, Inc, 272 Mich App 341 (2006).
In other words, even when a written contract includes freely agreed-to provisions specifying that a certain state’s laws are to be applied, or that the parties consent to the personal jurisdiction of a court only in Michigan or only in some other state for resolving disputes that arise under the contract, those provisions are not necessarily always enforceable. This is because Michigan law itself provides some wiggle room for allowing courts in Michigan to consider whether or not to enforce such provisions in light of certain factors and the particular circumstances in a case.
Basics of Michigan Automobile No Fault Insurance Law Course
Garan Lucow Miller, P.C. will be teaching the Basics of No Fault course on Tuesday evenings from October 1 through November 26, 2013. The classes will be held at the Lexington Hotel (soon to be named Crowne Plaza), 925 S. Creyts Road, Lansing, Michigan 48192 from 6:00 p.m. to 8:00 p.m.
The cost for this 9 week course will be $350.00 per person. GLM will offer a discounted rate for our clients that register 5 or more from the same company.
Please contact Eileen Carty at firstname.lastname@example.org to register, or call at (800) 875-7600.
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TROY BREAKFAST SEMINAR WILL TAKE PLACE ON THURSDAY SEPTEMBER 5, 2013 AT THE TROY MARRIOTT. WATCH LAW FAX FOR FURTHER DETAILS REGARDING REGISTRATION AND AGENDA.
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BUCKEYE SEMINAR WILL TAKE PLACE ON THURSDAY OCTOBER 17, 2013 AT THE GREATER COLUMBUS CONVENTION CENTER. WATCH LAW FAX FOR FURTHER DETAILS REGARDING REGISTRATION AND AGENDA.