Language of Forum Selection Clause Impacts Federal Jurisdiction

In FindWhere Holdings, Inc. v. System Environment Optimization, LLC, the Fourth Circuit Court of Appeals determined that the use of the word "of" in a forum selection clause instead of the word "in" can deprive federal courts of jurisdiction to hear a case.

FindWhere Holdings filed suit in the Circuit Court for Loudon County, Virginia seeking to recover from a number of defendants for an alleged breach of contract. After the defendants removed the case to the United States District Court for the Eastern District of Virginia, the plaintiff filed a motion to remand based upon the language in the contract's forum selection clause. According to the plaintiff, the language in the clause that jurisdiction "shall lie exclusively in … the courts of the State of Virginia" precluded removal of the case to Federal court. The district court agreed and remanded the case to Loudon County. Defendants appealed to the Fourth Circuit Court of Appeals.

After conducting a brief review of the factual and procedural history of the case, the Fourth Circuit addressed whether it had jurisdiction to hear the appeal given the general prohibition on appellate review of remand orders contained in 28 U.S.C. § 1447(d). The Court determined that remand orders based upon the language of a forum selection clause do "not fall within the general prohibition of appellate review for remand orders pursuant to 28 U.S.C. § 1447(d)." Only remand orders based on a lack of subject matter jurisdiction or a timely raised defect in removal procedure are barred from appellate review. Thus, the Court of Appeals had jurisdiction to review the district court's determination on the motion to remand.

When the Court of Appeals turned to the merits of the appeal, it joined the Ninth, Tenth, Fifth, and First Circuits in adopting the "widely-accepted rule that forum selection clauses that use the term 'in [a state]' express the parties' intent as a matter of geography, permitting jurisdiction in both the state and federal courts of the named state, whereas forum selection clauses that use the term 'of [a state]' connote sovereignty, limiting jurisdiction over the parties' dispute to the state courts of the named state." Ultimately, the Fourth Circuit held that because "federal courts are not courts 'of' the state of Virginia," the district court lacked jurisdiction and correctly determined that the case should be remanded to Loudon County Circuit Court.

Court of Appeals Opinions

Today the North Carolina Court of Appeals issued 17 opinions. We will have more on any noteworthy cases later.

The next release date for Court of Appeals' opinions is December7, 2010.

Today at the Supreme Court

Today, Tuesday, November 16, 2010, the Supreme Court is scheduled to hear oral argument in three cases:

• State v. Neil Matthew Sargeant
  
  • Whether the trial court erred by taking verdicts on two theories as to the charge of first degree murder while the jury continued deliberations on a third.
    
  • Whether the trial court erred by excluding a hearsay statement under the catch-all provision of Rule 804(b)(5)
    
• In the Matter of HND
  
  • Whether the failure of the trial court to make a finding that the alleged conditions caused the juvenile some physical, mental, or emotional impairment, or create a substantial risk of such impairment, to sustain an adjudication of neglect is reversible error.
    
  • Whether a proper review of a trial court's finding of neglect entails a determination of (1) whether the findings of fact are supported by clear and convincing evidence; and (2) whether the legal conclusions are supported by the findings of fact.
    
• State v. Artives Jerod Freeman
  
  • Whether the trial court correctly permitted defendant's counsel to decline to exercise a preemptory challenge when the defendant, who determined to not be capable of representing himself, disagreed with this decision and the impasse was brought to the attention of the court.

Today at the Supreme Court

Today, November 15, 2010, the North Carolina Supreme Court will hear oral arguments in three cases:

• Morris Communications Corp. v. City of Bessemer City Zoning Board –
  
  • Whether a reviewing court should accord deference to a zoning board's interpretation of a city's zoning ordinance or should review the interpretation de novo; and
    
  • Whether the Court of Appeals erred in concluding that the Petitioner's zoning permit expired when the work authorized by the permit commenced within six months from the date of issuance
    
• Wilson v. Wilson –
  
  • Whether the Court of Appeals has jurisdiction to review an order despite failure to perfect the appeal;
    
  • Whether North Carolina General Statutes Section 36C-1-105(b) requires a trustee to provide the trust beneficiaries with discovery in the form of an accounting where the trust instrument relieves the trustee of this duty and there is no evidence supporting that the accounting is necessary in the interests of justice.
    
• In the Matter of ARD –
  
  • Whether the trial court abused its discretion by failing to conduct an inquiry into whether respondent mother needed a guardian ad litem pursuant to North Carolina General Statutes Section 7B-1101.1(C)

NC Appellate Gets National Attention for Judicial Election Results

National Review magazine’s popular online edition linked to this blog for results of last week’s judicial election results. One North Carolina Supreme Court seat and five Court of Appeals seats were decided in the elections.

Womble Carlyle attorney Bob Numbers provided in-depth coverage of the judicial elections. These elections received relatively little public notice compared to other, higher-profile state and local races. But they were important, as the political balance of the N.C. Supreme Court was up in the air pending the results of this election.

Numbers and fellow litigation attorney Amanda Ray contribute to the North Carolina Appellate Blog.

Supreme Court Opinions

On Friday, November 5, 2010, the North Carolina Supreme Court issued two opinions.

In Kinlaw v. Harris, a divided Supreme Court affirmed and reversed an opinion from a divided Court of Appeals. Justice Newby, writing for a four justice majority, held that trial courts could determine on a case-by-case basis whether to allow a judgment debtor to exempt funds withdrawn from the debtor's individual retirement account ("IRA") from execution by creditors. While funds contained in an IRAs and similar retirement accounts are typically exempt from a judgment creditor's collection efforts, the majority explained that "there may be some circumstances under which withdrawn funds are no longer exempt from execution." (emphasis added) Although the majority did not specify what those circumstances were, the opinion seems to indicate that funds withdrawn for purposes other than retirement related expenses would not be exempt. The majority went on to hold – contrary to the majority opinion from the Court of Appeals – that the trial court did not abuse its discretion when it ordered that the judgment debtor place any funds withdrawn from his IRA into an escrow account in order to allow the judgment creditor to challenged the proposed withdrawal.

Justice Edmunds, joined by Chief Justice Parker and Justice Timmons-Goodson, concurred in part and dissented in part from the majority opinion. Justice Edmunds believed that both the corpus of the IRA and any future withdrawals were exempt from collections efforts. Justice Edmunds raised concerns that "[t]he majority's holding both thwarts the General Assembly's intent to exempt retirement funds and puts trial courts in the untenable position of determining which withdrawals from a debtor's IRA represent legitimate retirement expenses."

In State v. Waring, Justice Edmonds wrote for a unanimous court in upholding a death sentence in a case involving what the Court described as "a brutal, prolonged, and merciless killing."

Articles Regarding Judicial Elections

Here are a few articles, editorials, and posts regarding North Carolina's Judicial Elections:

• Rob Richie of The Center for Voting and Democracy published a piece titled "North Carolina uses Instant Runoff Voting for state, county-wide elections"
• The Raleigh News & Observer Editorial Board opined that "[v]oters made a good case on Election Day that they're up to the job of electing appellate judges."
• Mandy Locke of The Raleigh News & Observer explained the logistics behind the instant runoff portion of the election for the seat formerly held by Judge James A. Wynn.
• Gary Marx of National Review Online's Bench Memos blog briefly discussed the outcomes in North Carolina's judicial elections.

Judicial Election Results

One seat on the North Carolina Supreme Court and five seats on the North Carolina Court of Appeals were up for grabs in yesterday's election.

In the race to replace retiring Supreme Court Justice Edward Brady, North Carolina Court of Appeals Judge Barbara Jackson prevailed over her colleague Robert C. Hunter by a margin of 51.88% to 48.12%. As noted on National Review Online's Bench Memos blog, the political balance of the Supreme Court was in play in this election. The election of Judge Jackson, a registered Republican who Bench Memos said "worked to position herself as the candidate of choice for judicial conservatives," means that the Supreme Court will retain its 4-3 Republican majority. Governor Beverly Perdue will appoint a judge to fill Justice-elect Jackson's seat on the Court of Appeals.

Incumbents were the big winners in the North Carolina Court of Appeals races:

Court of Appeals Judge Ann Marie Calabria defeated Wake County District Court Judge Jane Gray by a margin of 53.71% to 46.29%.

Judge Rick Elmore retained his seat on the Court of Appeals despite a serious challenge by Steven Walker, a law clerk at the North Carolina Supreme Court. Although the candidates remained relatively cordial throughout the campaign, Walkers credentials and qualifications for a seat on the court were repeatedly called into question by the "legal establishment."

Judge Martha Geer overcame a challenge by Employment Security Commission Appeals Referee Dean Poirier by a margin of 1,112,435 votes to 747,587 votes.

Judge Sanford Steelman will also be returning to the Court of Appeals for another term, but because he was running unopposed his reelection was never in doubt.

The final Court of Appeals seat on the ballot was the seat recently vacated by Judge James A. Wynn upon his confirmation to the Fourth Circuit Court of Appeals. As readers of this blog will recall, Governor Beverly Perdue appointed Cressie Thigpen to Judge Wynn's seat until a successor could be elected and sworn in.

Judge Thigpen was one of thirteen candidates who competed for Judge Wynn's seat under an Instant Runoff Voting ("IRV") system. North Carolina was the first state in the nation to use IRV for a statewide election. To summarize the IRV system, voters were required to rank their top three candidates from 1-3. If any candidate received more than 50% of the first place votes, that candidate would be declared the winner. If no candidate receives more than 50% of the first place votes, the top two first place vote getters are placed into an "instant runoff." The candidate in the instant runoff that was ranked higher on more ballots would be declared the winner.

According to the Board of Election's web site, Judge Thigpen received 20.30% of the first place votes and former North Carolina Court of Appeals judge Doug McCullough received 15.23% of the first place votes. Despite the allegedly instant nature of the runoff, a final announcement on the winner of the Thigpen/McCullough runoff is not expected for a few weeks.

COA Opinions

The Court of Appeals issued 18 opinions today. The next release date for Court of Appeals Opinions is November 16, 2010.