Wednesday, August 03, 2011, 11:34 AM

COA Upholds Forum Selection Clause

Yesterday the Court of Appeals held that a party cannot avoid enforcement of a forum selection clause requiring all disputes to be brought in Illinois where the last party to sign the contract signed in Illinois, even though the contract contained a provision stating that it became effective when money was received, and that money was received in North Carolina. The case is Parson v. Oasis Legal Finance, LLC, et al.

Plaintiff Parson entered into a contract with Oasis for an advance of funds to pay Parson's legal fees. The contract's forum selection clause required that the Circuit Court of Cook County, Illinois was the exclusive forum for all disputes, as well as a choice of law provision that North Carolina law would apply. In exchange for Oasis' payment of the fees, Parson agreed that if he won his personal injury lawsuit he would repay the amount advanced by Oasis plus an additional amount. The contract also provided that it was not effective until Parson received that advance (Parson lived in NC and received the payment there). Parson sued Oasis and two of its officers in North Carolina, alleging various claims arising out of the contract, including usury and unfair and deceptive trade practices.

The COA held that Parson's suit should have been brought in the forum provided for in the contract. Parson apparently argued that the forum selection clause was void against public policy and was unfair and unreasonable. The Court first reasoned that the contract was formed in Illinois because Parson, along with his attorney, signed the contract first in NC, then Oasis mailed the advance to Parson, and then an Oasis representative signed the contract in Illinois. The COA concluded that "the last act essential to establishing a meeting of the minds and affirming the mutual assent of both parties" was the signing of the contract by Oasis, and thus the contract was formed in Illinois. The Court noted that because the contract was formed in Illinois, the forum selection clause was not void against public policy under N.C. Gen. Stat. § 22B-3 (which says that any contract entered into in North Carolina that requires disputes arising out of the contract to be brought in another state is void and unenforceable).

The COA also found that enforcement of the forum selection clause would not be unfair or unreasonable because Parson claimed there was only a small amount of money at issue (Parson said about $3500, but he brought the suit in Superior Court) or due to Parson's "limited means" to litigate in Illinois. The Court concluded that Parson had not met the “heavy burden" required to avoid enforcement of the forum selection clause.

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