Businesses, rightly or wrongly, believe that home court advantage exists in litigation, not just sports. Accordingly, employment agreements including non-competition provisions often contain language designating the location (as well as law) for resolving disputes. Where the employer and employee are located in the same state, this presents no difficulty. That, however, is not always the case. Minnesota employers often require their out of state employees to consent in advance to Minnesota venue for hearing non-compete lawsuits. This article will discuss whether and when such provisions stick.
Enforceability of so-called “choice of forum” or “forum selection” clauses depends on the law of the state in which an action is brought, and to a lesser extent, whether the action arises under federal or state law. Minnesota courts generally favor forum selection clauses, on the premise that parties have broad latitude to negotiate terms of employment contracts. Such clauses are only unenforceable where (1) the forum selected is a seriously inconvenient location for trial; (2) the clause appears in a contract of adhesion; or (3) the agreement is “otherwise unreasonable.” C.H. Robinson Worldwide v. Fls Transp., (Minn. Ct. App. 2009). A forum is seriously inconvenient if, by litigating there, a party would be “effectively deprived of a meaningful day in court.” Alpha Sys. Integration v. Silicon Graphics, (Minn. App. 2002). Contracts of adhesion are defined as “take-it-or-leave-it” contracts and which are the product of unequal bargaining power. Hauenstein & Bermeister, Inc. v. Met-Fab Indus., Inc., 320 N.W.2d 886, 891 (Minn. 1982). Perhaps surprisingly, given the seeming lack of bargaining power of all but the highest ranking, highest compensated employees, Minnesota courts have a track record of finding choice of forum selections not to be contracts of adhesion. That was the case in two cases involving the Minnesota based, national logistics company C.H. Robinson, Inc. In both, rank-and-file employees sued by Robinson were found not to lack “business sophistication,” and (presumably) the ability to negotiate a different forum. Despite the fact that the employees were “instructed” to sign the agreements and no actual negotiation ever took place. FLS Transportation; C.H. Robinson Worldwide, Inc. v. XPO Logistics, Inc. (Minn. Ct. App. 2014). The outcome of any case will depend on the facts, and employees do sometimes prevail in disputes over choice of forum. E.g. Nelson v. Master Lease Corp., (D. Minn.1991) (refusing to enforce a forum-selection clause in employment lawsuit where the employer was a large corporation with the ability to protect its interests in any forum).
Employees in non-compete cases have a second bite at the apple in opposing forum selection clauses based on lack of personal jurisdiction. The legal standard is whether the employee has “sufficient minimum contacts” with the forum state. This standard is met in most cases by virtue of a non-Minnesota based employee contractually agreeing to have his/her case heard in Minnesota, especially in the presence of other factors such as travel to the state (e.g. for training or orientation), communications with the home office, administration of benefits and presence of supervisors. An out of state employee of a Minnesota company may be forced to appear in Minnesota to answer a legal Complaint even in the absence of a contractual choice of forum provision, where these other factors exist. Patterson Dental Supply, Inc. v. Vlamis, (Minn. Ct. App. 2016) (breach of duty of loyalty and theft of trade secrets case).
Federal law on the subject tracks Minnesota law pretty closely. Historically, forum selection clauses were disfavored by Federal Courts. This changed over time, to the point that today they are presumptively valid and enforceable “unless they are unjust or unreasonable or invalid for reasons such as fraud or overreaching.” M.B. Rests., Inc. v. CKE Rests., Inc., (8th Cir. 1999). For purposes of determining reasonableness, courts are to ignore the merits of the case: whether the plaintiff presents a strong versus iffy case. Works Computing, inc. v. Peterson, (D. Minn. 2018). In evaluating forum selection clauses, federal courts also look at all agreements signed by the parties, not just the one being sued over. Thus in Medtronic Sofamor Danek, Inc. v. Gannon (D. Minn. 2017), the court held that a forum selection clause in an employment agreement applying to all disputes related to employment covered a lawsuit brought under a separate repayment agreement which lacked such language, because both agreements were signed at the same time and “should be read together as one contract.” In a similar vein, another court held that a separation agreement lacking a forum designation clause that superseded an employment agreement did not wipe out the latter’s forum selection clause, where the employment agreement’s non-competition agreement was specifically preserved, reasoning that this strictly procedural language was integrally tied to the substantive prohibition on post-employment activities. Medtronic Inc. v. Carmichael (D. Minn. 2011). So strong is the public policy supporting forum selection clauses that they will be respected even where doing so would result in inconvenience and hardship. Such was the case in ProMove, Inc. v. Siepman, (D. Minn. 2019), in which the court rejected defendant’s forum non conveniens arguments, and required the parties to litigate in Minnesota despite the fact that several were located in Nevada, many of the events leading to the lawsuit occurred there, and at least one of the individual defendants had a medical condition that made travel difficult. The takeaway for non-Minnesota employees is don’t drop the ball when negotiating a contract of employment. At least try to negotiate away a forum selection clause, to avoid the perils of an employer’s home court advantage.