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According to a New Jersey federal court, an international forum selection clause is enforceable where the parties are sophisticated business people and enforcing the clause would not be gravely inconvenient.
In Elli v. Genmab, Inc., No. 06-1240, 2006 WL 2927622 (D.N.J. Oct. 12, 2006), Elli sued his former employer, Genmab, for breach of contract and tortious interference. Genmab moved to compel arbitration according to the terms of the employment contract.
When Elli signed his employment contract, he hired an attorney to examine the terms. The attorney suggested several changes, but left the arbitration provision intact. The arbitration agreement included a Denmark choice of law provision. In addition, the agreement required arbitration proceedings to be conducted in Denmark in Danish.
Elli argued that the arbitration clause was unenforceable because of its unreasonable terms. The Court acknowledged that forum selection clauses are “presumptively valid,” but are unreasonable if “enforcement of the clause would be so gravely difficult and inconvenient as to be unreasonable and unjust and … would deprive the party of its day in court.”
The Court held that the forum selection clause was not unreasonable because Elli’s claims were substantially related to Denmark. The Court reached this conclusion because Elli contracted with Genmab’s Danish parent corporation as well as its American corporation. Ten percent of Elli’s time was reserved for the Danish corporation, and 10 percent of his salary came from the same. In addition, Elli’s employment agreement included a stock option of the Danish company and observed Danish holidays.
The Court also rejected Elli’s argument that the forum selection clause should be invalidated because of its inconvenience. Elli failed to show that the forum selection clause was “gravely difficult and inconvenient.” The Court also found that Elli was a sophisticated business man who had legal counsel review the contract. “Simply because [Elli] is unhappy, in retrospect, about the forum it designated is insufficient to warrant a finding that the clauses are unenforceable.”
In its conclusion, the Court enforced the forum selection clause and determined that Elli’s claims were arbitrable. “I am sympathetic to [Elli’s] argument that the alleged expense of initiating arbitration in Denmark is significant, on the basis of … [Elli’s] bargained-for arbitration … I find that enforcement of the forum selection clause would not deprive [Elli] of ‘his day in court.’”
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