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Forum Selection Clause in Employment Agreement Will Control, Even if Another Court Might Better Understand the Applicable Law

 

In re:  RYZE Claim Solutions, LLC - Seventh Circuit Court of Appeals


Facts:  Leslie Billings (“Billings”) worked at RYZE Claim Solutions, LLC (“RYZE”).  RYZE is an Indiana business that employs remote workers across the country.  Billings was party to an employment agreement with RYZE which contained a forum selection clause which stipulated that any claim filed against RYZE must be brought in Indiana.  Billings proceeded to file a Fair Labor Standards Act claim against RYZE along with several alleged violations of the California Labor Code and California Business and Professions Code on behalf of a putative class of RYZE workers based in California.  Billings filed his suit in California state court.  RYZE removed the case to federal court in California and held that Billings failed to show why the forum selection clause did not apply.  The case was subsequently transferred to federal court in Indiana.

The federal court in Indiana granted RYZE’s motion for summary judgment as to the federal claims but transferred the state claims back to the federal court in California on the grounds that the California court would have greater familiarity with California labor law (and the Indiana federal court’s docket was too congested.)  RYZE proceeded to petition the Seventh Circuit Court of Appeals for a writ of mandamus to have the federal court in Indiana request the federal court in California send the case back to Indiana, based upon the forum selection clause.

Holding:  The Court of Appeals recognized that the U.S. Supreme Court has previously held that forum selection clauses should be given “controlling weight in all but the most exceptional cases.”  In this case, the Court held that an improper burden had been placed on RYZE in the lower court.  The federal court in Indiana required RYZE to justify why the case should remain in Indiana.  Rather, the Court of Appeals held that the burden rested on Billings.  Further, while it was proper for the federal court in Indiana to consider that the federal court in California might have had a better understanding of California labor law, the heavy reliance upon that factor contracted U.S. Supreme Court precedent.  As the Supreme Court had previously held, “federal judges routinely apply the law of a State other than the State in which they sit.”  In this case, the federal court in Indiana did not identify any specific portion of California labor law that would necessitate only a federal court in California from considering the matter.

As well, in regard to the federal court in Indiana holding that the transfer of the case was needed to alleviate its docket and allow the matter to proceed to trial quicker, the Court of Appeals was unswayed.  Precedent from the Sixth Circuit established that transferring a case merely to alleviate a court’s docket was an insufficient reason to do so.  As well, the federal court in Indiana apparently had not addressed whether trial would even be speedier in the federal court in California.

Finally, the Court of Appeals recognized that great weight should be given to a forum selection clause.  Neither RYZE nor the federal court in Indiana had established an exceptional circumstance for why the federal court in California should hear the dispute, contrary to the forum selection clause.

Judgment:  The Seventh Circuit Court of Appeals held that the forum selection clause in the employment agreement controlled and therefore granted the petition from the employer and issued a writ of mandamus requiring that the employee’s lawsuit against his former employer be litigated in Indiana, as provided for in the forum selection clause.

The Takeaway:  This case is a good example of showing that just because a party believes another court might better understand the relevant law in relation to the dispute, that likely will not contradict the express language of a forum selection clause.  As well, just because a court might have a congested docket or it might take a case a while to work its way to an eventual trial, those reasons will not necessarily dictate that another court or circuit would be better equipped to handle the dispute, again contrary to the express language of a forum selection clause.

Majority Opinion Judge:  Judge Ripple

Date:  August 3, 2020

Opinion:  http://media.ca7.uscourts.gov/cgi-bin/rssExec.pl?Submit=Display&Path=Y2020/D08-03/C:19-2930:J:Ripple:aut:T:fnOp:N:2556930:S:0


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