## Facts

- Instrumentation Associates, Inc., a Pennsylvania corporation, served as an exclusive distributor of audiological devices in specified U.S. states.
- Madsen Electronics (Canada) Ltd., a Canadian supplier/manufacturer, entered into a written distributorship agreement with Instrumentation.
- The agreement granted Instrumentation exclusive distribution rights, had an initial one-year term, and renewed automatically unless either party gave at least three months’ written termination notice.
- The contract included a combined choice-of-law and forum-selection clause stating that disputes would be decided by a Canadian court and governed by the “laws of Canada.”
- Instrumentation sued Madsen in the U.S. District Court for the Eastern District of Pennsylvania alleging wrongful termination.
- Madsen moved to dismiss based on the forum-selection clause; the district court denied dismissal, reasoning that “laws of Canada” was ambiguous because Canadian provincial laws vary and treating the entire clause as unenforceable.

## Issues

1. Whether, in a federal diversity action, the agreement’s forum-selection clause requiring litigation in a Canadian court is enforceable despite the clause’s general reference to the “laws of Canada.”
2. Whether the district court erred by invalidating the forum-selection clause based on perceived ambiguity in the choice-of-law language rather than applying the Erie/Klaxon conflict-of-laws framework to the forum-selection question.

## Decision

- The Third Circuit reversed the order denying dismissal and required enforcement of the Canadian forum-selection clause.
- The court held that enforceability of a forum-selection clause is a question of law reviewed de novo.
- The district court erred by treating an asserted ambiguity in the choice-of-law phrase (“laws of Canada”) as a basis to void the forum-selection agreement.
- The case was remanded with instructions consistent with dismissal in favor of the contractually selected Canadian forum.

## Legal Principles

- In diversity cases, a federal court must apply the forum state’s conflict-of-laws rules under Erie Railroad Co. v. Tompkins and Klaxon Co. v. Stentor Electric Manufacturing Co. when assessing contractual forum-selection provisions.
- Forum-selection clauses are generally enforceable; refusal to enforce requires strong countervailing reasons (e.g., fraud, overreaching, or serious inconvenience).
- A forum-selection agreement must be analyzed independently; uncertainty or generality in an accompanying choice-of-law phrase does not, by itself, invalidate the chosen forum.
- Questions about which jurisdiction’s substantive law within a chosen foreign legal system applies are to be addressed in the selected forum after the forum-selection clause is enforced.

## Conclusion

The Third Circuit required litigation in the contractually chosen Canadian court, holding that the district court improperly conflated choice-of-law ambiguity with forum-selection enforceability and failed to apply the proper Erie/Klaxon conflict-of-laws approach before refusing to honor the parties’ forum choice.


Instrumentation Assocs., Inc. v. Madsen Elecs. (Can.) Ltd., 859 F.2d 4 (3d Cir. 1988)