Facts
- Independent insurance agents licensed in Alabama entered written agreements with Professional Insurance Corporation (PIC) to sell payroll-deduction insurance plans in Alabama.
- The agent contracts contained outbound forum-selection clauses requiring contract actions to be brought in Florida.
- The agents alleged PIC and related defendants devised a scheme to terminate the agents’ contracts and divert business to avoid paying commissions.
- The agents sued in the Circuit Court of Montgomery County, Alabama, asserting breach of contract, interference with business relations, and fraudulent misrepresentation.
- PIC and other defendants moved to dismiss or otherwise enforce the Florida forum-selection clauses.
- The trial court, following then-existing Alabama precedent treating outbound forum-selection clauses as void on public-policy grounds, refused to enforce the clauses.
- Defendants pursued an interlocutory appeal under Rule 5, Ala. R. App. P., to resolve whether Alabama should continue refusing to enforce outbound forum-selection clauses per se.
Issues
- Whether outbound forum-selection clauses are void per se as against Alabama public policy.
- If not void per se, what standard governs enforcement of an outbound forum-selection clause and who bears the burden of proof.
Decision
- The Supreme Court of Alabama rejected the per se rule that outbound forum-selection clauses are void as against public policy.
- The Court adopted a general rule that an outbound forum-selection clause should be enforced unless enforcement would be unfair or unreasonable under the circumstances.
- The Court remanded for the trial court to apply the new standard to the clause and the parties’ circumstances.
Legal Principles
- Outbound forum-selection clauses are presumptively valid and enforceable in Alabama.
- The party resisting enforcement bears the burden to show enforcement would be unfair or unreasonable under the circumstances.
- A clause may be denied enforcement when it results from fraud or overreaching, or when the selected forum is so seriously inconvenient that the resisting party is effectively deprived of a meaningful opportunity to litigate.
- Public policy is not violated merely because parties agree to litigate in another state connected to the parties or transaction.
Conclusion
Alabama abandoned its prior categorical refusal to enforce outbound forum-selection clauses and adopted a presumption of enforceability, subject to a case-specific showing by the resisting party that enforcement would be unfair or unreasonable; the case was remanded for application of that standard.