Or...The Eyes of Texas Were Upon the Beauty Consultant From NJ
How many contracts have you signed in the course of your business career? Did any of them contain a choice of law provision? You know, buried down somewhere toward the end where you always find the boilerplate provisions, where they put the stuff that you think doesn't matter and seldom changes from contract to contract? I suspect that we've all done it more often than we care to acknowledge.
A recent decision by the United States Court of Appeals for the 3rd Circuit teaches us to be more careful and not quite so dismissive of the ordinary.
The case is Collins v. Mary Kay, Inc. (3rd Cir. October 19, 2017). Yes, that Mary Kay, headquartered in Dallas, Texas.
The plaintiff is a beauty consultant from New Jersey who attempted to bring a class action on behalf of others like her, for asserted violations of the NJ Wage Payment Law, a state statute. The Mary Kay Company moved to dismiss the complaint on the basis of the two agreements it had with the plaintiff. Both contained forum selection clauses stating that legal claims would be submitted to Texas state court and that Texas law would apply.
Plaintiff argued that the claim based upon the NJ statute did not fall within the scope of the choice of law clauses, the boilerplate in this case.
Finding that plaintiff had failed to carry her burden of showing that her claim exceeded the scope of the forum selection clause, the trial court granted the motion. On appeal, the 3rd Circuit affirmed the dismissal. We will spare you the rather arcane legal discussion. The salient lesson is that the plaintiffs, who were citizens of NJ working in their home state, were forced to submit their claim to Texas courts under Texas law instead of the seemingly more logical application of NJ law to their situation.
It bears mention that the court emphasized that someone in plaintiff's position is obligated to challenge not just the scope but also the enforceability of the forum selection clauses in order to have a chance to avoid an unfavorable forum. That challenge must include telling the trial court exactly how (in this case) they would be deprived of the wage payment protections guaranteed by the NJ statute if the forum selection clauses were not negated. Unfortunately, plaintiff limited her challenge to the scope of the clauses rather than whether they should have been enforced at all. That doomed her argument and left her to seek relief in Texas.
The lesson: be careful about those seemingly innocuous “standard” clauses or risk finding yourself at a disadvantage.