9.0 COMPLIANCE WITH LAWS
(paragraph 2)
This Subcontract shall be subject to the law
and jurisdiction of the State of Colorado
unless expressly designated otherwise in this
Subcontract.
15.0 CHOICE OF LAW.
Notwithstanding any provision in the Prime
Agreement to the contrary, this Subcontract
and the Prime Agreement have been made in and
their validity, performance and effect shall
be determined in accordance with the internal
laws, without reference to conflict of laws,
of Colorado.
On 13 December 2000, plaintiff filed suit against defendants
in Polk County, North Carolina, seeking damages for breach of
contract and negligent misrepresentation. On 24 May 2001,
defendants filed a motion to dismiss plaintiff's complaint based on
clauses 9.0 and 15.0 of the contract. The trial court denied the
motion, and defendants appealed to this Court.
Initially we note that, although an appeal from the denial of
a motion to dismiss or motion for summary judgment is ordinarily
not appealable, this matter is properly before this Court because
North Carolina “case law establishes firmly that an appeal from a
motion to dismiss for improper venue based upon a jurisdiction or
venue selection clause dispute deprives the appellant of a
substantial right that would be lost.”
Mark Group Int'l, Inc. v.
Still, ____ N.C. App. ____, 566 S.E.2d 160, 161 n.1 (2002).
Seealso L.C. Williams Oil Co. v. NAFCO Capital Corp., 130 N.C. App.
286, 288, 502 S.E.2d 415, 417 (1998).
On appeal, defendants argue that the case should have been
dismissed because: (1) we should apply Colorado law; and (2) under
Colorado law section 9 is a mandatory forum selection clause and as
a result the case must be dismissed and heard in Colorado.
Parties often include in contracts one or more of three types
of clauses to establish where jurisdiction lies and which state's
laws will apply to the contract. First, a “choice of law” clause
may provide that the substantive laws of a particular state govern
the construction and validity of the contract. Second, under a
“consent to jurisdiction” clause, the parties may agree to submit
to the jurisdiction of a specific court or state. Third, a “forum
selection” clause goes beyond a “consent to jurisdiction” clause,
and designates a particular state or court jurisdiction as the one
in which the parties will litigate any disputes arising out of
their contract or contractual relationship.
See Mark Group Int'l,
Inc. at ___, 566 S.E.2d at 161;
Johnston County v. R.N. Rouse &
Co., Inc., 331 N.C. 88, 92-93, 414 S.E.2d 30, 33 (1992).
Paragraphs 9.0 and 15.0, respectively, are “consent to
jurisdiction” and “choice of law” clauses. Whether paragraph 9.0
is a forum selection clause is an issue we must decide.
But first we must decide whether paragraph 15.0, the “choiceof law” clause, is valid. Our Supreme Court has held that “the
interpretation of a contract is governed by the law of the place
where the contract was made.”
Land Co. v. Byrd, 299 N.C. 260, 262,
261 S.E.2d 655, 656 (1980). In
Land Co., the Court applied
Virginia law, since the parties had signed the contract in that
state. The Court noted that “where parties to a contract have
agreed that a given jurisdiction's substantive law shall govern the
interpretation of the contract, such a contractual provision will
be given effect.”
Id.
In general, a court interprets a contract according to the
intent of the parties to the contract.
Bueltel v. Lumber Mut. Ins.
Co., 134 N.C. App 626, 631, 518 S.E.2d 205, 209 (1999),
disc.
review denied, 351 N.C. 186, 541 S.E.2d 709 (1999). In addition,
“[i]f the plain language of a contract is clear, the intention of
the parties is inferred from the words of the contract.”
Id.
Thus, the Court in
Bueltel held that “following the logic of
Land
Co., it is apparent that when a choice of law provision is included
in a contract, the parties intend to make an exception to the
presumptive rule that the contract is governed by the law of the
place where it was made.”
Id. The contract in the present case
provides that its “validity, performance and effect shall be
determined in accordance with the internal laws . . . of Colorado.”
However, under certain circumstances, North Carolina courtswill not honor a choice of law provision.
See Behr v. Behr, 46
N.C. App. 694, 266 S.E.2d 393 (1980) (citing Restatement (Second)
of Conflict of Laws . 187 (1971));
Torres v. McClain, 140 N.C. App.
238, 535 S.E.2d 623 (2000). In
Behr, the parties' dispute involved
their separation agreement, which they had executed in New York,
and which “specifically provide[d] that it should be interpreted
under the laws of that State.”
Behr at 696, 266 S.E.2d at 395.
Section 187 of the Restatement (Second) of the Conflict of Laws,
cited and incorporated into our common law analysis of this issue
by
Behr and
Torres, provides that:
(2) The law of the state chosen by the parties
to govern their contractual rights and duties
will be applied, even if the particular issue
is one which the parties could not have
resolved by an explicit provision in their
agreement directed to that issue, unless
either
(a) the chosen state has no substantial
relationship to the parties or the transaction
and there is no other reasonable basis for the
parties' choice,
or
(b) application of the law of the chosen state
would be contrary to a fundamental policy of a
state which has a materially greater interest
than the chosen state in the determination of
the particular issue and which, under the rule
of . 188, would be the state of applicable law
in the absence of an effective choice of law
by the parties.
Restatement (Second) of Conflict of Laws . 187 (1971). Applyingthese principles, this Court in
Behr followed New York law in
accordance with the contract noting that the “parties' choice of
law is generally binding on the interpreting court as long as they
had a reasonable basis for their choice and the law of the chosen
State does not violate a fundamental policy of the state of
otherwise applicable law.”
Behr at 696, 266 S.E.2d at 395;
see
also, Bundy v. Commercial Credit Co., 200 N.C. 511, 516, 157 S.E.
860, 863 (1931) (refusing to apply parties' choice of Delaware law
because their contractual stipulation was “immaterial” in that the
“record [did] not disclose that any transaction took place in
Delaware or that the parties even contemplated either the making or
the performance of the contract in said State.”);
Torres v.
McClain, 140 N.C. App. 238, 535 S.E.2d 623 (2000);
Key Motorsports,
Inc., v. Speedvision Network, L.L.C., 40 F.Supp.2d 344, 346
(M.D.N.C. 1999) (applying principles from
Behr and
Bundy in
recognizing that “in limited circumstances, North Carolina courts
will ignore the parties' choice of law and instead apply the law of
the place where the contract is made”);
Broadway & Seymour, Inc. v.
Wyatt, 944 F.2d 900 (4th Cir. 1991) (recognizing that the
application of the Restatement finds support in North Carolina in
Behr).
Though the choice of law provision here (paragraph 15.0)
indicates that the contract was “made” in Colorado, the recordreflects that the contract was actually entered into by plaintiff
in North Carolina. According to his affidavit, Robert Long,
President of Cable Tel, received the written contract at his office
in Polk County, North Carolina and executed the contract there by
signing it and returning it to defendant in Kansas. Cable Tel has
never engaged in business of any kind in Colorado, is not licensed
or registered to conduct business in the State of Colorado and has
never knowingly entered into any contracts with any person or
entity in Colorado. In addition, all work to be performed by Cable
Tel under the contract was to be performed in Missouri. Thus, in
accordance with
Bundy and
Behr, we conclude from this record that
Colorado has no relationship, let alone a “substantial
relationship,” to this transaction. Finally, we can discern no
other reasonable basis for the parties or for us to apply Colorado
law to this contract. Thus, these authorities direct us to hold
that Colorado law will not apply here.
Defendant argues that paragraph 9.0 contains an enforceable
forum selection clause under Colorado law. However, because we
have held that the choice of law provision contained in paragraph
15.0 does not apply, we address instead whether paragraph 9.0
contains a forum selection clause enforceable under North Carolina
law.
On review of the denial of the motion to dismiss based on avenue selection clause, we apply an abuse of discretion standard.
Cox v. Dine-A-Mate, Inc., 129 N.C. App. 773, 776, 501 S.E.2d 353,
355 (1998),
disc. review denied, 349 N.C. 355, 525 S.E.2d 449
(1998) (holding that “because the disposition of such cases is
highly fact-specific, the abuse-of-discretion standard is the
appropriate standard of review”). “Under the abuse-of-discretion
standard, we review to determine whether a decision is manifestly
unsupported by reason, or so arbitrary that it could not have been
the result of a reasoned decision.”
Mark Group Int'l, Inc. at ___,
566 S.E.2d at 161.
Generally in North Carolina, “when a jurisdiction is specified
in a provision of contract, the provision generally will not be
enforced as a mandatory selection clause without some further
language that indicates the parties' intent to make jurisdiction
exclusive.”
Id. at ___, 566 S.E.2d at 162. As recognized by our
appellate courts, mandatory forum selection clauses “have contained
words such as 'exclusive' or 'sole' or 'only' which indicate that
the contracting parties intended to make jurisdiction exclusive.”
Id. See also, Internet East, Inc. v. Duro Communications, Inc.,
146 N.C. App. 401, 403, 553 S.E.2d 84, 86 (2001) (holding that
clause was a mandatory forum selection clause where clause provided
that “The parties . . . stipulate that the State Courts of North
Carolina shall have sole jurisdiction . . . and that venue shall beproper and shall lie exclusively in the Superior Court of Pitt
County, North Carolina”);
Appliance Sales & Service v. Command
Electronics Corp., 115 N.C. App. 14, 23, 443 S.E.2d 784, 790 (1994)
(finding an enforceable forum selection clause existed where
language in parties' contract provided that “the Courts in
Charleston County, South Carolina shall have exclusive jurisdiction
and venue”);
Perkins v. CCH Computax,
Inc., 333 N.C. 140, 141, 423
S.E.2d 780, 781 (1992) (finding a mandatory forum selection clause
existed where language in parties' agreement provided that “Any
action relating to this Agreement shall only be instituted . . . in
courts in Los Angeles County, California”).
In contrast to the language in the cases cited above, the
language in paragraph 9.0 of the present contract does not contain
language to indicate that it is a mandatory forum selection clause.
Paragraph 9.0 provides that the contract “shall be subject to the
. . . jurisdiction of the State of Colorado . . .“ but does not
indicate that the state courts in Colorado shall have “sole” or
“exclusive” jurisdiction.
In sum, because the record before us reveals no connection
between these parties or the contract and the State of Colorado, we
apply North Carolina law. Under North Carolina law, we find no
abuse of discretion on the part of the trial court in denying the
motion to dismiss.
Affirmed.
Judges WYNN and CAMPBELL concur.
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