Lumbermens Mutual Casualty Co. v. Commonwealth of Penn.

Part 2 of 2 Continued from the April 22 CDE edition of The New York Real Estate Journal. Although the forum designation clause designating New York as the forum for lawsuits seemed valid at the time of execution, enforcement of the clause was non binding because PDOT did not have the authority to agree that Pennsylvania may be sued in New York. According to Pennsylvania's Constitution, Article I Section II, the General Assembly of the Commonwealth of Pennsylvania is the only party with the power to designate the forum where Pennsylvania may be sued. As such, the clause was unenforceable and Pennsylvania had a more compelling interest in maintaining the constitutional limits on the powers of its agencies. The New York court therefore lacked subject matter jurisdiction. Plaintiff's efforts to avoid litigation on the home-turf of the PDOT and the Commonwealth of Pennsylvania proved fruitless. Ultimately, plaintiff's reliance on the forum designation clause contained in the Kemper policy failed because the clause turned out to be unenforceable. Instead, defendants' theory of forum non conveniens prevailed because it was in the interests of substantial justice to allow the Commonwealth of Pennsylvania to entertain this action. On a business to business level, the forum designation clause in a contract between two business entities is generally upheld by the courts in New York and the surrounding states of New Jersey and Connecticut. However, the designated forum must have some nexus to the parties or the situs of the project/real estate. A manufacturer can't provide in its purchase order that disputes be resolved in courts or states having laws favorable to manufacturers, if those designated states have no relationship to the parties. As an example, if a developer purchases structural steel from a manufacturer in Pennsylvania, and the developer of the shopping mall is in New York State, a provision in the purchase order from the manufacturer providing for Mississippi courts to be the forum for litigation should not be binding on the purchaser/developer if there is no nexus of that jurisdiction to the manufacturer or purchaser. Peter Goetz is founding partner and Rosalie Valentino is an associate for Goetz Fitzpatrick LLP, New York, N.Y.