Court Refuses to Enforce Forum Selection Clause

Andrew Ottaway, B.A. (Hons.), LL.B.Civil Litigation, Commercial Litigation, Contract Disputes, Cross-Border Litigation, Jurisdictional Challenges, Of Interest to US Counsel0 Comments

In McMillan McGee Corp. v Northrop Grumman Canada, 2016 ONSC 6334, the Plaintiff sued the Defendants (“Northrop”) for damages arising from work done by the Plaintiff for the Northrop in Ontario.  Northrop’s Request for Proposals included “Purchase Order Terms and Conditions” (the “RFP Terms and Conditions”).  The RFP Terms and Conditions contained:

  • a forum selection clause, stating that “either Party may only bring suit in federal or state court in the state from which this Order is issued”; and
  • a choice of law clause, stating that “his Order will be construed and interpreted according to the law of the state from which this Order is issued, as identified in the Order”.

“Order” was defined as “The instrument of contracting including this Purchase Order and all referenced documents”.

The parties’ relationship involved three Purchase Orders, and many change orders.  The lawsuit involved invoices delivered after the Second Purchase Order.

The First Purchase Order explicitly referred to the RFP Terms and Conditions. The Second and Third Purchase Orders did not refer to the RFP Terms and Conditions. Rather, the Second and Third Purchase Order incorporated different terms and conditions.

Northrop brought a motion to dismiss the Plaintiff’s claim, arguing that the Ontario Court should decline jurisdiction based on the RFP Terms and Conditions’ forum selection clause.   Northrop stated that the forum selection clause provided exclusive jurisdiction to the Courts of California.

The Judge dismissed Northrop’s motion.  The Court concluded that the forum selection clause did not apply, because:

  • there was no evidence that the forum selection clause was incorporated into the Second or Third Purchase Order.  The Plaintiff’s claim for unpaid services arose after the First Purchase Order, which was the only Purchase Order to incorporate the forum selection clause;
  • even if the clause applied, it was unclear that the forum selection clause reflected an intention of both parties to choose California.  The Court stated that the wording of the forum selection clause was such that  Northrop controlled the place from which each Order was issued, which would allow Northrop to unilaterally contol the choice of forum; and
  • even if the clause applied, there was no evidence that the Second Purchase Order was issued from California.

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About the Author
Andrew Ottaway, B.A. (Hons.), LL.B.

Andrew Ottaway, B.A. (Hons.), LL.B.

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