JURISDICTION, VENUE, AND THE HOME COURT ADVANTAGE
Businesses sign a lot of contracts that determine where any litigation regarding the contract might be held. Business owners view this as just being part of the “boiler plate” of the contract. Until you have had the experience of litigating in a far away location, these provisions do not have much meaning, but let me assure you they can.
Within certain constitutional bounds, a contract can specify the jurisdiction in which a lawsuit must be conducted. The jurisdiction may be wide such as an entire state or a federal district. If a state or district has some connection to one of the parties or the purpose of the contract, generally, these provisions will be enforceable.
Sometimes these jurisdiction provisions are written in such a way that a certain jurisdiction is permissible. More frequently, they are written so that the jurisdiction is mandatory. It is common for contracts to provide for jurisdiction at or near the headquarters of the other party to the contract (or where their primary law firm is located).
A subset of the concern about where a lawsuit will be tried is venue. This is also important. The contract could say, for example, that the courts of the State of Indiana have jurisdiction. But this would leave open the question of where venue within the state might be. Circuit and superior courts in Indiana have statewide jurisdiction. However, there are rules that govern the selection of the proper county of venue. These can be modified by the parties in a contract. Thus, just because a contract says the courts of Indiana will have jurisdiction, it could also require a venue several hundred miles away from your location.
Two concerns relative to the location immediately come to mind. The first is expense. It is extremely expensive to litigate off your home court. This may not be only because of higher legal rates in certain communities, but also the time and expense of travel for you and your witnesses as well as time spent in that jurisdiction during trial.
The other concern is whether or not the other side may have a “hometown advantage” in that location. Being the “out of towner” is never a positive. While it certainly may not be fully determinative of the outcome, it will be a burden to be overcome.
Frequently, sales people will tell you that these provisions are non-negotiable, and that may be the case. If you cannot switch that provision that says the case will be tried in Manhattan to your local court, you may want to discuss changing the provision from being mandatory to permissive. Arbitration could also be considered as an alternative, but that adds additional issues to the analysis.
If you think that the stakes could be high in connection with the contract if there is a dispute, this could be a deal breaker. Obviously, the provision needs to be considered in light of all the provisions of the agreement and the prospective advantage of the contract itself. But it is always worth thoughtful consideration and perhaps a conversation with knowledgeable litigation counsel.