Wednesday, May 1, 2013

Ninth Circuit Requires Evidentiary Hearing on Enforceability of Forum Selection Clause

            Pro se plaintiff Robin Petersen was recruited to work in Saudi Arabia as a flight instructor for a subsidiary of Boeing Corporation.  His complaint alleged that on arrival in Saudi Arabia, he was forced to sign an employment agreement which he was not given time to read and which he was told he must sign or else return immediately to the U.S. at his own expense.  This agreement contained a forum selection clause requiring any contractual disputes to be resolved in the Labor Courts of Saudi Arabia.  Petersen then alleged a series of wrongful incidents in Saudi Arabia perpetrated by his employer. Finally returning to the U.S. after the intervention of the U.S. Consulate, he filed suit alleging breach of contract and other claims.  He submitted an affidavit along with his complaint claiming that he was not financially capable of returning to Saudi Arabia to pursue the lawsuit, that he would be subject to harsh conditions there, and that the forum selection clause was foisted on him through fraud and undue pressure.  He also submitted a report from the U.S. Department of State indicating that, among other things, he would not be able to obtain a fair trial in Saudi Arabia.

            The district court dismissed the lawsuit without a hearing under Rule 12(b)(3), holding the forum selection clause enforceable.  The district court also denied leave to amend the complaint, although plaintiff submitted additional information indicating that he would not even be eligible for a visa to Saudi Arabia.

            The Ninth Circuit reversed and remanded for an evidentiary hearing.  Under M/S Bremen v. Zapata Off-Shores Co. and Carnival Cruise Lines, Inc. v. Shute, a forum selection clause may be unenforceable if, for example, “the inclusion of the clause in the agreement was the product of fraud or overreaching,” or “the party wishing to repudiate the clause would effectively be deprived of his day in court were the clause enforced.”  The court held that the complaint and other materials raised an issue of fact as to whether the forum selection clause was enforceable under Bremen, thus requiring an evidentiary hearing, and that the district court abused its discretion by denying leave to amend the complaint. Petersen v. Boeing Co.,, No. 11-18075 (9th Cir. April 26, 2013).


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