Choice of a Few Words Make a Major Difference in Contracts
August 29, 2016 By Erin H. Cancienne
In the case of Larry Klayman v. Judicial Watch, Inc., the United States District Court for the District of Columbia had to carefully consider a specific provision in a contract between Larry Klayman and Judicial Watch, Inc. Mr. Klayman was an employee of Judicial Watch, Inc. and entered into a severance agreement with the company. In the agreement, there was a “Choice of Law; Consent to Venue and Jurisdiction” provision, which read:
The Parties consent to the jurisdiction and venue of any state or federal court located within the District of Columbia in any action or judicial proceeding brought to enforce, construe, or interpret this Agreement or otherwise arising out of or relating to Klayman’s employment.
Mr. Klayman had filed a suit in the District of Columbia Superior Court based on an alleged violation of the severance agreement. Judicial Watch, Inc. sought to move the case to federal court, and Mr. Klayman for several reasons filed a motion for the case to be transferred back to the Superior Court.
The focus of the opinion by the District Court was whether either party had waived their right to complain about either of the courts (Superior Court or Federal District Court). As to Judicial Watch, Inc., the court considered whether the jurisdiction provision was permissive or mandatory. If the jurisdiction provision was mandatory, then Judicial Watch, Inc. could have waived the right to remove the case from Superior Court to the federal court. However, in this case, the parties had agreed to “consent to the jurisdiction… of any state or federal court located within the District of Columbia…” The clause did not limit the parties to bringing suit only in those courts. The clause permits the parties to proceed in these courts, but does not require proceeding in either court. Therefore, Judicial Watch, Inc. has not waived its right to remove the case from the Superior Court to the federal court.
The next question was whether the Mr. Klayman waived his right to seek remand of the case. Mr. Klayman was seeking remand based on the fact that Judicial Watch, Inc. is a citizen of the District of Columbia. The Court held that the Mr. Klayman had not waived his right to remand. Mr. Klayman had agreed to a permissive jurisdiction clause, which did not limit jurisdiction to a single court. Similarly, the clause did not specifically reference a right to remand or a waiver of any jurisdictional rules or provisions. Without explicit language stating a waiver of the right to remand, the court held that Mr. Klayman could move to remand the case based on the citizenship of Judicial Watch, Inc. The Court remanded this matter back to Superior Court.
The Court made specific note to state that the parties could have specifically waived the right to remove, or alternatively, specifically waived the right to a remand in the contract. This would have to be done explicitly in order to be enforced.
The court’s decision highlights why it is important that contracts are reviewed by competent counsel to discuss the implications of the various provisions and to properly assess risks and benefits of entering into any agreement. If you are entering into a contract, please contact the attorneys at DeCaro Doran to review your contract and provide you with a proper assessment.