UPDATE - Mississippi Court of Appeals Finds Forum Selection Clause Unenforceable

On February 2, 2009, I posted a blog on forum selection clauses and their enforceability. [Link to prior blog article] On May 10, 2016, in Rigsby v. American Credit Counselors, Inc., the Mississippi Court of Appeals found a forum selection clause included in American Credit Counselors, Inc.’s Program Guidelines unenforceable. In so doing, the Court provides an excellent analysis of when forum selection clauses may be found to be unenforceable. [Link to Decision]

Ms. Rigsby was in serious financial problems and decided to engage the assistance of American Credit Counselors, Inc. ("ACCI") to assist in managing the payment of her debts. She was provided "Program Guidelines" which included a forum selection clause. The clause provided in pertinent part as follows:

…the parties agree that any arbitration brought with respect to this Agreement shall be brought exclusively in The State of Florida, County of Palm Beach, and the parties irrevocably submit to the jurisdiction of Palm Beach County, Florida.

When a dispute developed between Ms. Rigsby and ACCI she filed suit in the County Court of Harrison County, Mississippi. In its answer, ACCI claimed the protection of the forum selection clause and filed a motion to dismiss which was granted by the county court and affirmed on appeal by the circuit court. The Court of Appeals reversed the circuit court finding the forum selection clause unenforceable.

The Court, citing Titan Indem. Co. v. Hood, 895 So. 2d 138, 145 (Miss. 2004), acknowledged that "[a] clause is ‘mandatory’ if it purports to require litigation in the specified forum only and to prohibit litigation in any other forum." It therefore found the use of the word "solely" to be "sufficient to make it [the forum selection clause] mandatory."

Nonetheless, the Court continued with its analysis to determine whether, although mandatory, the clause was enforceable. In doing so, the Court considered the following guidance from the Mississippi Supreme Court:

Forum selection clauses are ‘presumptively valid and enforceable’ unless the resisting party can show:

(1) Its incorporation into the contract was the result of fraud, undue influence or overweening bargaining power;

(2) The selected forum is so gravely difficult and inconvenient that the resisting party will for all practical purposes be deprived of its day in court; or

(3) The enforcement of the clause would contravene a strong public policy of the forum in which the suit is brought, declared by statute or judicial decision.

The Court then considered the facts presented to the trial court and decided that there was no evidence of fraud or overreaching associated in the inclusion of the forum selection clause. However, the Court did find that Ms. Rigsby had satisfied the second consideration because of her age and financial condition she ‘will for all practical purposes be deprived of [her] day in court.’ Titan Indem., 895 So. 2d at 146.

The lesson for any contracting party is to consider the forum selection clause in any contract before placing your signature on the dotted line. Verify whether the forum selection clause is mandatory or permissive and that you can follow the requirements if the clause is enforced. Finally, do not assume you will be able to get out of a mandatory clause under the "deprivation of day in court" exception as it is a higher burden to meet and will be easier to negotiate terms you can live with before you ever sign the contract.