A Trustee steps into the shoes of the Debtor and in this case, the forum selection clause was upheld because the inclusion of the forum selection clause was the product of fraud or overreaching, or that enforcement would contravene a strong public policy.
“[T]he
trustee stands in the shoes of the bankrupt corporation and has standing to
bring any suit that the bankrupt corporation could have instituted had it not
petitioned for bankruptcy.” Smith v. Arthur Andersen LLP, 421 F.3d 989, 1002 (9th
Cir.2005) (quotation omitted). This also means “the trustee is subject to
all claims and defenses which might have been asserted against the bankrupt but
for the filing of the petition,” including contractual forum selection clauses.
In re Destro, 675 F.2d 1037, 1040 (9th Cir.1982)
(quotation omitted); In re Mercurio, 402 F.3d 62, 66 (1st Cir.2005) (enforcing
against the trustee a forum selection clause contained in a contract entered
into by the debtor before the debtor filed for bankruptcy).
“The enforceability of
forum selection clauses is governed by federal law.” Petersen, 715 F.3d at 280. “[W]hile courts normally defer
to a plaintiff's choice of forum, such deference is inappropriate where the
plaintiff has already freely contractually chosen an appropriate venue,” such as
agreeing to a forum selection clause in a contract. Jumara v. State Farm Ins. Co., 55 F.3d 873, 880 (3d
Cir.1995). “[F]orum selection clauses are presumptively valid, [and] they
should be honored absent some compelling and countervailing reason.” Murphy v. Schneider Nat'l, Inc., 362 F.3d 1133, 1140 (9th
Cir.2004) (quotation omitted).
Increased
litigation costs generally are not enough to find enforcement of the forum
selection clause unreasonable. In re Mercurio, 402 F.3d at 66 (“The cost of [litigating
in a different forum] alone cannot be enough to meet the heavy burden imposed
upon the reneging party.” (quotation marks omitted)); see also Fireman's Fund Ins. Co. v. M.V. DSR Atl., 131 F.3d 1336, 1338
(9th Cir.1997) (finding the “serious inconvenience” of an American party
having to litigate in Korea based on a forum selection clause did not meet the
heavy burden of proof required to render the enforcement of a forum selection
clause unreasonable). However, specific evidence showing that increased
litigation costs actually would deprive the party opposing enforcement of the
forum selection clause from bringing suit in the contractually mandated forum
may be sufficient to show the forum selection clause should not be enforced.
Cf. Murphy, 362 F.3d at 1142–43 (finding the combination of a
plaintiff's low monthly income, combined with his inability to work or to travel
long distances due to a disability, demonstrated the plaintiff would be unable
to maintain suit in the contractually mandated forum, rendering enforcement of
the clause unreasonable).
Finally, whether the
party seeking enforcement of the clause would obtain any benefit from enforcing
the clause or bear a burden from not enforcing the clause is not a consideration
in determining whether a forum selection clause is unreasonable. Rather, the
party opposing enforcement has the burden to show enforcing the clause would
effectively deprive that party of its day in court. See In re D.E. Frey Grp., Inc., 387 B.R. 799, 807
(D.Colo.2008) (finding the bankruptcy court improperly shifted the burden to the
party seeking enforcement of the forum selection clause by finding that ignoring
the forum selection clause would not detrimentally affect the party seeking
enforcement). And even if neither party has a tie to the contractually mandated
forum, the forum selection clause still may be enforced. In re Manchester, Inc., 417 B.R. 377, 387
(Bankr.N.D.Tex.2009) (“While the parties may have few, if any, direct ties
to New York, they chose to have all disputes settled before a New York court
applying New York law.”).
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