Maryland Federal Court Asserts Jurisdiction Over Purported State Court Contract Claim

In Allied Fire Prot., Inc. v. Thai, No. PWG-17-551, 2017 WL 4354802, at *1 (D. Md. Oct. 2, 2017), the plaintiff employer filed suit against its former employee in the Circuit Court for Prince George's County, alleging four causes of action: (I) breach of contract (specifically, the Non-Compete/Non-Disclosure Agreement); (II) breach of the non-compete and non-solicitation provisions of the Agreement; (III) tortious interference with contractual relations and prospective advantage; and (IV) intentional misrepresentation.
 
Defendant Thai removed the case to the Federal District Court in Maryland under diversity jurisdiction and filed a motion to dismiss. Allied Fire filed an untimely opposition thirty-three days later, and Thai filed a timely reply.
 
In its Opposition, Allied Fire challenged the Federal Court's jurisdiction to resolve its claims because to do so would violate Article I, § 10, Clause 1 of the United States Constitution, the so-called “Contracts Clause.” Specifically, Allied Fire asserted that the purported Agreement included a “choice of law section” that stated:
Any disputes arising from or related to the subject matter of this agreement shall be heard in an appropriate court of PG County, Maryland and the parties hereby consent to the personal jurisdiction and venue of these courts.

After ruling that Allied Fire was untimely in challenging personal jurisdiction, the court noted that the purported forum selection clause, stating that disputes “shall be heard in an appropriate court of PG County, Maryland,” does not vest exclusive jurisdiction in the state courts.

The court first noted that the "Contracts Clause" applies only to the states, not to the federal government.

The court then addressed the "choice of law section," citing Mims v. Arrow Fin. Servs., LLC, 565 U.S. 368, 374, 380 (2012), a Supreme Court case construing a statutory provision that “a person or entity may, if otherwise permitted by the laws or rules of court of a State, bring a private action in an appropriate court of that State” concluded that “nothing in that permissive language makes state-court jurisdiction exclusive."  Id.

Next the court looked to IntraComm, Inc. v. Bajaj, 492 F.3d 285, 290 (4th Cir. 2007), stating that under federal law, “a general maxim in interpreting forum-selection clauses is that ‘an agreement conferring jurisdiction in one forum will not be interpreted as excluding jurisdiction elsewhere unless it contains specific language of exclusion.'"

Therefore, the court held that it had jurisdiction to hear the case since the court was located in Prince George's County.

Takeaway: If you want to limit the court venue options in your contracts, you must input specific language of exclusion. Here, the contract language limiting the venue to "an appropriate court of Prince George's County" was construed to include the Federal Court in Prince George's County and was not limited to state courts in the County.

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