TecFolks v. Claimtek Systems

U.S. DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
Contracts

New York Law Journal

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Judge Denis Hurley

Claimtek was to provide California-based TecFolks with a medical claims processing system under a 2010 contract whose forum selection clause stated that resolution of all disputes arising from or related to the contract "shall" be in California. TecFolks' diversity action against Claimtek alleged fraud and breach of contract. Claimtek sought dismissal, based on the forum selection clause, under Federal Rules of Civil Procedure 12(b)(1) and (3). Analyzing defendants' motion under Rule 12(b)(3)—and the four-prong test articulated by the Second Circuit in Phillips v. Audio Active—district court found the subject contract's forum selection clause enforceable, and dismissed TecFolks' complaint. Because it was clearly labeled and identified within the contract, the clause was reasonably communicated to TecFolks. Moreover, based on its sentence structure and inclusion of the word "shall", the forum selection clause was mandatory—not permissive as TecFolks argued—and did not negate the contract's other arbitration and clause. The court found that the arbitration and forum selection clauses complimented each other. TecFolks failed to make any showing rebutting the forum selection clause's presumptive enforceability.

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