March 25, 2020
When negotiating a commercial contract, forum selection is often the least disputed issue. But given the daily expansion of COVID-19 court closures, now is the time to assess forum selection clauses in key contracts, before litigating a dispute in the chosen forum becomes indefinitely and prejudicially delayed.
For the first time since the Spanish influenza, Americans are being asked to stay home and non-essential businesses are being shuttered. Even essential businesses are losing staff, suppliers, vendors, and clients, and many of their key commercial relationships and contracts are in danger. In the face of this unprecedented epidemic, courts in a number of jurisdictions, including New York, have taken affirmative steps to restrict access to the courts to try to focus judicial resources on matters they deem “essential.” With COVID-19 still increasing in magnitude and severity, court closures may only increase and, at this point, are indeterminate.
The following are practical solutions that Gibson Dunn attorneys may be able to help you negotiate with contractual counterparties:
The boilerplate template provision below may be helpful to you as you consider whether to provide for an alternative forum during the COVID-19 pandemic, and Gibson Dunn attorneys may be able to assist you in crafting a fallback forum selection provision tailored to your specific needs. Because all contracts are different, you should ensure that you carefully review the components of any forum selection provision to ensure that, among other things, it adequately addresses the scope of the issues to be arbitrated:
In light of the current COVID-19 pandemic, for so long as a state of emergency shall have been declared by, and remain in effect in, the state of the litigation forum, each of the parties irrevocably agrees that any legal action or proceeding [arising out of or relating to this Agreement or arising under this Agreement or involving enumerated items] shall be settled by binding arbitration administered by [insert arbitration institution] under its [insert rules] in effect as of the date [hereof or then-in effect], and judgment on the award rendered by the arbitrator(s) may be entered by any court having jurisdiction thereof. [Insert arbitrator selection mechanism; otherwise default arbitration rules will apply.] Either party may apply to the arbitrator(s) seeking any equitable relief, and the arbitrator(s) is/are empowered to award any and all equitable relief, including preliminary or permanent injunctive relief. Any legal action or proceeding that is initiated pursuant to this provision shall remain in binding arbitration until final resolution.
The following are some non-exhaustive, key points to consider when drafting your fallback forum selection clause:
Gibson Dunn’s lawyers are available to assist with any questions you may have regarding developments related to the COVID-19 outbreak. For additional information, please contact any member of the firm’s Coronavirus (COVID-19) Response Team.
Gibson Dunn regularly counsels clients on issues raised by this pandemic in the commercial context. For additional information, please contact the Gibson Dunn lawyer with whom you usually work, any member of the firm’s Litigation, Real Estate, or Transactional groups, or the authors:
Shireen A. Barday – New York (+1 212-351-2621, firstname.lastname@example.org)
Mary Beth Maloney – New York (+1 212-351-2315, email@example.com)
Andrew Paulson – New York (+1 650-849-5214 , firstname.lastname@example.org)
Victoria R. Orlowski – New York (+1 212-351-2367, email@example.com)
Nathan C. Strauss – New York (+1 212-351-5315, firstname.lastname@example.org)
Please also feel free to contact any of the following practice leaders and members:
Andrew Lance – New York (+1 212-351-3871, email@example.com)
Randy M. Mastro – Co-Chair, Litigation Group, New York (+1 212-351-3825, firstname.lastname@example.org)
Mylan L. Denerstein – Co-Chair, Public Policy Group, New York (+1 212-351-3850, email@example.com)
Lauren J. Elliot – New York (+1 212-351-3848, firstname.lastname@example.org)
James P. Fogelman – Los Angeles (+1 213-229-7234, email@example.com)
Mitchell A. Karlan – New York (+1 212-351-3827, firstname.lastname@example.org)
Marshall R. King – New York (+1 212-351-3905, email@example.com)
Robert L. Weigel – Co-Chair, Judgment & Arbitral Award Enforcement Group, New York (+1 212-351-3845, firstname.lastname@example.org)
Avi Weitzman – New York (+1 212-351-2465, email@example.com)
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