Category Archives: business law suit

May a “Floating Forum Selection Clause” be Enforced by a New Jersey Court?

May a New Jersey Court enforce a floating forum selection clause in which someone from another jurisdiction is required to appear in New Jersey? The issue was recently dealt with in Professional Solutions Financial Services v. Cregar et al.  Superior Court of New Jersey, Appellate Division, Docket No. A-2239-11T3 (February 28, 2013).

In that case, the Court first defined the term, “floating forum selection clause” as one in which the signatory to a contract agrees that jurisdiction to enforce that contract will be in a different location according the prevailing circumstances at the time it is enforced. In Cregar, the clause stated:

You [Cregar] agree this Lease is to be performed in Dade County, Florida and this Lease will be governed by the laws of the State of Florida. You consent to personal jurisdiction and venue in the State or Federal Court located in Miami, Dade County, Florida . . . . You specifically agree to waive any right to transfer venue and that agreement is knowing and voluntarily and is an essential term to Lessor’s willingness to enter into this Lease. If this Lease is assigned by Lessor, You consent to personal jurisdiction and venue in the State or Federal Court located where the Assignee’s Corporate Headquarters is located. This is known as a floating forum selection clause and You agree that this is done knowingly and voluntarily and is an essential term to Assignee’s willingness to take an assignment of this Lease. You specifically agree to waive any right to transfer venue and that agreement is knowing and voluntary and is an essential term to Assignee’s willingness to take an assignment of this Lease.

Emphasis added.

After the lease was executed, Cregar stopped making payments. Cregar was sued in Iowa and did not enter an appearance.  As a result, a default judgment was entered against him.

Cregar lost his motion for relief from the judgment and appealed, stating that he was denied due process and that it was an error to use the floating forum selection clause to apply Iowa law instead of New Jersey law.  The Appellate Division rejected his arguments.

The Appellate Division ruled that a sister state’s judgment is enforceable absent a due process violation.  The Court held that Cregar was given adequate notice of the lawsuit, and he entered into an agreement which required him to litigate any disputes where the assignee’s headquarters was located.

Although the Court acknowledged that New Jersey law might not authorize a floating forum selection clause, that was irrelevant. Since Iowa law did, the judgment would be enforced in New Jersey.

© 2014 Nissenbaum Law Group, LLC

Which state has jurisdiction when the sale of New Jersey real estate is handled by a New York law firm?

The Appellate Division of the New Jersey Superior Court  has refortified the commitment to holding persons responsible for actions they take in one state but knowing it will or might have a tendency to have an effect in another. Lee v. Rah, 2011 WL 2802794 (N.J.Super.A.D.,2011).

This case is about Rah, a New York attorney, who did not practice in New Jersey, but drafted documents for his clients regarding the ownership and sale of a piece of real estate in New Jersey. Rah performed all the work in his New York office. He also claimed that at all times the deed for the real estate was held in escrow in New York, and it was never recorded in New Jersey. Also, the fees for his services were paid by a New York Corporation. When the Lees tried to sell their real estate, the transaction went sour because the documents Rah drafted had not been recorded and, even if they had been, were improper because they were drafted on a New York form. Thereafter, the Lees sued Rah in New Jersey for malpractice.

Rah moved to dismiss the action on the grounds that he was not subject to the Court’s jurisdiction in New Jersey. The lower court agreed and dismissed the complaint on the grounds of lack of in personam (personal) jurisdiction. The Appellate Division disagreed and reinstituted the lawsuit. The Court held that Rah provided legal services for the transfer and sale of a New Jersey property. Although all of Rah’s activities occurred in New York, he was handling a New Jersey transaction for New Jersey residents. Therefore, even though Rah had no presence in the state of New Jersey, he “was well aware that his legal activities ‘would have direct consequences in New Jersey’”. Id. at 5.  This meant that Rah could not avoid a New Jersey lawsuit by remaining in New York to do work related to New Jersey real estate. Any malpractice attributed to him regarding the real estate would have a predictable impact in New Jersey and, thus, New Jersey was well within its rights to exercise its judicial authority over Rah.

Comments/Questions: gdn@gdnlaw.com

© 2011 Nissenbaum Law Group, LLC

May an oral settlement agreement reached through mediation be enforced by the court?

In a recent case, the Appellate Division of the Superior Court of New Jersey held that an oral settlement agreement reached during a mediation session could be enforced. However, the party seeking to enforce the mediator’s decision would need to waive his right to confidentiality of the mediation proceedings.  N.J. Ct. Rule 1:40-4(d).  Willingboro Mall, Ltd. v. 240/242 Franklin Avenue, L.L.C.  421 N.J. Super. 445 (N.J. Super. 2011).

On Feb. 2, 2005, plaintiff agreed to sell a Willingboro Township property to defendants. Id. at 449.  In a separately executed indemnification agreement, the defendants also agreed to pay the fines and penalties imposed on the property by the township. Id. On Aug. 22, 2005, plaintiff filed a foreclosure complaint alleging that the defendants defaulted on their obligation to pay the fines and penalties.  Id.  Defendants responded by asserting that foreclosure should not be granted because no such default had occurred. Id.

The General Equity Judge referred the parties to mediation. Id.  On November 6, 2007, the parties and their attorneys attended a mediation session at which the parties reached a settlement. Id. Three days after the mediation session, the defendant’s attorney sent a letter memorializing the terms of the settlement.  Id. Two weeks later, the defendants’ attorney sent another letter to the court and the plaintiff informing them that he had placed $100.000 in the escrow as settlement funds. Id. at 450.

Plaintiff claimed that no final, binding settlement agreement was reached at the mediation session. Id. Defendants’ responded by filing a motion to enforce the mediation settlement. Id.  Following discovery, five witnesses including the mediator testified at a hearing.  Id. at 451. The lower court held that the parties had reached a final, binding settlement at the mediation session. Id.  Plaintiff appealed, arguing that under Rule 1:40-4(i), the oral settlement was not enforceable because it did not meet the following criteria:

1)      It was not reduced to writing at the mediation session.

2)      A copy of the settlement was not given to each party.

3)      The parties did not sign the writing at the mediation session.

Id.

The Court considered the express terms of the rule governing mediation which states:
If the mediation results in the parties’ total or partial agreement, it shall be reduced to writing and a copy thereof furnished to each party. The agreement need not be filed with the court, but if formal proceedings have been stayed pending mediation, the mediator shall report to the court whether agreement has been reached. If an agreement is not reached, the matter shall be referred back to court for formal disposition.
            R. 1:40-4(i)

The Court held that the rule does not require the parties to reduce the settlement agreement to writing at the mediation session, nor does it provide that all parties should receive a copy of the writing before leaving the mediation session. Id. at 453. “A delay of three days to memorialize a settlement reached through mediation does not vitiate the settlement.” Id. at 454. Thus, the Court rejected the plaintiff’s argument that the rule requires “contemporaneous reduction of the terms to writing and obtaining signatures on the document at the mediation” session.  Willingboro Mall, Ltd. v. 240/242 Franklin Avenue, L.L.C.,  421 N.J. Super.  445, 453 (N.J. Super. 2011).

Accordingly, the oral agreement was enforceable.

Comments/Questions: gdn@gdnlaw.com

© 2011 Nissenbaum Law Group, LLC