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Outbound Forum-Selection Clause: Ex Parte United Propane Gas, Inc.

Ex parte United Propane Gas, Inc., [Ms. 1160891, Feb. 2, 2018] __ So. 3d __ (Ala. 2018). This decision by Justice Bolin, (Stuart, C.J., and Shaw, Main, Wise, Bryan, and Sellers, JJ., concur; Parker, J., concurs in the result), issues a writ of mandamus vacating the Cullman Circuit Court’s order denying United Propane’s motion to dismiss an action arising from a contract for the purchase of propane filed by Cullman Security Services, Inc. (CSS). The circuit court had denied the motion to dismiss reasoning that the outbound forum-selection clause, requiring suit in McCracken County, Kentucky, effectively deprived CSS of the ability to file a class action in contravention of Alabama public policy. Ms. *2.

The Court held, consistent with prior law, “that an outbound forum-selection clause is enforceable unless the party challenging the clause can clearly establish that enforcement of the clause would be (1) unfair on the basis that the contract was affected by fraud, undue influence, or overweening bargaining power, or (2) that enforcement would be unreasonable on the basis that the chosen forum would be seriously inconvenient for the trial of the action.” Ms. *9. In considering whether enforcement of a forum-selection clause is unreasonable, the Court applies the following five factors:

“‘“When an agreement includes a clearly stated forum-selection clause, a party claiming that clause is unreasonable and therefore invalid will be required to make a clear showing of unreasonableness. In determining whether such a clause is unreasonable, a court should consider these five factors: (1) Are the parties business entities or businesspersons? (2) What is the subject matter of the contract? (3) Does the chosen forum have any inherent advantages? (4) Should the parties have been able to understand the agreement as it was written? (5) Have extraordinary facts arisen since the agreement was entered that would make the chosen forum seriously inconvenient? We state these items not as requirements, but merely as factors that, considered together, should in a particular case give a clear indication whether the chosen forum is reasonable.”’”

Ms. *11, (quoting Ex parte Nawas Int’l Travel Serv., Inc., 68 So. 3d 823, 827 (Ala. 2011), quoting in turn Ex parte Rymer, 860 So. 2d 339, 342-43 (Ala. 2003), quoting in turn Ex parte Northern Capital Res. Corp., 751 So. 2d 12, 15 (Ala. l999)).

The Court noted while the chosen Kentucky forum is inherently advantageous to United Propane because the plaintiffs are prevented from filing class actions in Kentucky state courts in which alleged damages are aggregated to meet the $5,000 jurisdictional threshold. Ms. *12. The Court rejected plaintiffs’ argument that the disallowance of a class action prevents plaintiffs’ pursuit of their claims because “there is nothing to stop the purported class action plaintiffs from pursuing their claims individually in a district or a small-claims court in McCracken County, Kentucky.” Ms. *12-13.

The Court rejected the circuit court’s finding that the parties’ bargaining power was significantly disproportionate because plaintiff CSS is a business and purchased the propane for business use. Ms. *16. The Court also rejected the argument that the contract was a contract of adhesion because CSS presented no evidence that it had taken steps to pursue sources of propane other than United Propane. Ms. *16-17.

Finally, the Court rejected CSS’s contention that the unavailability of a class action remedy in Kentucky violated Alabama public policy and precluded enforcement of the outbound forum-selection clause. The Court distinguished Leonard v. Terminix International Co., 854 So. 2d 529 (Ala. 2002), a 5-4 decision, which invalidated an arbitration provision which limited the consumer’s damages to $500 and prohibited class actions. The Court noted that CSS is a business, not an individual consumer as in Leonard, and that (also unlike Leonard) there is no arbitration clause or limitation of damages clause in the United Propane contracts. Ms. *19. The Court concluded, “[t]herefore, ... this Court cannot say that the outbound forum-selection clause is an unconscionable violation of public policy.” Ms. *21.

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