07 March 2006

The Courts of Colorado.

I draft many contracts with clauses saying which courts a lawsuit can be brought in if there is a dispute. The 10th Circuit interpreted a few months ago, now ruled the language in one such clause, in a case that I had overlooked when it came out:

When a forum selection clause calls for the resolution of disputes in the "courts of the State of Colorado," does that include the federal court sitting in Colorado? In other words, is the "of" meant to designate sovereignty or geography? If the language refers to the state courts to the exclusion of the federal courts, it is a term of sovereignty. Otherwise, if the language encompasses Colorado state courts and the federal court sitting in Colorado, it is a term of geography. The Tenth Circuit recently held that the language refers to sovereignty, and concluded that the contract did not designate the federal courts sitting in Colorado as a forum.

Incidentally, one of the reasons that language is used is because it wasn't always clear that you could keep someone out of federal court by agreement without an arbitration clause, and so the language was kept deliberately vague and not changed as the case law made clear that this was permitted.

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