by Dr. Eric J. Ploumis
We are all very good at evaluating and correcting malocclusions. But when it comes to reviewing a contract, many of us could use some assistance. Cue the attorney, whose job it is to help us evaluate and correct any “malocclusions” in a contract we sign. Just as every cusp and every fossa has an occlusal function, every word and every line in a contract has meaning and significance. In this issue of “Legal Bites” we will explore the often-overlooked clause that relates to the choice of venue.
Let’s start with an example of a standard clause that addresses choice of venue. We will explore why it is important to evaluate and, where appropriate, negotiate this clause. Somewhere in every contract will be text similar to this:
THIS AGREEMENT IS MADE IN THE STATE OF NEW YORK. ITS VALIDITY, CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY THE LAWS OF DELAWARE. THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE STATE OF DELAWARE. THE PARTIES WAIVE ANY RIGHT THEY MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO SUCH VENUE AND HEREBY CONSENTS TO ANY COURT ORDERED RELIEF.
This type of clause is found in every contract you sign, whether for an employment agreement, a practice loan, a piece of office equipment, or the purchase of the practice itself. It is a binding contractual provision that can have significant consequences on your rights and remedies. The parties to an agreement are free to choose both the applicable law that will be applied in the event of a dispute and the location where the dispute will be heard but once you choose, you cannot complain that it is not convenient to have your case heard in that venue.
Why is this of concern to you? If you ever have to litigate the agreement, either as a plaintiff or a defendant, where that dispute is litigated often determines the outcome even more than the validity of the dispute. There is a legal adage that a good attorney prevails based on a winning argument, a great attorney wins on procedural grounds before the case is ever heard on its merits. That is where venue is critical. If you have to go to some far-away location to have your case heard, the cost and inconvenience involved may make it impracticable to contest. You may have a winning argument but the time out of your office to get to the location where the case is heard and the cost to get there often makes settling the case the more cost-efficient outcome. In the worst-case scenario, you simply lose the case because it is too difficult to defend.
Let’s look at a couple of hypotheticals.
Scenario one: you sign an employment agreement with a large national DSO. You work in New York State. The DSO owes you $50,000 in back pay. Your contract says in the event of a dispute, the venue is Elephant, Illinois, and any dispute must be heard in that city. By the time you hire an Illinois attorney and fly out to Illinois a few times, most of the $50,000 you claim you are owed is eaten up. The savvy DSO attorney will keep delaying the trial, costing you day after day of work. If the case was venued in NY, you would at least have a shot at having the case heard on its merits. Simply because of the unfavorable venue clause you will most likely walk away from what you are owed.
Scenario two: you buy a new CBCT from Careless Imaging for your office. It proves to be defective, and the company will not honor the warranty. You threaten to bring legal action to enforce the contract. Careless replies, “Not a problem doctor. Read your contract. See you in Flyspeck, Texas, where your contract says disputes will be heard.” Are you really going to go to Flyspeck to contest the issue? Most likely, you will just accept the loss.
Anytime you sign a contract you should insist that the venue for any dispute be where you are conducting your business. Whoever drafts the agreement will choose the venue most beneficial to it, often where its corporate headquarters is. It will be up to you and your attorney to insist that the venue be changed to where your office is located. When I review a contract for a client, local venue is one of the “drop dead” clauses I insist on. If an adverse party will not make the venue the state and county where the office is located, I advise my client not to sign the agreement.
Choice of venue is but one of many important, but often overlooked, clauses in a contract. In future issues of “Legal Bites” we will explore other important contract clauses.
This information is not intended as a substitute for legal advice. You should familiarize yourself with the laws of your jurisdiction and seek legal advice from an attorney who specializes in such matters.
Dr. Ploumis is an attorney at Rivkin Radler, LLP, an orthodontist in New York City, an associate clinical professor of orthodontics at New York University, and an orthodontic practice broker with Wicklow Healthcare Advisors. He can be reached at www.DentalPracticeLawyers.com or Eric.Ploumis@getwicklow.com.
Recent Comments