Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—E.D. Ark.: Unlawful termination suit shipped to New York, (Dec 11, 2014)

By Greg Hammond, J.D.

A global supplier of filtration, separations, and purification products successfully enforced a forum selection clause in a distribution agreement with a hydraulic systems equipment and supplies distributor. The federal district court in Pine Bluff, Arkansas therefore transferred the case to the federal district court in New York, pursuant to the parties’ agreement (Applied Energy of AR-LA-MS, Inc. v. Pall Corp., December 10, 2014, Holmes, J.).

Applied Energy of AR-LA-MS, Inc. entered into a distribution agreement with Pall Corp., agreeing to a forum selection clause that stated, “The Distributor…hereby submits to the exclusive jurisdiction of the Supreme Court of the State of New York, Nassau County, or the U.S. District Court for the Eastern District of New York for all suits or causes of action relating to or arising directly or indirectly from this Agreement.”

Applied Energy filed suit against Pall Corp., alleging that Pall Corp. violated the Arkansas Franchise Practices Act by terminating the franchise without giving 90 days’ notice and without providing any reasons for the termination. After the case was removed to the district court, remanded to state court, and removed once again, Pall Corp. moved to transfer the action to the federal district court in New York, pursuant to the forum selection clause in the parties’ agreement.

The court determined that the action arose directly or indirectly from the distribution agreement, and that it was therefore governed by the forum selection clause in the contract. Despite Applied Energy’s argument that the result would be unfair, and that it was being “victimized by a wealthy international corporation, using its vast financial resources to the detriment of a small, local corporation,” the court found that bargaining power need not be equal to enforce a forum selection clause, and Applied Energy provided no support to demonstrate the clause was the product of overwhelming bargaining power. Because there was no legal principle which could authorize the court to disregard the forum selection clause, Pall Corp.’s motion to transfer was granted.

The case number is 5:14CV00301 JLH.

Attorneys: Don A. Eilbott for Applied Energy of AR-LA-MS Inc. Gordon S. Rather, Jr. (Wright, Lindsey & Jennings) and Joseph J. Ortego (Nixon Peabody LLP) for Pall Corp.

Companies: Applied Energy of AR-LA-MS, Inc.; Pall Corp.

Cases: FranchisingDistribution ArkansasNews