In the early 1980s, a successful and ambitious Alabama businessman named Walter H. Stewart purchased a failing local copying business. Through the Stewart Organization, a corporation he controlled, Stewart sought to steer this troubled business to the realm of profitability. To do so, he entered into a dealership contract with Ricoh Corporation, a national manufacturer of copy machines that conducted its operations in New York. Unfortunately, their relationship soured. Stewart sued Ricoh in an Alabama federal district court, basing jurisdiction on diversity of citizenship. Ricoh did not want to litigate in Alabama, and the original dealership contract seemed to provide a way out. That contract included a forum selection clause stating that any litigation arising out of the agreement had to be filed in a state or federal court located in Manhattan. Ricoh had two basic options for attempting to enforce this clause. It could move for the case to be transferred under the federal transfer statute to the federal district court in Manhattan. Alternatively, it could ask the court to enforce the clause by dismissing the Alabama suit. Ricoh chose to do both, but the district court, applying Alabama law to both motions, refused to enforce the clause. Ricoh preferred the application of federal law, which generally favored enforcing forum selection clauses, and it litigated the choice- of-law issue all the way to the U.S. Supreme Court. The Court sided with Ricoh, holding that the decision to transfer is governed by federal rather than state law. Thus, in the end, Ricoh from New York prevailed over Stewart from Alabama in selecting the forum for litigation.
Ryan T. Holt,
A Uniform System for the Enforceability of Forum Selection Clauses in Federal Courts,
62 Vanderbilt Law Review
Available at: https://scholarship.law.vanderbilt.edu/vlr/vol62/iss6/6