Inconsistent forum selection clauses in asset purchase agreement and ancillary agreements must be read together; where some agreements had permissive forum selection and others had exclusive selection, all clauses were deemed permissive. Smith v. B2K Sys

A buyer and seller entered into an asset purchase agreement providing for the purchase of the seller’s assets. The asset purchase agreement referenced various “related agreements” that were executed as part of the purchase, including: (i) a promissory note executed by the buyer in favor of the seller’s president and sole shareholder; (ii) a guarantee of that note executed by the buyer’s parent company; and (iii) an employment agreement between the buyer and the seller’s president. Each of the four agreements contained a forum selection clause. The asset purchase agreement and the guarantee provided that any claims arising there from “may” be brought in a state or federal court in Michigan, while the employment agreement and the promissory note provided that any claims arising there from “shall” be brought in a state or federal court in Michigan. After closing, the buyer stopped making payments on the note and terminated the president’s employment. The president then sued the buyer and various other parties for breach of the contracts in Jefferson County, Alabama.

The trial court rejected the defendants’ arguments that the forum selection clauses made a Michigan court the exclusive forum for disputes, finding that the clauses were unclear and therefore that Michigan was a permissible but not exclusive forum. The Supreme Court of Alabama affirmed. Because the asset purchase agreement specifically referenced and required contemporaneous execution of the other three “related” agreements, the court ruled that all four forum selection clauses should be read together. The court found the clauses ambiguous, because they included two apparently “permissive” forum selections and two apparently “exclusive” forum selections. The defendants failed to cite any authority regarding the proper standards for interpreting or enforcing the inconsistent forum selection clauses. Accordingly, the Supreme Court declined to disturb the trial court’s conclusion that the clauses were permissive, not mandatory.