Contract Clause Waiving Right to Challenge Jurisdiction of the Courts of the State of New York Insufficient to Waive Venue Challenge

On July 26, 2021, Justice Platkin of the Albany County Commercial Division issued a decision in Meritage Hospitality Group, Inc. v. North Am. Elite Ins. Co., 2021 NY Slip Op 50700(U), holding that a contract clause stating that the parties "irrevocably submit to the exclusive jurisdiction of the Courts of the State of New York, and to the extent permitted by law, the parties expressly waive all rights to challenge or otherwise limit such jurisdiction" was insufficient to constitute a waiver of the right to challenge venue, explaining:

The clause relied upon by Meritage states that the parties "irrevocably submit to the exclusive jurisdiction of the Courts of the State of New York, and to the extent permitted by law, the parties expressly waive all rights to challenge or otherwise limit such jurisdiction" (Policy, p. 56, § IX, ¶ F [2]). While Meritage contends that venue is proper in Albany County because this Court is one of "the Courts of the State of New York," the quoted language speaks only to "jurisdiction" and says nothing about "venue" or "the place of trial."

Jurisdiction and venue are separate and distinct concepts (see CV Holdings, LLC v. Bernard Tech., Inc., 14 AD3d 854, 855 [3d Dept 2005]; see also Opp Mem, p. 6 ["Venue is different than jurisdiction."]). Jurisdiction concerns a court's authority "to hear and determine" a dispute, whereas venue pertains to "the proper situs" (i.e., place of trial) of an action or proceeding within the court system (Weingarten v. Board of Educ. of City School Dist. of City of NY, 3 Misc 3d 418, 420 [Sup Ct, Bronx County 2004]; see Matter of Fister, 19 Misc 3d 1145[A], 2008 NY Slip Op 51169[U], *1 [Sup Ct, Queens County 2008]; Vincent C. Alexander, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR 509; see also Lowenbraun v. McKeon, 98 AD3d 655, 656 [2d Dept 2012]; Callanan Indus. v. Sovereign Constr. Co., 44 AD2d 292, 295 [3d Dept 1974]).

The Policy language relied upon by Meritage establishes the exclusive jurisdiction of the New York courts and constitutes a waiver of the parties' right to challenge such jurisdiction, but it does not speak to venue. As such, the clause is not a "written agreement fixing place of trial" (CPLR 501 [emphasis added]). And absent such an agreement, venue must be determined under CPLR 503, which, among other things, allows for suit in a county where "one of the parties resided when [the action] was commenced" (CPLR 503 [a]).

The attorneys at Schlam Stone & Dolan frequently litigate issue related to proper jurisdiction and venue.

Contact our attorneys at commercialdivisionblog@schlamstone.com if you or a client have questions regarding the enforceability or interpretation of forum selection clauses.