Venue (International)

• Author: International Law Group

K & V Scientific Co., Inc. (K & V), a New Mexico corporation, developed a novel technology for triggering air bags in automobiles. It consisted of a semiconductor bridge that bursts into a plasma discharge to ignite some pyrotechnic material that inflates the air bag. The Sandia Laboratories in New Mexico had developed the process for military applications. After the government allowed K & V to market the mechanisms for private automobiles, K & V got in touch with Bayerische Motorenwerke (BMW) in Germany.

In 1996, K & V and BMW agreed that K & V would design BMW's "next generation" air bag systems. The deal included a confidentiality clause.

In 1997, BMW mailed a new confidentiality agreement to K & V. This time it contained a choice-of-forum clause which stated: "Jurisdiction for all and any disputes arising out of or in connection with this agreement is Munich. All and any disputes arising our of or in connection with this agreement are subject to the laws of the Federal Republic of Germany." K & V signed the new provision.

After the parties had a falling out, BMW allegedly began working directly with the original developers of the semiconductor bridge. K & V then sued BMW in a New Mexico state court claiming, inter alia, that BMW had breached the confidentiality agreements, and had acted in bad faith.

BMW had the case removed to federal court, and moved to dismiss for lack of personal jurisdiction and improper venue. The district court granted BMW's motion to dismiss for improper venue because the forum selection clause in the 1997 confidentiality agreement was "unambiguous and enforceable." K & V appealed. The U.S. Court of Appeals for the Tenth Circuit reverses and remands.

K & V argued that the forum selection clause in the 1997 confidentiality agreement was permissive rather than mandatory. "'Mandatory forum selection clauses contain clear language showing that jurisdiction is appropriate only in the designated forum.' ... 'In contrast, permissive forum selection clauses authorize jurisdiction in a designated forum, but do not prohibit litigation elsewhere.' ..."

"... The district court ... purported to rely exclusively on Tenth Circuit precedent in general, and our decision in Milk 'N' More, Inc. v. Beavert, 963 F.2d 1342 (10th Cir. 1992), in particular. In Milk 'N' More, we concluded that a forum selection clause stating 'venue shall be proper under this agreement in Johnson County, Kansas' was mandatory. [Cite] Based upon our...