W. Scott Johnson v. Tomcat USA, Inc. et al., Tennessee Court Of Appeals, 8/24/2021
Mr. Johnson was hired by Tomcat USA, LLC, a Delaware corporation with its principal office and distribution center located in Knoxville. Mr. Johnson ultimately ascended to the role of President. As part of the promotion, Mr. Johnson obtained 150 shares of the Tomcat stock pursuant to a Stock Bonus Transfer Agreement. In said agreement, there was a forum selection clause, that being, a term in the contract that stated that any lawsuit related to or deriving out of the stock transfer must be brought in the State of New York.
Ultimately, Mr. Johnson was terminated (the opinion details the circumstances surrounding it which will not be discussed here). Mr. Johnson then filed suit in Tennessee related to his termination. Because Mr. Johnson filed his suit in Tennessee, Tomcat moved to dismiss the case based on the forum selection clause.
The Trial Court denied the motion to dismiss, holding that the claims raised were unrelated to the stock agreement, that New York would not be the most convenient state for litigation, and that the clause itself was arbitrary as neither party had contacts the State of New York. The Trial Court noted that forum selection clauses are generally honored, but that they may be set aside where the chosen forum (New York) bears no substantial relationship to the underlying claims, which the Court believed was the case in this matter.
The Tennessee Court of Appeals held that the forum selection clause was not fair and reasonable based on the factors presented in the Tennessee Supreme Court case Dyersburg Machine Works, Inc. vs. Rentenbach Engineering Company. Specifically, the Court found that the clause is not fair and reasonable because New York is a substantially less convenient place to hold the lawsuit. Of note, Mr. Johnson is a Tennessee resident and the disputed matters occurred in Tennessee; none of the prospective witnesses are New York residents; Tomcat is not a New York corporation and does not have its principal place of business in New York; rather, its headquarters is in Tennessee. All these factors led the Court to ruling that New York was a substantially less convenient forum than Tennessee.
As such, Mr. Johnson is permitted to continue his litigation in the State of Tennessee.
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