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Hallowell v. Blue Haven Pools National, Inc.

2005 WL 2648870 (N.J. Super. App. Div. 2005) (Unpublished)

CONTRACTS; FORUM SELECTION; CONSUMER FRAUD — Forum selection clauses are presumptively valid and won’t be set aside unless there was fraud or overweening power, enforcement would violate public policy, or enforcement would seriously inconvenience the parties, and it doesn’t matter if a violation of New Jersey’s Consumer Fraud Act needs to be resolved by the out-of-state forum.

A woman entered into a contract with a pool company to construct an in-ground pool at her home. The company began the construction work, but never completed it despite having been paid by the woman in full. The homeowner sued the pool company and its three principals in federal court. Her complaint was dismissed for lack of diversity. The woman then filed an action against the company and its principals in New Jersey Superior Court asserting breach of contract and violation of the New Jersey Consumer Fraud Act (CFA). The company and two of its principals moved to dismiss the complaint for lack of jurisdiction. The lower court ruled that it lacked jurisdiction over the matter because the contract between the parties contained a forum selection clause which required all disputes to be resolved in Pennsylvania. It further ruled that the homeowner failed to show that the pool company’s principals had sufficient activities or contacts with New Jersey to warrant the court exercising personal jurisdiction over them. The woman appealed, asserting that the forum selection clause of the contract was ambiguous and therefore unenforceable.

The Appellate Division affirmed the lower court’s determination. The contract’s forum selection provision mandated that all disputes arising under the contract be resolved by arbitration or through the court system in Pennsylvania. The Court expressed some concern over enforcing the provision in light of the woman’s CFA claim, but ultimately decided to enforce it based on state public policy regarding forum selection clauses. In New Jersey, forum selection provisions are prima facie valid and enforceable unless one of the following factors is present: 1) the clause is a result of fraud or overweening bargaining power; 2) enforcing the clause would violate public policy; or 3) enforcing the clause would seriously inconvenience the parties. The party opposing the provision has the burden of proving that one of the above factors is present. Here, the Court refrained from invalidating the clause because the homeowner failed to demonstrate that any of the foregoing factors was present. With respect to the first factor, the Court found that although the pool company had the stronger bargaining position at the time the contract was formed, there was no evidence that it was overweening. It also found that the clause did not violate state public policy. Lastly, it found that the homeowner failed to show that holding the trial in Pennsylvania would severely inconvenience her or the other parties. It also held that a Pennsylvania court could decide Consumer Fraud Act issues. For those reasons, the Court held that the forum selection clause was enforceable.

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