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Karon v. Aviation

Supreme Court of Iowa

January 10, 2020

ROY KARON and PEDDLER LLC, Appellants,
v.
ELLIOTT AVIATION, JAMES MITCHELL, WYNN ELLIOTT, ELLIOTT AVIATION AIRCRAFT SALES, INC., and ELLIOTT JETS, Appellees.

          Appeal from the Iowa District Court for Polk County, David N. May, Judge.

         The plaintiffs appeal a district court order dismissing their claims without prejudice based on a forum-selection clause. .

          Steven J. Crowley and Edward J. Prill of Crowley & Prill Law Firm, Burlington, for appellants.

          William W. Graham and Wesley T. Graham of Duncan Green, P.C., Des Moines, and Patrick J. Rooney and Tyler P. Brimmer of Fafinski Mark & Johnson, P.A., Eden Prairie, Minnesota, for appellees.

          MANSFIELD, JUSTICE.

         I. Introduction.

         This case, involving an alleged scheme to inflate the purchase price of a general aviation jet aircraft, presents the question of what must be shown to avoid the effects of a contractual forum-selection clause. Is fraud in general enough, or does the fraud have to relate specifically to the clause? Joining the Restatement (Second) of Conflict of Laws, the United States Supreme Court, and a number of our fellow state supreme courts, we conclude that the fraud must relate to the clause itself. This is a logical corollary to our prior holding that the fraud necessary to set aside an agreement to arbitrate must relate to the arbitration clause itself. See Dacres v. John Deere Ins., 548 N.W.2d 576, 578 (Iowa 1996).

         In the present case, the plaintiffs contend that the defendants cheated them, but they have not alleged fraud with respect to the forum-selection clause in the written contract. Accordingly, we affirm the district court's order dismissing this action without prejudice and requiring any future action to be brought in Kansas.

         II. Facts and Procedural History.

         Because we are reviewing the grant of a motion to dismiss, we take as true the plaintiffs' factual allegations. See Venckus v. City of Iowa City, 930 N.W.2d 792, 798 (Iowa 2019).

         A. The Parties Involved.

         Roy Karon is an Iowa resident and the sole member of Peddler, LLC, an Iowa limited liability company. Karon is also the sole shareholder of BVS, Inc., a nonparty Iowa corporation based in Cedar Rapids. Peddler leases an aircraft to BVS and Karon so their personnel can travel the United States and Canada to provide training to financial institutions.

         Wynn Elliott is the president and a director of Elliott Aviation Aircraft Sales, Inc., an Iowa corporation, and the president and a director of Elliott Aviation, Inc., an Iowa corporation. At all relevant times, James Mitchell was an aircraft sales manager at Elliott Aviation Aircraft Sales, Inc. The parties have collectively referred to Wynn Elliott, James Mitchell, Elliott Aviation Aircraft Sales, and Elliott Aviation as "the Elliott Defendants."

         B. The Cessna Citation X Agreement.

         In April 2014, Karon was looking to upgrade Peddler's 1999 Cessna Citation Bravo jet aircraft to a Cessna Citation X, a larger, faster jet. Karon wanted Peddler to sell the Bravo and purchase a Citation X in a tax-free exchange pursuant to § 1031 of the Internal Revenue Code. See 26 U.S.C. § 1031 (2012).[1]

         Karon had been doing business with the Elliott Defendants for over thirty years, and he decided to use their services in purchasing the Citation X. Thus Karon proposed to Mitchell, who was acting on behalf of the Elliott Defendants, that (1) Karon would search for and find a Citation X suitable for Peddler's needs, (2) Karon would negotiate a price with the Citation X seller on the behalf of Peddler, (3) Karon would notify the Elliott Defendants, and (4) the Elliott Defendants would act as the broker to accomplish the § 1031 exchange. In the brokered transaction, the Elliott Defendants would acquire the chosen Citation X from the seller for Peddler, and then Peddler would trade in the Bravo to the Elliott Defendants for an agreed-upon $1.8 million, pay the remaining cash balance due, and immediately accept delivery of the Citation X. The Elliott Defendants would be compensated through a transaction fee of $100, 000 plus whatever profit they received on the lease or resale of the Bravo. Mitchell, on the behalf of the Elliott Defendants, orally accepted Karon's proposal.

         Although Karon was to be responsible for finding the Citation X, both Mitchell and Karon researched the aircraft market and found a used 2000 Citation X that would suit Peddler's needs. The Citation X was being sold by Kansas-headquartered Cessna Aircraft Company, a company for which Mitchell used to work. When Karon contacted Mitchell to inform him that he would begin price negotiations with Cessna, Mitchell offered to negotiate the price himself. Mitchell represented that he (Mitchell) would be able to negotiate a lower price because of his prior relationship with Cessna. Karon agreed.

         Karon alleges that Mitchell informed him Cessna wanted $6 million for the Citation X. Karon responded to Mitchell that he would pay no more than $5.8 million. The negotiations continued.

         Mitchell and Cessna arrived at a final acquisition price, which Mitchell told Karon was $5.8 million. Karon accepted this price, and the parties then negotiated additional details, including the installation of winglets to increase the plane's range and capacity, pilot training, and subscriptions to certain service programs. A written purchase agreement (Purchase Agreement) was drawn up between the parties based upon the $5.8 million aircraft acquisition price. The brokerage fee, winglets, pilot training, and service program subscriptions brought the total contract value to approximately $6.7 million. Karon signed the Purchase Agreement on behalf of Peddler on May 30, and Mitchell signed on behalf of Elliott Aviation Aircraft Sales on June 2. Approximately three weeks later, on June 26, the Citation X was transferred from Cessna to Elliott Aviation Aircraft Sales and then immediately to Peddler. At that time, Peddler paid the Elliott Defendants the $100, 000 brokerage fee.

         The Purchase Agreement contained the following paragraph:[2]

9. CHOICE OF LAW AND JURISDICTION. [Elliott Aviation Aircraft Sales] and [Peddler] agree this Agreement will be deemed made and entered into and will be performed wholly within the State of Kansas, and any dispute arising under, out of, or related in any way to this Agreement, the legal relationship between [Elliott Aviation Aircraft Sales] and [Peddler], or the transaction that is the subject of this Agreement will be governed and construed under the laws of the State of Kansas, USA, exclusive of conflicts of laws. Any dispute arising under, out of, or related in any way to this Agreement, the legal relationship between [Elliott Aviation Aircraft Sales] and [Peddler] or the transaction that is the subject of this Agreement will be adjudicated solely and exclusively in the United States District Court for the State of Kansas, in Wichita, Kansas, or, if that court lacks jurisdiction, Kansas state courts of the 18th Judicial District. Each of the parties consents to the exclusive, personal jurisdiction of these courts and, by signing this Agreement, waives any objection to venue of the Kansas courts.
The Purchase Agreement also had a "severability and waiver" clause:
If any provision of this Agreement is or becomes null or unenforceable by operation of law, the other provisions will remain valid and enforceable. The waiver by either party of a breach of any provision of this Agreement will not constitute a waiver of any subsequent breach of the same or any other provision nor will it be considered a waiver of the provision itself.

         Furthermore, the Purchase Agreement contained an integration clause: "This Agreement constitutes the entire agreement between the parties with respect to its subject matter and supersedes all prior written or oral agreements, representations, negotiations, proposals or discussions between the parties with respect to its subject matter."

         C. The Litigation.

         In February 2015, "an outside source" informed Karon that the actual acquisition price for the Citation X was likely far less than $5.8 million. Accordingly, Karon contacted the Elliott Defendants and requested documentation of the acquisition price. Peddler and Karon allege they ultimately discovered "via a separate and independent source" that the acquisition price was indeed misrepresented, and they demanded reimbursement of the $400, 000 difference between $5.8 million and the actual $5.4 million acquisition price. The Elliott Defendants refused. This litigation followed.

         On February 26, Peddler filed suit against Elliott Aviation Aircraft Sales in the Iowa District Court for Linn County. Fact discovery took place. The defendant filed a motion for summary judgment which, on April 7, 2016, the district court denied.[3] A jury trial was scheduled for January 9, 2017. On December 29, 2016-eleven days prior to the scheduled commencement of trial in Linn County-Peddler voluntarily dismissed its petition without prejudice pursuant to Iowa Rule of Civil Procedure 1.943.

         Over a year later, on February 23, 2018, Peddler, this time joining with Karon, refiled its action in the Iowa District Court for Polk County against all the Elliott Defendants. The petition alleged that the Elliott Defendants had breached their oral brokerage contract with Peddler; the Elliott Defendants had fraudulently misrepresented the acquisition price of the Citation X and failed to disclose the true acquisition price; and Mitchell, acting individually and as an agent of the Elliott Defendants, had breached a fiduciary duty to Peddler by misrepresenting the acquisition price.

         The Elliott Defendants, in lieu of filing an answer, moved to dismiss on three grounds. First, the Elliott Defendants maintained the claims were barred by the applicable Kansas statutes of limitations. Second, the Elliott Defendants asserted improper venue based on the forum-selection clause in the Purchase Agreement. Third, the Elliott Defendants urged that the petition failed to allege a cause of action against Wynn Elliott or Elliott Aviation, Inc. Peddler and Karon resisted, and a hearing was held on June 7.

         On June 13, the district court issued an order dismissing the case without prejudice based on improper venue:

Defendants ask this Court to enforce Paragraph 9. Specifically, Defendants ask this Court to: (1.) dismiss with prejudice because, inter alia, Plaintiffs' claims are barred by the applicable Kansas statutes of limitation; or, in the alternative, (2.) dismiss without prejudice because Kansas, not Iowa, is the parties' chosen venue.
Plaintiffs respond that, because they have alleged that the purchase agreement was "procured by fraud" and is "void ab initio," the Court cannot enforce Paragraph 9 of the purchase agreement. Plaintiffs emphasize that, because the purchase agreement is not "fully integrated," their claims of fraudulent inducement are not precluded.
Importantly, though, Plaintiffs' fraud claims are about the transaction as a whole, through which they were allegedly "defrauded out of $400, 000." Plaintiffs make no claim that Paragraph 9 was induced by fraud. Nor do Plaintiffs claim that Paragraph 9 itself is otherwise invalid.
Thus, the problem before the Court is similar to one that sometimes arises in the context of arbitration: If a contract contains an arbitration clause, and if the plaintiff claims that the entire contract was fraudulently induced, should the arbitration clause be enforced?
In Prima Paint, the United States Supreme Court held that if the plaintiff's allegations of fraud are directed to the total transaction, and not to the arbitration clause itself, then the arbitration clause should be enforced. Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967). Arbitrators, not judges, should resolve allegations of fraud in the transaction "as a whole." See Madol v. Dan Nelson Auto. Grp., 372 F.3d 997, 1000 (8th Cir. 2004) (applying Prima Paint).
Iowa has adopted the Prima Paint rule. [The court went on to quote from Dacres, 548 N.W.2d at 578].
Of course, Paragraph 9 is not an arbitration clause. Instead, it contains venue and choice of law provisions. Courts have held, however, that the Prima Paint rule applies with equal force to venue and choice of law provisions. See, e.g., Stamm v. Barclays Bank of N.Y., 960 F.Supp. 724, 729 (S.D.N.Y. 1997) (citing Prima Paint and other authorities for the proposition that a "claim of fraud in the inducement of a contract is insufficient to invalidate a forum selection or choice-of-law clause found in that contract"). As Magistrate Judge Walters correctly observed, venue and choice of law provisions "would be practically unenforceable if they could be avoided simply by an allegation of fraud in the inducement." Morris v. McFarland Clinic P.C., No. CIV. 4:03-CV-30439, 2004 WL 306110, at *2 (S.D. Iowa Jan. 29, 2004).
The Court concludes, therefore, that the Prima Paint rule should be used to determine whether Paragraph 9 is enforceable. See Dacres, 548 N.W.2d at 578. As already explained, Plaintiffs' claims of fraud are about the transaction as a whole. Plaintiffs do not claim that Paragraph 9 itself was fraudulently induced. Therefore, under the Prima Paint rule, Paragraph 9 should be enforced.

         Karon and Peddler filed a timely appeal, which we retained.

         III. Standard of Review.

         We review rulings on motions to dismiss for correction of errors at law. Venckus, 930 N.W.2d at 798.

         IV. Does the Prima Paint Rule Apply in Iowa to Forum-Selection Clauses?

         Under paragraph 9 of the Purchase Agreement, there is no dispute that the plaintiffs' claims "aris[e] under, out of, or [are] related . . . to" the agreement between Elliott Aviation Aircraft Sales and Peddler or "the transaction that is the subject of" that agreement. Therefore, taking paragraph 9 at its terms, exclusive jurisdiction and venue for this case should rest in the federal and state courts located in Wichita, Kansas.[4]The plaintiffs, however, argue that their allegation of fraud changes things.

         The district court in this case applied the rule provided by the United States Supreme Court for arbitration clauses in Prima Paint Corp. v. Flood & Conklin Manufacturing Co., 388 U.S. 395, 87 S.Ct. 1801 (1967). Prima Paint purchased the assets of Flood & Conklin's paint business. Id. at 397, 87 S.Ct. at 1802. After Prima Paint failed to make the first payment due under the agreement, Flood & Conklin served a notice to arbitrate. Id. at 398, 87 S.Ct. at 1803. Prima Paint filed suit seeking rescission of the entire agreement on the basis of fraud. Id. Flood & Conklin moved to stay the court action pending arbitration, contending that whether there was fraud in the inducement of the consulting agreement was a question for the arbitrators. Id. at 399, 87 S.Ct. at 1803. The district court granted Flood & Conklin's motion, and the court of appeals affirmed. Id. at 399, 87 S.Ct. at 1803-04.

         The Supreme Court also affirmed. Id. at 406-07, 87 S.Ct. at 1807. It held that under the Federal Arbitration Act (FAA), a claim of fraud in the inducement of the entire contract did not vitiate an arbitration clause referring any controversy or claim arising out of or relating to the agreement to arbitration:

Accordingly, if the claim is fraud in the inducement of arbitration clause itself-an issue which goes to the "making" of the agreement to arbitrate-the federal court may proceed to adjudicate it. But the statutory language does not permit the federal court to consider claims of fraud in the inducement of the contract generally.

Id. at 403-04, 87 S.Ct. at 1806 (footnote omitted).

         Our court followed the Prima Paint rule in Dacres, 548 N.W.2d 576. Dacres brought an action against his employer to recover damages for breach of contract and fraud. Id. at 577. The employer invoked an arbitration clause in the parties' contract. Id. Over Dacres's opposition, the district court ordered that the action for damages be stayed and that the dispute be settled by arbitration. Id. The arbitration panel found against Dacres. Id. at 577-78. On appeal, Dacres argued that the arbitration clause should not have been enforced because (among other things) it had been procured by fraud. Id. at 578. We held that because Dacres's allegations of fraud in the inducement went to the entire agreement rather than specifically to the arbitration clause, it was appropriate for the arbitration panel rather than the district court to resolve the merits of the dispute:

[I]f a claim of fraud in the inducement is aimed at the entire contract and that contract includes an agreement for arbitration of disputes with respect thereto, the fraud claim is properly to be determined by the arbitrators. Only if the fraud in the inducement claim is specifically directed at the arbitration clause itself is it subject to litigation in a court. . . . Because Dacres'[s] allegations of fraud in the inducement go to the entire agreement, they were properly determined by the arbitrators.

Id. (citation omitted).

         The question then is whether Prima Paint applies to a forum-selection clause. In Scherk v. Alberto-Culver Co., the Supreme Court held that it did as a matter of federal law. 417 U.S. 506, 519-20, 94 S.Ct. 2449, 2457 (1974). Scherk, a German citizen, sold his trademarks and interest in a European toiletries business to Alberto-Culver, a Delaware corporation with its principal place of business in Illinois. Id. at 508, 94 S.Ct. at 2451-52. The contract called for the arbitration of disputes in France with the application of Illinois law. Id. at 508, 94 S.Ct. at 2452. After differences between the parties arose, Alberto-Culver filed suit in the United States District Court for the Northern District of Illinois, and Scherk moved to dismiss for lack of jurisdiction based on the forum-selection clause. Id. at 509, 94 S.Ct. at 2452. The district court denied the motion, and the court of appeals affirmed the denial. Id. at 510, 94 S.Ct. at 2452-53.

         The Supreme Court reversed, concluding that the forum-selection clause should control. Id. at 519-21, 94 S.Ct. at 2457-58. The Court noted, "An agreement to arbitrate before a specified tribunal is, in effect, a specialized kind of forum-selection clause that posits not only the situs of suit but also the procedure to be used in resolving the dispute." Id. at 519, 94 S.Ct. at 2457.

         The Court further noted,

In The Bremen we noted that forum-selection clauses "should be given full effect" when "a freely negotiated private international agreement [is] unaffected by fraud . . . ." 407 U.S., at 13, 12, 92 S.Ct., at 1915, 1914. This qualification does not mean that any time a dispute arising out of a transaction is based upon an allegation of fraud, as in this cause, the clause is unenforceable. Rather it means that an arbitration or forum-selection clause in a contract is not enforceable if the inclusion of that clause in the contract was the product of fraud or coercion. Cf. Prima Paint Corp., 388 U.S. 395, 87 S.Ct. 1801.

Id. at 519 n.14, 94 S.Ct. at 2457 n.14 (emphasis added); see M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15, 92 S.Ct. 1907, 1916 (1972) ("The correct approach would have been to enforce the forum clause specifically unless Zapata could clearly show that enforcement would be unreasonable or unjust, or that the clause was invalid for such reasons as fraud or overreaching." (Emphasis added.)).

         Scherk and M/S Bremen were decided under federal law. Unlike in the arbitration context, where the FAA applies, there is no federal legislation that governs state court proceedings when a forum-selection clause is at issue. Cf. Stewart Org., Inc., 487 U.S. at 28-29, 108 S.Ct. at 2243 (holding that 28 U.S.C. § 1404(a) governs the enforceability of a forum-selection clause in a diversity case in federal court). Accordingly, enforcement of a forum-selection clause in state court is a matter of state law. See Perkins v. CCH Computax, Inc., 415 S.E.2d 755, 757 ( N.C. Ct. App. 1992) (declining to apply federal law), rev'd, 423 S.E.2d 780, 781 ( N.C. 1992), superseded in part by statute, 1993 N.C. Sess. Laws ch. 436

         Nonetheless, a number of state appellate courts have followed the United States Supreme Court's lead in ruling that forum-selection clauses are enforceable unless the fraud goes specifically to the clause. See, e.g., Ex parte PT Sols. Holdings, LLC, 225 So.3d 37, 45 (Ala. 2016) ("White has never contended that the forum-selection clause itself is invalid as the result of fraud, undue influence, or overweening bargaining power. Instead, she challenged the validity of the contract as a whole based on when she executed it. White is certainly entitled to argue that the contract never became effective, but the argument must be raised in the forum dictated by the forum-selection clause because the possible invalidity of the contract as a whole does not negate enforcement of the forum-selection clause."); Bennett v. Appaloosa Horse Club, 35 P.3d 426, 431-32 (Ariz.Ct.App. 2001) (holding that the forum-selection clause requiring litigation in Idaho applied to the plaintiff's fraud and consumer fraud claims); Provence v. Nat'l Carriers, Inc., 360 S.W.3d 725, 730 (Ark. 2010) ("[W]e hold that in Arkansas a party like the appellants in the instant case must plead fraud in the inducement of the forum-selection clause itself to avoid its application. Generalized allegations of fraud with respect to the inducement of the contract as a whole, as the appellants have made in the instant case, will not operate to invalidate a forum-selection clause."); Edge Telecom, Inc. v. Sterling Bank, 143 P.3d 1155, 1162 (Colo.App. 2006) ("We agree with the rationale . . . and similarly hold that so long as a forum selection clause is itself not the result of fraud, the parties can fairly expect to litigate any issues, including the plaintiff's general allegations of fraud, in the designated forum."); Nat'l Indus. Grp. (Holding) v. Carlyle Inv. Mgmt. L.L.C., 67 A.3d 373, 380 (Del. 2013) ("[A] party cannot make 'an end-run around an otherwise enforceable [f]orum [s]election [p]rovision through an argument about the enforceability of other terms in the contract' . . . ." (alterations in original) (quoting Ashall Homes Ltd. v. ROK Entm't Grp., Inc., 992 A.2d 1239, 1248 (Del. Ch. 2010))); Golden Palm Hosp., Inc. v. Stearns Bank Nat'l Ass'n, 874 So.2d 1231, 1235 (Fla. Dist. Ct. App. 2004) ("When it claims that a forum selection clause is invalid based on fraud, the party must show that the clause itself is the product of the fraud or that the fraud caused the inclusion of the clause in the agreement."); Brandt v. MillerCoors, LLC, 993 N.E.2d 116, 122 (Ill.App.Ct. 2013) ("[I]n order to invalidate the clause on the ground of fraud and overreaching, the fraud alleged must be specific to the forum selection clause itself." (quoting IFC Credit Corp. v. Rieker Shoe Corp., 881 N.E.2d 382, 395 (Ill.App.Ct. 2007))); Vanier v. Ponsoldt, 833 P.2d 949, 952 (Kan. 1992) ("Parties to a contract may choose the jurisdiction in which all actions or proceedings arising from their transaction shall be heard. The forum selected by the parties must bear a reasonable relationship to the transaction and the forum-selection clause in the contract must not have been entered into under fraud or duress." (syllabus by the court)); Vallejo Enter., L.L.C. v. Boulder Image, Inc., 950 So.2d 832, 835 (La. Ct. App. 2006) ("For the forum-selection clause to be unenforceable on the grounds of fraud or overreaching, it must be shown that the inclusion of the clause in the contract was the product of fraud or coercion."); Karty v. Mid-Am. Energy, Inc., 903 N.E.2d 1131, 1135 (Mass. App. Ct. 2009) ("[B]ecause the allegations set out in Karty's complaint and amended complaint speak only to fraud in the inducement as to the entire subscription agreement and fail to allege or set out any facts concerning the specific question whether the forum-selection clause was obtained by fraud, we see no error in the dismissal of his complaint."); Paradise Enters. Ltd. v. Sapir, 811 A.2d 516, 521 ( N.J.Super.Ct.App.Div. 2002) ("[G]enerally [forum-selection clauses] are 'prima facie valid and enforceable in New Jersey[, ]' and . . . 'New Jersey courts will decline to enforce a clause only if it fits into one of three exceptions to the general rule: (1) the clause is a result of fraud or "overweening" bargaining power; (2) enforcement would violate the strong public policy of New Jersey; or (3) enforcement would seriously inconvenience trial.' . . . Bremen 'represents the prevailing view on the enforceability of forum-selection clauses, and has been applied by federal and state courts confronted by jurisdictional choices involving forum-selection clauses.' General acceptance of the validity of forum selection agreements principles is corroborated by the Restatement (Second) of Conflict of Laws . . . ." (first quoting Caspi v. Microsoft Network, L.L.C., 732 A.2d 528, 530 ( N.J.Super.Ct.App.Div. 1999); and then quoting Kubis v. Perszyk Assocs., Inc. v. Sun Microsystems, Inc., 680 A.2d 618, 624 (N.J. 1996))); Original Pizza Pan v. CWC Sports Grp., Inc., 954 N.E.2d 1220, 1223 (Ohio Ct. App. 2011) ("It is settled law that unless there is a showing that the alleged fraud or misrepresentation induced the party opposing a forum selection clause to agree to inclusion of that clause in the contract, a general claim of fraud or misrepresentation as to the entire contract does not affect the validity of the forum selection clause. Thus even if plaintiffs were induced to enter into the agreement by fraud, deceit and misrepresentation, this would not affect the validity of the forum selection clause." (Citation omitted.) (quoting Four Seasons Enters. v. Tommel Fin. Servs., Inc., No. 77248, 2000 WL 1679456, at *2 (Ohio Ct. App. Nov. 9, 2000)); Patriot Commercial Leasing Co. v. Kremer Rest. Enters., LLC, 915 A.2d 647, 653 (Pa. Super. Ct. 2006) ("A forum selection clause can be avoided for fraud only when the fraud relates to procurement of the forum selection clause itself, standing independently from the remainder of the agreement."); In re Lyon Fin. Servs., Inc., 257 S.W.3d 228, 232 (Tex. 2008) ("We have held that fraudulent inducement to sign an agreement containing a dispute resolution agreement such as an arbitration clause or forum-selection clause will not bar enforcement of the clause unless the specific clause was the product of fraud or coercion."); Paul Bus. Sys., Inc. v. Canon U.S.A., Inc., 397 S.E.2d 804, 807 (Va. 1990) ("According to the modern view, which we now embrace, contractual provisions limiting the place or court where potential actions between the parties may be brought are prima facie valid and should be enforced, unless the party challenging enforcement establishes that such provisions are unfair or unreasonable, or are affected by fraud or unequal bargaining power."); Caperton v. A.T. Massey Coal Co., 690 S.E.2d 322, 348 ( W.Va. 2009) (adopting the federal approach and stating that the party challenging the contractually chosen forum must show "that the clause was invalid for such reasons as fraud or overreaching"); Durdahl v. Nat'l Safety Assocs., Inc., 988 P.2d 525, 528 (Wyo. 1999) ("We adopt the modern approach and hold forum selection clauses are prima facie valid and will be enforced absent a demonstration by the party opposing enforcement that the clause is unreasonable or based upon fraud or unequal bargaining positions.").

         A handful of state courts, such as the Utah Supreme Court, take a minority approach that allows a plaintiff's claim that the contract as a whole was entered into fraudulently to potentially render the forum-selection clause unenforceable. See, e.g., Energy Claims Ltd. v. Catalyst Inv. Grp. Ltd., 325 P.3d 70, 83 (Utah 2014). In Energy Claims, the Utah Supreme Court reasoned,

The major flaw with the majority approach is that the district court must accept as valid a provision in a contract despite the plaintiff's contention that the entire contract was induced by fraud. We also find it problematic that the majority approach imposes upon the plaintiff the burden of making a "separate and distinct challenge" to the forum selection clause itself, when the only support the plaintiff has-the allegation that the entire contract and all of the provisions contained therein are fraudulent-is deemed to be necessarily inadequate. The application of this approach may also result in defrauded ...

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