Corporate & Securities Law

How Not to Specify Jurisdiction, Part Deux

By Ken Adams

As a follow-up to this recent post, let me tell you about another opinion featuring a dispute over a jurisdiction provision. (My thanks to the indefatigable Steven H. Sholk for the lead.)

The case is D.B. Zwirn & Co. v. Dittman, No. 09 Civ. 10498 (S.D.N.Y. filed Mar. 23, 2010) (click hereto go to a pdf copy). At issue was the following language:

The Company may bring an action or special proceeding in a state or federal court of competent jurisdiction sitting in the City of New York, for the purpose of temporarily, preliminarily or permanently enforcing the provisions of this Agreement or seeking any other remedy, and the Employee consents to and hereby submits to the exclusive jurisdiction of any state or federal court located in the City of New York for the purpose of any disputes arising hereunder or any equitable relief arising out of or relating to this Agreement.

The question was whether this language provided for mandatory or permissive jurisdiction. The court held that the provision was ambiguous:

The first part of the sentence, standing alone, is obviously permissive: That DBZ may sue in New York City expressly leaves open the possibility that either party could file suit elsewhere, including Texas. However, the use of the word “exclusive” in the second part of the sentence indicates that the parties meant for New York City to be the sole forum for a suit arising under the Confidentiality Agreement. But if, as DBZ argues, New York City is the exclusive forum, then use of the word “may” makes little sense.

I’d have analyzed it differently. For one thing, this provision isn’t ambiguous. Instead, the question is whether the first part of the sentence is inconsistent with the second part. (See chapter 6 of MSCD, or this March 2008 blog post, for more on the different kinds of uncertainty that afflict contract language.)

And it’s not that use of “may” makes little sense for purposes of mandatory jurisdiction; the “may” is fine. Instead, the problem is absence of the word only, as in “The Company may bring an action or special proceeding [insert only] in a state or federal court of competent jurisdiction … .”

Because the first part of the sentence appropriately grants discretion but doesn’t specify that the discretion is limited, I don’t think that saying the two parts of the sentence are inconsistent quite captures it. Instead, it’s more that the first part is overly broad, with the second part providing greater specificity. Given the lack of conflict, I think the court could just as easily have held that the contract provides for mandatory jurisdiction.

Full post as published by AdamsDrafting on March 29, 2010 (boomark / email).