In Raab v. Nu Skin Enters., Inc., the Washington Supreme Court resolved a long-standing procedural question regarding the enforcement of contractual forum selection clauses. The case centered on whether a motion to dismiss for improper venue under CR 12(b)(3) is the correct mechanism for enforcing such clauses when they designate a mandatory non-Washington forum. In a decision that overrules Voicelink, Inc. v. Superior Court, 86 Wn. App.618,937 P.2d 1016 (1997), and aligns with federal precedent set by Atlantic Marine Construction Co. v. United States District Court, 571 U.S. 49 (2013), the court held that arguing improper venue under CR 12(b)(3) is not the appropriate procedural mechanism. The ruling provides critical guidance for litigants and courts handling contractual disputes involving forum selection clauses.
Factual Background
Defendant NuSkin markets beauty and nutritional products through a direct sales multi-level marketing network of independent distributors. The plaintiffs are disaffected distributors—some reside in Washington State and others in various states. NuSkin has a standardized contract distributor agreement. Plaintiffs' contend that NuSkin operates as an unlawful pyramid scheme, and asserted claims under consumer protection and tortious interference with business expectancy theories.
The plaintiffs asserted that venue was proper in Spokane County as NuSkin conducts business there. However, NuSkin's contract contains a forum selection clause designating Utah as the exclusive venue for dispute resolution and an arbitration agreement mandating binding arbitration for all disputes. Plaintiffs challenged the enforceability of the arbitration clause, arguing that its jurisdictional limitation to Utah is unconscionable and should not preclude litigation in Spokane County.
Procedural History in State and Federal Trial Courts
Before filing its response in the Washington action, NuSkin initiated a separate case in the U.S. District Court for the District of Utah, referred to as the Utah Action, where it moved to compel arbitration and enjoin further proceedings in Washington involving the contractual arbitration agreement and the federal Arbitration Act. Plaintiffs opposed this motion, seeking dismissal of the Utah Action. While that motion was pending, NuSkin simultaneously filed a CR 12(b)(3) motion in the Washington Action, arguing improper venue based solely on the contract's forum selection clause, and alternatively sought to stay the proceedings pending in the Utah motion.
In response, the plaintiffs' contended that both the arbitration agreement and the forum selection clauses were inapplicable, arguing that the Washington Action did not qualify as a dispute under the contract, and that enforcing these provisions would impair their state statutory claims. The Superior Court denied NuSkin's motions to dismiss and stay, ruling that Spokane County was a proper venue and that the action did not fall within the contractual definition of dispute as argued by NuSkin. NuSkin's subsequent motion for reconsideration was denied, and it sought discretionary review.
Meanwhile, the Utah District Court denied NuSkin's arbitration motion and dismissed the Utah Action based on the Superior Court's determination. However, upon review, the Washington Court of Appeals reversed part of the Superior Court's decision by holding that the Washington Action met the contractual definition of a dispute. As a result, the tenth circuit later reversed the dismissal of the Utah Action, remanding the matter for further proceedings and clarifying that the Superior Court's earlier determination no longer had preclusive effect.
The Court of Appeals ruled that a CR 12(b)(3) motion to dismiss for improper venue was not the appropriate mechanism for enforcing a contractual forum selection clause, noting that the complaint sufficiently established venue under RCW 4.12.025, and remanded the issue of whether to enforce the forum selection clause, along with guidance for future proceedings.
A CR 12(b)(3) motion to dismiss for improper venue in not the correct procedural mechanism to seek enforcement of a contractual forum-selection clause.
The Washington State Supreme Court held that, as a matter of law, a contractual forum selection clause cannot render a statutorily authorized venue improper under CR 12(b)(3), overruling the 1997 VoiceLink decision.
The view on this issue has evolved over the years in federal and state courts around the country, and the unanimous Supreme Court decision in Atlantic Marine Construction Co. v. United States District Court, 571 U.S. 40 (2013) clarified that dismissal under FRCP 12(b)(3) is limited to cases where the court lacks jurisdiction under the relevant federal venue statutes. Under federal law, venue is strictly determined by statutory requirements and does not consider contractual forum selection provisions. Several states have also adopted this interpretation, and the Washington State Supreme Court here followed suit.
In Washington, venue is a well-defined statutory term, typically referring to the county where a lawsuit is filed under state law. By contrast, a contractual forum selection clause may designate a forum outside of Washington without affecting the propriety of a statutorily authorized venue. Here, since Spokane County meets all applicable statutorily criteria as the proper venue for the action, venue was proper under CR 12 (b)(3), regardless of any contractual clause to the contrary. Therefore, NuSkin's CR 12(b)(3) motion to dismiss for improper venue was deemed an improper mechanism to dismiss the suit as a matter of law.
What is the Proper Procedural Mechanism?
The Court declined to resolve the question of what would be the correct procedural mechanism to enforce a forum selection clause, noting that the question is complex and fact dependent. Potential options would include a CR 56 motion for summary judgment or other methods like forum non conveniens (as discussed in Atlantic Marine), depending upon the circumstances.
Key Takeaways
- A motion to dismiss for improper venue under CR12(b)(3) is not the proper avenue to enforce a forum selection clause.
- This decision resolves a split in the Washington appellate case law, overruling Voicelink, and establishes clear precedent moving forward. However, litigants must carefully consider the appropriate procedural vehicle for enforcing forum selection clauses.
- The best procedural mechanism to enforce a forum selection clause depends on case-specific factors. Possible alternatives include a CR 56 motion for summary judgment or a forum non conveniens argument.
Conclusion
The Washington Supreme Court's decision in this case represents a significant clarification of procedural law regarding forum selection clauses. By rejecting the use of CR 12(b)(3) and aligning with federal precedent, the Court has provided a more structured approach for litigants navigating contractual disputes. While the ruling leaves open questions about the precise procedural mechanism for enforcement, it ensures that Washington courts apply a consistent and legally sound framework.