In Oxford Global Resources LLC v. Hernandez, SJC – 12439 (September 7, 2018), the Supreme Judicial Court invalidated standard forum selection and choice of law provisions in a confidentiality, non-solicitation and non-competition agreement (“Agreement”) between a Massachusetts recruiting and staffing company and one of its account managers. As a result of this decision, the issue of whether such provisions are enforceable under Massachusetts Law is very much an open question.

In Hernandez, the employee, Hernandez, entered into the Agreement with a Massachusetts company, Oxford Global Resources LLC. Oxford is a recruiting and staffing company with twenty-four offices throughout the United States and Europe that places consultants with specialized technical expertise. Its headquarters are located in Beverly, Massachusetts. Account managers, like Hernandez, assist Oxford’s recruiters and recruiting managers in placing consultants with clients using, among other means, a secure database of detailed client information developed by Oxford. Shortly after joining Oxford, Hernandez voluntarily terminated his employment and commenced work with a competing company in California. Oxford brought suit when it discovered that Hernandez was violating the Agreement by soliciting Oxford’s customers and consultants, improperly competing with Oxford, and misappropriating and disclosing Oxford’s trade secrets and confidential information.

The Superior Court judge allowed Hernandez’s motion to dismiss on forum non conveniens grounds based on the judge’s conclusion that the Agreement was a contract of adhesion. The SJC reached the same result in the case but on very different grounds, putting aside the Superior Court judge’s finding that the contract was one of adhesion.

The Court began its analysis by stating that Massachusetts courts uphold the parties’ choice of law so long as the result is not contrary to public policy. In deciding whether the result is contrary to public policy, the Court adopted a two-part test set forth in the Restatement (Second) of Conflict of Laws § 187 (2) (1971) and Hodas v. Morin, 442 Mass. 544 (2004).

In applying the first part of the Restatement’s two-part test, the Court concluded that Massachusetts has a substantial relationship to the parties and the transaction, in that Hernandez worked for Oxford in Massachusetts pursuant to the Agreement which was executed in Massachusetts.

In applying the second part of the Restatement’s test, the Court analyzed, at length, whether application of Massachusetts law “would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state”. The Court explicated at length California’s strong public policy against non-compete and non-solicitation provisions. The Court then cited a case wherein New York dismissed a case in deference to Massachusetts’ superior interest in enforcing the Massachusetts Wage Act, reasoning that if the Court expects other states to defer to Massachusetts, the Court should honor the fundamental public policy of California with regard to non-compete agreements. In what perhaps was a driving force behind its decision, the Court stated as follows: “without such a commitment to honor the fundamental public policy of another state regarding open competition and employee mobility, an employer might successfully execute an ‘end run’ around that policy by including a choice of law provision in its employment agreements.” The Court then concluded that the choice of law provision of the Agreement was unenforceable.

The Court then turned to the question of the enforceability of the Agreement’s forum selection clause. Beginning with the notion that forum selection is a matter of procedure and therefore subject to the law of the forum state, the Court conducted a forum non conveniens analysis under Massachusetts law. This involved a consideration of both public concerns such as administrative burdens and the desirability of holding the trial in a forum familiar with the governing law, and private, practical concerns such as the ease of access to proof, the availability of compulsory process and the cost of witnesses’ attendance. The overarching consideration, said the Court, citing G.L. c. 223A § 5, was the interest of substantial justice. The Court stated that while Hernandez, in the Agreement, waived any objection to the forum based on the inconvenience of the forum to him, such a waiver did not waive an objection to the forum based on other private factors including the convenience of witnesses, the location of relevant evidence in California, and the ease and efficiency for both Hernandez and Oxford of trying the case in California.

Noting that Massachusetts has very little interest in the outcome of the lawsuit, the Court concluded that, in the interest of substantial justice, the action should be dismissed on the ground of forum non conveniens so that the case can be resolved by a California court.

This case raises substantial questions as to the continuing validity of choice of law and forum selection provisions under Massachusetts law, at least without doing the extensive analysis conducted by the Court in the Hernandez case.