Wisconsin Court of Appeals Upholds Choice of Law / Forum Selection Clauses

Posted: Monday, December 22, 2008

By: David M. Kight

Topic: Non-Compete Cases

The Wisconsin Court of Appeals recently upheld a non-compete agreement's choice of law and forum selection clauses directing litigation in Illinois under Illinois law.  Martin v. Stassen Insurance Agency, 2008 WL 5220283 (Dec. 16, 2008).

The plaintiff was a former insurance agent for the defendant.  Plaintiff was hired in 1997 in Woodstock, Illinois for the Defendant, based in Illinois.  The employment agreement had a choice of law provision which provided that Illinois law would prevail, and a forum-selection clause requiring all litigation to be brought in either a specific Illinois county court or a federal court in Illinois.  The plaintiff eventually resigned, moved to Wisconsin and started a competing business.  The plaintiff brought suit in Wisconsin seeking a declaration that the non-compete agreement was invalid.  The plaintiff alleged that because he now lived in Wisconsin and his business was in Wisconsin, Wisconsin law applied.  Wisconsin law was much more restrictive than Illinois law on non-compete agreements. The defendant then sued in Illinois state court.  The Illinois court issued a TRO prohibiting the plaintiff from violating the agreement.   The defendant sought a motion to dismiss in the Wisconsin court. The Illinois court issued a subsequent injunction against the plaintiff directing no violations of the employment agreement.

The Wisconsin court granted the motion to dismiss concluding that Illinois law applied.  The plaintiff appealed arguing that the choice of law provision is invalid because Illinois law is contrary to Wisconsin law on covenants.   The plaintiff cited a prior Wisconsin case  - Beiffus v. Huffy Corp., 685 N.W. 2d 373 (Wi. App. 2004) -  invalidating similar clauses in a contract between an employer of another state and and a resident of Wisconsin.  In this case, the court ruled, the plaintiff signed the agreement in Illinois, lived in Illinois, performed the agreement in Illinois, before he resigned and moved to Wisconsin.  Thus, the Court concluded that Illinois had a more significant relationship with the Plaintiff and upheld the finding that the choice of law and forum selection clauses supporting Illinois were proper.

Note:  Had the plaintiff had been living and performing this agreement in Wisconsin, it appears that the result would have been different.