How your registered agent’s address could get you sued in their county.

Earlier this week, a lawsuit was filed in Davidson County Chancery Court by a landlord to collect $130,697.44 in unpaid rent from a Romano’s Macaroni Grill located in Rutherford County. There was no allegation that any of the facts of the case occurred in Davidson County or that the parties contractually agreed that the venue for any disputes would be in Nashville.

Should this lawsuit be dismissed for improper venue, where the business, all operations, and the leased premises were all in Rutherford County?

Not necessarily. Here’s why: All of the Defendants use corporate registered agents whose offices are based in Davidson County, and that subjects them to venue in Davidson County.

When analyzing venue for causes of action under Tenn. Code Ann. § 20-4-101(a), a defendant can be “found” in “any county wherein it has an office for the furtherance of its business activities.”

Tennessee courts have said that a registered agent’s address is an office for the furtherance of the defendant’s business activities, and it doesn’t matter that the defendant doesn’t actually operate a business out of that address or doesn’t otherwise have any other connection to that county. See Fed. Exp. v. The Am. Bicycle Grp., LLC, No. E200701483COAR9CV, 2008 WL 565687, at *3 (Tenn. Ct. App. Mar. 4, 2008).

Maybe this isn’t a big deal–most of these corporate agents are located in Davidson County, and Nashville uniformly has very strong courts and judges.

But, Tennessee is a very, very long state. It’s definitely something to keep in mind when you’re a company in Greenville or Memphis, and you’re selecting a registered agent.

Forum Selection Clauses Will be Upheld by Tennessee Courts

You don’t need a law degree to know this: The tricky stuff in a contract is always in the fine print, at the end of the contract.

For instance, most good contracts will invariably include a forum selection clause. This is generally a line at the end of the “Miscellaneous” paragraph that says something like: the parties to the contract agree that any action or proceeding arising under or related to this agreement shall be filed only in the United States District Court or the state courts in Nashville, Tennessee.

Of course, forum selection clauses don’t always say “Nashville,” but they do generally list the forum in a location that is: (1) convenient to the party preparing the contract; and (2) inconvenient for the other party. It makes sense, the contract drafter says, because that company doesn’t want to open itself to lawsuits all over the country. Presented with these “take it or leave it” terms, the other party often doesn’t object, no matter how burdensome the forum would be, because a party doesn’t generally sign a contract anticipating a default.

Unless, you know, they have a lawyer review the contract and warn you about the doomsday scenario. In Tennessee, these provisions are generally enforceable, as noted in a recent Court of Appeals opinion, The Cohn Law Firm v. YP Southeast Advertising & Publishing, LLC. In that case, a Memphis-based law firm filed suit against the Yellow Pages in Memphis; in response, the Yellow Pages moved to dismiss, citing page 3, paragraph 18 (titled “Miscellaneous”) of the contract, stating that all lawsuits must be filed in Georgia. The lower court dismissed the lawsuit for lack of jurisdiction and improper venue, and the appellate court agreed.

That Court wrote that: “Generally, a forum selection clause is enforceable and binding on the parties entering the contract. Lamb v. MegaFlight, Inc., 26 S.W.3d 627, 631 (Tenn. Ct. App. 2000). A forum selection clause will be upheld if it is fair and reasonable in light of all the circumstances surrounding its origin and application. Id. (citing Dyersburg Mach. Works, Inc. v. Rentenbach Eng’g Co., 650 S.W.2d 78 (Tenn. 1983)). A party seeking to invalidate a forum selection clause must prove that the clause resulted from misrepresentation, duress, abuse of economic power, or other unconscionable means. Id.”

The Court further wrote: “Tennessee law is clear that the party challenging the enforcement of the forum selection clause “should bear a heavy burden of proof.” Chaffin v. Norwegian Cruise Line Ltd., 1999 WL 188295, *4 (Tenn. Ct. App. Apr. 7, 1999).

The Plaintiffs argued that the contract was an “adhesion” contract, i.e. a boilerplate provision that wasn’t discussed or contemplated, and the Court ultimately rejected this, since the forum selection clause wasn’t patently unfair and had a reasonable basis.

I estimate that most contracts have these provisions in them; if they don’t, they should. A good lawyer will always consider the “worst case” scenario, even at the front end of the deal. In doing that, no lawyer worth his billable hour rate will overlook the impact of a forum selection clause.