Legal Memorandum: Enforcement of a Financing Agreement

Issue: What defenses may possibly be raised against enforcement of a financing agreement with a wholly owned subsidiary of a financial corporation?

Area of Law: Business Organizations & Contracts
Keywords: Financing agreement; Forum selection clause; Wholly owned subsidiary
Jurisdiction: Federal, Minnesota
Cited Cases: 137 N.W.2d 172; 382 F.3d 852
Cited Statutes: Minn. Stat. § 336.2A-407, § 336.2A-108(1)
Date: 08/01/2010

One of the possible defenses would be a forum selection clause.  In general, it appears the federal courts may be less likely to enforce that clause.  See, for example:  Lyon Fin. Servs., Inc. v. Reno Sparks Ass’n of Realtors, No. 03-5539JRTFLN (D. Minn. Feb. 4, 2004) (noting that while in many cases the court will enforce a valid forum selection clause, the presence of a forum selection clause in a contract is not dispositive; rather, in determining whether to transfer venue, the court must ultimately balance the competing interests and facts of each individual case, including (1) the convenience of the parties; (2) the convenience of the witnesses; and (3) the interests of justice.  With respect to the interests of justice, factors including the familiarity of the two courts with the law to be applied, the ability of the parties to bear the expense of litigating in a distant forum, judicial economy, the plaintiff’s choice of forum, obstacles to a fair trial, and each party’s ability to enforce a judgment may also be relevant). In the Reno Sparks case, no party to the litigation other than Lyon, the assignee of the disputed agreement, had any ties to Minnesota.  To the contrary, Reno Sparks was a Nevada entity doing business exclusively in Nevada.  More importantly, per the court, the defendant was a small entity with just ten employees, at least four of whom would be required to travel to Minnesota for trial.  Additionally, the defendant was projected to have only […]

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