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Federal Court Requires Foreign Resident To Litigate Non-Compete Dispute in Missouri Based Upon Forum Selection Clause

Posted in Non-Compete Enforceability, Practice & Procedure, Restrictive Covenants

By Robert Milligan and Grace Chuchla

It’s 8,242.7 miles or a 17 hour flight between the Philippines and Missouri.  Nobody would dispute that this is a significant distance, but as far the Eastern District of Missouri is concerned, forcing a defendant who lives in the Philippines to participate in litigation occurring in Missouri does not constitute an unfair or unreasonable burden. Emerson Electric Co. v. Yeo, Case No. 4:12CV1578 JAR (E.D.M.O. 12/28/2012).

On August 30, 2012, Emerson Electric sued Peter Ramos Yeo, a former employee of its subsidiary Astec International, Ltd., in St. Louis County Circuit Court for violating the non-compete clause that was included with a Stock Option Agreement that Yeo signed in 2011.  The case was removed to federal court, at which point Yeo brought a Motion to Dismiss for Failure to State a Claim and Lack of Personal Jurisdiction.  Yeo’s sought to invalidate his non-compete on three fronts – 1) that the Stock Option Agreement containing the non-compete was an illusory promise, 2) that the non-compete was unenforceable due to lack of adequate consideration, and 3) that the forum selection clause within the non-compete was unenforceable. 

In support of his first and second claim, Yeo argued that, under his Stock Option Agreement, Emerson retained the right to terminate him at any time.  Therefore, because his stock options did not vest for one year, Emerson had the ability to relieve itself of its promises, rendering the stock option grant illusory and the agreement unenforceable.  Additionally, Yeo argued that, even if the agreement were not illusory, Emerson’s agreement to buy back his stock upon termination was not sufficient consideration to support the non-compete clause that the agreement contained.

Judge Ross rejected both of these arguments, noting that, in certain circumstances, Yeo did in fact have the right to exercise his options before they vest.  The court also distinguished Yeo’s situation from the facts of Sturgis Equipment Co., Inc. v. Falcon Industrial Sales Co., 930 S.W.2d 14 (Mo.Ct.App. 1996), where the Missouri Court of Appeals held that an agreement to buy back stock was insufficient consideration to support a non-compete clause.  Unlike Sturgis, where the agreement dealt solely with stock options, Yeo’s agreement contained language regarding the protection of Emerson’s confidential information.  Thus, Yeo’s “stock options were granted to [him] in consideration of his position with Emerson and in recognition of his role as a key employee,” which “constitutes sufficient consideration to support the non-compete clause.”

Finally, Yeo sought to invalidate the forum selection clause of his non-compete by arguing that he currently resides in the Philippines, has minimal contact with Missouri, and would face a huge burden if he were forced to litigate in a court over 8,000 miles away.  Despite these geographic realities, Judge Ross did not find Yeo’s argument convincing.  A 17 hour plane ride apparently does not meet the standard of “so gravely inconvenient that he will for all practical purposes be deprived his day in court.” See Servewell Plumbing LLC v. Federal Ins. Co, 439 F.3d 786 (8th Cir. 2006).  That said, geography was not the only factor in the court’s decision.  Judge Ross also pointed out that, as “an educated person,” Yeo is “presumed to have agreed to the forum selection clause knowingly and intelligently.”  Thus, there is nothing unjust about “hold[ing] him to his bargain” and making Yeo defend himself in a Missouri court. 

This order is notable for just how strictly it enforces Yeo’s forum selection clause.  There is no denying that the geographic realities of this case suggest that Missouri federal courts are ready and willing to enforce even the most logistically challenging forum selection clauses.  Add this decision to cases such as MB Restaurants, Inc. v. CKE Restaurants, Inc., (enforcing a forum selection clause despite plaintiff’s objections about the expense, 183 F.3d 750 (8th Cir. 1999)) and Afram Carriers, Inc. v. Moeykens (enforcing a Peruvian forum selection clause against a destitute family, 145 F.3d 298 (5th Cir. 1998)) — both of which were cited by Judge Ross in his order — and one has to question if there are any situations that a Missouri federal court would deem “gravely inconvenient” when it comes to enforcing forum selection clauses.  But speculation aside, there is no question that this order bodes well for Missouri employers looking to avoid both the difficulty of litigating in a variety of forums and the possibility of having to bring suit in courts that are unfriendly toward non-compete agreements.  Please also see our previous post on a California federal court’s decision finding personal jurisdiction over an Irish company in a business dispute, involving a non-disclosure agreement.