RT Auto. Ctr., Inc. v. Westlake Servs. LLC – 4/12/2022
Arizona Court of Appeals Division One holds that a showing of fraud can invalidate a forum selection clause only if such fraud was directed at procuring the clause itself, not the broader contract.
A car dealership sued a lender for breach of contract. The lender moved to dismiss citing a forum selection clause requiring that all claims—including claims regarding the contract’s formation and validity—be filed in California. The superior court granted the motion. Noting the clause’s specific application to claims regarding the contract’s formation and validity, the court rejected as illogical the dealership’s position that the contract’s allegedly fraudulent formation had rendered the forum selection clause unenforceable. The dealership appealed.
The Court of Appeals affirmed. It held that “a showing of fraud only invalidates a forum selection clause if it is aimed at procuring the forum selection clause itself, not the contract as a whole.” By treating the forum selection clause as “a separate agreement,” courts ensure that general fraud claims are litigated according to party expectations. Because the dealership’s fraud allegations went “beyond the forum selection clause” to challenge the validity of the entire contract, the dealership was bound by the clause, which specifically applied to such claims.
Judge Portley authored the opinion; Judge Campbell and Judge Thumma joined.