
Am. First Fed. Credit Union v. Soro (Nev. Supreme Ct. – Sep. 24, 2015)
The issue is whether a contract clause stating that the parties “submit themselves to the jurisdiction of” another state results in a mandatory forum selection clause requiring dismissal of a Nevada action.
In 2002, America First Federal Credit Union (the credit union) loaned $2 9 million, secured by real property in Mesquite, Nevada, to borrowers for the purchase of a liquor/mini- mart. The borrowers defaulted, and the credit union held a trustee’s sale, resulting in a deficiency on the loan balance of approximately $2.4 million. The Utah-based credit union sued the borrowers in Clark County to recover the deficiency.
The borrowers moved to dismiss the action under NRCP 12(b)(1), arguing that the credit union could not sue to recover the deficiency in Nevada and citing several clauses in the Commercial Promissory Note and Business Loan Agreement to support their argument. An Applicable Law clause in the loan agreement stated that “[t]his Agreement (and all loan documents in connection with this transaction) shall be governed by and construed in accordance with the laws of the State of Utah.” The loan agreement also contained the following: “Jurisdiction. The parties agree and submit themselves to the jurisdiction of the courts of the State of Utah with regard to the subject matter of this agreement.” A clause in the note stated: “If there is a lawsuit, Borrower(s) agrees to submit to the jurisdiction of the court in the county in which Lender is located.”
The district court agreed with the borrowers and granted the motion to dismiss. The district court found that the note and loan agreement contain language which clearly expressed the parties’ intent to submit litigation relating to the Agreement and the Note, to the jurisdiction of the State of Utah. The credit union appealed.
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