Swanson v. The Image Bank, Inc.

Brief Fact Summary.

Plaintiff sued Defendant for breach of employment contract. Plaintiff sought partial summary judgment.

Synopsis of Rule of Law.

Under Restatement Second of Conflicts of Law § 187, a choice of law provision in a contract is valid and effective when the balance of interests and circumstances does not disfavor the agreed upon law.

Facts.

Image Bank (Defendant) purchased Swanstock, Inc., an Arizona corporation that represented owners of fine art photography, and retained the previous owner Swanson (Plaintiff) to operate the corporation. The parties negotiated and signed an employment contract, which included a provision regarding post-termination compensation and a choice of law provision that Texas law would govern the contract. Plaintiff sued Defendant for breach of the employment contract after he was terminated without receiving the agreed upon compensation. Plaintiff filed a motion for partial summary judgment.

Issue.

Is the employment contract’s choice of law provision enforceable?

Held.

Yes, the choice of law provision in the employment contract is enforceable. The lower courts decisions are reversed.

Discussion.

The Court determined that the choice of law provision in the employment contract was valid and enforceable under Restatement Second of Conflicts of Law § 187, and thus Texas law should govern the case. The issue of contractual waiver of treble damages was not precluded by Arizona law, and it was thus appropriate for the parties to waive this remedy by agreeing to the application of Texas law.