Declan Flight, Inc. v. Textron Aviation, Inc.

The Eleventh Circuit reversed the dismissal of tortious interference claims, holding that federal common law does not govern the interpretation of forum-selection clauses in contracts governed by foreign law. The court ruled that the scope of such clauses must be determined under the substantive law of the contract, which in this case was Slovenian law.

Background

Declan Flight, Inc. and Right Rudder Aviation, LLC served as sales representatives and distributors for the Slovenian aircraft manufacturer Pipistrel. In 2022, Textron, Inc. acquired Pipistrel and its subsidiary, Textron eAviation, Inc., and subsequently terminated the plaintiffs’ contracts. The plaintiffs sued for tortious interference with their contracts and a separate sales agreement with Mesa Airlines. The district court dismissed the claims against Pipistrel’s contracts for forum non conveniens, ruling that the defendants could enforce the Slovenian forum-selection clauses against the plaintiffs under the federal doctrine of equitable estoppel. The court also dismissed the claim regarding the Mesa Airlines contract for failure to state a claim.

The court’s reasoning

The court held that the applicability of a forum-selection clause is a matter of contract interpretation, which is a substantive issue governed by the law applicable to the contract under Erie doctrine. The court distinguished between the ‘applicability’ of a clause (who it binds) and its ‘enforceability’ (whether it should be upheld). While enforceability is governed by federal common law, applicability must be determined by the substantive law governing the contract. Applying Florida choice-of-law rules, the court found that Slovenian law governed the contracts. Under Slovenian law, non-signatories cannot invoke forum-selection clauses via equitable estoppel. Consequently, there was no valid forum-selection clause applicable to the defendants, and the district court abused its discretion by applying the Atlantic Marine test.

we hold that courts must interpret a contract’s forum-selection clause just like any other provision—under the substantive law governing the contract.

What it means going forward

The decision requires federal courts in the Eleventh Circuit to apply the substantive law of the contract to determine the scope of forum-selection clauses before applying federal common law to assess enforceability. This prevents non-signatories from using equitable estoppel to enforce foreign forum-selection clauses when the governing contract law does not permit such enforcement.

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