Forced Venue and Jurisdiction Clauses: How Brokers Use Litigation Cost Barriers to Eliminate Accountability

In our ongoing series examining the 14 Hidden Dangers Lurking in Business Broker NDAs, we have explored numerous provisions designed to insulate brokers from consequences and shift risk to buyers. Today we examine a provision that weaponizes litigation costs to prevent buyers from challenging broker misconduct: forced venue and jurisdiction clauses that require all disputes to be resolved in the broker's home state or county, often hundreds of miles from where the buyer lives. These provisions create devastating practical and financial barriers to pursuing legitimate claims against brokers, while simultaneously making it easy and inexpensive for brokers to pursue claims against buyers. When combined with other NDA provisions requiring buyers to pay broker attorney fees, forced venue clauses transform the cost of litigation into an enforcement mechanism that silences buyer complaints and makes brokers virtually unaccountable for their conduct.

The Actual Language From Business Broker NDAs

During our review of business broker confidentiality agreements, we encountered venue and jurisdiction provisions that deliberately concentrate litigation power in the broker's jurisdiction:

"Consent & Jurisdiction. This Agreement shall be governed by the laws and construed in accordance with the laws of the State of North Carolina, and the parties consent and agree that Pitt County, North Carolina, shall be the sole and exclusive venue for all proceedings relating to this Agreement and/or its subject matter, including without limitation the enforcement hereof. Prospect hereby waives all objections to establishing venue elsewhere."

Another NDA from a Florida-based broker contains similar language:

"Consent & Jurisdiction. This Agreement shall be governed by the laws and construed in accordance with the laws of the State of Florida, and the Parties consent and agree that the County where Broker's office is located, Sarasota County, Florida, shall be the sole and exclusive venue for all proceedings relating to this Agreement and/or its subject matter, including without limitation the enforcement hereof. Prospect hereby waives all objections to establishing venue elsewhere."

These provisions serve a specific function: they ensure that if a dispute arises, it must be litigated in the broker's home jurisdiction, not in the buyer's home. And crucially, these provisions appear in adhesion contracts—take-it-or-leave-it agreements presented by brokers to buyers with no opportunity to negotiate.

Let's examine the practical and strategic impact of these forced venue provisions.

The Financial Barrier to Enforcing Rights

To understand why forced venue clauses are so problematic, consider the practical costs of litigating in a distant jurisdiction. Suppose you are a buyer in Charlotte, North Carolina, evaluating a business in Greenville, South Carolina, represented by a broker based in Sarasota, Florida. The NDA requires you to litigate any disputes in Sarasota County.

If you want to sue the broker for providing false financial information or breaching confidentiality obligations, you face substantial costs. First, you must hire an attorney licensed to practice in Florida. You cannot use your North Carolina attorney. You need a Florida attorney. If you have an existing relationship with an attorney in your home state, that attorney must associate with a Florida firm, increasing your legal costs.

Second, you must travel to Sarasota for depositions, court appearances, and trial. This means flights from Charlotte to Florida, hotel accommodations, time away from your business, and travel costs for you and your attorney. If your case goes to trial, that could mean days or weeks in Florida.

Third, you must manage the litigation from afar. Communications with your attorney become more difficult. Gathering documents, witness preparation, and case management all become more cumbersome when you are not in the same state as your attorney.

Consider the financial impact. A modest dispute over whether the broker breached confidentiality obligations or provided false information might involve a claim for $50,000 to $100,000. But the cost of litigating that claim in Florida could easily exceed $30,000 to $50,000 in attorney fees, travel costs, and expenses. Suddenly, the economic rational calculation changes. Paying the broker's demand becomes cheaper than fighting the claim, even if you believe you are right.

This is precisely the effect brokers want. By establishing venue in a distant jurisdiction, brokers create cost barriers that make it economically irrational for most buyers to pursue legitimate claims. The cost of litigation becomes so high relative to what is at stake that most buyers will simply accept broker demands rather than fight.

This creates a form of economic coercion. Brokers know that most disputes will never go to litigation because the cost barrier is too high. This knowledge insulates brokers from accountability. They can make aggressive or questionable claims against buyers, knowing that most buyers will settle rather than incur the cost of distant litigation.

The Power Imbalance Problem

Forced venue clauses create an asymmetric power dynamic that advantages brokers and disadvantages buyers. The impact is particularly acute when combined with other NDA provisions that require buyers to pay broker attorney fees.

Consider this scenario: You are a buyer in North Carolina. You evaluate a business through a broker in Florida. You determine you are not purchasing the business. Months later, the broker claims you violated the NDA by contacting the seller. The broker demands $25,000, claiming it is owed broker commission or penalties for the alleged breach.

You believe the claim is unjustified. You want to defend yourself by challenging the broker's claim in court. But the NDA requires you to litigate in Florida. You face a choice: (1) pay the broker's demand to avoid litigation, (2) travel to Florida to defend yourself, incurring travel costs, paying an out-of-state attorney, and facing substantial litigation expenses, or (3) default and let the broker win by default judgment.

Meanwhile, if the broker decides to sue you, they litigate in their home jurisdiction, where they have local counsel relationships, where they appear regularly, where they have the home court advantage. The broker can easily hire local counsel who knows the judges, understands local practice, and can efficiently manage litigation. For the broker, litigating in their home state is cheap and convenient.

Now imagine the broker also includes a provision requiring you to pay the broker's attorney fees if the broker prevails. Suddenly, losing to the broker could mean not only paying the broker's claim but also paying the broker's attorney fees—potentially doubling or tripling your liability.

This asymmetry creates a power imbalance that works entirely in the broker's favor. Brokers can make aggressive claims against buyers knowing that the cost of defending those claims is so high that buyers will likely settle. Buyers cannot effectively threaten to sue brokers because the cost of suing in a distant venue is prohibitive.

The practical effect is to eliminate broker accountability. Brokers become insulated from meaningful challenge because the procedural barriers are so high that most buyers will not bother to pursue claims, even legitimate ones.

Why North Carolina Law Disfavors These Provisions

North Carolina has specific law addressing forum selection clauses in contracts. North Carolina General Statute § 22B-3 and case law establish that forum selection clauses are not automatically enforceable, particularly when they are one-sided, appear in adhesion contracts, or would create fundamental unfairness.

North Carolina courts have held that forum selection clauses must be scrutinized for "fundamental fairness," particularly in consumer or adhesion contracts where one party has superior bargaining power and imposes take-it-or-leave-it terms. When a venue clause would impose unreasonable burdens on one party or create a cost barrier that effectively prevents that party from accessing the courts, North Carolina courts may refuse to enforce the clause.

Additionally, North Carolina has a statute specifically addressing this issue. The statute provides that, absent other applicable law, certain types of contract litigation "must be tried in the county in which" one or more parties reside. Courts have applied this statute to override forum selection clauses that would require parties to litigate in jurisdictions where they do not reside, particularly when the selected venue has no connection to the parties or the transaction.

Furthermore, when a venue clause is included in an adhesion contract, a take-it-or-leave-it agreement where the buyer has no opportunity to negotiate, North Carolina courts view the clause more skeptically. The venue clause in broker NDAs is precisely this type of adhesion contract. The broker presents the NDA on a take-it-or-leave-it basis. Buyers cannot negotiate venue provisions. The venue clause is imposed, not negotiated.

Under these circumstances, North Carolina courts have authority to refuse to enforce forum selection clauses that work fundamental unfairness. A provision that requires a North Carolina buyer to litigate disputes with a North Carolina broker in Sarasota County, Florida—hundreds of miles away, at enormous cost; could reasonably be viewed as working fundamental unfairness.

The Justice System Cost Barrier Problem

Beyond North Carolina law, there is a broader principle that courts recognize: provisions that create cost barriers so high that they effectively prevent access to courts violate fairness principles and may be unenforceable.

Courts have addressed this issue in the context of mandatory arbitration agreements that shift costs to the weaker party. When an arbitration agreement creates a cost barrier so high that it prevents the employee or weaker party from accessing dispute resolution, some courts have struck down or reformed the agreement. The logic is that access to justice should not depend on a party's ability to pay for the extraordinary costs imposed by a contract.

The same principle applies to forced venue clauses. If a venue clause creates a cost barrier so high that a buyer cannot realistically afford to litigate, it effectively denies the buyer access to justice. This violates principles of fundamental fairness that courts protect.

While North Carolina courts have not specifically addressed this issue with forced venue clauses in broker NDAs, the principle is well-established in other contexts: provisions that create cost barriers to accessing courts are disfavored and may be unenforceable.

How These Provisions Reveal Broker Intent

The inclusion of forced venue clauses in broker NDAs reveals brokers' true intent regarding accountability. If brokers were confident in the fairness of their contracts and their conduct, they would not need to impose venue provisions that make it prohibitively expensive for buyers to challenge them.

The forced venue clause serves one purpose: to eliminate practical accountability. Brokers know that most disputes will never reach litigation because the cost barrier is too high. This knowledge enables aggressive enforcement of questionable provisions against buyers.

Furthermore, brokers typically choose their home county for venue, which maximizes convenience for the broker and cost for the buyer. This asymmetry is not accidental. Brokers deliberately structure the venue provision to maximize their advantage and minimize buyer options.

Protecting Yourself From Forced Venue Clauses

If you are presented with a broker NDA containing a forced venue clause, you should immediately object and propose modifications. Here are specific steps to take:

First, propose that venue be in the location where you are domiciled or where the business being evaluated is located, not in the broker's home county. This creates fairness and reasonableness in venue selection.

Second, propose that venue be mutual. If disputes go to the broker's county, then disputes should go to the buyer's county. This mutual arrangement is more reasonable than a one-sided provision favoring the broker.

Third, propose that venue be where the business or transaction is located. This makes practical sense because witnesses, documents, and information are likely to be in that location.

Fourth, propose that virtual litigation be permitted, including virtual depositions and virtual hearings. This addresses the core concern about cost by permitting litigation to proceed without requiring extensive travel.

Fifth, if the broker insists on a specific venue, propose that they agree to waive the venue provision if the buyer pays the broker's attorney fees for venue-related costs. This way, if the broker insists on bringing the buyer to a distant venue, the broker absorbs the cost.

Sixth, if the broker refuses to modify the venue provision, make sure you document your objection in writing. Note that the venue provision is one-sided, favors the broker, and creates fundamental unfairness.

If you have already signed an NDA with a forced venue clause, you may have grounds to challenge it as unenforceable under North Carolina law. If a dispute arises and the broker attempts to enforce the venue provision, consult an attorney about whether the clause can be challenged as creating fundamental unfairness or imposing cost barriers that violate public policy.

Moving Forward With Fair Venue Provisions

Forced venue clauses in broker NDAs represent another example of brokers using contractual provisions to eliminate practical accountability for their conduct. By concentrating venue in the broker's home jurisdiction, brokers create cost barriers so high that most buyers will not pursue legitimate claims. This insulates brokers from meaningful consequences for misconduct and eliminates a critical check on broker behavior.

Fair venue provisions would be mutual, would be located in a jurisdiction with reasonable connection to the parties or transaction, or would permit virtual proceedings to minimize travel costs. Venue provisions that impose severe cost barriers on buyers while creating convenient and inexpensive litigation for brokers are not fair or enforceable.

Insisting on fair, mutual, or reasonably located venue provisions is essential to protecting your right to access courts and challenge broker misconduct when necessary. Do not accept a venue provision that would require you to litigate hundreds of miles from home at prohibitive cost. This type of provision is a red flag that the broker is not interested in fair dealing and is attempting to use litigation costs as a mechanism to eliminate accountability.

Important Legal Disclaimer: This article provides general educational information about forced venue and jurisdiction clauses in business broker NDAs and North Carolina law. It does not constitute legal advice for any specific situation. While North Carolina law on forum selection clauses is discussed here, state laws vary and the enforceability of specific provisions depends on the facts and circumstances of each case. Many states have principles similar to North Carolina's regarding venue clause enforceability, though specific applications vary. Reading or relying on this article does not create an attorney-client relationship with Howard Law. If you have questions about venue or jurisdiction provisions in a specific NDA or need assistance challenging such provisions, contact Howard Law at www.ehowardlaw.com for professional legal consultation.

---

Howard law is a legal and M&A advisory firm providing experienced representation for buyers and sellers navigating business transactions nationwide. We specialize in protecting client interests from unqualified or unethical intermediaries while ensuring successful deal completion with appropriate professional standards. Contact us at www.ehowardlaw.com for consultation on your business acquisition needs.