Can incapacity invalidate forum selection clauses in retainer agreements? PCVI v. Premsrirut Explained

The Utah Court of Appeals recently addressed whether a principal’s incapacity can invalidate forum selection clauses in legal retainer agreements in PCVI v. Premsrirut. This case provides important guidance for practitioners challenging forum selection clauses based on mental capacity issues.

Background and Facts

Entrepreneur Anthony Hsieh executed a power of attorney in July 2020, authorizing Connie Yeh to act on his behalf. Weeks later, Yeh signed a retainer agreement with Nevada law firm Brown Brown & Premsrirut, which contained forum selection clauses requiring disputes to be litigated in Nevada. After Hsieh’s death in November 2020, entities formed under his power of attorney sued the firm for legal malpractice in Utah. The defendants moved to dismiss for improper venue, citing the forum selection clauses.

Key Legal Issues

The primary issue was whether Hsieh had mental capacity to execute the power of attorney on July 18, 2020. The plaintiffs presented extensive evidence of Hsieh’s substance abuse and delusional thinking in the months surrounding that date, including expert medical opinions that he lacked contractual capacity from June 2020 until his death. The court also addressed whether it would be unfair to enforce the forum selection clauses and whether non-signatory entities were bound by them.

Court’s Analysis and Holding

The Court of Appeals reversed, finding the district court applied the wrong standard. When a motion to dismiss moves beyond the pleadings and involves contested facts, courts must allow factual development through discovery rather than viewing facts in the plaintiff’s favor. The court held that plaintiffs presented sufficient evidence of Hsieh’s incapacity near July 18, 2020, including testimony from friends who observed erratic behavior and expert medical opinions. The court emphasized that incapacity can be proven through evidence from witnesses who observed the individual “at or near the time” of the transaction.

Practice Implications

This decision clarifies the procedural framework for challenging forum selection clauses based on incapacity. Practitioners should present specific evidence of mental impairment close in time to the contract execution and request discovery when factual disputes arise. The court rejected arguments that expert medical testimony is required, noting that lay witness testimony can establish incapacity. However, practitioners challenging forum selection clauses must still meet the burden of proving incapacity by clear and convincing evidence once discovery is completed.