Forum selection clauses are common in commercial contracts, but the reach of those clauses – particularly to non-signatories – is not always clear. The “closely related party” doctrine is one tool that courts have used to extend forum selection clauses to parties who are so closely related to the contractual parties that it was foreseeable that the clause would apply to and be enforceable by them, even though they have not signed the contract themselves. But on November 28, 2025, the Supreme Court of Arizona unanimously rejected the “closely related party” doctrine in Henderson v. Moskowitz. The Court found that existing doctrines, such as alter ego and third-party beneficiary doctrines, were sufficient to address non-signatory issues, and that specific features of the underlying contract suggested that the non-signatory should not be covered by the forum selection clause.
Key Takeaways
- The Arizona Supreme Court has rejected the application of the “closely related party” doctrine to allow non-signatories of a contract to benefit from forum selection clauses.
- It remains to be seen, however, how lower courts will apply the Court’s holding, particularly in cases that do not have the unique facts in Henderson and in light of the Court’s acknowledgment that the “closely related party” doctrine “may” be a “unique, new tool.”
- It also remains to be seen how federal courts will apply the Court’s holding, given caselaw from the Ninth Circuit recognizing and applying the “closely related party” doctrine.
Background
Nomad Capitalist USA, LLC (“Nomad”), is a consulting company offering services to people interested in “relocating to foreign jurisdictions, obtaining foreign citizenship, and planning offshore tax strategies.” In pursuit of these services, Robert Sullivan signed a contract with Nomad. The contract was governed by Arizona law, and contained a forum selection clause stipulating that "[e]ach party further consents to exclusive jurisdiction and venue in the jurisdiction of Hong Kong, S.A.R. China.” The contract was signed by Andrew Henderson, Nomad’s founder and manager, on Nomad’s behalf and not in his personal capacity.
The relationship between the two parties deteriorated, and Sullivan sued Nomad and Henderson in Arizona state court for breach of contract, unjust enrichment, and consumer fraud under Arizona’s Consumer Fraud Act. Both defendants moved to dismiss, invoking the contract’s forum selection clause.
The trial court granted Nomad’s motion to dismiss, and also dismissed the breach of contract claim against Henderson. But it denied Henderson’s motion to dismiss the consumer fraud claim, finding that there was no case law in Arizona that supported extending a forum selection clause that applies to “each party” to a non-signatory to the contract.
Henderson appealed all the way to the Arizona Supreme Court. He argued that the forum selection clause should apply to him under the “closely related party” doctrine. In response, Sullivan argued that applying the “closely related party” doctrine would be akin to re-writing the otherwise unambiguous language in the contract. After all, if Nomad wanted Henderson to benefit from the forum selection clause, it could have explicitly included him in the forum selection clause as it did elsewhere, including in the contract’s indemnification and social media provisions.
The Court’s Decision
The Arizona Supreme Court agreed with Sullivan. It remarked that under ordinary contract principles, Henderson would not have a right to enforce contract provisions as a non-signatory, including the forum selection clause, in his personal dispute with Sullivan. Under Arizona law, any third-party beneficiaries must be explicitly named in the contract to be able to enforce its terms. Here, the fact that Henderson was not mentioned in the forum selection clause – when he was named elsewhere in the contract – cut against his attempt to invoke the forum selection clause to his benefit. And unlike with an arbitration clause, where the public policy in favor of arbitration carries significant weight, public policy considerations are less weighty in the context of a forum selection clause that selects another country’s courts, particularly given Arizona’s strong interest in enforcing its consumer fraud statutes. Thus, the plain language of the contract and public policy considerations suggested that Henderson was not covered by the forum selection clause.
The Court also focused on the status of the “closely related party” doctrine in Arizona and elsewhere. After confirming that Arizona courts had not adopted the “closely related party” doctrine, the Court surveyed federal caselaw that criticized the “closely related party” doctrine. The Court also highlighted a 2009 decision from the Northern District of Texas, which called the doctrine “so vague as to be unworkable.”
Finally, the Court addressed Henderson’s argument that it would be unfair and inefficient to litigate in two courts at the same time. But the Court reiterated that Henderson could have been named in the contract’s forum selection clause if the parties had intended that he benefit from it. And, the Court observed, there are plenty of procedural tools to dismiss claims that lack merit. Thus, the Court did not allow Henderson to benefit from the contractual forum selection clause.
Conclusions
The Court’s rejection of the “closely related party” doctrine in Henderson is an important reminder to contracting parties that contract language matters, and that choices made in contract drafting can have significant ramifications in case of a dispute. But much still remains to be seen. In Henderson, the Court acknowledged that the “closely related party” doctrine “may” be a “unique, new tool” – seemingly leaving open a small window for its application in future cases with distinguishable facts. And the Court did not address caselaw from the Ninth Circuit (which includes within it federal courts in Arizona) that recognizes and applies the “closely related party” doctrine. That appears to be a situation that is ripe for forum-shopping, unless the Ninth Circuit revisits its prior decisions.
