Legal Issues on the Edge of the State Line
Despite their differences, the laws affecting businesses in Missouri and Kansas also have much in common.

By Kevin J. Odrowski

Say a business headquartered in Kansas wants to buy a hundred widgets for its new Missouri facility. The widget maker has a factory in Kansas but its corporate offices are located in Missouri. Which state’s law would apply to the sale? In the event of a dispute, where should the lawsuit be filed? Are the laws in Missouri and Kansas really so different that they would affect the outcome?

Choice of Law
Lawyers who practice in the Kansas City metropolitan area are frequently confronted with these issues. Sometimes, the  “choice of law” is the state where the contract was made. This can be a real brainteaser when the contract is signed at different times and in different states.

Sometimes the applicable law can be determined only on a case-by-case basis. It may depend upon a rather nebulous balancing act in which many facts are weighed to find out which state has the most significant relationship to the transaction or dispute.

In contractual relationships, the underlying agreement should specifically identify which state’s law will govern the validity, interpretation and enforcement of the agreement. As long as there is some reasonable connection between the transaction and the chosen state, generally the clause will be binding on the court.

A choice of law clause will create greater certainty and avoid needless legal analysis. If the subject matter of the contract is an area where there are differences in Missouri and Kansas law, sometimes the party who has drafted the document can gain greater protection or obtain a strategic advantage simply by selecting the controlling law.

Forum Selection
A  “forum selection” provision goes hand-in-hand with choice of law. A forum selection clause will mandate precisely where a lawsuit must be filed, to the exclusion of all other courts, in the event of a dispute between the contracting parties. This literally may give one party a  “home court” advantage. It also will prevent the other party from shopping around for the most favorable forum for the particular type of claim. Sometimes, forum selection clauses will prevent the practical inconveniences of having to select an unfamiliar lawyer in a distant state or in having to travel a great distance for meetings and court hearings.

The demographics of potential jurors is sometimes a factor in forum selection. Locally, plaintiff’s lawyers in search of large verdicts look to the urban juries of Jackson County, Mo., as the holy grail. Most defense lawyers would much rather be in the more constrained environs of a federal court, or have a more conservative pool of jurors from Johnson County, Kan. (or, anywhere else but Jackson County).

A well-drafted forum selection clause may prevent dismissal of a lawsuit where the court would otherwise lack jurisdiction or authority over an out-of-state company. For instance, a contract between a Missouri seller and Kansas buyer reached solely by interstate means, such as phone calls and faxes, may not be enough to give a Missouri court jurisdiction over the out-of-state business. This problem can be eliminated by language in the agreement that states the out-of-state party irrevocably consents to the jurisdiction of that state’s courts.

Variations in the Law
Business lawyers representing clients on both sides of the state line must be familiar with the significant differences in the substantive areas of Missouri and Kansas law. Some of the most significant differences between Kansas and Missouri law are found in tort litigation. Kansas has a number of statutes on the books designed to limit tort recoveries, so-called  “tort reform” measures, while earlier this year, Missouri Governor Bob Holden vetoed comprehensive tort reform legislation.

There are many other variations in the law between Missouri and Kansas, such as those affecting banks, insurance companies, licensed professions and other regulated industries. The consumer protection statutes of Missouri and Kansas also vary significantly. A business practice lawful in one state may not necessarily be legal in the other.   

Similarities Exist, Too
Despite their differences, the laws affecting businesses in Missouri and Kansas also have much in common. First, the ever-expanding federal laws apply with equal force in both states.

Second, there are a number of nationally adopted uniform legislative acts. The Uniform Commercial Code (UCC) is a good example. The UCC has been adopted in every state except Louisiana. The UCC affects a wide variety of business transactions, including the sale of goods, equipment leases, collateralized loan agreements, letters of credit, bank deposits and funds transfers, promissory notes, bills of lading and warehouse receipts.

Third, Missouri and Kansas, like every other state (again, except Louisiana), have a common law legal system whose roots date back several centuries to England. Finally, the use of common sense, prudence, fairness and reasonableness in business practices apply in equal measure on both sides of the state line.

Because of the challenges of operating in a bi-state environment, small business owners should work with legal advisors who understand the intricacies of interstate commerce.

Kevin Odrowski is an attorney who represents both individuals and small businesses in Missouri and Kansas. He has experience in drafting agreements, commercial litigation, real estate law and general business law. He can be reached at (816) 931-4408.