US Forum-Selection Clause Upheld

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In this blog, we typically review forum-selection cases in the context of internet-related contracts and software licenses. A recent decision out of the US Supreme Court squarely addressed the issue of forum-selection clauses in a construction contract. While this is not an intellectual property case, it is instructive for Canadian companies entering into any contract in the US. To review, a “forum-selection clause” is a provision in a contract which picks a particular country or province or state for the resolution of disputes - put another way, it’s the place where litigation would be started in the event of a dispute.

In Atlantic Marine Construction Co., Inc. v. U.S. District Court For The Western District of Texas, the US Supreme Court indicated that where the parties have elected to include a forum-selection clause in their contract, that clause “represents [their] agreement as to the most proper forum,” and should be “given controlling weight in all but the most exceptional cases.”.

The Court went on to say that:

  • First, if one party defies the forum-selection clause by commencing a lawsuit in another jurisdiction, that party has the burden of convincing the court that the case shouldn’t be transferred to the forum named in the agreement.
  • Second, “the court should not consider the parties’ private interests aside from those embodied in the forum-selection clause; it may consider only public interests.” Public-interest factors will not typically override the forum-selection clauseexcept in very unusual cases.
  • Lastly, if a party is bound by a forum-selection clause and they choose to flout those contractual obligations by filing a lawsuit in a different forum, then they don’t get the benefit of applying the choice-of-law rules in the jurisdiction in which they filed. In other words, they can’t improve their chances of success by filing in a state with favourable choice-of-law rules. They will be bound by the choice-of-law rules of the forum named in the forum-selection clause.

The US Supreme Court has confirmed that forum-selection clauses should be upheld in the US.

Topics:  Forum Selection Clause, SCOTUS

Published In: Civil Procedure Updates, General Business Updates, International Trade Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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