On December 3, 2013, the Supreme Court of the United States issued its opinion in Atlantic Marine Constr. Co. v. U. S. Dist. Court for the W. Dist. of Tex.,—U.S.—, 134 S. Ct. 568 (2013). At issue was a forum selection clause in a domestic construction contract, but the opinion instructs parties on the weight to be given forum selection clauses in contracts and the manner in which a party may challenge the plaintiff’s chosen forum.
The case involved a subcontract between Atlantic Marine Construction Company and J-Crew Management, Inc., which was to perform work on a construction project. The subcontract’s forum-selection clause indicated that all disputes between the parties would be litigated in Virginia. When a dispute arose, though, J-Crew Management filed suit in federal court in Texas.
Atlantic Marine moved to dismiss the suit, on the basis that the forum-selection clause rendered venue “wrong” under the applicable statute, 28 U.S.C. § 1406(a), and “improper” under Federal Rule of Civil Procedure 12(b)(3). In the alternative, Atlantic Marine moved to transfer the case to the Eastern District of Virginia, under another statute, 28 U.S.C. § 1404(a). The District Court denied both motions. It held that § 1404(a) was the exclusive applicable statute, and under it, Atlantic Marine bore the burden to show that a transfer was appropriate, considering both the public and private interests at issue. The Court held that the forum selection clause was merely one factor to be considered. It then held that Atlantic Marine had not carried its burden to show that transfer was appropriate.
Atlantic Marine filed a petition for writ of mandamus with the United States Court of Appeals for the Fifth Circuit, asking it to direct the District Court to dismiss the case or transfer it to the Eastern District of Virginia. The Fifth Circuit affirmed the holding of the District Court, holding that § 1404(a) provided the exclusive statute available to enforce a forum-selection clause that points to another federal forum and that Rule 12(b)(3) would have been applicable if the forum selection clause pointed to a nonfederal forum (a state forum or a foreign jurisdiction). The Court also held that the District Court had not abused its discretion in finding that Atlantic Marine had not carried its burden of proof under § 1404(a).
The Supreme Court clarified three points that will be helpful to any party attempting to enforce a forum selection clause, whether in a domestic or international transaction. First, the Court clarified that when the forum selection clause points to another federal forum, § 1404(a) provides the exclusive mechanism to enforce the forum selection clause. § 1404(a) is a codification of the doctrine of forum non conveniens, so a court considering a motion to transfer venue would apply those factors to determine whether transfer is appropriate.
Second, where the forum selection clause points to a nonfederal forum—either a state forum or a foreign jurisdiction—the Court should enforce the forum selection clause through the doctrine of forum non conveniens. Since § 1404(a) is a codification of forum non conveniens, the relevant factors to be considered and the balancing test to be employed are actually the same.
However, the Court also clarified that in making that determination in a case in which there has been a valid forum-selection clause, the choice of forum in that clause is to be given “controlling weight.” The Court stated that “[w]hen parties agree to a forum-selection clause, they waive the right to challenge the preselected forum as inconvenient or less convenient for themselves or their witnesses, or for their pursuit of the litigation.” Thus, the private-interest factors must be deemed to weigh in favor of the preselected forum. And since the public-interest factors alone will rarely defeat a transfer motion, “the practical result is that forum-selection clauses should control except in unusual cases.” Because the District Court’s decision did not comport with those principles, the Court reversed the decision of the Fifth Circuit and remanded to consider whether a transfer was appropriate.
This decision should be of great benefit to parties attempting to enforce a forum-selection clause. Where the parties have validly included a forum-selection clause, the Court has severely limited the reasons why a lower court might allow one party to pursue litigation in another forum—even if the selected forum is a foreign jurisdiction. As a result, the parties will not be able to escape their choice of forum except in unusual cases.