Supreme Court Offers Guidance on How to Enforce Forum Selection Clauses
The United States Supreme Court has just decided a case about the proper weight to attribute to contractual forum selection clauses and how to enforce the clause if a plaintiff files suit in a different court. The Court’s December 3, 2013, decision in Atlantic Marine Construction Co., Inc. v. U.S. District Court For The Western District of Texas, 571 U.S. ___, No. 12-929 (Dec. 3, 2013) (slip opinion), highlights the value of including a mandatory forum selection clause in contracts.
The Court laid out both the method for challenging the venue of a suit and the analysis that a district court needs to apply to such a proper challenge.
The Method for Challenging the Suit:
- When asserting a forum selection clause, it is not proper to move to dismiss pursuant to 28 U.S.C. § 1406 or Federal Rule of Civil Procedure 12(b)(3) on the basis that the venue in which the suit was filed is “wrong” or “improper;”
- When asserting a forum selection clause that selects anotherfederal forum, 28 U.S.C. § 1404(a) is the proper means of challenging the forum and obtaining a transfer (the Court expressly recognized that it might be possible to move to dismiss under Federal Rule of Civil Procedure 12(b)(6), but did not resolve the question because only amicus had raised it); and
- When asserting a forum selection clause that selects a state orforeign forum, forum non conveniens is the proper means of challenging the forum and obtaining dismissal.
The Supreme Court clarified the ways in which analysis of a motion to transfer or for forum non conveniens differs when a party is seeking to enforce a forum selection clause. The changes arise because the parties have already made a determination as to what forum is proper at the time they entered into their contract. Thus, where a court would ordinarily defer to the plaintiff’s venue choice, that factor is immaterial when there is a forum selection clause, because it is theinitial choice of forum¾at the time of contracting¾that carries weight, not the later change of mind. The plaintiff then must show why the court should not transfer the case to the agreed forum. Likewise, the “private interests” have already been weighed between the parties, and the court will look only to “public interests” in determining whether to uphold the forum selection clause. Flowing from those two, the law of the court in which the suit was filed is not given weight: if the case is transferred, the choice-of-law rules of the forum set forth in the forum selection clause apply to determine the substantive law that will govern the dispute. “In all but the most unusual cases, therefore, ‘the interest of justice’ is served by holding parties to their bargain.”