Supreme Court Gives Heavy Weight to Forum-Selection Clause

Supreme Court Gives Heavy Weight to Forum-Selection Clause

By: Jamie Johnson

Atlantic Marine Construction Company v. U.S. District Court for the WD of Texas, No. 12–929 (U.S. Dec. 3, 2013) dealt with a defendant seeking to enforce a forum-selection clause. Petitioner Atlantic Marine Construction Company (“Atlantic Marine”), a Virginia corporation, entered into a subcontract with respondent J-Crew Management (“J-Crew”), a Texas corporation, for a construction project. The subcontract contained a clause stating that all disputes would be litigated in Virginia. A dispute then arose over payment and J-Crew filed the suit in the Western District of Texas, under diversity jurisdiction, instead of Virginia, where they contracted to file. Atlantic Marine moved to dismiss based on 28 U.S.C. § 1406(a) and under Federal Rule of Civil Procedure 12(b)(3) claiming that venue was wrong. Alternatively, they moved to transfer the case to the Eastern District of Virginia under 28 U.S.C. § 1404(a). There was no dispute as to whether the forum-selection clause was valid. The district court denied both motions and held that Atlantic Marine had the burden to show that the transfer would be appropriate and that the court would employ a balancing test between public and private factors, with the forum-selection clause only being one factor.Writing for the Court, Justice Alito reversed and remanded the case in a 9-0 decision, ruling that the lower courts applied the wrong standard for a 1404(a) transfer. They agreed that a forum-selection clause may not be enforced by a motion to dismiss based on 1406(a) or FRCP 12(b)(3) because those rules only allow for dismissal when venue is “wrong” or “improper.” Whether venue is “wrong” or “improper” depends wholly on whether the court in which the case was brought satisfies the requirements of federal venue laws, and those provisions say nothing about aforum-selection clause. If a forum-selection clause points to a non-federal forum, then a motion to dismiss under FRCP 12(b)(3) would be the correct mechanism because 1404(a) by its terms does not permit transfer to any tribunal other than another federal court.The Court reversed and held that a forum-selection clause may be enforced by a motion to transfer under 28 U.S.C. § 1404(a), which provides that, “[f]or the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought or to any district or division to which all parties have consented.” In other words, 1404(a) does not condition the transfer on the initial forum being “wrong.” Instead, it permits transfer to any district in which the parties have agreed by contract or stipulation. Therefore, if there is a forum-selection clause that points to a specific federal district, the district court should transfer the case unless extraordinary circumstances unrelated to the convenience of the parties clearly disfavor a transfer. The plaintiff’s choice of forum merits no weight and the court evaluating the transfer should not consider arguments about the parties’ private interests.