Court Clarifies Enforceability Of Forum-Selection Clauses

Vol. 17 No. 1

By

Christianne Edlund, Mullin Russ Kilejian, PC, Maisa Jean Frank, Gray Plant Mooty

A recent unanimous ruling by the United States Supreme Court has brought clarity and certainty to previously murky questions regarding enforcement of forum selection clauses in federal court. In Atlantic Marine Construction Co. v. U.S. District Court, 187 L. Ed. 2d 487 (2013), the Court established that a party seeking to enforce a forum-selection clause and transfer a lawsuit to another federal court should file a motion to transfer venue under 28 U.S.C. § 1404. The Court also established that, absent extraordinary circumstances clearly disfavoring a transfer, a valid forum-selection clause should be enforced.

Prior to Atlantic Marine, federal courts were split over how a party to a lawsuit should challenge venue or jurisdiction based on a forum-selection clause. Some courts required litigants to file a motion to transfer venue under 28 U.S.C. § 1404, which gives a court broad discretion to transfer a lawsuit for the convenience of the parties. Courts in the Third, Fifth, and Sixth Circuits typically relied on Section 1404 to adjudicate disputes over venue. See, e.g., Jumara v. State Farm Ins. Co., 55 F.3d 873, 879 (3d Cir. 1995); In re Atl. Marine Constr. Co., 701 F.3d 736, 737 (5th Cir. 2012); Kerobo v. Sw. Clean Fuels Corp. 285 F.3d 531, 535 (6th Cir. 2002).

Under this line of authority, a forum-selection clause was merely one of multiple factors courts could consider when determining whether to transfer a case, and the party seeking enforcement of the clause had the burden to show why a transfer was justified. Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 30 (1988).

Other courts allowed, or sometimes required, litigants to use a myriad of other methods to enforce forum-selection clauses, including motions to dismiss for improper venue under Federal Rule of Civil Procedure 12(b)(3) and 28 U.S.C. § 1406, motions to dismiss for failure to state a claim under Rule 12(b)(6), or motions to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1). Courts in the Second, Seventh, Eighth, Ninth, and Eleventh Circuits typically relied on Section 1406 and Rule 12(b)(3) to adjudicate disputes over venue. See, e.g., TradeComet.com LLC v. Google, Inc., 647 F.3d 472, 477-78 (2d Cir. 2011); Doe 1 v. AOL LLC, 552 F.3d 1077, 1081 (9th Cir. 2009); Slater v. Energy Servs. Grp. Int’l Inc., 634 F.3d 1326, 1333 (11th Cir. 2011).

Under this line of authority, courts presumed a forum-selection clause to be valid unless the party seeking to avoid enforcement of the clause could prove it was unreasonable or unjust. M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 20 (1972). This wide variety of enforcement methods caused a great deal of confusion and left a great deal of uncertainty regarding whether federal courts would uphold parties’ written agreements to litigate matters in their agreed-upon jurisdictions.

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