Supreme Court Favors Enforcement of Contractual Forum Selection Clauses

In Atlantic Marine Construction Co., Inc. v. U.S. District Court For The Western District of Texas, 571 U.S. ___, No. 12-929 (December 3, 2013), the Court issued an opinion strongly favoring enforcement of contractual forum-selection clauses and holding that a party who files suit in violation of such a clause faces a heavy burden to avoid transfer of the case. The Court held that forum-selection clauses should be enforced under the venue statute, 28 U.S.C. § 1404(a), and stated that “a proper application of § 1404(a) requires that a forum-selection clause be “given controlling weight in all but the most exceptional cases.”

In particular, in conducting a Section 1404(a) analysis where a contractual forum selection clause is at issue, the plaintiff’s choice of forum shall be afforded no weight. Per the Court, “when a plaintiff agrees by contract to bring suit only in a specified forum—presumably in exchange for other binding promises by the defendant—the plaintiff has effectively exercised its ‘venue privilege’ before a dispute arises. Only that initial choice deserves deference, and the plaintiff must bear the burden of showing why the court should not transfer the case to the forum to which the parties agreed.” The Court specifically noted that trial courts should not consider the parties’ private interests, such as convenience of the witnesses or the location of evidence when conducting the transfer analysis. Private-interest factors are to be deemed to weigh entirely in favor of the preselected venue. The Court also held that “when a party bound by a forum-selection clause flouts its contractual obligation and files suit in a different forum, a § 1404(a) transfer of venue will not carry with it the original venue’s choice-of-law rules.” In other words, the law of the contractually selected forum will apply.