U.S.A.: Supreme Court Upholds Enforceability of Forum-Selection Clauses

Carl ZWISLER | USA | 2014-07-15


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In Atlantic Marine, plaintiff J-Crew Management, Inc. filed a breach-of-contract lawsuit against Atlantic Marine Construction in the Texas, even though the parties had agreed upon a forum-selection clause designating Norfolk, Virginia, as the mandatory venue for litigation. Atlantic Marine moved to dismiss the lawsuit, and in the alternative to transfer the case, arguing that the forum-selection clause obligated J-Crew to bring suit in Virginia. The district court denied Atlantic Marine’s motion, holding that the forum-selection clause was only one factor to be considered along with the convenience of the parties and their witnesses. It determined that Atlantic Marine had not met its burden to show that a transfer to Virginia was justified. Atlantic Marine appealed, arguing that the district court abused its discretion by, among other things, giving undue consideration to J-Crew’s arguments that a transfer would be inconvenient. The appellate court rejected these arguments and affirmed the district court’s decision.

The United States Supreme Court clarified that a party seeking to enforce a forum-selection clause by transferring its case from one federal court to another must rely on Section 1404 of the United States Code. On the other hand, a party seeking to enforce a forum-selection clause that points to a state or foreign forum must invoke the doctrine of forum non conveniens, the common law version of Section 1404. Under the doctrine of forum non conveniens, a case that is brought in an improper forum may be dismissed and then brought in the proper forum.

Under either the Section 1404(a) or forum non conveniens analysis, valid forum-selection clauses will almost always be enforced, and “[o]nly under extraordinary circumstances unrelated to the convenience of the parties” should a motion to dismiss or transfer to the appropriate forum be denied. The Court announced an altered analysis that trial courts should use in deciding whether to enforce valid forum-selection clauses. First, under this analysis, no weight may be given to the forum chosen by the plaintiff. And the party seeking to avoid application of a forum-selection clause must bear the burden of establishing that a transfer to the forum for which the parties bargained is unwarranted.

Second, the parties’ private interests (such as convenience, expense, and access to sources of evidence) may not be considered, unless those interests are embodied in the forum-selection clause itself. The only additional factors to be considered are public interest factors such as administrative difficulties resulting from court congestion, local interests in having local controversies decided at home, and the interest in trying diversity cases in forums that are familiar with the governing law. The Court acknowledged, however, that those factors will rarely defeat a motion to dismiss or transfer to an appropriate forum.

Third, when a case is transferred to the forum designated in the forum-selection clause, the new forum will not apply the original forum’s choice-of-law rules. This means that courts will not follow an exception that requires a transferee court to apply the state law applicable in the original court in a case transferred from a different forum.

Forum-selection clauses are ubiquitous in franchising because of the predictability they provide, and because many franchisors prefer to resolve disputes in their home state. The opinion’s strong language confirms that valid, mandatory forum-selection clauses will be enforced in almost every case.



Carl Zwisler, IDI Franchise Country Expert for U.S.A. and Maisa Jean Frank, Gray Plant Mooty Washington, DC.


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