Enforcement Of Forum Selection Clauses Just Got Easier

The U.S. Supreme Court's recent decision in Atl. Marine Const. Co., Inc. v. U.S. Dist. Ct. for the W. Dist. of Tex., et al., No. 12-929, 2013 U.S. LEXIS 8775, 571 U.S. ___ (2013), provides needed clarity not only on the mechanism by which forum selection clauses should be enforced but also makes clear that such clauses should, in fact, be enforced, absent "extraordinary circumstances." This decision should make it easier for a party to obtain its contractually bargained for forum if litigation arises and, hopefully, reduce the number of challenges that are made to such contractual provisions.

Background

Atlantic Marine, a Virginia corporation, entered into a construction contract with the U.S. Army Corps of Engineers for a project at Fort Hood in Texas. Atl. Marine, 2013 U.S. LEXIS 8775, at *8. Atlantic Marine, in turn, entered into subcontract with J-Crew Management, Inc., a Texas corporation. Id. The subcontract contained a forum-selection clause specifying that disputes would be litigated in specific state or federal court in Norfolk, Virginia. Id. After a dispute arose between Atlantic Marine and J-Crew, however, J-Crew sued in the Western District of Texas, ignoring the forum-selection clause. Id.

Atlantic Marine moved to dismiss the Texas lawsuit based on the forum-selection clause in the parties' contract. Atlantic Marine argued that the clause rendered venue "wrong" under § 1406(a) or "improper" under Fed. R. Civ. P. 12(b)(3). Id. at *9. Section 1406(a) provides that when a case is brought in the "wrong" venue, the district court must dismiss or transfer the case to "any district or division in which it could be been brought." Similarly, Rule 12(b)(3) allows a party to move to dismiss on the basis of "improper venue."

Alternatively, Atlantic Marine moved to transfer to the Eastern District of Virginia under § 1404(a). Section 1404(a) provides a district court broader power to transfer a case "for the convenience of parties and witnesses, in the interest of justice . . . to any other district or division where it might have been brought or to any district or division to which all parties have consent."

The U.S. District Court for the Western District of Texas denied both motions, holding that § 1404(a) was the sole mechanism for enforcing a forum-selection clause and that Atlantic Marine bore the burden of establishing that transfer was in fact appropriate. Id. (citing U.S. ex rel. J-Crew Mgmt., Inc. v. Atl. Marine Constr. Co., 2012...