US Supreme Court Reaffirms That Forum-Selection Clauses Are Presumptively Enforceable

Keywords: Forum-selection clauses, district court, Atlantic Marine

Forum-selection clauses are common, and highly useful, features of commercial contracts because they help make any future litigation on a contract more predictable for the parties and, in some cases, less expensive. But what procedure should a defendant use to enforce a forumselection clause when the defendant is sued in a court that is not the contractually selected forum?

On December 3, 2013, the US Supreme Court issued a decision in Atlantic Marine Construction Co. v. United States District Court for the Western District of Texas1 that answers this question. The Court held that, if the parties' contract specifies one federal district court as the forum for litigating any disputes between the parties, but the plaintiff files suit in a different federal district court that lawfully has venue (and therefore could be a proper place for the parties to litigate), the defendant should seek to transfer the case to the court specified in the forum-selection clause by invoking the federal statute that permits transfers of venue "[f]or the convenience of the parties and witnesses, in the interest of justice."2 If the contract's forumselection clause instead specifies a state court as the forum for litigating disputes, the defendant may invoke a different federal statute that requires dismissal or transfer of the case.3

Importantly, the Court held that the parties' contractual choice of forum should be enforced except in the most unusual cases, and that the party resisting the forum-selection clause (i.e., the plaintiff who filed in a different court) has the burden of establishing that public interests disfavoring transfer outweigh the parties' choice.

Atlantic Marine is significant for the banking and finance community because it provides greater certainty regarding the enforceability of forum-selection clauses, giving banks and other lenders that employ such clauses in their contracts greater predictability about where they will face future litigation. The Court in Atlantic Marine reinforced the strong federal policy favoring the enforcement of such clauses, and clarified the mechanism for their enforcement.

As the Court explained, "[w]hen parties have contracted in advance to litigate disputes in a particular forum, courts should not unnecessarily disrupt the parties' settled expectations. A forum-selection clause, after all, may have figured centrally in the parties' negotiations and may have affected how they set monetary and other contractual terms; it may, in fact, have been a critical factor in their agreement to do business...