|December 6, 2013|
Previously published on December 4, 2013
There has been confusion in the courts over the years regarding the appropriate mechanism to enforce forum-selection clauses, which are now routinely included in many commercial and personal contracts. Such clauses typically require any dispute between contracting parties to be resolved in the particular federal or state court chosen by the parties in the contract. On December 3, 2013, the U.S. Supreme Court issued a key decision clarifying the course that a court must follow when confronted with a dispute over a forum-selection clause.
In Atlantic Marine Construction Co. v. United States District Court for the Western District of Texas, No. 12-929, the Supreme Court in a unanimous opinion, authored by Justice Alito, set forth the procedure a federal court must follow when confronted with a lawsuit that has been filed in a jurisdiction not selected by the parties in their contract. Specifically, the Court ruled that in an action involving a federal forum-selection clause, a court must transfer the action to the appropriate federal forum selected by the parties. The Court also opined that, in a situation involving a state forum-selection clause, the proper course is dismissal of the case, which can potentially lead to significant statute-of-limitation issues for the unwary. The only exception to the enforceability of the above clauses is the rare situation when public policy would preclude the enforcement of such clauses.
This decision is of significance to business interests as it clarifies that courts will respect the forum-selection clauses chosen by the parties. The Court emphasized the value in "holding parties to their bargain."