A contract dispute over building a child-development center at Fort Hood, in central Texas, today spawned a ruling that will bring joy to firms that put forum-choice clauses in their contracts in hopes of making lawsuits too costly to pursue.
The agreement between Atlantic Marine Construction Company and J-Crew Management, Inc., stated that all disputes between the parties "shall be litigated in the Circuit Court for the City of Norfolk, Virginia, or the United States District Court for the Eastern District of Virginia, Norfolk Division." The district court, which sat in the district that includes Fort Hood, denied Atlantic Marine's motion to dismiss the case for "wrong" or "improper" venue under 28 U.S.C. § 1406(a) or Rule 12(b)(3) or to transfer it to the Eastern District of Virginia "[f]or the convenience of the parties and witnesses, in the interest of justice" under 28 U.S.C. § 1404(a). The Fifth Circuit affirmed.
The Court, by a 9-0 vote, ruled that federal judges must almost always enforce the parties' choice of forum. As Justice Samuel Alito wrote for the unanimous justices:
When the parties have agreed to a valid forum-selection clause, a district court should ordinarily transfer the case to the forum specified in that clause. Only in extraordinary circumstances unrelated to the convenience of the parties should a §1404(a) motion be denied.
Atl. Marine Construction Co., Inc. v. United States District Court for the Western District of Texas, No. 12-929, slip op. at 11 (U.S. Dec. 3, 2013).
The Court also clarified, as a matter of procedure, that section 1404(a) provides a proper way to enforce a forum-choice clause even where the district court has venue. Section 1406(a) and Rule 12(b)(3), by contrast, require "wrong" or "improper" venue -- a situation that did not exist in the case before the Court -- and therefore couldn't serve as a vehicle for transferring or dismissing the case.
The Court added that the doctrine of forum non conveniens affords a way to enforce a forum-choice clause that calls for litigation in a state or foreign court rather than a federal one.
And Their Honors even reached the question of what conflict of laws rules will apply in the transferee court. Its own, the Court ruled -- not those of the transferor court.
The decision continues a strong trend in which the Court has made suing more difficult for the weak. As Justice Elena Kagan noted not long ago:
I think the Court is doing some big things regarding how civil litigation is conducted in America and things which really affect the ability of people without a lot of money to bring lawsuits to vindicate their legal rights, that are changing our litigation system in ways that I think are unfortunate and are not supported by the law that's out there. I wish that that got more attention.
Elena Kagan, Harvard Law Today at 3 (Nov. 2013).