It is not unusual for parties to agree to settle disputes in a preselected court or arbitration proceeding, in a preselected location. These are referred to as “forum selection” provisions. The Supreme Court recently addressed the enforceability of such clauses in Atlantic Marine Construction Co., Inc. v. United States District Court for the Western District of Texas, 2013 WL 6231157 (U.S. Dec. 3, 2013).

Atlantic Marine, a Virginia corporation, entered into a contract with the U.S. Army Corps of Engineers to construct a facility at Fort Hood in Texas. Atlantic Marine subcontracted some of the work to J-Crew Management, a Texas corporation. The subcontract included a clause stating that all disputes would be litigated in Virginia. J-Crew filed suit in federal district court in Texas alleging breach of contract. Citing the forum selection provision, Atlantic Marine sought to have the Texas suit dismissed or transferred to Virginia.

The Texas federal district court, citing the convenience and availability of witnesses in Texas, denied both motions. The U.S. Court of Appeals for the Fifth Circuit affirmed. The Fifth Circuit found that institutional concerns, such as the availability of witnesses, cannot be contracted away by private parties.

The Supreme Court disagreed, holding that courts should not consider the parties’ “private-interests,” such as the availability of witnesses, in determining whether to enforce a forum selection clause. The party seeking to avoid enforcement of the forum selection clause has the burden of showing “institutional concerns” sufficient to ignore the parties’ agreement. The court then remanded the case to allow the lower courts to decide whether there are any public interest factors that would warrant nonenforcement, thereby leaving it to the lower courts to decide what public interests demonstrate a compelling enough reason to defeat enforcement of forum selection clauses. The Court’s decision, however, makes it clear that the plaintiff carries a heavy burden of showing that public interest factors “overwhelmingly disfavor a transfer.” As the Court noted, “those factors will rarely defeat a transfer motion.”

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