February 12, 2014
Forum Selection Clauses Remain Enforceable
Companies working in multiple states with contracts containing forum selection clauses can take comfort that courts will likely find such clauses enforceable. The United States Supreme Court’s recent holding in Atlantic Marine Construction Co., Inc. v. U.S. District Court for the Western District of Texas, 2013 WL 6231157, 2013 U.S. Dist. LEXIS 8775 (2013), confirmed that clauses in contracts that specify the jurisdiction in which disputes must be resolved will be enforced except in very limited circumstances. Specifically, the Supreme Court stated that “[w]hen parties have contracted in advance to litigate disputes in a particular forum, courts should not unnecessarily disrupt the parties’ settled expectations.”
The Court did allow for the consideration of “public interest” factors in determining whether to enforce a forum selection clause. Such public interest factors include “the administrative difficulties flowing from court congestion; the local interest in having localized controversies decided at home; and the interest in having the trial of a diversity case in a forum that is at home with the law.” Although the Court did identify these factors that may serve as the basis for not enforcing a forum selection clause, the Court was quick to add that these factors will rarely result in a clause not being enforced. Therefore, a party performing work pursuant to a contract with a forum selection clause that requires disputes to be resolved in a state other than where the project is located, can expect that the clause will be enforced absent overwhelming “public interest factors.” [Note, some states (e.g. Connecticut) have statutes prohibiting forum selection clauses in construction contracts. The Court did not address the enforceability of a forum selection clause in a contract concerning a construction project that is located in a state that bars such clauses.]
Should you have any questions with regard to the above, please contact your attorney or an attorney in our Construction practice group.
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