Atlantic Marine Construction Co., Inc. v. United States District Court for the Western District of Texas, 134 S. Ct. 568 (2013) [click for opinion]
Atlantic Marine Construction entered into an agreement with J-Crew Management for a construction project in Texas. The agreement included a forum-selection clause which provided that all disputes between the parties would be litigated in Virginia. When a dispute arose, rather than honoring the forum-selection clause, J-Crew brought suit in a federal court in Texas. Atlantic moved to dismiss the claims, arguing that venue was “wrong” under 28 U.S.C. § 1406(a) and "improper" under Federal Rule of Civil Procedure 12(b)(3). Atlantic moved in the alternative to transfer the case to the Eastern District of Virginia under 28 U.S.C. § 1404(a). The district court denied both motions and the Fifth Circuit affirmed. The Supreme Court reversed.
Whether a particular federal court is a wrong (or improper) venue is governed exclusively by federal statute, 28 U.S.C. § 1391, which provides that a civil action may brought in: (1) a judicial district in which any defendant resides, if all defendants reside in the state in which the district is located; (2) a judicial district in which a substantial part of the events giving rise to the claim occurred; or (3) if there is no district in which an action may otherwise be brought then any district in which any defendant is subject to the court's personal jurisdiction (the fallback option).
The statute reflects Congress' intent, said the court, that venue will always exist in some federal court whenever federal courts have personal jurisdiction over the defendant. Therefore, when a party challenges venue, the district court must determine if the case fits within any of the three statutory categories. If it does, venue is "proper" and the case may not be dismissed; if it does not, then the case must be dismissed or transferred under § 1406(a), which applies when a case is filed in the "wrong" venue. But in no event can a forum-selection clause make (by supplanting the statutory framework) a venue wrong or improper.
Rather, a forum-selection clause becomes relevant and can be enforced through a motion to transfer. Transfer within the federal court system is governed by § 1404(a), which authorizes transfer to any district in which the case might have been brought or to any district to which the parties have agreed by contract or stipulation. Transfer to a state or foreign court, on the other hand, is governed by the doctrine forum non conveniens. In fact, the court noted, § 1404(a) is simply a codification of the forum non conveniens doctrine for the federal court system.
A motion to transfer under either rule requires the district court to weigh the convenience of the parties and public-interest considerations. When, however, there is a forum selection clause, courts must give controlling weight to that clause in all but the most exceptional cases. No exceptional factors were present here.
Finally, the court held that where a party flouts a valid forum selection clause by filing suit in a different forum, a § 1404(a) transfer of venue will not carry with it the original venue’s laws. This is different from the normal rule, under which the transferee court must apply the law of the transferor court. Applying that rule to a case in which a party violates a valid forum-selection clause would encourage forum shopping and gamesmanship and would be inequitable.