RESPONDENT: U.S. District Court for the Western District of Texas
LOCATION: Fort Hood
DOCKET NO.: 12-929
DECIDED BY: Roberts Court (2010-2016)
CITATION: 571 US (2013)
GRANTED: Apr 01, 2013
ARGUED: Oct 09, 2013
DECIDED: Dec 03, 2013
William R. Allensworth - for the respondents
William S. Hastings - for the petitioner
Facts of the case
In 2009 the U.S. Corps of Engineers contracted with Atlantic Marine Construction Company (Atlantic) to build a child development center at Fort Hood, a military base located in the western district of Texas. Atlantic then subcontracted with J-Crew Management, Inc. (J-Crew) to provide labor and materials. The subcontract agreement contained a forum selection clause stating that any dispute would be litigated in Circuit Court for the City of Norfolk, Virginia, or the U.S. District Court for the Eastern District of Virginia, Norfolk Division. Despite this clause, J-Crew brought suit against Atlantic in the U.S. District Court for the Western District of Texas for failure to pay for work J-Crew performed.
Atlantic moved to dismiss the suit under Federal Rule of Civil Procedure 12(b)(3) and 28 U.S.C. §1406, arguing that the forum selection clause required the suit to be brought in Virginia. Atlantic also 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 Atlantic's motions, holding that Atlantic did not show why the interest of justice or the convenience of the parties weighed in favor of Virginia. Atlantic petitioned the U.S. Court of Appeals for the Fifth Circuit for a writ of mandamus ordering the district court to dismiss the case or transfer it to Virginia. The court of appeals held that the district court did not abuse its discretion and venue was proper in the Texas court because the parties entered into and performed the agreement in that district.
Did the Supreme Court's decision in Stewart Organization, Inc. v. Ricoh Corp. limit review of forum selection clauses to a discretionary, balancing-of-conveniences analysis under 28 U.S.C. § 1404(a)
If so, who has the burden of proof when a party seeks to enforce or avoid a forum selection clause?
Media for Atlantic Marine Construction Company v. U.S. District Court for the Western District of TexasAudio Transcription for Oral Argument - October 09, 2013 in Atlantic Marine Construction Company v. U.S. District Court for the Western District of Texas
Audio Transcription for Opinion Announcement - December 03, 2013 in Atlantic Marine Construction Company v. U.S. District Court for the Western District of Texas
Justice Alito has the opinion of the Court this morning in Case 12-929 Atlantic Marine Construction versus United States District Court for the Western District of Texas.
In this case the Virginia Corporation and the Texas Corporation entered into a subcontract for the Texas Corporation to do construction work in Texas.
Their contract had a forum selection clause in which they agreed to resolve all disputes in a court in Virginia.
But when a dispute arose the Texas Corporation sue the Virginia Corporation in federal court in Texas not Virginia.
The Virginia Corporation argued that the venue in Texas was “wrong and improper” under 28 U. S. C. Section 1406 and Federal Rule of Civil Procedure 12(b)(3).
So at the Texas Court, it was argued it should dismiss the suit.
In the alternative, the Virginia Corporation asked that the case be transferred to a federal court in Virginia under 28 U. S. C. Section 1404.
The lower courts held that venue in Texas was not wrong or improper under Section 1406 and Rule 12 (b)(3) so they refuse to dismiss the case.
They also held that the Virginia Corporation as the defendant in the case had the burden of showing that transfer to a Virginia Court under Section 1404 would further private and public interests and that the Virginia Corporation had failed to make that showing.
We granted the certiorari and now reverse.
We agree with the lower courts that the venue in Texas was not wrong or improper as those terms are used in Section 1406 and Rule 12 (b)(3).
Whether venue was wrong or improper under those statutes depends solely on federal venue laws.
If those laws say that venue is proper in a particular forum the private parties forum selection cause cannot render venue in that forum wrong or improper.
Here, federal venue laws said that venue was proper in the Texas District because that was the location where the parties entered into and performed their contract.
We therefore agree that the venue in Texas was not wrong or improper under 1406 and Rule 12 (b)(3) and the Virginia Corporation therefore obtain dismissal of the case.
We conclude however that the lower courts did not properly apply Section 1404.
When parties enter into a forum selection clause, courts must enforce that clause in all but the most exceptional circumstances.
The clause represents the parties' agreement as to the most appropriate forum and that agreement should not be disregarded by a court later faced with arguments about the plaintiff's interests including arguments about the convenience to itself, its witnesses or the pursuit of the litigation.
The parties' private interests are captured in the forum selection clause and therefore all this way in favor of transfer to the forum on which the parties have agreed.
In unusual circumstances, it is conceivable that public interest factor such as congestion in a particular court might overcome the substantial counterweight of the forum a selection clause but we perceive no such overwhelming public interest in this case.
We therefore reverse the decision of the Fifth Circuit and remand for further proceedings consistent with this opinion.
Our decision is unanimous.