Of interest to litigators and corporate lawyers alike, the Fifth
Circuit recently decided the correct procedure for enforcing a
contractual forum selection clause—a matter of some
disagreement among the circuit courts and, until now, an unanswered
question in the Fifth Circuit.
The issue in In re Atlantic Marine Construction Company was
how to enforce a forum selection clause when a case is filed in
(what is otherwise) a federal court of proper venue. Atlantic
Marine involved a dispute over work being performed in the
Western District of Texas. The contract between the parties
included an agreement to venue in the Eastern District of Virginia,
but did not include a choice of law provision. The plaintiff sued
in the Western District of Texas.
In response, the defendant moved to dismiss for improper venue
under Rule 12(b)(3) and 28 U.S.C. § 1406(a). In the
alternative, the defendant moved to transfer venue under §
1404(a). The difference is important: In a motion to transfer
venue, the burden is on the movant to show why transfer should be
granted, and courts consider other factors in determining whether
venue should be changed, such as the convenience of the parties and
witnesses and the interests of justice.
The court focused on whether private parties can, by contract,
render a venue "improper" which would otherwise be proper
under federal law. Finding that statutory venue cannot be trumped
by contract, the Fifth Circuit held that a § 1404(a) motion to
transfer is the only correct procedure when a case is
filed in a federal court of proper venue. Accordingly, other
factors—such as convenience and the public
interest—must be considered. The court seemed to suggest that
the result could have been different had the contract included a
choice of law provision.
A final note: The procedure is different if the
contractually-agreed forum is a state court, a foreign court, or
arbitration. Because a federal court cannot transfer a case to such
a venue, dismissal under Rule 12(b)(3) and § 1406(a) is the
only remedy. This dichotomy was not lost on Judge Haynes, who
concurred in the result (due to the high standard for mandamus) but
disagreed with the majority's analysis. With the circuits split
on this issue, Supreme Court review may be next.
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