U.S. SUPREME COURT

Atlantic Marine Construction Co. Inc. v. U.S. District Court for the Western District of Texas

CIVIL PROCEDURE — Venue

New Jersey Law Journal

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Atlantic Marine Construction Co. Inc. v. U.S. District Court for the Western District of Texas, No. 12-929; U.S. Supreme Court; opinion by Alito, J.; decided December 3, 2013. On certiorari to the U.S. Court of Appeals for the Fifth Circuit.

Petitioner Atlantic Marine Construction Co., a Virginia corporation, entered into a subcontract with respondent J-Crew Management Inc., a Texas corporation, for work on a construction project. The subcontract included a forum-selection clause, which stated that all disputes between the parties would be litigated in Virginia. When a dispute arose, however, J-Crew filed suit in the Western District of Texas. Atlantic Marine moved to dismiss, arguing that the forum-selection clause rendered venue "wrong" under 28 U.S.C. § 1406(a) and "improper" under Federal Rule of Civil Procedure 12(b)(3). In the alternative, Atlantic Marine moved to transfer the case to the Eastern District of Virginia under 28 U.S.C. § 1404(a).

The district court denied both motions. It concluded that § 1404(a) is the exclusive mechanism for enforcing a forum-selection clause that points to another federal forum; that Atlantic Marine bore the burden of establishing that a transfer would be appropriate under § 1404(a); and that the court would consider both public- and private-interest factors, only one of which was the forum-selection clause. After weighing those factors, the court held that Atlantic Marine had not carried its burden.

The Fifth Circuit denied Atlantic Marine's petition for a writ of mandamus directing the district court to dismiss the case under § 1406(a) or to transfer it to the Eastern District of Virginia under § 1404(a). The court agreed with the district court that § 1404(a) is the exclusive mechanism for enforcing a forum-selection clause that points to another federal forum; that dismissal under Rule 12(b)(3) would be the correct mechanism for enforcing a forum-selection clause that pointed to a nonfederal forum; and that the district court had not abused its discretion in refusing to transfer the case after conducting the balance-of-interests analysis required by § 1404(a).

Held: 1. A forum-selection clause may be enforced by a motion to transfer under § 1404(a), which provides that "[f]or the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought or to any district or division to which all parties have consented." Pp. 4-11.

(a) Section 1406(a) and Rule 12(b)(3) allow dismissal only when venue is "wrong" or "improper." Whether venue is "wrong" or "improper" depends exclusively on whether the court in which the case was brought satisfies the requirements of federal venue laws. Title 28 U.S.C. § 1391, which governs venue generally, states that "[e]xcept as otherwise provided by law...this section shall govern the venue of all civil actions brought in" federal district courts. See § 1391(a)(1). It then defines districts in which venue is proper. See § 1391(b). If a case falls within one of § 1391(b)'s districts, venue is proper; if it does not, venue is improper, and the case must be dismissed or transferred under § 1406(a). Whether the parties' contract contains a forum-selection clause has no bearing on whether a case falls into one of the specified districts.

This conclusion is confirmed by the structure of the federal venue provisions, which reflects Congress' intent that venue should always lie in some federal court whenever federal courts have personal jurisdiction over the defendant. See § 1391(b)(3). The conclusion also follows from this Court's decisions construing the federal venue statutes. See Van Dusen v. Barrack, 376 U.S. 612; Stewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22. Pp. 4-8.

(b) Although a forum-selection clause does not render venue in a court "wrong" or "improper" under § 1406(a) or Rule 12(b)(3), the clause may be enforced through a motion to transfer under § 1404(a), which permits transfer to any other district where venue is proper or to any district to which the parties have agreed by contract or stipulation. Section 1404(a), however, governs transfer only within the federal court system. When a forum-selection clause points to a state or foreign forum, the clause may be enforced through the doctrine of forum non conveniens. Section 1404(a) is a codification of that doctrine for the subset of cases in which the transferee forum is another federal court. Sinochem Int'l Co. v. Malaysia Int'l Shipping Corp., 549 U.S. 422. For all other cases, parties may still invoke the residual forum non conveniens doctrine. See id. at 430. Pp. 8-10.

(c) The Court declines to consider whether a defendant in a breach-of-contract action could obtain dismissal under Rule 12(b)(6) if the plaintiff files suit in a district other than the one specified in a forum-selection clause. Petitioner did not file a motion to dismiss under Rule 12(b)(6), and the parties did not brief the rule's application. Pp. 10-11.

2. When a defendant files a § 1404(a) motion, a district court should transfer the case unless extraordinary circumstances unrelated to the convenience of the parties clearly disfavor a transfer. No such exceptional factors appear to be present in this case. Pp. 11-17.

(a) Normally, a district court considering a § 1404(a) motion must evaluate both the private interests of the parties and public-interest considerations. But when the parties' contract contains a valid forum-selection clause, that clause "represents [their] agreement as to the most proper forum," Stewart, 487 U.S. at 31, and should be "given controlling weight in all but the most exceptional cases," id. at 33 (Kennedy, J., concurring). The presence of a valid forum-selection clause requires district courts to adjust their usual § 1404(a) analysis in three ways. First, the plaintiff's choice of forum merits no weight, and the plaintiff, as the party defying the forum-selection clause, has the burden of establishing that transfer to the forum for which the parties bargained is unwarranted. Second, the court should not consider the parties' private interests aside from those embodied in the forum-selection clause; it may consider only public interests. Because public-interest factors will rarely defeat a transfer motion, the practical result is that forum-selection clauses should control except in unusual cases. Third, when a party bound by a forum-selection clause flouts its contractual obligation and files suit in a different forum, a § 1404(a) transfer of venue will not carry with it the original venue's choice-of-law rules. See Van Dusen, 376 U.S. at 639. Pp. 12-16.

(b) Here, the district court's application of § 1404(a) did not comport with these principles. The court improperly placed the burden on Atlantic Marine to prove that transfer to the parties' contractually preselected forum was appropriate instead of requiring J-Crew, the party acting in violation of the forum-selection clause, to show that public-interest factors overwhelmingly disfavored a transfer. It also erred in giving weight to the parties' private interests outside those expressed in the forum-selection clause. And its holding that public interests favored keeping the case in Texas because Texas contract law is more familiar to federal judges in Texas than to those in Virginia rested in part on the district court's mistaken belief that the Virginia federal court would have been required to apply Texas' choice-of-law rules instead of Virginia's. Pp. 16-17.

701 F.3d 736, reversed and remanded.

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