'Contractually Valid' Forum Selection Clauses

Abstract

In Atlantic Marine Construction Company v. United States District Court, the Supreme Court held that a “contractually valid” forum selection clause should be enforced by federal courts absent extraordinary circumstances. Unfortunately, the Court provided no guidance on how to assess whether a clause is “contractually valid.” This Article fills the gap. It argues that the answer to this question turns on three separate inquiries. First, a court should determine whether the forum selection clause is valid. Second, the court should interpret the forum selection clause to determine whether it is exclusive and applies to the claims asserted. Third, the court should evaluate whether the forum selection clause is enforceable. Until each of these inquiries is complete, it is impossible to know whether a clause is “contractually valid” as that term is used in Atlantic Marine.

The third inquiry—relating to enforceability—is arguably the most complex. In an attempt to demystify it, the Article draws upon an original, hand-collected dataset of 658 federal cases decided after Atlantic Marine to evaluate how the federal courts resolve cases where one party challenges the enforceability of a forum selection clause. The cases in this dataset show that forum selection clauses are enforced roughly eighty-eight percent of the time. They also show that federal courts are reluctant to strike down forum selection clauses for being unreasonable. This reluctance, combined with other doctrinal innovations that favor the enforcement of these clauses, means that the current legal regime overwhelmingly and unduly favors the large corporations that write forum selection clauses into their agreements with customers and employees. In an attempt to address this imbalance, the Article urges the lower federal courts to adopt a number of specific reforms—none of which requires intervention by Congress or the Supreme Court—that would help to level the playing field.

Keywords: forum selection clause, Atlantic Marine, contractually valid, enforcement, enforceability, interpretation, choice of law