'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 as a matter of contract law. 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 as a matter of conflict of laws. 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 Article first surveys federal law in each of these areas to provide an analytical framework for determining when a clause is “contractually valid.” It then relies on an original, hand-collected dataset of 669 federal cases decided after Atlantic Marine to evaluate how the federal courts actually resolve cases where one party challenges the enforceability of a forum selection clause. The cases in that dataset show that forum selection clauses are enforced by the federal courts roughly 87% 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 make it easier for individuals litigating in federal court to avoid these clauses.

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