Erie and Forum Selection Clauses

42 Pages Posted: 18 Apr 2023

See all articles by John F. Coyle

John F. Coyle

University of North Carolina School of Law

F. Andrew Hessick

University of North Carolina School of Law

Date Written: April 12, 2023

Abstract

Since Erie Railroad Company v. Tompkins, the U.S. Supreme Court has recognized that federal courts should generally follow state law if not doing so would significantly affect the outcome of the case. This principle suggests that federal courts should apply state law to determine the enforceability of forum selection clauses. Although seemingly mundane, these clauses can make or break a lawsuit. If a clause is enforced, the suit must be filed in a different location. This change in location affects the procedures that will be applied, the substantive law, and the overall cost of litigation. In extreme cases, enforcing a forum selection clause may lead the plaintiff to abandon the case altogether.

Although these clauses are critically important, and although they frequently have a major impact on a case, the federal courts do not follow state law to determine whether they should be enforced. Instead, they apply federal common law. In this Article, we illustrate the real-world consequences of this decision. We draw upon a hand-collected dataset of hundreds of state and federal court decisions to show that federal courts sitting in diversity enforce forum selection clauses at a higher rate than state courts in virtually every state and every federal circuit. This divergence presents obvious opportunities for forum shopping as between state and federal courts in the same state. And yet the federal courts to continue to apply federal law to determine the enforceability of these clauses. The solution to this problem, we argue, is simple. Federal courts should apply state law to determine whether a forum selection clause is enforceable.

Keywords: forum selection clauses; Erie; federalism;

Suggested Citation

Coyle, John F. and Hessick, F. Andrew, Erie and Forum Selection Clauses (April 12, 2023). University of Illinois Law Review, Forthcoming, UNC Legal Studies Research Paper No. 4417491, Available at SSRN: https://ssrn.com/abstract=4417491

John F. Coyle (Contact Author)

University of North Carolina School of Law ( email )

Van Hecke-Wettach Hall, 160 Ridge Road
CB #3380
Chapel Hill, NC 27599-3380
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919-843-9634 (Phone)

HOME PAGE: http://www.law.unc.edu/faculty/directory/coylejohnf/

F. Andrew Hessick

University of North Carolina School of Law ( email )

Van Hecke-Wettach Hall, 160 Ridge Road
CB #3380
Chapel Hill, NC 27599-3380
United States

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