Originally published by Barry Barnett.
A tough clause to beat
A little over two years ago, the Supreme Court held that judges must enforce forum-choice clauses in the absence of “extraordinary” reasons “unrelated to the convenience of the parties”.
On the day that the 9-0 Court issued Atlantic Marine Construction Co., Inc. v. United States District Court for the Western District of Texas, 134 S. Ct. 568 (2013), I wrote that the ruling “will bring joy to firms that put [the] clauses in their contracts in hopes of making lawsuits too costly to pursue.”
Has Atlantic Marine made enforcing forum-choice clauses routine?
A recent Fifth Circuit decision and rulings by all courts of appeals since Atlantic Marine suggest a strong yes.
Fifth Circuit case
In Weber v. PACT XPP Technologies, AG, No. 15-40432 (5th Cir. Jan. 26, 2016), the former CEO of a patent-assertion entity sued the entity, PACT XPP, for non-payment under a compensation contract. He brought the case in Marshall, where PACT had won a handsome settlement in patent litigation.
But the contract included a mandatory forum-choice clause, calling for suit at the “Sitz der PACT”. The district court relied on Atlantic Marine in granting PACT’s motion to dismiss. Noting “a strong presumption in favor of the enforcement of mandatory” forum-choice clauses, the court rejected Weber’s four “theories of unenforceability” the panel also deemed “Sitz der PACT” to mean PACT’s “corporate seat” in Germany. Pointing to “quite a high burden of persuasion” for one claiming that public-interest factors outweigh the clause, the court held that Weber’s points did not meet the burden.
The other courts agree
Westlaw reports that, as of Jan. 31, 2016:
- State and federal courts have cited Atlantic Marine in 672 opinions.
- only 39 of the 672 opinions — fewer than six percent — accorded “negative treatment” to the decision — either distinguishing it, declining to extend it, or recognizing its limitations.
- of the 21 rulings by courts of appeals, only three declined to enforce a forum-choice clause — two because the clauses made venue “permissive” in particular forums and only one on the ground that a mandatory clause lacked validity (because defendants fraudulently induced it).
Upshot
In the post-Atlantic Marine era, you can pretty much count on getting judges to enforce mandatory forum-choice clauses.
Merely permissive clauses — ones that say the parties “may” bring an actin in certain spots — do not receive the same routine treatment.
The decisions do not reflect how many times parties chose to file a lawsuit where mandatory forum-selection clauses mandated. I expect that that has happened a lot, likely more than a thousand times.
Has the halo that Atlantic Marine put around forum-choice clauses made cases harder to pursue by forcing plaintiffs to go to forums that are inconvenient or stingy in awarding damages? I do not have numbers, but I would guess that Atlantic Marine has made some cases less valuable.
All of which makes a mandatory forum-choice clause very worthwhile.
Curated by Texas Bar Today. Follow us on Twitter @texasbartoday.
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