A new Supreme Court ruling found that the venue of legal proceedings should be the one specified in a contract’s forum-selection clause in all by “extraordinary” and “most unusual” cases of public, but never private, interest.
The Supreme Court of the United States reviewed a lower court ruling in Atlantic Marine Construction Company, Inc. v. J-Crew Management, Inc. that revolved around a lawsuit of a withheld final payment from a general contractor to a subcontractor, and an attempt to move the case. The ruling, written by Justice Samuel Alito, found that a district-level judge should, as an “ordinary” course of business, transfer civil actions upon request as long as the destination court was agreed to by contract in a forum-selection clause. Only a rare public-interest matter should be considered to break from terms agreed to in such a clause.
“Motion to transfer based on a forum-selection clause should not consider arguments about the parties’ private interests,” Alito wrote in the unanimous decision. “When parties agree to a forum-selection clause, they waive the right to challenge the preselected forum as inconvenient or less convenient for themselves or their witnesses, or for their pursuit of the litigation.” The judge suggested that failure to honor the forum-selection clause in that way might encourage widespread venue-shopping and “gamesmanship.”
The Supreme Court also remanded the case back to the Court of Appeals for the Fifth Circuit to review whether any extraordinary public-interest factors were in play. The high court found none in its review. The American Subcontractors Association, which called the ruling a win for subcontractors, argued following the ruling that matters of public interest “most certainly would include the laws in the 24 states that limit the use of forum-selection clauses in construction.”
NACM Secured Transaction Services National Sales Representative Chris Ring noted such a case also drives home the deep importance of having credit, sales and upper management on the same page where specific details of contracts are concerned. Know and carefully consider the contract terms, especially when large dollar values are in play.
-Brian Shappell, CBA, CICP, NACM staff writer
Check back here on Thursday for legal deeper analysis of the Supreme Court’s decision.