Atlantic Marine Construction Co. v. United States District Court for the Western District of Texas

Facts

Atlantic Marine Construction Co., a Virginia corporation, contracted with the United States Army Corps of Engineers to build a child-development center at Fort Hood in the Western District of Texas. Atlantic Marine then hired J-Crew Management, Inc., a Texas corporation, as a subcontractor for work on the project. The subcontract had a forum-selection clause (a contract term naming where disputes must be litigated). It said all disputes between the parties had to be litigated in the Circuit Court for the City of Norfolk, Virginia, or in the federal district court for the Eastern District of Virginia, Norfolk Division. A dispute arose over payment under the subcontract. J-Crew ignored the clause and sued Atlantic Marine in the Western District of Texas, relying on diversity jurisdiction. Venue was otherwise proper there, because the subcontract was entered into and was to be performed in that district. Atlantic Marine moved to dismiss, arguing that the clause made venue “wrong” under § 1406(a) and “improper” under Federal Rule of Civil Procedure 12(b)(3). In the alternative, it moved to transfer the case to the Eastern District of Virginia under § 1404(a). J-Crew opposed both motions. No one disputed that the forum-selection clause was valid.

Issues

1. Can a defendant enforce a forum-selection clause by moving to dismiss under 28 U.S.C. § 1406(a) or Rule 12(b)(3) on the ground that venue is “wrong” or “improper”?
2. How should a district court decide a § 1404(a) motion to transfer when the parties have agreed to a valid forum-selection clause?
3. What is the proper way to enforce a forum-selection clause that points to a state or foreign court?

Holding

Because the Western District of Texas satisfied the federal venue statutes, the forum-selection clause did not make venue wrong or improper, so dismissal was unavailable. Atlantic Marine's § 1404(a) motion should have been decided under adjusted standards that give the clause controlling weight in all but the most exceptional cases. The lower courts misapplied those standards.