All of the U.S. Supreme Court justices saw Atlantic Marine Construction Co. v. U.S. District Court for the Western District of Texas the same way, ruling 9-0 generally in the company's favor. But construction attorneys' interpretations of that Dec. 3 decision differ. Lawyers supporting each side call the ruling a victory.
The case originated in a payment dispute between prime contractor Atlantic Marine Construction (AMC), Virginia Beach, Va., and subcontractor J-Crew Management Inc., Killeen, Texas. The central issue before the high court wasn't the money, but the AMC-J-Crew contract's "forum selection" clause. Such clauses determine in which court a party in a contract may bring a lawsuit.
J-Crew contended that AMC owed it $159,000 for work it carried out on an Army Corps of Engineers child-development center project at Fort Hood, Texas. J-Crew sued AMC in federal court in the Lone Star State. The contract, however, specified that suits would have to be brought in courts in Virginia. AMC wanted the district court to dismiss J-Crew's suit or transfer it to federal court in Virginia. The court in Texas ruled against AMC, as did an appellate court.
The Supreme Court reversed the appeals court. Writing for the high court, Justice Samuel A. Alito Jr. said a federal district court "should not consider arguments about the parties' private interests" in considering a request to transfer a contract-dispute case to a location other than the one specified in the contract. But Alito also said that in such forum-transfer requests, a district court "may consider arguments about public-interest factors only," adding, "The practical result is that forum-selection clauses should control except in unusual cases."
Alito said, "A forum-selection clause, after all, may have figured centrally in the parties' negotiations and may have affected how they set monetary and other contractual terms; it may ... have been a critical factor in their agreement to do business together in the first place." He added, "In all but the most unusual cases … 'the interest of justice' is served by holding parties to their bargain."
Michael Sterling, an attorney for AMC, says that, from his client's standpoint, the ruling is "a complete victory." Sterling, a partner with Vandeventer Black LLP, Norfolk, Va., says the opinion's major point for construction firms is that "contractors, whether they be general or subcontractors or vendors, can know that they're able to rely on the terms of the contract they enter into."
But attorney Eric Travers, who filed a pro-J-Crew friend-of-the-court brief for the American Subcontractors Association (ASA), zeroes in on the part of the opinion stating that courts reviewing forum-transfer requests can consider public-interest factors. From ASA's perspective, that statement is "a huge victory," he says.
Travers, a director with Kegler Brown Hill + Ritter, a Columbus, Ohio, law firm, says ASA's brief focused on policy interests and that 24 states have found forum-selection clauses invalid. Instead of a decision saying parties must "litigate in State X," Travers says that "now the court can look at it and say, 'What is the state law? What is the legislature of this state saying about this contract clause? Is this an enforceable contract clause?' If not, that clause ought not be enforceable."
Mike Kennedy, Associated General Contractors of America's general counsel, says, "I believe that the facts of this case have ... led people to portray it as some kind of conflict between general contractors and subcontractors. And quite frankly, it is nothing of the kind." AGC did not take part in the case.
Kennedy says the court held that "the relevant statute requires the federal courts to defer to the decisions that the parties have privately made, of their own volition [when] they negotiated their contract." He adds, "The court did say fairly clearly that public-interest factors could change the analysis, but ... neither of the parties' private interests are going to be a factor."
Andrew Ness, a partner with Jones Day's Washington, D.C., office, said in an email, "There is no doubt that Atlantic Marine is a strong reaffirmation of the reach and power of forum-selection clauses." He also said the court left open "a window" for public-interest factors to be considered but made clear such factors "will rarely interfere with enforcing the contract forum-selection clause."
He added that those hoping for "more opportunities for escaping an onerous forum-selection clause had their hopes dashed." Ness took no part in the case.
