Supreme Court decision allows employers to more easily enforce forum selection clauses

Employers should review the forum selection and choice of law clauses in their employment and non-competition agreements following the Supreme Court’s recent decision in Atlantic Marine Construction Co Inc v US District Court for the Western District of Texas, 134 S. Ct. 568, 571 US (3 December 2013). Atlantic Marine, which held that contractual forum selection clauses should be enforced in all but the most exceptional cases, may prove especially helpful to employers who seek to enforce non-competition agreements against employees who work or live in states that disfavour such restrictive covenants (such as California).

In Atlantic Marine, the Supreme Court reaffirmed the principle that a valid forum selection clause represents the parties’ agreement as to the most proper forum and thus should be given controlling weight in most cases. The Supreme Court then held that a federal district court should apply three rules in deciding a motion to transfer a case from one federal district to another pursuant to a forum selection clause.

First, the plaintiff’s choice of forum should merit no weight, and the plaintiff, as the party defying the forum selection clause, should have the burden of establishing that transfer to the forum for which the parties bargained is unwarranted. Second, the court should not consider the parties’ private interests aside from those embodied in the forum selection clause; it should instead consider only public interests and, as noted by the Supreme Court, public interest factors will rarely defeat a transfer motion. Third, when a party bound by a forum selection clause flouts its contractual obligation and files suit in a different forum, a transfer of venue will not carry with it the original venue’s choice-of-law rules. As an aside, the Supreme Court also noted that in cases where transfer to a state court is sought, as opposed to transfer to another federal district, the party seeking to enforce the forum selection clause may also raise traditional forum non conveniens defenses. Following these pronouncements in Atlantic Marine, lower courts generally should enforce contractual forum selection clauses if there is any reasonable basis for the chosen forum, for example, if the employer has its headquarters or principal place of business in the designated forum…

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