Legal Alert - U.S. Supreme Court May Strongly Enforce Forum Selection Clauses: Many Businesses Will Breathe a Sigh of Relief, While Smaller Contractors Might Brace for Impact
by Eric H. Spencer
The U.S. Supreme Court appears poised—for the first time in 25 years—to uphold the enforceability of forum selection clauses, which permit contracting parties to prospectively determine the location/court where a lawsuit will be adjudicated in the event of a dispute. Specifically, in cases where a plaintiff disregards that clause by filing suit in a federal court in its home state, the Supreme Court signaled it will streamline the process for the defending party to dismiss the lawsuit or transfer it to the contractually specified federal forum. This would provide some much-needed predictability for businesses that routinely conduct business across state lines and rely on forum selection clauses to control litigation costs accordingly.
However, the potential impact on the construction industry could be particularly significant. For example, while large general contractors who perform projects across the country will likely benefit, especially those engaged in federal contracting, smaller subcontractors potentially stand to lose the benefit of certain legal protections they rely upon to keep litigation close-to-home if Atlantic Marine Constr. v. U.S.D.C. West. Dist. Texas is decided the way the Supreme Court appears to be leaning.