FOREIGN FORUM-SELECTION FRUSTRATIONS: DETERMINING CLAUSE VALIDITY IN FEDERAL DIVERSITY SUITS

  • October 2016
  • 4 Stan. J. Complex Litig. 131
  • Article
Rachel Kincaid

In Atlantic Marine Construction Co. v. U.S. District Court, the Supreme Court clarified the proper mechanism for transferring a case with a valid forum-selection clause that designates a forum other than the federal court in which the suit was brought. If the chosen forum is another federal forum, a transfer of venue motion (under 28 U.S.C. § 1404(a)) is required. If the designated forum is a foreign jurisdiction, the proper mechanism is forum non conveniens dismissal. The Court assumed the existence of a valid forum- selection clause. In a previous case, the Court held that in the § 1404 transfer context clause validity is governed by federal law. However, the Court has never articulated whose law applies in a diversity case to determine whether a forum-selection clause that designates a non-federal forum is valid and enforceable in the first instance. This Article takes up that question with respect to foreign forum-selection clauses (as opposed to clauses designating domestic non-federal courts).

There are two legitimate routes for determining whose law to apply in this context: a vertical choice-of-law Erie analysis, or the creation of federal common law on point. I argue that an Erie analysis is the most straightforward way to make this determination, and that Erie dictates the application of state law to clause validity. I contend that precedent does not support the use of federal substantive common law to govern clause validity in place of an Erie analysis. But I also recognize that the Supreme Court could hold that federal procedural common law governs clause validity—pretermitting Erieespecially given that the majority of federal appellate courts have held that federal law should govern in this context (after questionable analysis). In an increasingly globalized world, this is an important question for courts and one that has yet to be answered adequately by either judges or scholars. 

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