Relevant Facts: A contract between two companies contained a forum-selection clause requiring any litigation to proceed in London. Later, the plaintiff filed suit in admiralty in the United States. The defendant moved for dismissal under the forum-selection clause.
Question Before The Court: Whether a choice-of-forum clause in a contract requiring all controversies to be adjudicated in an international foreign jurisdiction are enforceable.
The Opinion: At the time of this case, many courts at the federal and state level declined to enforce forum-selection clauses as a matter of public policy. With this case, the U.S. Supreme Court took the opposite approach, finding that parties are free to waive their rights to particular jurisdictions (amongst other procedural safeguards), and held that the forum-selection clause, which was the result of “an arm’s length negotiation by experienced and sophisticated businessmen,” should be binding on parties unless they can meet the heavy burden of showing that its enforcement is “unreasonable, unfair, and unjust.” Disregarding concerns about the ability for parties to receive equal and just treatment in alternative forums, the Court here asserted, “The argument that such clauses are improper because they tend to ‘oust’ a court of jurisdiction is hardly more than a vestigial legal fiction. . .. It reflects something of a provincial attitude regarding the fairness of other tribunals.”
Although this case did not involve the Federal Arbitration Act, the Court has subsequently maintained that arbitration clauses are “mere forum-selection clauses” and has enforced them based on the (frequently incorrect) assumption that they were freely negotiated by parties of equal bargaining power. See, e.g., Mitsubishi Motors v. Soler Chrysler-Plymouth, 473 U.S. 614 (finding a strong presumption in favor of freely negotiated contractual choice-of-forum provisions). Furthermore, the Court’s embrace of non-judicial forums here, and its downplaying of the potential harms to plaintiffs in those forums, paved the way to an exponential increase of dispute resolution in forums other than a court of law, including forced arbitration.