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December 3, 2013 - In a unanimous decision, the Supreme Court of the United States today ruled in favor of Locke Lord LLP client Atlantic Marine Construction Co. in a highly watched case regarding the validity of forum-selection clauses in business contracts.
Locke Lord Partner Scott Hastings, who argued the case before the Supreme Court in October, said this decision will impact any business, large or small, that agrees to select forums for settling disputes.
"It brings heightened certainty to business contracts," he said. "But it also frees courts and clients from unnecessary and expensive litigation."
In this case, Virginia-based Atlantic Marine had subcontracted with J-Crew Management, Inc. of Killeen, Texas, to provide labor and materials for construction of a Fort Hood children's center for the Army Corp of Engineers. The contract agreed upon by both companies stipulated that any dispute in the project would be heard in Virginia. After a dispute arose, J-Crew filed suit in federal court in Austin.
The Supreme Court agreed to hear the case after the 5th Circuit Court of Appeals supported an earlier ruling from the U.S. District Court which stated that hearing the case in Virginia would result in significant expenses and inconvenience for witnesses and parties in the case.
In writing the Court's opinion, Justice Samuel Alito wrote: "When parties agree to a forum-selection clause, they waive the right to challenge the preselected forum as inconvenient or less convenient for themselves or their witnesses, or for their pursuit of the litigation. A court accordingly must deem the private-interest factors to weigh entirely in favor of the preselected forum."
"The 5th Circuit and other appeals courts across the country have been split regarding the proper procedural mechanism to enforce forum-selection clauses, which resulted in many of these clauses being ignored," said Hastings. "This was an excellent opportunity for the Justices to resolve this important issue affecting commerce and the judicial system, thereby ensuring that contractual clauses are enforced as written."
"Taking this case to the Supreme Court and winning for our client is not just significant for us, it's significant for any business that signs a contract and expects it to be honored," said Locke Lord Chair Jerry Clements.
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