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Forum Selection Clause: Motion to Transfer or Motion to Dismiss?

July 23, 2020

In the Seventh Circuit it has long been acceptable to file a Motion to Dismiss in order to enforce a forum selection clause. See Auto. Mechanics Local 701 Welfare & Pension Funds v. Vanguard Car Rental USA, Inc., 502 F.3d 740, 746 (7th Cir. 2007).

But a just-published case out of the Northern District of Illinois reflects a different practice:  that a forum-selection clause, if it permits federal jurisdiction, should now be enforced via a motion to transfer, not a motion to dismiss. The history of this change can help inform practitioners when deciding how to enforce forum selection clauses in similar cases.

In KFC Corp., Plaintiff, v. Iron Horse of Metairie Road, LLC & Iron Rooster, LLC, Defendants. Professional Service Industries, Inc., Third-Party Defendant., No. 18 C 5294, 2020 WL 3892989, at *2 (N.D. Ill. July 10, 2020), the third-party Defendant had filed a motion to transfer the third-party complaint from the Eastern District of Louisiana to the Northern District of Illinois based on a forum selection clause. The Northern District, in describing this transfer, quoted Atl. Marine Const. Co. v. U.S. Dist. Court for W. Dist. of Texas, 571 U.S. 49, 59 (2013) for the proposition that “Section 1404(a) therefore provides a mechanism for enforcement of forum-selection clauses that point to a particular federal district.”

In Atlantic Marine, SCOTUS held that venue is not rendered “wrong” or “improper” by a forum selection clause alone. Therefore, a motion to dismiss arguing “wrong” or “improper” venue is not the proper vehicle, and the forum selection clause can only be enforced now through a Motion to Transfer based on 1404(a).

The Southern District of Illinois followed the guidance of Atlantic Marine in 2016: “The proper mechanism for enforcing a forum selection clause that points to a particular federal district court is a motion to transfer under 28 U.S.C. § 1404(a).” Feather v. SSM Health Care, 216 F. Supp. 3d 934, 937 (S.D. Ill. 2016)

But some cases still seem to take a different approach. Consider Leon’s Auto Sales, Inc. v. Leedom & Assocs., LLC, No. 15 C 3069, 2015 WL 4978696, at *2 (N.D. Ill. Aug. 19, 2015). There, even after Atlantic Marine, the Northern District of Illinois stated: “A motion to dismiss based on a forum selection clause is treated as a Rule 12(b)(3) motion to dismiss for improper venue.”

Leon’s Sales did not mention Atlantic Marine. The authority Leon’s Sales does cite – Auto. Mechanics Local 701 Welfare & Pension Funds v. Vanguard Car Rental USA, Inc., 502 F.3d 740, 746 (7th Cir. 2007) – predated the developments in Atlantic Marine. Also, the authority relied upon by Auto Mechanics – Wright & Miller – now reflects the teachings of the Court in Atlantic Marine.

Wright & Miller explains the history of the previous (Auto Mechanics) view:  “[C]ourts of appeals were previously split as to how to treat such motions [enforcing forum selection clauses as between federal courts], treating dismissal of the action as the proper remedy but divided as to whether dismissal was proper pursuant to Rule 12(b)(3) or Rule 12(b)(6) when it is based on one of these forum selection clauses rather than on noncompliance with a federal venue statute.”  Wright § 1352 Motions to Dismiss—Improper Venue, 5B Fed. Prac. & Proc. Civ. § 1352 (3d ed.)

But now, after Atlantic Marine, Wright & Miller agrees that “the appropriate method for enforcing a valid forum-selection clause is the use of transfer to the contractually selected forum under 28 U.S.C.A. § 1404(a), provided the clause permits adjudication in a federal court. … If transfer is impossible, for instance when the selected forum is arbitration, state court or a foreign court, then a dismissal through forum non conveniens is the appropriate method for dealing with a valid forum-selection clause.” Wright § 1352 Motions to Dismiss—Improper Venue, 5B Fed. Prac. & Proc. Civ. § 1352 (3d ed.)

In sum, a motion to transfer under 28 U.S.C. § 1404(a) is now the appropriate vehicle to enforce a forum selection clause that envisions another federal district court as the agreed upon proper venue.

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