Under 28 U.S.C. § 1404, when a contract contains a forum-selection clause designating a different forum, and a court must decide whether to transfer venue, which approach best governs the decision in a diversity action where State A law says forum clauses are unenforceable?

Under 28 U.S.C. § 1404, when a contract contains a forum-selection clause designating a different forum, and a court must decide whether to transfer venue, which approach best governs the decision in a diversity action where State A law says forum clauses are unenforceable?

• A. Deny the motion, because this is a diversity action and State A law provides that forum-selection clauses are unenforceable
• B. Grant the motion, because federal law provides that forum-selection clauses are enforceable
• C. Grant the motion, because State A law is inapplicable given that the contract has a choice-of-law provision, not a forum-selection clause
• D. Consider the motion, because the court should weigh all factors, including the presence of a forum-selection clause, to decide whether to grant the transfer

Answer: (B)

A valid forum-selection clause in a federal contract generally governs transfer decisions under § 1404(a), and federal law governs the enforceability of that clause even when state law would say otherwise. The key rule comes from Atlantic Marine Construction Co. v. United States District Court, which holds that a forum-selection clause should receive controlling weight in deciding whether to transfer, provided the clause is valid. In a diversity action, this federal-law enforcement of the clause overrides contrary state-law conclusions about enforceability, so long as the clause designates a proper forum and is not invalid or unreasonable. Here, the contract includes a forum-selection clause designating a different forum, and the action is in federal court based on diversity. Since the clause is enforceable under federal law, the court should grant the motion to transfer to the forum specified by the clause. This aligns with the federal policy of honoring private agreements on forum and avoids undermining the clause by applying State A’s unenforceability rule. The other options conflict with this approach: simply denying the transfer ignores the controlling effect of the clause under federal law; treating State A’s rule as controlling ignores the federal posture for forum-selection clauses; or weighing all factors without giving the clause controlling weight would undermine the strong presumption Atlantic Marine assigns to enforcing the clause.

A valid forum-selection clause in a federal contract generally governs transfer decisions under § 1404(a), and federal law governs the enforceability of that clause even when state law would say otherwise. The key rule comes from Atlantic Marine Construction Co. v. United States District Court, which holds that a forum-selection clause should receive controlling weight in deciding whether to transfer, provided the clause is valid. In a diversity action, this federal-law enforcement of the clause overrides contrary state-law conclusions about enforceability, so long as the clause designates a proper forum and is not invalid or unreasonable.

Here, the contract includes a forum-selection clause designating a different forum, and the action is in federal court based on diversity. Since the clause is enforceable under federal law, the court should grant the motion to transfer to the forum specified by the clause. This aligns with the federal policy of honoring private agreements on forum and avoids undermining the clause by applying State A’s unenforceability rule.

The other options conflict with this approach: simply denying the transfer ignores the controlling effect of the clause under federal law; treating State A’s rule as controlling ignores the federal posture for forum-selection clauses; or weighing all factors without giving the clause controlling weight would undermine the strong presumption Atlantic Marine assigns to enforcing the clause.