Erie and Enforceability of Forum Selection Clauses

Whether and to what extent state law governs the contractual validity of forum selection clauses in federal court remains highly contested. This Article argues for a two-part answer. State law should govern whenever a party seeks a § 1404(a) transfer of venue within the federal judicial system. The Court has insisted that the choice-of-law rules of the state to which the suit is transferred govern when transfer is required by a contractually valid clause. That insistence accords with the Erie policy of vertical uniformity between state and federal courts only if the law of the state in which the transferring federal district court sits governs contractual validity. And the Erie policy properly applies whenever the forum selection clause is found in a contract governed by state or foreign contract law. The federal interest in controlling where in the federal judicial system a suit is heard does not change the analysis. That is because a federal district court may order a transfer even in the absence of a contractually valid clause. By contrast, federal common law properly governs contractual validity when a party seeks a forum non conveniens dismissal on the ground that the federal judicial system as a whole is an inappropriate forum. A dismissal on that ground cannot plausibly depend on the law of the state in which the federal court sits. Reliance on that state’s law would be incompatible with the need for a uniform answer across the federal judicial system. Federal common law, however, may borrow state or foreign law when doing so would not interfere with the federal interest in ensuring a federal forum when appropriate.