Forum-Selection Clauses: Should State or Federal Law Determine Validity in Diversity Actions?—Stewart Organization, Inc. v. Ricoh Corp., 108 S. Ct. 2239 (1998)

Forum-selection clauses are contractual provisions that confine future litigation to particular courts. Such clauses are common in interstate contracts despite uncertainty concerning their validity. Before Stewart Organization, Inc. v. Ricoh Corp., the circuit courts were divided as to whether federal courts with diversity jurisdiction were compelled to determine forum-selection clause validity in accordance with state law, as directed by Erie R.R. Co. v. Tompkins. In Stewart, the United States Supreme Court ruled that federal courts did not have to apply state law. Instead, the court held that the federal transfer statute, 28 U.S.C. § 1404(a), governed forum-selection clause validity. A statutory interpretation analysis demonstrates 28 U.S.C. § 1404(a) was never intended to govern forum-selection clause validity. State law should govern the clause\u27s validity in order to prevent forum shopping and the inequitable administration of the laws