Litigation Byte

5th Circuit Reminder: Forum Selection Clause Cannot Strip a Federal Court of Jurisdiction

June 27, 2025

The 5th Circuit recently reversed a district court’s decision to remand a case before ruling on a pending motion to compel arbitration. This is because the remand motion did not challenge the district court’s jurisdiction; instead, it sought remand due to a forum selection clause in the parties’ contract that was in dispute. As the 5th Circuit noted, a forum selection clause cannot strip a court of jurisdiction conferred by statute. Thus, courts must rule on a pending motion to compel arbitration if there is no dispute as to the court’s jurisdiction over the claim.

Background

In Odom Industries, a dispute arose between the parties, resulting in a lawsuit being filed in Mississippi state court. The dispute arose from a contract that contained two separate but equally relevant provisions. First was an arbitration provision that required arbitration for any controversy or claim that arose from the contract. Next was a forum selection clause stating that any suit arising from the contract must be maintained in Mississippi state court. The defendant removed the case to Mississippi federal court, properly invoking the court’s diversity jurisdiction, which resulted in the plaintiff filing a motion to remand, citing the contract’s forum selection clause. The district court granted the remand motion, focusing solely on the forum selection clause, and the defendant timely appealed the decision to the 5th Circuit.

Court’s Analysis

The sole question before the 5th Circuit was whether the district court erred in ruling on the motion to remand before it ruled on the defendant’s motion to compel arbitration. The Court noted at the outset that the district court’s jurisdiction was never in question; the case was properly before it, and the plaintiff did not raise a jurisdictional argument in its motion to remand. Accordingly, as set forth in the Federal Arbitration Act, a court must address a motion to compel arbitration at the outset of the litigation once the court’s jurisdiction is established. Thus, the district court erred when it remanded the case for contractual reasons before ruling on the motion to compel because, as the 5th Circuit noted, the forum selection clause did not change the fact that it had subject-matter jurisdiction over the claims.

While it is true that a court must typically resolve jurisdictional issues before resolving a motion to compel arbitration, where the remand motion is based on a contractual limitation as opposed to a jurisdictional dispute, as was the case in Odom Industries, courts should first rule on the motion to compel because the remand does not concern the court’s jurisdiction. The 5th Circuit noted that the proper way to address a forum selection clause is not through a motion to remand, but instead through the doctrine of forum non conveniens. Thus, not only did the court err in its ruling, but the plaintiff may also have relied on the wrong tool in seeking the requested relief.

Takeaways

While it may appear that Odom Industries runs afoul of parties’ freedom to contract, it instead serves as a reminder to properly utilize the tools at your disposal once you are in federal court. If the court has jurisdiction over the claims, a motion to remand based on a contractual provision may not be successful because parties cannot confer subject-matter jurisdiction on federal courts, nor can they strip federal courts of jurisdiction via contract.