Source: https://law.justia.com/cases/federal/appellate-courts/F2/810/1066/355851/
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Matched Legal Cases: ['in fine', '§ 1404', '§ 1404', '§ 1404', '§ 1406', '§ 1404', '§ 1391', '§ 1391', '§ 1391', '§ 1391', '§ 1404', '§ 1391', '§ 1406', '§ 1292']

The Stewart Organization, Inc., a Corporation; Walter H.stewart, and James S. Snow, Jr., Plaintiffs-appellees, v. Ricoh Corporation, a Corporation, Ricoh of America, Inc., Acorporation, Defendants-appellants, 810 F.2d 1066 (11th Cir. 1987) :: Justia
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The Stewart Organization, Inc., a Corporation; Walter H.stewart, and James S. Snow, Jr., Plaintiffs-appellees, v. Ricoh Corporation, a Corporation, Ricoh of America, Inc., Acorporation, Defendants-appellants, 810 F.2d 1066 (11th Cir. 1987)
US Court of Appeals for the Eleventh Circuit - 810 F.2d 1066 (11th Cir. 1987)
Before RONEY, Chief Judge, GODBOLD, TJOFLAT, HILL, FAY, VANCE, KRAVITCH, JOHNSON, HATCHETT, ANDERSON, CLARK, EDMONDSON, Circuit Judges, and TUTTLE* , Senior Circuit Judge.
The threshold question is whether federal or state law governs the enforceability of a forum selection clause. The panel opinion chronicles the difficulties the Supreme Court has had in attempting to handle the difficult question of which law, state or federal, will govern various aspects of the decisions of federal courts sitting in diversity. Stewart Organization, Inc. v. Ricoh Corp., 779 F.2d 643, 645-47 (11th Cir. 1986).
Our decision as to the choice of forum clause boils down to whether these two parties may choose the courts of Manhattan as the appropriate venue to try the controversy arising from this contract. Employing Hanna v. Plumer, 380 U.S. 460, 85 S. Ct. 1136, 14 L. Ed. 2d 8 (1965) as the guide, we hold that venue in a diversity case is manifestly within the province of federal law. In Hanna, the Supreme Court determined that to the extent that Congress has enacted federal procedural rules (and implicitly federal statutes governing federal court procedure), the question is governed by federal law. Noting the important federal interests supporting the use of federal law, the Hanna court observed:
One of the shaping purposes of the Federal Rules is to bring about uniformity in the federal courts by getting away from local rules. This is especially true of matters which relate to the administration of legal proceedings, an area in which federal courts have traditionally exerted strong inherent power, completely aside from the powers Congress expressly conferred in the Rules. The purpose of the Erie doctrine, even as extended in York and Ragan, was never to bottle up federal courts with 'outcome-determinative' and 'integral-relations' stoppers--when there are 'affirmative countervailing [federal] considerations' and when there is a Congressional mandate (the Rules) supported by constitutional authority. Lumbermen's Mutual Casualty Co. v. Wright, 322 F.2d 759, 764 (C.A. 5th Cir. 1963).
Hanna, 380 U.S. at 472-74, 85 S. Ct. at 1144-46 (footnotes omitted).
Under Hanna, federal law, not Alabama law, must be applied to determine the effect of forum selection clauses. This decision is dictated by both statute and binding precedent. Venue is a matter of federal procedure for several reasons. As to statutory law: First, Congress has specifically provided, by statutory enactment, rules of venue to govern federal district courts in diversity actions. 28 U.S.C.A. Secs. 1391, et seq. By providing specific provisions rather than allowing rules of venue to be governed by state common law, the statute makes clear that Congress considered this a question appropriately governed by federal legal standards. Second, Congress has approved the adoption of Fed. R. Civ. P. 12(b) (3) and 41(b), federal procedural rules that direct federal courts as to the principles involved in deciding questions of venue. As the panel stated in reflection on these rules:
As to case law: a year before Hanna was decided, the Supreme Court in National Equipment Rental v. Szukhent, 375 U.S. 311, 84 S. Ct. 411, 11 L. Ed. 2d 354 (1964), considered a diversity case analogous to the instant case. Michigan residents leased farm equipment from a New York-based company. The contract contained in fine print both choice of forum and choice of law clauses, both favoring New York. The Szukhents did not read this provision. The Court held this clause enforceable because "it is settled, as the courts below recognized, that parties to a contract may agree in advance to submit to the jurisdiction of a given court...." Id. at 315-16, 84 S. Ct. at 414. While the central issue in the case was the propriety of another clause designating a New York agent for service of process, the Court upheld the clause in all respects without reference to either New York or Michigan law. Id.
The second case, The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S. Ct. 1907, 32 L. Ed. 2d 513 (1972), although not controlling because it arose under an admiralty statute creating exclusive federal jurisdiction, is nevertheless instructive with respect to the growing judicial approval of choice of forum clauses. The Court noted:
Id. at 9-12, 92 S. Ct. at 1912-14 (footnotes omitted).
Similarly, in Citro Florida, Inc. v. Citrovale, S.A., 760 F.2d 1231 (11th Cir. 1985) (per curiam), a panel of this Court considered in diversity a contractual forum selection clause that referred the case to Brazil. There, the court held that because the clause was ambiguous as to whether it vested venue solely or concurrently in Brazil, an American court could hear the suit. The analysis regarding the enforceability of the clause, however, turned on the reasonableness principles set forth in The Bremen. There is no reason not to apply The Bremen test to domestic cases. Indeed, the Second Circuit did precisely this in a case similar to the instant one. In Bense v. Interstate Battery System of America, 683 F.2d 718, 721-22 (2d Cir. 1982), the Second Circuit Court of Appeals expressly declined to use Texas venue law, which disfavored forum selection clauses, to undo a contractual agreement.
Applying federal law to this question, the inquiry is whether the forum selection clause in this case is unenforceable under the standards set forth in The Bremen. There the Supreme Court identified two factors that might justify refusing to enforce a clause. First, "if enforcement would contravene a strong public policy of the forum in which suit is brought, whether declared by statute or by judicial decision." 407 U.S. at 15, 92 S. Ct. at 1916. At first glance, this appears to support The Stewart Organization's argument that the choice of forum clause should not be enforced because the Alabama courts have deemed such clauses as violative of public policy. See Redwing Carriers, Inc. v. Foster, 382 So. 2d 554, 556 (Ala.1980). A closer look at Redwing reveals, however, that the Alabama policy is for the protection of the jurisdiction of the state courts rather than the protection of the state's citizens. The Redwing court held:
The Supreme Court of Alabama would not seem to be concerned with the protection of the jurisdiction of the federal district courts located in the state. Indeed, if a contract sought to require litigation in a federal court in Alabama, it can be presumed the agreement would be unenforceable in an Alabama state court. Since this case will be tried in federal court, the protection of state court jurisdiction is not involved. There are simply no federalism concerns in deciding which federal court will try a case of federal jurisdiction. New York law will govern the underlying dispute. The parties, by the terms of the contract, have agreed to this. Under Guaranty Trust Co. v. York, 326 U.S. 99, 65 S. Ct. 1464, 89 L. Ed. 2079 (1945), the resolution of the choice of forum question should not affect the substantive outcome of the case. Both New York and Alabama would enforce the contract in this regard and apply New York law.
A second factor which might justify refusal to enforce a forum selection clause would be "if the chosen forum is seriously inconvenient for the trial of the action." The Bremen, 407 U.S. at 16, 92 S. Ct. at 1916 (emphasis in original). The party opposing the clause must "show that trial in the contractual forum will be so gravely difficult and inconvenient that he will for all practical purposes be deprived of his day in court. Absent that, there is no basis for concluding that it would be unfair, unjust, or unreasonable to hold that party to his bargain." Id. at 18, 92 S. Ct. at 1917.
The Stewart Organization has failed to meet this heavy burden of proof. First, and most importantly, The Stewart Organization will not be deprived of its day in court. Although it may be more expensive for it to do so, the record does not show that Mr. Stewart or The Stewart Organization is unable to afford the costs of litigating this case in Manhattan. Second, there is no merit to The Stewart Organization's argument that the contract should be held void because it is a product of fraud and overreaching. They argue that Ricoh possessed superior bargaining power and that Mr. Stewart was pressured into signing this contract by a pushy salesman. Mr. Stewart, however, is a certified public accountant of fifteen years standing and is a senior partner in a major Birmingham firm. He is a knowledgeable, sophisticated and successful businessman, participating in several ventures that have produced multi-million dollar profits. He purchased a failing local copying business and took it from $750,000 indebtedness to sales of 1.8 million in one year. The record reflects an "arm's-length negotiation by experienced and sophisticated businessmen, and [because there is absence of] some compelling and countervailing reason it should be ... enforced by the court [ ]." The Bremen, 407 U.S. at 12, 92 S. Ct. at 1914.
I concur in the court's judgment, directing the district court to transfer this case to the United States District Court for the Southern District of New York. I write separately, however, because I disagree with the majority's analysis of the questions this appeal presents. In my view, we must decide whether the district court erred by refusing to consider the parties' choice-of-forum clause in passing on the defendant's motion to transfer this case to the Southern District of New York, pursuant to 28 U.S.C. § 1404(a) (1982).1 If the court should have considered the clause, we must then decide whether it would have been an abuse of discretion not to transfer this case. The district court concluded that the doctrine of Erie R.R. v. Tompkins, 304 U.S. 64, 58 S. Ct. 817, 82 L. Ed. 1188 (1938), precluded it from giving any effect to the choice-of-law clause because Alabama forbids its courts from honoring such provisions. I believe that the Erie doctrine presents no bar and that the district court should have taken the clause into account in deciding the section 1404(a) motion. I also believe that the facts in this case make it clear that the district court would have abused its discretion if it refused to transfer this case.
What I have said also applies when the plaintiff decides to bring his state law claim to federal court, invoking its diversity of citizenship jurisdiction. The doctrine laid down by Erie R.R. v. Tompkins, 304 U.S. 64, 58 S. Ct. 817, 82 L. Ed. 1188 (1938), and reinforced in Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 61 S. Ct. 1020, 85 L. Ed. 1477 (1941), guarantees him that the federal court will apply the same conflict-of-laws rules and the same rule of decision as would the courts of the state in which it sits.
Recognizing that another federal court might be a more suitable place to try a case than the court the plaintiff chooses, Congress passed a statute, the Act of June 25, 1948, 62 Stat. 937 (codified as amended at 28 U.S.C. § 1404(a) (1982)),2 authorizing a district court to transfer a civil action to another district " [f]or the convenience of parties and witnesses, in the interest of justice," if venue is otherwise proper in the transferee district. Through this law, Congress increased the efficiency of the federal court system. In doing so, it gave the district courts the discretion to override the plaintiff's traditional right to select his forum. See Reviser's Note, 28 U.S.C. § 1404(a).
The Supreme Court solved this problem in Van Dusen v. Barrack, 376 U.S. 612, 84 S. Ct. 805, 11 L. Ed. 2d 945 (1964). Analyzing the purposes of section 1404(a), the Court found that Congress did not intend that a defendant obtaining a transfer " 'get a change of law as a bonus for a change of venue.' " Id. at 636, 84 S. Ct. 819 (footnote omitted). The court therefore held that when a defendant successfully moves to have a case transferred, the transferee court should apply the same substantive law that the transferor court would have applied, not the substantive law of the forum state of the transferee court. See generally Note, Choice of Law in Federal Court After Transfer of Venue, 63 Cornell L. Rev. 149, 151-59 (1977).
Ricoh, relying on the contract's forum selection clause, moved the district court to either dismiss the case for improper venue, under 28 U.S.C. § 1406(a) (1982),6 or to transfer the case to the Southern District of New York, under 28 U.S.C. § 1404(a) (1982). Because Ricoh does business in the relevant judicial district in Alabama as well as New York, the Northern District of Alabama constituted a proper venue. See 28 U.S.C. § 1391(b) & (c) (1982). The district court therefore properly denied Ricoh's section 1406(a) motion to dismiss the case. Seizing on ambiguous language in an Alabama case that refused to enforce a choice-of-forum clause, Redwing Carriers, Inc. v. Foster, 382 So. 2d 554 (Ala.1980), the district court also denied Ricoh's motion to transfer. The court read this language as declaring choice-of-forum agreements null and void and concluded that it was bound by Erie to ignore the clause. Because he doubted his conclusion, the district judge certified to this court the question of whether he should have transferred this case.7 We accepted jurisdiction.
Section 1404(a) permits a district court to transfer a case " [f]or the convenience of parties and witnesses, in the interest of justice." Here, the fact that the parties entered into a valid contract creates a conclusive presumption that Ricoh has already compensated Stewart for any inconvenience Stewart and its witnesses8 might suffer from trying this case in New York. Furthermore, I find it self-evident that the interests of justice would best be served by respecting a valid contract.
The Supreme Court considered the effect of a choice-of-forum clause in The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S. Ct. 1907, 32 L. Ed. 2d 513 (1972). In that case, the respondent, owner of a sea-going drilling rig, contracted with the petitioner, owner of The Bremen, to have petitioner tow the rig across the Atlantic Ocean. The contract contained a provision that any dispute would be litigated in a specified court, in London, England. Shortly after petitioner began towing the rig, bad weather damaged the rig. The respondent sued the petitioner in admiralty in the United States District Court for the Middle District of Florida, and the petitioner sought to have the case dismissed on forum non conveniens grounds, relying on the choice-of-forum clause.
The district court gave no effect to the clause, concluding that to do so would permit the parties to oust the court of its admiralty jurisdiction, and denied the motion. The court of appeals affirmed. Zapata Off-Shore Co. v. The Bremen, 446 F.2d 907 (5th Cir. 1971) (en banc) (per curiam) (adopting panel decision located at 428 F.2d 888 (5th Cir. 1970)), rev'd, 407 U.S. 1, 92 S. Ct. 1907, 32 L. Ed. 2d 513 (1972). The Supreme Court, reversing, ordered the forum selection agreement enforced, unless the respondent "could clearly show that enforcement would be unreasonable and unjust, or that the clause was invalid for such reasons as fraud or overreaching." The Bremen, 407 U.S. at 15, 92 S. Ct. at 1916. Phrasing the question as whether the district court should have "give [n] effect to the legitimate expectations of the parties, manifested in their freely negotiated agreement, by specifically enforcing the forum clause," id. at 12, 92 S. Ct. at 1914, the Court formulated a test for determining the enforceability of forum selection clauses in individual cases: a choice-of-forum agreement will bind the parties, unless the party opposing its enforcement can establish that the provision was the product of duress, fraud, or some other conduct the common law traditionally recognized as a defense to contract enforcement. See id. at 15, 92 S. Ct. at 1916. Moreover, such an agreement will bind the parties even if, at the time plaintiff institutes suit, the court happens to be the most convenient forum. The Court reasoned that when parties freely negotiate an agreement containing a forum selection clause, one party cannot avoid that clause merely because it has become inconvenient for him to abide by it. See id. at 16, 92 S. Ct. at 1916-17.
Despite the compelling reasons for the district court to give weight to the parties' forum selection clause and transfer the trial of this case, Stewart argues that the State of Alabama has a substantive rule, announced in Redwing Carriers, Inc. v. Foster, 382 So. 2d 554 (Ala.1980), against enforcing such clauses, and that the Erie doctrine required the district court to apply that rule in passing on Ricoh's section 1404(a) motion to transfer. I believe that Stewart misunderstands the policy underlying the Alabama rule; a more thorough analysis of that policy reveals that the district court was free, under the Erie doctrine, to consider the forum selection clause.
Of course, this is a dispute over "venue" in the sense of "where shall the case be tried?" But this states only part of the question, which is: "where shall a diversity case be tried when the parties, by a choice of forum clause, have selected a place for trial (New York), and the forum state (Alabama) considers such a clause to be violative of its public policy, and under the federal statute, 28 U.S.C. § 1391, venue is appropriate in both Alabama and New York?"
The fallacy in characterizing the problem as "just a dispute over venue" is that it leads the en banc court, as it led the panel, to conclude that because there is a federal venue statute the dispute is a procedural matter and therefore a federal matter. Of course, there are federal venue statutes. The particular statute, 28 U.S.C. § 1391, identifies the courts that Congress-- mindful of the convenience of the parties, (Citizens & Southern National Bank v. Bougas, 434 U.S. 35, 44 n. 10, 98 S. Ct. 88, 94 n. 10, 54 L. Ed. 2d 218 (1977)--has defined as suitable to hear diversity cases. This and other venue statutes do not address the question of whether or under what circumstances a party may antecedently agree to proceed in one or another of the federal judicial districts that under the federal statutes are "suitable." This case is not about what court is suitable. It is about an agreement to choose between suitable courts.
The matter before us is not, as stated by the panel and restated by the en banc court, a matter of negating the federal venue statute. The venue statute is fully vindicated. Venue exists in both courts. The issue before us concerns a contract between parties relating to which of two acceptable federal places of trial (as established by the federal venue statutes) shall be utilized. No federal law answers this question. The bargain reached by the parties choosing between two courts each defined as "suitable" under 28 U.S.C. § 1391 is of no federal concern. It is a matter of state contract law, and the forum state's policy should be recognized.
28 U.S.C. § 1404(a) (1982) states as follows: "For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought."
Prior to the enactment of section 1404(a), federal courts could dismiss a case for forum non conveniens reasons, even if venue was proper. See Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 67 S. Ct. 839, 91 L. Ed. 1055 (1947). A dismissal on forum non conveniens grounds could effectively bar a plaintiff's opportunity to proceed with his claim, as when the statute of limitations in the more convenient forum had completely run. See Norwood v. Kirkpatrick, 349 U.S. 29, 31-32, 75 S. Ct. 544, 546, 99 L. Ed. 789 (1955). By permitting district courts to transfer cases they might otherwise have dismissed, section 1404(a) mitigates the harsh consequences a plaintiff might suffer by bringing his action in a proper, but inconvenient, forum
I am perplexed by Judge Godbold's concern that a difference between federal and state court treatment of forum selection clauses will lead to "the kinds of forum shopping ... deplored in Erie." Post at 1077; see also Stewart Org., Inc. v. Ricoh Corp., 779 F.2d 643, 651 (11th Cir. 1986) (Godbold, J., dissenting), vacated, 785 F.2d 896 (11th Cir. 1986). The forum shopping that disturbed the Erie Court was the ability of a plaintiff to get an entirely different result in his case, depending on whether he brought it in state or federal court. As I demonstrate in the text, the Van Dusen rule, requiring the transferee court to apply the same law that the transferor court would have applied, eliminates Judge Godbold's concern
The choice-of-forum provision must be read against the background of the Alabama rule, pronounced in Redwing Carriers, Inc. v. Foster, 382 So. 2d 554 (Ala.1980). The effect of that rule, see infra Part II.C., is to create the following exception to the choice-of-forum clause: if Stewart sues Ricoh and a resident defendant in Alabama state court, thus precluding Ricoh from removing the case to federal court, the state court will ignore the choice-of-forum clause and proceed to litigate the case.
Stewart's complaint contains federal antitrust claims, in addition to its state law claims against Ricoh. Ricoh does business in Alabama and New York, making venue for all of Stewart's claims statutorily proper in both the Northern District of Alabama and the Southern District of New York. See 28 U.S.C. § 1391(b) & (c) (1982); 15 C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure Sec. 3818 (2d ed. 1986)
28 U.S.C. § 1406(a) (1982) provides as follows:
28 U.S.C. § 1292(b) (1982) allows a district court to certify an order in a civil action that although not normally immediately appealable, involves "a controlling question of law as to which there is substantial ground for difference of opinion" and an appeal from which might materially advance the conclusion of the litigation. The former Fifth Circuit held that section 1292(b) was an appropriate method for appellate review of section 1404(a) decisions. See Continental Grain Co. v. Federal Barge Lines, Inc., 268 F.2d 240, 241-43 (5th Cir. 1959), aff'd, 364 U.S. 19, 80 S. Ct. 1470, 4 L. Ed. 2d 1540 (1960) (in Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), this court adopted as binding precedent all decisions of the former Fifth Circuit handed down prior to October 1, 1981). In addition, Ricoh could have obtained appellate review of the district court's section 1404(a) decision by seeking a writ of mandamus. See Roofing & Sheet Metal Servs. v. La Quinta Motor Inns, 689 F.2d 982, 987-89 (11th Cir. 1982)
In theory, the parties had two categories of witnesses in mind when they negotiated the choice-of-forum provision. The first category includes witnesses over whom the respective parties exercised control and could therefore bring to trial. Ricoh has compensated Stewart for its inconvenience in transporting those witnesses to trial in New York City. The second category of witnesses consists of those not under a party's control, residing beyond the reach of a subpoena calling for the witness' appearance at trial. See, e.g., Fed. R. Civ. P. 45(e). The testimony of those witnesses would have to be obtained by deposition, the expense of which would be substantially the same whether the parties were litigating in Manhattan or elsewhere