Opinion ID: 3011713
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Heading: The Procedure for Enforcing A Forum Selection

Text: Clause It is clear that a party may bring a motion to transfer from the initial federal forum to another federal court based on a valid forum selection clause. Such a motion is governed by 28 U.S.C. S 1404(a).5 See Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 32, 108 S.Ct. 2239, 2245 (1988). Transfer is not available, however, when a forum selection clause specifies a non-federal forum. In that case, it seems the district court would have no choice but to dismiss the action so it can be filed in the appropriate forum so long as dismissal would be in the interests of justice. See, e.g., Instrumentation Assoc., Inc. v. Madsen Elec. (Canada) Ltd., 859 F.2d 4, 6 n.4 (3d Cir. 1988); Central Contracting Co. v. Maryland Casualty Co., 367 F.2d 341 (3d Cir. 1966);17 Moore's Federal Practice, S111.04[4][c] (Matthew Bender 3d ed.). It is also clear that where venue would be proper in the initial forum court, provided no forum selection clause covered the subject matter of the lawsuit, it is inappropriate to dismiss pursuant to 28 U.S.C. S 1406 (allowing dismissal based on improper venue). See Jumara, 55 F.3d at 878-79. In the present case, the forum selection clause specified that suit could be brought either in state courts located within New York County or in the United States District Court for the Southern District of New Y ork. Lazard has not filed a motion for transfer, but rather a motion to dismiss based on the forum selection clause. The District Court treated this as a motion to dismiss under Fed. R. Civ. P. 12(b)(6), but still employed the balancing test of 28 U.S.C. S 1404(a) to determine whether dismissal based on the forum selection clause was proper. The District Court found that dismissal was proper. Salovaara appeals, arguing that Lazard's motion should have been construed as a motion for transfer because the forum selection clause allowed suit _________________________________________________________________ 5. Under 28 U.S.C. S 1404(a), a district court may transfer a civil case to another district [f]or the convenience of the parties and witnesses, in the interest of justice. . . . Before permitting such a transfer, a district court also must consider all relevant factors to determine whether on balance the litigation would more conveniently pr oceed and the interests of justice be better served by transfer to a dif ferent forum. Jumara, 55 F.3d at 879 (quoting 1A Pt. 2 Moor e's P 0.345[5], at 4363). 13 to be filed in another federal forum. He notes that dismissal is only warranted when the forum selection clause pr events filing in any federal court. See 17 Moore's Federal Practice, S 111.04[4][c]; Reynolds Publishers, Inc. v. Graphics Fin. Group, Ltd., 938 F. Supp. 256, 260-61 (D.N.J. 1996). We agree that venue was otherwise pr oper in the District of New Jersey and that 28 U.S.C. S 1406 would therefore not apply. The question is whether the District Court properly dismissed the case instead of transferring it to the Southern District of New York. In that regard, an examination of our decision in Crescent Int'l Inc. v. Avatar Communities, Inc., 857 F.3d 943, 944 (3d Cir. 1988), is particularly helpful. In Crescent, a Florida corporation, Avatar Communities, Inc. (Avatar), and a Pennsylvania corporation, Crescent International, Inc. (Crescent), entered into an agreement containing a forum selection that required `any litigation . . . [to] be maintained' in a state or federal court in Miami, Florida. 857 F.2d 943, 944 (3d Cir. 1988) (per curiam) (emphasis added). Nevertheless, Crescent filed an action in the United States District Court for the Eastern District of Pennsylvania. In r esponse, Avatar filed a Rule 12(b)(6) motion to dismiss, arguing a breach of the forum selection clause. The District Court granted Avatar's Rule 12(b)(6) motion based on the forum selection clause and we upheld the dismissal.6 See Crescent, 857 F.2d at 944-45. Our holding in Crescent leaves no doubt that a 12(b)(6) dismissal is a permissible means of enfor cing a forum selection clause that allows suit to be filed in another federal forum. The present case involves such a clause and accordingly Crescent contr ols. The District Court's sua sponte weighing of S 1404's factors does nothing to limit the precedential impact of Crescent, where the parties agreed _________________________________________________________________ 6. There is much disagreement over whether dismissal (where appropriate) should be made pursuant to Fed. R. Civ. P. 12(b)(1), 12(b)(3), or 12(b)(6). See, e.g.,Lambert v. Kysar, 983 F.2d 1110, 1112n.1 (1st Cir. 1993) (dismissal based on forum selection clause specifying state forum grounded on Fed. R. Civ. P. 12(b)(6), not 12(b)(3)); Lipcon v. Underwriters at Lloyd's, London, 148 F.3d 1285, 1289 (11th Cir. 1998) (collecting cases adopting each rationale and wher e forum selection clauses specified non-federal forums). 14 that S 1404 was inapplicable to their case. Indeed, there is nothing in Crescent that pr ecludes a district court, faced with a Rule 12 motion based on a forum selection clause, from considering S 1404 factors to deter mine whether transfer is the better course. Moreover , adding S 1404 to the mix does nothing to abrogate a district court's authority to dismiss under Rule 12. That is, the existence or nonexistence of a S 1404(a) motion is not pertinent to deciding the proper scope of a 12(b)(6) motion. We acknowledge that, as a general matter , it makes better sense, when venue is proper but the parties have agreed upon a not-unreasonable forum selection clause that points to another federal venue, to transfer rather than dismiss. And if a defendant moves under S 1404(a), transfer, of course, is the proper vehicle (assuming the r easonableness of the forum selection clause). But when a defendant moves under Rule 12, a district court retains the judicial power to dismiss notwithstanding its consideration of S 1404. As such, the District Court's dismissal of Salovaara's claim against Lazard was proper. The District Court's interpretation of Rule 12(b)(6) not only comports with our holding in Crescent but is also corroborated by authority from other jurisdictions. In Security Watch v. Sentinel Sys., Inc., for example, the Sixth Circuit affirmed a Rule 12 dismissal based on a forum selection clause that specified that litigation only be brought in the . . . Circuit Court for the City of Hampton, Virginia, or the United States District Court for the Eastern District of Virginia. 176 F .3d 369, 374 (6th Cir. 1999) (emphasis added). Additionally, Ninth Circuit case law has been read to allow Rule 12(b)(3) as a means of enforcing forum selection clauses that permit suit in state or federal courts. See Walker v. Carnival Cruise Lines, 63 F. Supp. 2d 1083 (N.D. Cal. 1999).7 Similarly, other courts that have _________________________________________________________________ 7. Walker's interpretation ofNinth Circuit precedent (Walker explicitly relied on Argueta v. Banco Mexicano, S.A., 87 F.3d 320 (9th Cir. 1996)) finds further support in Shute v. Carnival Cruise Lines, 934 F.2d 1091 (9th Cir. 1991) (Shute II), despite Shute's somewhat complicated procedural history. The Shute litigation began with a summary judgment motion, in which the defendant alleged: (i) that the District Court, in the 15 addressed the scope of Rule 12 in this context have confirmed the power to dismiss under such circumstances. See Rooney v. Biomet, Inc., 63 F. Supp. 2d 126 (D. Mass. 1999) (granting dismissal under Rule 12(b) based on a forum selection clause that specified certain state and federal courts as acceptable forums); Soil Shield Int'l Inc. v. Lilly Indus., Inc., No. C 98-1353, 1998 WL 283580 (N.D. Cal. May 29, 1998) (same); Hunter Distrib. Co., Inc. v. Pure _________________________________________________________________ Western District of Washington, lacked personal jurisdiction; and (ii) that a forum selection clause permitted suit only in Florida's state or federal courts. In the alternative, the defendant r equested that the case be transferred to the Southern District of Florida. See Shute v. Carnival Cruise Lines, 897 F.2d 377, 379 (9th Cir . 1990) (Shute I). The District Court granted summary judgment on personal jurisdiction grounds without addressing the forum selection clause, and the Ninth Circuit reversed in Shute I. In Shute I, the Court of Appeals held that personal jurisdiction was proper, but that, since the forum selection clause was unreasonable, that clause was legally unenforceable. The Supreme Court granted certiorari and reversed, holding that the forum selection clause was reasonable and enfor ceable, though the Court did not address whether the proper mechanism for such enforcement was summary judgment under Rule 56 or transfer underS 1406(a). See Carnival Cruise Lines v. Shute, 499 U.S. 585 (1991). On remand, defendant's request for transfer was not discussed; instead, the District Court's original decision granting summary judgment was simply affirmed. See Shute II, 934 F.2d at 1091. By so doing, the Ninth Circuit necessarily, though implicitly, affirmed the District Court's authority to grant summary judgment, instead of granting transfer, in enforcing a forum selection clause that would have allowed litigation to proceed in the Souther n District of Florida. Although the Shute litigation dealt only with summary judgment motions under Rule 56, subsequent decisions have construed the principles contained therein as relevant in the context of 12(b) motions as well. See Foster v. Chesapeake Ins. Co., 933 F.2d 1207, 1215 (3d Cir. 1991) ([N]o one doubts the district court's power to dismiss pursuant to a properly construed forum selection clause . . . .) (citing Carnival Cruise Lines, Inc., 499 U.S. at 585) (dictum); Inter national Software Sys. v. Amplicon, Inc., 77 F.3d 112, 114 (5th Cir. 1996) (The Supreme Court reversed the Court of Appeals without reaching the personal jurisdiction issue, in effect reinstating the dismissal of the suit based on the forum selection clause.). 16 Beverage Partners, 820 F. Supp. 284 (N.D. Miss. 1993) (same). In light of the foregoing, we conclude that the District Court was not required to treat Lazar d's motion for dismissal as a motion for transfer simply because the forum selection clause specified that suit be br ought in either a federal or a state forum. Ther efore, we hold that the District Court properly dismissed Salovaara's complaint against Lazard.