Opinion ID: 772806
Heading Depth: 2
Heading Rank: 1

Heading: The Procedure for Enforcing A Forum Selection Clause

Text: 36 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. 1404(a). 5 See Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 32, 108 S. Ct. 2239,2245, 101 L. Ed. 2d 22 (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, 111.04[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. 1406 (allowing dismissal based on improper venue). See Jumara, 55 F.3d at 878-79. 37 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 York. 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. 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 to be filed in another federal forum. He notes that dismissal is only warranted when the forum selection clause prevents filing in any federal court. See 17 Moore's Federal Practice, 111.04[4][c]; Reynolds Publishers, Inc. v. Graphics Fin. Group, Ltd., 938 F. Supp. 256, 260-61 (D.N.J. 1996). 38 We agree that venue was otherwise proper in the District of New Jersey and that 28 U.S.C. 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.2d 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 response, 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. 39 Our holding in Crescent leaves no doubt that a 12(b)(6) dismissal is a permissible means of enforcing a forum selection clause that allows suit to be filed in another federal forum. The present case involves such a clause and accordingly Crescent controls. The District Court's sua sponte weighing of 1404's factors does nothing to limit the precedential impact of Crescent, where the parties agreed that 1404 was inapplicable to their case. Indeed, there is nothing in Crescent that precludes a district court, faced with a Rule 12 motion based on a forum selection clause, from considering 1404 factors to determine whether transfer is the better course. Moreover, adding 1404 to the mix does nothing to abrogate a district court's authority to dismiss under Rule 12. That is, the existence or non-existence of a 1404(a) motion is not pertinent to deciding the proper scope of a 12(b)(6) motion. 40 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 1404(a), transfer, of course, is the proper vehicle (assuming the reasonableness 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 1404. As such, the District Court's dismissal of Salovaara's claim against Lazard was proper. 41 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 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., 1998 U.S. Dist. LEXIS 8002, No. C 98-1353, 1998 WL 283580 (N.D. Cal. May 29, 1998) (same); Hunter Distrib. Co., Inc. v. Pure Beverage Partners, 820 F. Supp. 284 (N.D. Miss. 1993) (same). 42 In light of the foregoing, we conclude that the District Court was not required to treat Lazard's motion for dismissal as a motion for transfer simply because the forum selection clause specified that suit be brought in either a federal or a state forum. Therefore, we hold that the District Court properly dismissed Salovaara's complaint against Lazard. 43