Court Opinion

ID: 76180
Source: CourtListenerOpinion
Date Created: 2010-04-26 23:52:55+00
Date Added: 2024-06-11T15:01:02.662384
License: Public Domain

[PUBLISH]

                  IN THE UNITED STATES COURT OF APPEALS

                            FOR THE ELEVENTH CIRCUIT                         FILED
                                                                   U.S. COURT OF APPEALS
                              ________________________               ELEVENTH CIRCUIT
                                                                          MAY 21, 2003
                                     No. 02-13488                     THOMAS K. KAHN
                             ________________________                      CLERK
                         D. C. Docket No. 01-01458-CV-HGS-S

P & S BUSINESS MACHINES, INC.,

                                                                           Plaintiff-Appellee,
       versus

CANON USA, INC.,

                                                                       Defendant-Appellant,

CANON COMPUTER SYSTEMS, INC.,

                                                                                    Defendant.
                              ________________________

                      Appeal from the United States District Court
                         for the Northern District of Alabama
                            _________________________
                                   (May 21, 2003)

Before BLACK, RONEY and STAPLETON*, Circuit Judges.

PER CURIAM:

______________________
       *Honorable Walter K. Stapleton, United States Circuit Judge for the Third Circuit, sitting
by designation.
      The issue on appeal is whether the district court erred in denying a defendant’s

motion to transfer this case pursuant to a contract forum selection clause because of

alleged inconvenience to the plaintiff and allegations that the plaintiff could not

afford to litigate in the forum designated by the contract. We reverse and remand

with instructions to transfer to the Central District of California.

      Plaintiff P & S Business Machines, Inc. (“P & S”) is an Alabama corporation.

Defendant Canon U.S.A., Inc. is a New York corporation, and Defendant Canon

Computer Systems, Inc. was a California corporation that still maintains offices in

California. Defendants are jointly referred to as “Canon.” P & S and Canon entered

into a contract in which Canon agreed to refer customers in a set geographic region

to P & S, as an approved service facility for Canon products. On May 26, 1999,

Canon sent P & S a letter expressing dissatisfaction with P & S and giving P & S time

to improve. In reliance, P & S took action to increase customer satisfaction and asked

Canon whether the deficiencies had been remedied. P & S alleged that Canon’s May

26 letter was false in that Canon ceased referring customers to P & S as of May 26.

P & S claims that Canon had a duty to disclose in the May 26 letter that Canon had

terminated P & S’s status as an authorized service facility and had ceased referral of

customers.

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      P & S filed suit against Canon in Alabama circuit court, alleging causes of

action for fraud and suppression. Canon removed the action to federal court based

on diversity jurisdiction and filed a motion to transfer the case to the district court in

California, pursuant to a forum selection clause in the agreement between the parties

which provided that California law would apply and that suits between the parties

should be brought within the state of California as follows:

      B.     SERVICE FACILITY CONSENTS TO THE JURISDICTION AND
             VENUE OF THE STATE AND FEDERAL COURTS SITUATED
             WITHIN THE STATE OF CALIFORNIA UPON SERVICE OF
             PROCESS MADE IN ACCORDANCE WITH THE STATUTES OF
             CALIFORNIA AND THE UNITED STATES. SERVICE FACILITY
             FURTHER AGREES THAT SUITS BETWEEN THE PARTIES UPON
             ANY AND ALL CAUSES OF ACTION, WHETHER OR NOT SUCH
             CAUSES OF ACTION HAVE RISEN UNDER THIS AGREEMENT
             AND REGARDLESS OF THE LEGAL THEORY UPON WHICH
             SUCH CAUSES OF ACTION ARE BASED, SHALL BE BROUGHT
             EXCLUSIVELY IN A STATE OR FEDERAL COURT SITUATED
             WITHIN THE STATE OF CALIFORNIA.

      In considering Canon’s motion to transfer this action to the Central District of

California, the district court adopted the magistrate judge’s report and

recommendation that compared Canon and P & S’s inconvenience in litigating in

Alabama or California. The magistrate judge reasoned that “[t]he relative ability of

the parties to bear the expense of changing the forum militates heavily in favor of

plaintiff’s choice of forum. Further, trial efficiency would best be served by leaving

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this action in Alabama rather than transferring it to the Central District of California,

where the court docket surely is more crowded.” The magistrate judge noted that due

to exhaustion of P & S’s financial resources, transfer to California “would essentially

end the litigation before the merits could even be addressed.”

      The following principles have been established for consideration of whether

a case should be removed to another jurisdiction pursuant to a forum selection cause.

      1. Forum selection clauses in contracts are enforceable in federal courts.

See e.g. M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15 (1972).

      2. Consideration of whether to enforce a forum selection clause in a diversity

jurisdiction case is governed by federal law, under 28 U.S.C. § 1404(a) (1982), not

state law. See Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 28–29 (1988).

      3. The burden is on the party opposing the enforcement of the forum selection

clause to show that the contractual forum is sufficiently inconvenient to justify

retention of the dispute. See In re Ricoh Corp., 870 F.2d 570, 573 (11th Cir. 1989).

      4. The validity of a forum selection clause is determined under the usual rules

governing the enforcement of contracts in general. See In re Ricoh Corp., 870 F.2d

at 573–74 (considering whether the clause was “freely and fairly negotiated by

experienced business professionals” and whether there was any fraud, duress,

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misrepresentation, or other misconduct in connection with the agreement to the forum

selection clause).

      5. Under Section 1404(a), the court should consider “the convenience of

parties and witnesses” and “the interest of justice,” with a choice of forum clause “a

significant factor that figures centrally in the district court’s calculus.” Stewart Org.,

Inc., 487 U.S. at 29 (emphasis added). “Thus, while other factors might ‘conceivably’

militate against a transfer . . . the venue mandated by a choice of forum clause rarely

will be outweighed by other 1404(a) factors.” In re Ricoh Corp., 870 F.2d at 573.

      6. By enforcing the contractual forum, the Court is not attempting to limit the

plaintiff’s usual right to choose its forum, but is enforcing the forum that the plaintiff

has already chosen. In re Ricoh Corp., 870 F.2d at 573.

      7. The financial difficulty that a party might have in litigating in the selected

forum is not a sufficient ground by itself for refusal to enforce a valid forum selection

clause. See Bonny v. Society of Lloyd’s, 3 F.3d 156, 160 n.11 (7th Cir. 1993)

(reasoning that a “party's financial status at any given time in the course of litigation

cannot be the basis for enforcing or not enforcing a valid forum selection clause”);

Moses v. Business Card Exp., Inc., 929 F.2d 1131, 1138–39 (6th Cir. 1991)

(reasoning that economic disparity between franchisor and franchisees and

franchisees' claim of financial hardship were insufficient reasons to refuse

                                            5
enforcement of a forum selection clause); see also Carnival Cruise Lines, Inc. v.

Shute, 499 U.S. 585, 594–95 (1991) (rejecting the Court of Appeals’ finding of fact

on insufficient evidence that respondents were physically and financially incapable

of litigating in the selected forum and enforcing the forum selection clause); Diaz

Contracting, Inc. v. Nanco Contracting Corp., 817 F.2d 1047, 1052–53 (3d

Cir.1987), overruled on other grounds by Hays & Co. v. Merrill Lynch, Pierce,

Fenner & Smith, Inc., 885 F.2d 1149 (3d Cir.1989) (concluding that the inability of

the plaintiff to finance additional litigation in another forum was insufficient to prove

unreasonableness).

      8. No case has been cited indicating that congestion of the selected forum’s

court docket should be grounds to avoid enforcement of a forum selection clause.

Although docket congestion, if proven, may be an appropriate consideration in a §

1404 motion to transfer, case law does not suggest that docket congestion is, by itself,

a dispositive factor. See e.g. Jumara v. State Farm Ins. Co., 55 F.3d 873, 882–83

(3rd Cir. 1995) (mandating transfer to venue specified in forum selection clause and

noting, among other factors, there was no evidence of an appreciable difference in

docket congestion between the two forums); Chrysler Credit Corp. v. Country

Chrysler, Inc., 928 F.2d 1509, 1516 (10th Cir. 1991) (including “difficulties that may

                                           6
arise from congested dockets” among other factors a district court should consider in

deciding a § 1404(a) motion to transfer).

      Applying these principles to this case, it is readily apparent the district court

should have transferred the case to California pursuant to an admittedly valid forum

selection clause in the contract. There is no evidence that the contract at issue was

not freely and fairly negotiated by experienced business professionals, nor has the

plaintiff claimed that Canon engaged in fraud, duress, misrepresentation, or other

misconduct in connection with the agreement. The considerations concerning the

plaintiff’s financial ability and the contrasting congestion in the two courts, even if

established by a better record than the one in the district court, would not be reasons

for failure to enforce the contract in this case under the established law.

      The choice of a California venue is entirely reasonable given that Canon

Computer Systems, Inc. was a California corporation and its headquarters and

principal place of business were and are still located in California. Almost all of

Canon’s employees and former employees that had involvement with P & S during

the relevant time period and would have information making them relevant witnesses

in this case, either work or formerly worked at the headquarters in California. All of

these present and former employees live in California. This suit simply does not

                                            7
present the type of “exceptional” situation in which judicial enforcement of a

contractual choice of forum clause would be improper.

      REVERSED and REMANDED with instructions to transfer to the United

States District Court for the Central District of California.

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