Summary
finding clause permissive despite the "obligatory nature" of the provision that read "[a]ll lawsuits will be handled in the State of Michigan"
Summary of this case from Siegel v. AU Optronics Corp. (In re TFT-LCD Antitrust Litig.)Opinion
Civil Action No. 3:02-CV-2555-D
May 14, 2003
MEMORANDUM OPINION AND ORDER
The instant motion to transfer venue under 28 U.S.C. § 1404 (a) turns on the question whether a forum selection clause that provides that "[a]ll lawsuits will be handled in the State of Michigan" (emphasis added) is mandatory or permissive. Concluding that the clause is ambiguous and thus must be construed against the drafter and deemed permissive, and that defendants have otherwise failed to demonstrate that the case should be transferred under § 1404(a), the court denies the motion.
I
Plaintiff Thomas Watson ("Watson") injured his knee while employed as an outside sales representative by defendant John K. Burch Company a/k/a Burch Fabrics ("Burch"). He filed a worker's compensation claim and underwent surgery and other treatment. Continued weakness revealed that he had a form of degenerative motor neuron disease, amyotrophic lateral sclerosis (ALS), sometimes referred to as Lou Gehrig disease. Burch later terminated Watson's employment. Watson's supervisor — defendant Richard Hatch ("Hatch"), Burch's Vice President of Sales and Marketing — assumed responsibility for his sales territory and allegedly told Burch clients that Watson had been terminated because of his medical condition.
Watson sued defendants alleging claims for violations of the Americans with Disabilities Act of 1990 ("ADA"), 42 U.S.C. § 12101 et seq., Tex. Lab. Code Ann. § 451.001 (Vernon 1996) (retaliation for filing a worker's compensation claim), slander, and invasion of privacy. He filed suit in this court despite a provision in the Burch Personnel Manual that states; "All lawsuits will be handled in the State of Michigan." Ds. App. 005. Watson acknowledged that he had received and read the Personnel Manual and agreed "to be bound by all policies in the manual." Id. at 003.
Defendants maintain that it is unclear whether Watson is suing Hatch only for libel and invasion of privacy or also for violating the ADA and § 451.001.
This proviso follows a multi-step grievance process that mandates binding arbitration. Ds. App. 004-005. Defendants do not contend in their motion, however, that Watson's claims are subject to binding arbitration.
Defendants move under § 1404(a) to transfer this action to the Western District of Michigan for the convenience of the parties and witnesses, relying on the forum selection clause in the Personnel Manual. Watson opposes the motion, contending, inter alia, that the proviso does not qualify as a forum selection clause.
II A
Section 1404(a) provides that "[f]or 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." The decision to transfer is made to prevent waste of time, energy, and money and to protect litigants, witnesses, and the public against unnecessary inconvenience and expense.Bank One, N.A. v. Euro-Alamo Invs., Inc., 211 F. Supp.2d 808, 811 (N.D. Tex. 2002) (Fitzwater, J.) (citing Stabler v. N.Y. Times Co., 569 F. Supp. 1131, 1137 (S.D. Tex. 1983)). "Within this framework, a forum selection clause is treated as a manifestation of the parties' preferences as to a convenient forum." Jumara v. State Farm Ins. Co., 55 F.3d 873, 880 (3d Cir. 1995). "Although the parties' agreement as to the most proper forum should not receive dispositive weight, it is entitled to substantial consideration." Id. (citations omitted). "[W]hile courts normally defer to a plaintiff's choice of forum, such deference is inappropriate where the plaintiff has already freely contractually chosen an appropriate venue." Id. A forum selection clause will be "a significant factor that figures centrally in the district court's calculus." Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29 (1988). "The flexible and individualized analysis Congress prescribed in § 1404(a) thus encompasses consideration of the parties' private expression of their venue preferences." Id. at 29-30. A forum selection clause is thus one factor, albeit a significant one. It "should receive neither dispositive consideration . . . nor no consideration . . ., but rather the consideration for which Congress provided in § 1404(a)." Id. at 31. To be valid and enforceable, a forum selection clause must be mandatory, not be invalid due to fraud or overreaching, and not deprive the resisting party of its day in court. See Caldas Sons, Inc. v. Willingham, 17 F.3d 123, 127 (5th Cir. 1994); Seattle-First Nat'l Bank v. Manges, 900 F.2d 795, 799 (5th Cir. 1990)
In most instances, the moving party bears the burden of proving that transfer under § 1404(a) is appropriate. This requires a particularized showing regarding why transfer is necessary, including identification of key witnesses and the general content of their testimony. Young v. Armstrong World Indus., Inc., 601 F. Supp. 399, 401-02 (N.D. Tex. 1984) (Sanders, J.). Although the Fifth Circuit has not decided this precise question, other circuits have held that the presence of a valid and enforceable forum selection clause shifts the burden of persuasion to the nonmovant who is attempting to avoid its enforcement. See, e.g., Jumara, 55 F.3d at 880 ("Where the forum selection clause is valid . . . the plaintiffs bear the burden of demonstrating why they should not be bound by their contractual choice of forum."); In re Ricoh Corp., 870 F.2d 570, 573 (11th Cir. 1989) (per curiam) (mandamus proceeding) ("in the usual motion for transfer under section 1404(a), the burden is on the movant to establish that the suggested forum is more convenient. When, however, the parties have entered into a contract containing a valid, reasonable choice of forum provision, the burden of persuasion is altered . . . [and] . . . the opponent bears the burden of persuading the court that the contractual forum is sufficiently inconvenient to justify retention of the dispute."). This rule is necessary to ensure that the forum selection clause is properly weighed as a substantial factor and to avoid encouraging parties to breach their contractual obligations. See Ricoh, 870 F.2d at 573. There is nothing in Stewart to suggest that this rule is incorrect. Cf. Stewart, 487 U.S. at 30-31 ("It is conceivable in a particular case, for example, that because of these factors a district court acting under § 1404(a) would refuse to transfer a case notwithstanding the counterweight of a forum-selection clause[.]"), and 33 ("[T]he authority and prerogative of the federal courts to determine the issue, as Congress has directed by § 1404(a), should be exercised so that a valid forum-selection clause is given controlling weight in all but the most exceptional cases.") (Kennedy, J., concurring)).
B
Given the central role of the forum selection clause in resolving defendants' motion, the court will first decide whether it is mandatory or permissive.
Watson essentially maintains that the clause is not a significant factor because it is at most permissive. He argues that the clause is "vague and ambiguous and open to several interpretations." P. Br. at 18. Watson contends that the proviso could merely explain that Burch intends to deal with lawsuits from its base in Michigan and that it does not dictate that employee lawsuits must be "filed and maintained in an appropriate court in Michigan," id.
Although courts addressing forum selection clauses have not always comprehensively explained their reasoning for concluding that a specific provision was permissive or mandatory, some courts have recognized a trend in, and have synthesized, the case law:
[C]ase law . . . involving forum selection clauses . . . is surprisingly uniform. Generally speaking, the circuits that have addressed the issue are in agreement that "where venue is specified [in a forum selection clause] with mandatory or obligatory language, the clause will be enforced; where only jurisdiction is specified [in a forum selection clause], the clause will generally not be enforced unless there is some further language indicating the parties' intent to make venue exclusive."K V Scientific Co. v. Bayerische Motoren Werke Aktiengesellschaft, 314 F.3d 494, 499 (10th Cir. 2002) (emphasis added) (quoting Paper Express, Ltd. v. Pfankuch Maschinen GmbH, 972 F.2d 753, 757 (7th Cir. 1992)). Accordingly, for a forum selection clause to be mandatory, the provision must clearly indicate its obligatory nature and refer specifically to venue.
As the Tenth Circuit noted in KV, this formulation is reflected in the case law:
Applying this rule, these circuits (and the district courts within them) have held the following forum selection clause language to be permissive:
* "Any dispute arising between the parties hereunder shall come within the jurisdiction of the competent Greek Courts, specifically of the Thessaloniki Courts."
* * *
* "The courts of California, County of Orange, shall have jurisdiction over the parties in any action at law relating to the subject matter or the interpretation of this contract."
* "Place of jurisdiction is Sao Paulo/Brazil."
* * *
* "This agreement shall be governed by and construed in accordance with the laws of the Federal Republic of Germany. * * * Place of jurisdiction shall be Dresden."
Applying the same rule, these courts have held the following clauses to be mandatory:
* "[ P] lace of jurisdiction . . . is the registered office of the trustee [in Germany], to the extent permissible under the law." ([The court] conclud[ed] that the phrase "to the extent permissible under the law" "would have no function if the [forum selection] clause were not mandatory — if, in other words, a party could sue anywhere he wanted").
* "In all disputes arising out of the contractual relationship, the action shall be filed in the court which has jurisdiction for the principal place of business of the supplier. . . . The supplier also has the right to commence an action against the purchaser at the purchaser's principal place of business."
* "Licensee hereby agrees and consents to the jurisdiction of the courts of the State of Virginia. Venue of any action brought hereunder shall be deemed to be in Gloucester County, Virginia."314 F.3d at 499-500 (citations and footnote omitted) (emphasis added).
This circuit has taken a similar path. In Keaty v. Freeport Indonesia, Inc., 503 F.2d 955 (5th Cir. 1974) (per curiam), the forum selection clause provided that "[t]his agreement shall be construed and enforceable according to the law of the State of New York and the parties submit to the jurisdiction of the courts of New York." Id. at 956 (emphasis added). The court held that the venue provision was ambiguous and must be construed against the defendant as the drafting party. Id. at 957; see Caldas, 17 F.3d at 128. The forum selection clause in Keaty neither made the forum obligatory nor referred specifically to venue as opposed to jurisdiction.
Caldas also fits within the Tenth Circuit's reasoning. In Caldas the provision contained "a one sentence forum selection clause, which provided that `[t]he laws and courts of Zurich [shall be] applicable.'" Caldas, 17 F.3d at 127. Although the panel held that the parties' use of the term "shall" was permissive rather than mandatory, it did so on the ground that the language of the clause was "not nearly as clear, unequivocal and mandatory as that presented" in M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972), and therefore was properly construed against the defendant (the drafting party) as permissive. Id. at 128. The court recognized that the contract language did not clearly indicate the obligatory nature of venue selection. The provision only ensured that the parties submitted to the laws and courts of Zurich, but did not require that all suits must be brought there: "The only thing certain about the clause . . . is that the parties consented to the personal jurisdiction of the Zurich courts." Id.
In the instant case, although the clause at issue does indicate the clause's obligatory nature — " All lawsuits will be handled in the State of Michigan" (emphasis added) — it does not clearly refer to a choice of venue. The provision's requirement that lawsuits will be handled in Michigan does not unambiguously command that they must be brought or litigated in Michigan. An agreement on venue is not specified. The clause could refer to jurisdiction or to venue. Accordingly, applying the rule of contra proferentum, see Keaty, 503 F.2d at 957; Caldas, 17 F.3d at 128, the court holds that the clause must be deemed permissive.
C
The court now considers whether to transfer this action pursuant to the factors of § 1404(a). To decide whether a case should be transferred under § 1404(a),
[t]he court considers several factors in their totality, including (1) plaintiff's choice of forum; (2) the availability of compulsory process for the attendance of unwilling witnesses; (3) the cost of obtaining the attendance of willing witnesses; (4) the accessibility and location of sources of proof; (5) the relative congestion of the courts' dockets; (6) the accessibility of the premises to jury view; (7) the relation of the community in which courts and the jurors are required to serve to the occurrence giving rise to the suit; and (8) the time, cost, and ease with which the trial can be conducted, and all other practical considerations relative to the trial and determination of the case.Bank One, 211 F. Supp.2d at 811-12 (citing Fletcher v. S. Pac. Transp. Co., 648 F. Supp. 1400, 1401 (E.D. Tex. 1986); Greiner v. Am. Motor Sales Corp., 645 F. Supp. 277, 278 (E.D. Tex. 1986)). As a general matter, the party with the burden of proof will not be able to carry that burden by demonstrating that his preferred forum "merely . . . shift[s] the inconvenience from one party to the other." 15 Charles Alan Wright Arthur R. Miller, Federal Practice and Procedure § 3848, at 386 (2d ed. 1986); see Enserch Int'l Exploration, Inc. v. Attock Oil Co., 656 F. Supp. 1162, 1167 n. 15 (N.D. Tex. 1987) (Fitzwater, J.) (holding that court may not transfer venue where result will be merely to shift burden of trial from one party to the other).
Given the permissive nature of the forum selection clause, the court refuses to give significant weight to the contractual provision, and as such does not shift the burden of persuasion to Watson as it would if a mandatory forum selection clause were involved. See Jumara, 55 F.3d at 880; Ricoh, 870 F.2d at 573. In an attempt to satisfy their burden, defendants simply note some pertinent issues that the court can consider and argue in conclusory fashion that the interests weigh in favor of transfer. See, e.g., Ds. Br. at 5 ("The Cost of Obtaining Attendance of Witnesses And Other Trial Expenses — Since the majority of Defendant's employees are located in Michigan, the cost of obtaining attendance of witnesses weighs heavily in favor of transferring venue."). Defendants' list is too general to constitute a sufficiently particularized showing, because it neither identifies the key witnesses or documents nor discloses their testimony or contents. See Dupre v. Spanier Marine Corp., 810 F. Supp. 823, 825 (S.D. Tex. 1993); Young, 601 F. Supp. at 401-02. Furthermore, defendants' arguments prove nothing more than that transferring venue will shift the inconvenience from them to Watson.
* * *
Defendants have failed to establish that this case should be transferred to the Western District of Michigan. Accordingly, their January 23, 2003 motion to transfer venue is denied.