PATRICK E. HIGGINBOTHAM, Circuit Judge:
This case turns on the proper procedural treatment of a forum-selection clause. In April 2009, the United States Corps of Engineers contracted with Atlantic Marine Construction ("Atlantic") for construction of a child development center at Fort Hood, located in the Western District of Texas. In connection with that contract, Atlantic entered into a Subcontract Agreement with J-Crew Management, Inc. ("J-Crew") for provision of construction labor and materials. This Subcontract Agreement included a forum-selection clause, providing that disputes "shall be litigated in the Circuit Court for the City of Norfolk, Virginia, or the United States District Court for the Eastern District of Virginia,
Ignoring the forum-selection clause, J-Crew filed suit against Atlantic in the Austin Division of the Western District of Texas,
The district court denied the motion to dismiss or transfer the case. It first concluded that when a forum-selection clause designates a specific federal forum or allows the parties to select the federal courts of a different forum, section 1404(a), not Rule 12(b)(3) and § 1406, is the proper procedural mechanism for its enforcement. Applying § 1404(a), the district court denied Atlantic's motion to transfer, finding that Atlantic had not met its burden of showing why the interest of justice or the convenience of the parties and their witnesses weighed in favor of transferring the case to Virginia. Atlantic petitions this Court for a writ of mandamus directing the district court to dismiss the case or transfer it to the United States District Court for the Eastern District of Virginia.
Three requirements must be met before a writ of mandamus may issue. First, the petitioner must have no other adequate means of relief.
With respect to the second requirement — that the petitioner's right to issuance of the writ must be "clear and indisputable" — this Court has made clear that "we are not to issue a writ to correct a mere abuse of discretion, even though such might be reversible on a normal appeal."
Atlantic urges that the district court clearly abused its discretion (1) by considering enforcement of the forum-selection clause under § 1404(a), instead of under Rule 12(b)(3) and § 1406, and (2) by committing errors when conducting its analysis under § 1404(a). Because we find the district court did not clearly abuse its discretion in either respect, we deny Atlantic's petition.
Atlantic first argues that the district court clearly abused its discretion by using § 1404(a), instead of Rule 12(b)(3) and § 1406, to enforce the contractual forum-selection clause. We begin with a brief explanation of the relevant statutory
The district court below held that when a forum-selection clause designates a specific federal forum or allows the parties to select the federal courts of a different forum, a motion to transfer under § 1404(a) is the proper procedural mechanism for enforcing the clause. In so doing, the district court followed the approach taken by a majority of district courts in this Circuit
In reaching the conclusion that enforcement of the forum-selection clause under § 1404(a) was proper, we find the Supreme Court's opinion in Stewart Organization, Inc. v. Ricoh Corp. instructive.
Although Atlantic urges otherwise, our approach is in accord with Fifth Circuit precedent holding that dismissal under Rule 12(b)(3) is the proper approach when a forum-selection clause designates an arbitral, foreign, or state court forum.
Nor is our approach inconsistent with this Court's decision in Jackson v. West Telemarketing Corp. Outbound.
In short, Stewart did not hold that § 1404 is always the proper approach when the parties have entered into a contractual forum-selection clause. The choice between § 1404 and § 1406 depends on whether venue was statutorily proper under § 1391 in the forum where the action was initially filed. A forum-selection clause is properly enforced via § 1404(a) as long as venue is statutorily proper in the district where suit was originally filed and as long as the forum-selection clause elects an alternative federal forum. When the forum-selection clause designates an arbitral, foreign, or state court forum, the federal district court is without power to transfer and thus must dismiss the case as long as it determines the forum-selection clause is enforceable.
Atlantic next argues that even if the district court correctly chose § 1404(a) as the proper procedural mechanism for enforcing the forum-selection clause, it made several errors in conducting its analysis under § 1404(a) that show a clear abuse of discretion. Specifically, Atlantic alleges that the district court clearly erred (1) by placing the burden of proof under § 1404(a) on Atlantic, the party seeking to enforce the forum-selection clause, to show why transfer to the designated forum should be granted; (2) by considering inconvenience that was foreseeable at the time the parties entered into the Subcontract Agreement; (3) by considering non-existent difficulties in obtaining depositions from non-party witnesses located in Texas; and (4) by not considering the public interests served by enforcement of the forum-selection clause. After reviewing the record and case law with respect to each of these alleged errors, we cannot find that the district court clearly abused its discretion.
First, Atlantic contends that although the movant seeking to transfer under § 1404(a) generally bears the burden of proving the propriety of transfer, when the parties have entered into a contractual forum-selection clause the party seeking to avoid the contractually-chosen forum bears the burden of proving why the contractual choice should not be honored. Given the fact that this Court has never confronted that issue, we cannot conclude that the district court clearly abused its discretion by placing the burden on the movant. Moreover, no part of the Supreme Court's decision in Stewart necessarily requires the burden to be placed on the non-moving party. The Supreme Court merely insisted that the forum-selection clause be "a significant factor that figures centrally in the district court's calculus."
Second, Atlantic argues that the district court gave undue consideration to the foreseeable inconvenience J-Crew would face if the case were transferred to the Eastern District of Virginia. Atlantic urges that because J-Crew entered into a valid forum-selection clause it should have been precluded from arguing that the selected forum is inconvenient if such inconvenience was foreseeable at the time of contracting. Stewart teaches that Congress has by § 1404(a) removed the lateral transfer of cases among federal courts from the control of private contracts. While a contracted-for choice of forum remains a significant factor, it is not controlling. To remove all matters of inconvenience foreseeable when the parties reached their choice of forum agreement from the required weighing by federal district judges cannot be squared with Stewart. The argument is simply a slip past its core holding — institutional concerns cannot be contracted away by private parties. Finally, we add that our consideration of this late-arriving argument as a variation of the arguments made below is generous. Atlantic failed to argue below that the district court should not consider foreseeable inconvenience and Atlantic points to no controlling authority holding foreseeability is a necessary consideration under § 1404(a).
Third, Atlantic argues that the district court clearly erred in considering
Finally, Atlantic argues that the district court clearly erred in not recognizing the strong public interest favoring enforcement of forum-selection clauses. However, Atlantic failed to raise this argument below. In fact, the only argument Atlantic made with respect to the public's interest in transferring the case to Virginia was that courts in the Eastern District of Virginia resolve cases faster than those in the Western District of Texas, a factor considered and rejected by the district court below. Regardless, the argument here is essentially that because the forum-selection clause did not dictate a different outcome it must not have been weighed properly. The district court was plainly conversant with Stewart. We cannot conclude that the district court "clearly and indisputably erred" by not giving proper weight to the public interest in ways Atlantic did not even raise before the district court.
The core of Stewart is the directive of Congress that allocation of matters among the federal district courts is not wholly controllable by private contract. Rather the agreement of parties will signify in the district court's allocating decision, tempering the private agreement's reflection of private interests with the public interest attentive to the usual metrics of this case law, such as time to trial and convenience of witnesses. The contention that dismissal may be under § 1406 or Rule 12(b)(3) empties Stewart of force and confounds the plain language § 1406. Thus, we DENY Atlantic Marine's Petition for a Writ of Mandamus.
HAYNES, Circuit Judge, specially concurring:
In light of the majority opinion, I cannot credibly contend that the right to the writ is "clear and indisputable" as required for mandamus relief. See In re Volkswagen of Am., Inc., 545 F.3d 304, 310 (5th Cir.2008) (en banc). Thus, I concur in the majority opinion's holding.
I. The District Court Erred
I submit, however, that the district court erred in its ruling and approach. I also respectfully diverge from the analysis of the majority opinion. Plainly stated, the Supreme Court has made clear that forum-selection clauses are enforceable. M/S
In M/S Bremen, the Supreme Court stated that forum-selection clauses "are prima facie valid," and should generally be enforced "unless [the party challenging enforcement] could clearly show that enforcement would be unreasonable and unjust, or that the clause was invalid for such reasons as fraud or overreaching." Id. at 10, 15, 92 S.Ct. 1907. Under this standard, the parties' forum-selection clause, which requires that disputes be brought in a specific state or federal court in Virginia, is enforceable as J-Crew Management, Inc. ("J-Crew") has neither shown nor made any attempt to show any injustice in proceeding in Virginia. J-Crew simply violated its agreement and filed suit against Atlantic in the Western District of Texas.
The district court denied Atlantic's motion to dismiss because it found venue was proper in the Western District of Texas pursuant to 28 U.S.C. § 1391. The court then stated it would consider the parties' forum-selection clause merely as a factor in denying Atlantic's motion to transfer pursuant to § 1404(a), although it gave very short shrift to the forum-selection clause in the ensuing analysis. The majority opinion correctly concludes that a forum-selection clause may be enforced through a motion to transfer based on § 1404(a). See, e.g., Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29, 108 S.Ct. 2239, 101 L.Ed.2d 22 (1988). I disagree, however, with the holding that this vehicle for relief is the exclusive means of enforcing a forum-selection clause that contemplates a federal forum when the original federal forum is valid under a permissive venue statute.
II. The Majority Opinion's Analysis is Incorrect
A. Forum-Selection Clauses Do Not "Transcend" Permissive Venue Statutes
The majority opinion reasons that a motion to dismiss or transfer pursuant to § 1406 cannot be granted when a forum-selection clause contemplates another federal forum and the plaintiff's chosen forum is statutorily permissive because doing so would allow private parties to transcend federal venue statutes. However, the statute in question here is permissive, not mandatory.
Here, because J-Crew and Atlantic contracted to limit the scope of permissive federal forums to the Eastern District of Virginia, the Western District of Texas becomes a "wrong venue." The district court should have given effect to the parties' valid forum-selection clause and either dismissed the action for improper venue under 12(b)(3) or transferred it pursuant to § 1406. The parties did not seek to transcend the applicable federal venue statute; instead, each merely agreed that it would not bring suit in any other permissive federal forum apart from the Eastern District of Virginia, a permissive venue. This agreement does not replace or contradict § 1391, but instead only limits the parties' prerogative to avail themselves of the full scope of permissive venues that the statute would otherwise provide.
Stewart Does Not Require a Contrary Result
The majority opinion's reliance on Stewart to support the proposition that federal venue law must trump forum-selection clauses that contemplate a federal forum is misplaced. Similar to the forum-selection clause at issue here, Stewart involved a forum-selection clause that allowed for suit only in specific state or federal courts. 487 U.S. at 24, 108 S.Ct. 2239. Stewart's narrow holding determined that federal law, rather than state law, applies to a party's motion to transfer in a diversity action filed in federal court. See id. (describing the question presented as "whether a federal court sitting in diversity should apply state or federal law in adjudicating a motion to transfer a case to a venue provided in a contractual forum-selection clause." (emphasis added)). The Court specifically noted that the defendant's motion to dismiss based on § 1406 was not at issue on appeal because the claim of "improper venue" had been waived by the defendant. See id. at 28 n. 8, 108 S.Ct. 2239.
We have recognized the limited scope of Stewart, explaining that the case holds
The Supreme Court has not read Stewart the same way as the majority opinion. Indeed, following Stewart, the Court in Shute embraced M/S Bremen's holding and enforced a forum-selection clause by affirming the grant of a motion for summary judgment. See 499 U.S. at 591-94, 111 S.Ct. 1522. The Court's approval of the use of a summary judgment motion as a vehicle for enforcing the forum-selection clause — which implicitly contemplated a federal forum by allowing for suit in any court in "the State of Florida" — demonstrates that Stewart does not render forum-selection clauses enforceable only under the discretion of a district court performing a § 1404(a) analysis. See id. at 588-89, 111 S.Ct. 1522. Instead, as Shute demonstrates, these clauses may also be given effect when a party alleges venue is not proper under a motion to dismiss or a motion for summary judgment. Accordingly, I respectfully submit that the majority opinion takes Stewart too far.
C. The Majority Opinion Is Contrary to the Majority of Circuit Courts and Inconsistent with Our Precedent
My view is consonant with that of the majority of circuits which give effect to a forum-selection clause through a motion to dismiss filed pursuant to Rule 12(b)(3) and § 1406. See, e.g., Union Elec. Co. v. Energy Ins. Mut. Ltd., 689 F.3d 968, 970-73 (8th Cir.2012) (rejecting the notion that a claim cannot be dismissed under § 1406 for failure to comply with a forum-selection clause if venue is otherwise appropriate under 28 U.S.C. § 1391); TradeComet.com LLC v. Google, Inc., 647 F.3d 472, 478 (2d Cir.2011) (noting that Stewart does not compel consideration of a forum-selection clause under § 1404(a) and holding that "a defendant may seek to enforce a forum selection clause under Rule 12(b)"); Slater v. Energy Servs. Gr. Int'l, Inc., 634 F.3d 1326, 1333 (11th Cir.2011) ("[W]e conclude that § 1404(a) is the proper avenue of relief where a party seeks the transfer of a case to enforce a forum-selection clause, while Rule 12(b)(3) is the proper avenue for a party's request for dismissal based on a forum-selection clause."); Hillis v. Heineman, 626 F.3d 1014, 1016 (9th Cir.2010) (finding that a party's defense for improper venue under Rule 12(b)(3) based on a forum-selection clause was valid and was not waived by the filing of a counterclaim); Muzumdar v. Wellness Int'l Network, Ltd., 438 F.3d 759, 760-62
Our circuit has not addressed whether a forum-selection clause contemplating a federal forum may be enforced through a motion to dismiss for improper venue. However, as the majority opinion points out, we have found that a Rule 12(b)(3) motion to dismiss for improper venue is an appropriate vehicle for enforcing a forum-selection clause that contemplates state, foreign, or arbitral forums. See Lim v. Offshore Specialty Fabricators, Inc., 404 F.3d 898 (5th Cir.2005) (arbitral forum); Mitsui & Co. (USA), Inc. v. Mira M/V, 111 F.3d 33, 37 (5th Cir.1997) (foreign forum); Int'l Software Sys., Inc. v. Amplicon, Inc., 77 F.3d 112, 115 (5th Cir.1996) (state forum).
Further, we suggested in Jackson that a forum-selection clause contemplating a federal forum could be enforced through a motion to transfer for improper venue based on § 1406. See 245 F.3d at 522. The choice-of-law analysis in Jackson required us to consider whether a federal district court in California transferred a case to a federal district court in Texas based on § 1404(a) or § 1406. We concluded that the California court ordered transfer under § 1406 based on a forum-selection clause. Id. at 522-23. We specifically noted that "Stewart does not mandate that whenever a forum selection clause exists any transfer must fall under § 1404(a)." Id. at 522. The majority opinion disregards Jackson's guidance.
D. The Forum-Selection Clause at Issue Should be Given Effect
The effect of the majority opinion is to leave us with the somewhat bizarre situation that forum-selection clauses are enforceable by specific performance where the forum is state, foreign, or arbitral, but enforceable by specific performance only at the mercy of the district court for federal courts. I submit that we should adopt the approach of the majority of our sister circuits and use § 1406 transfers in these situations. Absent a mandatory venue statute, a valid forum-selection clause renders any other forum inappropriate, regardless of whether the forum contemplated
Congress, is of course, free to limit the enforcement of forum-selection clauses if it so chooses, as it has done in the past. For example, after the Supreme Court in Shute gave effect to a forum-selection clause in a cruise line's passage contract ticket, Congress initially amended 46 U.S.C. § 30509 to prevent passenger ships from seeking enforcement of forum-selection clauses when plaintiffs raise personal-injury or wrongful-death claims. See Reynolds-Naughton v. Norwegian Cruise Line Ltd., 386 F.3d 1, 2 (1st Cir.2004) (explaining that § 30509 was initially amended to supercede Shute's holding). Interestingly, however, Congress ultimately re-amended the statute to allow for the enforcement of forum-selection clauses in the context of passage contract tickets. See id. at 2-3 (discussing the subsequent amendments to § 30509). Congress continues to look favorably on forum-selection clauses, as reflected in the recent amendment to § 1404(a) allowing for the transfer of cases to venues chosen by agreement that would otherwise not be districts where an action "might have been brought." See § 1404(a).
A forum-selection clause that was negotiated and agreed to by sophisticated parties and is not challenged based on fraud, unreasonableness, or anything similar should be given effect. As Atlantic notes, the negotiation of a forum-selection clause involves various economic decisions and often requires a party to make concessions in exchange for the assurance that potential litigation will occur in a predetermined venue. Companies, such as Atlantic, that conduct business throughout a broad geographical area rely on forum-selection clauses to ensure that they can anticipate business costs and avoid litigation in a plethora of possible venues. Section 1406 seems to be the cleanest way to do so, treating the venue now "deselected" by the agreement as a "wrong" venue. This approach does not transcend federal venue statutes, but instead recognizes the ability of parties to "var[y] by their agreement," 588 F.2d at 95, the breadth of the scope of permissive venue statutes through their contractual agreements.
I note, however, that even if the majority opinion is correct that § 1404 is the only appropriate procedural vehicle here, the district court still abused its discretion. While stating that it considered the forum-selection clause as a "factor," the district court in practical terms gave it no weight and conducted a standard § 1404 "convenience"
Absent any claim of fraud or unreasonableness by J-Crew, mere "convenience" should not trump the parties' reasoned contract. Had the district court given the forum-selection clause the deference it deserves, it would have transferred the case under either § 1404 or § 1406.
We should not leave the enforcement by specific performance of otherwise valid contractual forum selection clauses to the vicissitudes of virtually unfettered judicial discretion. Absent some compelling countervailing factor (something J-Crew does not even argue is present here), forum-selection clauses such as this one should be and should have been enforced by transfer or dismissal.
Given the state of the law in this area, I encourage the parties to request review of today's decision by the United States Supreme Court, so it may consider whether this area of the law would benefit from its further guidance.