[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.
2 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
3 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,
4 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
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[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.
2 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
3 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,
4 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.