Citation. 22 Ill.487 U.S. 22, 108 S. Ct. 2239, 101 L. Ed. 2d 22 (1988)
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Plaintiff and Defendant had a contract with a forum selection clause listing New York as the selected forum. Plaintiff sued Defendant in federal court in Alabama and Defendant moved to transfer pursuant to 28 U.S.C. Section: 1404(a) and the forum selection clause. The District Court judge in Alabama refused because Alabama law disapproved of the enforcement of forum-selection clauses.
Synopsis of Rule of Law.
The federal policy of having district court judges consider interests Congress has enumerated in a statute prevails over a state policy disapproving certain means by which venue might be decided.
Facts.
Stewart, Plaintiff, sued Ricoh Corp., Defendant, in federal court in Alabama based on diversity of citizenship. Defendant asked the federal court to use its discretion under 28 U.S.C. Section: 1404(a) to honor the forum selection clause and transfer the case to New York, or, alternatively, to dismiss the case for improper venue based on 28 USC Section: 1406. The District Court denied the motion, stating that the case is governed by Alabama law and Alabama disfavors forum selection clauses. The District Court certified the ruling for interlocutory appeal and the Court of Appeals accepted jurisdiction. A panel of the Court of Appeals reversed, stating venue questions are governed by federal law, and that the clause was enforceable as a matter of federal law. The Court of Appeals reversed and remanded to transfer the case to New York. The Court of Appeals en banc affirmed the panel’s decision. Plaintiff appealed.
Issue.
In a federal court sitting in diversity, is an issue regarding venue is controlled by federal law as opposed to state law?
Held.
Yes. Judgment of the Court of Appeals affirmed. Section 1404(a) is sufficiently broad to cover the issue at hand. The focus is on whether the case might have been brought in New York, while taking into consideration bargaining power and convenience in light of the forum selection clause. By focusing on Alabama law, the District Court contravened Congressional intent by considering factors that defeat the purpose of Section 1404(a). Because the two statutes conflict with each other, the federal statute controls. It is within Congress’ power to enact section 1404(a) because that section can be classified as procedural and does not change the applicable law regarding venue in Alabama.
Discussion.
The Alabama law articulated a clear policy against forum selection clauses. The federal statute, by contrast, required consideration of various factors such as bargaining power and convenience when evaluating the validity of the forum selection clause. The laws conflict because the Alabama law does not require consideration of these additional factors. Therefore, federal law prevails.
