Stewart Organization, Inc. v. Ricoh Corp.

487 U. S. 22

June 20, 1988

A contract dispute from Alabama went to federal court. The contract said that venue would be in New York, but Alabama had a state policy against putting binding venue selection in contracts. The question was whether Alabama’s federal court had to follow the state policy, or if it could consider it preempted by federal jurisdiction rules. The dispute centered on Section 1404(a). It said “For 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 Supreme Court ruled 8-1 that 1404(a) governed the situation. Marshall identified the key issue as whether or not 1404(a) was meant to cover the general topic of forum selection clauses. He said it was, because forum selection clauses bear heavily on any possible transfers, and the interests of justice in ordering them. Marshall thought 1404(a) was a perfectly reasonable housekeeping rule, and allowed it to preempt any Alabama policies on the topic. He stressed that the federal courts would still weigh the equities of transfer – they would make neither state policies nor forum selection clauses dispositive, but would consider both along with other factors.

Kennedy, joined by O’Connor, concurred to say that federal courts should almost always follow venue selection clauses, unless there was a really strong reason not to. Scalia dissented. He felt the wording of 1404(a) was too vague to  conclude that it covered forum selection clauses, especially given that other federal jurisdiction rules covered arbitration clauses far more specifically. Scalia also felt that the majority’s interpretation was inconsistent with the policy goals of the Erie doctrine. It wouldn’t, he contented, stop forum shopping, and it could produce inequitable administration of the law.

I really hate lawyers who will fight to the death over every single stupid little jurisdictional thing. These meta-lawsuits – lawsuits about lawsuits – clog up way too much of the Supreme Court’s valuable time. After I read this case’s first sentence (“This case presents the issue 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.”) I actually said aloud “Oh, for crap’s sake.” The Court did, at least, make the right decision. When you agree to a venue selection clause in a contract, pacta sunt servanda should prevail.

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