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Stewart Organization, Inc. v. Ricoh Corp.

Supreme Court of the United States · 1988 · Civil Procedure

venueforum selection clausetransferErieCivil Procedure28 U.S.C. § 1404(a)diversity jurisdictionforum-selection clause

Facts

Stewart, an Alabama corporation, entered into a dealership agreement with Ricoh, a nationwide manufacturer with its principal place of business in New Jersey. The agreement contained a forum-selection clause stating that disputes arising under or in connection with the agreement could be brought only in a state or federal district court located in Manhattan, New York City. Stewart later sued Ricoh in federal court in the Northern District of Alabama, alleging breach of the dealership agreement and other claims. Ricoh moved to transfer the case to the Southern District of New York under 28 U.S.C. § 1404(a), but the District Court denied the motion on the ground that Alabama law disfavors such clauses.

Issue

When a federal court sits in diversity and a party seeks transfer under 28 U.S.C. § 1404(a) to the venue designated in a contractual forum-selection clause, should the court apply § 1404(a) or state law disfavoring forum-selection clauses? More specifically, does § 1404(a) control the effect to be given the clause in deciding whether to transfer?

Rule

A federal court sitting in diversity must apply a federal statute if the statute is sufficiently broad to control the issue before the court and is a valid exercise of Congress' constitutional authority. Section 1404(a) is sufficiently broad to govern a motion to transfer based on a contractual forum-selection clause, and the clause is a significant but not dispositive factor in the district court's individualized, case-by-case analysis of convenience and fairness under that statute.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Maya Ortiz, a Nevada retailer, sued Blue Mesa Systems, a Delaware manufacturer, in federal court in Las Vegas on diversity jurisdiction. Their distribution contract required litigation in federal court in Chicago, but Nevada has a state policy treating outbound forum-selection clauses as void; Blue Mesa moved to transfer under 28 U.S.C. § 1404(a).

What law should the district court apply in deciding the transfer motion?

Explanation. The majority held that when a federal statute is sufficiently broad to control the issue before the court, and it is constitutionally valid, the federal court must apply that statute rather than contrary state law. A motion to transfer to the contractually chosen venue is governed by § 1404(a), not by a state policy categorically disfavoring such clauses.