F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
SEP 10 2003
FOR THE TENTH CIRCUIT
PATRICK FISHER
Clerk
MICHAEL J. KING,
Plaintiff-Appellant,
v. No. 02-1560
(D.C. No. 02-B-1874 (BNB))
PA CONSULTING GROUP, INC., (D. Colo.)
a New Jersey Corporation,
Defendant-Appellee.
ORDER AND JUDGMENT *
Before EBEL , PORFILIO , and McCONNELL , Circuit Judges.
After examining the briefs and appellate record, this panel has determined
unanimously to grant the parties’ request for a decision on the briefs without oral
argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument.
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
Plaintiff Michael J. King appeals from a district court order dismissing his
action for a declaration of contract rights without prejudice in favor of an action
for breach of the same contract currently prosecuted by defendant PA Consulting
Group in New Jersey. Following circuit precedent decided after the district court
ruled here, we hold that its otherwise discretionary ruling regarding venue was
premised on an erroneous legal characterization of a provision in the parties’
contract. We therefore vacate the dismissal order and remand the case for the
district court to exercise its discretion anew on the basis of a proper construction
of this pivotal contract provision.
In the summer of 2002, plaintiff notified PA that he planned to leave its
employ and hire on with a rival. PA insisted this would violate non-compete
provisions in his contract. Plaintiff claimed the provisions were unenforceable.
While the parties were attempting to negotiate their differences, plaintiff filed the
instant declaratory judgment action seeking to void the disputed provisions. He
did not, however, serve the complaint on PA. Consequently, when the parties’
negotiations broke down shortly thereafter, PA filed a breach of contract suit in
New Jersey state court pursuant to section 17.2 of the contract:
This agreement and all matters arising in connection with it shall be
governed by the law of the State of New Jersey and shall be subject
to the jurisdiction of the New Jersey Courts.
Aplt. App. at 20.
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Plaintiff then immediately served the pleadings in his declaratory judgment
action on PA, which moved in the alternative to dismiss for improper venue under
28 U.S.C. § 1406(a) or to transfer the action to New Jersey on forum-convenience
grounds under 28 U.S.C. § 1404(a), contending the quoted provision effected a
mandatory selection of New Jersey as the exclusive forum for resolving contract
disputes. Plaintiff opposed PA’s motion, insisting the provision merely permitted
but did not require venue in New Jersey and that the factors pertinent to § 1404(a)
showed that Colorado was the more appropriate forum. In the meantime, PA’s
New Jersey action for breach of contract was removed to federal court.
The district court agreed with PA that the disputed provision constituted a
mandatory forum-selection clause, and then weighed the considerations relevant
to § 1404(a) in light of that legal conclusion. Following Stewart Organization,
Inc. v. Ricoh Corp. , 487 U.S. 22, 29 (1988), the district court held that the clause
did not override or obviate the § 1404(a) inquiry, but did play a central role in
weighting and balancing the many factors in the convenience calculus. Accord
Kerobo v. S.W. Clean Fuels Corp. , 285 F.3d 531, 536-39 (6 th Cir. 2002); Jumara
v. State Farm Ins. Co. , 55 F.3d 873, 880 (3d Cir. 1995). In the end, the district
court relied heavily on its mandatory characterization of the forum-selection
clause to conclude that the balance tipped in favor of PA’s New Jersey suit.
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While the district court’s reasoning is explicit and straightforward, there is,
strictly speaking, a disjunction between its reasoning and its formal disposition of
the case, which has prompted a dispute between the parties regarding our standard
of review. As noted above, upon determining that the quoted provision was a
mandatory forum-selection clause, the court did not immediately and peremptorily
dismiss this action under § 1406(a); rather, following the Supreme Court’s lead in
Stewart , it proceeded to analyze the relative convenience of the venue-of-filing
versus the venue-of-contract pursuant to § 1404(a). However, after deciding that
the venue-of-filing should give way, it did not transfer the action to the federal
court presiding over the rival New Jersey suit, which would have been in accord
with the exclusive remedy provided for in § 1404(a), see generally 17 James Wm.
Moore, Moore’s Federal Practice § 111.19, at 111-131 & nn.1, 2 (3d ed. 2003)
(citing Am. Dredging Co. v. Miller , 510 U.S. 443, 449 n.2 (1994), and Norwood v.
Kirkpatrick , 349 U.S. 29, 32 (1955)); Headrick v. Atchison, T. & S.F. Ry. Co. ,
182 F.2d 305, 308 (10 th Cir. 1950). Instead, it “ordered that: Defendant’s motion
to dismiss pursuant to 28 U.S.C. § 1406(a) and Fed. R. Civ. P. 12(b)(3) is granted
without prejudice.” Aplt. App. at 319 (typeface altered).
Plaintiff seizes upon the reference to dismissal under § 1406(a) to invoke
the de novo review generally accorded determinations of improper venue under
that statute. First of Mich. Corp. v. Bramlet , 141 F.3d 260, 262 (6 th Cir. 1998);
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see also Pierce v. Shorty Small’s of Branson, Inc. , 137 F.3d 1190, 1191 (10 th Cir.
1998). Defendant, in contrast, points to the substance of the court’s preceding
analysis under Stewart and § 1404(a) to invoke the deferential abuse-of-discretion
standard generally applied to assessments of convenience under that statute. 1
See
Scheidt v. Klein , 956 F.2d 963, 965 (10 th Cir. 1992). For purposes of the pivotal
issue on which our disposition of the appeal turns, this dispute is inconsequential.
Whether the contract effects a mandatory or permissive forum designation is an
issue of law reviewed de novo, even if it arises in connection with a discretionary
assessment of convenience under § 1404(a). See Jumara , 55 F.3d at 880-81; see
also Milk ‘N’ More, Inc. v. Beavert , 963 F.2d 1342, 1345 (10 th Cir. 1992). And
an error on this legal issue would necessarily undermine the district court’s
resultant exercise of discretion. See Hartsel v. Springs Ranch of Colo., Inc. v.
Bluegreen Corp., 296 F.3d 982, 987 (10 th Cir. 2002).
1
Another, related consideration driving the parties’ opposing positions has to
do with the proper characterization of our review authority: plaintiff relies on the
formal order of dismissal to underwrite our appellate jurisdiction under traditional
principles of finality; defendant argues that under § 1404(a) the order should have
been–and, more importantly, should now be deemed–an interlocutory transfer
challengeable only through mandamus. On this jurisdictional point, we agree
with plaintiff that the express terms of the court’s order control, as we “decline to
recast the relevant procedural events after the fact in such a way as to cut off
appeal rights.” United States v. Bly , 328 F.3d 1262, 1263 n.1 (10 th Cir. 2003).
Of course, that is not to say dismissal was the correct disposition of the case; the
authorities cited above indicate that the courses open to the district court here
under § 1404(a) were limited to transfer or retention of the case.
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We come to the dispositive issue: did the parties’s contract effect a
mandatory, exclusive designation of venue in New Jersey? The contract did not
refer to venue. To be sure, the parties agreed to submit to jurisdiction in New
Jersey and to resolve their disputes by reference to New Jersey law. But a
mandatory designation of venue is not effected by either of these stipulations. It
confuses substance with procedure to conflate choice-of-law provisions with
forum-selection clauses. See Hugel v. Corp. of Lloyd’s , 999 F.2d 206, 210 (7 th
Cir. 1993); see also Apex Plumbing Supply, Inc. v. U.S. Supply Co. , 142 F.3d 188,
191 (4 th Cir. 1998) (noting choice-of-law provision “in no way designated any
one court as the exclusive forum” in which the chosen law would be applied).
Jurisdiction and venue, in contrast, do share a basic focus on the location of
litigation and, indeed, a clause specifying a forum for jurisdiction may mandate
that forum for purposes of venue as well, if it “contains clear language showing
that jurisdiction is appropriate only in the designated forum.” Excell, Inc. v.
Sterling Boiler & Mech., Inc. , 106 F.3d 318, 321 (10 th Cir. 1997) (quotation
omitted and emphasis added). There is no such clear language of exclusivity in
the provision under review.
It is true that the provision uses the legally freighted term “shall” in
connection with the parties’ submission to New Jersey jurisdiction. But, as a
number of courts dealing with similar provisions have carefully explained, the
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plain meaning of the term here indicates that the jurisdictional burden assumed is
obligatory , not that it is exclusive . In Hunt Wesson Foods, Inc. v. Supreme Oil
Co. , 817 F.2d 75, 76 (9 th Cir. 1987), the court considered a clause reciting that
“[t]he courts of California, County of Orange, shall have jurisdiction over the
parties in any action relating to . . . this contract.” The court held this language
did not mandate a California venue because the submission to jurisdiction, though
certainly binding (California jurisdiction could not be denied), was not exclusive
(jurisdiction outside California had not been renounced):
Here, the plain meaning of the language is that the Orange County
courts shall have jurisdiction over this action. The language says
nothing about the Orange County courts having exclusive
jurisdiction. The effect of the language is merely that the parties
consent to the jurisdiction of the Orange County courts.
Id. at 77. The court’s discussion of the mandatory but nonexclusive import of the
term “shall” is particularly relevant here:
Although the word ‘shall’ is a mandatory term, here it mandates
nothing more than that the Orange County courts have jurisdiction.
Thus, [the defendant] cannot object to litigation in the Orange
County Superior Court on the ground that the court lacks personal
jurisdiction. Such consent to jurisdiction, however, does not mean
that the same subject matter cannot be litigated in any other court. In
other words, the forum selection clause in this case is permissive
rather than mandatory.
In comparison, in cases in which forum selection clauses have
been held to require litigation in a particular court, the language of
the clauses clearly required exclusive jurisdiction. . . . In [such]
cases it is clear that the language mandates more than that a
particular court has jurisdiction. The language mandates that the
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designated courts are the only ones which have jurisdiction. Here the
language clearly falls short of designating an exclusive forum.
Id. at 77-78. The Ninth Circuit reaffirmed Hunt Wesson in Northern California
District Council of Laborers v. Pittsburg-Des Moines Steel Co. , 69 F.3d 1034,
1036-37 (9 th Cir. 1995); the Fifth Circuit expressly adopted its analysis in Caldas
& Sons, Inc. v. Willingham , 17 F.3d 123, 127-28 (5 th Cir. 1994); and just last year
this circuit specifically cited Hunt Wesson to illustrate the prevailing approach to
forum-selection clauses it was embracing in K & V Scientific Co. v. BMW , 314
F.3d 494, 499 (10 th Cir. 2002). 2
In holding that the provision here constituted a mandatory forum-selection
clause notwithstanding these considerations, the district court relied on a decision
from the federal district court in New Mexico, which held that a clause specifying
jurisdiction in Munich, Germany effected a mandatory designation of venue
because it included choice-of-law language making German law controlling. See
K & V Scientific Co. v. BMW , 164 F. Supp. 2d 1260, 1270-71 (D. N.M. 2001).
2
We emphasize that the issue here is whether a recognition-of-jurisdiction
provision implies an exclusive selection of venue. Use of mandatory language
like “shall” in a clause dealing directly with venue carries stronger implications
regarding the intent to designate an exclusive forum. See Milk ‘N’ More , 963
F.2d at 1346 (holding clause stating that “venue shall be proper . . . in” effected
an exclusive designation of forum). When, as here, the relation of such language
to the question of venue is at most derivative, through a jurisdictional provision,
decisions such as “ Milk ‘N’ More . . . are of little assistance in resolving the . . .
dispute.” K & V Scientific , 314 F.3d at 498-99.
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Shortly after the district court’s ruling, however, this court reversed the decision
from the district of New Mexico–indeed, the panel “ha[d] little trouble concluding
that the forum selection clause at issue is permissive”–in an opinion we have
already referred to above. K & V Scientific , 314 F.3d at 500. More specifically,
this court rejected the idea that submission-to-jurisdiction plus choice-of-law
equals mandatory designation-of-venue, holding that “the parties’ choice of law
provision (even assuming that it is binding and controls all of plaintiff’s claims)
appears to carry little, if any, weight in determining whether the parties’ forum
selection clause was intended as mandatory or permissive.” Id. at 501. We also
note that K & V Scientific cited with evident approval two decisions (the Hunt
Wesson case discussed above and Keaty v. Freeport Indonesia, Inc. , 503 F.2d
955, 956-57 (5 th Cir. 1974)) which the district court here specifically discounted
as inconsistent with what it took to be the controlling analysis in the circuit.
Compare K & V Scientific at 499 with Aplt. App. at 316.
For the foregoing reasons, we hold that the provision under consideration
effected only a permissive selection of venue in New Jersey. Because the district
court’s legal characterization of the provision as mandatory played such a central
role in its forum-convenience analysis under § 1404(a), its decision to dismiss
cannot stand on its stated rationale (thus, it was necessarily erroneous to hold that
the provision made venue not just inconvenient under § 1404(a) but improper
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under § 1406(a)). Because the assessment of forum convenience is reserved to
the discretion and case-specific judgment of the district court, see Stewart , 487
U.S. at 29, our ability to affirm here by undertaking our own re-assessment of the
matter (in light of the proper understanding of the forum-selection clause as
permissive) is greatly circumscribed. Such an affirmance could be premised only
on the conclusion that “it would have been an abuse of discretion for the trial
court to rule otherwise.” Ashby v. McKenna , 331 F.3d 1148, 1151 (10 th Cir.
2003) (discussing when appellate court can rely on different reasoning to affirm
decision committed to discretion of district court) (quotation omitted). There are
many procedural, practical, and fact-intensive considerations to be weighed in the
balance, see Chrysler Credit Corp. v. Country Chrysler , Inc., 928 F.2d 1509, 1516
(10 th Cir. 1991), and the legal clarification of the forum-selection clause as
permissive may affect these in ways which are difficult if not impossible for an
appellate court in the first instance to frame and evaluate, as it must, in terms
“sufficient to permit conclusions of law.” Ashby , 331 F.3d at 1151 (quotation
omitted). At this stage,
we cannot say the only legally permissible exercise of [§ 1404(a)]
discretion would be to [transfer] the case, though it is not for us to
gainsay that result either. Hence, we must allow the district court to
exercise its discretion anew in light of the changed legal
circumstances clarified by this opinion.
Id. at 1151 (quotation omitted).
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We are aware of the district court’s comment that “[i]f the mandatory
selection clause did not exist, the balance of the factors would weigh in favor of
Plaintiff [i.e., of retaining the case in Colorado].” Aplt. App. at 319. This does
not persuade us that it would be appropriate to preemptively order the court to
resolve the § 1404(a) question in favor of retention. First of all, the comment is
dictum and we are hesitant to speculate about whether the district court would
legally commit to, or perhaps reconsider, views it previously expressed in a
non-binding manner. Morever, the counterfactual premise of the dictum is still
counter to the facts: the force of the forum-selection clause has been reduced,
from prescriptive designation to permissive recognition of New Jersey venue, but
the clause has not disappeared . See generally 17 Moore’s Federal Practice,
§ 111.13[1][p][C] (noting that even permissive forum-selection clauses are given
consideration in the § 1404(a) convenience calculus). Finally, there appear to be
other relevant considerations which the district court has not yet addressed and
which it may see as especially significant now that the forum-selection clause no
longer figures so prominently. 3
3
For example, defendant contends on the basis of numerous authorities that
the relatively favorable position plaintiff secured by being the first to file could
be undercut if the district court were to find that plaintiff rushed to the courthouse
with this anticipatory declaratory judgment action while maintaining a negotiating
stance designed to lull defendant into delaying its own affirmative suit for breach
of contract.
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Accordingly, informed by this court’s recent decision in K & V Scientific ,
we vacate the district court’s ruling on venue and remand for reconsideration in
light of our holding that the parties’ contractual references to New Jersey law and
New Jersey jurisdiction effected only a permissive forum selection. Should the
district court again decide that these proceedings must give way to those pending
in the district of New Jersey, it should dispose of the case by transfer rather than
by dismissal.
The district court’s judgment is VACATED and the cause is REMANDED
for further proceedings consistent with the principles stated herein. The parties’
pending motions regarding judicial notice are DENIED. 4
Entered for the Court
John C. Porfilio
Circuit Judge
4
The parties ask us to take judicial notice of many legal documents from the
New Jersey case. These are irrelevant to our basis for disposition of this appeal.
Of course, our denial of the parties’ requests is without prejudice to presentation
of the materials to the district court on remand.
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