Algodonera De Las Cabezas, S.A. v. American Suisse Capital, Inc.

[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS
FILED
FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
DECEMBER 19, 2005
No. 05-14046 THOMAS K. KAHN
Non-Argument Calendar CLERK
________________________

D. C. Docket No. 04-21809-CV-MGC

ALGODONERA DE LAS CABEZAS, S.A.,
a Spanish corporation,

Plaintiff-Appellant,

versus

AMERICAN SUISSE CAPITAL, INC.,
a New York corporation,
AMERICAN SUISSE,
AMERICAN SUISSE, INC.,

Defendants-Appellees.

________________________

Appeal from the United States District Court
for the Southern District of Florida
_________________________

(December 19, 2005)

Before DUBINA, BARKETT and HULL, Circuit Judges.

PER CURIAM:
Algodonera de las Cabezas, S.A. (“Algodonera”) appeals the district court’s

sua sponte dismissal of its diversity suit for improper venue. The district court

based its dismissal on 28 U.S.C. § 1391(a)(3), which provides that diversity suits

may be brought in a “judicial district in which any defendant is subject to personal

jurisdiction at the time the action is commenced, if there is no district in which the

action may otherwise be brought.” The district court concluded that because the

suit could have been brought in New York, Algodonera could not rely on §

1391(a)(3), and the suit was due to be dismissed. However, as Algodonera

explained in both its motion for reconsideration and on appeal, it did not rely on §

1391(a)(3). Rather, venue was proper under § 1391(a)(1), which provides that in

diversity cases, venue lies “in a judicial district where any defendant resides, if all

defendants reside in the same State.” As both the defendants here were “residents”

of the Southern District of Florida within the meaning of § 1391(c), venue was

conferred by § 1391(a)(1). Accordingly, we reverse.

BACKGROUND

Algodonera filed this diversity suit in the Southern District of Florida,

alleging that the defendants failed to perform an agreement to sell it certain

Venezuelan sovereign bonds. The complaint alleged that venue was proper under

the terms of 28 U.S.C. § 1391(a). The complaint did not specify which subsection

2
of § 1391(a) conferred venue.

The defendants were served with process in the Southern District of Florida

but failed to respond or otherwise appear. Upon Algodonera’s motion, the clerk of

court entered default judgment against the defendants. The district court then held

a hearing to determine damages. At the close of the hearing, the district court

requested a memorandum of law concerning the recovery of lost profits.

However, before Algodonera filed such a memo, the district court entered a

sua sponte order dismissing the case based on improper venue. The district court’s

order proceeded on the assumption that Algodonera relied on § 1391(a)(3), under

which venue was not proper because the case could have been filed in New York.

Algodonera timely filed a motion for reconsideration, explaining that venue was

proper under § 1391(a)(1), given that both defendants were residents of Florida and

the Southern District within the meaning of § 1391(c). The district court denied

the motion for reconsideration, explaining only that it remained “unconvinced.”

STANDARD OF REVIEW

We review the district court's dismissal of a lawsuit for a lack of venue for

an abuse of discretion. Home Ins. Co. v. Thomas Industries, Inc., 896 F.2d 1352,

1355 (11th Cir. 1990).

DISCUSSION

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Section 1391(a)(1) provides that in diversity suits, venue is proper “in a

judicial district where any defendant resides, if all defendants reside in the same

State.” A defendant is a resident of a judicial district if it is subject to personal

jurisdiction there at the time the case is initiated. 28 U.S.C. § 1391(c).

In this case, both of the defendants conducted business through their offices

in the Southern District of Florida, received correspondence there, and were

subject to service of process there. Accordingly, both defendants were “residents”

of the Southern District of Florida, within the meaning of 28 U.S.C. § 1391(c).

Venue was thus proper in the Southern District within the meaning of § 1391(a)(1).

While the district court relied on § 1391(a)(3) to hold that venue was

improper because the action could be brought in New York 1, venue may be

predicated on § 1391(a)(3) only when neither § 1391(a)(1) or (2) are satisfied.

Doctor's Assocs. v. Stuart, 85 F.3d 975, 983 (2d. Cir. 1996); see also, 17 Moore’s

Federal Practice, § 110.02 (describing § 1391(a)(3) as a “fall-back provision” used

where “venue will be unavailable under § 1391(a)(1)”). Section 1391(a)(3) does

not dictate that venue is improper in diversity cases any time the case could be

brought in another district. Stuart, 85 F.3d at 893.

1
We note Algodonera’s argument that venue is not even proper in New York, given
newly-discovered information suggesting that the defendants never actually conducted business
there. We need not reach these contentions, however, as we find § 1391(a)(1) to be dispositive.

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Moreover, we have previously made clear that while a district court may

dismiss a suit sua sponte for lack of venue, it may not do so “without first giving

the parties an opportunity to present their views on the issue.” Lipofsky v. N. Y.

State Workers Comp. Bd., 861 F.2d 1257, 1259 (11th Cir. 1988). This rule gives

defendants an opportunity to waive the venue defense and plaintiffs an opportunity

to present arguments as to why venue is proper before the case is dismissed. Id. In

this case, the district court dismissed the case sua sponte before receiving any

submissions or arguments from the parties on the propriety of venue in the

Southern District. While the district court opined that Algodonera’s motion for

reconsideration gave it the opportunity to present its position on venue, that

opportunity came only after the district court had dismissed the case and ordered

the clerk of court to close it. This does not satisfy Lipofsky’s command that the

parties be given an opportunity to present their views, and bolsters our conclusion

that the district court abused its discretion.

In short, because § 1391(a)(1) indisputably provided venue, and as the

parties were not given an opportunity to present their views prior to dismissal, the

district court abused its discretion.

REVERSED and REMANDED for further proceedings.