International Software Systems, Inc. v. Amplicon, Inc., Doing Business as Amplicon Financial
77 F.3d 112
5th Cir.
1996
Check Treatment
REAVLEY, Circuit Judge:

By what criteria should a federal court, acting under diversity jurisdiction, decide a motion to dismiss on grounds of a forum selection clause? The district court employed the Bremen 1 analysis, and we affirm.

International Software Systems, Inc. (ISSI) originally sued Amplicon, Inc. in Texas state court, claiming that certain lease agreements with Amplicon had been fraudulently induced, and seeking damаges or in the alternative rescission of the leases. The ease was removed to federal court based on diversity jurisdiction. Amplicon filed a motion to dismiss the case оn grounds of improper venue, relying on a forum selection clause found in the lease agreements. The clause states that “[t]he lessee agrees that all litigation arising out of this lease or any breach thereof shall be filed and conducted in the California Superior Court for the County *114 of Orange, unless the Lessor or its assignee selects an altеrnative venue of litigation.”

The district court dismissed the case based on this forum selection clause alone, noting that the claims arose out of the written contract and that the forum selection clause is “reasonable and unfortunately necessary in a commercial world where litigation is the norm.”

DISCUSSION

Amplicon made no claim of lack of personal jurisdiction. Its only objection to venue in the Texas federal court was based on the forum selection clause. 2 Furthermore, Am-plicon did not move, even in the altеrnative, to transfer the case to another district court. In light of this posture of the case, our analysis centers on two questions. The first is whether a district court may dismiss (as oppоsed to transfer) a case based solely on a forum selection clause, where personal jurisdiction exists and venue is otherwise proper. Second, if dismissal is allowеd in such a case, what test or standards should the court employ in deciding the motion to dismiss?

A. May the Court Dismiss?

In M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972), the Court held that in admiralty cases forum selection clauses “are prima facie vаlid and should be enforced unless enforcement is shown by the resisting party to be ‘unreasonable’ under the circumstances,” and that courts should enforce such clauses unless the rеsisting party “could clearly show that enforcement would be unreasonable and unjust, or that the clause was invalid for such reasons as fraud or overreaching.” Id. at 9-11, 15, 92 S.Ct. at 1913, 1916. We have applied Bremen to transfer motions in nonadmiralty cases. E.g., Seattle-First Nat’l Bank v. Manges, 900 F.2d 795, 799 (5th Cir.1990); In re Fireman’s Fund Ins. Cos., 588 F.2d 93, 95 (5th Cir.1979). The district court applied the Bremen case here.

We see no justification for regarding ‍​​‌‌​‌​​‌‌‌‌‌​​​​​​‌‌​​‌​‌​‌‌‌​‌​​‌​​​​‌​​​‌‌‌‌​‍the scope of 28 U.S.C. § 1406(a) 3 as to dismissal any narrower than § 1404(a) 4 as to transfer. This court has upheld dismissal of a suit as an appropriate means of enforcing a forum selection clause under Bremen. Zapata Marine Serv. v. O/Y Finnlines, Ltd., 571 F.2d 208 (5th Cir.1978). In another admiralty case the Supreme Court implicitly approved of dismissal of a case as a means of enforcing a forum selection clause. In Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 111 S.Ct. 1522, 113 L.Ed.2d 622 (1991), two passengers on a cruise brought a negligence action against the cruise operator. The plaintiffs sued in their home state of Washington. The defendant moved for summary judgment, claiming that the forum selection clause on the cruise tickets required suit to be brought in Florida, and alternatively that the Washington court lacked personal jurisdiction over defendant. Id. at 586-88, 111 S.Ct. at 1524. The district court granted summary judgment based on the personal jurisdiction argument. Id. The court of appeals reversed, holding that personal jurisdiction existed, and that the forum selection clause should not be enforced. Id. at 586-90, 111 S.Ct. at 1524-25. The Supreme Court reversed the court of appeals without reaching the personal jurisdiction issue, in effect reinstating the dismissаl of the suit based on the forum selection clause. Id. at 588-90, 596-98, 111 S.Ct. at 1525, 1529.

B. Determining the Dismissal Motion

We return to the question of whether the Bremen test or something different should be applied in a diversity case upon a motion to dismiss. In Stewart Org., Inc. v. *115 Ricoh Corp., 487 U.S. 22, 108 S.Ct. 2239, 101 L.Ed.2d 22 (1988), an action filed in federal court undеr diversity jurisdiction, the defendant moved to dismiss or transfer venue based on a forum selection ‍​​‌‌​‌​​‌‌‌‌‌​​​​​​‌‌​​‌​‌​‌‌‌​‌​​‌​​​​‌​​​‌‌‌‌​‍clause. The Court held that federal rather than state law governed this issue, and that under federal law the decision whether to transfer venue is governed by 28 U.S.C. § 1404(a). Id. at 27-29, 108 S.Ct. at 2243. The Court instructed that under this statute the court must make an “individualized, case-by-case consideration of convenience and fairness.” Id. at 29, 108 S.Ct. at 2244 (citation omitted). It should “weigh in the balance a number of case-specific factors,” of which the forum selection clause is “a significant factor that figures centrally in the distriсt court’s calculus.” Id. The court should also consider “the convenience of the witnesses and those public-interest factors of systemic integrity and fairness under the heading of ‘the interest of justice.’ ” Id. Stewart has been described as a response to “lower courts’ overly broad application of The Bremen result[ingj in ov-erenforcement of forum-selection сlauses.” Leandra Lederman, Note, Viva Zapata!: Toward a Rational System of Forum-Selection Clause Enforcement in Diversity Cases, 66 N.Y.U.L.Rev. 422, 447 (1991). 5

Although we would prefer to apply the same Stewart balancing in diversity cases to motions to dismiss and motions to transfer, the other federal courts have decided otherwise and continue to apply Bremen to motions to dismiss based on a forum selection clause. In Jones v. Weibrecht, 901 F.2d 17 (2d Cir.1990), the court reasoned that “Ltjhere is no basis ... to import ‍​​‌‌​‌​​‌‌‌‌‌​​​​​​‌‌​​‌​‌​‌‌‌​‌​​‌​​​​‌​​​‌‌‌‌​‍the discrеtionary federal standard of section 1404(a) discussed in Stewart to the instant cases. A motion to transfer an action to another federal district pursuant to section 1404(a) calls for аn ‘individualized, case-by-case consideration of convenience and fairness.’ The same broad-based balancing is not appropriate where, as here, a рarty seeks to have an action dismissed or remanded to state court, rather than transferred, on the basis of a forum selection clause that purports to pre-elude litigation from a venue other than a specific state court.” Id. at 19. (citations omitted). In Manetti-Farrow, Inc. v. Gucci America, Inc., 858 F.2d 509 (9th Cir.1988) the court explained that “[o]ur case involves a motion to dismiss, rather than to transfer venue, and becаuse there is no federal rule directly on point the Stewart analysis is inapplicable.”. Id. at 512 n. 2 The Second and Ninth Circuits hold that Bremen applies to such motions to dismiss. Jones, 901 F.2d at 18-19; Manetti-Farrow, 858 F.2d at 513. The Fourth Circuit has looked to state law to determine the motion to dismiss. Nutter v. Rents, Inc., 1991 WL 193490, at **5-7 (4th Cir. Oct. 1, 1991). The First and Third Circuits have ruled that they need not reach the issue of whether state or federal law should govern the motion to dismiss, since under either Bremen or applicable state law the result is the same. Lambert v. Kysar, 983 F.2d 1110, 1116-22 (1st Cir.1993); Instrumentation Assocs., Inc. v. Madsen Elecs. (Canada) Ltd, 859 F.2d 4, 6-8 (3d Cir.1988); Crescent Int’l, Inc. v. Avatar Communities, Inc., 857 F.2d 943, 945 (3d Cir.1988). Still other courts have suggested that a motion to dismiss is not an appropriate means of enforcing a forum selection clause, and that instead the motion should be treated as a motion to transfer. Haskel v. FPR Registry, Inc., 862 F.Supp. 909, 915-16 (E.D.N.Y.1994); National Micrographics Sys., Inc. v. Canon U.S.A., Inc., 825 F.Supp. 671, 679 (D.N.J.1993); Page Constr. Co. v. Perini Constr., 712 F.Supp. 9, 10-11 (D.R.I.1989). However, these cases, unlike our own, did not involve a fоrum selection clause that limited the agreed venue to a state court.

We choose to join the other courts rather than to make a circuit split and further complicate this area of the law.

C. Arguments For Reversal

ISSI urges this court to decide venue in its favor and sustain venue in the Western ‍​​‌‌​‌​​‌‌‌‌‌​​​​​​‌‌​​‌​‌​‌‌‌​‌​​‌​​​​‌​​​‌‌‌‌​‍District of Texas, but we reject its arguments. It contends that this case does not *116 really arise out of the contract since it is not suing for breach of contract. We agree with the district court that even though ISSI is not technically suing for breach of contract, the entire controversy centers around which party’s interpretation of the contract is the correct one, and whether ISSI was fraudulently induced to enter into the contract.

ISSI then argues that it is a small company with only twenty employees and no business ties to California. This is not a persuasive argument for several reasons. First, despite its size, ISSI aрpears to be a fairly sophisticated business with experience in negotiating complex government and private contracts. Second, it is disingenuous to argue that ISSI has no ties to California, since in this very case it did business with Amplicon, makes payments to Amplieon in California, agreed in writing that the leases shall be governed by California law, and agreed to return the equipment in issue to California upon the termination of the lease, if it chose not to purchase the equipment. Third, while litigation in California may be inconvenient for ISSI, Amplieon points out that it would be equally inconvenient for Amplicon to have to litigate in Texas. Fourth, a forum selection clause was upheld in Carnival Cruise Lines even where the plaintiffs werе individuals. ISSI’s David versus Goliath argument is not persuasive.

ISSI also argues that the forum selection clause here is different from those enforced in other cases, since it appliеd only to ISSI; Amplicon was not bound to litigate the agreement only in California. We fail to see how this distinction matters. There was still a meeting of the minds that ISSI should have to sue in California.

AFFIRMED.

Notes

1

. M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972).

2

. Undеr 28 U.S.C. § 1391(a) and (c), venue in a diversity suit lies against a corporate defendant in any district where the corporation "resides,” and a corporation is deemed to reside in аny district in which it is subject to personal jurisdiction.

3

. Section 1406(a) provides that "[t]hc district court of a district in which is filed a case laying venue in the wrong division or district shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought.”

4

.Section 1404(a) provides that "[f]or 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."

5

. If this explains the Court’s different treatment in Stewart, we might expect in a proper case for Bremen to be modified to match Stewart.