IN RE: RYZE CLAIMS SOLUTIONS, LLC,
No. 19-2930
United States Court of Appeals For the Seventh Circuit
August 3, 2020
ARGUED APRIL 8, 2020 — DECIDED AUGUST 3, 2020
Before RIPPLE, BRENNAN, and SCUDDER, Circuit Judges.
Petition for Writ of Mandamus from the Southern District of Indiana, Indianapolis Division.
No. 1:18-cv-01767-JMS-MJD — Jane Magnus-Stinson, Chief Judge.
OPINION
In due course, the district court in Indiana granted RYZE‘s motion for summary judgment on Mr. Billings‘s federal claims. The district court then transferred, sua sponte, the case back to the Eastern District of California. It explained that its own docket was congested and that the Eastern District of California had a greater familiarity with California labor law. When the case was docketed once again in the Eastern District of California, RYZE petitioned this court for a writ of mandamus directing the Southern District of Indiana to request that the Eastern District of California transfer the action back
We must give forum-selection clauses “‘controlling weight in all but the most exceptional cases.‘” Atl. Marine, 571 U.S. at 63 (quoting Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 33 (1988) (Kennedy, J., concurring)). Because no such exceptional circumstances exist here, the district court de-parted from the settled approach for applying the federal transfer statute in cases governed by a forum-selection clause. Accordingly, we grant the petition and issue the writ of mandamus.
I
BACKGROUND
A.
RYZE is an Indiana business. It employs remote workers across the Nation. One of these workers, Mr. Billings, filed this action against RYZE and ten unnamed defendants in a California state court. As amended, the complaint stated a claim alleging violations of the Fair Labor Standards Act (“FLSA“),
RYZE removed the action to the United States District Court for the Eastern District of California. Then, relying on a forum-selection clause in the employment agreement between RYZE and Mr. Billings, RYZE moved to transfer venue under
Once in the Southern District of Indiana, the parties engaged in discovery and the district court resolved numerous discovery-related disputes. The court also granted RYZE‘s motion to add counterclaims against Mr. Billings, alleging breach of the employment agreement,3 misappropriation of trade secrets in violation of the Indiana Uniform Trade Secrets Act,
The district court then granted RYZE‘s motion for summary judgment on Mr. Billings‘s FLSA claim and denied Mr. Billings‘s class certification motion to the extent he sought conditional certification of an FLSA collective action. Two matters remained briefed and outstanding: RYZE‘s motion to strike Mr. Billings‘s expert report and Mr. Billings‘s class certification motion under
B.
Two days after it granted RYZE‘s motion for summary judgment on the FLSA claim, the Southern District of Indiana sua sponte ordered the parties to show cause “why this matter should not be transferred to [the] U.S. District Court for the Eastern District of California for further proceedings.”5 The district court stated that “[t]he backdrop of this litigation has changed dramatically since the Eastern District of California evaluated the public-interest factors and trans-ferred this matter to this District.”6 It also emphasized its own docket congestion and noted that “the citizens of California have a strong interest in adjudicating claims based upon its labor laws.”7
The court ordered RYZE to respond to the order first. RYZE contended in its response to the order to show cause that “[t]here is nothing exceptional about this case that would warrant disregarding that forum selection agreement now.”8 RYZE submitted that transferring the case back to the Eastern District of California, after the Southern District of Indiana had “already invested its own substantial time and effort in deciding a summary judgment motion, would not serve the purposes of conserving judicial resources.”9 RYZE, contended that, despite the district court‘s docket congestion, “[t]he median time from filing to trial in civil cases [was] substantially shorter in the Southern District of Indiana at 26.4 months compared to nearly a year longer in the Eastern District of California at 36.8 months.”10
The Southern District of Indiana rejected RYZE‘s view of the proper measure of court congestion. In the court‘s view, an assessment of “court congestion” also takes into account “the extent to which this Court‘s unprecedented caseload strain impacts the ability of court and clerk staff
On July 30, 2019, this action was docketed once again in the Eastern District of California. On October 3, 2019, the Eastern District of California ordered the parties to show cause why the action should not be remanded to state court for lack of subject matter jurisdiction. On the same day, RYZE sought a petition for writ of mandamus from this court. After Mr. Billings filed a response, we ordered the case to proceed to full briefing and oral argument.
II
DISCUSSION
A.
B.
We begin with the language of the federal transfer statute that must guide a district court when considering a motion to transfer a case from one federal district to another.
These considerations, however, will “rarely” outweigh the parties’ private interests in enforcing a forum-selection provision. Atl. Marine, 571 U.S. at 64. “The presence of a valid forum-selection clause requires district courts to adjust their usual § 1404(a) analysis in three ways.” Id. Two of these adjustments are relevant to this case.13 First, “the plaintiff‘s choice of forum merits no weight.” Id. at 63. Instead, the plaintiff, in opposing the forum-selection clause, “bears the burden of establishing that transfer to the forum for which the parties bargained is unwarranted.” Id. Moreover, a court “should not consider arguments about the parties’ private interests” because the parties, in contracting to a forum-selection clause, “waive the right to challenge the preselected forum as inconvenient or less convenient for themselves or their witnesses.” Id. at 64. Accordingly, the private-interest factors are deemed “to weigh entirely in favor of the preselected forum,” and a court “may consider arguments about public-interest factors only.” Id. When this analysis is properly applied, it “requires that a forum-selection clause be ‘given controlling weight in all but the most exceptional cases.‘” Id. at 59-60 (quoting Stewart, 487 U.S. at 33). Parties expect to litigate in their agreed-to forum, and “courts should not unnecessarily disrupt the parties’ settled expectations.” Id. at 66.
C.
Our examination of the record convinces us that the district court employed a flawed methodology in deciding to send this case back to the Eastern District of California. First, it is evident that the district court improperly placed the burden on RYZE to justify keeping the case in Indiana. This improper allocation of the burden is evident in the district court‘s ordering RYZE to respond first to the court‘s order to show cause. As the party resisting the application of the forum-selection clause, Mr. Billings, not RYZE, had the burden of justifying a transfer contrary to the terms of that clause.14
The district court also erred in concluding that the Eastern District of California‘s familiarity with the applicable state law “weigh[ed] heavily in favor of
The Southern District of Indiana, in holding that this factor is entitled heavy weight, did not identify, moreover, any features of the relevant California law that were “exceptionally arcane.” Id. at 68; see also Aliano v. Quaker Oats Co., No. 16 C 3087, 2017 WL 56638, at *3 (N.D. Ill. Jan. 4, 2017) (“[N]or have Plaintiffs identified any unique or idiosyncratic aspect of Illinois law at issue here that would make this court‘s purported greater familiarity with Illinois law significant.“). We therefore must conclude that the district court erred in concluding that this factor weighed heavily in favor of a transfer back to the Eastern District of California.
The district court also erred in its treatment of another public-interest factor, “‘the administrative difficulties flowing from court congestion.‘” Atl. Marine, 571 U.S. at 62 n.6 (quoting Piper Aircraft, 454 U.S. at 241 n.6). The district court concluded “that the caseload and scheduling congestion in this District and on the undersigned‘s trial calendar weigh in favor of transfer.”17 The district court also rejected RYZE‘s argument that a court‘s docket congestion is only considered under this public-interest factor to the extent it affects the case‘s time to resolution. Instead, the district court broadly construed “administrative difficulties” to include “trial calendar congestion, the amount of time the Court can dedicate to cases, and the extent to which
The district court evaluated this factor through a different lens than the one usually employed by the federal courts. We have held that, “[t]o the extent that court congestion matters, what is important is the speed with which a case can come to trial and be resolved.” In re Factor VIII or IX Concentrate Blood Prod. Litig., 484 F.3d 951, 958 (7th Cir. 2007) (emphasis added). We further explained:
[T]he real issue is not whether a dismissal [for forum non conveniens] will reduce a court‘s congestion but whether a trial may be speedier in another court because of its less crowded docket. In addition, ... [t]he forum non conveniens doctrine should not be used as a solution to court congestion; other remedies, such as placing reasonable limitations on the amount of time each side may have to present evidence, are more appropriate.
Id. at 958-59 (first and last alterations in original) (citations omitted) (internal quotation marks omitted).
Our perspective is shared by other circuits. See Gates Learjet Corp. v. Jensen, 743 F.2d 1325, 1337 (9th Cir. 1984) (“The real issue is not whether a dismissal will reduce a court‘s congestion but whether a trial may be speedier in another court because of its less crowded docket.“); In re Scott, 709 F.2d 717, 721 (D.C. Cir. 1983) (“The law is well established that a federal court may not order transfer under section 1404(a) merely to” alleviate docket congestion); Fannin v. Jones, 229 F.2d 368, 369 (6th Cir. 1956) (same).19
Although the district court noted that it could not schedule a trial for at least fourteen months from the transfer decision (or longer if any scheduling delay occurred),20 it never addressed whether trial would be speedier in the Eastern District of California. Instead, the district court merely observed that its own docket was crowded, and its resources strained, before concluding that this factor weighed in favor of a transfer.21
[A] clause establishing ex ante the forum for dispute resolution has the salutary effect of dispelling any confusion about where suits arising from the contract must be brought and defended, sparing litigants the time and expense of pretrial motions to determine the correct forum and conserving judicial resources that otherwise would be devoted to deciding those motions.
Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 593-94 (1991) (second emphasis added). “[A] proper application of § 1404(a) requires that a forum-selection clause be ‘given controlling weight in all but the most exceptional cases.‘” Atl. Marine, 571 U.S. at 59-60 (quoting Stewart, 487 U.S. at 33 (Kennedy, J., concurring)). “In all but the most unusual cases, therefore, ‘the interest of justice’ is served by holding parties to their bargain.” Id. at 66.
This case is not an “exceptional” case. Indeed, for purposes of the federal transfer statute, it is a very “ordinary” action.22 Notably, neither the Southern District of Indiana nor Mr. Billings identified any decision since Atlantic Marine in which a district court refused to enforce a valid forum-selection agreement under § 1404(a) due to exceptional circumstances. RYZE invites our attention to only two decisions. The first of these cases is Ha Thi Le v. Lease Finance Group, LLC, No. 16-14867, 2017 WL 2915488 (E.D. La. May 9, 2017). This case is of very limited help in our present inquiry. There, the district court had to decide whether to sever and transfer some claims while retaining others. The court ultimately decided that “the need—rooted in the valued public interest in judicial economy—to pursue the same claims in a single action in a single court can trump a forum-selection clause.” Id. at *7 (quoting In re Rolls Royce Corp., 775 F.3d 671, 679 (5th Cir. 2014)). The second case that RYZE identifies is Bollinger Shipyards Lockport, L.L.C. v. Huntington Ingalls Inc., No. 08-4578, 2015 WL 65298 (E.D. La. Jan. 5, 2015). As RYZE points out, however, this case is distinguishable because the defendant waited six years before moving to transfer venue. By that time, the district court already had ruled on, among numerous other motions, a motion for summary judgment and a motion for reconsideration.
We have identified several other cases where courts have found extraordinary circumstances. Each of these cases presented a significantly more serious and unusual situation than the one here. For example, the court in ABC Medical Holdings, Inc. v. Home Medical Supplies, Inc., No. 15-2457, 2015 WL 5818521, at *9 (E.D. Pa. Oct. 6, 2015), the court did not have jurisdiction over one of the parties, and the court could not sever the claims. The court held that “it would require litigation of substantially the same issues in two different courts.” Id. “The public interest in efficiency served by litigating substantially the same claims in one court rather than two outweighs the prior agreement as to forum ... .” Id. Similarly, in In re Dozier Financial, Inc., 587 B.R. 637, 650 (Bankr. D. S.C. 2018), the court did not enforce a forum-selection clause where only one of the six defendants was bound by the clause and where splitting up the case would have resulted in “substantially duplicative discovery and court proceedings.” The court acknowledged that forum-selection clauses are meant to provide parties with greater predictability about where they would engage in future litigation, but noted that in that particular case, the forum-selection clause did the opposite. Id. at 650-51. See Alabsi v. Savoya, LLC, No. 18-cv-06510-KAW, 2019 WL 1332191, at *5 (N.D. Cal. Mar. 25, 2019) (“Courts recognize three circumstances in which enforcement of a forum selection clause would be unreasonable: (1) if the inclusion of the forum selection clause was the product of fraud or overreaching, (2) if the party challenging the forum selection clause would effectively be deprived of his day in court if the clause is enforced, or (3) if enforcement would contravene a strong public policy of the forum in which the suit was brought.” (citing Murphy v. Schneider Nat‘l, Inc., 362 F.3d 1133, 1140 (9th Cir. 2004))); Argosy Cap. Grp. III, L.P. v. Triangle Cap. Corp., No. 17 Civ. 9845 (ER), 2019 WL 140730, at *7 (S.D.N.Y. Jan. 9, 2019) (An exceptional case is “where the action is core to a bankruptcy proceeding, in which case the policy toward enforcement of forum-selection clauses is ‘not so strong’ as to mandate enforcement in the face of strong countervailing public interests in centralizing bankruptcy proceedings, judicial economy, and overall justice.” (quoting In re Iridium Operating LLC, 285 B.R. 822, 836-37 (S.D.N.Y. 2002))).
None of the complications identified by the courts in these cases is present here. Indeed, the clause already had brought the case to the Southern District of Indiana, and that court had partially decided the case. Mr. Billings articulates no compelling reason to seek a return to California at this juncture. The “interests of justice,” as delineated in Atlantic Marine, clearly require that the district court complete its adjudication of the case.
Conclusion
We accordingly grant RYZE‘s petition for writ of mandamus. The district court deviated substantially from the methodological course of decision-making mandated by the Supreme Court of the United States. This is not the exceptional or unusual case that would justify giving controlling weight to factors other than the forum-selection clause.
Notes
Id. at 238-39 (internal citations edited) (parallel citations omitted).the proposition that a district judge is better able to “intuit” the answer to an unsettled question of state law is foreclosed by our holding in Erie. The very essence of the Erie doctrine is that the bases of state law are presumed to be communicable by the parties to a federal judge no less than to a state judge. Almost 35 years ago, Professor Kurland stated: “Certainly, if the law is not a brooding omnipresence in the sky over the United States, neither is it a brooding omnipresence in the sky of Vermont, or New York or California.” Philip B. Kurland, Mr. Justice Frankfurter, the Supreme Court and the Erie Doctrine in Diversity Cases, 67 Yale L. J. 187, 217 (1957). See S. Pac. Co. v. Jensen, 244 U.S. 205, 222 (1917) (Holmes, J., dissenting) (“The common law is not a brooding omnipresence in the sky but the articulate voice of some sovereign or quasi-sovereign that can be identified“).
The Court continued: “To the extent that the available state law on a controlling issue is so unsettled as to admit of no reasoned divination, we can see no sense in which a district judge‘s prior exposure or nonexposure to the state judiciary can be said to facilitate the rule of reason.” Id. at 239. Given this skepticism, we see no reason why a non-local district court would be less capable of discerning the content of another state‘s law.
Mr. Billings also relies on In re Genentech, Inc., 566 F.3d 1338, 1347 (Fed. Cir. 2009), where the court stated that “[t]he likely speed to trial ‘factor appears to be the most speculative ... and case disposition statistics may not always tell the whole story.‘” Respondent‘s Br. 22 (quoting In re Genentech, Inc., 566 F.3d at 1347). The quoted language fails to capture fully the court‘s intended meaning. In In re Genentech, the Federal Circuit first stated that, “[t]o the extent that court congestion is relevant, the speed with which a case can come to trial and be resolved may be a factor.” In re Genentech, Inc., 566 F.3d at 1347. Then, in stating that “this factor appears to be the most speculative,” id., the Federal Circuit cited Collins v. American Automobile Insurance Co. of Saint Louis, 230 F.2d 416, 419 (2d Cir. 1956). In Collins, the Second Circuit explained that it has “often questioned reliance upon the fact of locally congested dockets as a proper ground for an order of transfer.” Id. at 419. Besides the fact that “conditions below may be no worse than elsewhere,” the court stated that “we think it dangerous to suggest that a judge may deny entrance to his court to a litigant on the ground of his serious burdens; his understandable complaints should be directed elsewhere, as to executive and legislature.” Id.