which had jurisdiction over the action, could consider whether it "should . . . excercise its jurisdiction to do more than give effect to the legitimate expectations of the parties, manifested in their freely negotiated agreement, by specifically enforcing the forum selection clause." Id. at 12.
Subsequently, in Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29, 101 L. Ed. 2d 22, 108 S. Ct. 2239 (1988), the Court injected a fairness and convenience component into the enforcement analysis. The Court held that federal law controls a motion pursuant to 28 U.S.C. § 1404(a) to transfer an action to the venue provided in a contractual forum selection clause. Under 28 U.S.C. § 1404(a), a district court can transfer a civil action "for the convenience of the parties and witnesses, in the interest of justice [to] . . . any other district . . . where it might have been brought." Under federal law, the Court ruled, a forum selection clause should "be a significant factor that figures centrally" in a transfer analysis but that a forum selection clause should be considered "only one relevant factor." 487 U.S. at 32. The appropriateness of transfer is to be considered on an "individualized case-by-case consideration of convenience and fairness," including the convenience of the contractual forum and the relative bargaining power of the parties. Stewart, 487 U.S. 22, 29, 101 L. Ed. 2d 22, 108 S. Ct. 2239 (1988) (quoting Van Dusen v. Barrack, 376 U.S. 612, 622, 11 L. Ed. 2d 945, 84 S. Ct. 805 (1964)). Under the Court's analysis, the presence of a valid forum selection clause would not preclude the denial of a motion to transfer brought by a party seeking to enforce the clause.
While the Court did not directly address the issue of the proper procedural vehicle for enforcing a forum selection clause, it appeared to have adapted the view that a valid forum selection clause does not render improper what would otherwise be a proper venue, although more by implication than by explicit statement. In a footnote, the Court observed that "the parties do not dispute that the District Court properly denied the motion to dismiss for improper venue under 28 U.S.C. § 1406(a) because respondent does business in the Northern District of Alabama. See 28 U.S.C. § 1391(c) (venue proper in judicial district in which corporation is doing business)." Stewart, 487 U.S. at 28, n.8. Accordingly, Stewart indicates that the proper procedure for enforcing a forum selection clause is through a motion to transfer pursuant to § 1404(a), which applies when venue is otherwise proper. See Crescent International, Inc. v. Avatar Communities, Inc. 857 F.2d 943, 944 (3d Cir. 1988); David Taylor, The Forum Selection Clause: A Tale of Two Concepts, 66 TMPLR 785 at n.259.
Thus the analysis of defendants' motion would be relatively straightforward but for the Court's decision in Carnival Cruise, handed down just three years later. In Carnival Cruise, the Court returned to the analysis used in The Bremen, this time to harsher effect, and left unclear the proper means for enforcing a forum selection clause. In Carnival Cruise, plaintiffs filed suit in federal district court in Washington, their home state, to recover for personal injuries sustained when one of the plaintiffs fell during a cruise on one of defendant's ships while it was in international waters. The defendant then moved for summary judgment on the grounds that it lacked sufficient contacts with the State of Washington to confer personal jurisdiction over it, despite the fact that the ticket had been purchased there. As a second ground for the summary judgment motion, defendant argued that a forum selection clause on the back of the passenger ticket required the plaintiffs to bring suit on all claims in the Florida courts. In the alternative, Carnival sought a transfer of the case to the United States District Court for the Southern District of Florida. See Shute v. Carnival Cruise Lines, 897 F.2d 377, 379 (9th Cir. 1990).
In reversing the district court's determination that Carnival lacked sufficient contacts with the forum, the Ninth Circuit Court of Appeals ruled that not only were the contacts sufficient with the forum but that the forum selection clause should not be enforced because it was "not freely bargained for," and enforcement would deprive the respondents of their day in court as they were "physically and financially incapable of pursuing [the] litigation in Florida." 897 F.2d at 389.
The Supreme Court reversed, ruling that the contract was enforceable under the standards of The Bremen, without, however, either applying or overruling the balancing test of Stewart. The Court held that the inclusion of a reasonable forum selection clause in a form contract benefited litigants by limiting pretrial motions on the proper forum for litigation and possibly lowering the fares to passengers because of costs savings accruing to the cruise line through the limitation of fora where it could be sued. 499 U.S. at 593-594. The Court also noted that the respondents bore a "heavy burden of proof" of showing that the clause was so inconvenient that it precluded them from having their claims heard or that it violated notions of fundamental fairness, particularly since Florida was not a "remote alien forum," the dispute at issue was not essentially a local one, and no evidence had been presented that inclusion of the clause stemmed from bad faith on the part of the cruise line.
Carnival Cruise left open the question of whether a forum selection clause should be enforced through dismissal or transfer. It did not appear that the Court intended to overrule Stewart. However, the Court's reversal of the Ninth Circuit's decision had the effect of dismissing the case even though the action could have been transferred to Florida. The Court never reached the issue of whether the action should have been transferred. Indeed, it appears that the Court may have unintentionally overlooked or ignored the issue since the description of the procedural history of the case took no notice of the fact that the defendant had sought transfer as alternative relief. See Carnival Cruise v. Shute, 499 U.S. at 588 (describing procedural history but not including petitioner's alternate ground of motion to transfer). If the Court merely intended that the forum selection clause be enforced in the context of a transfer, that never happened: on remand, the Ninth Circuit simply affirmed the district court's dismissal "for the reasons set forth" in the Supreme Court's opinion, thereby apparently resulting in a dismissal of the action without ever considering the possibility of transfer or what standard might apply. Shute v. Carnival Cruise Lines, 934 F.2d 1091 (9th Cir. 1991).
The Court of Appeals for this Circuit has not specifically addressed the issue of whether a forum selection clause may be enforced by dismissing an action where transfer is possible.
Defendant relies heavily on Jones v. Weibrecht, 901 F.2d 17 (2d Cir. 1990), a decision handed down between Stewart and Carnival, for the proposition that the only option here is to dismiss the action without considering transfer. In Jones, Jones and Weibrecht signed two agreements containing a forum selection clause limiting all litigation on the basis of the agreements to the Supreme Court of New York, Essex County. When a dispute arose, Jones commenced a contract action in federal court seeking a recision of the agreements. Weibrecht then filed suit in the Supreme Court of New York, Essex County, alleging breach of contract. Jones removed that action to the same federal court on the basis of diversity jurisdiction. In affirming the district court's dismissal of the complaint filed in federal court and the remand of the other action to state court on the basis of the forum selection clause, the Court of Appeals held that the standard of The Breman, rather than Stewart, applies to the analysis of forum selection clauses in diversity cases. The Court of Appeals reasoned that
[a] motion to transfer an action to another federal district pursuant to [28 U.S.C.] section 1404(a) calls for an 'individualized, case-by-case consideration of convenience and fairness.' The same broad-based balancing is not appropriate where, as here, a party 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 preclude litigation from a venue other than a specific state court.
The Ninth Circuit took the same view of the applicability of Stewart in Manetti-Farrow v. Gucci Am., 858 F.2d 509, 512 n.2 (9th Cir. 1988).
Jones does not, however, preclude the transfer of an action where the forum selection clause allows the parties to bring suit in a federal court. While the action begun in federal court was dismissed, the district court did not have the option of transferring the case to another federal court. The state action was remanded. See also Karl Koch Erecting Company v. New York Convention Center Dev. Corp., 838 F.2d 656, 659 (2d Cir. 1988) (in two actions stemming from contract containing forum selection clause limiting suit to state court, action begun in state court remanded pursuant to 28 U.S.C. § 1447(c), action begun in federal court dismissed). In the case at bar, the forum selection clause does not limit plaintiff to a state court, since suit may also pursuant to agreement be brought in the federal district court in Maryland.
The issue here is whether a party may limit the court to considering only dismissal rather than transfer and, to the extent that there is a difference, to the standard of Carnival Cruise and The Bremen, solely by virtue of language in which he casts his motion. Such a result would be inappropriate, particularly in light of 28 U.S.C. § 1406, which allows transfer of an action rather than dismissal "in the interests of justice."
Although courts have often enforced forum selection clauses by granting a motion to dismiss for improper venue, the better view is that forum selection clauses do not render venue improper and thus may not be enforced by a motion to dismiss for improper venue. See Lambert v. Kysar, 983 F.2d 1110, 1113 n.2 (1st Cir. 1993) (motion to dismiss an action on the basis of a forum selection clause must be brought under 12(b)(6) rather than 12(b)(3)); but cf. Riley v. Kingsley Underwriting Agencies, Ltd., 969 F.2d 953 (10th Cir. 1992) (noting that forum selection clauses are "frequently" analyzed as motions to dismiss for improper venue under 12(b)(3)). As noted above, the decision in Stewart provides some support for this position, and the Court of Appeals has not ruled to the contrary, although district courts have. See, e.g., Medoil Corp. v. Citicorp, 729 F. Supp. 1456, 1457 n.1 (S.D.N.Y. 1990) (Stanton, J.) ("[A] motion to dismiss pursuant to a forum-selection clause is properly considered a motion to dismiss for lack of venue"); Lexington Investment Company v. Southwest Stainless, Inc., 697 F. Supp. 139 (S.D.N.Y. 1988) (court held that forum selection clause warranted dismissal under 12(b)(3), but transferred the action pursuant to 28 U.S.C. § 1406(a) to avoid statute of limitations problems and save the plaintiff time and expense); Full-Sight Contact Lens v. Soft Lenses, Inc., 466 F. Supp. 71, 72 (S.D.N.Y. 1978) (court held that forum selection clause rendered venue in New York improper and transferred case pursuant to 28 U.S.C. § 1406(a), noting that same result would have been reached under section 1404(a)). In National Micrographics Systems, Inc. v. Canon U.S.A., Inc., 825 F. Supp. 671 (D.N.J. 1993), Judge Simandle held that enforcement of a forum selection clause by way of a motion to dismiss for improper venue --
is an improper application of Rule 12(b)(3). Rule 12(b)(3) provides for a motion to dismiss for improper venue. See Fed. R. Civ. P. 12(b)(3). "Venue," in turn, is defined by statute at 28 U.S.C. § 1391, which sets forth where venue may properly be laid. The determination of the appropriate venue under § 1391 revolves around factors such as whether the court is acting within its diversity or federal question jurisdiction; whether the defendant is a citizen or an alien or a corporation; and the jurisdiction in which the defendant(s) resides or in which a corporation does business. 28 U.S.C. § 1391. Section 1391 does not list "forum selection clauses" as a factor to be considered when determining where venue may be laid.