In Re Howmedica Osteonics Corp. ( 2017 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_______________
No. 16-3682
_______________
IN RE: HOWMEDICA OSTEONICS CORP,
a New Jersey corporation and subsidiary
of STRYKER CORPORATION,
Petitioner
_______________
On Petition for Writ of Mandamus from the United States
District Court
for the District of New Jersey
(D.N.J. No. 2:14-cv-03449)
Honorable Claire C. Cecchi, U.S. District Judge
_______________
Argued: January 25, 2017
Before: KRAUSE, SCIRICA, and FUENTES, Circuit Judges
(Opinion Filed: August 15, 2017)
Robert J. Carty, Jr. (Argued)
Seyfarth Shaw
700 Milam Street, Suite 1400
Houston, TX 77002
Michael D. Wexler
Seyfarth Shaw
233 South Wacker Drive, Suite 8000
Chicago, IL 60606
Attorneys for Plaintiff-Petitioner Howmedica Osteonics Corp.
Jed L. Marcus (Argued)
Bressler Amery & Ross
325 Columbia Turnpike, Suite 301
Florham Park, NJ 07932
Attorney for Defendant-Respondents Brett Sarkisian,
Keegan Freeman, Michael Nordyke, Taylor Smith, and
Bryan Wyatt
Leigh Ann Buziak
Anthony B. Haller (Argued)
Rosemary McKenna
Blank Rome
130 North 18th Street
One Logan Square
Philadelphia, PA 19103
David C. Kistler
Stephen M. Orlofsky
Blank Rome
301 Carnegie Center, Third Floor
Princeton, NJ 08540
Attorneys for Defendant-Respondent DePuy Orthopaedics
Inc.
2
Jeffery K. Brown (Argued)
Erik M. Andersen
Payne & Fears
4 Park Plaza, Suite 1100
Irvine, CA 92614
Robert B. Rosen
Hellring Lindeman Goldstein & Siegal
One Gateway Center, 8th Floor
Newark, NJ 07102
Attorneys for Defendant-Respondent Golden State
Orthopaedics Inc.
_______________
OPINION OF THE COURT
_______________
KRAUSE, Circuit Judge.
In the absence of a forum-selection clause, a defendant
in federal court may move under 28 U.S.C. § 1404(a) for a
transfer to another district for “convenience” and “in the
interest of justice.” But where contracting parties have
specified the forum in which they will litigate disputes arising
from their contract, federal courts must honor the
forum-selection clause “[i]n all but the most unusual cases,”
following the Supreme Court’s instructions in Atlantic
Marine Construction Co. v. U.S. District Court, 134 S. Ct.
568, 583 (2013). This mandamus proceeding requires us to
determine how district courts should apply Atlantic Marine
where all defendants seek a transfer to one district under
3
§ 1404(a) and where some, but not all, of those defendants are
parties to forum-selection clauses that designate different
districts. Because we conclude the District Court erred in its
application of Atlantic Marine by declining to honor the
forum-selection clauses applicable to some of the litigants
and by transferring the action in its entirety, we will issue a
writ of mandamus and, applying the test we announce today,
direct the District Court to transfer claims against only the
two corporate defendants who did not agree to any forum-
selection clause.
I. Background
California natives Keegan Freeman, Michael Nordyke,
Brett Sarkisian, Taylor Smith, and Bryan Wyatt (collectively,
“Sales Representatives”) are former California sales
representatives for Howmedica Osteonics Corp., a New
Jersey corporation, and its parent company, Stryker Corp.
(collectively, “Howmedica”).1 The Sales Representatives
1
Any distinctions between the two companies are
immaterial to this mandamus action, as “Howmedica
Osteonics Corp.” was a party to all of the Sales
Representatives’ employment agreements, whether by name
in some agreements or as a subsidiary included within the
definition of “Stryker,” where that entity was the party, in
others. And although the Sales Representatives previously
contended that Howmedica Osteonics Corp. lacked standing
to enforce Stryker’s contracts, they have not renewed—and
hence have waived—that contention here. See Gonzalez v.
AMR, 549 F.3d 219, 225 (3d Cir. 2008); see also United
States v. Menendez, 831 F.3d 155, 175 (3d Cir. 2016)
(applying traditional appellate waiver rules in a mandamus
4
began their employment with Howmedica when they signed
employment agreements with confidentiality and
non-compete clauses. The agreements also contained
forum-selection clauses, which designated New Jersey (or, in
Nordyke’s case, Michigan) as the forum for any litigation
arising out of the agreements.
After clashes with Howmedica over its management
and their compensation, the Sales Representatives resigned
and became independent contractors representing
Howmedica’s competitor, DePuy Orthopaedics, Inc., and
DePuy’s regional distributor, Golden State Orthopaedics, Inc.
Some of Howmedica’s customers, who were previously
assigned to the Sales Representatives, followed them, leading
Howmedica to suspect that the Sales Representatives, DePuy,
and Golden State had conspired to convert those customers
even in advance of the Sales Representatives’ resignation
dates. Howmedica therefore brought suit in the District of
New Jersey, charging DePuy and the Sales Representatives
with breach of contract and related claims under state law,
and joining Golden State to the suit as a “necessary party.”
Emphasizing the convenience to themselves and to the
witnesses in California, the defendants promptly moved to
transfer the case to the Northern District of California
pursuant to 28 U.S.C. § 1404(a), which, for “the convenience
of parties and witnesses” and “in the interest of justice,”
allows transfer to a district where the case “might have been
brought.” See Howmedica Osteonics Corp. v. Sarkisian
proceeding), cert. denied sub nom. Menendez v. United
States, 137 S. Ct. 1332 (2017).
5
(Howmedica I), No. 14-3449, 2015 WL 1780941, at *2
(D.N.J. Apr. 20, 2015). After balancing the relevant public
and private interests, the District Court agreed and ordered
the transfer. See Howmedica Osteonics Corp. v. Sarkisian
(Howmedica II), No. 14-3449, 2016 WL 8677214, at *2-6
(D.N.J. Aug. 26, 2016).2 The District Court did not address
Golden State’s separate argument asserting that the District of
New Jersey lacked personal jurisdiction as to that defendant.
See Howmedica II, 2016 WL 8677214, at *2-6.3
2
In so doing, the District Court affirmed the order of
the Magistrate Judge, who had granted the transfer motions
pursuant to his authority under 28 U.S.C. § 636 and Federal
Rule of Civil Procedure 72(a), and who had held, in the
alternative, that the District Court lacked personal jurisdiction
over Golden State. See Howmedica I, 2015 WL 1780941, at
*1 n.2, *7-9 & n.11. The Magistrate Judge declined to
address Golden State’s and the Sales Representatives’
alternative contention that, because venue in New Jersey was
improper under the federal venue statute, 28 U.S.C. § 1391,
transfer was required under 28 U.S.C. § 1406, which
authorizes transfer for the purpose of curing venue defects.
See Howmedica I, 2015 WL 1780941, at *2. No defendant
has renewed these venue objections before this Court, and
they are therefore waived. See Gonzalez, 549 F.3d at 225.
3
Golden State preserved its personal jurisdiction
challenge by raising it before both the District Court and this
Court. The other defendants, however, did not. Although the
Sales Representatives also asserted to the Magistrate Judge
and to the District Court that New Jersey lacked personal
jurisdiction over them, personal jurisdiction is “a waivable
6
While those New Jersey proceedings were pending,
Golden State filed its own suit for declaratory relief against
Howmedica in the Northern District of California, alleging
that the non-compete clauses in Howmedica’s employment
agreements violated California law. That district court issued
an order deeming Golden State’s suit related to the transferred
New Jersey case and also issued two preliminary scheduling
orders in the transferred case, but it then stayed both cases
after Howmedica petitioned this Court for a writ of
mandamus. Howmedica now asks us to vacate the District
Court’s transfer order on the ground that it contravenes the
Supreme Court’s decision in Atlantic Marine Construction
Co. v. U.S. District Court, which held that, except in “the
most unusual cases,” a district court should give effect to a
valid forum-selection clause. 134 S. Ct. 568, 583 (2013).4
right,” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472
n.14 (1985); see, e.g., Fed. R. Civ. P. 12(h)(1), and the Sales
Representatives waived any personal jurisdiction challenge
by failing to raise it here, see Gonzalez, 549 F.3d at 225.
Moreover, all of the Sales Representatives but one consented
to jurisdiction in New Jersey within their employment
agreements. See Burger King, 471 U.S. at 472 n.14. For its
part, DePuy has never raised a personal jurisdiction objection.
4
In Atlantic Marine, the Supreme Court
“presuppose[d] a contractually valid forum-selection clause.”
134 S. Ct. at 581 n.5. We will do the same, because no
defendant has challenged the validity of the forum-selection
clauses in the Sales Representatives’ employment
agreements, thus waiving any such challenge, see Gonzalez,
549 F.3d at 225, and because, regardless of the treatment of
7
Below, we first confirm our jurisdiction to entertain
Howmedica’s mandamus petition. Second, we consider the
applicable standard of review. Third, we address the crux of
this case: how district courts should apply Atlantic Marine
when all defendants seek a transfer to one district under
§ 1404(a), but only some of those defendants agreed to
forum-selection clauses that designate a different district.
II. Discussion
A. Jurisdiction5
The defendants have challenged our jurisdiction,
contending that review of a § 1404(a) transfer order is
permissible only to remedy a procedural defect and that,
regardless, the Northern District of California’s post-transfer
orders in this case preclude our review. We, however,
perceive no jurisdictional defect.
The All Writs Act, 28 U.S.C. § 1651, grants us
jurisdiction to adjudicate a mandamus petition challenging an
interlocutory order over which, pursuant to another
jurisdictional statute, we could exercise jurisdiction at a later
point. See United States v. Wright, 776 F.3d 134, 145 (3d
the agreements’ non-compete clauses under California law,
see generally Edwards v. Arthur Andersen LLP, 189 P.3d
285, 290-91 (Cal. 2008), the non-compete clauses are
severable from the agreements’ forum-selection clauses.
5
The District Court had subject-matter jurisdiction
pursuant to 28 U.S.C. § 1332.
8
Cir. 2015); Council Tree Commc’ns, Inc. v. FCC, 503 F.3d
284, 292-93 (3d Cir. 2007). Here, because 28 U.S.C. § 1291
affords us jurisdiction to review district courts’ § 1404(a)
transfer orders after entry of final judgment, those transfer
orders are reviewable on a mandamus petition. See In re
United States, 273 F.3d 380, 382-85 & n.4 (3d Cir. 2001);
Nascone v. Spudnuts, Inc., 735 F.2d 763, 772-74 (3d Cir.
1984). Moreover, under our case law, our mandamus
jurisdiction over transfer orders encompasses both procedural
and legal issues. See In re United States, 273 F.3d at 384
(procedural issues); id. at 389-90 (legal issue). The District
Court’s § 1404 transfer order therefore falls within a class of
orders reviewable on mandamus.
But that does not end our jurisdictional inquiry, for we
do not “indefinitely” possess mandamus jurisdiction, and,
“once the transferee court proceeds with the transferred case,
the decision as to the propriety of transfer is to be made in the
transferee court,” whether by appeal or by mandamus petition
to the court of appeals for the transferee circuit. Id. at 384.
The question, then, is at what point the transferee court
“proceeds” with a transferred case, and whether the transferee
court in this case, by issuing two scheduling orders and an
order deeming the case related to Golden State’s previously
filed case, has crossed that threshold.
We conclude this case has not proceeded in the
Northern District of California in a manner that would
deprive us of jurisdiction. In In re United States, even after
the transferee court had received the record from the Eastern
District of Pennsylvania and had “scheduled the case for
prompt trial,” we held that we retained mandamus jurisdiction
over the Eastern District of Pennsylvania’s transfer order. Id.
at 382-84. And although we declined to indicate “the specific
9
length of time needed to allow the party resisting transfer to
seek review” before our Court, we held that the Government,
contesting the transfer order by mandamus petition, had
“acted with sufficient dispatch”—even though the
Government had filed its mandamus petition thirty-three days
after the Eastern District of Pennsylvania had denied the
Government’s request for reconsideration of the transfer order
and twelve days after the transferee court had issued a trial
scheduling order. See id. at 382, 384; Order, United States v.
Streeval, No. 01-0084-1 (M.D. Tenn. June 6, 2001), ECF
No. 12.
We reach the same conclusion here. Howmedica filed
its mandamus petition only twenty-seven days after the
District Court’s transfer order, as compared to the thirty-three
day delay in In re United States. And although the transferee
court in the Northern District of California issued two case
management scheduling orders and an order relating the
transferred case to Golden State’s previously filed case, those
orders do not show that the transferee court here proceeded
any further with the case than the transferee court did in In re
United States by issuing a trial scheduling order. Because we
have held that case management orders in the transferee court
are not sufficient to divest us of jurisdiction, we conclude that
the Northern District of California did not proceed with this
case and that Howmedica acted with “sufficient dispatch” in
filing its mandamus petition, which we have jurisdiction to
consider. In re United States, 273 F.3d at 382-84.6
6
In In re United States, we did not identify at what
point the transferee court definitively “proceeds” with the
case so as to divest us of mandamus jurisdiction, 273 F.3d at
10
 B. Standard of Review
A writ of mandamus is, of course, an “extraordinary”
remedy. United States v. Wright, 776 F.3d 134, 145-46 (3d
Cir. 2015). It may issue only if the petitioner shows (1) a
clear and indisputable “abuse of discretion or . . . error of
law,” (2) “a lack of an alternate avenue for adequate relief,”
and (3) “a likelihood of irreparable injury.” Id.; see also
384, whether it occurs at the moment the transferee court
issues a discovery ruling, see Fed. R. Civ. P. 26(b), (c);
Fed. R. Civ. P. 37, at the moment it issues a legally binding
ruling that would become the law of the case, see Musacchio
v. United States, 136 S. Ct. 709, 716 (2016); Hayman Cash
Register Co. v. Sarokin, 669 F.2d 162, 168-69 (3d Cir. 1982),
or at the moment some other threshold is crossed. We
likewise do not resolve that question today, given that our
ruling in In re United States controls the jurisdictional
analysis here.
DePuy’s counsel raised the concern at argument that, if
the transferor Circuit can retain jurisdiction notwithstanding a
transfer order, then the resulting jurisdictional regime will
prompt extensive discovery requests in future cases, reaching
even merits discovery under the guise of determining
§ 1404(a) transfer motions. We believe that concern is
unfounded, for our longstanding precedent provides that
discovery on the merits “is irrelevant to the determination of
the preliminary question of transfer.” McDonnell Douglas
Corp. v. Polin, 429 F.2d 30, 30-31 (3d Cir. 1970) (per
curiam); accord Wood v. Zapata Corp., 482 F.2d 350, 357
(3d Cir. 1973).
11
Cheney v. U.S. Dist. Court, 542 U.S. 367, 381 (2004); Sunbelt
Corp. v. Noble, Denton & Assocs., Inc., 5 F.3d 28, 30 (3d Cir.
1993). Even when these requirements are met, we may, in
the exercise of our discretion, decline to issue a writ of
mandamus when it is not “appropriate under the
circumstances.” Cheney, 542 U.S. at 381.
Appropriate circumstances are more readily present
where, as here, a petitioner challenges a transfer order.
Transfer orders as a class meet the second requirement for a
writ of mandamus, “a lack of an alternate avenue for adequate
relief,” Wright, 776 F.3d at 146, because “the possibility of an
appeal in the transferee forum following a final judgment
there is not an adequate alternative to obtain the relief
sought,” Sunbelt Corp., 5 F.3d at 30. Transfer orders likewise
meet the third requirement, “a likelihood of irreparable
injury,” Wright, 776 F.3d at 146, because an erroneous
transfer may result in “judicially sanctioned irreparable
procedural injury,” Chi., R.I. & P.R. Co. v. Igoe, 212 F.2d
378, 381 (7th Cir. 1954); accord In re United States, 273 F.3d
at 385. Thus, our inquiry here collapses to the first
requirement: Was the District Court’s transfer order a clear
and indisputable “abuse of discretion or . . . error of law” for
which mandamus relief is appropriate? Wright, 776 F.3d at
146; see In re United States, 273 F.3d at
385-90; Carteret Sav. Bank, FA v. Shushan, 919 F.2d 225,
230-33 (3d Cir. 1990). We will apply this standard of review,
turning now to the merits of the parties’ dispute.
C. Application of Atlantic Marine
The Supreme Court made clear in Atlantic Marine that,
in most cases, district courts must enforce valid forum-
selection clauses when adjudicating § 1404(a) transfer
12
motions, but the Court did not have occasion to address how
that general rule should apply where non-contracting parties
are present, much less how it should apply where, as here,
there are other complications such as competing forum-
selection clauses, personal jurisdiction challenges, and
allegations of necessary party status. That is the quandary we
confront today, and we resolve it by (1) reviewing the legal
principles relevant both in the absence of a forum-selection
clause and where one is present; (2) developing from those
principles a framework for applying Atlantic Marine to cases
involving both contracting and non-contracting parties; and
(3) applying that framework to the facts of this case.
1. Governing Legal Principles
To understand Atlantic Marine’s significance and its
instructions regarding § 1404(a) transfers when a
forum-selection clause is present, we begin with a review of
the legal principles governing the § 1404(a) transfer analysis
in the absence of a forum-selection clause. In such cases,
courts decide whether to grant a § 1404(a) transfer by
evaluating various private and public interests. See Atl.
Marine, 134 S. Ct. at 581 & n.6; Jumara v. State Farm Ins.
Co., 55 F.3d 873, 879 (3d Cir. 1995). The balancing of those
interests is in the district courts’ discretion, see Shutte v.
Armco Steel Corp., 431 F.2d 22, 25 (3d Cir. 1970), but we
have prescribed an “enumeration of factors to be balanced” in
each case, Jumara, 55 F.3d at 879-80.
Private interests to be balanced relate to “the
convenience of the parties and witnesses.” 28 U.S.C.
§ 1404(a). They therefore include the “plaintiff’s forum
preference as manifested in the original choice”; “the
defendant’s preference”; “whether the claim arose
13
elsewhere”; “the convenience of the parties as indicated by
their relative physical and financial condition”; “the
convenience of the witnesses”; and “the location of books and
records,” Jumara, 55 F.3d at 879, as well as “all other
practical problems that make trial of a case easy, expeditious
and inexpensive,” Atl. Marine, 134 S. Ct. at 581 & n.6.
By contrast, public interests to be balanced are not
necessarily tied to the parties, but instead derive from “the
interest of justice.” 28 U.S.C. § 1404(a). These interests
include “the enforceability of the judgment”; “the relative
administrative difficulty in the two fora resulting from court
congestion”; “the local interest in deciding local controversies
at home”; “the public policies of the fora”; and “the
familiarity of the trial judge with the applicable state law in
diversity cases.” Jumara, 55 F.3d at 879-80. We regard
these public interests to include judicial economy
considerations, which support “having the two actions in the
same district (through transfer)” when the two cases are in
different courts but involve “the same or similar issues and
parties.”7 1 James Moore et al., Moore’s Manual: Federal
7
To the extent we recognized the “practical
considerations that could make the trial easy, expeditious, or
inexpensive” as a public interest in Jumara, 55 F.3d at 879,
we did so with judicial economy considerations in mind, as
those particular practical considerations constitute a public
interest, while practical considerations that might burden the
parties constitute a private interest. Today, we clarify that
“practical problems that make trial of a case easy,
expeditious, and inexpensive” represent a private interest, as
the Supreme Court stated in Atlantic Marine, 134 S. Ct. at
14
Practice and Procedure, § 7.81[3][c] (2017). In other
instances, judicial economy considerations weigh against
transfer when a separate case involving “the same or similar
legal and factual issues” is pending in the originating district.
Id.
The weighing of private and public interests under
§ 1404(a) changes, however, if a forum-selection clause
enters the picture. When that happens, as the Supreme Court
clarified in Atlantic Marine, “district courts [must] adjust
their usual § 1404(a) analysis in three ways.” 134 S. Ct. at
581. Specifically, district courts (1) must give no weight to
the forum preferred by “the party defying the forum-selection
clause”; (2) must deem the private interests to “weigh entirely
in favor of the preselected forum” because the parties agreed
to the preselected forum and thereby waived the right to
challenge it as inconvenient; and (3) must proceed to analyze
only public interests. Id. at 581-82. The Supreme Court
explained that, with these modifications to the typical
§ 1404(a) analysis, district courts should enforce valid
forum-selection clauses “[i]n all but the most unusual cases.”
Id. at 583.
While the Court in Atlantic Marine modified the
§ 1404(a) transfer inquiry for contracting parties who
581 n.6, and as we have often stated in the forum non
conveniens context, see, e.g., Kisano Trade & Invest Ltd. v.
Lemster, 737 F.3d 869, 873 (3d Cir. 2013); Eurofins Pharma
US Holdings v. BioAlliance Pharma SA, 623 F.3d 147, 161
(3d Cir. 2010), and we acknowledge judicial economy
considerations to be a distinct, cognizable public interest.
15
affirmatively agreed to litigate in a particular forum as an
express term of their agreements, see id. at 581-82, it did not
disturb in any way the customary § 1404(a) analysis that
applies where parties are not bound by a forum-selection
clause, see id. at 581-84. Those modifications, in other
words, are inapplicable where a case involves only
non-contracting parties. And for good reason. Where
Atlantic Marine establishes what amounts to a strong
presumption in favor of enforcing forum-selection clauses,
see id. at 581, 583, the private and public interests that inform
a § 1404(a) transfer inquiry do not bespeak a presumption one
way or another and require a district court to conduct a wide-
ranging inquiry specific to the circumstances of that case, see
Jumara, 55 F.3d at 879-80. Similarly, where the Atlantic
Marine framework would wholly deprive non-contracting
parties of their right to seek transfer on the basis of their
private interests, the customary § 1404(a) analysis guarantees
them that right. See id.
For these reasons, we have need of a separate
framework to determine how forum-selection clauses affect
the § 1404(a) transfer analysis where both contracting and
non-contracting parties are found in the same case and where
the non-contracting parties’ private interests run headlong
into the presumption of Atlantic Marine—hence, the problem
we confront today.
2. Four-Step Framework
Fortunately, in taking on this challenge, we do not
write on a blank slate. Our colleagues in the Fifth Circuit
have forged an approach that we consider a helpful starting
point for our own.
16
In In re Rolls Royce Corp., where a helicopter owner
brought suit against various entities involved in its aircraft’s
design and manufacture, and where the forum-selection
clause applied to only one of the defending parties (Rolls
Royce), the Fifth Circuit prescribed a three-step framework.
775 F.3d 671, 674, 681 (5th Cir. 2014). First, the Fifth
Circuit confirmed that, owing to the Supreme Court’s
guidance in Atlantic Marine, contracting parties’ private
interests support transferring any claims involving those
parties to their agreed-upon forum, a result which may be
accomplished after first severing those claims pursuant to
Federal Rule of Civil Procedure 21. Id. at 681. Second, the
court recognized that, just as non-contracting parties’ private
interests are routinely considered in a traditional § 1404(a)
analysis, those interests must still be considered even when a
forum-selection clause is present in the case. Id. Lastly, the
Fifth Circuit directed district courts to “ask whether this
preliminary weighing is outweighed by the judicial economy
considerations of having all claims determined in a single
lawsuit,” taking into account “procedural mechanisms . . . ,
such as common pre-trial procedures, video depositions,
stipulations, etc.” that could alleviate any inefficiencies
resulting from severance. Id. Applying this framework, the
court concluded that it would enforce the forum-selection
clause in that case by severing and transferring claims against
Rolls Royce, but also observed that non-contracting parties’
interests and considerations of judicial economy at times “can
trump a forum-selection clause.” Id. at 679-83.
We embrace much of our Sister Circuit’s approach,
but, prompted by the challenges raised in this case—for
example, the contention that a forum specified in some of the
parties’ contracts lacks personal jurisdiction over Golden
17
State and the assertion that Golden State is a “necessary
party”—we deem some modifications warranted. Building
on Rolls Royce, we prescribe a four-step inquiry in which the
reviewing court, whether the District Court in the first
instance, or this Court on appeal, will consider in sequence:
(1) the forum-selection clauses, (2) the private and public
interests relevant to non-contracting parties, (3) threshold
issues related to severance, and (4) which transfer decision
most promotes efficiency while minimizing prejudice to non-
contracting parties’ private interests.
Step One: Forum-Selection Clauses. At the first step,
the court assumes that Atlantic Marine applies to parties who
agreed to forum-selection clauses and that, “[i]n all but the
most unusual cases,” claims concerning those parties should
be litigated in the fora designated by the clauses. Atl. Marine,
134 S. Ct. at 583. This step mirrors the first step of the Fifth
Circuit’s framework, which provides that “the private factors
of the parties who have signed a forum agreement . . . cut in
favor of severance and transfer to the contracted[-]for forum.”
Rolls Royce, 775 F.3d at 681.
Step Two: Private and Public Interests Relevant to
Non-Contracting Parties. Second, the court performs an
independent analysis of private and public interests relevant
to non-contracting parties, just as when adjudicating a
§ 1404(a) transfer motion involving those parties in the
absence of any forum-selection clauses.8 See Jumara, 55
8
At this step, assuming that the court intends to handle
the § 1404(a) transfer issues first, the court should suspend
concerns about other threshold issues such as subject-matter
jurisdiction, personal jurisdiction, improper venue, or
18
F.3d at 879-80. This step, like the first, tracks the Fifth
Circuit’s approach: courts at Step Two should consider the
private and public interests “of the parties who have not
signed a forum-selection agreement.” Rolls Royce, 775 F.3d
at 681. If, at this juncture, the Step One and Step Two
analyses point to the same forum, then the court should allow
the case to proceed in that forum, whether by transfer or by
retaining jurisdiction over the entire case, and the transfer
inquiry ends there.
Step Three: Threshold Issues Related to Severance.
Third, if the Step One and Step Two analyses point different
ways, then the court considers severance. See Fed. R. Civ.
P. 21. In some cases, severance clearly will be warranted to
preserve federal diversity jurisdiction; to cure personal
jurisdiction, venue, or joinder defects; or to allow for
subsequent impleader under Federal Rule of Civil Procedure
14.9 In such cases, the court should sever and transfer claims
misjoinder, as it has discretion to address convenience-based
venue issues first under Sinochem International Co. v.
Malaysia International Shipping Corp., 549 U.S. 422, 425,
432 (2007). Under our four-step framework, any other
threshold issues are reserved for Steps Three and Four of the
transfer inquiry.
9
See Grupo Dataflux v. Atlas Global Grp., L.P., 541
U.S. 567, 572-73 (2004) (diversity jurisdiction); DirecTV,
Inc. v. Leto, 467 F.3d 842, 844-45 (3d Cir. 2006) (joinder);
Trierweiler v. Croxton & Trench Holding Corp., 90 F.3d
1523, 1544-45 (10th Cir. 1996) (personal jurisdiction);
Cottman Transmission Sys., Inc. v. Martino, 36 F.3d 291, 296
19
as appropriate to remedy jurisdictional and procedural
defects. If only one severance and transfer outcome satisfies
the constraints identified at this step, then the court adopts
that outcome and the transfer inquiry ends. But if more than
one outcome satisfies the threshold severance constraints,
then the court continues to Step Four.
In other cases, severance is clearly disallowed, such as
when a party is indispensable under Federal Rule of Civil
Procedure 19(b). See Grupo Dataflux v. Atlas Global Grp.,
L.P., 541 U.S. 567, 572-73 (2004); Zambelli Fireworks Mfg.
Co. v. Wood, 592 F.3d 412, 421-22 (3d Cir. 2010). In these
cases, the court cannot sever, see Publicker Indus., Inc. v.
Roman Ceramics Corp., 603 F.2d 1065, 1069 (3d Cir. 1979),
and the case must continue with all parties present in a forum
where jurisdiction and venue are proper as to the
indispensable party, which could be either the originating
district court or the court to which transfer is sought. If
jurisdiction and venue are proper as to the indispensable party
in only one of those courts, then the transfer inquiry ends
there and the case must continue in that court. If, however,
jurisdiction and venue are proper as to the indispensable party
in both the originating court and the proposed transferee
court, then, in deciding where the whole case should proceed,
the court proceeds to Step Four.
Likewise, in cases where severance is neither clearly
warranted nor clearly disallowed and is therefore committed
to the court’s discretion (such as when there are no
(3d Cir. 1994) (venue); Stahl v. Ohio River Co., 424 F.2d 52,
55 & n.3 (3d Cir. 1970) (impleader).
20
indispensable parties or defects in jurisdiction, venue, or
joinder), the court goes on to select the appropriate fora based
on a combination of interests addressed at the next step.
Step Four: Efficiency and Non-Contracting Parties’
Private Interests. Fourth, and akin to the final step in the
Fifth Circuit’s framework, see Rolls Royce, 775 F.3d at 681, a
district court exercises its discretion (which we will review
for abuse of discretion) in choosing the most appropriate
course of action, see DirecTV, 467 F.3d at 844; Shutte, 431
F.2d at 25, but it measures its decision against two key sets of
interests. On the one hand, the court considers efficiency
interests in avoiding duplicative litigation, see D’Jamoos v.
Pilatus Aircraft Ltd., 566 F.3d 94, 111 (3d Cir. 2009), taking
into account case management techniques that can reduce
inefficiencies accompanying severance, Rolls Royce, 775
F.3d at 681, as well as any other public interests that may
weigh against enforcing a forum-selection clause, see Atl.
Marine, 134 S. Ct. at 582; Jumara, 55 F.3d at 879-80. On the
other hand, the court also considers the non-contracting
parties’ private interests and any prejudice that a particular
transfer decision would cause with respect to those interests.
See Rolls Royce, 775 F.3d at 681; DirecTV, 467 F.3d at 846-
47; Jumara, 55 F.3d at 879.
In exercising its discretion to determine whether it
should retain the case in its entirety, transfer the case in its
entirety, or sever certain parties or claims in favor of another
forum, the court considers the nature of any interests
weighing against enforcement of any forum-selection clause;
the relative number of non-contracting parties to contracting
parties; and the non-contacting parties’ relative resources,
keeping in mind any jurisdiction, venue, or joinder defects
that the court must resolve. Only if it determines that the
21
strong public interest in upholding the contracting parties’
settled expectations is “overwhelmingly” outweighed by the
countervailing interests can the court, at this fourth step,
decline to enforce a valid forum-selection clause.
Atl. Marine, 134 S. Ct. at 581, 583.
3. Analysis
Applying this framework to the record of this case, we
hold that a writ of mandamus is warranted. Although we
acknowledge the novelty and difficulty of the task set before
the District Court, we conclude that court’s transfer decision
and its reasoning for the decision misapplied Atlantic Marine
in ways that constitute clear and indisputable errors. Below,
we address those errors and then analyze the appropriate fora
using the four-step framework we announce today.
a. The District Court’s Errors
The District Court misapplied Atlantic Marine in two
ways. First, although the District Court acknowledged
Atlantic Marine’s applicability to the contracting parties in
this case (Howmedica and the Sales Representatives), it did
not apply Atlantic Marine’s precepts correctly to those
parties. Specifically, the District Court bypassed the initial
step where a district court “must deem the [contracting
parties’] private-interest factors to weigh entirely in favor of
the preselected forum.” Atl. Marine, 134 S. Ct. at 582; see
Howmedica II, 2016 WL 8677214, at *3-4. And, even when
it professed to address only “public-interest considerations,”
the District Court conflated public interests with private ones
by considering the parties’ and witnesses’ convenience,
which are not public interests, but private ones. See
22
Howmedica II, 2016 WL 8677214, at *3; cf. Atl. Marine, 134
S. Ct. at 581 n.6; Jumara, 55 F.3d at 879.10
Second, the District Court did not acknowledge or
address the fact that Atlantic Marine applies only to parties
who agreed to a forum-selection clause—not, as the District
Court’s opinion implies, either to the whole case or not at all.
See Howmedica II, 2016 WL 8677214, at *3-6. The District
Court’s “all or nothing” approach contravenes Atlantic
Marine’s language, which specifies that a forum-selection
clause “represents the parties’ agreement as to the most
proper forum” and was “bargained for by the parties.” Atl.
Marine, 134 S. Ct. at 581. In light of how the Supreme Court
limited Atlantic Marine’s holding to contracting parties, the
District Court erred in creating a false dichotomy between, on
the one hand, applying Atlantic Marine to all parties in the
10
For example, the District Court purported to
consider the enforceability of the judgment as a
public-interest factor and concluded that that factor favored
transfer notwithstanding any forum-selection clauses,
reasoning that “it will be easier to obtain judgment over [the
defendants] in California because [the majority of the
defendants] reside in that state.” Howmedica II, 2016 WL
8677214, at *3 (brackets omitted). But the public interest in
the enforceability of the judgment is not concerned with the
convenience with which the parties may obtain a judgment;
rather, this factor concerns whether a judgment is capable of
being enforced at all. See generally, e.g., Bhatnagar v.
Surrendra Overseas Ltd., 52 F.3d 1220, 1225 n.3 (3d Cir.
1995).
23
case and, on the other hand, applying it to none. See
Howmedica II, 2016 WL 8677214, at *3-6.
Given the District Court’s clear and indisputable
errors, mandamus is warranted, so we turn next to the scope
of that mandamus. While we could remand and direct the
District Court to apply the four-step framework we prescribe
today, we have discretion to apply it ourselves where no
additional record development is needed, the outcome is clear
as a matter of law, and our application best serves the
interests of judicial efficiency. See Wallach v. Eaton Corp.,
837 F.3d 356, 374-75 (3d Cir. 2016). Those criteria are met
here, so we proceed to address the question of where the
claims in this case should proceed. We conclude that the
proper disposition of the defendants’ § 1404(a) transfer
motions is severance of Howmedica’s claims against DePuy
and Golden State, transfer of the severed claims to the
Northern District of California pursuant to § 1404(a), and
denial of the motion to transfer the claims against the Sales
Representatives. We reach this conclusion applying today’s
four-step framework.
b. The Proper Fora Under the Applied
Framework
i. Step One: Forum-Selection Clauses
At Step One, we presume that valid forum-selection
clauses should be enforced against the relevant contracting
parties. Given the number of defendants and their different
positions in this case, at Step One we address them in two
groups.
24
Freeman, Sarkisian, Smith, and Wyatt. These Sales
Representatives agreed to New Jersey forum-selection
clauses, and Howmedica seeks to enforce those clauses, so we
presume that Howmedica’s claims against these Sales
Representatives should be litigated in the District of New
Jersey.
DePuy, Golden State, and Nordyke. None of the other
defendants agreed to New Jersey forum-selection clauses,
though Nordyke’s employment agreement had a Michigan
forum-selection clause. Because neither Nordyke nor
Howmedica now seeks to enforce the Michigan
forum-selection clause, and because venue objections are
waivable, even when premised on a forum-selection clause,
see 28 U.S.C. § 1406(b); Auto. Mechs. Local 701 Welfare &
Pension Funds v. Vanguard Car Rental USA, Inc., 502 F.3d
740, 746 (7th Cir. 2007), we do not consider Michigan as a
possible venue for Howmedica’s claims against Nordyke.
Accordingly, DePuy, Golden State, and Nordyke all are not
subject to the presumption that the claims against them should
be litigated in a contractually agreed-upon forum. Cf.
Atlantic Marine, 134 S. Ct. at 581, 583.
Instead, we consider Howmedica’s argument that these
three defendants are bound by the other Sales
Representatives’ New Jersey forum-selection clauses under
the “closely related parties” doctrine and that, therefore, we
must apply Atlantic Marine’s presumption in favor of a New
Jersey forum. See generally Magi XXI, Inc. v. Stato della
Citta del Vaticano, 714 F.3d 714, 722 & n.8 (2d Cir. 2013).11
11
In this case, we analyze the “closely related parties”
doctrine as a matter of federal common law, because “federal
25
We have held, however, that a forum-selection clause “can be
enforced only by the signator[y] to [the] agreement[],”
Dayhoff, Inc. v. H.J.Heinz Co., 86 F.3d 1287, 1293-97 (3d
Cir. 1996), which DePuy, Golden State,12 and Nordyke were
not. There is thus no presumption that Howmedica’s claims
against these three defendants should be litigated in New
law, specifically 28 U.S.C. § 1404(a)” and federal common
law interpreting that statute, “governs the District Court’s
decision whether to give effect to the parties’ forum-selection
clause and transfer the case.” Stewart Org., Inc. v. Ricoh
Corp., 487 U.S. 22, 32 (1988).
12
Although the Northern District of California held, in
the context of Golden State’s suit for a declaratory judgment
against Howmedica, that Golden State was closely related to
Howmedica’s employment agreements with the Sales
Representatives, that court’s conclusion is not binding here
for two reasons. First, issue preclusion is inapplicable
because the Northern District of California stayed Golden
State’s suit pending our disposition of this one, so the court’s
holding was not essential to any judgment. See B & B
Hardware, Inc. v. Hargis Indus., Inc., 135 S. Ct. 1293, 1303
(2015); Golden State Orthopaedics, Inc. v. Howmedica
Osteonics Corp., No. 14-3073, 2016 WL 4698931, at *1
(N.D. Cal. Sept. 8, 2016). Second, the Northern District of
California based its holding on Ninth Circuit case law we
explicitly rejected in Dayhoff. See Dayhoff, 86 F.3d at 1296;
cf. Golden State Orthopaedics, Inc. v. Howmedica Osteonics
Corp., No. 14-3073, 2014 WL 12691050, at *4-5 (N.D. Cal.
Oct. 31, 2014).
26
Jersey, and we will proceed to address Howmedica’s claims
against them at Step Two of the transfer inquiry.13
ii. Step Two: Private and Public Interests
Relevant to Non-Contracting Parties
We perform at Step Two an independent § 1404(a)
analysis of private and public interests relevant to DePuy,
13
While some courts have held that a non-signatory
may enforce or be bound by a forum-selection clause, even
those courts do not apply the “closely related parties” doctrine
if doing so would have been unforeseeable for the party
against whom the clause would be enforced. See, e.g., Magi
XXI, 714 F.3d at 717-20, 722-24; Lipcon v. Underwriters at
Lloyd’s London, 148 F.3d 1285, 1299 (11th Cir. 1998); Hugel
v. Corp. of Lloyd’s, 999 F.2d 206, 209 (7th Cir. 1993).
Hence, Howmedica’s “closely related parties” argument
would not prevail even under those courts’ case law, for
DePuy, Golden State, and Nordyke could not have foreseen
that the other Sales Representatives’ forum-selection clauses
could later be enforced against them. That is because there is
no evidence that DePuy or Golden State were aware of or
participated in the other Sales Representatives’ contractual
negotiations with Howmedica, Nordyke’s employment
agreement with Howmedica had its own (different)
forum-selection clause, and, even if Nordyke could have
known about the forum-selection clauses in the other Sales
Representatives’ employment agreements, that knowledge
would have rendered a New Jersey forum foreseeable only for
a dispute over another Sales Representative’s conduct, not for
a dispute over Nordyke’s own conduct.
27
Golden State, and Nordyke. Here, to the extent the District
Court discussed interests relevant to those three defendants,
we agree with the District Court’s analysis of private and
public interests. See Howmedica II, 2016 WL 8677214, at
*3-6. After all, the claims against these defendants arise from
their alleged actions in California; it is far easier for Nordyke,
who has fewer financial resources than Howmedica, to
litigate in California; surgeons and former Howmedica
employees who may serve as witnesses are located in
California; and trial would therefore be easier and less
expensive in California. See Jumara, 55 F.3d at 879-80.
Because our Step Two analysis weighs in favor of
transferring Howmedica’s claims against DePuy, Golden
State, and Nordyke to the Northern District of California, and
because that result is in conflict with the Step One
presumption that Howmedica’s claims against the remaining
defendants should proceed in New Jersey, we next assess
whether severance is warranted.
iii. Step Three: Threshold Issues Related to
Severance
At Step Three, we consider threshold issues such as
the presence of indispensable parties and defects in subject-
matter jurisdiction, personal jurisdiction, venue, or joinder, all
of which may direct our severance analysis. Here, we must
consider two such issues.
First, although Howmedica justified its decision to join
Golden State as a defendant by asserting Golden State is a
“necessary party,” Golden State, in fact, does not meet the
relevant criteria under Federal Rule of Civil Procedure 19(b).
To be an indispensable party under Federal Rule of Civil
28
Procedure Rule 19(b), a party must also be a “required” party
under Rule 19(a). That the parties are allegedly joint
tortfeasors or that the judgment might set “a persuasive
precedent” against the alleged required party is not sufficient.
Huber v. Taylor, 532 F.3d 237, 250 (3d Cir. 2008); see
Temple v. Synthes. Corp., 498 U.S. 5, 7 (1990); Lomando v.
United States, 667 F.3d 363, 384 (3d Cir. 2011). Yet that is
all we have here: Golden State is no more than an alleged
joint tortfeasor, and any judgment without Golden State’s
presence in this case would relate only to the other
defendants, would not have preclusive effect against Golden
State, see B & B Hardware, Inc. v. Hargis Indus., Inc., 135 S.
Ct. 1293, 1303 (2015), and at most would be “persuasive
precedent,” Huber, 532 F.3d at 250. Golden State, then, is
neither a “required” party under Rule 19(a) nor an
indispensable party under Rule 19(b), and it is permissible to
sever claims against this defendant. See Grupo Dataflux, 541
U.S. at 572-73.
Second, New Jersey’s lack of personal jurisdiction
over Golden State, which Howmedica has never challenged
except by means of its unsuccessful “closely related parties”
argument, requires dismissal or transfer of at least the claims
against Golden State. See Howmedica I, 2015 WL 1780941,
at *7-8 & n.11. Nothing in the record indicates that Golden
State deliberately engaged in “significant activities” within
New Jersey or created “continuing obligations” between itself
and New Jersey residents, and the absence of those
prerequisites means that Golden State lacks the
constitutionally required “minimum contacts” sufficient to
allow New Jersey to exercise personal jurisdiction. Burger
King Corp. v. Rudzewicz, 471 U.S. 462, 474-76 (1985).
Accordingly, the District of New Jersey cannot retain
29
jurisdiction over Howmedica’s claims against Golden State,
see Fed. R. Civ. P. 4(k), and at least those claims should be
transferred to the Northern District of California, where
personal jurisdiction over Golden State is proper.
The Step Three analysis, in sum, indicates that
Howmedica’s claims against Golden State may be severed
and, indeed, that dismissal or transfer of those claims to
another forum is mandatory.
iv. Step Four: Efficiency and
Non-Contracting Parties’ Private
Interests
To recap, the first three steps of our analysis present us
with three options: severance and transfer of only the claims
against Golden State; severance and transfer of other claims
in the case along with the claims against Golden State; or
transfer of the entire case, including the claims against
Freeman, Sarkisian, Smith, and Wyatt, who all agreed to New
Jersey forum-selection clauses. To select among these
options at Step Four, we are guided by considerations of
efficiency, the non-contracting parties’ private interests, and
Atlantic Marine’s directive that “courts should not . . . disrupt
the parties’ settled expectations” embodied in forum-selection
clauses except when other factors “overwhelmingly” weigh
against enforcing the clauses, 134 S. Ct. at 583.
The interests of efficiency clearly favor the severance
and transfer of Howmedica’s claims against DePuy along
with its claims against Golden State, because Howmedica
charges these two corporate defendants with the same
wrongdoing—aiding and abetting the breach of the duty of
loyalty, tortious interference with contract and with
30
prospective economic advantage, unfair competition, and
corporate raiding—and because “the same issues” should be
litigated in the same forum, Sunbelt Corp., 5 F.3d at 33-34.14
And to the extent such severance and transfer to California
create a risk of duplicative litigation if the claims against the
Sales Representatives are litigated in New Jersey, that risk
can be reduced or eliminated with “procedural
mechanisms . . . , such as common pre-trial procedures, video
depositions, stipulations, etc.,” which can “echo those used by
judges in cases managed pursuant to multidistrict litigation
statutes,” and which can encompass joint oral argument and
bellwether trials if necessary and appropriate. Rolls Royce,
775 F.3d at 681; see, e.g., Excentus Corp. v. Giant Eagle,
Inc., 2014 WL 923520, at *10-11 (W.D. Pa. Mar. 10, 2014).15
Although there may be some overlap in legal issues, we are
confident that each court can become “familiar[] . . . with the
applicable state law” (turning on the outcome of the courts’
14
For this reason, severance and transfer of only the
claims against Golden State would be inefficient and
inappropriate. Also inappropriate is severance and transfer of
the claims against Nordyke without transferring the claims
against the other Sales Representatives, as Howmedica
accuses Nordyke of the same misconduct as it does the other
Sales Representatives: breach of contract, breach of the duty
of loyalty, and unfair competition.
15
See generally Fed. Judicial Ctr., Manual for
Complex Litigation 227 (2004); Sean J. Griffith & Alexandra
D. Lahav, The Market for Preclusion in Merger Litigation, 66
Vand. L. Rev. 1053, 1134-35 (2013); Alexandra D. Lahav,
Bellwether Trials, 76 Geo. Wash. L. Rev. 576, 581 (2008).
31
choice-of-law analyses and whether they choose to apply the
choice-of-law provisions in the Sales Representatives’
employment agreements). Jumara, 55 F.3d at 879-80.
Moreover, notwithstanding Howmedica’s purported concerns
about “court congestion,” the caseloads in both courts are
comparable. Jumara, 55 F.3d at 879-80.16
“The enforceability of the judgment” and the “public
policies of the fora,” Jumara, 55 F.3d at 879, likewise support
both courts’ jurisdiction, for “it is unlikely that there would be
any significant difference in the difficulty of enforcing a
judgment rendered by one federal forum or the other,”
1 Moore, supra, § 7.81[3][b], and both California and New
Jersey lack any public policy against enforcing
forum-selection clauses, see Nedlloyd Lines B.V. v. Superior
Court, 834 P.2d 1148, 1150 (Cal. 1992) (en banc); McMahon
v. City of Newark, 951 A.2d 185, 187, 196-97 (N.J. 2008).17
To the extent the “local interest in deciding local
controversies at home” weighs against retaining in New
Jersey any claims about the Sales Representatives, who all
16
See Admin. Office of the U.S. Courts, United States
District Courts—National Judicial Caseload Profile 15, 66
(2016), http://www.uscourts.gov/sites/default/files/data_
tables/fcms_na_distprofile1231.2016.pdf.
17
To be sure, California has a public policy against
non-compete agreements. See Advanced Bionics Corp. v.
Medtronic, Inc., 59 P.3d 231, 236 (Cal. 2002). But that
public policy is distinct from any public policy regarding
where a non-compete dispute should be litigated, which
California does not have. See id. at 237.
32
live in California and worked for Howmedica in California,
Jumara, 55 F.3d at 879, California’s interest is offset by New
Jersey’s countervailing interest in deciding claims concerning
the employment agreements at issue, which Howmedica, a
New Jersey corporation, prepared and executed in New
Jersey, see generally Peregrine Myanmar Ltd. v. Segal, 89
F.3d 41, 47 (2d Cir. 1996).
The non-contracting parties’ private interests also are
not unduly prejudiced by severance and transfer of only the
claims against the two corporate defendants. Golden State is
a California corporation, Howmedica’s claims against DePuy
and Golden State pertain to these entities’ California
operations, and, as a matter of law, the two corporate
defendants will not be subject to issue preclusion. See B & B
Hardware, 135 S. Ct. at 1303; supra Part II.C.3.b.iii. While
retaining the claims against Nordyke in New Jersey cuts
against Nordyke’s private interests given his relatively
meager financial resources, see supra Part II.C.3.b.ii,
Nordyke himself agreed to a forum-selection clause that
designated a similarly inconvenient Michigan forum, and,
particularly given that Nordyke is represented by the same
counsel as the other Sales Representatives, the minimal
additional burden to him of litigating in New Jersey does not
“overwhelmingly” outweigh the interests in upholding the
other parties’ “settled expectations,” Atl. Marine, 134 S. Ct. at
583, and the efficiency of retaining Howmedica’s identical
claims against all five Sales Representatives in one court, see
supra note 12.
III. Conclusion
The correct outcome of our four-step transfer inquiry
in this case is clear, as severance and transfer of only the
33
claims against DePuy and Golden State satisfies Atlantic
Marine’s prescription that forum-selection clauses should be
enforced “[i]n all but the most unusual cases,” Atl. Marine,
134 S. Ct. at 583, accounts for private and public interests
relevant to non-contracting parties, see Jumara, 55 F.3d at
879-80, resolves the personal jurisdiction defect as to Golden
State in New Jersey, see Howmedica I, 2015 WL 1780941, at
*7-8 & n.11, and promotes efficient resolution of
Howmedica’s claims without unduly prejudicing
non-contracting parties’ private interests, see supra Part
II.C.3.b.iv. This outcome is therefore optimal for “the
convenience of the parties and witnesses” and “in the interest
of justice.” 28 U.S.C. § 1404(a). Because the District Court
clearly and indisputably erred in transferring this case in its
entirety to the Northern District of California, we will issue a
writ of mandamus vacating the transfer order and instructing
the District Court on remand to sever Howmedica’s claims
against DePuy and Golden State under Federal Rule of Civil
Procedure 21, to transfer those claims to the Northern District
of California under 28 U.S.C. § 1404(a), and to retain
jurisdiction over Howmedica’s claims against the five Sales
Representatives.
34