Terra Intl. Corp. v. MS Chemical Corp. ( 1997 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
96-2140NISC
Terra International, Inc., A *
Delaware Corporation,, *
* Appeal from the United
Appellant, * States
* District Court for the
v. * Northern District of Iowa
*
Mississippi Chemical *
Corporation, A Mississippi *
Corporation,, *
*
Appellee.
On the court's own motion, the judgment of May 16, 1997,
is vacated, and the opinion filed on that date is withdrawn.
The attached opinion is filed in its stead.
July 11, 1997
Order entered at the direction of the Court:
Clerk, U.S. Court of Appeals, Eighth Circuit.
United States Court of Appeals
FOR THE EIGHTH CIRCUIT
_____________
No. 96-2140
_____________
TERRA INTERNATIONAL, INC., *
A Delaware Corporation, *
*
Plaintiff - Appellant, *
* Appeal from the United States
v. * District Court for the
* Northern District of Iowa.
MISSISSIPPI CHEMICAL *
CORPORATION, *
A Mississippi Corporation, *
*
Defendant - Appellee. *
_____________
Submitted: September 9, 1996
Filed: July 11, 1997
_____________
Before WOLLMAN, Circuit Judge, HENLEY, Senior Circuit Judge, and
HANSEN, Circuit Judge.
_____________
HANSEN, Circuit Judge.
Terra International, Inc., (Terra) appeals the district court's1 order granting
Mississippi Chemical Corporation's (MCC) motion to transfer this lawsuit to the United
States District Court for the Southern District of Mississippi and denying Terra's
motion to enjoin permanently MCC from proceeding in its own lawsuit subsequently
filed in the Mississippi court. Terra Int'l, Inc. v. Mississippi Chem. Corp., 922 F. Supp.
1334 (N.D. Iowa 1996). Terra filed its complaint in the Northern District of Iowa,
alleging that MCC's design of its ammonium nitrate neutralizer technology, which MCC
licensed to Terra, was defective and caused an explosion at Terra's plant. Relying
primarily on the forum selection clause contained in the license agreement, the district
court granted MCC's motion to transfer under 28 U.S.C. § 1404(a) (1994). For the
reasons outlined below, we affirm.
I.
Terra International, Inc., manufactures and distributes a variety of agricultural
products including nitrogen-based fertilizers. Terra's principal place of business is in
Sioux City, Iowa. Mississippi Chemical Corporation also engages in the production
of fertilizers and is the largest manufacturer of ammonium nitrate fertilizer in the United
States. MCC's principal place of business is in Yazoo City, Mississippi.
In the late 1970s, MCC developed an improved ammonium neutralization
process and designed a new version of an apparatus called a "neutralizer" which,
working together, reduced the ammonium nitrate emissions into the environment and
increased the efficiency of the ammonium nitrate manufacturing process. MCC decided
to make its neutralizer technology available to the rest of the fertilizer industry by
licensing its technology to other fertilizer producers. On April 28, 1980, MCC and
Terra entered into a license agreement under which Terra agreed to pay MCC $40,000
1
The Honorable Mark W. Bennett, United States District Judge for the Northern
District of Iowa.
2
to use MCC's neutralizer technology at Terra's manufacturing facility in Port Neal,
Iowa.2 The license agreement required MCC to provide Terra with the blueprints to
its neutralizer, to review Terra's proposed design of a neutralizer, and to provide
training and start-up engineering assistance to Terra.3
One section of the license agreement, entitled "Laws and Suits," contained a
forum selection clause. The entire paragraph reads as follows:
This agreement will be construed in accordance with the laws of the State
of Mississippi. Any dispute or disputes arising between the parties hereunder,
insofar as the same cannot be settled by friendly agreement, will be determined
in the District Court of the United States for the Southern District of Mississippi
and, for the purpose of instituting such suit, [Terra] hereby consents to service
in connection therewith through the Secretary of State for the State of
Mississippi.
(Appellant's App. at A261 (emphasis added).) The emphasized portion of the above
paragraph is the forum selection clause at issue in this case, the meaning of which is
highly contested.
On December 13, 1994, 14 years after Terra and MCC entered into the license
agreement, an explosion occurred at Terra's Port Neal factory. The explosion killed 4
people, injured 18 others, and leveled the facility's ammonium nitrate plant.
On August 31, 1995, Terra filed a lawsuit against MCC in the United States
District Court for the Northern District of Iowa, Western Division, located in Sioux
2
MCC's technology is currently used at 22 other ammonium nitrate
manufacturing facilities.
3
MCC does not actually manufacture neutralizers but merely licenses its
neutralizer design to its licensees.
3
City. In its complaint, Terra limited its cause of action to two tort claims. The first
count alleged that MCC negligently designed its neutralizer technology and failed to
train and properly warn Terra employees regarding the technology. The second count
asserted that MCC's neutralizer technology was unreasonably dangerous and defective
and thus alleged that MCC should be held strictly liable for the damages caused by the
explosion. Terra did not assert any parallel claims for breach of contract. On the same
day, a few hours later, MCC filed a lawsuit against Terra in the United States District
Court for the Southern District of Mississippi, located in Jackson. In its complaint,
MCC sought a declaratory judgment that it was not liable in any way for the explosion
at Terra's Port Neal facility and asserted a defamation claim against Terra.4
In December 1995, MCC filed a motion to transfer the Iowa case to Mississippi
pursuant to 28 U.S.C. § 1404(a), while Terra filed a motion for a permanent injunction
asking the federal court in Iowa to prevent MCC from prosecuting MCC's lawsuit in
Mississippi.5 After considering many of the relevant factors under section 1404(a), the
Iowa court determined that neither the "convenience" factors nor the "interest of
justice" factors decidedly weighed in favor of either Iowa or Mississippi. Terra Int'l
Inc., 922 F. Supp. at 1356-64. The court then analyzed the forum selection clause
contained in the 1980 license agreement and concluded that the clause unambiguously
required Terra's tort claims to be litigated in the Mississippi federal court. Id. at 1382.
4
MCC based its defamation claim on several public statements made by Terra
officials in which they asserted that MCC's defectively designed neutralizer caused the
explosion.
5
Terra also filed its own motion to transfer in the federal district court in
Mississippi, asking the Mississippi court to transfer MCC's lawsuit to Iowa. In an
unreported decision, the federal magistrate judge denied Terra's motion to transfer,
finding that the forum selection clause unambiguously required these disputes to be
litigated in Mississippi. Mississippi Chem. Corp. v. Terra Int'l Inc., 1996 WL 293764,
at *7 (S.D. Miss. 1996). The magistrate judge's decision was affirmed by the district
judge on appeal.
4
The court thus granted MCC's motion to transfer Terra's lawsuit to Mississippi and
correspondingly denied Terra's motion for a permanent injunction. Terra challenges the
conclusions of the Iowa federal court.
II.
Section 1404(a) governs the ability of a federal district court to transfer a case
to another district. This provision reads: "For the convenience of the 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." 28 U.S.C. § 1404(a)
(1994). The statutory language reveals three general categories of factors that courts
must consider when deciding a motion to transfer: (1) the convenience of the parties,
(2) the convenience of the witnesses, and (3) the interests of justice. Id. Courts have
not, however, limited a district court's evaluation of a transfer motion to these
enumerated factors. Instead, courts have recognized that such determinations require
a case-by-case evaluation of the particular circumstances at hand and a consideration
of all relevant factors. See Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29 (1988);
Jumara v. State Farm Ins. Co., 55 F.3d 873, 879 (3d Cir. 1995); 15 Charles Alan
Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure § 3847,
at 370 (2d ed. 1986). As the Supreme Court explained, "[a] motion to transfer under
§ 1404(a) thus calls on the district court to weigh in the balance a number of case-
specific factors." Stewart, 487 U.S. at 29. Although there is no exhaustive list of
specific factors to consider, courts have determined that a valid and applicable forum
selection clause in a contract is "a significant factor that figures centrally in the district
court's calculus." Id. On appeal, Terra argues that the district court incorrectly found
the forum selection clause applicable to its tort claims and improperly weighed the
other section 1404(a) factors.
Although the parties agree that we review a district court's decision regarding a
section 1404(a) transfer motion for an abuse of discretion, see Stewart, 487 U.S. at 29;
5
Everett v. St. Ansgar Hosp., 974 F.2d 77, 79 (8th Cir. 1992), they disagree over the
appropriate standard of review regarding a district court's construction of a forum
selection clause. Terra argues that we should review the court's interpretation of the
forum selection clause de novo, because such an interpretation is equivalent to the
construction of a contract which is a legal issue. MCC, however, asserts that in
weighing the relevant section 1404(a) factors, the district court was not required to
interpret the specific meaning of the forum selection clause but merely recognize its
presence and factor it into the equation. Consequently, MCC believes that the abuse
of discretion standard, which applies to the district court's overall balancing of various
factors, also applies to the court's specific treatment of the forum selection clause.
In Sun World Lines v. March Shipping Corp., 801 F.2d 1066, 1068 n.3 (8th Cir.
1986), this court, following the Ninth Circuit's approach, reviewed for an abuse of
discretion a district court's "enforcement" of a forum selection clause. The dispute in
Sun World, however, concerned the validity of the forum selection clause. Id. at 1067.
In the case at hand, neither party challenges the validity of the forum selection clause;
rather, they contest the specific meaning of the language used in the forum selection
clause, which was not an issue in Sun World. The Ninth Circuit itself has refined its
approach and has explained that it employs de novo review when a district court is
required to interpret the language of a forum selection clause. Northern. Cal. Dist.
Council of Laborers v. Pittsburg-Des Moines Steel Co., 69 F.3d 1034, 1036 n.3 (9th
Cir. 1995).
Here, interpreting the language of the forum selection clause is necessary to the
section 1404(a) transfer analysis. Before a district court can even consider a forum
selection clause in its transfer analysis, it first must decide whether the clause applies
to the type of claims asserted in the lawsuit. Following the Ninth Circuit's approach,
as well as our own standard of review in cases of contract interpretation, see United
States v. Brekke, 97 F.3d 1043, 1049 (8th Cir. 1996) (applying de novo review to
district court's construction of a contract), we conclude that de novo review is the
6
appropriate standard for reviewing a district court's interpretation of the specific terms
contained in a forum selection clause. See Jumara, 55 F.3d at 880-81; Hugel v.
Corporation of Lloyd's, 999 F.2d 206, 207 (7th Cir. 1993); Milk ``N' More, Inc. v.
Beavert, 963 F.2d 1342, 1345 (10th Cir. 1992).
A.
Terra claims that the forum selection clause in the license agreement does not
apply to its tort claims and therefore should not receive any consideration in the transfer
analysis under section 1404(a). To reiterate, the forum selection clause provides, "Any
dispute or disputes arising between the parties hereunder, insofar as the same cannot
be settled by friendly agreement, will be determined in the District Court of the United
States for the Southern District of Mississippi . . . ." (Appellant's App. at A261.) Terra
contends that the word "hereunder" modifies the word "arising" instead of the word
"parties," indicating that the clause applies only to claims arising under the license
agreement. Terra asserts that its tort claims do not arise under the agreement but are
independent of it. The district court rejected Terra's interpretation and emphasized that
the placement of "hereunder" directly after "parties" unambiguously indicates that
"hereunder" modifies "parties." Terra, 922 F. Supp. at 1376. Thus, the court
concluded that the forum selection clause unambiguously applies to any disputes arising
between the parties.6 Id. at 1375-76.
6
Recognizing that its interpretation of the forum selection clause was very broad,
the district court attempted to confine the breadth of the clause not by its own terms,
but by policy considerations that indicate that it would be unreasonable to apply a
broad forum selection clause contained in a contract to a lawsuit that is completely
unrelated to the subject of the contract. Consequently, the district court imposed the
requirement that the claims at issue between the parties must be sufficiently related to
the contract in order for the forum selection clause to apply. See Terra, 922 F. Supp.
at 1376.
7
After analyzing the language of the clause and reviewing the arguments of the
parties, we conclude that the forum selection clause is reasonably susceptible to both
interpretations. The placement of "hereunder" directly after the word "parties" could
reasonably suggest that it modifies "parties," which would give the clause a very broad
scope covering any disputes arising between the parties. We also find Terra's
interpretation reasonable, because we are persuaded that, at least in this contractual
context, "hereunder" typically signifies "under the agreement," while "hereto" most
often refers to the parties to the agreement. Thus, we find that the clause is ambiguous.
See Wilson v. Prudential Ins. Co. Am., 97 F.3d 1010, 1013 (8th Cir. 1996); Service
Unlimited, Inc. v. Elder, 542 N.W.2d 855, 857 (Iowa Ct. App. 1995); Texaco, Inc. v.
Kennedy, 271 So. 2d 450, 452 (Miss. 1973).
Terra urges us to construe the ambiguous clause against its drafter--MCC. We
decline to apply the doctrine of contra proferentem to this case due to the relatively
equal bargaining strengths of both parties and the fact that Terra was represented by
sophisticated legal counsel during the formation of the license agreement. See Data
Gen. Corp. v. Grumman Sys. Support Corp., 36 F.3d 1147, 1166 n.33 (1st Cir. 1994).
We are convinced, however, that Terra's more narrow interpretation of the forum
selection clause (i.e., "hereunder" modifies "arising" not "parties") is more compelling.
First, construing the license agreement as a whole, see, e.g., Krupnick v. Ray, 61 F.3d
662, 664 (8th Cir. 1995); Lange v. Lange, 520 N.W.2d 113, 119 (Iowa 1994); Brown
v. Hartford Ins. Co., 606 So. 2d 122, 126 (Miss. 1992), the parties uniformly use the
word "hereunder" in several other portions of the license agreement to mean "under this
Agreement," while they use the word "hereto" to refer to the parties to the Agreement.7
7
See, e.g., License Agreement, ¶ 10 ("[n]either party hereto will assign any of its
rights or obligations hereunder to any person, firm, corporation or organization not a
party to this Agreement without the prior written consent of the other party.")
(Appellant's App. at A261 (emphasis added)); License Agreement, ¶ 12(b) ("The
headings contained in this Agreement are used solely for convenience and do not
constitute a part of the Agreement between the parties hereto.") (Id. (emphasis added)).
8
Second, the forum selection clauses contained in MCC's license agreements with other
parties indicate that MCC knew how to draft an explicitly broad clause when it wanted
to but did not do so here.8 One such clause reads, "Should any dispute or difference
of any kind whatsoever arise between MCC and [redacted party] in connection with
or arising out of this Agreement. . . ." (Appellant's App. at A264.) Moreover, these
other clauses were drafted many years before this litigation arose which indicates that
MCC was aware of the significance of the particular wording of these clauses at the
time it drafted them. Consequently, we believe that the parties intended the forum
selection clause in this case to apply only to disputes arising under the license
agreement. This conclusion, however, only leads us to our next question-- whether
Terra's tort claims actually arise under the license agreement.
"Whether tort claims are to be governed by forum selection provisions depends
upon the intention of the parties reflected in the wording of particular clauses and the
facts of each case." Berrett v. Life Ins. Co. of the Southwest, 623 F. Supp. 946, 948-49
(D. Utah 1985). An analysis of the specific language of the forum selection clause in
this case does not clearly indicate whether the clause applies to Terra's tort claims. As
we have construed it, the clause requires any disputes arising under the license
agreement to be determined in Mississippi. Terra asserts that its negligence and strict
liability claims do not arise under the agreement because they are based on MCC's
breach of common law tort duties that are independent of any duty arising from the
license agreement, and they do not require a particular construction of the agreement's
terms. MCC, on the other hand, contends that Terra's tort claims target the specific
subject matter of the license agreement, the neutralizer technology, and explains that
without the license agreement, Terra never would have received the technology.
8
Having found the clause ambiguous, we appropriately consider extrinsic
evidence to interpret this contract provision. See Marren v. Mutual Life Ins. Co. of
New York, 84 F.3d 1068, 1070 (8th Cir. 1996); Uhl v. City of Sioux City, 490 N.W.2d
69, 73 (Iowa Ct. App. 1992); Farragut v. Massey, 612 So. 2d 325, 329 (Miss. 1992).
9
Although the cases deciding whether very similarly-worded forum selection
clauses cover tort claims have reached different conclusions, the majority of these cases
suggests that such clauses do apply to tort claims. In Banco Popular de Puerto Rico
v. Airborne Group PLC, 882 F. Supp. 1212 (D.P.R. 1995), the parties entered into a
sales agreement for the sale of a blimp. The agreement contained a forum selection
clause which provided that "disputes hereunder or as to the construction of this
Agreement shall be resolved in the Courts of England." Id. at 1213. The court
determined that, in addition to his breach of contract claims, this clause encompassed
all of the plaintiff's tort claims which included claims for negligent manufacture and
maintenance of the blimp. Id. at 1214, 1217. Additionally, another court determined
that a forum selection provision which read, "In the event of any litigation commenced
by either party hereunder, such action shall be commenced in New York," covered tort
claims based on fraud and deceit. Picken v. Minuteman Press Int'l, Inc., 854 F. Supp.
909 (N.D. Ga. 1993). In discussing the clause, which is remarkably similar to the one
presently at issue, the court explained that "Reading the word ``hereunder' to apply only
to a pure breach of contract claim between the parties would be unduly crabbed and
narrow. ``Hereunder' refers to the relations that have arisen as a result of this contract."
Id. at 911; see also, Warnaco Inc. v. VF Corp., 844 F. Supp. 940, 947-49 (S.D.N.Y.
1994) (finding tort claims covered by forum selection clause reading, "Any dispute or
issue arising hereunder . . . ."); Nat'l Micrographics Sys., Inc. v. Canon U.S.A., Inc.,
825 F. Supp. 671, 677-78 (D.N.J. 1993) (finding forum selection provision reading
"any and all causes of action hereunder by and between the parties hereto" covered
claims for tortious interference); but see, Hoffman v. Minuteman Press Int'l. Inc., 747
F. Supp. 552, 559 (W.D. Mo. 1990) (holding that tort claim for fraudulent inducement
was not covered by forum selection clause reading "any litigation commenced by either
party hereunder"); Berrett, 623 F. Supp. at 947, 949 (finding that forum selection clause
which read "parties agree that any action at law or in equity hereunder" did not apply
to several business-related tort claims). These cases indicate that forum selection
clauses referring to claims "hereunder" or "under the agreement" can be broad enough
to cover contract-related tort claims.
10
Although determining the scope of a forum selection clause is a rather case-
specific exercise, several courts have offered further guidance on this issue and have
articulated variously phrased general rules regarding the circumstances in which a
forum selection clause will apply to tort claims. The Third Circuit has indicated that
where tort claims "ultimately depend on the existence of a contractual relationship"
between the parties, such claims are covered by a contractually-based forum selection
clause. Coastal Steel Corp. v. Tilghman Wheelabrator Ltd., 709 F.2d 190, 203 (3d
Cir.), cert. denied, 464 U.S. 938 (1983). In Manetti-Farrow, Inc. v. Gucci America,
Inc., 858 F.2d 509, 514 (9th Cir. 1988), the Ninth Circuit stated that "[w]hether a forum
selection clause applies to tort claims depends on whether resolution of the claims
relates to interpretation of the contract." The First Circuit has phrased its test slightly
differently, explaining that "contract-related tort claims involving the same operative
facts as a parallel claim for breach of contract should be heard in the forum selected by
the contracting parties." Lambert v. Kysar, 983 F.2d 1110, 1121-22 (1st Cir. 1993).
The district court in the present case referred to these cases, but relied chiefly on this
court's decision in Farmland Indus., Inc. v. Frazier-Parrott Commodities, Inc., 806 F.2d
848, 852 (8th Cir. 1986), abrogated on other grounds by Lauro Lines v. Chasser et al.,
490 U.S. 495 (1989), for the general proposition that forum selection clauses cover tort
claims that are directly or indirectly related to the parties' contractual relationship. See
Terra, 922 F. Supp. at 1379-80. While the three previous cases do speak in general
terms, our review of the Farmland decision leads us to conclude that the case does not
stand for such a general proposition. Instead, the decision is limited to its facts,
because the "directly" or "indirectly" language was contained in the specific forum
selection clause at issue in that case. See Farmland, 806 F.2d at 849, 852.
Consequently, our consideration is limited to the first three generally applicable tests.
The first two guiding principles are not very instructive when applied to the facts
of this case. At first glance it appears that Terra's tort claims would not be covered by
the forum selection clause under the Ninth Circuit's test because the resolution of these
products liability claims does not seem to relate to or require the interpretation of the
11
license agreement. Nevertheless, while these tort claims do not center around a
disagreement over the specific terms of the license agreement, one could argue that
they "relate" to the agreement's interpretation because the tort claims directly involve
the entire subject matter of the license agreement. The Third Circuit's rule is also
inconclusive in this case. MCC asserts that Terra's tort claims do ultimately depend on
the existence of a contractual relationship because without the license agreement, MCC
would not have provided Terra with its neutralizer technology. Terra, however, argues
forcefully that its tort claims are based on MCC's alleged breach of its common law tort
duties which are independent of the contract.
The First Circuit's approach is more revealing in this case, and we believe that
it merits application to the circumstances before us. We think it is clear that Terra's tort
claims involve the same operative facts as would a parallel claim for breach of contract.
Admittedly, Terra did not raise any claims for breach of contract in its complaint.
Strategic or artfully drawn pleadings, however, will not work to circumvent an
otherwise applicable forum selection clause. See Lambert, 983 F.2d at 1121; Coastal
Steel, 709 F.2d at 203. Although we recognize that Terra's claims are alleged as tort
claims, Terra plainly could have asserted a parallel claim for breach of contract in the
same complaint. The fact that MCC's technology allegedly caused an explosion that
actively inflicted damage does not transform Terra's cause of action into one based
exclusively in tort. The same exact facts surrounding Terra's tort claims would also
give rise to a breach of contract claim. Therefore, according to the rationale of the First
Circuit's rule in Lambert, we believe that the forum selection clause applies to Terra's
tort claims.
Several other considerations also persuade us that the forum selection clause
covers Terra's tort claims. After finalizing the license agreement, we believe that both
parties could have anticipated that tort claims such as Terra now brings would be
litigated in Mississippi. Paragraph 2(b) of the license agreement provides that MCC
will reimburse Terra for costs or damages resulting from "any defect in the design of
12
[Terra's] neutralizer . . . which can be shown to result from errors in the information
contained in the Design Manual." (Appellant's App. at A255.) Although Terra
contends that this provision is very limited in scope, it expressly envisions that future
claims of defective design may arise between the parties. Moreover, Terra's own
complaint repeatedly refers to the specific promises that MCC made under the license
agreement. (Id. at A18.) These facts support our conclusion that Terra's tort claims
arise under the license agreement, and therefore, the forum selection clause applies to
Terra's claims.9
B.
Our conclusion that the scope of the forum selection clause covers Terra's tort
claims does not end our analysis, however. As mentioned earlier, the significance of
the forum selection clause in this case arises in the context of a motion to transfer under
section 1404(a). The fact that we have found the clause applicable merely allows us
to consider it as one factor, albeit a very important one, in the overall transfer analysis.
Terra posits the alternative argument that even if the forum selection clause applies, the
other relevant factors, especially the convenience of the witnesses, weigh decidedly in
favor of the Iowa forum and sufficiently outweigh the significance of the forum
selection clause. Terra argues that the district court abused its discretion in evaluating
these additional factors and in concluding that they do not weigh in favor of either Iowa
or Mississippi, thus giving the forum selection clause dispositive effect in this case.
9
Our references to portions of the License Agreement that refer to possible
design defects merely bolster our belief that the forum selection clause applies to
Terra's common law tort claims. We express no views regarding the applicability of
any other provision (including any provision for the limitation of liability or
damages) of the License Agreement to Terra's tort claims.
13
Terra alleges that the district court abused its discretion in conducting the general
section 1404(a) transfer analysis. Initially, Terra argues that the district court
improperly shifted the burden of persuasion from MCC to Terra. In general, federal
courts give considerable deference to a plaintiff's choice of forum and thus the party
seeking a transfer under section 1404(a) typically bears the burden of proving that a
transfer is warranted. See Jumara, 55 F.3d at 879; Scheidt v. Klein, 956 F.2d 963, 965
(10th Cir. 1992). Some courts, however, have held that the existence of a forum
selection clause that dictates that a lawsuit should be transferred to another court shifts
the burden to the party opposing the transfer motion. See Jumara, 55 F.3d at 880; In
Re Ricoh Corp., 870 F.2d 570, 573 (11th Cir. 1989).10 Terra disagrees with the
holdings in these cases and alleges that the district court abused its discretion by
shifting the burden to Terra. The district court did in fact believe that the burden was
on Terra to demonstrate why the forum selection clause should not be enforced. Terra,
922 F. Supp. at 1370. Nevertheless, the district court also stated that "even if the
burden remained with MCC, MCC met that burden." Id. at 1382 n.33. We agree with
the district court's conclusion that MCC fulfilled any potential burden it had to prove
that a transfer was warranted by establishing that the other section 1404(a) factors
(discussed below) did not overcome the significance of the forum selection clause.
Because we agree with the district court's alternative conclusion that MCC fulfilled its
potential burden, we decline to rule on the issue of whether a forum selection clause
shifts the burden of proof to the party resisting the clause's enforcement and merely
conclude that the district court did not abuse its discretion on this issue.
10
In The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10 (1971), the Supreme
Court also suggests that the burden shifts to the party resisting the application of a
forum selection clause to demonstrate that enforcement of the clause would be
unreasonable. The breadth of this holding, however, is unclear due to the fact that the
Court subsequently states that "this is the correct doctrine to be followed by federal
district courts sitting in admiralty." Id.
14
Terra next contends that the district court improperly analyzed the section
1404(a) factors by focusing on whether the inconvenience of litigating in Mississippi
could be mitigated instead of determining, on balance, which forum would be the most
convenient. Terra primarily challenges the district court's conclusion that the other
relevant factors did not weigh decidedly in favor of the Iowa forum. After reviewing
the district court's reasoning, we find that the district court did not abuse its discretion
in weighing the factors relevant to a motion to transfer under section 1404(a).
As mentioned earlier, a transfer motion requires the court to consider the
convenience of the parties, the convenience of the witnesses, the interests of justice,
and any other relevant factors when comparing alternative venues. See 28 U.S.C.
§ 1404(a); 15 Wright, Miller, and Cooper, supra, § 3847. A review of the district
court's opinion reveals that the court meticulously analyzed the numerous criteria that
courts traditionally consider when deciding a motion to transfer. Under the general
category titled "Balance of Convenience" the district court considered (1) the
convenience of the parties, (2) the convenience of the witnesses--including the
willingness of witnesses to appear, the ability to subpoena witnesses, and the adequacy
of deposition testimony, (3) the accessibility to records and documents, (4) the location
where the conduct complained of occurred, and (5) the applicability of each forum
state's substantive law. Terra, 922 F. Supp. at 1357-61. Under the category titled
"Interest of Justice" the court also considered (1) judicial economy, (2) the plaintiff's
choice of forum, (3) the comparative costs to the parties of litigating in each forum, (4)
each party's ability to enforce a judgment, (5) obstacles to a fair trial, (6) conflict of law
issues, and (7) the advantages of having a local court determine questions of local law.
Id. at 1361-63. These considerations parallel the factors that courts typically analyze
under section 1404(a). See, e.g., Jumara, 55 F.3d at 879-80; Chrysler Credit Corp. v.
County Chrysler, Inc., 928 F.2d 1509, 1516 (10th Cir. 1991) (quoting Texas Gulf
Sulphur Co. v. Ritter, 371 F.2d 145, 147 (10th Cir. 1967)).
15
Although Terra concedes that the district court considered the appropriate
factors, Terra focuses its attack primarily on the district court's analysis regarding the
convenience of the witnesses. Terra argues that this factor is significant and weighs
heavily in favor of the Iowa forum. Terra explains that a clear majority of nonparty
witnesses resides in Iowa, that Terra would not be able to compel these witnesses to
testify in Mississippi, and that videotaped depositions are a poor substitute for live
testimony. While these assertions may be true, we agree with the district court's
conclusion that "sheer numbers of witnesses will not decide which way the convenience
factor tips." Terra, 922 F. Supp. at 1360. Moreover, similar inconveniences would fall
on MCC if it were required to litigate in Iowa. "Merely shifting the inconvenience from
one side to the other, however, obviously is not a permissible justification for a change
of venue." Scheidt, 956 F.2d at 966.
To Terra's credit, we admittedly are quite skeptical of the district court's
conclusion that the balance of convenience was flat. Even if we tend to believe that the
convenience factors weigh in favor of an Iowa forum, however, we cannot say that they
so overwhelmingly favor Iowa as to outweigh the significance of the agreed-upon
forum selection clause and moreover, to such a degree that the district court abused its
discretion in concluding that a transfer was warranted.11 To reiterate, a forum selection
clause is "a significant factor that figures centrally in the district court's calculus" in a
motion to transfer, Stewart, 487 U.S. at 29, and section 1404(a) accords the district
court much discretion in deciding such motions. See id.; Norwood v. Kirkpatrick, 349
U.S. 29, 32 (1955). We have carefully reviewed the record, and while we may have
reached a different decision were we the district court, we conclude that the district
court did not abuse its discretion in deciding to transfer this lawsuit to Mississippi.
11
The district court in Mississippi reached this very conclusion. Unlike the Iowa
district court, the Mississippi court believed that the convenience factors favored Iowa
but determined that the forum selection clause outweighed these considerations. See
Mississippi Chem. Corp., 1996 WL 293764, *3.
16
III.
Consequently, we affirm the judgment of the district court.12 We deny as moot
MCC's motion to supplement the record on appeal.
A true copy.
Attest:
CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.
12
In the district court, Terra initially argued that because it filed its lawsuit in
Iowa a few hours before MCC filed its lawsuit in Mississippi, the first-filed rule
dictates that this litigation should proceed in Iowa. See United States Fire Ins. Co. v.
Goodyear Tire & Rubber Co., 920 F.2d 487, 488 (8th Cir. 1990) (first-filed rule gives
priority, for purposes of choosing among possible venues when parallel litigation has
been instituted in separate courts, to the party who first established jurisdiction). The
district court concluded that the first-filed rule does not "trump" the transfer analysis
and reasoned that when a transfer analysis under section 1404(a) dictates that a case
should be transferred, this constitutes a "compelling circumstance" that warrants an
abrogation from the first-filed rule. Terra, 922 F. Supp. 1350; see also Northwest
Airlines v. American Airlines, 989 F.2d 1002, 1006 (8th Cir. 1993) (explaining
"compelling circumstances" exception to first-filed rule). Because the parties did not
challenge this conclusion on appeal, we limit our review to the district court's section
1404(a) transfer analysis and need not further discuss the first-filed rule.
17