Stewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22 (1988)

Stewart Organization, Inc. v. Ricoh Corp.

No. 86-1908

Argued February 29, 1988
Decided June 20, 1988
487 U.S. 22

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR

THE ELEVENTH CIRCUIT

Syllabus

Petitioner company, an Alabama corporation, entered into a dealership agreement to market copier products of respondent, a nationwide manufacturer with its principal place of business in New Jersey. The agreement contained a clause providing that any dispute arising out of the contract could be brought only in a court located in Manhattan, in New York City. Petitioner company (and the individual stockholder petitioners) filed a diversity action in the United States District Court for the Northern District of Alabama, alleging, inter alia, that respondent had breached the agreement. Relying on the contractual forum-selection clause, respondent filed a motion seeking, inter alia, the transfer of the case to the Southern District of New York under 28 U.S.C. § 1404(a), which provides:

For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought.

The court denied the motion, holding that Alabama law controlled and that Alabama looks unfavorably upon contractual forum-selection clauses. On interlocutory appeal, the Court of Appeals reversed and remanded with instructions to transfer the case, holding that venue is a matter of federal procedure and that, under the standards articulated in the admiralty case of The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, the forum-selection clause was in all respects enforceable generally as a matter of federal law.

Held:

1. When a federal law sought to be applied in a diversity action is a congressional statute, the chief question for the district court’s determination is whether the statute is sufficiently broad to control the issue before the court. If so, the court then must inquire whether the statute represents a valid exercise of Congress’ authority under the Constitution. If Congress intended to reach the issue before the court, and if it enacted its intention into law in a manner that abides with the Constitution, that is the end of the matter; federal courts are bound to apply laws enacted by Congress with respect to matters over which it has legislative power. Pp. 25-27.

2. In this case, federal law, specifically § 1404(a), governs the decision whether to give effect to the parties’ forum-selection clause and to transfer the case to a court in Manhattan. Pp. 28-32.

(a) Although the Court of Appeals properly noted that the Bremen case -- which held that federal courts sitting in admiralty generally should enforce forum-selection clauses absent a showing that to do so would be unreasonable and unjust, or that the clause was invalid for such reasons as fraud or overreaching -- may prove "instructive" in resolving the parties’ dispute, the court erred in its articulation of the relevant inquiry as being whether the forum-selection clause in this case was unenforceable under the Bremen standards. The first question for consideration should have been whether § 1404(a) itself controls respondent’s request to give effect to the contractual choice of venue and to transfer the case to a Manhattan court. Pp. 28-29.

(b) Section 1404(a) is sufficiently broad to control the forum-selection issue. The statute is intended to place discretion in the district courts to adjudicate motions for transfer according to an individualized, case-by-case consideration of convenience and fairness. A motion to transfer under § 1404(a) calls on the district court to weigh in the balance a number of case-specific factors, and the presence of a forum-selection clause will figure centrally in the calculus. A forum-selection clause should receive neither dispositive consideration nor no consideration, but rather the consideration for which Congress provided in § 1404(a). Section 1404(a) must be applied, since it represents a valid exercise of Congress’ authority under Article III as augmented by the Necessary and Proper Clause. In this case, the District Court should determine in the first instance the appropriate effect under federal law of the parties’ forum-selection clause on respondent’s § 1404(a) motion. Pp. 29-32.

810 F.2d 1066, affirmed and remanded.

MARSHALL, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and BRENNAN, WHITE, BLACKMUN, STEVENS, O’CONNOR, and KENNEDY, JJ., joined. KENNEDY, J., filed a concurring opinion, in which O’CONNOR, J., joined, post, p. 33. SCALIA, J., filed a dissenting opinion, post, p. 33.