Court Offers Common Sense Standards for Challenging Plaintiffs' Choice of Venue

 

By Meredith L. Ainbinder

D

efendants often recoil from the venue where plaintiffs have chosen to sue them. Although complaints about venue often spring from a defendant’s sense that the jurisdiction is unfriendly to his case, the challenge is usually couched in terms of inconvenience—either to key witnesses or to one or more parties.

As a rule, overturning the plaintiff’s forum choice is a tough goal to reach. But the Federal Circuit has recently set  some guideposts for getting there.

On May 22, 2009, that court issued two opinions concerning requests to transfer cases out of the Eastern District of Texas. These cases, In re Genentech, Inc. and In re Volkswagen of America, Inc., showcase the factors that courts consider in ruling on a change-of-venue request. Prominent among these factors are the location of witnesses and the ever-present concern for judicial economy.

In the first case, the Federal Circuit granted Genentech and Biogen’s petition to transfer from Texas to California an action brought against them by pharmaceutical company Sanofi-Aventis.

The court explored both the private and public factors that figure in making venue determinations. The private factors deal with matters specific to the case, such as the location of witnesses and documents, and the court’s ability to compel witnesses to appear in the case.

The public factors address concerns such as the congestion of the courts involved; whether there is local interest in resolving the case; the law that will govern the case; and whether there are conflict of law issues.

The Federal Circuit faulted the district court’s decision to keep the action in Texas. While many of the witnesses were located in California and not one in Texas, the district court had reasoned that because Genentech and Biogen did not identify them as “key witnesses,” their California presence did not favor transfer.

The Federal Circuit rejected this analysis, because the injection of a “key witness” requirement improperly toughened the standard a party must satisfy for transfer.

The court held that the presence of these witnesses favored transfer, as did the fact that Genentech and Biogen are both California companies with many case documents stored in California as well.

By contrast, German company Sanofi had no witnesses or documents in Texas. Its European witnesses would be forced to travel a great distance regardless of whether the case was tried in Texas or California. The Federal Circuit criticized the district court for crediting the argument that transfer was improper because personal jurisdiction over Sanofi would not be appropriate in California; after all, Sanofi was the plaintiff, so this consideration was improper.

The court gave no weight to the fact that Genentech had previously sued another party in the Eastern District of Texas. This case, it said, was not about whether Genentech might sometimes find Texas an appropriate forum, but about what was appropriate for this action.

In applying the public factors, the Federal Circuit considered Sanofi’s argument that a faster trial was available in Texas to be speculative and not a decisive factor. Moreover, to the extent any jurisdiction had a local interest, it would have been California, home to both defendants. For the Federal Circuit,  the private and public factors thus required transfer.

In re Volkswagen came to a different result. In a much briefer opinion that referred to the reasoning of the companion case, the court upheld the district court’s refusal to transfer the case to the Eastern District of Michigan. Here, the court was much less focused on issues specific to the defendants challenging the venue ruling than it was when considering In re Genentech.

Because the plaintiff had sued 30 companies in Texas through two lawsuits concerning the same patents, the district court determined that it should preside over these common issues. The Federal Circuit upheld this decision and noted that this concern for judicial economy was a rational basis for retaining the case against Volkswagen and Audi in Texas. Otherwise, similar cases with much of the same evidence could potentially lead to inconsistent results in different jurisdictions.

The court did not give much attention to the location of the parties, witnesses, and evidence. Yet it is easy to believe that the court reasoned that, because Volkswagen and Audi are located throughout the United States and the world, witnesses will likely have to travel great distances regardless of the location of the venue.

In both cases, the Federal Circuit balanced competing considerations of the litigants, precious judicial resources, and the burden imposed on third parties who find themselves involved in others’ litigation. The Federal Circuit does not overturn the venue decisions of district courts lightly. 

Whether they are defendants seeking to move the case to a friendlier climate or plaintiffs hoping to continue litigation in their chosen locales, parties should be ready to show the location of their witnesses and documentary evidence. Indeed, plaintiffs should consider these factors when making strategic decisions about where to bring suit.