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Handling business litigation in one’s home forum, as opposed to a remote location, can have significant strategic advantages and reduce the stress and hassle of litigation.  When a Florida business becomes involved in a lawsuit with an out-of-state opponent, that business may be forced to challenge the opponent’s invocation of an out-of-state forum or need to defend their own attempt to bring the case in Florida.  A recent article posted by Mavrick Law Firm discussed how it is necessary for a court to have personal jurisdiction over each of the parties. The court must also be the proper venue.  While each state has its own requirements concerning venue, federal courts all share the same requirements.  A federal case that makes business litigation claims that do not comport with these federal requirements risk dismissal or transfer to a different federal court where venue is proper.  Peter Mavrick is a Fort Lauderdale business litigation lawyer.  The Mavrick Law Firm represents clients in breach of contract litigation, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, and other legal disputes in federal and state courts and in arbitration.

Federal court venue is determined exclusively by 28 U.S.C. § 1391.  28 U.S.C. § 1391 (a)(1) (“this section shall govern the venue of all civil actions brought in district courts of the United States”).  “When venue is challenged, the court must determine whether the case falls within one of the three categories set out in § 1391(b). If it does, venue is proper; if it does not, venue is improper, and the case must be dismissed or transferred under § 1406(a).”  Atl. Marine Const. Co., Inc. v. U.S. Dist. Court for W. Dist. of Texas, 571 U.S. 49 (2013).

The statute states that:

A civil action may be brought in–

(1) a judicial district in which any defendant resides, if all defendants are residents of the State in which the district is located;

(2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated; or

(3) if there is no district in which an action may otherwise be brought as provided in this section, any judicial district in which any defendant is subject to the court’s personal jurisdiction with respect to such action.

28 U.S.C. § 1391(b). “The test for determining venue is not defendants’ ‘contacts’ with a particular district, but rather the location of those ‘events or omissions giving rise to the claim […].’” Cottman Transmission Systems, Inc. v. Martino, 36 F.3d 291 (3d Cir.1994).

If business litigation defendants do not reside in a particular jurisdictional district, the plaintiff must show that a “substantial part of the events or omissions giving rise to the claim occurred” within the district.  “Events or omissions that might only have some tangential connection with the dispute in litigation are not enough. Substantiality is intended to preserve the element of fairness so that a defendant is not haled into a remote district having no real relationship to the dispute.”  Cottman Transmission Sys., Inc. v. Martino, 36 F.3d 291, 294 (3d Cir. 1994); LeRoy v. Great W. United Corp., 443 U.S. 173 (1979) (holding that “the purpose of statutorily specified venue is to protect the defendant against the risk that a plaintiff will select an unfair or inconvenient place of trial”).

Normally, the forum selected in a contract is binding on the parties except in extraordinary circumstances.  “Forum selection clauses in contracts are enforceable in federal courts.” P & S Bus. Machines, Inc. v. Canon USA, Inc., 331 F.3d 804 (11th Cir. 2003).  “Forum selection clauses are presumptively valid and enforceable unless the plaintiff makes a ‘strong showing’ that enforcement would be unfair or unreasonable under the circumstances.” Rucker v. Oasis Legal Fin., L.L.C., 632 F.3d 1231 (11th Cir. 2011). Even if the forum selection clause will cause a significant financial burden to a business litigant, the forum selection clause will still be enforced.  Bonny v. Society of Lloyd’s, 3 F.3d 156 (7th Cir.1993) (reasoning that a “party’s financial status at any given time in the course of litigation cannot be the basis for enforcing or not enforcing a valid forum selection clause”).

The issue of whether a federal court is the proper venue, however, is not influenced by a forum selection clause in a contract.  If the federal requirements for venue are not met, the case must be transferred to a federal court with the proper venue.  A party cannot waive the mandatory requirements for federal venue except through the failure to timely file a Fed.R.Civ.P. Rule 12(b)(3) motion in litigation.  Atl. Marine Const. Co., Inc. v. U.S. Dist. Court for W. Dist. of Texas, 571 U.S. 49 (2013)(“Whether venue is ‘wrong’ or ‘improper’ depends exclusively on whether the court in which the case was brought satisfies the requirements of federal venue laws, and those provisions say nothing about a forum-selection clause”; “Whether the parties entered into a contract containing a forum-selection clause has no bearing on whether a case falls into one of the categories of cases listed in § 1391(b).”); 28 U.S.C.A. § 1406 (b) (Nothing in this chapter shall impair the jurisdiction of a district court of any matter involving a party who does not interpose timely and sufficient objection to the venue”).

Federal business litigation cases must be initiated in a district court which has proper venue under § 1391.  When the defendants are not within that district and a substantial portion of acts or omissions did not occur within that district, federal courts will dismiss or transfer the case to another federal district court.  Peter Mavrick is a Fort Lauderdale business litigation attorney.  This article does not serve as a substitute for legal advice tailored to a particular situation.

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