In Re: Rolls Royce Corporation

This mandamus petition brings the question of who—the parties or the court—determines in which judicial district a civil action is to proceed. In Atlantic Marine Construction Company,1 the Supreme Court held that when all parties have entered into a forum selection contract, that contract controls, except in exceptional circumstances, and the district court must transfer the action to the agreed-upon district.2 Here, we must address a related issue—what should a district court do when some, but not all, litigants are subject to a forum selection clause, and one of the parties to the clause files a motion to sever and transfer its claims to the forum chosen in the contract.

Faced with this situation, the district court refused to sever and transfer the party claiming the benefit of the forum selection clause. We respectfully disagree, persuaded that on these facts the forum *674selection contract must be enforced and GRANT the petition for mandamus.

I.

The underlying litigation concerns the liability stemming from a helicopter crash in the Gulf of Mexico. A Bell 407 helicopter owned by Petroleum Helicopters, Inc. (“PHI”) allegedly suffered a failure of its number two engine bearing, forcing the pilot to make an emergency landing in the Gulf. During the landing, the pilot inflated the helicopter’s skid-mounted emergency pontoon floats, which were designed to keep the helicopter from sinking. While the pontoon bags worked long enough to allow a safe evacuation of passengers and crew, one of the pontoons eventually failed, and the helicopter flipped, rendering the aircraft a total loss.

PHI brought suit in Louisiana state court against three parties: (1) Rolls Royce Corporation (“Rolls Royce”), which designed and manufactured the engine bearing, (2) Apical Industries, Inc. (“Apical”), which designed, manufactured, and sold the pontoon flotation system, and (3) Offshore Helicopter Support Services, Inc. (“OHS”), which repaired and reworked the float system before the crash. The defendants timely removed- on the basis of diversity jurisdiction.

Once in federal court, Rolls Royce moved to sever PHI’s claims against the company, and to transfer those claims to the Southern District of Indiana.3 It relied on a forum selection clause in a warranty to which the engine bearing was subject, which stated, in relevant part:

Any controversy or claim arising out of or relating to this Limited Warranty or breach thereof shall be litigated only in the Circuit or Superior Courts of Marion County, Indiana or of the United States District Court for the Southern District of Indiana, Indianapolis Division. In connection with the foregoing, the Purchaser consents to the jurisdiction and venue of such courts and expressly waives any claims or defenses of lack of jurisdiction or proper venue by such courts.

Apical and OHS, neither of whom were subject to a forum selection clause, opposed the severance and transfer, as did PHI.

The district court denied the motion.4 First, it determined that the entire action could not be transferred to Indiana.5 Second, the court turned to the issue of *675whether severance under Federal Rule of Civil Procedure (“Rule”) 21 was warranted. The court articulated five factors that district courts had used in analyzing a severance motion, and concluded that each weighed against severance.6 As a result, there was no basis for a transfer.7 Finally, the district court considered whether the Supreme Court’s decision in Atlantic Marine mandated transfer. It held that it did not. The district court determined that key difference between this case and Atlantic Marine was that not all parties to the litigation had signed a forum selection contract. Reading Atlantic Marine to mandate severance and transfer of the party to the contract, the district court reasoned, “would not further the Supreme Court’s stated goal in Atlantic Marine of not disrupting the expectations of parties who bargained for litigation in a particular forum but would, instead, potentially inconvenience and prejudice parties having absolutely no relationship to a forum-selection clause they had no part in conferring.” 8

Following the denial of its severance- and-transfer motion, Rolls Royce petitioned this court for mandamus relief.9

II.

A writ of mandamus is an “extraordinary remedy,”10 and may only issue if three criteria are met:

First, the party seeking issuance of the writ [must] have no other adequate means to attain the relief he desires, a condition designed to ensure that the writ will not be used as a substitute for the regular appeals process. Second, the petitioner must satisfy the burden of showing that [his] right to issuance of the writ is clear and indisputable. Third, even if the first two prerequisites have been met, the issuing court, in the exercise of its discretion, must be satisfied that the writ is appropriate under the circumstances.11

“These hurdles, however demanding, are not insuperable.”12 We consider each in turn.

*676A.

First, Rolls Royce must show that mandamus is its exclusive vehicle to seek relief. It does. Our court, in accord with our sister circuits, has held “mandamus is an appropriate means of testing a district court’s [section] 1404(a) ruling.”13 Other means for review are unavailable. Rolls Royce cannot appeal an adverse final judgment under 28 U.S.C. § 1391, because it “would not been able to show that it would have won the case,” had the action been litigated in its desired forum.14 While the Supreme Court has crafted a narrow exception to the final order doctrine, termed the “collateral order doctrine” or “Cohen exception,”15 we have previously held that transfer orders do not fall within the scope of this doctrine.16 Nor can Rolls Royce bring an interlocutory appeal under 28 U.S.C. § 1292(b), as our circuit precedent forecloses reviews of transfer orders under that statute.17 Apical and OHS argue otherwise, saying that certification is available, because the district court’s order contained a cognizable “controlling question of law.”18 We have, though, squarely rejected this conclusion, holding that “[t]he Congressional policy against piecemeal appeals, as expressed in the final judgment rule, to which [section] 1292(b) is a narrow exception, is eroded by permitting review of exercise of the judge’s discretion under [section] 1404(a) as a ‘controlling question of law.’ ”19

There is one complication&emdash;the district court did not rule on a transfer motion, but a joint transfer and severance motion. While we have previously held that the denial of a standalone Rule 21 severance motion can be challenged through an appeal of a final judgment,20 we believe that the combination of transfer and severance inquiries dictates a different response. As the Federal Circuit, addressing whether mandamus was available to review the denial of a transfer and severance motion, concluded:

With regard to the ‘no other means’ requirement, there is no meaningful distinction between a petitioner’s seeking review of an order denying transfer because the district court clearly abused its discretion in applying the [section] 1404(a) factors and a petitioner’s seeking review of an order denying a motion to transfer because the district court elear*677ly abused its discretion by not severing the claims as a predicate to determining whether to transfer. In either case, a defendant would not have an adequate remedy for an improper failure to transfer or sever.... 21

We agree. Because the transfer order is unreviewable except through mandamus, and because the severance inquiry is, as will be discussed later, inextricably linked to the transfer analysis, we conclude that there are no other means for review of the district court’s order but through mandamus.

B.

We turn now to whether Rolls Royce’s right to mandamus relief is “clear and indisputable.”22 We look to whether there has been a “clear abuse of discretion,” which, under our circuit precedent, includes situations where the district court “relies on erroneous conclusions of law” which “produce a patently erroneous result.” 23

We conclude that, in this instance, the district court erred in refusing to transfer Rolls Royce in accordance with its forum selection clause and in light of the Supreme Court’s decision in Atlantic Marne. This said, we do not read Atlantic Marine to mandate severance and transfer of a party bearing a forum selection clause in all multiparty cases, regardless of countervailing considerations of judicial economy.

l—l

By the light of Atlantic Marine,24 we analyze a transfer motion brought by a party seeking to enforce a forum-selection cause pursuant to 28 U.S.C. § 1404.25 Section 1404, in turn, provides that “[f]or 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 or to any district or division to which all parties have consented.”26

We begin with the purpose of section 1404, by which Congress granted to the federal district court the power to allocate cases and controversies among federal district courts. The Supreme Court made plain that this grant of authority was intended to afford a powerful tool to bring forth efficient judicial case management among the various federal courts. The statute “should be regarded as a federal judicial housekeeping measure, dealing with the placement of litigation in the federal courts and generally intended, on the basis of convenience and fairness, simply to authorize a change of courtrooms.”27 These factors, in turn, are measured across two dimensions: the interests of the litigants, and the interests of the public and judicial system writ large.28

*678Animating the former are considerations governing the cost and ease of litigation.29 Animating the latter are a broader set of concerns, ranging from the interest in having a case involving local disputes and local law resolved by a local court,30 to facilitating judicial economy and avoiding duplicitous litigation.31 This inquiry necessarily requires the district court to “balance a number of case-specific factors,” and the Supreme Court has cautioned that a section 1404 transfer inquiry requires an “individualized, case-by-case consideration of convenience and fairness.”32

When the parties hold a valid forum selection clause, Atlantic Marine alters the normal section 1404 analysis. As is most relevant here, the district court cannot independently weight the parties’ private interests, but must deem such interests to weigh in favor of the preselected forum, the parties having struck that balance by their selection contract.33 Accordingly, only the public-interests may weigh against transfer, and “[bjecause those factors will rarely defeat a transfer motion, the practical result is that the forum-selection clauses should control except in unusual eases.”34

*6792.

For cases where all parties signed a forum selection contract, the analysis is easy: except in a truly exceptional case, the contract controls. But not so where, as here, not all parties to the lawsuit have entered into a forum selection agreement. The petitioner urges, as does our colleague in concurrence, that the analysis—and the result—follow pari passu with Atlantic Marne. With respect, we believe the answer is more complicated.

a.

In terms of the party who signed the agreement, Atlantic Marine is clear—the court cannot consider private-interest factors that counsel against transfer to the agreed-upon forum. But the analysis differs when there are parties who have not entered into any forum-selection contract. First, Atlantic Marine was premised on the fact that the parties had agreed in advance where their private litigation interests lie, and the reviewing court had no cause to disturb those expectations.35 A litigant not party to such a contract did not, of course, make any such advance agreements and their private interests must still be considered by the district court.36 As such, the section 1404 analysis, modified by Atlantic Marine, might point in the direction of one judicial district for the forum-selection clause parties, and in another direction for the parties without a preexisting agreement.

A properly conducted section 1404 inquiry may well require a district court to send different parties to pursue the same suit in different districts, implicating concerns attending parallel lawsuits not present in Atlantic Marine. While Atlantic Marine noted that public factors, standing alone, were unlikely to defeat a transfer motion,37 the Supreme Court has also noted that section 1404 was designed to minimize the waste of judicial resources of parallel litigation of a dispute.38 .The tension between these centrifugal considerations suggests that the need—rooted in the valued public interest in judicial economy—to pursue the same claims in a single action in a single court can trump a forum-selection clause.

b.

There is more. To transfer the claims of the forum-clause defendant, the district court would first have to sever those *680claims from the claims of the non-forum clause defendants, which remain in the original district. The petitioner’s answer is that Atlantic Marine vitiates the traditional severance analysis in multiparty cases. This is not so clear.

A district court has wide discretion to sever a claim against a party into separate cases,39 in vindication of public and private factors.40 Though we have not squarely addressed the issue, our jurisprudence suggests that the severance inquiry is different—and more focused on judicial efficiency—when it is combined with a section 1404 motion to transfer than when the severed case would remain in the original judicial district. In Liaw Su Teng v. Skaarup Shipping Corporation,41 addressing the situation where a court could transfer some but not all parties,42 we suggested that when considering a severance-and-transfer motion, the inquiry collapsed into an inquiry into the relative merits of convenience versus judicial economy. We held that when addressing a severance-and-transfer request:

[ T]he court must weigh carefully whether the inconvenience of splitting the suit outweighs the advantages to be gained from the partial transfer. It should not sever if the defendant over whom jurisdiction is retained is so involved in the controversy to be transferred that partial transfer would require the same issue to be litigated in two cases. That being the situation here, the district court should not have severed the claims if there were any alternative. Manifestly, the plaintiffs will suffer some inconvenience if they are forced to litigate their claims in two courts, half the world apart from each other, with not only the consequent added expense and inconvenience but also the possible detriment of inconsistent results. A single forum is also most suitable for determining possible counter- and cross-claims. The public also has an interest in facilitating a speedy and less-expensive determination in one forum of all of the issues arising *681out of one episode.43

Several of our sister circuits have also collapsed the severance-and-transfer analysis into a single inquiry into judicial economy. In White v. ABCO Engineering Corporation,44 the Third Circuit held that a severance motion is distinct from, and precedes, a transfer motion, but that “[bjefore effecting such a severance, a judge should weigh the convenience to the parties requesting transfer against the potential inefficiency of litigating the same facts in two separate forums.”45 The court did note that the analytical question was essentially whether “the interests of judicial economy dictated ... a severance and transfer.”46 The Second Circuit has similarly held that “where the administration of justice would be materially advanced by severance and transfer, a district court may properly sever the claims against one or more defendants for the purpose of permitting the transfer of the action against the other defendants.”47 While judicial economy is not the sole consideration for a district court facing a severance-and-transfer motion, it retains a cardinal role.

It is true that Atlantic Marine does not speak directly to the issue of severance. Yet, its principal conclusion that a reviewing court cannot consider the private interests of a party who entered into a forum selection clause remains relevant to a severance-and-transfer inquiry.48 We are persuaded that the severance-and-transfer inquiry in situations where some but not all parties have entered into a forum selection clause ought go as follows: First, pursuant to Atlantic Marine, the private factors .of the parties who have signed a forum agreement must, as matter of law, cut in favor of severance and transfer to the contracted for forum. Second, the district court must consider the private factors of the parties who have not signed a forum selection agreement as it would under a Rule 21 severance and section 1404 transfer analysis. Finally, it must ask whether this preliminary weighing is outweighed by the judicial economy considerations of having all claims determined in a single lawsuit. In so determining, the district court should consider whether there are procedural mechanisms that can reduce the costs of severance, such as common pre-trial procedures, video depositions, stipulations, etc. Such practices could echo those used by judges in cases managed pursuant to multidistrict litigation statutes49

This is necessarily a fact-sensitive analysis, and while we agree that Atlantic Marine informs the analysis, we cannot conclude that it categorically requires severance-and-transfer in all situations. By failing to properly consider the impact of Atlantic Marine in considering the severance and transfer motion, we conclude that the district court erred in its construction of law, and thus mandamus is appropriate.50

c.

We recognize that that a large percentage of the federal judiciary’s business is *682conducted through the use of the multidis-trict litigation process.51 Strictly speaking, Atlantic Marne does not implicate transfer decisions by.the Panel on Multi-district Litigation. Those decisions are made pursuant to 28 U.S.C. § 1407, while Atlantic Marne, by its terms, only speaks to transfer motions brought under section 1404(a).52 Nonetheless, because Congress set similar considerations to guide treatment of transfer motions in both contexts,53 we believe that Atlantic Marine’s reasoning informs MDL practice.

Whether a case is to be transferred to an MDL docket is not our decision to make.54 We note, however, that judicial economy is of significant concern to a MDL transfer decision and often parallels private interests—more so than for the mine-run transfer—and so while Atlantic Marine may counsel against such consolidation in a marginal case, its independent force is much dissipated in the world of MDL.

d.

Our concurring colleague posits that we have misconstrued Atlantic Marine. We-must respectfully disagree. In our view, as we said earlier, the Supreme Court’s central teaching in Atlantic Marine is that when parties contractually agree on a choice of forum clause, that agreement dictates the result of any “private factor” inquiry under a transfer, or as here, severance motion. At the same time, the Supreme Court made plain that public interest factors are to be considered when present. In day-to-day operation the public interest factors will seldom impede enforcement. Atlantic Marine signifies that of the universe of federal multiple-party, multiple-district civil cases, few will be affected by this decision. A significant percentage of multi-party cases, representing about 40 percent of the federal civil case load, are managed through MDL dockets.55 These cases are to be transferred back to their original forum for trial; a right only reinforced by the presence of a *683contracted-for forum.56 The choice of law implicit in that contract would also be assured.57 The multi-party cases not in need of MDL management by definition present a much weaker call upon the public interest. And, as here, careful pre-trial management will allow the district courts to sever and transfer the contracting litigant while minimizing prejudice to the remaining parties. Nor do we suggest that merely joining a party to the suit will defeat a severance motion pursuant to a valid forum contract—certainly not when joined in a transparent effort to defeat the transfer. Our district judges are best situated to balance the competing interests and prudently exercise their judgment in 'determining how the business of the federal courts is to be allocated, giving the contracted-for choice of forum its due. Such management is indeed their hallmark.

C.

Here, the district court erred in not considering Rolls Royce’s forum-selection clause when conducting its severance-and-transfer analysis.58 Moreover, there is no evidence in the record indicating special administrative difficulties with severance, or that the interests of the defendants not privy to the clause would be significantly threatened. It remains that such interests can be secured by the hand of an experienced federal trial judge with such devices as common discovery among separated cases and sequencing of any dispositive motions or trials. As we recognized in Volkswagen “writs of mandamus are supervisory in nature and are particularly appropriate when the issues also have an importance beyond the immediate case.”59

III.

The mandamus petition is GRANTED. The judgment of the district court is REVERSED and this case is REMANDED with instructions to sever and transfer the claims against Rolls Royce.