Laurin and Huang comment on the changing landscape of determining venue

Posted on November 11, 2013 by

Check out page 9 of this week’s Indiana Lawyer for a guest column by Bose McKinney & Evans attorneys Sam Laurin and John Huang on the changing landscape of determining venue.

The text of the article is below.

The Changing Landscape of Determining Venue

Following the United States Supreme Court’s decision in M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972), many federal circuit courts have held that a valid forum-selection clause renders venue “improper” in a forum other than the one designated by contract.  This term the United States Supreme Court will address whether forum-selection clauses in contracts warrant dismissal or transfer of a case filed in an appropriate federal venue but in contravention of the forum-selection clauses.  In many circuits forum-selection clauses are routinely enforced through motions to dismiss or transfer venue under Federal Rule of Civil Procedure 12(b) (3) and 28 U.S.C. § 1406.  The Third, Fifth, and Sixth Circuits, however, follow a contrary rule that has its origins in the United States Supreme Court’s decision in Stewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22 (1988).  This rule states that when forum-selection clauses designate a specific federal forum, the clauses are enforced through motions to transfer under 28 U.S.C. § 1404(a).  Under this view, courts which review these motions undertake a discretionary, balancing-of-conveniences analysis.

To resolve this circuit split and to clarify Stewart, the Court has granted certiorari in a case entitled Atlantic Marine Construction Co. v. USDC WD TX, Docket No. 12-929 (“Atlantic Marine”).  In Atlantic Marine, a general contractor (Atlantic Marine Construction Co.) and a subcontractor (J-Crew Management, Inc.) entered into a subcontractor agreement for a construction project in Texas.  The subcontract contained a forum-selection clause requiring litigation in Virginia.  The subcontractor sued the general contractor in Texas federal district court for failing to make payments under the subcontract.  The general contractor responded by seeking dismissal or transfer based on the subcontract’s forum-selection clause.  Both the Texas federal district court and the Fifth Circuit Court of Appeal refused to grant dismissal or transfer the case to a Virginia court, reasoning that (1) Stewart mandated federal courts apply Section 1404(a) balancing-of-conveniences analysis to forum-selection clauses; and (2) the general contractor failed to meet its burden of showing that the interest of justice or the convenience of the parties and their witnesses weighed in favor of transfer under Section 1404(a).  In re Atlantic Marine Const. Co., Inc., 701 F.3d 736, 737, 739, 743 (5th Cir. 2012).

Judge Haynes filed a special concurrence and argued that because 28 U.S.C. § 1391 (the general federal venue statute) does not mandate venue in a particular forum in federal cases, the parties’ bargained for forum-selection clauses designate the correct forum.  Therefore, alternative venues are “wrong”, triggering the routine application of Rule 12(b) (3) and Section 1406 to dismiss or transfer venue.  Id. at 745.  Judge Haynes also noted that “negotiation of a forum-selection clause involves various economic decisions and often requires a party to make concessions in exchange for the assurance that potential litigation will occur in a pre-determined venue.  Companies . . . that conduct business throughout a broad geographical area rely on forum-selection clauses to ensure that they can anticipate business costs and avoid litigation in a plethora of possible venues.”  Id. at 748.  Finally, Judge Haynes asserted that the Fifth Circuit’s majority opinion misread Stewart, and suggested that the “parties request review of today’s decision by the United States Supreme Court.”  Id. at 745-747, 749.  The parties did just that and the Supreme Court agreed to hear the case.

The Supreme Court heard oral arguments in the case on October 9, 2013.  Atlantic Marine took the position that the courts should enforce forum-selection clauses as written and only apply the Section 1404 balancing-of-conveniences analysis in Stewart when one of the parties waives its objection to proper venue or in “exceptional circumstances” where “public interest required something other than the contract clause.” (Transcript, p. 6, l. 5-18).  J-Crew took the contrary position that the correct venue was the courts where the dispute took place, and that Stewart required these courts to apply a balancing-of-conveniences analysis under Section 1404(a) in reviewing forum-selection clauses that designate an alternative forum.

The Justices’ comments during oral argument signaled their approval of Atlantic Marine’s position.  In response to J-Crew’s argument that venue was proper in the Texas district court because that is “where we performed our work, where the project is located, where all the witnesses reside, and virtually all of the evidence is located,” Justice Kagan stated, “But, Mr. Allensworth, where you agreed not to bring it . . . this was a negotiated contract . . . You have to live with your contract.”  (Transcript, p. 26, l. 17-23; p. 27, l. 4-5, 12-13).  Justice Scalia agreed, stating that “it seems to me terribly unfair” to not enforce the forum-selection clause that the parties agreed to.  Id. at 46, l. 1-11.  Justices Alito, Kagan, and Sotomayor were unconvinced by the Texas district court’s “interests of justice” analysis under Section 1404(a), stating that the “interests of justice that the district court weighed almost all boiled down to the interests of your client [J-Crew]” and did not constitute “public interests” such as the integrity of the judicial system.  Id. at 28, l. 1-4, 11-13; Id. at 34, l. 2-18; Id. at 47, l. 22-25; Id. at 48, l. 2-3.  Chief Justice Roberts echoed Judge Haynes’s reasoning below, arguing that discretionary 1404(a) analysis would “be throwing a significant wrench into the process” of companies doing business nationwide by creating uncertainty in dispute resolution fora.  Id. at 35, l. 6-24.

One issue that may not be resolved by the Supreme Court’s pending decision are cases brought under the Miller Act, 40 U.S.C. §§ 3131, ­et. seq.  Unlike Atlantic Marine, where venue in Texas was discretionary, the Miller Act requires an action to be filed in the federal district court where the construction project was located (40 U.S.C. §3133(b) (3)(B)).  Lower courts are split on whether a forum-selection clause overrides the Miller Act’s mandatory venue requirements. Compare United States ex. rel. Brown Minneapolis Tank Co. v. Kinley Const. Co., 816 F.Supp.2d 1139 (D. New Mexico 2011) with In re Fireman’s Fund Companies, 588 F.2d. 93 (5th Cir. 1979).

Indiana Trial Rule 75 governs venue for cases filed in state court and by analogy Trial Rule 75 comports with Atlantic Marine’s view. A complaint can be filed in any county in Indiana, but if it is not filed in a county of preferred venue, it must be transferred to a county of preferred venue upon timely motion.  Sunburst Chemical LLC v. Acorn Distributors, Inc., 922 N.E.2d 652, 653 (Ind. Ct. App 2010).  In Sunburst, the plaintiff sued two defendants in Marion County based on a contract that provided that the defendants agreed that “jurisdiction” for any claim was Marion County.  Without the contract provision, preferred venue would have only been Allen County.  The Indiana Court of Appeals held that the contract provision allowed the plaintiff to sue the defendants in Marion County.  Id. at 654.

The Court’s decision in Atlantic Marine Construction Co. v. USDC WD TX should clarify the landscape of venue and will likely hold that district courts shall not engage in a balancing of conveniences analysis when there is a freely negotiated forum-selection clause.

Posted in Jurisdiction | Tagged , , , , , , | Leave a comment

Happy Fourth of July from the Bose Litigation Group

Posted on July 3, 2013 by

On behalf of all of us in the Litigation Group at Bose McKinney & Evans LLP, I’d like to wish all of you a Happy Fourth of July.

Oh, and Happy Birthday America!

Fireworks Show

Posted in Uncategorized | Leave a comment

SCOTUS: If Arbitration is Too Expensive, Just Buy Some More Money

Posted on June 20, 2013 by

We haven’t said much about arbitration lately because we’ve been waiting to see what the Supreme Court would do about class arbitration waivers in the American Express case. (See our earlier post on this case here.) Now we know…

Today, an ideologically-divided United States Supreme Court handed down its long-anticipated—albeit unsurprising—decision in American Express Co. v. Italian Colors Restaurant. And while the decision is good news for businesses, consumers are going to have trouble swallowing down this spicy meatball.

Here’s the background: Merchants who accept American Express cards sign an agreement with AmEx that says that all disputes must go through binding arbitration, and that there “shall be no right or authority for any Claims to be arbitrated on a class action basis.” Nonetheless, the merchants filed a class action suit against AmEx, alleging violations of the federal antitrust laws. AmEx moved to compel arbitration, and in response, the merchants submitted an economist’s declaration that stated that plaintiff’s cost of experts would be “’at least several hundred thousand dollars, and might exceed $1 million,’ while the maximum recovery for an individual plaintiff would be $12,850, or $38,549 when trebled.” The district court compelled arbitration and dismissed the case.

The Second Circuit, however, reversed, holding that because the merchants “’would incur prohibitive costs if compelled to arbitrate under the class action waiver,’” the waiver was unenforceable and the arbitration could not proceed.” In 2010, SCOTUS vacated the judgment and remanded the case in light of Stolt-Nielsen S. A. v. AnimalFeeds Int’l Corp., which held that a party cannot be compelled to class arbitration in the absence of an agreement to do so. The Second Circuit stuck to its guns, even after Concepcion, and then denied rehearing en banc, with five judges dissenting.

So, writing for the 5 member majority, Justice Scalia made it clear–as if it wasn’t already–that the FAA and the Court’s holding in Concepcion, reign supreme. Thus, concerns about an inability to vindicate statutory rights are immaterial:

Respondents argue that requiring them to litigate their claims individually—as they contracted to do—would contravene the policies of the antitrust laws. But the antitrust laws do not guarantee an affordable procedural path to the vindication of every claim.

Scalia wrapped it up this way:

The regime established by the Court of Appeals’ decision would require—before a plaintiff can be held to contractually agreed bilateral arbitration—that a federal court determine (and the parties litigate) the legal requirements for success on the merits claim-by-claim and theory-by-theory, the evidence necessary to meet those requirements, the cost of developing that evidence, and the damages that would be recovered in the event of success. Such a preliminary litigating hurdle would undoubtedly destroy the prospect of speedy resolution that arbitration in general and bilateral arbitration in particular was meant to secure. The FAA does not sanction such a judicially created superstructure.

Justice Kagan—who, after her dissent here and her brilliant dissent in Genesis Healthcare, is now my favorite writer on the court—wrote the dissent, joined by Justices Breyer and Ginsburg (Justice Sotomayor took no part in the decision). Her main point is that this case is nothing more than a prospective waiver of federal rights wrapped up in different cloth. For example, no one would think that contractual language or even crafty procedural requirements in a contract could insulate a party from liability for violations of federal statutes. As such, “the rule against prospective waivers of federal rights can work only if it applies not just to a contract clause explicitly barring a claim, but to others that operate to do so.” Yet that is exactly what the court is permitting when it places arbitration above all else. It’s a great read. To whet your appetite, here are her opening paragraphs in full:

Here is the nutshell version of this case, unfortunately obscured in the Court’s decision. The owner of a small restaurant (Italian Colors) thinks that American Express (Amex) has used its monopoly power to force merchants to accept a form contract violating the antitrust laws. The restaurateur wants to challenge the allegedly unlawful provision (imposing a tying arrangement), but the same contract’s arbitration clause prevents him from doing so. That term imposes a variety of procedural bars that would make pursuit of the antitrust claim a fool’s errand. So if the arbitration clause is enforceable, Amex has insulated itself from antitrust liability—even if it has in fact violated the law. The monopolist gets to use its monopoly power to insist on a contract effectively depriving its victims of all legal recourse.

And here is the nutshell version of today’s opinion, admirably flaunted rather than camouflaged: Too darn bad.

Boom! And here’s how she brings it all home:

The Court today mistakes what this case is about. To a hammer, everything looks like a nail. And to a Court bent on diminishing the usefulness of Rule 23, everything looks like a class action, ready to be dismantled. So the Court does not consider that Amex’s agreement bars not just class actions, but “other forms of cost-sharing . . . that could provide effective vindication.”  In short, the Court does not consider—and does not decide—Italian Colors’s (and similarly situated litigants’) actual argument about why the effective-vindication rule precludes this agreement’s enforcement.

As a result, Amex’s contract will succeed in depriving Italian Colors of any effective opportunity to challenge monopolistic conduct allegedly in violation of the Sherman Act. The FAA, the majority says, so requires. Do not be fooled. Only the Court so requires; the FAA was never meant to produce this outcome. The FAA conceived of arbitration as a “method of resolving disputes”—a way of using tailored and streamlined procedures to facilitate redress of injuries. In the hands of today’s majority, arbitration threatens to become more nearly the opposite—a mechanism easily made to block the vindication of meritorious federal claims and insulate wrongdoers from liability. The Court thus undermines the FAA no less than it does the Sherman Act and other federal statutes providing rights of action. I respectfully dissent.

(I’m looking forward to more Scalia v. Kagan battles next term.)

Just as some courts have taken a skeptical view of whether Concepcion applies to a given case, my sense is that many courts may take a similar course with AmEx. Stay tuned.

Posted in Arbitration, Class Actions | Tagged , , , | Leave a comment

Northern District of Indiana Approves Keyword Culling Prior to Predictive Coding; Can Skynet, LLP Be Far Behind?

Posted on May 3, 2013 by

Recently, Judge Miller in the Northern District of Indiana approved the use of predictive coding in a large, multidistrict litigation concerning certain hip implants manufactured by Biomet.

As the order notes, Biomet started with a universe of about 19.5 million documents and used keyword culling to trim that down to 3.9 million documents (about 1.5 terabytes of data). Taking out the duplicates brought that down to 2.5 million. Using statistical sampling, Biomet had a 99% confidence rate that .55% to 1.33% of the unselected documents would be responsive, and that 1.37% to 2.47% of the original 19.5 million were responsive.

Biomet then applied predictive coding to the remaining 2.5 million documents. The court described predictive coding this way:

Predictive coding has found many uses on the Internet. Under predictive coding, the software “learns” a user’s preferences or goals; as it learns, the software identifies with greater accuracy just which items the user wants, whether it be a song, a product, or a search topic. Biomet used a predictive coding service called Axelerate and eight contract attorneys to review a sampling of the 2.5 million documents. After one round of “find more like this” interaction between the attorneys and the software, the contract attorneys (together with other software recommended by Biomet’s e-discovery vendor) reviewed documents for relevancy, confidentiality, and privilege.

As of the date of the order, Biomet had incurred $1.07 million in e-discovery costs and was expected to incur up to $3.25 million. (Vendors:  “Cha-ching!”)

Biomet asked the Plaintiffs’ Steering Committee to suggest additional search terms, but they declined because they felt that the initial keyword culling used tainted the entire process. Instead, the Committee wanted Biomet to start over and use predictive coding on the original 19.5 million document universe. Biomet objected, claiming that would result in millions more in e-discovery costs.

Judge Miller approved Biomet’s e-discovery procedures, stating:

The issue before me today isn’t whether predictive coding is a better way of doing things than keyword searching prior to predictive coding. I must decide whether Biomet’s procedure satisfies its discovery obligations and, if so, whether it must also do what the Steering Committee seeks. What Biomet has done complies fully with the requirements of Federal Rules of Civil Procedure 26(b) and 34(b)(2). I don’t see anything inconsistent with the Seventh Circuit Principles Relating to the Discovery of Electronically Stored Information. Principle 1.02 requires cooperation, but I don’t read it as requiring counsel from both sides to sit in adjoining seats while rummaging through millions of files that haven’t been reviewed for confidentiality or privilege.

Further:

It might well be that predictive coding, instead of a keyword search, at Stage Two of the process would unearth additional relevant documents. But it would cost Biomet a million, or millions, of dollars to test the Steering Committee’s theory that predictive coding would produce a significantly greater number of relevant documents. Even in light of the needs of the hundreds of plaintiffs in this case, the very large amount in controversy, the parties’ resources, the importance of the issues at stake, and the importance of this discovery in resolving the issues, I can’t find that the likely benefits of the discovery proposed by the Steering Committee equals or outweighs its additional burden on, and additional expense to, Biomet.

A couple of takeaways:  First, keyword culling prior to the application of predictive coding is an acceptable e-discovery practice in Indiana federal courts.

Second, and more ominous, lawyers are actively and willingly helping machines learn how to replace them. I watched a lot of sci-fi movies as a younger man, and there’s only one way for this movie to end, and it’s not good. One day, you’re at your desk reviewing documents, and the next thing you know, there’s a flash of brilliant white li…….

Well, at least there's no more document review...

Well, at least there’s no more document review…

Posted in E-Discovery | Tagged , | Leave a comment

Groth to Present at ‘Expert Witness’ Panel Discussion

Posted on April 25, 2013 by

Bose McKinney & Evans LLP partner Steven Groth will participate in a litigation panel discussion entitled, “How to Get the Most Out of Your Expert Witness.” The discussion is part of an event presented by Thomson Reuters Expert Witness Services.

The panel discussion, which includes lunch, will take place Tuesday, May 7, at 12 p.m. at McCormick & Schmick’s located at 110 N. Illinois Street in Indianapolis. To attend, registration must be completed by April 30 by e-mailing erica.lyon@thomsonreuters.com.

During the luncheon, panelists will discuss the following:

  • What to look for in an expert witness;
  • Engaging experts and dealing with obstacles; and
  • Best practices for working with experts.

Groth is a partner in the Litigation Group of Bose McKinney & Evans and concentrates his practice in transportation, business and personal injury litigation. He defends clients in the trucking industry against wrongful death and serious injury claims, as well as represents businesses in connection with contract disputes, construction accidents and construction defect claims. Groth has significant jury trial experience and has briefed and argued successful appeals before the U.S. Court of Appeals for the Seventh Circuit and the Indiana Court of Appeals. He has been named to Indiana Super Lawyers® for his work in civil litigation defense since 2011.

Thomson Reuters Expert Witness Services is the leading authority in expert witness placement and intelligence reporting services. The company helps litigators find the right expert witnesses for their cases, provides resources for researching expert witnesses’ backgrounds, and helps expert witnesses grow their practices by connecting them with engagements and professional development opportunities.

Posted in Cross Examination, Direct Examination, Expert Witnesses | Tagged , , , , | Leave a comment

Vink to Speak at IndyBar Seminar on Litigation Skills

Posted on April 9, 2013 by

Bose McKinney & Evans LLP is pleased to announce partner Paul Vink will serve as a speaker for the Indianapolis Bar Association’s new litigation skills series, “Direct and Cross Exam,” which takes place Wednesday, April 10, at 12 p.m. EST.

Vink’s presentation will include how to elicit information important to your case and the art of examining witnesses in various trial settings. Lunch will be included and one general continuing legal education credit can be earned.

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Chair of the Construction Law Group quoted in article on public bidding

Posted on April 2, 2013 by

Partner Sam Laurin is quoted in the March 27, 2013 Indiana Lawyer article “Renovation project raises questions on public bidding” written by Marilyn Odendahl. Laurin is chair of the Bose McKinney & Evans Construction Law Group, as well as the law firm’s Litigation Group.

Posted in Appellate Court Indiana, Construction Law | Tagged , , , , , | Leave a comment