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Summary: Opinions of the United 1995 Decisions States Court of Appeals for the Third Circuit 6-2-1995 Jumara v State Farm Precedential or Non-Precedential: Docket 94-1447 Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1995 Recommended Citation "Jumara v State Farm" (1995). 1995 Decisions. Paper 149. http://digitalcommons.law.villanova.edu/thirdcircuit_1995/149 This decision is brought to you for free and open access by the Opinions of the United States Court of
Summary: Opinions of the United 1995 Decisions States Court of Appeals for the Third Circuit 6-2-1995 Jumara v State Farm Precedential or Non-Precedential: Docket 94-1447 Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1995 Recommended Citation "Jumara v State Farm" (1995). 1995 Decisions. Paper 149. http://digitalcommons.law.villanova.edu/thirdcircuit_1995/149 This decision is brought to you for free and open access by the Opinions of the United States Court of A..
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Opinions of the United
1995 Decisions States Court of Appeals
for the Third Circuit
6-2-1995
Jumara v State Farm
Precedential or Non-Precedential:
Docket 94-1447
Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1995
Recommended Citation
"Jumara v State Farm" (1995). 1995 Decisions. Paper 149.
http://digitalcommons.law.villanova.edu/thirdcircuit_1995/149
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
NO. 94-1447
GEORGE JUMARA and EVANGELINA JUMARA, H/W
Appellants
v.
STATE FARM INSURANCE COMPANY
Appellee
On Appeal From the United States Court of Appeals
For the Eastern District of Pennsylvania
(D.C. Civ. No. 94-cv-00366)
Argued: September 22, 1994
Before: BECKER, COWEN and GARTH, Circuit Judges.
(Filed June 2, l995)
LEE BELFER, ESQUIRE (ARGUED)
RONALD A. BLUMFIELD, P.C.
RONALD A. BLUMFIELD, ESQUIRE
1636 Pine Street
Philadelphia, PA 19103
Attorneys for Appellants
DANIEL A. PERRY, ESQUIRE (ARGUED)
THOMAS P. COMERFORD, ESQUIRE
FOLEY, COGNETTI & COMERFORD
507 Linden Street
700 Scranton Electric Bldg.
Scranton, PA 18503
Attorneys for Appellee
OPINION OF THE COURT
Becker, Circuit Judge.
This is an underinsured motorist (UM) case governed by
Pennsylvania law. The appeal arises out of an action filed in
the United States District Court for the Eastern District of
Pennsylvania by plaintiffs George and Evangelina Jumara seeking
to appoint arbitrators and to compel arbitration by their own
carrier, defendant State Farm Insurance Company. Ultimately, it
presents the question whether the Jumaras' (two) insurance
contracts with State Farm, which incorporate the Pennsylvania
Uniform Arbitration Act (UAA), contemplate arbitration-related
proceedings in the Court of Common Pleas of Luzerne County (PA)
or in the United States District Court for the Middle District of
Pennsylvania, or in either court. The district court denied the
Jumaras' motion to compel arbitration (and thereby effectively
dismissed the action), reasoning that the insurance contracts, in
light of the Pennsylvania law that they incorporate, contained a
forum selection clause that relegates the plaintiffs to suit in
the Court of Common Pleas of Luzerne County. We disagree, and
will vacate the order denying plaintiff's motion.
Although the district court in effect disposed of the
case under 28 U.S.C. § 1406 (for improper venue), we conclude
that, because venue was actually proper in the Eastern District
of Pennsylvania, the case could not be dismissed pursuant to that
provision. The district court should instead have invoked 28
U.S.C. § 1404(a), which involves a multi-factor balancing test in
which a contractual forum selection clause carries substantial
although not dispositive weight. However, because the other
factors cannot even in combination overcome the forum selection
clause, we will not remand the case, but rather will direct the
district court to transfer the case to the United States District
Court for the Middle District of Pennsylvania, a "court of
record" in Luzerne County.1
I. FACTS AND PROCEDURAL HISTORY
Plaintiffs are residents of Luzerne County. While
operating his motorcycle on May 22, 1992, George Jumara sustained
serious injuries as a result of a collision with an automobile
driven by Mary Reynolds. Jumara underwent emergency surgery for
numerous lacerations and fractures. On June 9, 1992, the Jumaras
filed a tort action against Reynolds, which they eventually
settled on October 20, 1994 for the limits of Reynolds'
automobile liability insurance policy, with the permission of
1
. Prior to argument, we requested supplementary briefs on the
question of whether this case was justiciable, i.e., whether
there was a case or controversy within the meaning of Article III
of the Constitution, and whether the dispute was ripe for
decision. This question arose because the Jumaras sought to
compel the appointment of an arbitrator before the amounts of the
underlying claims for underinsured motorists benefits were
determined. (The Jumaras had not yet settled their claim against
Reynolds when they filed this action.) After argument, any such
question was resolved by the Jumaras' settlement with Reynolds
for the limits of her liability policy.
State Farm. At the time of the accident, the Jumaras' two cars
were covered by automobile insurance policies issued by State
Farm. Each policy included underinsured motorist coverage of
$100,000/$300,000, and each provided for arbitration in the event
of disputes. Reynolds was covered by a $100,000 liability
policy.
On January 21, 1994, the Jumaras claimed underinsured
motorist benefits in the amount of $200,000 under their policies
by filing a complaint in the district court for the Eastern
District of Pennsylvania (¶ 9 of Petition). The complaint
designated Steven C. Forman as the Jumaras' arbitrator, and
sought the appointment of neutral and defense arbitrators and an
order compelling underinsured motorist arbitration.2 The Jumaras
served this complaint on State Farm on February 8, 1994.
In response, State Farm designated Joseph Van Jura as
its arbitrator, but, based on the arbitration provisions
contained in the insurance contracts, challenged venue in the
Eastern District. On April 4, 1994, the district court held that
proper venue lay with the Court of Common Pleas in Luzerne County
and therefore denied the Jumaras' motion. The Jumaras have
appealed. As of the time of oral argument before us, the two
parties' arbitrators had been unable to agree on a neutral third
arbitrator.
2
. The dissent inadvertently represents that the Jumaras sought
only the appointment of arbitrators in their petition.
By directing the Jumaras to the Pennsylvania state
court, the district court's order in effect terminated the
federal litigation of the Jumaras underinsured motorist claim.
The order denying the Jumaras' motion was premised on the
district court's view that Pennsylvania insurance law limited the
Jumaras to proceeding in the Courts of Common Pleas. The court
suggested no circumstances under which it would reconsider
granting the Jumaras' motion, and hence the district court's
order is final and appealable. 28 U.S.C.A. § 1291 (1994).
II. SUBJECT MATTER JURISDICTION
Jurisdiction in the district court was premised upon
diversity of citizenship, 28 U.S.C.A. § 1332 (1994). The Jumaras
are citizens of Pennsylvania, and State Farm is a citizen of
Illinois, which is the state of its incorporation and the
location of its principal place of business. Thus the Jumaras
established the complete diversity required by § 1332(a).
The diversity statute further requires, of course, that
the amount in controversy be in excess of $50,000. 28 U.S.C.A.
§ 1332(a) (1994). While the Jumaras allege that State Farm is
obligated to pay compensation in excess of that amount (up to
$200,000 or the sum of the underinsured motorist benefits of each
of the Jumara's policies), they did not demand any money damages
in the district court; rather they sought only arbitration.
Because of the nature of the policy, the amount of the Jumaras'
claim against State Farm depends on the insurance shortfall left
by Reynolds' policy, itself a function of the extent of both Mr.
Jumara's injuries and the recovery available under Reynolds'
policy. Because the Jumaras did not allege the amount of the
insurance shortfall, the question arises as to whether the
Jumaras have satisfied the diversity statute's amount in
controversy requirement. Indeed, State Farm argued in the
district court that the lack of amount in controversy deprived
that court of subject matter jurisdiction, an argument rejected
by the court.
The question, however, is far from novel. We faced a
similar situation in Manze v. State Farm Ins. Co., 817 F.2d 1062,
1068 (3d Cir. 1987). In Manze, the plaintiff sought to compel
arbitration with her insurance company and appointment of a
neutral arbitrator, and the carrier removed the action to federal
court. Although the demand made by the insured on her insurer
exceeded the jurisdictional minimum, and the policy provided
coverage in excess of the minimum, the plaintiff objected to
diversity jurisdiction, contending that the amount in controversy
requirement was unmet because she had asked the state court only
to compel arbitration, not to award the amount she demanded.
We rejected her argument, holding that the requirement
was satisfied despite the fact that the action did not itself
seek monetary relief, id. at 1068. We expressly followed
Davenport v. Procter & Gamble Mfg. Co.,
241 F.2d 511 (2d Cir.
1957), which denied a motion to remand to state court a (removed)
action to compel arbitration according to the terms of a
collective bargaining agreement, quoting Davenport's discussion
of the amount in controversy requirement:
In considering the jurisdictional amount
requirement the court should look through to
the possible award resulting from the desired
arbitration, since the petition to compel
arbitration is only the initial step in a
litigation which seeks as its goal a judgment
affirming the award.
Manze, 817 F.2d at 1068 (quoting
Davenport, 241 F.2d at 514).
Thus the amount in controversy in a petition to compel
arbitration or appoint an arbitrator is determined by the
underlying cause of action that would be arbitrated.
This is in accord with general precedent concerning the
amount in controversy requirement. The allegations on the face
of the complaint control the amount in controversy unless it
appears "`to a legal certainty the claim is really for less than
the jurisdictional amount . . . .'" Horton v. Liberty Mut. Ins.
Co., 367 U.S. 348, 353,
81 S. Ct. 1570, 1573 (1961) (quoting St.
Paul Mercury Indem. Co. v. Red Cab Co.,
303 U.S. 283, 289,
58
S. Ct. 586, 590 (1938)). Indeterminacy of the amount to be
recovered is therefore not sufficient to defeat diversity
jurisdiction, and so it is immaterial that the Jumaras might
eventually recover less than $50,000 from State Farm. Given that
the Jumaras allege quite serious injuries and an entitlement to
as much as $200,000 in underinsured motorist benefits, we cannot
say with legal certainty that the Jumaras will recover less than
$50,000. Thus, the amount in controversy requirement is
satisfied, the district court had subject matter jurisdiction.
We therefore turn to the merits of this appeal.
III. VENUE
As we have explained, the district court dismissed the
Jumaras' complaint by denying their motion to appoint arbitrators
and to compel arbitration on the grounds of faulty venue.3 We
conclude that the district court should instead have considered
whether to transfer the case to the United States District Court
for the Middle District of Pennsylvania. We further conclude
that the court should have ordered the transfer to the Middle
District.
A. SHOULD THE DISTRICT COURT HAVE ACTED PURSUANT TO
28 U.S.C. § 1404 OR 28 U.S.C. § 1406?
The salient factor here is the presence of the forum
selection clause. In federal court, the effect to be given a
contractual forum selection clause in diversity cases is
determined by federal not state law. Because "[q]uestions of
venue and the enforcement of forum selection clauses are
essentially procedural, rather than substantive, in nature,"
Jones v. Weibrecht, 901 F.2d 17, 19 (2d Cir. 1991), federal law
3
. The dissent argues that neither the parties nor the court
ever invoked 28 U.S.C. § 1391 (the general venue provision), 28
U.S.C. § 1404(a) or § 1406 in terms. However, the district
courts' order denying all of the relief sought in the action --
effectively dismissing the Jumara's suit -- relied on the premise
that this action could only be brought in a court of Luzerne
County. Thus, notwithstanding its failure to frame its order in
venue terms or to cite the relevant venue statutes, the district
court effectively dismissed the case for faulty venue, an action
addressed by § 1406. We hold, however, that the court's initial
premise, that venue was actually improper in the Eastern District
of Pennsylvania, was erroneous, and that, if the district court
thought the action should instead proceed in the Middle District,
it would have to consider transferring the case pursuant to §
1404.
applies in diversity cases irrespective of Erie Railroad Co. v.
Tompkins,
304 U.S. 64,
58 S. Ct. 817 (1938).
In Stewart Organization, Inc. v. Ricoh Corp., 487 U.S.
22,
108 S. Ct. 2239 (1988), the Supreme Court held that federal
law governed the district court's decision whether to grant a
motion to transfer a diversity case to the venue provided in the
contractual forum selection clause. The Court noted that venue
was proper in the district court under federal law (ignoring the
forum selection clause).
Id. at 28 n.8, 108 S. Ct. at 2243 n.8.
The majority rejected the dissent's contention that the effect --
if any -- of a forum selection clause should be a matter purely
of contractual interpretation governed by state law. Instead,
the Court required the district court to apply a case-specific
balancing pursuant to the standards laid out in 28 U.S.C.
§ 1404(a) to determine whether to give the clause effect by
transferring the case to another district court embracing the
contractually specified forum.
In federal court, venue questions are governed either
by 28 U.S.C. § 1404(a) or 28 U.S.C. § 1406. Section 1404(a)
provides for the transfer of a case where both the original and
the requested venue are proper. Section 1406, on the other hand,
applies where the original venue is improper and provides for
either transfer or dismissal of the case. Thus, while either
statute could theoretically provide a basis for the transfer of a
case, only § 1406 can support a dismissal. Because the district
court's order effectively terminated the litigation in federal
court and did not attempt to effect a transfer of the case, we
will construe the order as a dismissal pursuant to § 1406.
This determination of whether § 1404(a) or § 1406
applies affects our standard of review. If we determine that the
court correctly applied §1406, i.e., if the action could not be
maintained in the Eastern District, our threshold review is
limited to determining whether the court considered the
possibility of transferring the case, and if it did, whether it
properly exercised its discretion in ordering a dismissal instead
of a transfer. See 1A PT.2 JAMES W. MOORE & BRETT A. RINGLE, FEDERAL
PRACTICE ¶0.347, at 4446 (2d ed. 1995) [hereinafter MOORE'S]. If
the court did consider transferring the case, then our review of
the exercise of discretion would be deferential. In contrast, if
we decide that the district court failed to consider the transfer
and applied § 1406 instead of § 1404(a), the order dismissing the
case would reflect an error of law, subject to plenary review.
Cf. Kean v. Stone, 966 F.2d 119, 121 (3d Cir. 1992) (holding that
the question whether a district court applied the correct legal
standard in deciding a fee award should receive plenary review
notwithstanding the fact that fee awards are ordinarily reviewed
only for an abuse of discretion).
In order to decide which statute should have governed
the district court's transfer order in this case, therefore, we
must first decide whether venue was proper in either or both the
Middle District or the Eastern District.
The federal venue statute provides:
(a) A civil action wherein jurisdiction is founded
only on diversity of citizenship may, except as
otherwise provided by law, be brought only in (1) a
judicial district where any defendant resides, if all
defendants reside in the same State, (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) a judicial district in which
the defendants are subject to personal jurisdiction at
the time the action is commenced, if there is no
district in which the action may otherwise be brought.
* * *
(c) For purposes of venue under this chapter, a
defendant that is a corporation shall be deemed to
reside in any judicial district in which it is subject
to personal jurisdiction at the time the action is
commenced. In a State which has more than one judicial
district and in which a defendant that is a corporation
is subject to personal jurisdiction at the time an
action is commenced, such corporation shall be deemed
to reside in any district in that State within which
its contacts would be sufficient to subject it to
personal jurisdiction if that district were a separate
State, and, if there is no such district, the
corporation shall be deemed to reside in the district
within which it has the most significant contacts.
28 U.S.C. § 1391.
Clearly, venue would be proper in the Middle District
of Pennsylvania where the plaintiff resides, the defendant
transacts business, the contract was signed, and events
triggering the dispute occurred. Venue is also proper, however,
in the Eastern District of Pennsylvania, where the defendant
transacts business and is therefore subject to personal
jurisdiction. See 28 U.S.C. § 1391(c) (venue proper in judicial
district in which corporation is doing business); see also
Stewart Organization, Inc., 487 U.S. at 29 n.8, 108 S. Ct. at 2243
n.8 ("The parties do not dispute that the District Court properly
denied the motion to dismiss the case for improper venue under
28 U.S.C. § 1406(a) because respondent apparently does business
[there].") Since venue is proper in the Eastern District where
the action commenced, the district court's effective dismissal of
the action constituted an error of law. The District Court
should instead have applied the appropriate balancing test under
28 U.S.C. §1404(a) to determine whether the case should proceed
in the Eastern District or be transferred to the Middle
District.4
B. APPLICATION OF SECTION 1404(a)
Section 1404(a) 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 burden of
establishing the need for transfer still rests with the movant,
1A PT.2 MOORE'S ¶ 0.345[5]; Shutte v. Armco Steel Corp., 431 F.2d
22 (3d Cir. 1970), cert. denied,
401 U.S. 910,
91 S. Ct. 871
(1971). And, "in ruling on defendants' motion the plaintiff's
choice of venue should not be lightly disturbed." 1A PT.2 MOORE'S
¶ 0.345[5] at 4360; 15 CHARLES A. WRIGHT ET AL. FEDERAL PRACTICE AND
4
. The dissent argues that, in holding that the district court
should have considered transfer under § 1404(a), we "evolve
analyses and theories that neither the district court nor counsel
considered . . . ." We disagree. In holding that the action
could only proceed in a court of Luzerne County, an argument
raised by State Farm, the district court clearly did consider the
sort of venue analysis upon which we base our holding.
PROCEDURE: JURISDICTION AND RELATED MATTERS § 3848, at 385 (2d ed. 1986)
[hereinafter WRIGHT ET AL.]; Schexnider v. McDermott Int'l, Inc.,
817 F.2d 1159 (5th Cir. 1987); Miracle Stretch Underwear Corp. v.
Alba Hosiery Mills, Inc.,
136 F. Supp. 508 (D. Del. 1955).
In ruling on § 1404(a) motions, courts have not limited
their consideration to the three enumerated factors in §1404(a)
(convenience of parties, convenience of witnesses, or interests
of justice), and, indeed, commentators have called on the courts
to "consider all relevant factors to determine whether on balance
the litigation would more conveniently proceed and the interests
of justice be better served by transfer to a different forum."
15 WRIGHT ET AL. § 3847. While there is no definitive formula or
list of the factors to consider, see 1A PT.2 MOORE'S ¶ 0.345[5],
at 4363, courts have considered many variants of the private and
public interests protected by the language of § 1404(a).
The private interests have included: plaintiff's forum
preference as manifested in the original choice, 1A PT.2 MOORE'S
¶ 0.345[5], at 4363; the defendant's preference, 15 WRIGHT ET AL. §
3848, at 385; whether the claim arose elsewhere, 15 WRIGHT ET AL. §
3848; the convenience of the parties as indicated by their
relative physical and financial condition, id. § 3849, at 408;
the convenience of the witnesses -- but only to the extent that
the witnesses may actually be unavailable for trial in one of the
fora,
id. § 3851, at 420-22; and the location of books and
records (similarly limited to the extent that the files could not
be produced in the alternative forum),
id. § 3853.
The public interests have included: the enforceability
of the judgment, 1A PT.2 MOORE'S ¶ 0.345[5], at 4367; practical
considerations that could make the trial easy, expeditious, or
inexpensive, id.; the relative administrative difficulty in the
two fora resulting from court congestion,
id., at 4373; 15 WRIGHT
ET AL. § 3854; the local interest in deciding local controversies
at home, 1A PT.2 MOORE'S ¶ 0.345[5] at 4374; the public policies
of the fora, see 15 WRIGHT ET AL. § 3854; and the familiarity of the
trial judge with the applicable state law in diversity cases. 15
WRIGHT ET AL. § 3854.
Within this framework, a forum selection clause is
treated as a manifestation of the parties' preferences as to a
convenient forum. Hence, within the framework of § 1404,
Congress "encompasse[d] consideration of the parties' private
expression of their venue preferences." Stewart, 487 U.S. at 29-
30, 108 S. Ct. at 2244. Although the parties' agreement as to
the most proper forum should not receive dispositive weight,
id.
at 31, 108 S.Ct. at 2245; Red Bull Assocs. v. Best Western Int'l,
Inc.,
862 F.2d 963, 967 (2d Cir. 1988), it is entitled to
substantial consideration. See Weiss v. Columbia Pictures
Television, Inc., 801 F. Supp. 1276, 1278 (S.D.N.Y. 1992)
(quoting
Stewart, 487 U.S. at 29, 108 S. Ct. at 2243). Thus,
while courts normally defer to a plaintiff's choice of forum,
such deference is inappropriate where the plaintiff has already
freely contractually chosen an appropriate venue. See In re
Ricoh Corp.,
870 F.2d 570, 573 (11th Cir. 1989) (remand of
Stewart);
Weiss, 801 F. Supp. at 1278. Where the forum selection
clause is valid, which requires that there have been no "fraud,
influence, or overweening bargaining power," see The Bremen v.
Zapata Offshore Co.,
407 U.S. 1, 12-13,
92 S. Ct. 1907, 1914-15
(1972), the plaintiffs bear the burden of demonstrating why they
should not be bound by their contractual choice of forum.
Such an extensive enumeration of factors to be balanced
makes "a written opinion setting forth the reasons for transfer
. . . highly desirable, [although] not essential if the record
shows that the proper factors were considered." 1A PT.2 MOORE'S, ¶
0.345[5], at 4381; Westinghouse Elec. Corp. v. Weigel, 426 F.2d
1356 (9th Cir 1970). In light of this principle, the district
court's rather opaque order is problematic. Even had the court
believed that it was applying § 1404(a), there is no indication
that it properly considered these factors, and the written order
denying the motion to appoint the arbitrators does not satisfy
the mandate that the proper factors be considered. Ordinarily,
we would remand for further consideration; here, however, the
factors unequivocally support a transfer to the venue specified
in the contractual forum selection clause, so that a remand is
unnecessary.
We note in this regard that some courts have refused to
apply this multi-factored balancing test where the transfer
requested involves a forum which is a relatively short distance
from the original forum. Instead, such courts have simply
refused to consider transfer, arguing that the statute was not
intended for these types of transfers, and some commentators have
agreed. See 15 WRIGHT ET AL. § 3854, at 470 (citing cases).
But refusing to entertain the transfer would leave this
case in the Eastern District of Pennsylvania, an odd result given
the location of the parties, the situs of the original contract,
and the ultimate location of the arbitration proceedings
themselves pursuant to the contractual forum selection clause, as
we explain in the balance of this opinion. Although we recognize
the validity of these other courts' concerns, we believe the
factors weigh so heavily in favor of transferring this action to
the Middle District that we will apply § 1404(a) notwithstanding
the proximity of the alternative fora.
C. THE CONTRACTUAL VENUE PROVISIONS
In concluding that this action to compel arbitration
could only be brought in the Court of Common Pleas of Luzerne
County, the district court relied on its interpretation of the
insurance contract. As we have explained, however, the decision
whether venue was appropriate in the original forum or whether
the action should be transferred involves a multi-factored test
incorporating the forum selection clause as one facet of the
convenience-of-the-parties consideration. Hence, while the
district court should have interpreted and considered the
contractual choice of forum, it erred to the extent that it
accorded the clause dispositive effect.
Beyond relegating the forum selection clause to being a
non-dispositive factor, albeit one entitled to "substantial
consideration," we also review the district court's construction
of the provision. A district court's construction of a contract
is subject to plenary review, as it concerns the legal effect of
an agreement and is therefore a question of law. Vanguard
Telecommunications, Inc. v. Southern New England Tel. Co., 900
F.2d 645, 650 (3d Cir. 1990). We conclude that, although the
parties did contemplate that this action transpire within Luzerne
County, they did not limit the fora to the state courts but
rather intended to permit the action in any court, including the
federal court, of the county.
The insurance contracts between the Jumaras and State
Farm provide that the matters of whether the Jumaras are entitled
to collect damages from the owner of an underinsured motor
vehicle and if so, in what amount, are questions to be decided by
agreement of the parties. The contracts further provide:
If there is no agreement, these questions
shall be decided by arbitration at the
request of the insured or us. The
Pennsylvania Uniform Arbitration Act, as
amended from time to time, shall apply.
Each party shall select a competent and
impartial arbitrator. These two shall select
a third one. If unable to agree on a third
one within 30 days either party may request a
judge of a court of record in the county in
which the arbitration is pending to select a
third one. The written decision of any two
arbitrators shall be binding on each party.
* * *
The arbitration shall take place in the
county in which the insured resides unless
the parties agree to another place. State
court rules governing procedure and admission
of evidence shall be used.
App. at 144a.
Plaintiffs correctly note that the requirement that
arbitration occur in the county of their residence controls only
the location of the arbitration proceeding. By its terms, this
provision says nothing about where a petition to appoint
arbitrators or to compel arbitration may be brought. Accord
Shapiro v. Keystone Ins. Co., 558 A.2d 891, 894 (Pa. Super.
1989). But this conclusion does not end our inquiry.5
By its terms, the agreement directs that where, as
here, the two parties' arbitrators are unable to agree on a
neutral third arbitrator, "either party may request a judge of a
court of record in the county in which the arbitration is pending
to select a third one." Although the district court concluded
that this could only occur in the Court of Common Pleas of
Luzerne County, we hold that the phrase "a court of record in the
county" includes the United States District Court for the Middle
District of Pennsylvania, the federal judicial district that
encompasses Luzerne County. Our construction follows from the
fact that the federal courts are "courts" within the meaning of
the Pennsylvania UAA, which is incorporated in the insurance
contracts. As we noted in Allstate Ins. Co. v. Gammon, 838 F.2d
73 (3d Cir. 1988), the UAA was amended to change the definition
of "courts" from merely "the common pleas courts of the county
5
. Although neither party was able at oral argument to explain
how arbitration could actually be "pending" when arbitrators have
not been selected, we agree with the parties that the only
sensible construction of the contract language ("the county in
which the arbitration is pending") is to refer to the county
where the arbitration proceeding will be pending or held, i.e.,
Luzerne County, Pennsylvania.
having jurisdiction of the parties or the subject matter" to "any
court of competent jurisdiction of [the] Commonwealth." Id. at
76-77 (quoting former § 178 of the Pa. UAA and 42 PA. CON. STAT.
ANN. § 7318 (1952)). This venue provision thus permits
applications for appointment of arbitrators to be made to the
United States District Court for the Middle District of
Pennsylvania.
This conclusion does not by itself determine whether,
pursuant to this contractual provision, venue might not be proper
in the Eastern District of Pennsylvania, for the quoted provision
is permissive ("either party may request"), see supra at 17, and
thus leaves unresolved the question of the parties' intent, i.e.,
whether they intended to make an exclusive choice of courts of
Luzerne County as the only fora for these actions. It is
nevertheless unnecessary to remand this case to the district
court for the purpose of determining the parties' intent with
respect to the forum selection provision, inasmuch as other
provisions of the contract resolve any ambiguity.
The insurance contracts specifically direct that "the
Pennsylvania Uniform Arbitration Act . . . shall apply." Section
7304 of the UAA provides that "[o]n application to a court to
compel arbitration . . ., the court shall order the parties to
proceed with arbitration." 42 PA. CON. STAT. ANN. § 7304 (1982).
We believe that section § 7319, which governs venue
considerations, is dispositive. It commands that ("[e]xcept
where otherwise prescribed by general rules"),
[a]n initial application to a court under
this subchapter shall be made to the court of
the county in which the agreement prescribes
that the arbitration hearing shall be held
or, if the hearing has been held, in the
county in which the hearing was held.
42 PA. CON. STAT. ANN. § 7319(1) (1982) (emphasis added).
Thus, by incorporating the UAA, the insurance contracts
between the Jumaras and State Farm dictate that actions to compel
arbitration be made to "a court of record" of Luzerne County, see
supra at 17. As we explained above, this includes the
appropriate United States District Court. While it thus includes
the District Court for the Middle District of Pennsylvania, which
embraces Luzerne County, it does not include the United States
District Court for the Eastern District, which is not a court "of
[Luzerne] county." The district court was therefore correct in
concluding that, by their express terms, the insurance contracts
under which the Jumaras were proceeding did not contemplate venue
in the Eastern District.
D. OTHER § 1404 CONSIDERATIONS
As we have already explained, courts balancing the
convenience of the parties, the convenience of the witnesses, and
the interests of justice should place considerable weight on the
parties' original choice of forum, as expressed in a contractual
forum selection clause. The insurance contract at issue here
contained a forum selection clause in effect specifying the
Middle District of Pennsylvania as the site for any arbitration
under the contract. There is no claim of unequal bargaining that
might invalidate the clause. The plaintiffs in this case clearly
cannot make the showing of convenience necessary to overcome the
presumption established by the forum selection clause, and
neither the witness convenience nor the interest-of-justice
factors counsel in favor of maintaining the action in the Eastern
District of Pennsylvania. Indeed, some of these other
considerations actually militate in favor of the Middle District
of Pennsylvania.
Everything related to this action occurred in Luzerne
county, which lies in the Middle District: plaintiff resides
there, the contract was signed there, the underlying accident
occurred there, and the requested arbitration will eventually
occur there. Unlike Red Bull Associates, 862 F.2d at 963, where
the federal forum had a strong policy interest in enforcing the
civil rights laws thus justifying setting aside a forum selection
clause, the Eastern District has no corresponding public policy
interest in appointing the arbitrator in this case. Given the
close proximity of the two fora, the § 1404(a) factors other than
the forum selection clause factors -- the relative physical and
financial condition of the parties, the location of the
witnesses, the situs of the documentary evidence, and the
relative expense or expeditiousness of the trial -- do not render
one forum significantly more convenient than the other, and they
certainly do not support overriding the parties' original venue
preference as expressed in the forum selection clause.6
6
. The financial condition of the Jumaras might make the Middle
District more convenient to them, but since their present counsel
is from Philadelphia that consideration would appear muted.
The fact that the two fora are adjacent districts of
the same state also obscures the interest-of-justice analysis,
which gives little reason to override the forum selection clause.
None of the following factors exist: (1) a likelihood of an
enforcement problem; (2) a distinct public interest in resolving
the claims in a Luzerne County court as opposed to in
Philadelphia; (3) a different policy preference in the two
locales; (4) a disparity in the qualifications of the federal
judges sitting in the two districts to pass on the same
Pennsylvania law; or (5) an appreciable difference in docket
congestion between the two districts. After reviewing the
various facets of the convenience of the parties and witnesses as
well as the interests of justice, we do not believe that these
factors, most of which cannot distinguish the fora on convenience
grounds, could overcome the "substantial consideration" due the
forum selection clause.
IV. CONCLUSION
The Supreme Court explained in Stewart that section
1404(a) was intended to vest district courts with broad
discretion to determine, on an individualized, case-by-case
basis, whether convenience and fairness considerations weigh in
favor of transfer. Stewart, 487 U.S. at 30-31, 108 S. Ct. at
2244. Because it appears that the district court erroneously
believed that this action could only be brought in state court,
it did not construe State Farm's objection to the appointment as
a § 1404(a) motion. As a result, the court did not make the
determinations required by that provision. However, because the
balance in this case so clearly mandates a transfer to the Middle
District of Pennsylvania, a remand to the district court for the
§ 1404 balancing is unnecessary. We will therefore vacate the
district court's order denying the motion to appoint arbitrators
and compel arbitration, and direct the district court to order
the transfer.
______________________
George Jumara; et al. v. State Farm Insurance Company,
No. 94-1447
GARTH, Circuit Judge, dissenting:
After the Jumaras filed their petition and their motion
to appoint arbitrators, State Farm filed its answer in
opposition. The panel majority has now concluded that the
district court erred by failing to transfer the Jumaras'
proceeding to the Middle District of Pennsylvania. It does so by
using some judicial alchemy to transform State Farm's answer to
the Jumaras' motion to appoint arbitrators into a motion to
transfer venue under the federal venue statutes, 28 U.S.C.
§§ 1391, 1404 and 1406.
It so holds even while it agrees that the district
court judge was eminently correct when he denied the Jumaras'
petition to appoint arbitrators. Despite this admission, the
majority directs that the district court's order denying
appointment of arbitrators must be vacated. It also requires
that the district court transfer the Jumaras' petition to the
Middle District of Pennsylvania -- a transfer sought by neither
of the parties and certainly not desired by the Jumaras.
Because I believe that we should not vacate a district
court's order when the substantive order that it entered was
unquestionably correct in light of the issues raised by the
parties, and because no party in this case ever sought a
§ 1404(a) transfer of venue, either on appeal before us, or even
more importantly, before the district court, I am compelled to
dissent.7
I.
It should be remembered that the Jumaras' counsel only
petitioned the district court for the appointment of arbitrators
and to compel arbitration. He did so by invoking those portions
of the Jumaras' insurance contract and the sections of the
Pennsylvania Uniform Arbitration Act referred to by the majority.
7
. A question arose early on in this case whether the
district court was ever presented with a justiciable case or
controversy within the meaning of Article III. Under the
ripeness doctrine, federal courts "will not decide a case where
the claim involves contingent future events that may not occur as
anticipated, or indeed may not occur at all." Thomas v. Union
Carbide Agric. Prods. Co., 473 U.S. 568, 580-81 (1985).
The Jumaras seek ultimately to recover underinsurance
benefits from State Farm. By definition, and by the terms of the
insurance contract between the parties, underinsurance coverage
becomes available only after (1) it is determined that the
individual responsible for the harm complained of is liable and
unable to fully compensate the insured, or (2) the limits of the
tortfeasor's coverage has been offered.
Unless and until these conditions have been satisfied,
any judicial pronouncement on the matter is necessarily
speculative and vain. If for instance it is later found that the
alleged tortfeasor's liability is within the limits of her own
liability coverage (or indeed that she is not liable at all),
then the exertions of counsel and arbitrators, with their
associated costs to the parties, as well as the efforts of the
courts, will have been for nought.
We have been informed by counsel for the Jumaras that
on October 20, 1994, the Jumaras' action against Reynolds, the
alleged tortfeasor, was settled for the limits of Reynolds'
vehicle policy and that State Farm had waived its subrogation
rights. This, of course, triggered the Jumaras' rights under the
provisions of the Jumaras' own policy.
It was this motion that the district court denied, and properly
so, on the basis of the factual and legal contentions before it.
There can be no question that the majority is correct
in pointing out that under 28 U.S.C. § 1404(a), the district
court when faced with a motion challenging venue, is limited to
either retaining jurisdiction over the proceeding, or
transferring jurisdiction to the district where it should have
been brought. In this case, the most appropriate venue lay in
any court of competent jurisdiction of Luzerne County, which
would include the United States District Court for the Middle
District of Pennsylvania. See Allstate Ins. Co. v. Gammon, 838
F.2d 73, 77 (3d Cir. 1988) (holding that district courts are
included within the meaning of "any court of competent
jurisdiction of [the] Commonwealth").
I have no problem with the majority's analysis of 28
U.S.C. § 1404(a) and § 1406. Nor do I have a problem with the
majority's ultimate determination that the factors relevant to
retaining jurisdiction under § 1404(a) or transferring a
proceeding to another locality under § 1404(a) favor giving
predominant weight to the forum selection clause in the parties'
contract. Thus, I do not dispute the majority's view that the
Middle District was one venue open to the parties, as was the
Court of Common Pleas of Luzerne County.
Nor do I quarrel with the majority's analysis of the
federal venue provisions. In this case, of course, the forum
selection clause unquestionably required any application for
arbitrators to be made in Luzerne County and not in the Eastern
District of Pennsylvania. The majority so holds, and if it were
not for the fact that §§ 1404 and 1406 were never raised nor
presented as an issue in the Jumaras' proceedings, I would have
joined the majority opinion. However, at no time, and in no
court, did either the Jumaras or State Farm seek a venue change
under § 1404(a) or even mention § 1404(a) in their respective
arguments or briefs.
I emphasize first and foremost that neither party --
neither the Jumaras nor State Farm -- ever invoked, referred to,
cited or argued that 28 U.S.C. § 1391 (venue generally), or
§ 1404 (change of venue), or § 1406 (cure or waiver of defects
[in venue]) should be considered by any court.8 The motion made
by the Jumaras was purely and simply a substantive motion to
"Appoint Neutral and Defense Arbitrators and to Compel
Underinsured Motorist Arbitration." It was that motion, and
8
. I note that venue is a privilege provided to the defendant,
that this privilege may be waived, and that it is waived if it is
not expressly asserted. See generally, A. WRIGHT ET AL. FEDERAL
PRACTICE AND PROCEDURE: JURISDICTION AND RELATED MATTERS § 3829,
AT 309 - 318 (2D ED. 1986). Moreover, Fed.R.Civ.P. 12(b)(3)
requires that a defense of improper venue be raised in the
responsive pleadings or by motion, or it will be deemed waived.
In light of the record before us, which is totally
devoid of any mention of § 1406, § 1404, or § 1391 (the general
federal venue statute) in any pleading or motion, it is
surprising to me that the majority has ignored all waiver
jurisprudence and has gratuitously embarked on a venue analysis
which the parties and the district court have evidently abjured.
only that motion, that the district court considered and denied.
It did so properly and correctly, and the majority of the court
does not argue otherwise.
The record does not reveal that either party ever
raised the issue of § 1404 venue before the district court. At
no time did the district court ever advert to the subject of
§ 1404 venue. The district court's opinion makes no reference to
§ 1404 venue. The briefs before us did not raise any issue of
§ 1404 venue. The argument before us never touched on any of the
federal venue statutes. Indeed, the first time that § 1404 or
§ 1406 surfaced was when the majority, relying upon those
statutes, took the occasion to vacate the district court's order
and to direct the district court to order a transfer of the
Jumaras' proceedings to the Middle District of Pennsylvania
pursuant to § 1404(a).
Had the issue of venue under § 1404(a) been raised, I
could not fault the majority for holding that § 1404 required a
transfer. However, where the issue of § 1404(a) venue was never
raised and where the district court judge was presented only with
the substantive issue of appointing an arbitrator, I cannot find
fault, and I suggest the majority should not find fault, with the
district judge's disposition of the matter. In my opinion,
counsel have an obligation to specifically inform the judge
exactly what it is that they desire and they must then support
that request for relief with appropriate authority. Here, the
district court was asked only to appoint arbitrators. It was
never asked to consider a venue change under § 1404 or § 1406,
and indeed, despite the majority's claim that the district court
considered venue, it did not consider or analyze the federal
venue provisions. It was the issue of appointing arbitrators,
and that issue only, that the district court decided.
It is true that the district court in its footnote to
its order referred to Luzerne County as the proper place to seek
relief. But, the district court did not order transfer to
Luzerne County because it was obviously never asked to do so.
The Jumaras never asked for a transfer of venue. Quite to the
contrary, the Jumaras' counsel has persistently argued that the
Jumaras do not desire venue in Luzerne County. Why not? Because
arbitrators selected from Luzerne County might not be as liberal
with an insurance company's dollars as the arbitrators appointed
in the Eastern District of Pennsylvania.
For this reason, as candidly expressed by counsel,
application was made by the Jumaras to the United States District
Court for the Eastern District of Pennsylvania. We were informed
that an arbitrator appointed from within the geographical scope
of the Eastern District was likely to award a higher amount of
damages than an arbitrator appointed from Luzerne County.9
9
. At oral argument counsel for the Jumaras explained the rather
parochial practice of Philadelphia arbitrators in underinsurance
cases. They apparently determine what a case is "worth" and then
make an underinsurance award of the amount by which the
claimant's "damages" exceed the policy limits of the putative
tortfeasor's insurance. They do so seemingly in disregard of the
The record just does not reveal that State Farm asked
the district court to exercise its § 1404(a) discretion to
transfer the matter to Luzerne County. State Farm took the
position that the Jumaras' petition should be denied outright --
as it was. How then can we direct the district court to order a
transfer in conformity with relief that it was never asked to
grant and which neither of the parties sought?
One would think that we would affirm a district court's
order where the district court did not err in its substantive
disposition and where the district court was asked to do nothing
more than to decide the motion brought before it by the
plaintiff.10 Here, the Jumaras sought the appointment of
(..continued)
contractual conditions precedent referred to in note 1, supra.
Counsel also represented that it is the practice of Scranton
arbitrators, as contrasted with arbitrators appointed in the
Eastern District, to refrain from making an award until the
underlying claim has been resolved.
Together with both counsel, I share an inability to
explain how an arbitral award of underinsurance coverage may
properly be made prior to determining the extent (or even the
existence) of the alleged tortfeasor's liability.
10
. It is obvious to me, if not to the majority, that the
district court contemplated that the Jumaras would bring a new
action in Luzerne County after they were denied the appointment
of arbitrators in the Eastern District. The majority states
that, to implement this, "...it [the district court] would have
to consider transferring the case pursuant to § 1404." Maj. Op.
p. 8, n. 3. The difficulty with the district court considering
such a transfer was that neither the district court nor the
parties ever considered § 1404. The district court considered
such a transfer, if at all, only under the Commonwealth's
statutes, which could not in any event have been employed in a
federal court's venue analysis, as the majority makes clear in
its analysis of Stewart Organization, Inc. v. Ricoh Corp., 487
U.S. 22 (1988).
arbitrators. The district court properly denied that motion.
The district court was never asked about, or even became
acquainted with, the venue considerations that the majority has
today, by hindsight, now developed and analyzed. However, the
majority, without discussing the sua sponte responsibilities of a
district court to supply that which counsel has not supplied,
asked for, or even referred to, nevertheless has now vacated the
district court's order and has directed it to transfer the
proceeding to Luzerne County.
I cannot condone reversing a district court judge when
he has done no more than rule correctly on the issue as
formulated by the parties. I do not think that an appellate
court can or should convene months later and evolve analyses and
theories that neither the district court nor counsel ever
considered and then, for the first time, impose them upon the
district court.
The majority in its footnotes 3 and 4 seeks to excuse
its gratuitous discussion of federal venue under §§ 1404 and 1406
by noting that the district court in the footnote to its April 4,
1994 order, states that the Jumaras' proceeding should be
conducted in Luzerne County. There is no question but that the
district court was aware of a venue defect. But there is also no
question that the venue issue, if addressed at all by the
parties, was addressed under the terms of the State Farm contract
and the Pennsylvania venue statutes, and not under the federal
venue statutes. Thus, the majority is plainly disingenuous when
it states, at page 12, footnote 4, that "...the district court
clearly did consider the sort of venue analysis upon which we
base our holding." The district court at no time considered a
venue analysis which drew on the federal venue statutes, §§ 1404,
1406 and 1391, the very statutes on which the majority bases its
holding.
II.
Our decision in this case was crystal clear. We should
have affirmed the very correct decision made by the district
court judge. We did not. I therefore respectfully dissent.
