In re Howmedica Osteonics Corp

• Citation: 867 F.3d 390
• Decision Date: 15 August 2017
• Docket Number: No. 16-3682,16-3682
• Parties: IN RE: HOWMEDICA OSTEONICS CORP, a New Jersey corporation and subsidiary of Stryker Corporation, Petitioner
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

867 F.3d 390

IN RE: HOWMEDICA OSTEONICS CORP, a New Jersey corporation and subsidiary of Stryker Corporation, Petitioner

No. 16-3682

United States Court of Appeals, Third Circuit.

Argued: January 25, 2017

Opinion Filed: August 15, 2017

Robert J. Carty, Jr. (Argued), Seyfarth Shaw, 700 Milam Street, Suite 1400, Houston, TX 77002, Michael D. Wexler, Seyfarth Shaw, 233 South Wacker Drive, Suite 8000, Chicago, IL 60606, Attorneys for Plaintiff-Petitioner Howmedica Osteonics Corp.

Jed L. Marcus (Argued), Bressler Amery & Ross, 325 Columbia Turnpike, Suite 301, Florham Park, NJ 07932, Attorney for Defendant-Respondents Brett Sarkisian, Keegan Freeman, Michael Nordyke, Taylor Smith, and Bryan Wyatt

Leigh Ann Buziak, Anthony B. Haller (Argued), Rosemary McKenna, Blank Rome, 130 North 18th Street, One Logan Square, Philadelphia, PA 19103, David C. Kistler, Stephen M. Orlofsky, Blank Rome, 301 Carnegie Center, Third Floor, Princeton, NJ 08540, Attorneys for Defendant-Respondent DePuy Orthopaedics Inc.

Jeffery K. Brown (Argued), Erik M. Andersen, Payne & Fears, 4 Park Plaza, Suite 1100, Irvine, CA 92614, Robert B. Rosen, Hellring Lindeman Goldstein & Siegal, One Gateway Center, 8th Floor, Newark, NJ 07102, Attorneys for Defendant-Respondent Golden State Orthopaedics Inc.

Before: KRAUSE, SCIRICA, and FUENTES, Circuit Judges

OPINION OF THE COURT

KRAUSE, Circuit Judge.

In the absence of a forum-selection clause, a defendant in federal court may move under 28 U.S.C. § 1404(a) for a transfer to another district for "convenience" and "in the interest of justice." But where contracting parties have specified the forum in which they will litigate disputes arising from their contract, federal courts must honor the forum-selection clause "[i]n all but the most unusual cases," following the Supreme Court's instructions in Atlantic Marine Construction Co. v. U.S. District Court , ––– U.S. ––––, 134 S.Ct. 568, 583, 187 L.Ed.2d 487 (2013). This mandamus proceeding requires us to determine how district courts should apply Atlantic Marine where all defendants seek a transfer to one district under § 1404(a) and where some, but not all, of those defendants are parties to forum-selection clauses that designate different districts. Because we conclude the District Court erred in its application of Atlantic Marine by declining to honor the forum-selection clauses applicable to some of the litigants and by transferring the action in its entirety, we will issue a writ of mandamus and, applying the test we announce today, direct the District Court to transfer claims against only the two corporate defendants who did not agree to any forum-selection clause.

I. Background

California natives Keegan Freeman, Michael Nordyke, Brett Sarkisian, Taylor Smith, and Bryan Wyatt (collectively, "Sales Representatives") are former California sales representatives for Howmedica Osteonics Corp., a New Jersey corporation, and its parent company, Stryker Corp. (collectively, "Howmedica").¹ The Sales Representatives began their employment with Howmedica when they signed employment agreements with confidentiality and non-compete clauses. The agreements also contained forum-selection clauses, which designated New Jersey (or, in Nordyke's case, Michigan) as the forum for any litigation arising out of the agreements.

After clashes with Howmedica over its management and their compensation, the Sales Representatives resigned and became independent contractors representing Howmedica's competitor, DePuy Orthopaedics, Inc., and DePuy's regional distributor, Golden State Orthopaedics, Inc. Some of Howmedica's customers, who were previously assigned to the Sales Representatives, followed them, leading Howmedica to suspect that the Sales Representatives, DePuy, and Golden State had conspired to convert those customers even in advance of the Sales Representatives' resignation dates. Howmedica therefore brought suit in the District of New Jersey, charging DePuy and the Sales Representatives with breach of contract and related claims under state law, and joining Golden State to the suit as a "necessary party."

Emphasizing the convenience to themselves and to the witnesses in California, the defendants promptly moved to transfer the case to the Northern District of California pursuant to 28 U.S.C. § 1404(a), which, for "the convenience of parties and witnesses" and "in the interest of justice," allows transfer to a district where the case "might have been brought." See Howmedica Osteonics Corp. v. Sarkisian (Howmedica I) , No. 14-3449, 2015 WL 1780941, at *2 (D.N.J. Apr. 20, 2015). After balancing the relevant public and private interests, the District Court agreed and ordered the transfer. See Howmedica Osteonics Corp. v. Sarkisian (Howmedica II) , No. 14-3449, 2016 WL 8677214, at *2-6 (D.N.J. Aug. 26, 2016).² The District Court did not address Golden State's separate argument asserting that the District of New Jersey lacked personal jurisdiction as to that defendant. See Howmedica II , 2016 WL 8677214, at *2-6.³

While those New Jersey proceedings were pending, Golden State filed its own suit for declaratory relief against Howmedica in the Northern District of California, alleging that the non-compete clauses in Howmedica's employment agreements violated California law. That district court issued an order deeming Golden State's suit related to the transferred New Jersey case and also issued two preliminary scheduling orders in the transferred case, but it then stayed both cases after Howmedica petitioned this Court for a writ of mandamus. Howmedica now asks us to vacate the District Court's transfer order on the ground that it contravenes the Supreme Court's decision in Atlantic Marine Construction Co. v. U.S. District Court , which held that, except in "the most unusual cases," a district court should give effect to a valid forum-selection clause. ––– U.S. ––––, 134 S.Ct. 568, 583, 187 L.Ed.2d 487 (2013).⁴

Below, we first confirm our jurisdiction to entertain Howmedica's mandamus petition. Second, we consider the applicable standard of review. Third, we address the crux of this case: how district courts should apply Atlantic Marine when all defendants seek a transfer to one district under § 1404(a), but only some of those defendants agreed to forum-selection clauses that designate a different district.

II. Discussion

A. Jurisdiction⁵

The defendants have challenged our jurisdiction, contending that review of a § 1404(a) transfer order is permissible only to remedy a procedural defect and that, regardless, the Northern District of California's post-transfer orders in this case preclude our review. We, however, perceive no jurisdictional defect.

The All Writs Act, 28 U.S.C. § 1651, grants us jurisdiction to adjudicate a mandamus petition challenging an interlocutory order over which, pursuant to another jurisdictional statute, we could exercise jurisdiction at a later point. See United States v. Wright , 776 F.3d 134, 145 (3d Cir. 2015) ; Council Tree Commc'ns, Inc. v. FCC , 503 F.3d 284, 292-93 (3d Cir. 2007). Here, because 28 U.S.C. § 1291 affords us jurisdiction to review district courts' § 1404(a) transfer orders after entry of final judgment, those transfer orders are reviewable on a mandamus petition. See In re United States , 273 F.3d 380, 382-85 & n.4 (3d Cir. 2001) ; Nascone v. Spudnuts, Inc. , 735 F.2d 763, 772-74 (3d Cir. 1984). Moreover, under our case law, our mandamus jurisdiction over transfer orders encompasses both procedural and legal issues. See In re United States , 273 F.3d at 384 (procedural issues); id. at 389-90 (legal issue). The District Court's § 1404 transfer order therefore falls within a class of orders reviewable on mandamus.

But that does not end our jurisdictional inquiry, for we do not "indefinitely" possess mandamus jurisdiction, and, "once the transferee court proceeds with the transferred case, the decision as to the propriety of transfer is to be made in the transferee court," whether by appeal or by mandamus petition to the court of appeals for the transferee circuit. Id. at 384. The question, then, is at what point the transferee court "proceeds" with a transferred case, and whether the transferee court in this case, by issuing two scheduling orders and an order deeming the case related to Golden State's previously filed case, has crossed that threshold.

We conclude this case has not proceeded in the Northern District of California in a manner that would deprive us of jurisdiction. In In re United States , even after the transferee court had received the record from the Eastern District of Pennsylvania and had "scheduled the case for prompt trial," we held that we retained mandamus jurisdiction over the Eastern District of Pennsylvania's transfer order. Id. at 382-84. And although we declined to indicate "the specific length of time needed to allow the party resisting transfer to seek review" before our Court, we held that the Government, contesting the transfer order by mandamus petition, had "acted with sufficient dispatch"—even though the Government had filed its mandamus petition thirty-three days after the Eastern District of Pennsylvania had denied the Government's request for reconsideration of the transfer order and twelve days after the transferee court had issued a trial scheduling order. See id. at 382, 384 ; Order, United States v. Streeval , No. 01-0084-1 (M.D. Tenn. June 6, 2001), ECF No. 12.

We reach the same conclusion here. Howmedica filed its mandamus petition only twenty-seven days after the District Court's transfer order, as compared to the thirty-three day delay in In re United States . And although the transferee court in the Northern District of California issued two case management scheduling orders and an order relating the transferred case to Golden State's previously filed case, those orders do not show that the transferee court here proceeded any further with the case than the transferee court did in In re United...