Martin v. Stokes

• Decision Date: 19 June 1980
• Docket Number: No. 78-3390,78-3390
• Citation: 623 F.2d 469
• Parties: Diane C. MARTIN, Plaintiff-Appellant, v. Nelson STOKES t/a Nelson Stokes Garage and Allen R. Lisenby, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 469

623 F.2d 469

Diane C. MARTIN, Plaintiff-Appellant, v. Nelson STOKES t/a Nelson Stokes Garage and Allen R. Lisenby Defendants-Appellees.

No. 78-3390.

United States Court of Appeals Sixth Circuit.

Argued April 17, 1980.

Decided June 19, 1980.

Jeffrey H. Krasnow, Roanoke, Va., for plaintiff-appellant.

Burke B. Terrell, Hardy, Terrell & Boswell, Paducah, Ky., for defendants-appellees.

Before CELEBREZZE, KEITH and BROWN, Circuit Judges.

BAILEY BROWN, Circuit Judge.

This appeal presents the intriguing but difficult question of what state law should be applied in this diversity action originally commenced in a federal district court in Virginia and subsequently transferred to a federal district court in Kentucky.

I

The plaintiff, Diane C. Martin, was injured in an automobile accident at Ft. Campbell, Kentucky on August 2, 1973. The other vehicle was driven by Allen R. Lisenby, a minor and a citizen of California, and the vehicle was owned by the minor's grandfather, Nelson Stokes, who operated a garage in the Ft. Campbell area and was a citizen of Kentucky. The minor, with his mother, was visiting in the area at the time. Thereafter, Ms. Martin retained counsel at her home in Roanoke, Virginia, and counsel entered into settlement negotiations with adjusters for the liability insurance company whose policy covered the vehicle driven by Lisenby. Both Martin's attorney and the adjusters were under the mistaken impression that Kentucky, like Virginia, had a two-year applicable statute of limitations; in fact, the applicable Kentucky statute was one year.

After somewhat more than a year had expired following the accident, offers had been made by the adjusters and rejected, and a lawsuit was contemplated, the adjusters and counsel for Martin discovered that Kentucky's statute of limitations was one year. Counsel for Martin thereupon, in March, 1975, filed a diversity action for her in the federal district court for the Western District of Virginia and summonses were directed to the United States Marshals at Los Angeles and Paducah, Kentucky, and Lisenby and Stokes were personally so served in their home districts.

Lisenby and Stokes then, through their attorney retained by the insurance company, filed motions to "quash process . . . for the reason that service of process was had on this defendant outside of the territorial limits of the State of Virginia." While these motions were probably well taken (see Rule 4(f), Fed.R.Civ.P.), the district court denied them and, in the order denying these motions to quash process, the district court granted defendants' oral motion to transfer the case to the Western District of Kentucky. ¹ This order did not state the ground for denying the motions to quash. It also did not state whether the transfer was for the convenience of the parties and the witnesses under 28 U.S.C. § 1404(a) or was a transfer under 28 U.S.C. § 1406(a) because there was a legal impediment to proceeding in that forum, and, as will be seen, the nature of the transfer determines the law to be applied.

Following the transfer to Kentucky, Lisenby and Stokes filed a motion to dismiss the action asserting that it was barred by the one year Kentucky statute of limitations. In response to that motion, Martin contended that the two year Virginia statute of limitations was controlling. The district court, in granting the motion to dismiss, concluded that the Kentucky statute was applicable and that therefore the action was barred by the one year statute of that state. Martin then brought this appeal.

The parties agree that a Virginia state court would, labeling its statute of limitations as "procedural" law, apply its statute to this claim even though it grew out of an accident that occurred in Kentucky. It appears that the federal district court in Virginia should and would have likewise applied the Virginia statute; this is true because the federal district court should and would, for Erie purposes, have characterized this choice of law principle of Virginia as being "substantive" law. Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941); Sampson v. Channell, 110 F.2d 754 (1st Cir.), cert. denied, 310 U.S. 650, 60 S.Ct. 1099, 84 L.Ed. 1415 (1940). Thus, as the parties agree, the question is whether the Kentucky federal district court should apply the Virginia statute of limitations as the Virginia federal district court would have or should apply the Kentucky statute as it would have had this action initially been filed there.

II

In Van Dusen v. Barrack, 376 U.S. 612, 84 S.Ct. 805, 11 L.Ed.2d 945 (1964), the Supreme Court resolved at least in part the issue of what state law should be applied following the transfer of a diversity action from a federal district court in one state to a federal district court in another state. The Court held that where a defendant seeks and obtains a "convenience" transfer of venue pursuant to 28 U.S.C. § 1404(a), "the transferee district court must be obligated to apply the state law that would have been applied if there had been no change of venue." Van Dusen, however, did not specifically decide whether the state law to be applied following a transfer should be affected by which party sought the transfer. See Note, Choice of Law in Federal Court After Transfer of Venue, 63 Cornell Law Review 149 (1977), 1 Moore's Federal Practice P 0.145(4.-5) at 1608-1614. We conclude that it should make no difference whether the transfer was made on motion of plaintiff or defendant and that, as stated, the choice of law should depend upon the motive of the transfer, that is, whether the transfer was pursuant to 28 U.S.C. § 1404(a) or § 1406(a).

A.

The purposes of the two principal transfer provisions are significantly different. Section 1404(a) ² applies in general to those actions brought in a permissible but inconvenient forum. A district court may, "(f)or the convenience of parties and witnesses, in the interest of justice," transfer the action to a more convenient forum. In contrast, § 1406(a) ³ applies in general to those actions brought in an impermissible forum. Rather than dismiss the action when the issue is raised, a district court may, in its discretion, transfer the action to a permissible forum.

In reaching its conclusion in Van Dusen that, in a "convenience" transfer, the law of the transferor court is to be applied, the Supreme Court relied primarily on the underlying purposes of § 1404(a).

The legislative history of § 1404(a) certainly does not justify the rather startling conclusion that one might "get a change of law as a bonus for a change of venue." Indeed, an interpretation accepting such a rule would go far to frustrate the remedial purposes of § 1404(a). If a change of law were in the offing, the parties might well regard the section primarily as a forum-shopping instrument. And, more importantly, courts would at least be reluctant to grant transfers, despite considerations of convenience, if to do so might conceivably prejudice the claim of a plaintiff who had initially selected a permissible forum. We believe, therefore, that both the history and purposes of § 1404(a) indicate that it 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.

(Footnotes omitted.) Van Dusen v. Barrack, supra at 636-637, 84 S.Ct. at 819. Since a transfer under § 1404(a) represents only a change in courtrooms for the convenience of the litigants and witnesses, it should not affect the state law governing the action.

The purposes of § 1406(a), however, suggest just the opposite choice of law. A transfer under § 1406(a) is based not on the inconvenience of the transferor forum but on the impropriety of that forum. If the state law of the forum in which the action was originally commenced is applied following a § 1406(a) transfer, the plaintiff could benefit from having brought the action in an impermissible forum. Plaintiffs would thereby be encouraged to file their actions in the federal district court where the state law was the most advantageous, regardless of whether that district court was a proper forum. Such forum-shopping was what the Supreme Court sought to eliminate by its decision in Van Dusen. Accordingly, we conclude, as have the majority of authorities that have considered this question, that following a transfer under § 1406(a), the transferee district court should apply its own state law rather than the state law of the transferor district court. See Geehan v. Monahan, 382 F.2d 111 (7th Cir. 1967); Broome v. Antlers' Hunting Club, 448 F.Supp. 121 (M.D.Pa.1978), rev'd on other grounds, 595 F.2d 921 (3rd Cir. 1979); Note, Choice of Law in Federal Court After Transfer of Venue, supra at 160; 1 Moore's Federal Practice, supra at 1608.

While some authorities, including one in this court, have emphasized the importance of the party seeking the transfer, see Carson v. U-Haul Co., 434 F.2d 916 (6th Cir. 1970); ⁴ Parham v. Edwards, 346 F.Supp. 968 (S.D.Ga.1972), aff'd per curiam, 470 F.2d 1000 (5th Cir. 1973); 15 Wright, Miller, and Cooper, Federal Practice and Procedure, § 3846, we believe that the more appropriate emphasis is on the nature of the transfer. If, for example, the choice of law is based on which party requested the transfer, then the danger of improper forum-shopping would still remain in those situations where the plaintiff had brought his action in a permissible forum but had selected one with less favorable state law. The plaintiff could correct that error simply by moving to transfer the action under § 1404(a). See Note, Choice of Law in Federal Court After Transfer of Venue, supra. Section 1404(a) in such a situation would, contrary to Van Dusen, represent more than just a change of courtrooms. Moreover, such a result would...