Taylor v. Titan Midwest Const. Corp.

• Decision Date: 13 June 1979
• Docket Number: Civ. A. No. CA 3-78-1293-G.
• Citation: 474 F. Supp. 145
• Parties: G. A. TAYLOR, d/b/a Regal Drapery & Carpet Service v. TITAN MIDWEST CONSTRUCTION CORP.
• Court: U.S. District Court — Northern District of Texas

474 F. Supp. 145

G. A. TAYLOR, d/b/a Regal Drapery & Carpet Service v. TITAN MIDWEST CONSTRUCTION CORP.

Civ. A. No. CA 3-78-1293-G.

United States District Court, N. D. Texas, Dallas Division.

June 13, 1979.

Weil, Craig & Fischman, P. C. by Christopher M. Weil, J. Kathryn Lindauer, Dallas, Tex., for plaintiff.

John A. Martin, Wm. G. Milne, Carrington, Coleman, Sloman, Johnson & Blumenthal, Dallas, Tex., for defendant.

ORDER

PATRICK E. HIGGINBOTHAM, District Judge.

Plaintiff G. A. Taylor, a proprietorship based in Dallas, Texas, instituted this action against Titan Midwest Construction Corp. ("Titan"), a Delaware corporation with its principal place of business in St. Louis, Missouri, claiming actual and exemplary damages for breach of two subcontracts entered into by the parties in 1975. Jurisdiction is based on diversity of citizenship. The defendant seeks dismissal of the case for inproper venue pursuant to F.R.C.P. 12(b) or, alternatively, transfer of the case to the Eastern District of Missouri, Eastern Division. The motion is based on section 37 of the subcontracts, which reads as follows:

37. (a) It is agreed by Contractor and Subcontractor that if any controversy or claim arises out of or relates to this Subcontract or any alleged breach thereof jurisdiction and venue shall be in the appropriate Court having subject matter jurisdiction over the matter sitting within the County in which the principal offices of Contractor are located on the date of the dispute, and Contractor and Subcontractor hereby irrevocably agree to submit to the jurisdiction of such court. (emphasis added)

The question presented is whether this contractual venue provision should be enforced by this court.

I.

The threshold inquiry is whether federal law governs resolution of this dispute or whether the Erie doctrine requires that state law should control. While it is settled that venue in the federal courts is a matter governed by federal law, Brown v. Pyle, 310 F.2d 95 (5th Cir. 1962), the question involved here is not purely a matter of venue, as it also involves the enforceability of a contract provision. The courts are split on whether state or federal law provides the rule of decision with respect to the enforceability of contractual venue provisions. Compare Davis v. Pro Basketball, Inc., 381 F.Supp. 1 (S.D.N.Y.1974) and Leasewell, Ltd. v. Jake Shelton Ford, Inc., 423 F.Supp. 1011 (S.D.W.Va.1976) with St. Paul Fire and Maine Ins. Co. v. Travelers Indemnity Co., 401 F.Supp. 927 (D.Mass.1975) and Brown v. Gingiss Int'l, Inc., 360 F.Supp. 1042 (E.D.Wis.1973). See also In-Flight Devices Corp. v. Van Dusen Air, Inc., 466 F.2d 220, 234 n.24 (6th Cir. 1972). Other courts have declined to decide whether state or federal law governs the enforceability of contractual venue provisions in cases where under either view the result would have been the same. See, e. g., Central Contracting Co. v. Maryland Casualty Co., 367 F.2d 341 (3rd Cir. 1966); Cruise v. Castleton, Inc., 449 F.Supp. 564, 568 n.4 (S.D.N.Y. 1978). It is interesting to note, and perhaps significant, that in those cases where state law has been applied, the result under state law was substantially the same as it would have been under federal law.

This court is of the view that federal law should govern here. While resolution of the issue presented involves the construction and effect of a contractual provision, a matter ordinarily to be decided under state law, the overriding question is whether venue is proper in this court. The question whether venue is proper in a particular federal court is essentially a matter of procedure that is peculiarly within the province of the federal courts; and while the State of Texas has a strong interest in regulating the place where its citizens may sue or be sued in Texas state courts, the federal courts have an equally strong interest in regulating venue within the federal court system. See Byrd v. Blue Ridge Electric Cooperative, Inc., 356 U.S. 525, 78 S.Ct. 893, 2 L.Ed.2d 953 (1958). Moreover, while the application of federal law as opposed to state law may be outcome-determinative insofar as the venue question is concerned,¹ it is certainly not determinative of the ultimate outcome of the lawsuit. Where suit will lie in the federal system is peculiarly the concern of the federal courts. There is nothing to require resort to state law to lay out the rules. There is a conspicuous reason not to do so. Resort to state law would balkanize venue rules when a uniform rule is patently preferable. Thus even if we were faced with two paths of logic to differing conclusions, this court would choose the federal and uniform result. In fact, there is only one logical path to one result. See Guaranty Trust Co. v. York, 326 U.S. 99, 65 S.Ct. 1464, 89 L.Ed. 2079 (1945). Thus this court will apply federal law to the question presented here.²

II.

Before the question of the enforceability of the venue provision is discussed, another preliminary issue must be considered. Taylor argues that the contractual venue provision is not mandatory, but merely permissive; that is, Taylor contends that the effect of the provision is that venue is proper in the court or courts designated by the provision, although venue need not be laid there. This construction of the provision is erroneous. The contracts provide that venue shall be laid in the county where Titan has its principal offices; the language reveals an intention to designate that county as the only place where suits on the contracts may be brought. Cf. Keaty v. Freeport Indonesia, Inc., 503 F.2d 955 (5th Cir. 1974); Zapata Marine Service v. O/Y Finnlines, Ltd., 571 F.2d 208 (5th Cir. 1978). The question that remains, then, is whether the contractual venue provision is enforceable under federal law.

Contractual provisions designating a particular forum for resolution of disputes have historically been viewed with disfavor, and have often been held unenforceable because against public policy. See Annotation, 56 A.L.R.2d 300, 306-320 (1957). In recent years, however, federal courts have shown a willingness to honor forum-selection clauses where their enforcement would be neither unreasonable nor unjust, and where enforcement would not contravene a strong policy of the forum in which suit was originally brought. The leading case holding such a clause enforceable is The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972). There the Supreme Court, in an admiralty case, held enforceable a forum selection clause in a contract between an American and a German corporation providing for the towing of a drilling rig from Louisiana to Italy. The court was careful to limit its holding to the facts of the case before it, involving an international agreement with respect to which "much uncertainty and possibly great inconvenience to both parties could arise if a suit could be maintained in any jurisdiction in which an accident might occur or if jurisdiction were left to any place where the Bremen or Unterweser might happen to be found." 407 U.S. at 13, 92 S.Ct. at 1915. Nonetheless, the reasoning of the opinion is applicable, though perhaps with slightly less force, to forum-selection provisions between domestic corporations involved in multistate commercial transactions. It is noteworthy, too, that in stating that it granted certiorari to resolve a conflict among various circuit courts, the Supreme Court cited Central Contracting Co. v. Maryland...