487 U.S. 22 (1988)
Stewart Organization, Inc., an Alabama corporation, entered into a dealership agreement with Ricoh Corporation, a nationwide manufacturer whose principal place of business is in New Jersey, obligating Stewart to market Ricoh copier products.1
The agreement contained a forum-selection clause stating that any appropriate state or federal district court located in the Borough of Manhattan, New York City, New York, shall have exclusive jurisdiction over any case or controversy arising under or in connection with the agreement.2
Business relations between the parties soured, and in September 1984 Stewart filed a complaint in the United States District Court for the Northern District of Alabama alleging breach of the dealership agreement together with claims for breach of warranty, fraud, and antitrust violations.3
Relying on the forum-selection clause, Ricoh moved the district court to transfer the case to the Southern District of New York under 28 U.S.C. § 1404(a) or to dismiss for improper venue under 28 U.S.C. § 1406; the district court denied the motion after concluding that Alabama law governed and disfavored enforcement of such clauses, then certified its ruling for interlocutory appeal under 28 U.S.C. § 1292(b).4
A divided Eleventh Circuit panel reversed, holding that federal law governs venue questions in diversity actions and that the clause is enforceable; after rehearing en banc the full court adopted the panel result and reasoning, and the Supreme Court granted certiorari.5
Whether a federal court sitting in diversity should apply state or federal law in adjudicating a motion to transfer a case to a venue provided in a contractual forum-selection clause?6
When a federal statute such as 28 U.S.C. § 1404(a) is sufficiently broad to control the issue before the court and represents a valid exercise of Congress's authority under the Constitution, federal law governs and state law must yield.7
Facts of the Case:
Stewart Organization, Inc., an Alabama corporation, entered into a dealership agreement with Ricoh Corporation, a nationwide manufacturer whose principal place of business is in New Jersey, obligating Stewart to market Ricoh copier products. The agreement contained a forum-selection clause stating that any appropriate state or federal district court located in the Borough of Manhattan, New York City, New York, shall have exclusive jurisdiction over any case or controversy arising under or in connection with the agreement. Business relations between the parties soured, and in September 1984 Stewart filed a complaint in the United States District Court for the Northern District of Alabama alleging breach of the dealership agreement together with claims for breach of warranty, fraud, and antitrust violations.
Relying on the forum-selection clause, Ricoh moved the district court to transfer the case to the Southern District of New York under 28 U.S.C. § 1404(a) or to dismiss for improper venue under 28 U.S.C. § 1406. The district court denied the motion after concluding that Alabama law governed and disfavored enforcement of such clauses, then certified its ruling for interlocutory appeal under 28 U.S.C. § 1292(b). A divided Eleventh Circuit panel reversed, holding that federal law governs venue questions in diversity actions and that the clause is enforceable. After rehearing en banc the full court adopted the panel result and reasoning, and the Supreme Court granted certiorari.
Yes. Section 1404(a) is sufficiently broad to control the issue of whether to transfer the case to a court in Manhattan in accordance with the forum-selection clause contained in the dealership agreement between Stewart Organization, Inc. and Ricoh Corporation.8 The statute directs district courts to consider the convenience of parties and witnesses and the interest of justice on a case-by-case basis, and the presence of a forum-selection clause is a significant factor in that calculus.9 Because the statute covers the point in dispute and constitutes a valid exercise of congressional power under Article III as augmented by the Necessary and Proper Clause, it must be applied rather than Alabama law disfavoring such clauses.10 The District Court therefore erred in applying Alabama law to deny the motion to transfer.
Federal law, specifically 28 U.S.C. § 1404(a), governs the District Court’s decision whether to give effect to the parties’ forum-selection clause and transfer this case to a court in Manhattan.11
Related opinions on this issue
Justice Kennedy concurred to emphasize that enforcement of valid forum-selection clauses protects legitimate expectations and furthers vital interests of the justice system.12 He noted that the reasoning from The Bremen applies to diversity cases and that federal courts should give controlling weight to such clauses in all but the most exceptional cases.13
Justice Scalia dissented, arguing that 28 U.S.C. § 1404(a) does not reach the validity of the forum-selection clause between the parties.14 He contended that the statute's language looks to present and future convenience rather than retrospective validity of the contract, and that under the twin aims of Erie, state law must govern to avoid forum shopping and inequitable administration of the laws.15