Plaintiff-Initiated Transfers

Plaintiff-Initiated Transfers

Section 1404(a) lets a district court transfer a civil action for the convenience of parties and witnesses and in the interest of justice, but its text says neither who may ask nor which state's law the receiving court will apply.¹ The statute assumes several proper venues and authorizes the court where the action was filed to move the case to a more convenient one, which leaves the Erie question of whose law follows it.² Van Dusen v. Barrack answered that question for defendants: after a defendant-initiated transfer, the transferee court follows the choice-of-law rules that prevailed in the transferor court.³ The Court reserved the case of a plaintiff who moves.⁴

The reservation had a reason. Van Dusen feared that nonresident defendants, properly sued in Pennsylvania, could invoke § 1404(a) to gain the benefits of Massachusetts law.⁵ A plaintiff's motion raises the opposite worry. A plaintiff who picked a forum, perhaps for its law, and then asks to leave it for convenience seems to want the advantages of both. In Ferens v. John Deere Co., the Court rejected that objection: a transfer under § 1404(a) does not change the law applicable to a diversity case, whoever initiates it.⁶

Three reasons support that holding, and each meets a different objection: Erie's protection of state-law advantages, the policy against creating opportunities for forum shopping, and the statute's aim of convenience without costly complications. The facts and holding come first, and the reasons follow in that order.

Ferens: Facts and Holding

Albert Ferens lost his right hand when, he alleged, it became caught in a combine harvester made by Deere & Company. The accident happened while he worked the machine on his farm in Pennsylvania. For reasons the record does not explain, he delayed filing a tort suit, and Pennsylvania's two-year limitations period expired. In the third year he and his wife sued Deere in the Western District of Pennsylvania on contract and warranty claims, which the Pennsylvania period had not yet barred. Diversity jurisdiction was proper: the Ferenses are Pennsylvania residents, and Deere is incorporated in Delaware with its principal place of business in Illinois.⁷ Only the tort theory was lost in Pennsylvania.

To save it, the Ferenses sued Deere a second time, in federal court in Mississippi. A federal court in diversity follows the choice-of-law rules of the state where it sits,⁸ and a Mississippi court would apply Pennsylvania substantive law to the injury claim but Mississippi's own law to the limitations period.⁹ Mississippi's borrowing statute did not stand in the way. The state's highest court has said that it applies only where a nonresident defendant, in whose favor the statute has accrued, afterwards moves into the state, and Deere was a corporate resident of Mississippi before the claim accrued. Mississippi's six-year period therefore governed, and the tort claim was timely there.¹⁰

The Ferenses then took the strategy one step further. Having chosen Mississippi for its limitations period, they moved under § 1404(a) to transfer the action to the Western District of Pennsylvania as the more convenient forum, assuming that Mississippi's choice-of-law rules, including its limitations rule, would keep governing after the transfer.¹¹ Deere put up no opposition. The Mississippi court granted the motion after accepting that the Ferenses lived in Pennsylvania, that the accident happened there, that the claim had no connection to Mississippi, that the witnesses and documents were in the Western District of Pennsylvania and not in Mississippi, and that the warranty action pending there raised common questions of law and fact.¹² Convenience was never contested. The open question was which law the Pennsylvania court would apply on arrival.

The Pennsylvania court refused to apply Mississippi's limitations period. The Third Circuit affirmed, at first on the theory that applying Mississippi's statute would violate due process because Mississippi had no legitimate interest in the case. The Supreme Court vacated that decision and remanded in light of Sun Oil Co. v. Wortman, which held that a state may apply its own limitations statute to claims governed by another state's substantive law without constitutional violation.¹³ On remand the Third Circuit affirmed on the Van Dusen question itself, reasoning that by invoking § 1404(a) the Ferenses had lost their entitlement to Mississippi's choice-of-law rules.¹⁴

The Supreme Court reversed, five to four, and held that Mississippi's statute of limitations governed the Ferenses' action.¹⁵ Van Dusen's rule applies when the plaintiff moves for the transfer, just as it does when the defendant moves.¹⁶ The transferee court applies the law the transferor court would have applied, and the identity of the movant plays no part.¹⁷

The result looks strange, and the transfer rule explains only part of the strangeness. Mississippi applied its own limitations period to a claim governed by Pennsylvania's substantive law, a practice Sun Oil had already allowed. The oddity came largely from Mississippi's narrow borrowing statute and long limitations period, features that have since changed.¹⁸ Van Dusen's principle then carried Mississippi's rules across the state line with the case.¹⁹ The Ferenses ended with the best of both worlds, a Pennsylvania courtroom and Mississippi's limitations period, and in effect combined one state's tort law with another state's limitations law.²⁰ Applying the transferee's law instead would remove none of those features. It would only stop plaintiffs from requesting such transfers.²¹ Four Justices dissented, and the forum-shopping subsection returns to their objection.

The two situations differ in one fact: whether the original forum was proper. When a case moves for improper venue or lack of personal jurisdiction under § 1406(a), the transferee court follows Klaxon and chooses the law that would apply in the state court where it sits.²² The same is settled for § 1631 transfers, and any other rule would let a plaintiff law-shop by filing in courts that plainly lacked jurisdiction or venue.²³ A plaintiff in a proper but inconvenient forum holds a choice the venue statutes allow, and the state-law advantages that came with it travel with the case.²⁴

A stem in which a plaintiff files in a distant federal court to obtain a longer limitations period and then moves to transfer to a home district tests whether the movant's identity changes the analysis. It does not. Two checks decide the question: whether this is a § 1404(a) convenience transfer from a proper venue, and what choice-of-law rules the transferor state's courts would have applied. The transferee court then applies whatever law those rules select, whether that is the transferor state's law, the transferee state's law, or a third state's.

Erie and State-Law Advantages

Erie supplies the first reason for carrying the transferor's law along: a transfer should not strip anyone of state-law advantages. The policy may be discernible in the legislative history of § 1404(a), but its real foundation is Erie R. Co. v. Tompkins, which remains a vital expression of the federal system and the integrity of the separate States.²⁶ Guaranty Trust Co. v. York states what Erie was meant to secure: where a federal court exercises jurisdiction solely because the parties are citizens of different states, the outcome should be substantially the same, so far as legal rules determine it, as in a state court. The nub of the policy is that “for the same transaction the accident of a suit by a non-resident litigant in a federal court instead of in a State court a block away should not lead to a substantially different result.”²⁷

The mechanism is easy to state. Diversity jurisdiction opens a second courthouse to a dispute that the state courts could also decide. If walking through that door changed the governing rules, the choice of courthouse would pick the winner, and litigants would fight over where to sue instead of over the merits.

Van Dusen applied that policy against defendants who move. A convenience motion would have let a defendant take the plaintiff's state-law advantages if the governing law changed with the transfer. To allow transfers and still preserve those advantages, the Court held that choice-of-law rules do not change after a defendant-initiated transfer.²⁸ The danger there ran in one direction, so Ferens had to ask whether the rule still holds when the plaintiff moves.

It does, and a ledger of gains and losses shows why. Applying the transferor's law takes no state-law advantage from the plaintiff. It takes none from the defendant either, because the same law would have applied had the plaintiff never moved.²⁹ Everyone agreed that the Mississippi limitations statute would have applied if the Ferenses had stayed put, so Deere, which kept that statute after the move to Pennsylvania, stood where it would have stood anyway.³⁰

Deere lost only a nonlegal advantage: whatever benefit inheres in not having to litigate in Pennsylvania or, put another way, in forcing the Ferenses to litigate in Mississippi or not at all.³¹ Section 1404(a) does not protect that benefit. It was designed to protect litigants, witnesses, and the public against unnecessary inconvenience and expense, “not to provide a shelter for . . . proceedings in costly and inconvenient forums.” By letting venue move for convenience, Congress retained the Erie policy while diminishing the incidents of inconvenience.³² The section exists to eliminate inconvenience without altering permissible choices under the venue statutes.³³

The opposite rule shows what this reason excludes. Had the Pennsylvania court applied its own two-year period because the Ferenses initiated the move, their motion alone would have ended the tort claim, and a request to change courtrooms would have changed the law applicable to a diversity case, which the Court said a § 1404(a) transfer does not do.³⁴ The Court has found § 1404(a) to pre-empt state law in one isolated circumstance, Stewart Organization, Inc. v. Ricoh Corp., which held that federal law determines the validity of a forum-selection clause, a ruling covered earlier in this chapter. Otherwise it treats the section as a housekeeping measure that should not alter the state law governing a case under Erie.³⁵

A defendant's argument on an exam will say that a plaintiff who asked to leave the original forum should accept the transferee state's law. The ledger answers it: the plaintiff keeps the law of the original filing, the defendant keeps the law that would have governed anyway, and the defendant surrenders only a nonlegal edge that § 1404(a) does not protect.

Forum Shopping

The second reason is that § 1404(a) should not create opportunities for forum shopping, and it yields a test that can be put to any transfer rule: does the rule give a party a choice of law that the party did not already hold? An opportunity for forum shopping exists whenever a party has a choice of forums that will apply different laws. The Van Dusen policy therefore requires an interpretation of § 1404(a) that does not create an opportunity for obtaining a more favorable law by selecting a forum through a transfer of venue.³⁷

In Van Dusen itself the policy meant that defendants could not use a transfer to change the law.³⁸ The plaintiffs had chosen Pennsylvania from the forums open to them, and the defendants had no hand in that choice. A transfer to Massachusetts that carried Massachusetts law along would have let nonresident defendants, properly sued in Pennsylvania, gain the benefits of another state's law by a motion of their own.³⁹ Section 1404(a) would then have created a new opportunity to shop for law and handed it to the party who did not choose the forum.

The Ferenses stand on the other side of the line because the choice of law they exploited existed before any transfer motion. Both the Mississippi and Pennsylvania courts had jurisdiction, and each would have applied a different limitations statute.⁴⁰ Diversity jurisdiction did not remove that variation. Under Erie the federal courts had to replicate it, as Klaxon recognized when it traced any lack of uniformity among federal courts in different states to a federal system that leaves each state free to pursue local policies diverging from its neighbors'.⁴¹ The Ferenses made their choice of law when they filed in Mississippi, and the transfer moved the courtroom without adding a legal option. No reading of § 1404(a) can create comparable opportunities for a plaintiff, who already may shop for the forum with the most favorable law. The section exists to make venue convenient and should not let a defendant use inconvenience to discourage plaintiffs from exercising opportunities they already hold.⁴²

The contrast with Van Dusen comes down to whose option the transfer exercises. Defendants held no power over the governing law until a transfer motion handed them some, while the Ferenses held that power from the moment they chose where to file.

A transferee-law rule would also do little to curb the practice it targets. The Ferenses would no doubt have abided by their initial choice of Mississippi had they known the Pennsylvania court would dismiss their action. Ruling for Deere would accomplish little beyond discouraging the occasional plaintiff's motion to transfer an inconvenient case, because other plaintiffs would sue in an inconvenient forum expecting the defendant to seek transfer, which would carry the transferor's law under Van Dusen.⁴³ The rule might even multiply opportunities for shopping. Applying the transferee's law, to the extent that it discouraged plaintiff-initiated transfers, might give states an incentive to enact similar laws to bring in out-of-state business that plaintiffs would not move.⁴⁴

Four Justices dissented, and their objection measured forum shopping against another aspect of Erie: uniformity within a single state. Erie and Klaxon seek that harmony by making a federal court apply the law of the state where it sits.⁴⁵ In the dissent's view, the Ferenses used a distant federal court to get what Klaxon was meant to prevent, a federal court in Pennsylvania applying different substantive law than a Pennsylvania state court would apply.⁴⁶ Within Pennsylvania, the time to sue would then depend on which courthouse hears the case.

The two opinions ask much the same question, whether the transfer gave the plaintiff a choice of law otherwise unavailable, against different baselines. The majority measures against the forums open to the plaintiff at filing, and Mississippi's period lies within that set, so the transfer adds nothing. The dissent measures against the court that finally hears the case, and a Pennsylvania court could not have supplied that period, so the transfer imports it. The majority did not deny the shopping. It described the Ferenses as taking their forum shopping a step further, and it held that the shopping came from a filing choice that Erie required federal courts to replicate, so § 1404(a) was not its source.⁴⁷

A stem that labels the plaintiff a forum shopper does not settle the problem, because the Court conceded the shopping and still applied the transferor's law. The questions that matter are whether the transfer is a § 1404(a) convenience transfer from a proper venue and whether it gave anyone a law that the initial filing could not have produced. A defendant's transfer that would swap in new law fails the second question, as in Van Dusen. A plaintiff's transfer that carries the filing forum's law along passes it. The dissent's intrastate-uniformity argument is the strongest contrary point, and it records the minority position.

Convenience and Simplicity

The third reason follows from the statute's own terms. Section 1404(a) asks whether a transfer serves the convenience of parties and witnesses and the interest of justice,⁴⁹ and the Court concluded that the answer should not turn on prejudice from a change in the governing law.⁵⁰ Van Dusen had reasoned that if the law changed after a defendant-initiated transfer, a district court “would at least be reluctant to grant transfers, despite considerations of convenience, if to do so might conceivably prejudice the claim of a plaintiff.”⁵¹

The reluctance has a practical source. A judge guarding against prejudice would have to know how much a change of law would matter, and answering that could require an elaborate survey of the law, including statutes of limitations, burdens of proof, and presumptions. Such a survey would turn a statute for the convenience of the courts into one expending extensive judicial time and resources. Van Dusen removed the task by ruling that a defendant's transfer does not change the law, and the same policy requires application of the transferor's law when a plaintiff initiates the transfer.⁵²

The transferee-law alternative would also reshape the plaintiff's incentives. A plaintiff would move to transfer only when the benefits of convenience outweighed the loss of favorable law,⁵³ so a plaintiff with favorable law at stake would stay put, and the inconvenience the statute exists to cure would go uncured. Some would make the plaintiff pay for choosing an inconvenient forum. That view treats the statute as serving the movant alone, but § 1404(a) also names witnesses and the interest of justice.⁵⁴ A desire to take a punitive view of the plaintiff's actions obscures the systemic costs of litigating in an inconvenient place.⁵⁵

A rule keyed to the moving party would also leave the governing law unclear in cases beyond Ferens, as the Court listed.⁵⁶

• both the plaintiff and the defendant move for transfer;
• the court transfers venue on its own motion;
• the plaintiff moves for transfer after the defendant removed the case from state court;
• only one of several plaintiffs requests the transfer; and
• circumstances change, through no fault of the plaintiff, and make a once convenient forum inconvenient.

Each situation strains a rule whose trigger is the identity of whoever files the motion, because these cases present two movers, no mover, or a mover whose status removal or co-plaintiffs complicate. The Court could have reserved those questions for another day, but it had a duty in deciding Ferens to consider whether its decision would create litigation and uncertainty.⁵⁷

The Ferenses' own litigation shows the cost of the alternative. Applying the transferee's law would tell them that they should have kept litigating their warranty action in Pennsylvania and their tort action in Mississippi. Some might find that preferable, but the Court did not. Two cases involving precisely the same issues pending at once in different district courts produce “the wastefulness of time, energy and money that § 1404(a) was designed to prevent.”⁵⁸

The rule demands a formality, but the formality is real. Section 1404(a) provides no automatic transfer and permits one only when it is convenient and in the interest of justice, so a plaintiff in the Ferenses' position must go to the distant forum with no guarantee, until the court there examines the facts, that a transfer will follow. No one contested the justice of transferring the Ferenses' case, and defendants in future cases may still contest it.⁵⁹ Nor does the Court need elaborate federal choice-of-law rules for transferred diversity cases. State conflicts rules already ensure to a large extent that appropriate laws apply, and applying the transferor's law strikes the appropriate balance between fairness and simplicity.⁶⁰

A stem that adds a twist, such as both parties moving, the judge acting without a motion, or a plaintiff moving after the defendant removed the case, calls for the same answer as the Ferenses' facts. The transferor's law, including its choice-of-law rules, follows a § 1404(a) transfer from a proper venue, and the identity of the movant never enters the analysis.