Before bringing an action in a U.S. federal court, a party should examine various considerations. Venue is one such consideration that is often overlooked. Even if a court has personal jurisdiction over an entity and subject matter jurisdiction over the matter to be decided, the question of whether the court is the appropriate venue still must be evaluated. In short, venue asks whether the court hearing the matter has a substantial connection to the dispute.
Generally speaking, the question of venue in U.S. federal courts is governed by 28 U.S.C. § 1391 et seq.
One of its rules provides that venue is proper where “a substantial part of the events or omissions giving rise to the claim occurred . . . .” Venue also would be appropriate in a district where the defendants are located or where the property at issue is located.
In U.S. federal courts, “the plaintiff bears the burden of establishing that venue is proper.” Initially, the plaintiff only has to make a prima facie showing of venue. If the court decides to hold a hearing on venue, however, the plaintiff must demonstrate venue by a preponderance of the evidence.
When suing a sovereign, the question of venue is governed by Section 1391(f), which provides, among other things, that venue is appropriate “in any judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated.” This default basis for venue is essentially the same as the venue analysis for any civil action – i.e., there must be some connection between the venue and the dispute.
But Section 1391(f) contains an additional venue provision for actions against a foreign state and political subdivisions. When suing these entities in a U.S. federal court, the U.S. District Court for the District of Columbia (in Washington, DC) is always an appropriate venue. Despite the fact that venue can always be had against a sovereign in the U.S. District Court in D.C., some plaintiffs still bring cases against foreign states in other venues – sometimes resulting in negative consequences.
One such instance can be seen in a recent decision by Judge Broderick in the Southern District of New York. In June 2015, a group of plaintiffs (the “LuxExpress Plaintiffs”) brought racketeering, fraud, and theft claims against the Government of the Ukraine and others. Ukraine sought to dismiss the action, arguing, among other things, that New York was not the proper venue. In response, the LuxExpress Plaintiffs argued that a connection to New York existed because (1) one of the plaintiffs had to borrow money from a person in New York and (2) one of the plaintiffs was located in New York. After substantial briefing – and after more than two years had passed since the action was filed – Judge Broderick issued an order agreeing with Ukraine and dismissing the action based on venue. Judge Broderick noted that the plaintiffs’ “contacts with New York were irrelevant to the venue analysis under § 1391(f)(1).” Judge Broderick further stated that the fact that one of the LuxExpress Plaintiffs resided in New York did not “inform the venue analysis.” Ultimately, Judge Broderick held venue was “improper in [New York] because, as alleged, virtually all of Defendants’ actions giving rise to Plaintiffs’ claims occurred in Kiev” and “the property that is the subject of Plaintiffs’ claims was or is located in Ukraine and not the Southern District of New York.”
A dismissal for improper venue can result in negative consequences. First, a party may have to re-file its claim and serve the defendants again. Worse still, a claim may be time barred due to the expiration of the statute of limitations while the prior case was being litigated – especially where, as in LuxExpress, significant time passes while the issues is being litigated. Even if the claim can be brought again, a plaintiff will have wasted significant amounts of time and resources fighting an unnecessary venue issue..
In the end, the LuxExpress Plaintiffs avoided the worst of these consequences. 28 U.S.C § 1406(a) allows a federal court to – if it is in the interest of justice – transfer a case to a proper venue when it was filed in an improper one. Courts have significant discretion in deciding whether to transfer a case in the interest of justice. Judge Broderick decided to transfer the case to the federal court in D.C. – where venue is allowed by statute – to avoid the delay and other potential consequences that would be caused by requiring the LuxExpress Plaintiffs to re-file serve the defendants again. In any event, the LuxExpress Plaintiffs lost two years of time and the expense of litigating an unnecessary venue issue due to their filing in a court that did not have proper venue.
Venue is always an issue to be considered and weighed when bringing a claim in federal courts. If suing a sovereign, consider whether the federal court in D.C. might be the best option if there is not a strong basis for venue in another court to avoid a long and costly venue battle like that of the LuxExpress Plaintiffs.