A majority of the Fifth Circuit in an important en banc decision ruled that the Eastern District of Texas trial court abused its discretion in denying a motion to transfer venue to the Northern District of Texas when the only basis for laying venue in the Eastern District was that the defendant was subject to jurisdiction there. In re Volkswagen of America, Inc., No. 07-40058 (5th Cir., Oct. 10, 2008), is now a key precedent in future battles over venue for cases filed in the Eastern District of Texas and anywhere in the circuit in which transfer of venue is at issue. To view the court’s opinion, click here.

After a traffic accident that killed a seven-year-old girl and seriously injured other passengers, suit was filed against Volkswagen AG and Volkswagen of America, Inc., in the Eastern District of Texas, Marshall Division. Plaintiffs alleged that design defects in the car caused the accident. Plaintiffs asserted that the suit was filed properly in the Eastern District because Volkswagen was subject to jurisdiction in the Eastern District and, thus, venue was proper under 28 U.S.C. §1391(a)(1). There existed no other connection between the case and the Eastern District.

Defendant Volkswagen sought transfer to the Northern District of Texas, Dallas Division, under 28 U.S.C. §1404(a), and the trial judge denied their request. Volkswagen sought a writ of mandamus, which an initial panel of the Fifth Circuit denied in a split opinion. Request for rehearing was successful, and a second panel reversed, granting Volkswagen’s petition and issuing a writ that directed the district court to transfer the case to Dallas. In re Volkswagen of Am., Inc., 506 F.3d 376 (5th Cir. 2007). Plaintiffs filed a petition for rehearing en banc. In re Volkswagen of Am., Inc., 517 F.3d 785 (5th Cir. 2008).

Writing for a majority of the Fifth Circuit, Judge E. Grady Jolly first confirmed that mandamus is an appropriate means of testing a §1404(a) ruling by a district court, though she simultaneously emphasized that use of the writ should be quite limited and that a writ should not issue to correct a “mere” abuse of discretion, but “a writ is appropriate to correct a clear abuse of discretion.” While the opinion acknowledges that this distinction—between a “mere” and “clear” abuse of discretion—may not be susceptible to sharp definition in all cases, In re Volkswagen makes clear that when a trial judge issues “a patently erroneous ruling,” mandamus is available.

How, then, did the district court decision amount to a clear abuse of discretion? It seems the court set the bar too high by requiring Volkswagen to show that the §1404(a) factors must “substantially outweigh” the plaintiffs’ choice of venue. That, a majority of the Fifth Circuit concluded, may be right for forum non conveniens dismissal, but not for transfer under §1404. Because there was no meaningful factual connection with the Eastern District, and far more connection to Dallas, the trial judge should have found that a transfer to the Northern District of Texas, Dallas Division, would be for the convenience of the parties and in the interests of justice. [The dissent sharply disagreed with this characterization of the litigation, noting that the plaintiffs’ case involved design defect allegations and, thus, bore no greater connection to Dallas than to Marshall or to anywhere else in the state for that matter.] The majority also emphasized that no special weight was to be accorded to plaintiffs’ choice of forum when there is no meaningful connection between it and the litigation.

The most immediate impact of In re Volkswagen is on cases filed in the Eastern District of Texas that lack an obvious connection to the district beyond the fact that the suit is allowed under the general venue provisions in §1391. Thus, defendants who have been sued in the Eastern District and seek transfer may find the Fifth Circuit decision aids their prospects of having transfer granted to another federal district court where suit might otherwise have been brought.

More broadly, In Re Volkswagen likely will be important precedent for cases filed throughout the circuit. The majority decision seems to give a greater role to the appellate courts to monitor transfer decisions by district courts, and this oversight role would appear applicable whether the trial judge denies the transfer request—as in In re Volkswagen—or grants it. To be sure, Judge Jolly emphasized that the writ is an extraordinary remedy and that appellate courts are not to “replace a district court’s exercise of discretion with [their] own.” Only “clear abuses of discretion that produce patently erroneous results” are subject to hindsight review by a superior court.

These cautionary words may not provide much restraint for the party on the losing end of a transfer battle and what was once a decision largely left to the sound discretion of the trial judge may now be a more extended proceeding before appellate courts, possibly injecting greater additional litigation burdens and delay, a point Judge Carolyn D. King emphasized in dissent.