Federal Civil Law Remains Unclear Regarding Where an Action May Be Brought

May 9, 2022 | Benjamin J. Wisher | Commercial Litigation

One would think that the current state of federal law would be clear as to where a plaintiff may commence, and thereafter maintain, his/her action. However, that is not the case; particularly within the Second Circuit, and this ambiguity can create a host of unintended problems, including being forced to litigate an action thousands of miles away from where originally expected (causing logistical and financial nightmares) and perhaps resulting in the application of differing laws of another jurisdiction that materially affect the outcome of the litigation.

Venue, which describes where a lawsuit may be commenced and maintained, is governed by federal statute 28 U.S.C. section 1391 (“Section 1391”).[1] Subsection (b) of Section 1391 provides the following:

A civil action may be brought in: (1) a judicial district in which any defendant resides, if all defendants are residents of the State in which the district is located; (2) a 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; or (3) if there is no district in which an action may otherwise be brought as provided in this section, any judicial district in which any defendant is subject to the court’s personal jurisdiction with respect to such action.[2]

Based on this text, it seems that, when choosing venue, a party may utilize either subsections 1 or 2, regardless of whether the other is applicable.

However, courts within the Second Circuit interpret Section 1391(b) differently. Some courts employ the aforementioned interpretation, holding that either subsection may be invoked regardless of the other’s applicability.[3] Others hold that Section 1391(b) is hierarchical, meaning that a party must use subsection (1), if available, prior to designating venue pursuant to subsection (2).[4] The former interpretation appears to be more prevalent in the Second Circuit recently,[5] and some district courts in other Circuits treat the latter interpretation as a less-followed “minority view.”[6]

Nonetheless, neither the Second Circuit Court of Appeals, any federal courts of appeal, nor even the United States Supreme Court have specifically weighed in on the matter, leaving Section 1391(b) up for further debate in district courts, particularly district courts in the Second Circuit where both interpretations have been utilized.[7]

Although the differences in the two interpretations of Section 1391(b) are subtle, they can cause practical mayhem for unknowing legal practitioners and their clients. Take the following set of facts for example. Plaintiff is involved in a four-car collision in Westchester County, which is located in the Southern District of New York, a district within the Second Circuit, and sustains injuries. Plaintiff alleges the other three drivers, who are all residents of the Northern District of California, negligently operated their respective vehicles and caused Plaintiff’s injuries, which, if monetized, exceed $75,000. Plaintiff wishes to file a federal action in the Southern District of New York (where he resides) against the three drivers based on diversity jurisdiction[8] (Plaintiff and the proposed defendants are citizens and residents of different states, and Plaintiff’s damages exceed $75,000). Plaintiff seeks to rely on Section 1391(b)(2) for placing venue in the Southern District of New York as the “substantial part of the events or omissions giving rise to” Plaintiff’s injuries – the other drivers’ alleged negligent operation of their respective vehicles – occurred in the Southern District of New York. Plaintiff then files his action in the Southern District of New York based on the foregoing. In response, the other drivers, now named Defendants, file pre-answer motions to dismiss based on improper venue,[9] arguing that because all the drivers are residents of California, venue is only proper there pursuant to Section 1391(b)(1). Plaintiff then files his opposition to the motion, arguing the textual “majority view” interpretation of Section 1391(b), and the Defendant drivers file their reply, asserting the “minority view.”

Depending on which interpretation the hypothetical Southern District of New York court takes, the outcome can be entirely different. If the hypothetical court utilizes the majority approach, then the Defendant drivers’ motions will be dismissed as Plaintiff has the right to lay venue pursuant to either subsection (1) or (2), and Plaintiff properly invoked subsection (2). In that scenario, the litigation would assumably continue in the Southern District of New York, which is in Plaintiff’s locale and makes litigating the matter, from a logistical standpoint, considerably simple. However, if the hypothetical court takes the “minority view” for interpretating Section 1391(b), the Defendant drivers’ motions will be granted since Section 1391(b)(1) was available and, therefore, Plaintiff could not rely on subsection (2). In that scenario, the action would be transferred to the Northern District of California, and Plaintiff would have to litigate an action that is venued approximately 3,000 miles away from his residence and where the collision occurred, assumably causing enormous logistical, and perhaps financial, hurdles.

And logistical nightmares are not the only potential consequence of Section 1391’s ambiguity. Using the above hypothetical, the transfer of the action to California from New York may result in the application of differing law, as the California district court likely maintains jurisprudence that, in some ways, deviates from New York law. Those differences, which were originally unforeseen by the plaintiff and his/her counsel, may affect the ultimate outcome of the matter, potentially to a plaintiff’s detriment.

Until there is clarification from the Second Circuit Court of Appeals (or the United States Supreme Court) as to which interpretation of Section 1391(b) applies, parties, particularly those filing federal civil actions in the Second Circuit, and their counsel should be aware of the foregoing and the possible effects of each interpretation on their action(s).

[1] See 28 U.S.C. § 1391(a)(1) (West) (“[T]his section shall govern the venue of all civil actions brought in district courts of the United States”); but see, e.g., 28 U.S.C. § 1408 (West) (governing venue in bankruptcy actions).

[2] 28 U.S.C. § 1391(b) (West) (emphasis added).

[3] See, e.g., SGM Holdings LLC v. Andrews, No. 15CIV8142PACHBP, 2017 WL 151634, at *1 (S.D.N.Y. Jan. 12, 2017); I.M.D. USA, Inc. v. Shalit, 92 F. Supp. 2d 315, 316 (S.D.N.Y. 2000); Hall v. S. Orange, 89 F. Supp. 2d 488, 493 (S.D.N.Y. 2000); Pianelli v. Hershey, No. 99-CV-64(FJS)(GJD), 2000 WL 98098, at *4 (N.D.N.Y. Jan. 28, 2000); Gregory v. Pocono Grow Fertilizer Corp., 35 F. Supp. 2d 295, 298 (W.D.N.Y. 1999).

[4] Dashman v. Peter Letterese & Assocs., Inc., 999 F. Supp. 553, 554 (S.D.N.Y. 1998); Cobra Partners L.P. v. Liegl, 990 F. Supp. 332, 334 (S.D.N.Y. 1998); Welch Foods, Inc. v. Packer, No. 93-CV-0811E(F), 1994 WL 665399, at *2 (W.D.N.Y. Nov. 22, 1994)

[5] Compare, supra, notes 4 and 5.

[6] See San Francisco Residence Club, Inc. v. Leader Bulso & Nolan, PLC, No. C-13-0844 EMC, 2013 WL 2050884, at *4 (N.D. Cal. May 14, 2013); Kukui Gardens Corp. v. Holco Cap. Grp., Inc., 664 F. Supp. 2d 1103, 1120 (D. Haw. 2008); Wise v. Lindamood, 89 F. Supp. 2d 1187, 1196 (D. Colo. 1999).

[7] See supra notes 4 and 5.

[8] See 28 U.S.C. § 1332.

[9] See Federal Rule of Civil Procedure 12(b)(3).

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