Federal Circuit (Applying Fifth Circuit Standard) Holds That Venue Transfer Must on Balance Be Clearly More Convenient, Not Far More Convenient

by Orrick, Herrington & Sutcliffe LLP

An April 3, 2014, decision by the Court of Appeals for the Federal Circuit sheds a little more light on how to apply the Fifth Circuit’s test for determining whether a case should be transferred from the district in which it was filed to another. In re Toyota Motor Corporation, et al., Appeal No. 2014-113. This decision is particularly important in the context of patent infringement litigation given the number of patent cases filed in the Fifth Circuit and the frequency with which defendants sued there (particularly in the Eastern District of Texas) file motions to transfer.

Toyota asked the Federal Circuit to issue an order commanding the transfer of its case pursuant to 28 U.S.C. §1404, arguing that the district court erred in refusing Toyota’s transfer request. American Vehicular Sciences LLC v. Toyota Motor Corporation et al., Case No. 6:12-cv-00404-MHS-JDL, Document 131 (E.D. Tex. June 12, 2013). The Federal Circuit agreed with Toyota, articulating a new gloss on the Fifth Circuit standard for venue transfer.


The district court refused transfer because, as characterized by the Federal Circuit, it did not believe the relevant public and private factors rendered Toyota’s proposed forum “far more convenient.”  (Opinion at 5, emphasis in original).  The district court essentially reasoned that because only two of the relevant considerations weighed in favor of transfer, Toyota’s preferred venue was only marginally more convenient than the Eastern District of Texas.


The Federal Circuit emphasized that Toyota simply needed to establish that the transferee forum is clearly more convenient, a lower burden than that imposed by the district court. (Opinion at 5.)  Given that the district court had found that none of the factors weighed in favor of keeping the lawsuit in the Eastern District of Texas, two of the factors weighed in favor of a transfer (ease of access to evidence; local interest), and the other factors were all neutral, the Federal Circuit concluded that the Fifth Circuit’s “clearly more convenient” standard was met. Because the district court had in effect applied too high a convenience standard, amounting to “a clear abuse of discretion,” the Federal Circuit issued mandamus relief.


Importantly, the Federal Circuit suggested that, at least in the Fifth Circuit, transfer should always occur whenever “several factors favor the transferee forum” and there is “nothing on the transferor-forum side of the ledger.”  (Opinion at 5.)  This is a significant development, especially with respect to non-practicing entity (NPE) suits where there are commonly no percipient witnesses or other meaningful evidence located in the NPE’s chosen forum, and where there often are multiple defendants, not all of whom join in the transfer motion.


In this regard, Toyota’s motion also had sought to sever the claims against it (and a group of related Toyota defendants) from claims against co-defendant Gulf States Toyota, over whom the transferee court had no jurisdiction. The district court had denied the motion to sever as moot because it denied the transfer motion. The Federal Circuit accordingly remanded the case to the district court to decide the motion to sever, noting that “if the district court severs the claims against Gulf States, the remainder of the case [against Toyota] must be transferred.” (Opinion at 6.)


Venue enthusiasts might note the following events of interest. After a Magistrate Judge denied Toyota’s motion to transfer and sever in June 2013, Toyota timely filed a motion for reconsideration. On November 22, 2013, the District Judge adopted the Magistrate Judge’s order and denied the motion for reconsideration (Case 6:12-cv-00404-MHS-JDL Docket 179). On January 8, 2014, Toyota’s motion to stay the case pending an inter partes review of asserted claims was denied without prejudice because the PTO had not decided whether to grant review on all the asserted claims (Case 6:12-cv-00404-MHS-JDL Docket 179), and on February 19, 2014, a stay was granted as to those claims where the PTO had granted review (Case 6:12-cv-00404-MHS-JDL Docket 221). Meanwhile, the case (including discovery) has proceeded apace on the remaining asserted claims with updated infringement and invalidity contentions exchanged, a first Markman hearing held on March 6, 2014, a second Markman hearing set for May 8, 2014, and a motion for summary judgment of invalidity filed by Toyota. Despite all this activity, as well as the passage of about 21 months since the case (actually several consolidated cases) was filed on June 25, 2012, and about 18 months since Toyota first moved for transfer on October 4, 2012, the case is now poised for transfer to the Eastern District of Michigan.


In granting the mandamus petition, the Federal Circuit did not impose any constraints on the district court, now in the midst of further claim construction and summary judgment activities, as to when it must reconsider the severance issue, and if appropriate actually transfer the case. Certainly, district courts are left to manage their calendars, which probably explains why the Federal Circuit typically does not address timing in its decisions on mandamus petitions. As an aside, we note that in February 2014, CBS Corporation petitioned for a writ of mandamus to order a district court to decide a motion to transfer that CBS filed on June 28, 2013, and for which an evidentiary hearing was held in August 2013. See In Re CBS Corporation, Et Al., Appeal Case No. 2014-117. That petition was dismissed as moot on April 3, 2014, because the district court had finally issued a decision denying the transfer motion, Personal Audio, LLC v. CBS Corporation, Case No. 2:13-cv-270-JRG-RSP, Document 41 (E.D. Tex. March 20, 2014).


In making the In re Toyota decision precedential (compare In re TOA Technologies, Inc., a non-precedential decision involving a transfer motion handled by the authors), the Federal Circuit appears to be reiterating that where there is no logical connection to the transferor forum, district courts in the Fifth Circuit exercising their discretion need to fairly consider and weigh the factors and let cases go where the “clearly more convenient” standard is met.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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