• The Fifth Circuit's Decision in "In re Volkswagen" and What It Could Mean to the Patent Community
  • October 31, 2008 | Authors: Anthony A. Tomaselli; Kristin Graham Noel
  • Law Firms: Quarles & Brady LLP - Madison Office; Quarles & Brady LLP - Milwaukee Office
  • On Friday, October 10, 2008, the Fifth Circuit issued a writ of mandamus ordering the Eastern District of Texas to transfer a product liability case to the Northern District of Texas in Dallas. This decision will potentially have far-reaching consequences in the world of patent litigation.

    I. Background

    The case involved began with a car crash that took place in Dallas County, Texas. In re Volkswagen of America, Inc., No. 07-40058, at 2 (5th Cir. Filed Oct. 10, 2008). The plaintiffs sued Volkswagen AG and Volkswagen of America, Inc. in the Marshall Division of the Eastern District of Texas, based on a design defect theory. Id. Volkswagen filed a third-party suit against the driver who hit the plaintiffs’ car and then moved to transfer to the Dallas Division of the Northern District of Texas, where the accident occurred. Id. In its motion for transfer,

    Volkswagen asserted that a transfer was warranted as (1) the Volkswagen Golf was purchased in Dallas County, Texas; (2) the accident occurred on a freeway in Dallas, Texas; (3) Dallas residents witnessed the accident; (4) Dallas police and paramedics responded and took action; (5) a Dallas doctor performed the autopsy; (6) the third-party defendant lives in Dallas County, Texas; (7) none of the plaintiffs live in the Marshall Division; (8) no known party or significant non-party witness lives in the Marshall Division; and (9) none of the facts giving rise to this suit occurred in the Marshall Division.

    In re Volkswagen of America, Inc., 506 F.3d 376, 378-79 (5th Cir. 2007). Judge John Ward,1 of the Eastern District, denied the motion for transfer, finding that the Eastern District was no more inconvenient than the Northern District. In re Volkswagen, No. 07-40058, at 3. Volkswagen then filed for reconsideration, which Judge Ward denied on the same grounds that he denied the original motion for transfer. Id. Subsequently, Volkswagen asked the Fifth Circuit for a writ of mandamus, which was denied, but Volkswagen’s later petition for rehearing en banc was granted. Id. at 3-4.

    II. The Decision of the Fifth Circuit

    A. The Majority Decision

    In a 10-7 decision, the Fifth Circuit granted Volkswagen’s writ of mandamus and ordered Judge Ward to transfer the case to the Northern District of Texas. Id. at 4. In coming to this conclusion, the majority emphasized that a writ of mandamus was the appropriate mechanism of review under Cheney v. U.S. Dist. Ct. because this case fell within the bounds of “exceptional circumstances amounting to a judicial usurpation of power or a clear abuse of discretion.” Id. at 5-6 (quoting 542 U.S. 367, 380 (2004)). The majority did recognize that, while a writ would be an inappropriate tool “to correct a mere abuse of discretion, even though such might be reversible on a normal appeal[,] . . . a writ is appropriate to correct a clear abuse of discretion.” Id. at 6. In making this determination, the majority chastised the District Court on the grounds that it “gave undue weight to the plaintiff’s choice of venue, ignored our precedents, misapplied the law, and misapprehended the relevant facts. . . .” Id. at 5 (emphasis added).

    The majority determined that the District Court gave too much weight to the plaintiffs’ choice of venue and in doing so improperly required the movants to show inconvenience that substantially outweighed the plaintiffs’ choice. Id. at 13. The majority pointed out that this is an appropriate standard for a forum non conveniens motion to dismiss but not for a 28 U.S.C. § 1404(a) transfer motion. The majority instead held that the appropriate standard would have been the “good cause” burden:

    When viewed in the context of § 1404(a), to show good cause means that a moving party, in order to support its claim for a transfer, must satisfy the statutory requirements and clearly demonstrate that a transfer is “[f]or the convenience of parties and witnesses, in the interest of justice.” Then, when the transferee venue is not clearly more convenient than the venue chosen by the plaintiff, the plaintiff’s choice should be respected. When the movant demonstrates that the transferee venue is clearly more convenient, however, it has shown good cause and the district court should therefore grant the transfer.

    Id. at 14 (emphasis added) (quoting Humble Oil & Ref. Co. v. Bell Marine Serv., Inc., 321 F.2d 53, 56 (5th Cir. 1963)). Based on the District Court’s total disregard for the applicable standard, the Fifth Circuit granted Volkswagen’s motion for a writ of mandamus and ordered the District Court to transfer the case to the Northern District of Texas.

    B. The Dissenting Opinion

    Seven judges dissented from the majority opinion on the ground that a writ of mandamus was not the appropriate mechanism of review under the circumstances. See id. at 23 (King, J., dissenting). The dissenting judges primarily disagreed with the majority regarding the definition of “usurpation of judicial power” and “clear abuse of discretion.” Id. at 24. The dissent also contended that the Eastern District did not actually apply the forum non conveniens dismissal standard instead of the § 1404(a) standard. Id. at 26. The dissent went on to review the Eastern District’s analysis of the convenience factors and determined that the district court had not committed a clear abuse of discretion. Id. at 35. Based on their analysis, the dissenting justices held that, even though they would probably have granted Volkswagen’s motion for transfer, the writ of mandamus should be denied because the decision to transfer was soundly within the discretion of the district court. Id. at 36.

    III. What it Means in the Patent Community

    The Eastern District of Texas is notoriously plaintiff-friendly: Once a plaintiff chooses to file in this court, the defendants rarely succeed in getting the case transferred. The decision of the Fifth Circuit, however, may put an end to that reputation.

    In the course of the past year, the Eastern District of Texas had more patent cases than any other district in the United States.2 Further, over a 17-year period, only 33.1% of transfer requests in the Eastern District were granted, giving it the second-lowest transfer rate. Zusha Elinson, 5th Circuit Ruling Shoots Down IP Rocket Docket, LAW.COM, Oct. 14, 2008. However, there will likely be many more successful transfer motions in the Eastern District of Texas in the near future due to the Fifth Circuit’s writ of mandamus in this case. Moreover, for the same reason, plaintiffs will be less likely to file in the Eastern District of Texas if they have no ties there.

    The Fifth Circuit confirmed these suspicions, to a certain extent, by noting that its decision will have far-reaching consequences:

    Because venue transfer decisions are rarely reviewed, the district courts have developed their own tests, and they have applied these tests with too little regard to consistency of outcomes. Thus, here it is further appropriate to grant mandamus relief, as the issues presented and decided above have an importance beyond this case

    In re Volkswagen, No. 07-40058, at 21. Throughout the majority opinion, the Fifth Circuit expressed a clear annoyance with the conduct of the Eastern District of Texas. More importantly, the Fifth Circuit, through its decision, showed that it is not afraid to use Cheney to the greatest extent of its reach to keep the Eastern District of Texas in line. Thus, the Eastern District of Texas is likely to see similar reprimands in the future if it continues to inappropriately deny motions for transfer.

    Consequently, plaintiffs in patent suits will likely be seeking alternative venues in the future to avoid being transferred out of their preferred venue in the Eastern District of Texas and into a venue chosen by their defendants.

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    1 Judge Ward is recognized as the instigator behind the rule changes responsible for making the Eastern District of Texas a refuge for patent plaintiffs.

    2 Of the 2,926 patent cases filed in the district courts of the United States, 336 were filed in the Eastern District of Texas. The next highest court was the Central District of California, with 239.