Law Applied After Transfer

Law Applied After Transfer

A defendant who moves under Rule 12(b)(3) to dismiss for improper venue¹ may find the case transferred rather than dismissed, because § 1406(a) lets the court cure the defect by sending the case to a proper district. The move is from the transferor court, where the plaintiff filed, to the transferee court, which receives the case. It raises a question the parties care about as much as the courthouse: which state's law now governs? When the transfer cures improper venue, the transferee court applies the law it would have applied had the case been filed there originally.² That law includes the choice-of-law rules of the state where the transferee court sits. Choice-of-law rules are the rules a court uses to pick which state's law governs a dispute touching more than one state. A federal court sitting in diversity ordinarily follows them, as Klaxon Co. v. Stentor Elec. Mfg. Co. requires.³ A case transferred to cure a venue defect therefore starts over under the receiving state's rules. A transfer under § 1631 that cures a jurisdictional defect works the same way.⁴

The transferor's law stays behind because a plaintiff who filed in a district the venue statutes do not permit had no privilege worth protecting. Van Dusen v. Barrack draws the contrast between the two transfer statutes. Section 1406(a) provides for transfer from forums in which venue is wrongly or improperly laid, whereas § 1404(a) operates on the premise that the plaintiff has properly exercised the venue privilege.⁵ The venue privilege is the plaintiff's right to choose among the districts the venue statutes allow. A plaintiff who filed outside those districts never held it, so there are no state-law advantages of that choice to preserve. The alternative would reward the wrong behavior. Suppose the wrong court's choice-of-law rules followed the case. A plaintiff could file on purpose in a district whose rules favor the claim, accept a venue objection as a small cost, and carry the favorable law to a proper district. That is law shopping, and applying the transferee's law removes the payoff.⁶

The rule follows the transfer statute, not the kind of defect. A transfer under § 1406 or § 1631 requires the law the transferee court would have applied, whether the transferor court was a wrong venue or lacked jurisdiction.⁷ The same therefore holds for a transfer made under Goldlawr from a court that lacked personal jurisdiction over the defendant.

Applying the same instinct to a convenience transfer produces the wrong answer, because § 1404(a) rests on the opposite premise. It permits a transfer from a proper venue to a more convenient federal court, and Van Dusen held that the transferor's law, choice-of-law rules included, continues to apply in the new forum.⁸ The Court regarded § 1404(a) as a "federal judicial housekeeping measure" intended simply to authorize "a change of courtrooms."⁹ If the transfer also changed the law, defendants could invoke § 1404(a) to defeat the advantages that flow from the plaintiff's proper choice of forum, and courts would hesitate to grant even a well-justified convenience transfer for fear of prejudicing the plaintiff.¹⁰ The transferor's law follows the case even when the plaintiff is the one who asks for the transfer. In Ferens v. John Deere Co., the plaintiff sued in Mississippi to take advantage of its six-year statute of limitations and then obtained a transfer to Pennsylvania, the state where the accident occurred. By a five-to-four vote, the Court held that Mississippi law still applied.¹¹

The Maryland plaintiff never held a venue privilege, while the Pennsylvania plaintiff exercised one properly, and that single difference explains why one case starts over and the other keeps its law. One variation on the convenience transfer needs separate treatment. When a § 1404(a) transfer enforces a forum-selection clause, the original venue's choice-of-law rules do not follow the case. Atlantic Marine reasoned that a plaintiff who files in violation of the clause enjoys no venue privilege and is entitled to no concomitant state-law advantages, and that the court in the contractually selected venue should not apply the law of the transferor venue.¹² The result matches the cure transfer, for the same reason. In practice it seldom changes anything, because a contract with a forum-selection clause usually has a choice-of-law clause as well.¹³