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The Blacklands Railroad v. Northeast Texas Rural Rail Transportation District

United States District Court, E.D. Texas

August 5, 2019

THE BLACKLANDS RAILROAD, Plaintiff,
v.
NORTHEAST TEXAS RURAL RAIL TRANSPORTATION DISTRICT, Defendant.

          MEMORANDUM AND ORDER

          MARCIA A. CRONE UNITED STATES DISTRICT JUDGE

         Pending before the court is Defendant Northeast Texas Rural Rail Transportation District's (“NETEX”) Rule 12(b)(3) Motion to Transfer Venue (#3). NETEX seeks to transfer this action to the Eastern District of Texas, Tyler Division, on the grounds that the Eastern District of Texas, Beaumont Division, is an improper venue. NETEX claims the Operating Agreement between it and Plaintiff the Blacklands Railroad (“Blacklands”) requires transfer to the Tyler Division in view of the forum selection clause included in the agreement. Having reviewed the pending motion, the submissions of the parties, the pleadings, and the applicable law, the court is of the opinion that the Beaumont Division is an improper venue and the Sherman Division is the proper venue. Therefore, NETEX's Motion is GRANTED in part and DENIED in part.

         I. Background

         Blacklands initiated this action in the 62nd Judicial District Court of Hopkins County, Texas. Blacklands alleges that NETEX: (1) breached the Operating Agreement, which gave Blacklands exclusive, complete control over NETEX's right-of-way and track, by soliciting business relations from Blacklands' competitors; (2) anticipatorily repudiated the Operating Agreement; (3) falsely published disparaging statements regarding Blacklands' capabilities; (4) misappropriated Blacklands' trade secrets; (5) tortiously interfered with Blacklands' contract with Union Pacific Railroad, Iowa Northern Railway, and the Mount Vernon Economic Development Corporation; and (6) violated 49 U.S.C. § 11904 (#1-7, 3). On June 10, 2019, NETEX removed the case from Hopkins County to this court. On June 17, 2019, NETEX filed the instant motion requesting the court to transfer this case to the Tyler Division pursuant to the parties' Operating Agreement (#3, 1). The Operating Agreement states: “In the event any litigation arises in connection with this Agreement, the parties agree that jurisdiction will lie with either any Texas State court in Hunt County or Federal court in the Eastern District of Texas, Tyler division.”

         On July 2, 2019, Blacklands filed a response asserting that venue in the Tyler Division is improper and the case should be transferred to the Eastern District of Texas, Sherman Division, in accordance with Texas law. Blacklands argues that the action was properly filed prior to removal in Hopkins County, which the Sherman Division geographically encompasses, because the Operating Agreement's venue provision cannot be enforced under state law. Blacklands further alleges that venue selection clauses cannot waive mandatory venue provisions unless a statute grants such ability. Tex. Civ. Prac. Rem. Code § 15.020; In re Fisher, 433 S.W.3d 523, 533-34 (Tex. 2014). Accordingly, Blacklands contends that Hopkins County is the mandatory venue for state court actions against NETEX pursuant to Texas law (#1-7, 2). Tex. Civ. Prac. & Rem. Code §§ 15.0151, 15.017, 15.004.

         In response, NETEX argues that the forum selection clause is valid and enforceable, and that Blacklands has not met its burden of proof to avoid enforcement (#11, 3). Further, NETEX states the court should take into consideration the following public interest factors in determining whether venue is proper in the Tyler Division: (1) the administrative difficulties flowing from court congestion; (2) the local interest in having localized interests decided at home; (3) the familiarity of the forum with the law that will govern the case; and (4) the avoidance of unnecessary problems of conflict of laws in the application of foreign law (#11, 3). NETEX argues that there are not “any administrative difficulties . . . or local interests that would require venue to remain in the Beaumont Division and both [the Beaumont and Tyler Divisions] would apply the same laws.”

         II. Analysis

         District courts are authorized to transfer venue under both 28 U.S.C. §§ 1404(a) and 1406. “[T]he determination of whether § 1406 or § 1404(a) applies turns on whether venue is proper in the court in which the suit was originally filed. If venue is improper in that court, then § 1406 or Rule 12(b)(3) applies. If venue is proper in that court, then § 1404(a) applies.” In re Atl. Marine Constr. Co., Inc., 701 F.3d 736, 739 (5th Cir. 2012), rev'd on other grounds, 571 U.S. 49 (2013). Because NETEX asserts that venue is improper in the Beaumont Division, the court first considers § 1406 and Rule 12(b)(3)'s application before considering the relevance of the Operating Agreement.

         A. 28 U.S.C. § 1406 and Rule 12(b)(3)

         “The Federal Rules of Civil Procedure authorize a court, upon suitable showing, to dismiss an action where venue in that court is improper.” J.D. Fields, Inc. v. Indep. Enterprises, Inc., 4:12-CV-2605, 2012 WL 5818229, at *8 (S.D. Tex. Nov. 13, 2012) (citing Fed.R.Civ.P. 12(b)(3)); accord Herman v. Cataphora, Inc., 730 F.3d 460, 463 (5th Cir. 2013); Williamson- Dickie Mfg. Co. v. M/V HEINRICH J, 762 F.Supp.2d 1023, 1026 (S.D. Tex. 2011). The relevant statute provides:

The district court of a district in which is filed a case laying venue in the wrong division or district shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought.

28 U.S.C. § 1406(a); Atl. Marine Constr. Co., Inc. v. U.S. Dist. Court for the W. Dist. of Tex., 571 U.S. 49, 55 (2013) (hereafter “Atl. Marine”). If the court determines that venue is improper in this district, it may dismiss the case or transfer it to the proper venue in the interest of justice. 28 U.S.C. § 1406(a); Atl. Marine, 571 U.S. at 55; Herman, 730 F.3d at 466; Zurich Am. Ins. Co. v. Tejas Concrete & Materials Inc., 982 F.Supp.2d 714, 720 (W.D. Tex. 2013).

         The general venue statute, 28 U.S.C. § 1391, usually governs whether venue is proper or improper in a district. Subsection (a) states that § 1391, “[e]xcept as otherwise provided by law . . . shall govern the venue of all civil actions brought in district courts of the United States.” 28 U.S.C. § 1391 (emphasis added). The United States Supreme Court has interpreted this language to mean that the federal venue provisions “alone define whether venue exists in a given forum.” Atl. Marine, 571 U.S. at 56. Thus, “[w]hen venue is challenged, the court must determine whether the case falls within [the federal venue provisions]. If it does, venue is proper; if it does not, venue is improper, and the case must be dismissed or transferred under § 1406(a).” Id. As a consequence, the parties' inclusion of a forum selection clause in their contract “has no bearing on whether a case falls” under a federal venue provision. Id.

         The removal statute, 28 U.S.C. § 1441 supersedes § 1391 in removed actions. Polizzi v. Cowles Magazines, Inc., 345 U.S. 663, 665-66 (1953); Ashton v. Knight Transp., Inc., Civ. A. 309-CV-0759-B, 2009 WL 2407829, at *2 (N.D. Tex. Aug. 6, 2009); Republic Capital Dev. Grp., L.L.C., v. A.G. Dev. Grp., Inc., Civ.A. H-05-1714, 2005 WL 3465728, at *8 (S.D. Tex. Dec. 19, 2005); Dunn v. Babco Textron, 912 F.Supp. 231, 232 (E.D. Tex. 1995). In such actions, venue is proper in “the district court of the United States for the district and division ...


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