Wednesday, December 21, 2005

Eleventh Circuit Issues Venue Opinion

The Eleventh Circuit just issued a decision reversing an erroneous dismissal for improper venue in Algodonera De Las Cabezas, S.A. v. American Suisse Capital, Inc., --- F.3d ----, 2005 WL 3453884 (11th Cir. Dec. 19, 2005). Here is an extended excerpt reproducing most of the opinion:

The defendants were served with process in the Southern District of Florida but failed to respond or otherwise appear. Upon Algodonera's motion, the clerk of court entered default judgment against the defendants. The district court then held a hearing to determine damages. At the close of the hearing, the district court requested a memorandum of law concerning the recovery of lost profits.However, before Algodonera filed such a memo, the district court entered a sua sponte order dismissing the case based on improper venue. The district court's order proceeded on the assumption that Algodonera relied on § 1391(a)(3), under which venue was not proper because the case could have been filed in New York. Algodonera timely filed a motion for reconsideration, explaining that venue was proper under § 1391(a)(1), given that both defendants were residents of Florida and the Southern District within the meaning of § 1391(c). The district court denied the motion for reconsideration, explaining only that it remained “unconvinced.”

. . .

In this case, both of the defendants conducted business through their offices in the Southern District of Florida, received correspondence there, and were subject to service of process there. Accordingly, both defendants were “residents” of the Southern District of Florida, within the meaning of 28 U.S.C. § 1391(c). Venue was thus proper in the Southern District within the meaning of § 1391(a)(1).

While the district court relied on § 1391(a)(3) to hold that venue was improper because the action could be brought in New YorkFN1, venue may be predicated on § 1391(a)(3) only when neither § 1391(a)(1) or (2) are satisfied. Doctor's Assocs. v. Stuart, 85 F.3d 975, 983 (2d. Cir.1996); see also, 17 Moore's Federal Practice, § 110.02 (describing § 1391(a)(3) as a “fall-back provision” used where “venue will be unavailable under § 1391(a)(1)”). Section 1391(a)(3) does not dictate that venue is improper in diversity cases any time the case could be brought in another district. Stuart, 85 F.3d at 893.

Moreover, we have previously made clear that while a district court may dismiss a suit sua sponte for lack of venue, it may not do so “without first giving the parties an opportunity to present their views on the issue.” Lipofsky v. N.Y. State Workers Comp. Bd., 861 F.2d 1257, 1259 (11th Cir.1988). This rule gives defendants an opportunity to waive the venue defense and plaintiffs an opportunity to present arguments as to why venue is proper before the case is dismissed. Id. In this case, the district court dismissed the case sua sponte before receiving any submissions or arguments from the parties on the propriety of venue in the Southern District. While the district court opined that Algodonera's motion for reconsideration gave it the opportunity to present its position on venue, that opportunity came only after the district court had dismissed the case and ordered the clerk of court to close it. This does not satisfy Lipofsky's command that the parties be given an opportunity to present their views, and bolsters our conclusion that the district court abused its discretion.


Post a Comment

<< Home