CAFC OKs Transfer Despite Forum Selection Clause

In a non-precedential opinion issued October 18, 2013, the Federal Circuit issued a decision that calls into question the overall utility of forum selection clauses in contractual relationships. In fact, Eli Lilly lost its bid to have its dispute with Genentech and City of Hope heard in the Northern District of California despite having a forum selection clause in the governing contract that stated the parties would litigate any dispute in the Northern District of California. See In re Eli Lilly and Co. 

Eli Lilly petitioned for a writ of mandamus directing the United States District Court for the Northern District of California to vacate its order transferring this case to the United States District Court for the Central District of California. In its order granting Genentech’s motion to transfer, the district court noted that the trial judge in the Central District of California had presided over four cases involving the same family of patents at issue. The district court further noted that another trial judge in the Northern District of California had recently transferred a case brought by one of Eli Lilly’s business partners that involves the same patent and product to the Central District of California, citing the expertise the trial judge had gained through these prior lawsuits.

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5 comments so far.

  • [Avatar for Gene Quinn]
    Gene Quinn
    October 21, 2013 05:55 pm

    I also think this means that you cannot expect a district court to keep a case involving one issue when another district court has had several cases addressing related issues. If forum matters you need to fight for that fall all the cases otherwise you will lose the ability to keep the contract controlling.

    I don’t know how much it would matter in this case, but notice how the court did mention that the forum clause was for the benefit of Genentech and not Eli Lilly. If it matters to you and you are picking a forum where the other party has more ties it might be worth saying in the clause that the forum selection is agreed to be mutually beneficial to the parties and either party may challenge and stop a transfer to a different court.

  • [Avatar for Mark Malek]
    Mark Malek
    October 21, 2013 07:56 am

    This is a tough one. As attorneys, we do all we can to anticipate certain things in our contracts. One of them is controlling where litigation is going to take place. Here, the court is just telling us that it doesn’t matter any more what the parties already have agreed to. Going to have to take another look at how we draft contracts I suppose…

  • [Avatar for Anon]
    October 20, 2013 11:26 am

    Is “convenience for the courts” synonymous in this case and set of facts with better attainment of justice?

    After all, this is a non-precedential opinion, and justice is something that may not always be ‘contracted away,’ is it?

    I think her that more than mere cost and convenience is at the heart of the issue: but rather, triable facts, issues and, well, justice have a voice.

  • [Avatar for Michael Risch]
    Michael Risch
    October 20, 2013 10:22 am

    And I think forum non conveniens trumps an otherwise legal forum selection, since it is an add on equitable decision by the court.

  • [Avatar for Michael Risch]
    Michael Risch
    October 20, 2013 10:21 am

    Agreed about the uncertainty, but I think this is the standard background law for forum selection clauses – they are enforceable, unless they’re not.

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