In Atlantic Marine Construction Company v. U.S. Dist. Ct. W.D. Tex., 134 S.Ct. 568 (2013), the Supreme Court held that when all parties have entered into a forum selection contract, that contract controls and the district court must transfer the action to the agreed–upon district (see here). But what should a district court do when some but not all litigants are subject to a forum selection clause and one of the parties to the clause files a motion to sever and transfer its claims to the chosen forum? That was the question confronting the court in In re Rolls Royce Corporation, 2014 U.S. App. LEXIS 24579 (5th Cir. Dec. 30, 2014).

The case arose from a helicopter crash in the Gulf of Mexico. The helicopter's owner sued three defendants, including Rolls Royce, which designed and manufactured an engine bearing that allegedly failed and precipitated the crash.

Rolls Royce moved to sever under Rule 21 and transfer under Section 1404(a) the claims against it based on a forum selection clause in its warranty. The other two defendants––who were not parties to the clause––and the plaintiff objected. The district court denied the motion and Rolls Royce petitioned the Fifth Circuit for mandamus relief. The Fifth Circuit granted the petition for mandamus.

First, Rolls Royce showed that it had no other adequate means to seek relief. The Fifth Circuit had previously held that "mandamus is an appropriate means of testing a federal district court's section 1404(a) ruling." However, there was a wrinkle––the Fifth Circuit had also previously held that a denial of a standalone Rule 21 severance motion could be challenged by appeal. Here, because the transferring order was unreviewable except through mandamus and the severance inquiry was inextricably linked to the transfer analysis, the court concluded that the district court's order could be reviewed by mandamus.

Next, the Fifth Circuit fashioned a three–part inquiry for severance–and–transfer cases where some, but not all, of the parties have entered into a forum selection clause:

  • first, the private factors of parties who sign a forum agreement, as a matter of law, weigh in favor of severance and transfer to the contracted–for forum;
  • second, the district court must consider the private factors of the parties that have not signed the forum selection agreement as it would under a Rule 21 severance and section 1404 transfer analysis;
  • finally, it must ask whether this preliminary weighing is outweighed by the judicial economy of having all claims determined in a single lawsuit, considering procedural mechanisms that could reduce the cost of severance, such as pretrial procedures, video depositions, stipulations and other practices used in multi–district litigation.

Because there was no evidence of special administrative difficulties with severance, or that the interests of the defendants not privy to the forum selection clause would be significantly threatened, the Fifth Circuit reversed the district court and remanded with instructions to sever and transfer the claims against Rolls Royce.

Judge Jones specially concurred but warned that the majority sacrificed the clarity of Atlantic Marine to manipulation by parties who could avoid forum selection clauses by joining other parties to the litigation.

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