District Courts Continue to Split on Whether TC Heartland Provides Grounds to Raise New Venue Challenges

Order Granting Leave to Amend Answer and Granting Transfer of Venue, OptoLum, Inc. v. Cree, Inc., D. Ariz. (July 24, 2017) (Judge Douglas Rayes)

Since the Supreme Court’s decision in TC Heartland, many defendants in earlier-filed cases have tested whether they can raise an improper venue defense, or waived the issue by failing to raise it in their answers or through later litigation conduct. A majority of district courts to consider the issue have found that TC Heartland did not change the law so as to qualify as an exception to the waiver doctrine, but some jurisdictions have taken the opposite view. (A chart of exemplary cases is included below.) Judge Rayes’ recent decision in OptoLum v. Cree leads the District of Arizona into the minority group and suggests that the question will continue to be addressed district by district.

Defendant Cree was in a position that may sound familiar to many pre-TC Heartland defendants: At the start of the case, Cree had moved to dismiss under Rule 12(b)(6) and for transfer under 28 U.S.C. § 1404. After the court dismissed certain claims and denied transfer, Cree filed an answer admitting that venue is proper. In light of TC Heartland, however, Cree moved to amend its answer to deny proper venue and to dismiss on that basis.

The propriety of amendment turned on whether the improper venue defense was available to Cree at the time of its motion to dismiss and answer; if so, the defense had been waived. The Court found, however, that the defense was not available prior to the TC Heartland decision on May 22, 2017. In arriving at this result, the Court acknowledged many district courts had concluded TC Heartland does not constitute a sufficient intervening change in law, but disagreed with them.

Addressing a key piece of reasoning in many of those cases—that the Federal Circuit did not have the power to overrule the Supreme Court’s earlier Fourco decision—Judge Rayes stated that the Federal Circuit in VE Holding “did not purport to ‘overrule’ Fourco, but instead determined whether Congress intended to do so when it amended § 1391(c).” The Supreme Court addressed the same question 27 years later and disagreed with VE Holding, “but it did not do so on the ground that VE Holding had improperly ‘overruled’ Fourco.” Judge Rayes also cited other indications from TC Heartland and congressional reports that VE Holding was recognized as having changed the venue landscape. The fact that Cree, like the petitioner in TC Heartland, could potentially have taken the issue to the Supreme Court and prevailed ignored “the patent bar’s reliance on [VE Holding] for nearly three decades” and did not justify concluding that the improper venue defense was “available” to Cree at the time of its answer. Thus, Cree was permitted to amend.

In finding no waiver, the court also noted that defendants in contrary cases had raised the issue later in the litigation, whereas the instant case was in its early stages, with Markman three months away. Turning to the motion to dismiss, the court exercised its discretion to deny plaintiff OptoLum’s request for venue discovery, finding it “would be contrary to the just, speedy, and inexpensive determination of the merits of the action.” The court further exercised its discretion to transfer the case to North Carolina rather than dismiss the case.

OptoLum v. Cree potentially answers the venue waiver question for one more jurisdiction, but the decision also suggests that courts will continue to consider the question for themselves, notwithstanding any perceived momentum in favor of one view over another. For parties in jurisdictions where at least one judge has already issued a decision, it may be difficult to obtain a different result—we have not seen any intra-district splits to date. But otherwise, don’t expect a foregone conclusion.

List of district courts and exemplary decisions, chronological order:

Jurisdiction Example Case TC Heartland Exception to Waiver?
Eastern District of Virginia Cobalt Boats, LLC v. Sea Ray Boats, Inc., No. 2:15-cv-00021 (June 7, 2017) (Morgan, J.) NO
Eastern District of Texas Elbit Systems Land & C4I Ltd. v. Hughes Network Systems LLC, No. 2:15-cv-00037 (June 20, 2017) (Payne, M.J.) NO
Western District of Washington Westech Aerosol Corp. v. 3M Co., No. 3:17-cv-05067 (June 21, 2017) (Leighton, J.) YES
Northern District of Texas iLife Techs., Inc. v. Nintendo of Am., Inc., No. 3:13-cv-04987 (June 27, 2017) (Lynn, J.) NO
Northern District of Illinois The Chamberlain Group, Inc. v. Techtronic Indus. Co., Ltd., No. 1:16-cv-06097 (June 28, 2017) (Leinenweber, J.) NO
District of Massachusetts Amax, Inc. v. ACCO Brands Corp., No. 1:16-cv-10695 (June 29, 2017) (Gorton, J.) NO
District of Oregon Reebok Int’l Ltd. v. TRB Acquisitions LLC, No. 3:16-cv-01618 (July 14, 2017) (Simon, J.) NO
District of South Carolina Hand Held Prods. Inc. d/b/a Honeywell Scanning & Mobility v. The Code Corp., No. 2:17-cv-00167 (July 18, 2017)
(Gergel, J.)
Northern District of California Fox Factory, Inc. v. SRAM, LLC, No. 3:16-cv-00506 (July 18, 2017) (Orrick, J.) NO
District of Delaware Koninklijke Philips NV v. ASUSTek Computer Inc., No. 1:15-cv-01125 (July 19, 2017) (Sleet, J.) NO
Southern District of Mississippi SkyHawke Techs., LLC v. DECA Int’l Corp., No. 3:10-cv-00708 (July 21, 2017) (Lee, J.) NO
District of Arizona OptoLum Inc. v. Cree, Inc., No. 2:16-cv-03828 (July 24, 2017) (Rayes, J.) YES
Central District of California McRo, Inc. v. Valve Corp., No. 8:13-cv-01874 (July 24, 2017) (Wu, J.) NO