Charles O. KEROBO; Clean Fuels of Michigan, Inc., a Michigan Corporation, Plaintiffs-Appellants, v. SOUTHWESTERN CLEAN FUELS, CORP., a California Corporation, d/b/a Clean Fuels; Glen Fernandez; Nicholas Shepis; Norman Goldstein; Joe Ortega, jointly and severally, Defendants-Appellees, 285 F.3d 531

BATCHELDER, J., delivered the opinion of the court, in which MOORE, J., joined. BERTELSMAN, D.J. (pp. 539-544), delivered a separate dissenting opinion. OPINION BATCHELDER, Circuit Judge. This appeal arises from the district court’s enforcement of a forum-selection clause and grant of the defendants’ motion for dismissal for improper venue pursuant to Rule 12(b)(3) of the Federal Rules of Civil Procedure. We conclude venue was not improper, and we therefore hold that the district court erred in granting the motion. Because, as we shall explain, we conclude that this case is governed by Stewart Org., Inc. v.

Ricoh Corp., 487 U.S. 22, 108 S.Ct. 2239, 101 L.Ed.2d 22 (1988), we reverse the judgment and remand the case to the district court for further proceedings consistent with this opinion. BACKGROUND Southwestern Clean Fuels, Corp. (“Southwestern”) is a California corporation whose principal place of business is in California. Southwestern specializes in cleaning fuel storage tanks, a business that it has attempted to expand by franchising its operations.

Charles Kerobo, a Michigan resident who has a master’s degree in business administration and a doctorate in chemistry, is the sole shareholder Clean Fuels of Michigan, Inc., a Michigan corporation, whose principal place of business is in Michigan. On July 28, 1998, in South-field, Michigan, Southwestern and Kerobo, on behalf of Clean Fuels of Michigan, executed a “Licensing Agreement,” pursuant to which Clean Fuels of Michigan obtained the exclusive rights to operate under the business and marketing plans of Southwestern in the State of Michigan for a term of twenty years.

Article XXI of the Licensing Agreement provides: This agreement shall be interpreted, construed and governed by the laws of the State of California. Jurisdiction for any action for breach, damages or default shall be within the County of Orange, State of California.

For reasons not entirely clear from the record, the parties had a difficult relationship, and on October 13, 1999, Kerobo and Clean Fuels of Michigan filed a verified complaint in a Michigan state court, alleging that Southwestern and several of its officers and directors, all residents of California or New York, had misrepresented certain aspects of the sale of the franchised fuel storage tank cleaning and servicing business and breached the terms of the franchise agreement.

The complaint stated claims for breach of contract, fraudulent inducement, fraud, and violations of the Michigan Franchise Investment Law, Mich. Comp. Laws Ann. § 445.1501 et seq. The defendants removed the case to federal court based solely on diversity of citizenship; they then moved for dismissal of the suit for improper venue pursuant to Rule 12(b)(3), because the forum-selection clause in the franchise agreement established venue in California.

In the alternative, the defendants sought transfer of the case to the United States District Court for the Southern District of California pursuant to 28 U.S.C. § 1404(a). Relying on M/S Bremen v. Zapata OffShore Co., 407 U.S. 1, 10, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972), an admiralty case, the district court concluded that the forum-selection clause was valid unless the plaintiffs could establish that it was unreasonable.

Because it viewed the plaintiffs as seeking to litigate in Michigan only for the sake of convenience, the court concluded that the forum-selection clause was reasonable and granted the motion to dismiss. On appeal, the plaintiffs request that the district court’s order of dismissal be reversed and the forum-selection clause be invalidated pursuant to Michigan Franchise Investment Law, which voids franchise contract provisions that require litigation to be conducted outside the state of Michigan. STANDARD OF REVIEW We review de novo the district court’s

interpretation of the venue statutes and its determination of whether a case is filed in an improper venue. First of Michigan Corp. v. Bramlet, 141 F.3d 260, 262 (6th Cir.1998). We review for abuse of discretion a district court’s decision whether to dismiss or transfer a complaint for improper venue. Id. “A district court abuses its discretion when it relies on clearly erroneous findings of fact, uses an incorrect legal standard, or applies the law incorrectly.” United Food & Commercial Workers Union, Local 1099 v. S.W. Ohio Reg’l Transit Auth., 163 F.3d 341, 347 (6th Cir.1998).

ANALYSIS Because we conclude that in all material respects, this case is indistinguishable from Ricoh, we begin with a brief synopsis — upon which we will expand in a later

section of this opinion — -of the proceedings in that case. In Ricoh, the plaintiffs brought suit against the defendants in a forum other than that agreed upon in the forum-selection clause of the contract that was the subject of the action. The defendants moved under 28 U.S.C. § 1406(

a) to dismiss the case because of improper venue or, under 28 U.S.C. § 1404(a), to transfer the case to the contractual forum. See Ricoh, 487 U.S. at 24, 108 S.Ct. 2239; accord Stewart Org., Inc. v. Ricoh Corp., 779 F.2d 643, 645 (11th Cir.1986) (noting that “the appellant filed motions to dismiss and to transfer on grounds of improper venue and inconvenient forum”), vacated en banc, 785 F.2d 896 (11th Cir.1986); and Stewart Org., Inc. v.

Ricoh Corp., 696 F.Supp. 583, 585 (N.D.Ala.1988) (acknowledging on remand that “[i]n response to the complaint, Ricoh filed its motion to dismiss or to transfer this action to New York on grounds of improper venue and forum non conveniens.”). The district court dismissed the § 1406(

a) motion because the venue in which the action was filed was proper under 28 - U.S.C. § 1391, see id. at 28 n. 8, 108 S.Ct. 2239, and denied the § 1404(

a) motion because it concluded that the forum selection clause was unenforceable under state law, id. at 28, 108 S.Ct. 2239. On interlocutory appeal, the defendants raised only the denial of the motion to transfer. The Supreme Court held that the issue of whether the forum-selection clause should be given effect was governed by federal law, specifically 28 U.S.C. § 1404(a). The Court noted in the course of its discussion that “[t]he parties do not dispute that the district court properly denied the motion to dismiss the case for improper venue under 28 U.S.C. § 1406(

a) because respondent apparently does business in the Northern District of Alabama. See 28 U.S.C. § 1391(c) (venue proper in judicial district in which corporation is doing business).” Id. at 28 n. 8, 108 S.Ct. 2239. MOTION TO DISMISS PURSUANT TO RULE 12(b)

(3) This case originated in state court in Michigan and was removed to federal court pursuant to 28 U.S.C. § 1441(a), which provides: Except as otherwise expressly provided by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending.

For purposes of removal under this chapter, the citizenship of defendants sued under fictitious names shall be disregarded. 28 U.S.C. § 1441(a). Venue in removed-cases is governed solely by § 1441(a). Polizzi v. Cowles Magazines, Inc., 345 U.S. 663, 665, 73 S.Ct. 900, 97 L.Ed. 1331 (1953); see also Lee v. Chesapeake & O. Ry. Co., 260 U.S. 653, 657, 43 S.Ct. 230, 67 L.Ed. 443 (1923) (reviewing history of venue in removed cases from Judiciary Act of 1789 through Comp.

St. § 1011 in effect at the time and concluding that “in every instance the removal must be into the District court ‘in the district where such suit is pending;’ ” (quoting Comp. St. § 1011)). Here, the action was removed to the district court in the Eastern District of Michigan from state court within the area embraced by the Eastern District of Michigan. Hence, the action was removed to the only venue permitted by § 1441(a). That the statutory venue was proper, however, does not entirely resolve the question of whether the district court erred in granting the defendants’ Rule 12(b)(3) motion.

We recognize that the circuits are not in agreement about whether a claim that an action' is filed in a forum other than that designated in a contract’s forum selection clause may be raised in a Rule 12(b)(3) motion. See, e.g., Lipcon v. Underwriters at Lloyd’s, London, 148 F.3d 1285, 1290 (11th Cir.1998) (holding that a motion to dismiss based on a forum-selection clause in international agreement should be brought pursuant to Rule 12(b)(3) rather than Rule 12(b)(1) because the forum-selection clause is unrelated to the basis for federal jurisdiction); Lambert v.

Kysar, 983 F.2d 1110, 1112 (1st Cir.1993) (noting in removed action that the procedural vehicle for urging dismissal under a forum-selection clause is properly Rule 12(b)(6) rather than Rule 12(b)(3)). In essence, this difference of opinion centers around whether the parties’ contractual designation of forum can render the venue dictated by statute “improper.” We think that in the case of an action removed from state court to federal court, it cannot.

There is only one federal venue into which a state court action may be removed, and that is in the statutorily dictated “district court ... for the district and division embracing the place where [the state court] action [was] pending.” ’ 28 U.S.C. § 1441(a); see also PT United Can Co. Ltd. v.

Crown Cork & Seal Co., Inc., 138 F.3d 65, 72 (2d Cir.1998) (“[A] party may challenge removal as itself improper, or as having been made to the wrong district court if the case was removed to a district court other than that ‘embracing’ the state court in which the action was brought, but one may not challenge venue in the district court as of right, according to that district court’s venue rules, as if the case had originally been brought there.

A party may nonetheless request a discretionary transfer to a more convenient district court forum under the transfer provision.” (citing Polizzi, 345 U.S. at 665-66, 73 S.Ct. 900 (internal citations omitted))). The defendants could not have removed this case from state court in Michigan to federal court in California, the forum the parties agreed to in the contract. We think that this fact argues persuasively for the view that whether a forum-selection clause should be enforced is a matter of contract, not an issue of proper venue.

Further, we note that in M/S Bremen, the Supreme Court held that “[t]he threshold question is whether [the district] court should have exercised its jurisdiction to do more than give effect to the legitimate expectations of the parties, manifested in their freely negotiated agreement, by specifically enforcing the forum clause.” M/S Bremen, 407 U.S. at 12, 92 S.Ct. 1907. This is language, not of venue, but of jurisdiction and contract

interpretation. This circuit’s decisions in Security Watch, Inc. v. Sentinel Sys., Inc., 176 F.3d 369 (6th Cir.1999) and Shell v. R.W. Sturge, Ltd., 55 F.3d 1227 (6th Cir.1995) are not to the contrary.

In Security Watch, we specifically noted that the defendants’ motion to dismiss on forum-selection clause grounds had been brought under an unspecified subsection of Rule 12(b); that neither the parties nor the district court had attempted to identify which subsection of the rule should govern a motion to dismiss based on a contractual forum-selection provision; and that it was unnecessary to make that determination in the context of that case because Tennessee law governing the enforceability of forum-selection clauses was consistent with federal law set out in M/S Bremen. 176 F.3d at 371 n. 2.

Shell, a case arising out of an international agreement, was filed in state court and removed to federal court. The defendants filed a motion to dismiss under Rule 12(b)(3), pointing to the forum-selection clause requiring that the courts of England would have exclusive jurisdiction over any and all controversies arising out of that agreement. The district court granted the motion to dismiss, and we affirmed. Shell, 55 F.3d at 1229-32.

That case, however, did not raise and we did not address the federal venue statutes or the question of whether Rule 12(b)(3) was the proper vehicle by which to raise the forum-selection clause. Significantly, the contractually agreed forum in Shell was not within the jurisdiction of any United States district court, and a motion to transfer would therefore not have been available. As we will discuss more fully below, the Supreme Court made it clear in Ricoh that forum selection clauses do not dictate the forum.

Indeed, the Court footnoted with apparent approval the parties’ agreement that the district court had properly denied the motion to dismiss for improper venue because the case had been filed in the venue prescribed by 28 U.S.C. § 1391, the statute governing venue for cases filed directly in federal court. Ricoh, 487 U.S. at 28 n. 8, 108 S.Ct. 2239. We think this is a clear signal that if venue is proper under the statute, a motion to transfer for improper venue will not lie.

Finally, even the dissent in Ricoh does not argue that whether a forum-selection clause is enforceable should be considered in the context of the venue statutes and proper versus improper venue. Rather, the dissent argues that “no federal statute or Rule of Procedure governs the validity of a forum-selection clause,” and therefore, the issue the Court should have addressed is whether federal courts were free to fashion a judge-made rule to govern the question. Id. at 38, 108 S.Ct. 2239 (Scalia, J. dissenting).

We therefore hold that the district court erred in granting the defendants’ motion to dismiss for improper venue. MOTION TO TRANSFER PURSUANT TO 28 U.S.C. § 1404(

a) Because venue in the district court in Michigan is proper, we conclude that this case is indistinguishable from Ricoh, 487 U.S. 22, 108 S.Ct. 2239, 101 L.Ed.2d 22. The dealership agreement in Ricoh obligated the plaintiff, an Alabama corporation, to market copier products of the defendant, a national manufacturer with its principal place of business in New Jersey. Id. at 24, 108 S.Ct. 2239. The agreement contained a forum-selection clause which required that disputes arising out of the agreement must be brought in any appropriate state or federal district court located in Manhattan. Id.

When the business relationship soured, the plaintiff filed suit in the United States District Court for the Northern District of Alabama, claiming diversity jurisdiction and alleging breach of contract, breach of warranty, fraud, and antitrust violations. Id. The defendant moved either to transfer the case to the Southern District of New York pursuant to 28 U.S.C. § 1404(

a) or to dismiss for improper venue under 28 U.S.C. § 1406(a). Id.; accord Ricoh, 779 F.2d at 644; and Ricoh, 696 F.Supp. at 585. The district court denied the § 1406(

a) motion because venue was clearly proper in Alabama pursuant to 28 U.S.C. § 1391. The court denied the § 1404(

a) motion, reasoning that it was governed by Alabama law, which does not favor contractual forum-selection clauses. That ruling was certified for interlocutory review, and the Eleventh Circuit reversed, applying the standards set out in the admiralty case of M/S Bremen, in which the Supreme Court held that forum-selection clauses are prima fa-cie valid and should be enforced unless enforcement would be unreasonable under the circumstances of the case. The Eleventh Circuit concluded that the forum-selection clause was enforceable as a matter of federal law.

The Supreme Court did not begin its review with M/S Bremen. Rather, the Court first set out the framework for determining whether federal or state law governed the venue issue. Noting that the parties agreed that the district court had properly denied the § 1406(

a) motion because under 28 U.S.C. § 1391(c), venue would have been proper in Alabama, the state in which the case was filed, Ricoh, 487 U.S. at 28 n. 8, 108 S.Ct. 2239, the Court considered whether § 1404(

a) should be applied in this diversity action. The Court chose not to engage in an Eñe analysis, recognizing instead that “[a] district court’s decision whether to apply a federal statute such as § 1404(

a) in a diversity action ... involves a considerably less intricate analysis than that which governs the relatively unguided Eñe choice.” Id. at 26, 108 S.Ct. 2239 (internal quotations omitted) (citing Hanna v. Plumer, 380 U.S. 460, 471, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965)). The Court discussed a two-part test to be used in diversity cases in which the federal law sought to be applied is a congressional statute. The district court first must determine whether the congressional statute is “sufficiently broad to control the issue before the Court.” Id. (quoting Walker v.

Armco Steel Corp., 446 U.S. 740, 740-50, 100 S.Ct. 1978, 64 L.Ed.2d 659 (1980), and Burlington N. R.R. Co. v. Woods, 480 U.S. 1, 4-5, 107 S.Ct. 967, 94 L.Ed.2d 1 (1987)). If the district court finds that the federal statute does cover the disputed issue, then it must determine “whether the statute represents a valid exercise of Congress’ authority under the Constitution.” Id. at 27. Using that analysis, the Court held that 28 U.S.C. § 1404(

a) governs the Ricoh venue dispute. First, however, the Court addressed the Eleventh Circuit’s reliance on M/S Bremen to decide the issue. Adverting to its earlier holding that “federal common law developed undef admiralty jurisdiction [is] not freely transferable to [the] diversity setting,” id. at 28, 92 S.Ct. 1907 (quoting Texas Indus., Inc. v. Radcliff Materials, Inc., 451 U.S. 630, 641—42, 101 S.Ct. 2061, 68 L.Ed.2d 500 (1981)), the Court refused to hold that in a diversity case such as that presented in Ricoh, the M/S Bremen standard is to be applied in preference to applicable state contract principles.

The Court concluded that the M/S Bremen standard is not the controlling test in a diversity case. Id. at 28-29, 92 S.Ct. 1907. Rather, the Court held, the threshold question is “whether § 1404(

a) itself controls respondent’s request to give effect to the parties’ contractual choice of venue.” Id. at 29, 92 S.Ct. 1907. The Court then applied the two-part test it had earlier set out and concluded that § 1404(

a) governs the dispute. First, the Court held that § 1404(

a) is broad enough to control the issue of whether to transfer the case in accordance with the forum-selection clause.

Section 1404(

a) provides that “[f]or the convenience of the parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought.” Id. Congress intended to give district courts the discretion to transfer cases on an individual basis by considering convenience and fairness. Id. at 29, 92 S.Ct. 1907 (citing Van Dusen v. Barrack, 376 U.S. 612, 622, 84 S.Ct. 805, 11 L.Ed.2d 945 (1964)).

The district court must weigh a number of case-specific factors such as the convenience of parties and witnesses, “public-interest factors of systemic integrity,” and private concerns falling under the heading “the interest of justice.” Id. at 30, 92 S.Ct. 1907. A forum-selection clause in a contract is one of the factors to consider in this calculus. Id. at 31, 92 S.Ct. 1907. Such a clause “should receive neither dis-positive consideration ... nor no consideration ... but rather the consideration for which Congress provided in § 1404(a).” Id.

Similarly, when considering a forum-selection clause as a factor, a district court does not have the discretion to hold that because the state public policy prohibits the enforcement of clauses requiring an out-of-state venue, the state policy will be categorically upheld and the clause will not be enforced. Id. at 30-31, 92 S.Ct. 1907. Having concluded that § 1404(

a) controls the issue of venue, the Court proceeded to the second element of the test, whether the statute represents a valid exercise of Congress’ authority under the Constitution. Id. at 31-32, 92 S.Ct. 1907. The Court found that this element is satisfied as well: [T]he constitutional provision for a federal court system ... carries with it congressional power to make rules governing the practice and pleadings in those courts, which in turn includes a power to regulate matters which, though falling within the uncertain area between substance and procedure, are rationally capable of classification as either. Id. at 32, 92 S.Ct. 1907 (quoting Hanna, 380 U.S. at 472, 85 S.Ct. 1136).

Section 1404(

a) is classified as a procedural rule and is regarded as a “federal judicial housekeeping measure.” Id. (referring to Van Dusen, 376 U.S. at 636-37, 84 S.Ct. 805). Therefore, it falls within Congress’ powers under

Article III as augmented by the Necessary and Proper Clause. Id. Accordingly, the Supreme Court concluded that 28 U.S.C. § 1404(

a) governed the parties’ venue dispute and the district court’s decision as to whether the forum-selection clause was valid. Id. at 28, 31-32, 92 S.Ct. 1907. The Court remanded the case for determination of the effect under federal law of the forum-selection clause on the § 1404(

a) motion. Id. at 32, 92 S.Ct. 1907. The case before us today is virtually indistinguishable from Ricoh. It involves a dispute in which the plaintiffs allege breach of contract, fraudulent inducement, fraud, and violations of Michigan law. The contract in question contains a forum-selection clause which requires that any cause of action be brought in the state of California. Instead of filing the complaint in California, the plaintiffs chose to bring the suit before a Michigan state court.

As was the case in Ricoh, the law of the forum state disfavors, as a matter of public policy, forum-selection clauses that provide for out-of-state venues. The defendants properly removed this case to federal court; they then moved to dismiss for improper venue or, alternatively, to transfer pursuant to 28 U.S.C. § 1404(a). The district court enforced the forum-selection clause and dismissed the case for improper venue. It is true that here, the motion to dismiss was made pursuant to Rule 12(b)(3), without specific reference to 28 U.S.C. § 1406(a).

However, a Rule 12(b)(3) motion to dismiss for improper venue is simply the procedural vehicle by which to challenge improper venue; the Rules of Civil Procedure do not contain any venue provisions or requirements. The requirements for venue are set by statute, as are the remedies available for improper and inconvenient venue.

Section 1406(

a) applies only where venue is improper. Van Dusen, 376 U.S. at 634, 84 S.Ct. 805 (“[Section] 1406(

a) provides for transfer from forums in which venue is wrongly or improperly laid, whereas, in contrast, [section] 1404(

a) operates on the premises that the plaintiff has properly exercised his venue privilege.”). As we previously concluded, venue in Michigan is not improper in this case, and the dismissal under Rule 12(b)(3) must be reversed. As was the case in Ricoh, we are left with the § 1404(

a) motion. We hold that the Supreme Court’s analysis in Ricoh entirely governs the case before us here and compels the conclusion that § 1404(

a) governs the parties’ venue dispute.

Section 1404(

a) is a federal statute that purports to cover the dispute. “[A] district court sitting in diversity must apply a federal statute that controls the issue before the court and that represents a valid exercise of Congress’ constitutional powers.” Id. at 27, 108 S.Ct. 2239. For all of the reasons set out in Ricoh, we hold that § 1404(

a) is broad enough to control the issue of whether this forum-selection clause should be given effect. Therefore, § 1404(

a) must be applied here because the Supreme Court’s holding in Ricoh that § 1404(

a) represents a valid exercise of Congress’s authority under the Necessary and Proper Clause of

Article III is dispositive of the second element of the test. CONCLUSION For the foregoing reasons, we REVERSE the district court’s grant of the defendants’ motion to dismiss for improper venue pursuant to Rule 12(b)(3), and REMAND this case for determination, consistent with Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 108 S.Ct. 2239, 101 L.Ed.2d 22 (1988), and this opinion, of the appropriate effect under federal law of the parties’ forum-selection clause on the defendants’ 28 U.S.C. § 1404(

a) motion. . 28 U.S.C. § 1406(

a) 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. § 1404(

a) provides: For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought. . Erie v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938).