TikTok Makes It Out of West Texas to Sunny Northern California | McDermott Will & Emery
The US Court of Appeals for the Fifth Circuit granted a writ of mandamus ordering the transfer of a case, finding that the district court’s denial of the motion to transfer “was so patently erroneous” that the extreme measure was appropriate. In re TikTok, Inc., Case No. 23-50575 (5th Cir. Oct. 31, 2023) (Smith, Southwick, Wilson, JJ.)
In the underlying case, Beijing Meishe Network Technology Co. sued TikTok in the US District Court for the Western District of Texas, alleging infringement, trade secret misappropriation and false advertising. All claims stemmed from the theory that a former Meishe employee disclosed copyrighted source code for video and audio editing software to TikTok, which TikTok then implemented into its app. Meishe and TikTok are Chinese companies, and both the alleged disclosure and TikTok’s alleged code implementation occurred in China, assisted by TikTok engineers in California. TikTok has no engineers in Texas but does maintain a business office there, although not within the Western District.
TikTok moved under 28 U.S.C. § 1404 to transfer the case to the Northern District of California. The district court took 11 months to rule on the motion, and in the meantime the case continued through discovery. After the district court denied the motion, TikTok petitioned the Fifth Circuit for a writ of mandamus.
The sole issue on mandamus was the propriety of the district court’s refusal to transfer venue. To succeed on a writ of mandamus, a petitioner must satisfy the reviewing court regarding the following questions:
- Are there other ways to obtain the desired relief?
- Is the reviewing court’s right to issue the writ “clear and indisputable”?
- Is the writ appropriate, given the circumstances?
The Fifth Circuit focused on the second question, its right to issue the writ. In the Fifth Circuit, the 2008 en banc In re Volkswagen case mandates an eight-factor test that a district court must consider in deciding a § 1404 transfer motion. No one factor is dispositive, and the Fifth Circuit has cautioned against tallying the yes/no results or denying transfer just because most factors are neutral. Unsurprisingly, in the 15 years since Volkswagen, district courts applying these factors have reached inconsistent results. Even the Fifth Circuit has reached “conflicting outcomes” when reviewing these cases. The Fifth Circuit therefore took the opportunity to address each factor.
The Fifth Circuit found that two factors weighed in favor of transfer:
- The relative ease of access to sources of proof
- The cost of attendance of willing witnesses
Regarding ease of access to proof, the Fifth Circuit clarified that factfinders analyze “relative ease of access, not absolute ease of access” to documents and other physical evidence. The district court had determined that this factor was neutral, given that most documentation was electronic. The Fifth Circuit disagreed, explaining that while the source code was electronically stored, it was protected by a high level of security clearance. Only certain TikTok employees based in California and China were able to access the code. Using the relative metric, the Court found that it was clearly relatively easier for the team of engineers to gather in Northern California than in Western Texas, where no employee with source code access worked.
The second factor favoring transfer was the cost of attendance for willing witnesses. All parties recognized that the key witnesses were in China. The district court concluded that there was no real difference between Texas and California, since neither was convenient to China. Again, the Fifth Circuit disagreed, since travel from China to Texas would require substantial additional time and expense compared to travel to California.
The Fifth Circuit found that the lower court had abused its discretion in determining that these two factors were neutral, when in fact each favored transfer to California.
The Fifth Circuit determined that the remaining six factors were neutral. For several factors, this determination was in accord with the district court’s ruling, but for others the Court found clear abuse of discretion (where the district court had determined a factor weighed against transfer). These six factors were as follows:
- The availability of compulsory process
- All other practical problems
- The administrative difficulties flowing from court congestion
- The local interest in having localized interests decided at home
- The forum’s familiarity with the law that will govern the case
- The avoidance of unnecessary problems of conflict of laws
For several of these factors, the district court analyzed the practical and administrative issues at the time it issued its denial of transfer, which was almost a year after TikTok filed its motion. The Fifth Circuit chastised the district court for counting post-filing accumulated costs and difficulties against TikTok when it was the district court’s inaction that caused these factors to eventually tip against transfer. The Fifth Circuit observed that such a ruling was especially egregious because the district court had not “offered any adequate explanation for why this motion lingered on the docket for such a long period of time in contravention” of Fifth Circuit law, which dictates that transfer motions be given “top priority.”
Having determined that two factors favored transfer and six were “at most” neutral, the Fifth Circuit answered the second question (whether it had a “clear and indisputable” right to grant TikTok’s writ) in the affirmative.
The Fifth Circuit briefly addressed the other two questions necessary for granting mandamus. The Court explained that the first question (lack of another remedy) was automatically satisfied in the motion to transfer context. The final question (appropriateness of the writ) was satisfied because of the inconsistent case law in the Fifth Circuit and the instructive benefits of this opinion.
The Fifth Circuit granted the writ, ordering the lower court to transfer the case to the Northern District of California.
Practical Note: While successful writs of mandamus on transfer motions are rare, they may be worth pursuing, especially in cases where the motion was filed early but not promptly decided.
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