Case 3:09-cv-01822-IEG-RBB Document 25 Filed 10/08/09 PageID.797 Page 1 of 14 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 GRAHAM WEBB INTERNATIONAL, CASE NO. 09cv1822-IEG(RBB) INC., 12 Order Granting in Part Defendant’s Plaintiff, Motion to Dismiss; Denying as Moot 13 vs. Plaintiff’s Motion for Preliminary Injunction 14 C.B. SULLIVAN COMPANY, INC., 15 Defendant. 16 17 Plaintiff, Graham Webb International, Inc. (“GWI”), moves the Court for a preliminary 18 injunction staying a pending arbitration proceeding between the parties before the American 19 Arbitration Association (“AAA”) in Minnesota. Defendant, C.B. Sullivan Company, Inc. 20 (“CBS”), moves the Court to dismiss Plaintiff’s complaint for lack of personal jurisdiction, 21 pursuant to the first-to-file rule, under the doctrine of forum non conveniens, and based on the 22 Federal Arbitration Act. In the alternative, CBS asks the Court to transfer this action to the U.S. 23 District Court for the District of New Hampshire. The parties have filed opposition and reply 24 briefs with regard to both motions. 25 The Court heard oral argument on the parties’ motions on September 30, 2009. For the 26 reasons set forth herein, the Court GRANTS Defendant CBS’s motion to dismiss based upon the 27 Federal Arbitration Act, DENIES Defendant’s motion to dismiss in all other regards, and DENIES 28 AS MOOT Plaintiff’s motion for preliminary injunction. -1- 09cv1822 Case 3:09-cv-01822-IEG-RBB Document 25 Filed 10/08/09 PageID.798 Page 2 of 14 1 Background 2 The Agreements 3 GWI is a manufacturer of beauty supply products. CBS is a full-service distributor of 4 wholesale beauty supply products throughout New England. In February 1998, CBS and GWI 5 entered into a Distribution Agreement (the “1998 Distribution Agreement”). The 1998 Agreement 6 granted CBS exclusive rights to distribute GWI products to both professional stores and salons in 7 Massachusetts and to professional stores only in New Hampshire, Vermont, and Maine. 8 [Declaration of of Joanne Caruso in Support of Motion for Preliminary Injunction (“Caruso 9 Decl.”), Exhibit 1A.] The 1998 Distribution Agreement did not grant CBS any right to distribute 10 GWI products to salons in New Hampshire, Vermont, or Maine. The 1998 Distribution 11 Agreement contained an arbitration provision which states as follows: 12 All disputes and claims relating to or arising under or out of this Agreement shall be fully and finally settled by arbitration in Minneapolis, Minnesota pursuant 13 to the Rules of commercial arbitration of the American Arbitration Association and the terms of the Federal Arbitration Act. The decision of the arbitrator or 14 arbitrators shall be final and may be enforced by any court of competent jurisdiction. The foregoing paragraph of this Section shall survive any termination 15 of this Agreement. 16 [Caruso Decl., Exhibit 1A, page 11, ¶ 22.] This agreement expired in 2003, but GWI and CBS 17 continued to conduct its distribution relationship in accordance with the agreement. 18 On August 16, 2004, GWI entered into a distribution agreement with another distributor of 19 beauty products, Kaleidoscope (the “2004 Kaleidoscope Agreement”). [Caruso Decl., Exhibit 20 1C.] The 2004 Kaleidoscope Agreement granted Kaleidoscope the exclusive right to sell certain 21 GWI products to professional salons in New Hampshire, Vermont, and Maine. The 2004 22 Kaleidoscope Agreement also contained an arbitration provision, which states as follows: 23 All disputes among the parties hereto arising under this Agreement shall be settled by arbitration or litigation according to the Rules for Arbitration attached to 24 this Agreement as Exhibit “H” and incorporated herein. 25 All proceedings and hearings will take place in San Diego County, California. The parties elect to have the substantive law of California apply to the 26 arbitration, but the parties agree that activities undertaken pursuant to this Agreement in fact affect Interstate commerce and the parties elect to apply the 27 procedural law of the Federal Arbitration Act. The parties agree that arbitration can be compelled by a court located in San Diego County, California, that arbitration 28 cannot be avoided by the filing of any other lawsuit or proceeding, or the involvement or lack of involvement of any other party, and that provisions or -2- 09cv1822 Case 3:09-cv-01822-IEG-RBB Document 25 Filed 10/08/09 PageID.799 Page 3 of 14 1 ancillary remedies can be sought without waiver of arbitration rights. [Id., p. 15, ¶ 23.]1 2 On November 2, 2005, GWI, CBS, and Kaleidoscope entered into an agreement whereby 3 most of Kaleidoscope’s rights to distribute products to salons in New Hampshire, Vermont, and 4 Maine under the 2004 Kaleidoscope Agreement were assigned to CBS (the “Assignment 5 Agreement”). [Caruso Decl., Exhibit 1D.] The Assignment Agreement further provided that it 6 would be necessary to amend the underlying 1998 Distribution Agreement to reflect the change in 7 distribution rights: 8 To complete this transaction, it will be necessary to make certain amendments to 9 the distribution agreements to reflect the change in distribution rights. In this regard, we will need to amend the CB Sullivan Distribution Agreement to include 10 salon rights for Maine, Vermont, and New Hampshire; in the case of the Kaleidoscope Distribution Agreement, we will need to amend the distribution 11 agreement to delete the salon sales rights for all brands except the Graham Webb Classic Line. The parties agree to execute such amendments, and sign such other 12 documents as may be necessary to complete this transaction. 13 [Id., p. 3.] This Assignment Agreement contained yet a third arbitration provision stating that 14 “[i]n the event of any dispute arising from or pertaining to this agreement, the parties agree to 15 submit such dispute to binding arbitration before the American Arbitration Association in 16 accordance with its rules for commercial matters.” 17 Litigation History 18 On January 31, 2007, GWI notified CBS that it was unilaterally terminating the parties’ 19 distribution relationship effective April 1, 2007. [Complaint, ¶ 8.] On March 21, 2007, CBS sued 20 GWI in New Hampshire state court, asserting various claims arising out of GWI’s termination of 21 CBS’s distribution rights. GWI removed the case to federal court, and then moved to dismiss the 22 complaint arguing the claims must be submitted to arbitration based upon the clauses of the 1998 23 Distribution Agreement, the 2004 Kaleidoscope Agreement, and/or the Assignment Agreement. 24 [Plaintiff’s Request for Judicial Notice in Support of Motion for Preliminary Injunction, Exhibit B, 25 p.2.] 26 The District Court in New Hampshire granted in part GWI’s motion to dismiss and 27 28 1 GWI was located in Minneapolis, Minnesota at the time it entered into the original 1998 Distribution agreement with CBS. Shortly thereafter, GWI relocated its offices to San Diego. -3- 09cv1822 Case 3:09-cv-01822-IEG-RBB Document 25 Filed 10/08/09 PageID.800 Page 4 of 14 1 remanded the case for arbitration in accordance with the parties’ agreements. [Plaintiff’s Request 2 for Judicial Notice in Support of Motion for Preliminary Injunction, Exhibit D.] In compelling 3 arbitration, the district court first determined that although the 1998 Distribution Agreement 4 expired in 2003, the parties “continued a course of dealing prescribed by that contract” under an 5 implied-in-fact contract. [Id. at p.8.] Thus, the court found the parties were bound by the terms of 6 the 1998 Distribution Agreement, including its arbitration provisions. The Court then considered 7 whether the parties were bound by the arbitration provision in the 2004 Kaleidoscope Agreement 8 based upon the Assignment Agreement. The court concluded that as an assignee, CBS’s rights 9 against GWI were subject to all of the limitations of the assignor’s rights. “Consequently, absent 10 evidence that the parties specifically intended otherwise, Sullivan would, as the assignee of all of 11 Kaleidoscope’s rights under the Kaleidoscope Distribution Agreement, be bound by that 12 agreement’s arbitration provisions.” [Id. at pp. 11-12.] 13 Finally, the court examined the Assignment Agreement for evidence of GWI and CBS’s 14 intent to submit to arbitration of any disputes. The court noted the Assignment Agreement stated 15 the parties would amend their previously-existing distribution agreements, to reflect the change in 16 distribution rights, and found this language evidenced an intent that the parties be bound by the 17 original 1998 Distribution Agreement: 18 The assignment Agreement’s language quoted above plainly demonstrates that the parties intended Sullivan’s newly-acquired distribution rights to be governed by the 19 Sullivan Distribution Agreement (or the implied-in-fact contract that replaced it upon ... its expiration) – including, of course, the [Sullivan Distribution 20 Agreement]’s arbitration provisions. That is, the parties unmistakably contemplated amending Sullivan’s existing distribution agreement with GWI to 21 include the newly-acquired distribution rights. Consequently, any disputes relating to, or arising under or out of, Sullivan’s distribution of GWI’s products in the New 22 England region would be governed by the SDA. 23 [Id. at p. 13.] Finally, the Court noted the existence of the broad arbitration clause in the 24 Assignment Agreement, and found that “to the extent there is any confusion about what the parties 25 intended when they executed the Assignment Agreement, that, too, must be arbitrated.” [Id. at 13- 26 14.] 27 The New Hampshire court granted the motion to dismiss to the extent it sought an order 28 remanding the case for arbitration, and administratively closed the case “subject to reopening upon -4- 09cv1822 Case 3:09-cv-01822-IEG-RBB Document 25 Filed 10/08/09 PageID.801 Page 5 of 14 1 motion of either party after Sullivan’s claims have been fully arbitrated.” [Id. at p. 15.] 2 The Minnesota Arbitration 3 On June 25, 2008, CBS filed a Demand for Arbitration with the AAA in Minnesota as 4 provided for in the arbitration clause of the 1998 Distribution Agreement. [Caruso Decl., Exhibit 5 1.] On July 14, 2008, GWI filed an objection to the AAA’s jurisdiction over CBS’s claims based 6 upon termination of the distribution rights under the 2004 Kaleidoscope Agreement and 7 subsequent Assignment Agreement (i.e. the right to distribute products to salons in New 8 Hampshire, Vermont, and Maine). GWI argued that CBS was required to pursue its rights under 9 the 2004 Kaleidoscope Agreement and subsequent Assignment Agreement in San Diego, under the 10 rules set forth in the 2004 Kaleidoscope Agreement. 11 The parties engaged in mediation, which was unsuccessful, and on July 23, 2009, CBS 12 reinstated the Minnesota arbitration. The AAA has notified the parties that it will proceed with the 13 arbitration of the entire dispute in Minnesota, including the question of the scope of the issues 14 properly before the arbitrators in that venue, and has asked the parties to select an arbitration 15 panel. 16 The current litigation 17 On August 10, 2009, GWI filed an action in San Diego County Superior Court, seeking a 18 declaration that the claims arising out of the 2004 Kaleidoscope Agreement must be arbitrated in 19 San Diego under the rules set forth in that Agreement and enjoining the AAA in Minnesota from 20 arbitrating such dispute. On August 21, 2009, CBS removed the action to this Court. 21 Plaintiff GWI then filed a motion for preliminary injunction, to enjoin the AAA 22 proceedings in Minnesota. Defendant CBS moved the Court, instead, to dismiss this action on 23 several bases. Defendant CBS also filed a motion in the district court in New Hampshire, asking 24 that court to reopen its case and to compel arbitration of all claims in Minnesota. Plaintiff GWI 25 has filed an objection to the Defendant’s request to reopen and clarify in the New Hampshire 26 court. The court in New Hampshire has not yet taken action on Defendant’s motions, and 27 Defendant has filed a notice of its intent to file a reply brief. 28 -5- 09cv1822 Case 3:09-cv-01822-IEG-RBB Document 25 Filed 10/08/09 PageID.802 Page 6 of 14 1 Defendant CBS’s Motion to Dismiss 2 Defendant CBS moves to dismiss the Complaint based on lack of personal jurisdiction, 3 pursuant to the first-to-file rule, under the doctrine of forum non conveniens, and based on the 4 Federal Arbitration Act. Alternatively, CBS requests this Court decline jurisdiction and transfer 5 the action to the United States District Court for the District of New Hampshire, where the parties 6 previously litigated the question of whether the arbitration clauses in the various agreements 7 required them to arbitrate their dispute. 8 A. Personal jurisdiction 9 Defendant CBS first argues the Court lacks personal jurisdiction over it, and thus moves to 10 dismiss the Complaint under Fed. R. Civ. P. 12(b)(2). A federal district court exercising diversity 11 jurisdiction has personal jurisdiction over a non-resident defendant where jurisdiction is proper 12 under the forum state’s long-arm statute. Fireman’s Fund Ins. Co. v. Nat’l Bank, 103 F.3d 888, 13 893 (9th Cir. 1996). Because California’s long-arm statute extends jurisdiction to the full extent 14 allowable under the due process clause of the Fourteenth Amendment, Cal. Civ. Code § 410.10, 15 the question is whether the exercise of personal jurisdiction over CBS in this case comports with 16 due process. Pebble Beach Co. v. Caddy, 453 F.3d 1151, 1155 (9th Cir. 2006). 17 The burden is upon plaintiff to demonstrate the exercise of jurisdiction is reasonable. 18 Harris Rutsky & Co. Ins. Svcs. v. Bell & Clements Ltd., 328 F.3d 1122, 1129 (9th Cir. 2003). 19 Plaintiff need only make a prima facie showing that the exercise of personal jurisdiction is proper 20 in order to withstand a motion to dismiss under Rule 12(b)(2). Id. Specific jurisdiction exists if 21 the cause of action arises out of the defendant’s activities in the forum state. Fireman’s Fund Ins. 22 Co., 103 F.3d at 893-94. General jurisdiction exists when, regardless of where the particular 23 events giving rise to the litigation occurred, defendant has “substantial” or “continuous and 24 systematic” contact with the forum state. Helicopteros Nacionales de Colombia v. Hall, 466 U.S. 25 408, 414 (1984). Because a plaintiff can more easily demonstrate the existence of specific 26 jurisdiction, rather than general jurisdiction, the Court will first determine if Defendant’s contacts 27 satisfy the standard for exercise of specific personal jurisdiction. 28 The Ninth Circuit has established a three-pronged test for analyzing claims of specific -6- 09cv1822 Case 3:09-cv-01822-IEG-RBB Document 25 Filed 10/08/09 PageID.803 Page 7 of 14 1 personal jurisdiction: 2 (1) The non-resident defendant must purposefully direct his activities or consummate some transaction with the forum or resident thereof; or perform some 3 act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws; 4 (2) the claim must be one which arises out of or relates to the defendant's forum-related activities; and 5 (3) the exercise of jurisdiction must comport with fair play and substantial justice, i.e. it must be reasonable. 6 Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 802 (9th Cir. 2004) (citing Lake v. Lake, 7 817 F.2d 1416, 1421 (9th Cir. 1987)). Under the first prong, plaintiff must establish either that the 8 defendant “purposefully availed” itself of the privilege of conducting activities in California, or 9 that the defendant “purposefully directed” its activities toward California. Id. 10 Because this is an action relating to contractual relations, the court will utilize the 11 “purposeful availment” standard to determine if it has specific personal jurisdiction over the 12 defendant. Schwarzenegger, 374 F.3d at 802. “To have purposefully availed itself of the privilege 13 of doing business in the forum, a defendant must have ‘performed some type of affirmative 14 conduct which allows or promotes the transaction of business within the forum state’.” Boschetto 15 v. Hansing, 539 F.3d 1011, 1016 (9th Cir. 2008) (quoting Sher v. Johnson, 911 F.2d 1357, 1362 (9th 16 Cir. 1990)). “[T]he formation of a contract with a nonresident defendant is not, standing alone, 17 sufficient to create jurisdiction.” Id. (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 478 18 (1985)). 19 In support of its motion to dismiss, Defendant submitted a declaration from its President, 20 Charles B. Sullivan, stating in summary fashion that “CBS does not do business in California, 21 maintains no offices, employs no staff, has not designated an agent for service of process, and does 22 not own any property or other assets in California.” [Declaration of Charles B. Sullivan in Support 23 of Motion to Dismiss (“Sullivan Decl.”), ¶ 3.] Mr. Sullivan further states that “[n]o representative 24 of CBS has ever conducted business in California” and “[n]one of the agreements CBS entered 25 into with Graham Webb International, Inc. were either executed or performed in California, nor 26 did performance of the agreements require CBS to engage in any substantial business in 27 California.” [Id. ¶¶ 4-5.] 28 In response to CBS’s motion, Plaintiff GWI submitted declarations disputing the extent of -7- 09cv1822 Case 3:09-cv-01822-IEG-RBB Document 25 Filed 10/08/09 PageID.804 Page 8 of 14 1 CBS’s contacts with California. Plaintiff’s declarations detail the following facts regarding the 2 scope of CBS’s contacts with California within the context of the parties’ business relationship: 3 • Twice per month, CBS submitted to GWI in California product purchase orders, which were then processed in California by GWI and shipped from California 4 [Declaration of Beverlee Abell in Support of Plaintiff’s Opposition to Motion for Preliminary Injunction (“Abell Decl.”), ¶ 11]; 5 • CBS representatives Jeff Sullivan and Janet Caldwell regularly placed calls to GWI representative Beverlee Abell in California concerning issues relating to 6 distribution and operations [Abell Decl., ¶ 6]; • CBS representatives attended at least two GWI promotional product meetings in 7 California related to the Bibo Cosmetics and Back to Basics product launches; • CBS representatives attended GWI distributor conferences in California, the 8 coordination of which was primarily conducted in California [Abell Decl., ¶¶ 12,14; Declaration of Richard Kornbluth in Support of Plaintiff’s Opposition to Motion for 9 Preliminary Injunction (“Kornbluth Decl.”), ¶ 12]; • CBS representatives Jeff Sullivan and C.B. Sullivan attended and participated in 10 Distributor Counsel Meetings together with GWI and other GWI distributors in California [Kornbluth Decl., ¶ 12]; 11 • CBS representatives Jeff Sullivan and C.B. Sullivan met with GWI representative Richard Kornbluth and others in or around 1999 or 2000 in Carlsbad to request that 12 their distribution agreement not be terminated [Kornbluth Decl., ¶ 11]; • CBS representative C.B. Sullivan met with GWI representative Richard Kornbluth 13 in late 2005 regarding the assignment to CBS of Kaleidoscope’s distribution rights in Vermont, New Hampshire and Maine [Kornbluth Decl., ¶ 4]. 14 In support of its reply, Defendant CBS submitted declarations by its representatives 15 pointing out that at the time the parties entered into their 1998 Distribution Agreement, Plaintiff 16 GWI was a Delaware corporation based in Minnesota. [Declaration of Charles B. Sullivan in 17 Support of Reply (“Sullivan Reply Decl.”), ¶ 2.] Defendants’ representatives assert that after GWI 18 relocated to California, the bulk of their continuing contacts were limited to telephone and email 19 exchanges, its contacts were primarily with GWI representatives located in New England, and it 20 “rarely communicated” with GWI representatives in California. [Sullivan Reply Decl., ¶ 3; 21 Declaration of Jeffrey Sullivan in Support of Reply, ¶¶ 3-6.] Mr. Charles Sullivan also clarifies 22 that his meeting with Mr. Kornbluth to discuss the assignment of the Kaleidoscope distribution 23 rights occurred in California because he was in the State receiving chemotherapy treatment for 24 cancer. [Sullivan Reply Decl., ¶ 4.] 25 Ordinarily, telephone, mail, and email communications of a nonresident are insufficient to 26 establish purposeful availment. Peterson v. Kennedy, 771 F.2d 1244, 1262 (9th Cir. 1985). 27 Neither temporary physical presence of a party, nor other types of fortuitous contact are sufficient 28 to establish personal jurisdiction. FDIC v. British-American Ins. Co., Ltd., 828 F.2d 1439, 1443 -8- 09cv1822 Case 3:09-cv-01822-IEG-RBB Document 25 Filed 10/08/09 PageID.805 Page 9 of 14 1 (9th Cir. 1987). Here, however, the facts demonstrate CBS had more than mere sporadic or 2 fortuitous contact with California. From the time GWI relocated to California in 1998, shortly 3 after the parties entered into the 1998 Distribution Agreement, CBS distributed GWI’s products 4 through orders placed with GWI in California, and with products being shipped from California. 5 Although Defendant’s President, Charles Sullivan, was in California for circumstances unrelated 6 to the parties’ distribution relationship, he met with GWI representatives to discuss CBS’s 7 acquisition of Kaleidoscope’s distribution rights in New England, the very agreement giving rise 8 to this action. See Roth v. Garcia Marquez, 942 F.2d 617, 622 (9th Cir. 1991) (court correctly 9 found defendant purposefully availed himself of the privilege of doing business in California 10 where the subject matter of the contract, the making, editing, and production of a movie, would 11 have continuing and extensive involvement with the forum). Thus, the Court finds Plaintiff has 12 made a prima facie showing that Defendant CBS purposefully availed itself of the forum so as to 13 justify the exercise of specific personal jurisdiction. 14 CBS argues that even if it purposefully availed itself of the forum, the exercise of 15 jurisdiction would not be reasonable. The Ninth Circuit has enumerated seven factors for the court 16 to consider to determine whether the exercise of jurisdiction would be reasonable: 17 (1) the extent of the defendants’ purposeful interjection into the forum state’s affairs; (2) the burden on the defendant of defending in the forum; (3) the extent of 18 conflict with the sovereignty of the defendants’ state; (4) the forum state’s interest in adjudicating the dispute; (5) the most efficient judicial resolution of the 19 controversy; (6) the importance of the forum to the plaintiff’s interest in convenient and effective relief; and (7) the existence of an alternative forum. 20 Menken v. Emm, 503 F.3d 1050, 1058 (9th Cir. 2007). Once plaintiff has established the first two 21 prongs of the specific personal jurisdiction inquiry (i.e. purposeful availment and that the claim 22 arose out of contact with the forum state), the burden shifts to defendant to “‘present a compelling 23 case’ that the exercise of jurisdiction would not be reasonable.” Schwarzenegger, 374 F.3d at 802. 24 25 Defendant CBS has not made a “compelling case” that the exercise of jurisdiction by this 26 Court would be unreasonable. As explained above, Defendant CBS entered into a distribution 27 agreement (the Assignment Agreement) with a company in California, after negotiations which 28 occurred in California. Not only the Assignment Agreement, but also the course of the parties’ -9- 09cv1822 Case 3:09-cv-01822-IEG-RBB Document 25 Filed 10/08/09 PageID.806 Page 10 of 14 1 prior relationship under the 1998 Distribution Agreement, involve the ongoing distribution of 2 products flowing from California. This is purely a contract dispute, requiring few witnesses. The 3 presence of CBS’s President, who negotiated the Assignment Agreement, as well as CBS’s 4 counsel in California also weighs against a finding of undue hardship. Therefore, the Court finds 5 it has specific personal jurisdiction over Defendant CBS for purposes of resolving the claims in 6 this case. The Court DENIES Defendant CBS’s motion to dismiss for lack of jurisdiction. 7 Because the Court finds specific personal jurisdiction exists under the standards discussed above, 8 the Court will not address Plaintiff’s alternative arguments regarding the forum selection clause in 9 the 2004 Kaleidoscope Agreement or the existence of general jurisdiction over CBS. 10 B. First-to-File Rule 11 Defendant CBS alternatively asks the Court to dismiss this case under the first-to-file 12 doctrine based upon its previously filed New Hampshire action. Under the first-to-file doctrine, 13 “when cases involving the same parties and issues have been filed in two different districts, the 14 second district court has discretion to transfer, stay, or dismiss the second case in the interest of 15 efficiency and judicial economy.” Cedars-Sinai Medical Center v. Shalala, 125 F.3d 765, 770 (9th 16 Cir. 1997). Defendant CBS argues the parties and issues in this case are identical to those 17 addressed by the district court in New Hampshire, such that this Court should decline to exercise 18 jurisdiction and should, instead, defer to the New Hampshire court. 19 In opposition to Defendant CBS’s motion, Plaintiff GWI points out that the New 20 Hampshire case has been “administratively closed” with the provision that it may be reopened 21 following arbitration. In addition, Plaintiff GWI argues the issue presented in this case, whether 22 the claims arising out of the 2004 Kaleidoscope Agreement must be arbitrated in San Diego 23 pursuant to that Agreement’s clause rather than before AAA Minnesota as called for in the 1998 24 Distribution Agreement, were not presented in the New Hampshire case. Plaintiff argues 25 application of the first-to-file rule will not advance judicial economy because its preliminary 26 injunction motion here is fully briefed and ready for hearing, and any transfer to New Hampshire 27 will lead to additional delay. 28 An order administratively closing a case pending court-compelled arbitration has no impact - 10 - 09cv1822 Case 3:09-cv-01822-IEG-RBB Document 25 Filed 10/08/09 PageID.807 Page 11 of 14 1 upon the court’s continuing jurisdiction over the action. Dees v. Billy, 394 F.3d 1290, 1294 (9th 2 Cir. 2005). Thus, there is no jurisdictional bar to the New Hampshire court reopening the case 3 before it to clarify whether the arbitration it compelled should be conducted in Minnesota or San 4 Diego. Nonetheless, the New Hampshire court has not yet considered Defendant CBS’s motion to 5 reopen the case. As explained in detail below, the Court finds the parties’ agreements manifest a 6 clear intention that the current dispute be resolved by arbitration according to the terms of the 7 Assignment Agreement. Therefore, because this Court can readily resolve the issues presented, the 8 Court finds judicial efficiency is best served by going forward in this Court rather than deferring to 9 the court in New Hampshire.2 The Court DENIES Defendant CBS’s motion to dismiss based on 10 the first-to-file rule. 11 C. Forum Non Conveniens 12 Defendant CBS also moves to dismiss based on the common law doctrine of forum non 13 conveniens. As Plaintiff GWI points out in its opposition, this doctrine applies only in cases where 14 the alternative forum is abroad. Sinochem Int’l Co. Ltd. v. Malaysia Int’l Shipping Corp., 549 15 U.S. 422, 430 (2007). Where a party seeks transfer from one district court to another within the 16 federal court system, the proper analysis is under 28 U.S.C. §§ 1404(a) or 1406(a). Id. Thus, the 17 Court DENIES Defendant CBS’s motion to dismiss based upon the doctrine of forum non 18 conveniens. 19 D. Federal Arbitration Act 20 Defendant CBS argues the Court must dismiss this action pursuant to the Federal 21 Arbitration Act (“FAA”) because the Assignment Agreement specifically provides that all disputes 22 under that Agreement must be submitted to binding arbitration before the AAA in accordance with 23 its rules for commercial matters. CBS, therefore, argues any disagreement regarding whether the 24 25 2 Plaintiff GWI asserts the forum selection clause in the 2004 Kaleidoscope Agreement requires the issues raised by the Complaint to be litigated in this Court. The Court notes, however, 26 that the forum selection clause in the 2004 Kaleidoscope Agreement is “permissive” rather than “mandatory” because it provides only that a court in San Diego County “can” compel arbitration. 27 See Docksider, Ltd. v. Sea Technology, Ltd., 875 F.2d 762, 764 (9th Cir. 1989) (“When only jurisdiction is specified, the clause will generally not be enforced without some further language 28 indicating the parties’ intent to make jurisdiction exclusive.”). Thus, the clause does not prohibit the parties from litigating the issue of arbitrability in another forum. - 11 - 09cv1822 Case 3:09-cv-01822-IEG-RBB Document 25 Filed 10/08/09 PageID.808 Page 12 of 14 1 parties intended CBS’s newly-acquired distribution rights to be governed by the 1998 Distribution 2 Agreement or the 2004 Kaleidoscope Agreement must itself be submitted to arbitration. In 3 opposition, Plaintiff GWI argues this Court must, in the first instance, determine whether the 2004 4 Kaleidoscope Agreement’s arbitration provision encompasses the parties’ dispute relating to the 5 distribution of products to salons in Maine, Vermont, and New Hampshire. 6 A dispute about whether the parties are bound by a particular arbitration clause, as well as 7 a disagreement about whether an arbitration clause in an otherwise binding contract applies to a 8 particular controversy, are both for the court to determine. Howsam v. Dean Witter Reynolds, 9 Inc., 537 U.S. 79, 84 (2002). Under the FAA, however, where parties “clearly and unmistakably” 10 provide that arbitrators are to decide matters of arbitrability, courts are divested of their authority 11 to determine whether disputes are arbitrable. AT&T Technologies, Inc. v. Communications 12 Workers, 475 U.S. 643, 649 (1986); United Brotherhood of Carpenters and Joiners v. Desert 13 Palace, Inc., 94 F.3d 1308, 1310 (9th Cir. 1996). 14 In this case, Plaintiff GWI seeks a declaration that the 2004 Kaleidoscope Agreement 15 requires the parties to arbitrate their dispute regarding the termination of the distribution 16 relationship in San Diego under the set of rules specified in that Agreement. Although Defendant 17 CBS was not a signatory to the 2004 Kaleidoscope Agreement, Plaintiff GWI argues CBS is 18 bound by the terms of the original 2004 Kaleidoscope Agreement, including the arbitration clause 19 contained therein. See Comedy Club, Inc. v. Improv W. Assoc., 553 F.3d 1277, 1287 (9th Cir. 20 2009) (noting that arbitration clauses may bind non-parties such as an assignee or third party 21 beneficiary); Chan v. Society Expeditions, Inc., 39 F.3d 1398, 1406 (9th Cir. 1994) (noting that 22 non-party to original agreement may be bound by forum selection clause if the contracting party 23 was an authorized agent of the non-party). 24 Notwithstanding the general principle that an assignee is impliedly bound by the terms of 25 the original contract, including any arbitration provision, in this case there is a written agreement 26 documenting the assignment of rights by Kaleidoscope to CBS. The Assignment Agreement, 27 signed by GWI, Kaleidoscope, and CBS, sets forth the scope and terms of the assignment of rights 28 from Kaleidoscope to CBS. This Assignment Agreement itself contains an arbitration clause, - 12 - 09cv1822 Case 3:09-cv-01822-IEG-RBB Document 25 Filed 10/08/09 PageID.809 Page 13 of 14 1 providing that “[i]n the event of any dispute arising from or pertaining to this agreement, the 2 parties agree to submit such dispute to binding arbitration before the American Arbitration 3 Association in accordance with its rules for commercial matters.” [Caruso Decl., Exhibit 1D, p. 4 3.] This is the very sort of language that the Ninth Circuit has held requires decision by the 5 arbitrator regarding the scope of the claims to be arbitrated. Chiron Corp. v. Ortho Diagnostic 6 Systems, Inc., 207 F.3d 1126, 1130 (9th Cir. 2000) (where arbitration clause stated that “any 7 dispute, controversy or claim arising out of or relating to the validity, construction, enforceability 8 or performance of this Agreement shall be settled by binding Alternate Dispute Resolution 9 (‘ADR’) in the manner described below,” the question of whether a prior court judgment has res 10 judicata effect should be submitted to arbitrator); United Brotherhood, 94 F.3d at 1310 (where 11 parties agreed that all disputes “regarding the interpretation or application of the provisions of this 12 Agreement ...” would be submitted to arbitration, it was for the arbitrator, in the first instance, to 13 decide the question of arbitrability). 14 The Assignment Agreement unambiguously states that “any dispute” under the agreement 15 must be submitted to binding arbitration. Under the AAA Commercial Arbitration Rule 7, the 16 arbitrator “shall have the power to rule on his or her own jurisdiction, including any objections 17 with respect to the existence, scope or validity of the arbitration agreement.” Plaintiff GWI has 18 cited no authority which would require this Court ignore the arbitration clause contained in the 19 parties’ written and executed Assignment Agreement, and instead allow Plaintiff GWI to proceed 20 under the theory that Defendant CBS is impliedly bound by the arbitration clause contained in 21 GWI’s prior agreement with Kaleidoscope. Neither the Chan nor the Comedy Store case, upon 22 which Plaintiff GWI relied at the hearing on this motion, requires the Court to disregard the 23 arbitration clause contained in the written Assignment Agreement between the parties to this 24 action, in order to enforce the conflicting arbitration clause in the 2004 Kaleidoscope Agreement. 25 The Court finds the arbitration clause contained in the written Assignment Agreement, signed by 26 all of the parties, governs the arbitrability of disputes arising out of the assignment. 27 The arbitration clause contained in the Assignment Agreement provides that “any dispute 28 arising from or pertaining to” that agreement would be submitted to binding arbitration before the - 13 - 09cv1822 Case 3:09-cv-01822-IEG-RBB Document 25 Filed 10/08/09 PageID.810 Page 14 of 14 1 AAA in accordance with its rules for commercial matters. Thus, the question of whether the 2 parties intended CBS’s newly-acquired distribution rights to be subject to arbitration under the 3 provision of the 2004 Kaleidoscope, or instead intended such rights to be enforceable under the 4 provision of the parties’ 1998 Distribution Agreement, must itself be arbitrated by the AAA 5 according to the terms of the Assignment Agreement. The Court GRANTS Defendant CBS’s 6 motion to dismiss this action under the Federal Arbitration Act. 7 Conclusion 8 For the reasons set forth herein, the Court DENIES Defendant CBS’s motion to dismiss for 9 lack of personal jurisdiction, under the first-to-file rule, and based on the doctrine of forum non 10 conveniens. The Court GRANTS Defendant CBS’s motion to dismiss this action under the 11 Federal Arbitration Act. 12 Pursuant to the parties’ Assignment Agreement, the question of whether Defendant CBS 13 can include in its pending arbitration proceeding before the AAA in Minnesota its claims against 14 Plaintiff GWI, arising out of the 2004 Kaleidoscope Agreement, must itself be determined by 15 binding arbitration before the AAA according to its rules for commercial matters. Plaintiff GWI’s 16 motion for preliminary injunction is DENIED as moot. The Clerk is directed to close this case 17 subject to reopening following completion of the arbitration. 18 IT IS SO ORDERED. 19 20 DATED: October 8, 2009 21 IRMA E. GONZALEZ, Chief Judge 22 United States District Court 23 24 25 26 27 28 - 14 - 09cv1822