United States District Court, N.D. California
November 1, 2005.
MCDOWELL VALLEY VINEYARDS, INC., a California corporation, Plaintiff,
SABATÉ USA INC., SABATÉ SAS, SABATÉ SA, SABATÉ DIOSOS GROUP SA, and DOES 1 through 100, inclusive, Defendants.
The opinion of the court was delivered by: SAMUEL CONTI, Senior District Judge
ORDER DENYING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT AND
DISMISSING CASE WITHOUT PREJUDICE
McDowell Valley Vineyards, Inc. ("Plaintiff" or "McDowell")
brought this action against Sabaté USA Inc., Sabaté SAS,
Sabaté SA, Sabaté Diosos Group SA, and Does 1-100 ("Defendants"
in The Superior Court for the County of
Napa, California, alleging causes of action for, among others,
breach of contract, breach of express and implied warranties, and
fraud. Plaintiff's Complaint at 1 ("Compl.").
Presently before the Court is Defendants' motion for partial
summary judgment. The Court, having reviewed the parties' submissions, finds that it lacks subject matter jurisdiction over
this matter and hereby DENIES in its entirety Defendants' motion
for summary judgment and DISMISSES the case without prejudice.
Because Plaintiff is the non-moving party, the following
allegations are taken from Plaintiff's submissions and will be
assumed as true for purposes of the present motion.
Plaintiff is a California corporation in the business of
producing and selling premium wines, with its principal place of
business in Napa County, California. Compl. at 1. Defendants are
engaged in the manufacture, marketing, distribution and sale of
closures used for closing wine bottles. Id. at 2. These
closures are non-agglomerated corks known by the trade name of
Defendants marketed the Altec closures to Plaintiff and a
number of other wineries. Id. at 3. According to Plaintiff,
Defendants' advertising materials made the following
representations regarding the Altec closures: (1) Altec closures
prevent cork taint;*fn2 (2) the closures were "without risk
of cork taint"; (3) the closures offered "near perfect protection
against cork taint"; (4) there is "no cork taint" with these
closures; (5) the Altec closure is "the only pure cork which is
capable of relieving wine producers from the risk of cork taint";
and (6) the closures were free from defects and of a type and
quality fit for bottling premium quality wine. Compl. at 3. Additionally, Bill
Crawford and Gary Leonard, Plaintiff's president and purchasing
manager, respectively, were told specifically by representatives
of Sabaté that the Altec closure would prevent cork taint. Id.
Based on these representations, Plaintiff purchased
approximately 287,000 Altec closures from Defendants in June of
2000 for a total purchase price of roughly $33,000. Id. at 4.
Plaintiff used the Altec closures in bottling several of its
wines in July, August, and October of 2000. Id.
According to Plaintiff, it began to develop concerns with the
Altec closures in early 2001, which Plaintiff immediately
expressed to Defendants. Id. Defendants appeased these concerns
by again representing that the Altec closures would perform as
In the fall of 2001 and spring of 2002, Plaintiff received
reports that a high percentage of its wines bottled with Altec
closures were suffering from cork taint. Id. As a result,
Plaintiff was forced to recall a significant number of these
wines from its buyers at a great expense to Plaintiff. Id. at
4-5. Plaintiff alleges that the recall is attributable to the
Altec closures being defective and the presence of an
unacceptable level of TCA in the closures. Id. at 6.
In December of 2003, Plaintiff brought suit in The Superior
Court for the County of Napa, California against Defendants
alleging eight causes of action: (1) breach of contract; (2)
breach of express warranty; (3) breach of implied warranty; (4)
fraud; (5) negligent misrepresentation; (6) negligence; (7) unfair business practices under California Business and
Professions Code section 17200 et seq.; and (8) strict
liability. Compl. at 1. Defendants timely removed the action to
Federal Court based on federal question jurisdiction, under
28 U.S.C. § 1441(b). Notice of Removal at 2.
Defendants now move the Court to grant partial summary
judgment. Defendants' Memorandum in Support of Motion for Partial
Summary Judgment at 25 ("Defs' Mem."). For reasons that will be
discussed more fully below, the Court hereby DENIES Defendants'
motion and DISMISSES the case without prejudice.
III. LEGAL STANDARD
The federal courts have "original jurisdiction over all civil
actions arising under the Constitution, laws or treaties of the
United States." 28 U.S.C. § 1331.
A Federal Court may examine the question of subject matter
jurisdiction sua sponte. See Steel Company v. Citizens for
a Better Environment, 523 U.S. 83, 94 (1998). Federal Courts
must normally determine issues of subject matter jurisdiction
before considering a case on its merits. Id. When a court lacks
jurisdiction, the "only function remaining to the court is that
of announcing the fact and dismissing the cause." Id., quoting
Ex parte McCardle, 7 Wall. 506, 514 (1868).
Defendants contend that this Court has jurisdiction to hear
this case under federal question jurisdiction, pursuant to
28 U.S.C. § 1331. Defendants' Reply Brief in Support of Partial Summary Judgment at 1-2 ("Defs' Reply").*fn3 Specifically,
Defendants contend that The Convention on Contracts for the
International Sale of Goods ("CISG"), a federally-adopted treaty,
applies wherever the buyer and seller of goods are from different
countries, which have adopted CISG, and the parties have not
opted out of CISG. Id. Defendant contends that the seller
(Sabaté France) is a French company and the buyer (Plaintiff) is
a U.S. company and that both countries have adopted CISG. Id.
Finally, Plaintiff contends that the parties did not opt out of
CISG. Id. at 2.
Plaintiff contends that Defendants have not demonstrated that
CISG applies to this case. Plaintiff's Memorandum in Opposition
to Sabaté Inc.'s Motion for Summary Judgment at 9-10 ("Pl.'s
CISG "sets out substantive provisions of law to govern the
formation of international sales contracts and the rights and
obligations of the buyer and seller." U.S. Ratification of 1980
United Nations Convention on Contracts for the International Sale
of Goods: Official English Text, 15 U.S.C. App, Public Notice
1004. CISG applies to "sales contracts between parties with their
places of business in different countries bound by the
Convention, provided the parties have left their contracts silent
as to the applicable law." Id.
This case turns on the determination of Defendants' place of business. Again, CISG applies only when a contract is "between
parties whose places of business are in different States." 15
U.S.C. App. Art. 1(1)(a). "If a party has more than one place of
business, the place of business is that which has the closest
relationship to the contract and its performance, having regard
to the circumstances known to or contemplated by the parties at
any time before or at the conclusion of the contract." 15 U.S.C.
App. Art. 10(a).
Defendants contend that Sabaté SAS was a French entity, that
Sabaté USA had "limited involvement" in the transaction, and
never took possession of the Altec closures, which were shipped
from France directly to Plaintiff. Defs' Mem. at 3-4.
The crucial question is from where the representations about
the product came. The Court took up this issue in Asante
Technologies, Inc. v. PMC-Sierra, Inc., 164 F.Supp. 2d 1142
(N.D. Cal. 2001), a case on which Defendants heavily rely. In
Asante Technologies, the plaintiff, a Delaware corporation,
sued the defendant, a Delaware corporation which conducted the
bulk of its business in and from Canada. Id. at 1144-1145. The
plaintiff purchased the defendant's product through the
defendant's authorized and nonexclusive U.S. distributor. Id.
at 1145, 1148.
The Court in Asante Technologies determined that CISG applied
to the sales contracts based on the particular facts of the case.
Id. at 1149. The District Court found it significant that (1)
the plaintiff did not allege that the U.S. distributor made any
representations about the product, (2) the plaintiff did not
mention the distributor in its complaint, (3) the plaintiff's
claims concerned breaches of representations by the defendant
from Canada, (4) the products were manufactured in Canada, (5) the
plaintiff corresponded with the defendant at the defendant's
Canadian address and (6) the plaintiff did not "identif[y] any
specific representations or correspondence emanating" from the
defendant's U.S. branch. Id. The Court concluded that the U.S.
contacts between the plaintiff and the defendant were "not
sufficient to override the fact that most if not all of the
defendant's representations regarding the technical
specifications of the products emanated from Canada." Id.
The Court finds that the instant case presents a crucially
different set of facts from those discussed in Asante
Technologies. Looking at Plaintiff's exhibits, the Court notes
that a letter proposing a sale of Altec closures to Plaintiff is
printed on Sabaté USA letterhead, which gives a San Francisco,
California address and telephone number. Compl., Ex. B at 1. In
relevant part, the letter, which is addressed to Gary Leonard,
Purchasing Manager for McDowell Valley Vineyards, reads:
After talking with you the other day I could easily
sense your frustration with corks and cork taint. As
you know our Altec© corks are doing very well in
solving the two biggest concerns when it comes to
cork, Cork [sic] leakage and cork taint . . . Due
to our eagerness to work with you, below you can find
a price structure specifically formulated for
McDOWELL [sic] and the volumes you are currently
The invoice appears on Sabaté USA letterhead and gives a Napa,
California address and telephone number. Compl., Ex. C at 1.
Another letter regarding "your recent order" appears on Sabaté
USA letterhead. Id. at 2. Finally, some advertising literature,
which is printed on Sabaté USA letterhead and gives a San
Francisco, California address and telephone number, gives a list of California wineries using Altec closures and at one point
states: "For more information and a personal demonstration, call
[a San Francisco, California telephone number]." Id., Ex. A at
1-3, 5, 7.*fn4 Also, according to Plaintiff, the corks were
delivered to "C-Line shipping in the U.S. who maintains a
warehouse for Sabaté USA . . . near Sabaté USA's Napa office."
Pl.'s Mem. at 10.
Finally, according to Plaintiff, "after Sabaté USA was put on
notice that McDowell has had [sic] some problems with Altec in
2001, Sabaté USA did in fact take possession of the corks in
question" and that "Sabaté USA initiated this latter action and
was not directed by Sabaté S.A.S." Id.
The central issue in the instant case, as in Asante
Technologies, is from where the representations about the
product came. Based on the evidence submitted by the parties, the
Court finds that the representations regarding the specifications
of the product both in number and in substance came largely,
if not entirely, from California.
Because Defendants' place of business, taking into account the
circumstances known or contemplated by the parties before and at
the conclusion of the contract, is in California, the parties are
not from different states and therefore CISG does not apply.
Because CISG does not apply, there is no federal jurisdiction
over the case. Diversity does not exist because Plaintiff and
Sabaté USA are citizens of California. Accordingly, the Court
will deny the motion for summary judgment and dismiss the case. V. CONCLUSION
The Court finds that the majority of the representations about
the product came from California. Therefore, under CISG, the
parties' places of business are in the same state. CISG is,
therefore, inapplicable to the sale and consequently the Court
lacks jurisdiction over the case. Accordingly, Defendants' motion
for summary judgment is DENIED in its entirety. The Court
DISMISSES the case without prejudice.
If the parties refile with the Court, they will be obliged to
establish that the Court has jurisdiction over the matter.
IT IS SO ORDERED.
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