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Acceler-Ray, Inc. v. IPG Photonics Corp.

United States District Court, N.D. California, San Jose Division

March 31, 2017

ACCELER-RAY, INC., Plaintiff,


          HOWARD R. LLOYD United States Magistrate Judge

         In this diversity action, plaintiff Acceler-Ray, Inc. (Acceler-Ray) sues for alleged breach of contract, fraud, and unfair business practices arising out of Acceler-Ray's purchase of lasers from defendant IPG Photonics Corp. (IPG). IPG moves to dismiss the complaint, arguing that a forum selection clause requires this suit to be litigated in Massachusetts. Alternatively, IPG moves for an order transferring this case there pursuant to 28 U.S.C. § 1404(a). Plaintiff opposes the motion. Upon consideration of the moving and responding papers, as well as the oral arguments presented, this court grants the motion.[1]


         Acceler-Ray is a California precision machine laser shop. IPG manufactures and markets lasers. IPG is headquartered in Massachusetts, but it also has two smaller facilities here.

         In 2010, plaintiff was looking to purchase additional and upgraded lasers. Acceler-Ray says that it was contacted by one Tom Babcock, who was at that time an IPG sales manager based in California.[2] Plaintiff was interested in purchasing lasers with a pulse shaping feature. However, IPG's lasers with pulse shaping were not yet in production and were not anticipated to be ready until sometime in 2011. As will be discussed more fully below, the parties dispute whether IPG's Terms and Conditions (T&Cs) containing the forum selection clause were part of their contract. But, for present purposes, there appears to be no dispute as to the general parameters of the agreement re Acceler-Ray's purchase. In sum, Acceler-Ray wanted to buy lasers before the end of 2010 in order to be able to take a tax write-off, and IPG wanted to record a sale on its books for the 2010 calendar year. So, according to the complaint, plaintiff agreed to purchase three lasers that it didn't actually want, with the understanding that two of those lasers would be returned to IPG unused and unopened, and IPG would then send Acceler-Ray new lasers with pulse shaping sometime around March or April 2011.

         The lasers were purchased and delivered. Acceler-Ray says that the first one didn't work properly. As for the two “placeholder” lasers, plaintiff says that they were delivered months after the (allegedly promised) March/April 2011 timeframe. Plus, Acceler-Ray says that the replacement lasers were supposed to be two brand new ones with pulse shaping. Instead, plaintiff says IPG sent old, retrofitted lasers that did not function as specified or promised.

         In an attempt to resolve the parties' ongoing issues, plaintiff says that in October 2013 an IPG salesperson offered to provide Acceler-Ray with four new pulse shaping lasers, and Acceler-Ray accepted. However, plaintiff says that IPG subsequently advised in July 2014 that “current management disagree[d]” with that arrangement. (Dkt. 1-1, Complaint ¶ 39).

         This lawsuit followed. Acceler-Ray filed its complaint in California state court, asserting breach of contract and other contract-based claims. Plaintiff also asserts fraud-based claims, alleging that IPG never actually intended to provide the lasers Acceler-Ray wanted and instead made a “bait-and-switch” by trying to foist old retrofitted, nonworking lasers on plaintiff.

         IPG removed the matter here, invoking diversity jurisdiction, 28 U.S.C. § 1332. It moves to dismiss the complaint, arguing that Acceler-Ray assented to its T&Cs that contain a forum selection clause requiring this suit to be litigated in Massachusetts state court. The pertinent language states:

The validity, interpretation and performance of this Agreement shall be governed by the laws of Massachusetts, as if performed wholly within the state and without giving effect to the principles of conflict of laws. The parties specifically disclaim the application of the United Nations Convention on Contracts for the International Sale of Goods [CSIG]. IPG and Buyer hereby irrevocably and unconditionally submit to the courts of the Commonwealth of Massachusetts and all courts competent to hear appeals therefrom.

(Dkt. 17-1, Kelly Decl., Ex. A).[3] Alternatively, IPG moves for an order transferring this case to Massachusetts pursuant to 28 U.S.C. § 1404(a). Acceler-Ray contends that IPG's T&Cs were never part of the parties' deal and that it would be unreasonable, in any event, to require that this litigation proceed in Massachusetts. For the reasons to be discussed, this court grants the motion.


         A. Whether IPG's T&Cs were part of the parties' contract

         There is no dispute that forum selection clauses are evaluated under federal law. However, as a threshold matter, Acceler-Ray disputes that IPG's T&Cs containing the Massachusetts forum selection clause were ever part of the parties' contract. As to the matter of contract formation, plaintiff argues that state (California) law applies. IPG does not exactly dispute that assertion, although it argues that the cases on which Acceler-Ray chiefly relies are inapposite. In any event, there is no dispute that the essential elements of contract formation are offer, acceptance, and consideration. Here, the parties disagree whether Acceler-Ray accepted IPG's T&Cs (and, hence the forum selection clause) as part of the laser purchase. Acceler-Ray says it never negotiated the T&Cs, much less accepted them. IPG says that the T&Cs were included in all quotations sent to Acceler-Ray over the course of the parties' negotiations; and, it contends that Acceler-Ray assented to the T&Cs by issuing purchase orders and paying for the lasers without ever objecting to the T&Cs.

         The record indicates that the parties' reached their laser purchasing agreement through oral discussions and emails, primarily between IPG salesperson Babcock and Acceler-Ray's President, George Ludwig. The key events and documents[4] are as follows:

         On November 11, 2010, November 18, 2010, and November 19, 2010, IPG sent Acceler-Ray Formal Quotations---the first was for 2 lasers; the second and third were for one laser of that same model, plus a collimator. All three quotes appended IPG's T&Cs, including the Massachusetts forum selection clause, as well as a number of other sales-related documents (a credit form; a warranty sheet; and licensing agreements). All three quotes provided for a 1-year warranty. (Dkt. 17-1, Declaration of Jillian Kelly (Kelly Decl.) ¶¶ 2-4, Exs. A-C, E; Dkt. 16-2, Declaration of George Ludwig (Ludwig Decl.) ¶ 4, Ex. C).

         On November 19, 2010, Ludwig emailed Babcock stating that Acceler-Ray “need[s] a coupler, the on board modulation and two years of software upgrades, ” as well as a 2-year warranty. (Ludwig Decl. ¶ 5, Ex. D). Babcock replied that he was waiting to hear from his boss “on our ability to commit to the up-grad of on-board modulation, ” as well as the coupler. (Id.).

         Subsequently, on November 23, 2010, Babcock sent an email to Ludwig re ...

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