United States District Court, C.D. California
PRESENT HONORABLE JOHN A. KRONSTADT, UNITED STATES DISTRICT
MINUTES - GENERAL
MOTION TO REMAND (DKT. 20)
AND COUNTER-DEFENDANT'S MOTION TO DISMISS COUNT TWO OF
HYUNDAI ROTEM COMPANY'S FIRST AMENDED COUNTERCLAIMS (DKT.
Southern California Regional Rail Authority
(“Plaintiff”) brought this action in the Los
Angeles Superior Court (“LASC”) against Hyundai
Rotem Company (“Defendant”) for breach of
contract, breach of warranty and indemnity arising out of a
contract for the manufacture of railcars by Defendant for
Plaintiff. Dkt. 1-2. On October 28, 2016, Defendant removed
this action. Dkt. 1. On November 30, 2016, Plaintiff filed a
Motion to Remand. Dkt. 20. Defendant opposed the Motion to
Remand (Dkt. 25), and Plaintiff replied. Dkt. 34.
November 16, 2016, Defendant filed a Counterclaim. Dkt. 16.
On January 11, 2017, Defendant filed a First Amended
Counterclaim (“FACC”). Dkt. 35. On January 25,
2017, Plaintiff filed a Motion to Dismiss the FACC. Dkt. 39.
Defendant opposed the Motion to Dismiss (Dkt. 40), and
Plaintiff replied. Dkt. 42.
March 13, 2017, a hearing on the Motions was held and they
were taken under submission. Dkt. 43. For the reasons stated
in this Order, the Motions are DENIED.
is a government authority that operates the Metrolink
commuter rail system in Southern California. Dkt. 1-2 ¶
1. Defendant is a corporation formed under the law of South
Korea and whose principal place of business is there.
Id. ¶ 7.
April 13, 2006, the parties entered a contract pursuant to
which Defendant agreed to design and manufacture railcars for
Plaintiff for a total price of $305, 974, 486 (the
“Contract”). Id. ¶ 13. The
Complaint alleges that under the terms of the Contract,
Defendant was responsible for making all decisions as to the
design of the railcars. Id. ¶ 15. It also
alleges Defendant agreed to indemnify Plaintiff for any
losses it sustained as a result of Defendant's actions in
performing under the Contract. Id. ¶ 17.
Defendant also provided a two-year warranty for all work, and
a 15-year warranty for work relating to the carbody and
underframe of the railcars. Id. The Complaint
alleges that the last delivery under the Contract was in
April 2014. Id. ¶ 18.
Alleged Design Defects and the Oxnard Crash; Claims
Complaint alleges that Defendant's design of the railcars
was defective. Id. ¶ 2. It alleges that the
pilot, or cowcatcher, of the railcars was defectively
designed and inadequately attached to the railcars.
Id. “The pilot is a critical safety component
that is located at the front end of the cab car and is
required to prevent collision debris from getting under the
train's wheels that could cause it to derail.”
Id. ¶ 1. The Complaint alleges: “in
February 2015 . . . a Metrolink train with a Hyundai-built
cab car at the front collided with a pickup truck that had
stopped on the tracks in Oxnard. The pilot broke off from the
cab car and the train derailed.” Id. ¶
the Oxnard Crash, Plaintiff began an investigation into the
railcars and accompanying pilots. Id. ¶ 24. It
allegedly “revealed multiple fleet-wide defects”
in Defendant's railcars and pilot assemblies.
Id. The Complaint alleges that the “design of
the pilot assembly was defective as well.” Id.
¶ 27. It also alleges that Defendant refused to
cooperate with Plaintiff in curing the defects in the
railcars and as a result, Plaintiff had to lease another
locomotive to place in front of its railcars whose cost to
Plaintiff exceeded $20 Million. Id. ¶ 35.
on these allegations, the Complaint advanced the following
causes of action: (i) breach of written contract; (ii) breach
of express warranty; (iii) breach of implied warranty of
merchantability; (iv) breach of implied warranty of fitness
for a particular purpose; and (v) express indemnity.
Id. ¶¶ 37-72.
Allegations in the FACC
FACC advances two causes of action: (i) breach of contract
and (ii) breach of the implied covenant of good faith and
fair dealing. In support of these claims, the FACC alleges
that, pursuant to the terms of the Contract, the parties
participated in a design review process. During that process,
the parties allegedly held frequent meetings concerning the
design of the railcars, including the pilot. FACC
¶¶ 16-17. This process led to the approval of
Defendant's designs by LTK, the firm designated by
Plaintiff to provide engineering services. Id. The
FACC alleges the LTK had broad authority to approve and
modify the technical specifications for the design of the
railcars. Id. ¶¶ 18-19. It also alleges
that Plaintiff approved, inspected and tested Defendant's
proposed designs, which were then finalized. Id.
¶¶ 22-24, 31. The FACC also alleges that Plaintiff
tested, inspected and approved each final railcar.
Id. ¶¶ 25-31.
FACC alleges that Defendant performed all of its obligations
under the Contract. Id. ¶ 32. It also alleges
that, on July 1, 2015, Plaintiff agreed that it would pay to
Defendant $4, 991, 498.89, which was the total amount that
was due under the Contract. Id. ¶ 33. The
payment was allegedly to be made by September 15, 2015. It is
alleged that Plaintiff failed to make that payment.
Id. ¶ 34. It also alleged that, on October 30,
2015, Plaintiff confirmed that it would not make the final
payment in light of the Oxnard Crash and the other design
problems Plaintiff discovered as a result of the
investigation that it conducted after that incident.
Id. ¶¶ 34-35.
FACC alleges that the Oxnard Crash and derailment was caused
by the negligence of the truck driver and not by any defects
in the design or manufacture of the pilot or railcars.
Id. ¶ 36. It also alleges that Plaintiff
disclosed a confidential, internal report to the Los
Angeles Times that concluded that the crash was due to
defects in Defendant's design of the pilot. Id.
Motion to Remand
General Legal Standards
motion to remand is the procedural tool to challenge the
removal of an action. Moore-Thomas v. Alaska Airlines,
Inc., 553 F.3d 1241, 1244 (9th Cir. 2009). Generally, a
civil action may be removed only if it could have been
brought originally in a federal court. 28 U.S.C. §
1441(a). Federal courts have diversity jurisdiction where the
amount in controversy exceeds $75, 000 and is between parties
who are citizens of different states. 28 U.S.C. §§
1332, 1441. The removal statute is to be strictly construed;
any doubt about removal jurisdiction is to be resolved in
favor of remand. Gaus v. Miles, Inc., 980 F.2d 564,
566 (9th Cir. 1992). The result of the presumption against
removal is that a removing party has the burden of
establishing that removal was proper. Id. “If
a case is improperly removed, the federal court must remand
the action because it has no subject-matter jurisdiction to
decide the case.” ARCO Envtl. Remediation, LLC v.
Dep't of Health & Envtl. Quality of Mont., 213
F.3d 1108, 1113 (9th Cir. 2000).
contends that the Contract that gives rise to this dispute
contains a forum selection clause that specifies the state
courts of California as the exclusive forum. Defendant argues
that remand is improper because this Court has subject matter
jurisdiction and the forum selection clause is permissive,
Legal Standards for Applying a Forum Selection Clause
law governs the interpretation of a forum selection clause.
Doe 1 v. AOL LLC, 552 F.3d 1077, 1081 (9th Cir.
2009). When “interpret[ing] a contract under federal
law, [the court] look[s] for guidance ‘to general
principles for interpreting contracts.'”
Id. (quoting Klamath Water Users Protective
Ass'n v. Patterson, 204 F.3d 1206, 1210 (9th Cir.
1999)). “Contract terms are to be given their ordinary
meaning, and when the terms of a contract are clear, the
intent of the parties must be ascertained from the contract
itself. Whenever possible, the plain language of the contract
should be considered first.” Id. (quoting
Klamath Water Users Protective Ass'n., 204 F.3d
at 1210. “A primary rule of interpretation is that
‘[t]he common or normal meaning of language will be
given to the words of a contract unless circumstances show
that in a particular case a special meaning should be
attached to it.'” Hunt Wesson Foods, Inc. v.
Supreme Oil Co., 817 F.2d 75, 77 (9th Cir. 1987)
(quoting 4 S. Williston, A Treatise on the Law of
Contracts § 618 (W. Jaeger 3d ed. 1961)). A written
contract is to be read as a whole, and each part interpreted
with reference to the whole. Doe 1, 552 F.3d at
Circuit precedent requires that the court pay careful
attention to whether the language in a forum selection clause
is mandatory or permissive. If the language is mandatory, the
clause must be enforced and venue will lie in the designated
forum only.” Calisher & Assocs., Inc. v. RGCMC,
LLC, 2008 WL 4949041, at *3 (C.D. Cal. Nov. 17, 2008),
aff'd sub nom. Calisher & Assocs., Inc. v. RGCM,
LLC, 373 F.App'x 697 (9th Cir. 2010). “A forum
selection clause that designates a state court as the
exclusive forum is a mandatory clause requiring that the case
be remanded.” Chinatrust Bank (U.S.A.) v. Aclor,
Inc., 2011 WL 1668393, at *1 (N.D. Cal. May 3, 2011).
“[W]here venue is specified with mandatory language the
clause will be enforced. When only jurisdiction is specified
the clause will generally not be enforced without some
further language indicating the parties' intent to make
jurisdiction exclusive.” Docksider, Ltd. v. ...