United States District Court, E.D. California
ORDER RE: DEFENDANTS' MOTIONS TO DISMISS AND
MOTIONS TO TRANSFER VENUE
WILLIAM B. SHUBB UNITED STATES DISTRICT JUDGE.
Clippercreek, Inc. (“Clippercreek”) brings this
action against defendants Intelligrated Systems, LLC
(“Intelligrated”), Honeywell International, Inc.
(“Honeywell”), Deposco, Inc.
(“Deposco”), and Does 1 through 50, alleging that
defendants fraudulently induced plaintiff into a contract for
specialized custom technology and subsequently failed to
perform their obligations under the agreement. Before the
court are defendants' motions to dismiss, or, in the
alternative, to transfer venue. (Docket Nos. 29, 30).
Factual Allegations and Procedural Background
manufactures and sells electric vehicle charging stations.
(Compl. ¶ 19.) Honeywell purchased Intelligrated in
2016. (Compl. ¶ 20.) In late 2017 to early 2018,
Honeywell partnered with Deposco to sell integrated warehouse
management solutions, order management solutions, and
material handing solutions to Clippercreek. (Compl. ¶
23.) Defendants toured Clippercreek's headquarters to
study plaintiff's manufacturing process. (Compl. ¶
24.) Defendants then held a series of marketing and sales
meetings where they represented that defendants could design
an automated system that could be integrated into
Clippercreek's manufacturing, material management, and
internet sales systems. (Compl. ¶ 25.)
parties subsequently entered into a contract consisting of
three documents: (1) the Master Technology Agreement
(“MTA”), (2) the Sales Agreement, and (3) the
Intelligrated Proposal FQ-18-51002. (Compl. ¶¶
28-30.) The MTA included a forum-selection clause. (Compl.
Ex. 1, at 13, ¶ 18.2.) The clause requires the parties
to bring any action under the agreement in the Southern
District of Ohio. (Id.) Pursuant to the contract,
plaintiff paid defendants a deposit. (Compl. ¶ 40.)
to and after signing the contract, defendants assured
plaintiff that defendants' product would integrate
Clippercreek's manufacturing requirements. (Compl.
¶¶ 33, 35, 38.) For example, after the contract was
signed, defendants assured plaintiff that the system would
have the ability to auto-generate serial labels. (Compl.
¶ 37.) When Deposco sent its engineers to
Clippercreek's headquarters to integrate the technology,
however, the engineers told plaintiff that the system would
not be able to perform some of the “essential
requirements for manufacturing.” (Compl. ¶ 45.)
Two days after Deposco sent its engineers to plaintiff's
headquarters, Clippercreek notified defendants of its
immediate rescission of the contract. (Compl. ¶ 52).
Plaintiffs demanded a return of the deposit, but defendants
refused to comply with the demand. (Compl. ¶¶ 52,
then filed this action alleging the following six claims
under California state law: (1) rescission by mutual and/or
unilateral mistake, (2) rescission by lack of consideration,
(3) rescission by fraud, (4) negligent misrepresentation, (5)
breach of contract, and (6) unfair competition, pursuant to
California Business & Professions Code § 17200 et
seq. Defendants now move to dismiss the complaint under
Federal Rule of Civil Procedure 12(b)(6), or, in the
alternative, transfer the case to the Southern District of
Ohio, pursuant to 28 U.S.C. § 1404(a), in accordance
with the agreement's forum-selection
Validity of Forum-Selection Clause
selection clauses “are presumptively valid” and
“should be honored ‘absent some compelling and
countervailing reason.'” Murphy v. Schneider
Nat'l, Inc., 362 F.3d 1133, 1140 (9th Cir. 2004)
(quoting M/S Bremen v. Zapata Off-Shore Co., 407
U.S. 1, 12 (1972)); see also Atl. Marine Const. Co. v.
U.S. Dist. Court for W. Dist. of Texas, 571 U.S. 49, 63
(2013) (“[A] valid forum-selection clause [should be]
given controlling weight in all but the most exceptional
cases.”). The party opposing the enforcement of a forum
selection clause has the “heavy burden” of
showing that it is “‘unreasonable' under the
circumstances.” Bremen, 407 U.S. at 10, 18. A
forum selection clause is unreasonable under three
circumstances: “(1) ‘if the inclusion of the
clause in the agreement was the product of fraud or
overreaching'; (2) ‘if the party wishing to
repudiate the clause would effectively be deprived of his day
in court were the clause enforced'; [or] (3) ‘if
enforcement would contravene a strong public policy of the
forum in which suit is brought.'” Murphy,
362 F.3d at 1140 (quoting Richards v. Lloyd's of
London, 135 F.3d 1289, 1294 (9th Cir.1998)).
does not contend that enforcement of the clause would
contravene California public policy. The court therefore
evaluates only the first two exceptions to the enforcement of
Fraud and Overreaching
argues that “[t]he [complaint] makes a strong showing
that . . . the MTA containing the forum-selection clause . .
. was affected by fraud, undue influence and a huge
differential in bargaining power.” (Pl.'s Opp. to
Mot. to Dismiss at 14 (Docket No. 33).)
allegations are insufficient to decline enforcement of the
forum-selection clause on the grounds of fraud. “For a
party to escape a forum selection clause on the grounds of
fraud, it must show that ‘the inclusion of that clause
in the contract was the product of fraud or
coercion.'” Richards, 135 F.3d at 1297
(quoting Scherk v. Alberto-Culver Co., 417 U.S. 506,
518 (1974)). To do so, a party “must show that the
inclusion of the clause itself into the agreement was
improper; it is insufficient to allege that the agreement as
a whole was improperly procured.” Mahoney v. Depuy
Orthopaedics, Inc., No. 2:7-cv-1321 AWI SMS, 2007 WL
3341389, at *7 (E.D. Cal. Nov. 8, 2007); see also
Scherk, 417 U.S. at 519 n. 14 (The fraud exception in
Bremen “does not mean that any time a dispute arising
out of a transaction is based upon an allegation of fraud . .
. the clause is unenforceable.”); Richards, 135 F.3d at
1297 (“[S]imply alleging that one was duped into the
signing of the contract is not enough.”).
the complaint alleges that defendant fraudulently induced
plaintiff into signing the MTA. The complaint does not,
however, allege that defendant fraudulently introduced the
forum-selection clause into the agreement. Indeed, the
complaint does not even mention the forum-selection clause.
Plaintiff therefore cannot avoid enforcement of the clause on
the grounds of fraud. Cf. Richards, 135 F.3d at 1297 (finding
that a forum-selection clause was not ...