Mil-Ray v. EVP International, LLC

UNITED STATES DISTRICT COURT

DISTRICT OF OREGON

PORTLAND DIVISION

MIL-RAY, an Oregon corporation,

Plaintiff/Counter-Defendant

Case No. 3:19-cv-00944-YY

v.

OPINION AND ORDER

EVP INTERNATIONAL, LLC, an Ohio limited

liability company,

Defendant/Counter-Claimant.

YOU, Magistrate Judge.

Plaintiff Mil-Ray brings claims for fraud and quantum meruit. Defendant EVP

International, LLC counterclaims for breach of contract and seeks a declaratory judgment. This

court has jurisdiction over the action based on complete diversity between the parties and alleged

damages exceeding $75,000. 28 U.S.C. § 1332.

Defendant has filed a Motion to Transfer or Dismiss under 28 U.S.C. § 1404 and the

Doctrine of Forum Non Conveniens (ECF 64). Defendant seeks transfer of this lawsuit to the

Southern District of Ohio or dismissal so that it can be refiled in Ohio federal or state court.

Defendant’s motion is DENIED for the reasons discussed below.

I. Procedural History

Plaintiff originally brought this action in Multnomah County Circuit Court, alleging

claims for fraud and quantum meruit and a violation of O.R.S. 646A.097. Defendant removed

the matter to federal court and filed a Motion to Dismiss or Transfer (ECF 30), which this court

granted in part and denied in part. Findings and Recommendations (“F&R”), ECF 41, adopted

by Opinion and Order (“O&O), ECF 52. The court dismissed the claim premised on O.R.S.

646A.097, finding the statute violated the dormant Commerce Clause. See id. at 14. The court

denied with leave to renew the motion regarding plaintiff’s fraud and quantum meruit claims,

finding “there are unresolved factual and legal issues surrounding whether the parties made a

separate agreement about Home Depot sales and whether those sales are encompassed within the

ICA,” i.e., the Independent Contractor Agreement dated October 18, 2016. Id. at 25, 28.

Defendant argued that even assuming the parties had made a separate oral agreement, it

was void under the integration clause of the ICA, which provides that no waiver, alteration, or

modification of any of the provisions in the ICA is binding unless in writing. See ICA ¶ 21, ECF

10. However, plaintiff alleged that defendant itself believed the Home Depot agreement did not

fall under the ICA and claimed to have an email in which defendant’s CEO said as much. See

First Am. Compl. ¶ 6, ECF 24. Plaintiff chose to file statutory, fraud, and quantum meruit

claims against defendant, instead of a breach of contract claim, because defendant had taken the

position that the Home Depot sales did not fall within the ICA.

This court concluded that “[w]hile plaintiff has not yet provided any evidentiary support

for its claim that there was a separate, valid agreement, that is because plaintiff has been unable

to conduct discovery. . . Because of the unresolved issues, this is one of those instances where

the Rule 12(b)(3) motion must be denied, ‘at least until facts are resolved,’ perhaps by

evidentiary hearing, at a later date.” F&R 26, ECF 41 adopted by O&O, ECF 52 (quoting

Murphy v. Schneider National, Inc., 362 F.3d 1133, 1140 (9th Cir. 2004)).

Since the court’s prior ruling, plaintiff amended its complaint a second time, further

substantiating its fraud allegations, and defendant has asserted a counterclaim for breach of

contract and declaratory judgment. Defendant argues its counterclaim is both compulsory and

subject to the ICA’s forum selection clause and that the counterclaim’s allegations serve to

“clarify that Plaintiff’s claims cannot be adjudicated without analyzing the ICA.” Mot. 4, ECF

64. Plaintiff continues to maintain, however, that its “tort and equitable claims arise separately

and independently from” the ICA. Resp. 5, ECF 76.

II. Background

A. Plaintiff’s Allegations

Defendant makes luminous exit signs. Second Am. Compl. ¶ 1, ECF 71. In October

2016, plaintiff and defendant entered into the ICA through which they agreed that plaintiff would

solicit orders for luminous exit signs and, if defendant approved those orders, it would pay

plaintiff a commission for those sales. Id. ¶ 2.

This written agreement “existed between the parties from 2016 until 2018,” during which

time plaintiff “pursued Home Depot with the hopes of making them a customer.” Id. ¶¶ 3, 6.

Home Depot is a large national chain of home improvement stores with over 2,000 locations. Id.

¶ 3. Plaintiff alleges that in late 2017, it secured for defendant a preliminary commitment from

Home Depot for a pilot project consisting of ten stores. Id. Plaintiff further claims that, under

the ICA, it would have made approximately $3,211,059 in commissions from Home Depot sales,

assuming the pilot project was successful. Id. ¶ 4.

However, plaintiff alleges that during a September 24, 2017 conference call, defendant

induced plaintiff into transferring the Home Depot account over as a “house account” by falsely

promising to pay a straight 15% commission on Home Depot sales, installation, audits, and

removals.1 Id. ¶¶ 4, 8. Plaintiff alleges that, under this new formula, it was entitled to a lesser

commission of $2,730,015, but that it accepted this arrangement so it could pursue sales leads

with other large chains such as Walmart. Id. Plaintiff contends that defendant paid for several

Home Depot installations at the agreed 15% commission, but then stopped and wanted plaintiff

to accept a 3% “finder’s fee,” in violation of its “the written sales agreement that was entered

into in October, 2016.” Id. ¶ 5. Defendant has “disavowed” that it is obligated under the ICA to

pay plaintiff any commissions from Home Depot sales. Id. ¶ 6.

Plaintiff also alleges that after it turned over the Home Depot account to defendant,

defendant encouraged plaintiff to pursue, and plaintiff did pursue, other sales leads, including

Walmart, another large national chain of retail stores. Id. ¶¶ 14-15. However, after plaintiff

secured Walmart as a house account for defendant and just as defendant was planning to roll out

a pilot project with Walmart, defendant fired plaintiff. Id. ¶ 16.

B. The ICA

Under the terms of the ICA, defendant agreed to pay plaintiff referral fees for any

“Qualifying Transaction, whenever such transactions shall take place.” ICA ¶ 3, ECF 10. A

qualifying transaction is “defined as any sale consummated by [defendant] to a Customer . . . that

has been introduced by [plaintiff] through the procedures set forth on Addendum A to this

Agreement.” Id.

1 Plaintiff claims defendant was represented during this conference call by John Browner

(investor and acting president), Ken Miller, Jr. (vice president), and Duane Kimble (chief

financial officer). Second Am. Compl. ¶ 4, ECF 71.

Addendum A provides that plaintiff “may from time to time refer a potential customer

. . . to [defendant],” who “in its sole discretion, shall have the option to enter into, or decline to

enter into, an agreement with any Potential Customer.” Id., Addendum A, ¶¶ 3.1.1, 3.1.2. The

addendum further states that if defendant “enters into an agreement with any such Potential

Customer, . . . within one year of such Potential Customer being referred to [defendant], such

Potential Customer shall be considered a ‘Customer’ for purposes of this Agreement and

[defendant] shall pay a fee to [plaintiff] as set forth in Section 3 of the Agreement.” Id. ¶ 3.1.3.

The referral fees are established by a formula set forth and attached in Exhibit A, and appear to

range from 5% to 30%. Id., Ex. A.

The ICA contains the following pre-suit notification clause:

Notification of Suit. Contractor shall at all times hereafter immediately notify the

Company upon learning of any threatened or pending litigation or other action

arising out of or related to this Agreement and the activities conducted pursuant

hereto. The notification shall be in writing, shall include a detailed description of

the action and its basis, and shall include copies of all available documents to

such action.

Id. ¶ 16. The ICA also contains the following forum selection clause:

Governing Law. This Agreement shall be governed by and construed in

accordance with the laws of the State of Ohio. With respect to any disputes

arising pursuant hereto, each party: (1) irrevocably submits to the exclusive

general jurisdiction of the courts of the State of Ohio; (ii) consents that any such

action or proceeding may be brought in such courts; (iii) waives any objection

that he may have to the venue or any such action or proceeding in any such court

or that such action or proceeding was brought in such or any inconvenient court

and agrees not to plead or claim the same; and (iv) agrees that service of process

in any such action or proceeding may be effected in accordance with the

provisions of Section 20 hereof.

Id. ¶ 18.

C. Defendant’s Counterclaim

In its counterclaim, defendant alleges plaintiff “breached the ICA by, among other things:

(1) not being reasonably available to provide all services and duties agreed upon; (2) not

performing its duties faithfully and to the best of its abilities; (3) not performing its services in

accordance with EVP’s rules; (4) failing to maintain high ethical standards and meet or exceed

applicable quality standards; (5) falsely representing its performance of duties and obligations

under the ICA would not violate any rule applicable to it or any document to which it was bound;

and (6) assigning or delegating obligations under the ICA.” Mot. 3, ECF 64 (citing

Counterclaim ¶¶ 10-46, ECF 61).2

Defendant alleges breaches of the ICA not just over the Home Depot account but also

with respect to defendant’s accounts with Walmart, Creative Lighting Solutions, Inc., Complete

Threat Preparedness, Inc., CBRE Group, Inc., Simon Property Group, Inc., Nike, Inc., Pacific

University, the University of Oregon, and the State of Oregon. Am. Answer and Second Am.

Counterclaim ¶¶ 33-35, ECF 97. Defendant claims it has incurred more than $3,296,000 in

damages in the form of lost business opportunities, lost goodwill, lost benefits of its bargain, and

attorney’s fees incurred in defense of this lawsuit. Id. ¶ 71.

III. Interpretation and Scope of the ICA’s Forum Selection Clause

Whereas a motion to transfer a civil action to a federal forum is governed by 28 U.S.C.

§ 1404(a), a motion to dismiss or transfer a civil action to a nonfederal forum is subject to the

doctrine of forum non conveniens. The analysis for both motions is the same, however, because

§ 1404(a) is “merely a codification of the doctrine of forum non conveniens for the subset of

2 Although the parties amended their pleadings after defendant filed the present motion to

dismiss or transfer, there is no indication those amendments are material to the resolution of this

motion. The court therefore relies on the most recent pleadings.

cases in which the transferee forum is within the federal court system.” Atl. Marine Const. Co. v.

U.S. Dist. Ct. for W. Dist. of Texas, 571 U.S. 49, 60 (2013).

“A forum non conveniens determination is committed to the sound discretion of the

district court.” Lueck v. Sundstrand Corp., 236 F.3d 1137, 1143 (9th Cir. 2001) (citations

omitted). “Forum non conveniens is an exceptional tool to be employed sparingly, not a doctrine

that compels plaintiffs to choose the optimal forum for their claim.” Dole Food Co. v. Watts,

303 F.3d 1104, 1118 (9th Cir. 2002) (simplified). The standard is “whether defendants have

made a clear showing of facts which establish such oppression and vexation of a defendant as to

be out of proportion to plaintiff’s convenience, which may be shown to be slight or nonexistent.”

Id. (simplified). As the moving party, the defendant bears the burden of showing (1) there is an

adequate alternative forum, and (2) the balance of private and public interest factors favors

dismissal. Id.

The “calculus changes,” however, when the parties have a contract that contains a valid

forum selection clause. Atlantic Marine, 571 U.S. at 63. If so, (1) “the plaintiff’s choice of

forum merits no weight” and “the plaintiff bears the burden of establishing that transfer to the

forum for which the parties bargained is unwarranted,” (2) the court “should not consider

arguments about the parties’ private interests,” and (3) the court does not apply “the rule that the

law of the court in which the plaintiff inappropriately filed suit should follow the case to the

forum contractually selected by the parties.” Id. at 63-65. “In all but the most unusual cases,

therefore, ‘the interest of justice’ is served by holding parties to their bargain.” Id. at 66.

Thus, the first question is whether a valid forum selection clause applies in this case.

Plaintiff does not contest the validity of the ICA’s forum selection clause, but argues this dispute

falls beyond its reach.

Federal law governs the interpretation of a forum selection clause in a diversity case such

as this. Manetti–Farrow, Inc. v. Gucci America, Inc., 858 F.2d 509, 513 (9th Cir. 1988). In

interpreting a forum-selection clause under federal law, courts “look for guidance ‘to general

principles for interpreting contracts.’” Sun v. Adv. China Healthcare, Inc., 901 F.3d 1081, 1086

(9th Cir. 2018) (quoting Doe 1 v. AOL LLC, 552 F.3d 1077, 1081 (9th Cir. 2009)).

The standard for determining whether a forum selection clause applies depends on the

breadth of its language. Broad forum selection clauses include those applying to “any dispute

arising out of or relating to” an agreement. Cape Flattery Ltd. v. Titan Mar., LLC, 647 F.3d 914,

922 (9th Cir. 2011) (quoting Mediterranean Enterprises, Inc. v. Ssangyong Corp., 708 F.2d

1458, 1464 (9th Cir. 1983)).3 Narrow forum selection clauses include those applying to any

dispute “arising hereunder,” “arising under,” and “arising out of” an agreement.4 Id.

A broad forum selection clause “reaches every dispute between the parties having a

significant relationship to the contract and all disputes having their origin or genesis in the

contract.” See Simula, Inc. v. Autoliv, Inc., 175 F.3d 716, 721 (9th Cir. 1999). The factual

allegations of the dispute “need only touch matters covered by the contract” for the clause to

apply. Id.

3 Although Cape Flattery and Mediterranean concern the interpretation and scope of arbitration

clauses, the same analysis applies to forum selection clauses “because an agreement to arbitrate

is actually a specialized forum selection clause.” Manetti-Farrow, 858 F.2d at 514 n.4 (citing

Scherk v. Alberto-Culver Co., 417 U.S. 506, 519 (1974)).

4 This distinction between “broad” and “narrow” forum selection clauses is a generalization.

Ultimately, it is the language of the clause that controls. E.g., Edwards Vacuum, LLC v.

Hoffman Instrumentation Supply, Inc., No. 3:20-CV-1681-SI, 2021 WL 2355405, at *4 (D. Or.

June 9, 2021) (interpreting a forum selection clause’s “rather unusual phrasing” without

reference to this distinction).

By contrast, a narrow forum selection clause covers only those claims “relating to the

interpretation and performance of the contract itself.” Advanced China Healthcare, 901 F.3d at

1086 (quoting Cape Flattery, 647 F.3d at 922). “Resolution of noncontract claims relates to

interpretation of the contract when the noncontract claims require interpretation of the contract;

i.e., the noncontract claims cannot be adjudicated without analyzing whether the parties were in

compliance with the contract.” Oracle Am., Inc. v. Oregon Health Ins. Exch. Corp., 145 F.

Supp. 3d 1018, 1027 (D. Or. 2015) (citations and quotation marks omitted); see also Cape

Flattery Ltd., 647 F.3d at 924 (finding the plaintiff’s tort claims were not subject to a narrow

forum selection clause under Mediterranean and Tracer Research Corp. v. Nat’l Env’t Servs.

Co., 42 F.3d 1292 (9th Cir. 1994), because “[t]he present dispute does not turn on an

interpretation of any clause in the contract” nor on the defendant’s “performance under the

contract”); TK Products, 2016 WL 7013470, at *5 n.8 (“Mere references to the Agreement in the

Complaint do not require an interpretation of the Agreement.”). As framed by the district court

and affirmed by the Ninth Circuit in Cape Flattery, the question is whether the plaintiff “would

have the same claims regardless of whether the [a]greement existed.” Cape Flattery Ltd. v. Titan

Mar. LLC, 607 F. Supp. 2d 1179, 1190 (D. Haw. 2009), aff’d, 647 F.3d 914 (9th Cir. 2011).

That a claim “would not have arisen ‘but for’ the parties’ [agreement] is not determinative.”

Tracer, 42 F.3d 1292 at 1295 (citation omitted).

Although forum selection clauses often use the terms “disputes” or “proceedings” rather

than “claims,” see In re McGraw-Hill Glob. Educ. Holdings LLC, 909 F.3d 48, 67 (3d Cir.

2018), the Ninth Circuit looks only to the pleaded claims to determine whether a narrow forum

selection clause applies. See Kiley v. MedFirst Consulting Healthcare Staffing, LLC, 1:17-CV-

00470-CL, 2017 WL 11434180, at *4 (D. Or. Oct. 13, 2017) (“the fact that the parties use

‘proceeding’ instead of ‘claim’ has no effect on the applicability of the forum-selection clause”).

A defendant’s contract-based evidence and defenses, standing alone, do not bring a

noncontractual claim within the scope of a narrow forum selection clause. See Kwiecinski v.

Medi-Tech Intern. Corp., 3:14-CV-01512-BR, 2015 WL 3905224, at *3 (D. Or. June 25, 2015)

(construing a narrow forum selection clause and rejecting the defendant’s argument that an

employment contract would need to be interpreted to resolve the employer’s defense that it

terminated the plaintiff because he violated his employment contract); cf. Narayan v. EGL, Inc.,

616 F.3d 895, 899 (9th Cir. 2010). Narayan concerned the application of a narrow choice-of-law

clause under Texas law, but the Ninth Circuit asked a similar question: whether the claims rose

or fell on the interpretation and enforcement of any contractual provision. 616 F.3d at 898-99.

The plaintiffs brought claims under the California Labor Code. The defendant argued the court

would need to interpret the plaintiffs’ employment contracts to determine whether the plaintiffs

were employees or independent contractors. The Ninth Circuit disagreed, holding that “[w]hile

the contracts will likely be used as evidence to prove or disprove the statutory claims, the claims

do not arise out of the contract, involve the interpretation of any contract terms, or otherwise

require there to be a contract.” Id. at 899 (citation omitted).

This mirrors the Second Circuit’s approach. In Phillips v. Audio Active Ltd., the Second

Circuit found a narrow forum selection clause in the plaintiff’s recording contract did not cover

his copyright infringement claims because he had “asserted no rights or duties” under the

contract. 494 F.3d 378, 391 (2d Cir. 2007). The rights instead arose from the plaintiff’s status as

the author of original works. While the defendants were expected to invoke the recording

contract in their defense, the plaintiff denied that the contract had “any role or relevance

whatever” with respect to his claims. Id. The Second Circuit reasoned that “[b]ecause the

recording contract is only relevant as a defense in this suit, we cannot say that [plaintiff’s]

copyright claims originate from, and therefore ‘arise out of,’ the contract.” Id.5

The decision in Wireless Warehouse, Inc. v. Boost Mobile, LLC, helps to illustrate the

fine line between claims that require interpretation of a contract and those that do not. SACV

09-1436-MLG, 2010 WL 891329, at *7 (C.D. Cal. Mar. 10, 2010). There, Wireless Warehouse

and Boost Mobile (“Boost”) entered into a one-year, prepaid wireless agreement, which they

renewed for two years. Id. at *1. The wireless agreement contained integration and non-waiver

clauses prohibiting oral amendment to the agreement and oral waiver of the agreement’s terms

and conditions. Id. While the wireless agreement was in effect, a Boost representative promised

that Boost would pay certain commissions and establish a long-term business partner relationship

with Wireless Warehouse if it sold Boost service through its many sub-dealers. Id. at *2. In

reliance on those promises, Wireless Warehouse set up new facilities, signed new leases, and

hired new employees. Id. at *3. However, when the wireless agreement expired, Boost refused

5 Not all district courts agree this is the operative rule in the Ninth Circuit. E.g., Bromlow v. D &

M Carriers, LLC, 438 F. Supp. 3d 1021, 1028 (N.D. Cal. 2020). The plaintiffs in Bromlow

brought unfair competition and various wage and hour claims. 438 F. Supp. 3d at 1028. One

plaintiff had signed an independent contractor agreement with a narrow forum selection clause

but did not assert a violation of any rights under the agreement. Id. The court nonetheless

reasoned that analysis of the plaintiff’s noncontractual claims would require an inquiry into his

employment status, which would entail analysis of whether the plaintiff was free from the

defendant’s control, which, in turn, would involve an examination and interpretation of the

agreement’s provisions and their effect. Id. The court reasoned that “the strong judicial

preference for enforcing a contractually bargained-for venue is not compatible with allowing

creative plaintiffs to skirt forum-selection clauses by pleading around claims sounding in

contract.” Id. (citation omitted). However, this reasoning is inconsistent with the Ninth Circuit’s

decision in Tracer, which held that “[n]otwithstanding the federal policy favoring it, ‘arbitration

is a matter of contract and a party cannot be required to submit to arbitration any dispute which

he has not agreed so to submit.’” 42 F.3d at 1294 (quoting United Steelworkers v. Warrior &

Gulf Navigation Co., 363 U.S. 574, 582 (1960)).

to renew the agreement and terminated its business relationship in violation of the

representative’s promises. Id.

Wireless Warehouse asserted contractual claims and noncontractual claims for false

promise and promissory estoppel. The wireless agreement contained a narrow arbitration clause,

which clearly covered the contractual claims. Labeling it a “closer call,” however, the court

found the noncontractual claims did not arise out of the wireless agreement because those claims

were based on Wireless Warehouse’s reliance on promises regarding a future business

relationship between the parties made after the parties executed the wireless agreement, the

claims did not relate to the parties’ rights and duties under the agreement, the alleged promises

pertained to a period after the expiration of the agreement, and Wireless Warehouse’s

performance in reliance on the promises was outside the scope of its obligations under the

agreement. Id. The court also rejected Boost’s argument that it would use the agreement

defensively to suggest that Wireless Warehouse’s reliance was not reasonable in light of the

agreement’s terms stating, “While Defendant’s possible state-law defenses might ultimately

prove successful, they are insufficient to bring Plaintiff’s independent claims within the scope of

a narrow arbitration clause when those claims do not relate to the interpretation and performance

of the Agreement.” Id. at *7.

In sum, when applying a narrow forum selection clause, the court looks to whether the

claim “turn[s] on an interpretation of any cause in the contract.” See Cape Flattery, 647 F.3d at

924. “A motion to enforce a forum selection clause is treated as a motion to dismiss pursuant

to Rule 12(b)(3).” Doe 1 v. AOL LLC, 552 F.3d 1077, 1081 (9th Cir. 2009). Therefore, this

court “must draw all reasonable inferences in favor of the non-moving party and resolve all

factual conflicts in favor of the non-moving party.” Murphy, 362 F.3d at 1138. “It is the burden

of the party seeking enforcement of a forum selection clause to sufficiently demonstrate that a

claim requires interpretation of the contract.” TK Products, LLC v. Buckley, 3:16-CV-803-SI,

2016 WL 7013470, at *1 (D. Or. Nov. 29, 2016) (citations omitted).

A. Plaintiff’s Claims

Drawing all reasonable inferences in plaintiff’s favor, plaintiff’s fraud and quantum

meruit claims fall outside the scope of the ICA’s narrow forum selection clause.

This court previously recognized the ICA contains a narrow forum selection clause, but

denied defendant’s prior Motion to Dismiss or Transfer (ECF 30), finding “there are unresolved

factual and legal issues surrounding whether the parties made a separate agreement about Home

Depot sales and whether those sales are encompassed within the ICA.” F&R 24-25, ECF 41

adopted by O&O, ECF 52. However, during oral argument on the present motion, plaintiff made

clear it is not alleging that the parties reached a separate, oral agreement during the September

24, 2017 conference call or that they amended, modified, or altered the ICA. In short, plaintiff

does not allege breach of the ICA or any subsequent agreement. Instead, plaintiff alleges claims

for fraud and quantum meruit, which are wrongs independent of the ICA.

To recover on a claim of fraud under Oregon law, a plaintiff must prove the following

elements:

(1) the defendant made a material misrepresentation that was false; (2) the

defendant did so knowing that the representation was false; (3) the defendant

intended the plaintiff to rely on the misrepresentation; (4) the plaintiff justifiably

relied on the misrepresentation; and (5) the plaintiff was damaged as a result of

that reliance.

Murphy v. Allstate Ins. Co., 251 Or. App. 316, 324 (2012).

Here, plaintiff alleges that the representations defendant made during the conference call

are actionable in fraud and that analysis of the elements of a fraud claim does not require

interpretation of the ICA. Specifically, plaintiff alleges defendant falsely represented that (1) it

would pay a 15% commission for Home Depot sales to “secure the transfer of the Home Depot

account over to Defendant as a ‘house account[,]’” Second Am. Compl. ¶ 8(A), ECF 71; (2) this

representation was false, as evidenced by defendant’s subsequent denial that it ever made the

representation, id. ¶ 8(B); (3) the representation was made with the “specific intent” to induct

plaintiff into making the Home Depot account a “house account,” id. ¶ 8(C); (4) plaintiff

reasonably relied in good faith on the representation to its detriment by turning over the account

to defendant, id. ¶ 8(D); and (5) plaintiff sustained damages in the form of “lost commissions.”

id. ¶ 8(E).

Plaintiff proffers four emails in support of this claim. A December 5, 2018 email from

John Browner, defendant’s acting president, recognizes that “the contract was written over two

years ago and was reflective of a relationship that has since evolved.” Bennett Decl., Ex. 1, ECF

77-1. A December 13, 2018 email from Zachary Green, defendant’s CEO, states, “I feel they

should get a finder’s fee for both Walmart and Home Depot Facilities. They did open up both of

those accounts.” Bennett Decl., Ex. 2, ECF 77-2. The ICA contains no mention of a finder’s

fee. In a March 1, 2019 email, Browner took the position that the Home Depot sales were made

more than one year after plaintiff referred Home Depot to defendant, thereby making plaintiff

ineligible for a referral fee under the terms of the ICA. Id., Ex. 3, ECF 77-3; see also ICA,

Addendum A, ¶ 3.1.3, ECF 10. Finally, a March 21, 2019 email from Browner asserts that

plaintiff was not entitled to any compensation for Home Depot sales because they did not “fall[]

under the construct” of the ICA. Bennett Decl., Ex. 4, ECF 77-4.

As in Wireless Warehouse, plaintiff’s reliance on defendant’s representations made

during the conference call pertained to a business relationship that had, as Browner put it by

email, “since evolved.” The fraud claim, like the ICA, concerns Home Depot sales; however, the

promised commission was to be calculated from defendant’s servicing of Home Depot as a

“house account,” which is not contemplated by the ICA. Nor was plaintiff’s transfer of an

account to defendant as a house account an obligation imposed by the ICA. Moreover, in emails,

Green wrote about a finder’s fee and Browner wrote that the Home Depot sales fell outside the

construct of the ICA entirely. As alleged, none of the fraud claim’s elements turn on an

interpretation of any clause in the ICA. None of these elements invoke a right or duty

originating in the ICA, and none of these elements require analyzing whether the parties were in

compliance with the ICA.

Defendant argues the justifiable reliance element of the fraud claim necessarily relates to

the interpretation and performance of the ICA. Defendant invokes several Ninth Circuit cases

for the well-settled rule that justifiable reliance cannot be established where a written contract

exists whose terms contradict the oral representation. In Bank of the West v. Valley National

Bank of Arizona, 41 F.3d 471, 478 (9th Cir. 1994), and Paracor Financial, Inc. v. General

Electric Capital Corp., 96 F.3d 1151, 1159 (9th Cir. 1996), the Ninth Circuit found the plaintiffs

could not establish justifiable reliance as a matter of law when they agreed to exercise their own

judgment on certain financial matters but then alleged fraud in reliance on the defendants’

representations and assurances on those matters.6

6 Defendant also relies on two unpublished opinions for the same rule. In Government Computer

Sales v. Dell Marketing, the plaintiff brought fraud and negligent misrepresentation claims

alleging Dell Marketing made oral representations promising the plaintiff exclusivity as a reseller

of computer products. 199 F. App’x 636, 639 (9th Cir. 2006) (unpublished). The Ninth Circuit

affirmed the district court’s dismissal for failure to state a claim finding the parties’ written

agreements were nonexclusive, which clearly conflicted with the alleged oral representations

providing for exclusivity. Id. at 639. In Sussex Fin. Enterprises, Inc. v. Bayerische Hypo-Und

Vereinsbank AG, 460 F. App’x 709, 712 (9th Cir. 2011) (unpublished), the Ninth Circuit

Defendant asserts there is no way to determine whether it defrauded plaintiff by

promising a future 15% commission to make Home Depot a house account without determining

whether reliance was justified given that the ICA provides the mechanisms by which plaintiff

can otherwise earn a commission. This may well be true, but it would only be true if defendant

proffers the ICA in defense of the fraud claim. Although this argument “might ultimately prove

successful,” it is insufficient to bring plaintiff’s fraud claim within the scope of a narrow forum

selection clause when the claim does not otherwise “relate to the interpretation and performance

of the Agreement.” See Wireless Warehouse, 2010 WL 891329, at *7.

This same reasoning applies to the ICA’s pre-suit notice and integration clauses.

Defendant may invoke these clauses in defense of plaintiff’s claims, but this does not alter the

nature of the claims.

Plaintiff’s quantum meruit claim is a much easier call. The Ninth Circuit has specifically

held that “by definition,” a claim for “quantum meruit, which by its own terms rests on the

theory that services were performed and accepted pursuant to an implied contract” “does not

directly relate to the interpretation and performance of the [a]greement itself.” Mediterranean,

708 F.2d at 1464-65. Because the ICA would only be used as evidence to disprove plaintiff’s

claims in defense of this suit, the claims do not arise out of the ICA.

affirmed a grant of summary judgment on a fraud claim finding the defendant’s alleged

assurance that it would only unwind a loan for a particular commercial reason contradicted a

term in the agreement that provided the defendant could unwind the loan for any reason.

However, none of the Ninth Circuit cases defendant cites deal with the scope of a narrow forum

selection clause. Defendant has not moved to dismiss under Rule 12(b)(6) or for summary

judgment, but instead only to enforce the ICA’s narrow forum selection clause.

B. “Compulsory” Counterclaim

Defendant contends that, because it has brought compulsory counterclaims that arise

under the ICA, the entire case must be dismissed or moved to Ohio pursuant to the forum

selection clause. However, in analogous circumstances, courts have not dismissed or transferred

the entire case but instead dismissed or transferred only those counterclaims that are governed by

the forum selection clause.

For example, in Publicis Communication v. True North Communications Inc., 132 F.3d

363 (7th Cir. 1997), the Seventh Circuit recognized that compulsory counterclaims are not really

compulsory but are brought when a party wants to avoid the defense of preclusion:

Despite the impression one might get from the name of the doctrine, no one is

“compelled” to present a compulsory counterclaim. Only a litigant that wants to

avoid a later defense of preclusion need do so.

Id. at 365. The court observed that “[p]reclusion is an affirmative defense, and like other legal

affairs is subject to contractual adjustment by the parties,” including a forum selection clause:

“Just as one litigant may promise not to plead the statute of limitations, so it may promise not to

plead the defense of claim preclusion.” Id. at 366. And while the plaintiff in that case “did not

in so many words promise not to invoke the defense of preclusion in Delaware, . . . any forum

selection clause has this effect.” Id. Otherwise stated, “[i]f the parties promise to litigate a

dispute only in a particular forum, a party to the contract cannot seek to bar the litigation in that

forum because the claim was not presented in some other forum.” Id.

The court then analogized forum selection clauses to arbitration clauses, which are “just a

particular kind of forum-selection clause.” Id. The court cited the Ninth Circuit’s decision in

Electrical Workers Local No. 11 v. G.P. Thompson Electric, Inc., 363 F.2d 181 (9th Cir. 1966),

which “holds that a dispute covered by a contract’s arbitration clause need not—indeed, may

not—be asserted as a compulsory counterclaim in litigation.” Id. (also citing Bristol Farmers

Market & Auction Co. v. Arlen Realty & Development Corp., 589 F.2d 1214, 1220-21 (3d Cir.

1978), and FED. PRAC. & PROC. § 1412, at 96-97). Under that reasoning, the court held that the

defendant’s “compulsory” counterclaim was subject to the forum selection clause:

By agreeing to litigate in Delaware all claims arising out of requests under § 1.1

of the pooling agreement, True North promised not to assert such claims in other

forums whether or not they would be “compulsory” counterclaims, and Publicis

promised not to contend (in Delaware) that True North should have raised the

claim somewhere else. By presenting the claim in Chicago, True North broke its

promise. The district court should have enforced the pooling agreement by

dismissing the counterclaim.

Id.

Recently, the Central District of California applied the Publica holding in TMF Tr. Ltd. v.

M/T Megacore Philomena, No. CV 17-09010 AGR, 2020 WL 3064447, at *3 (C.D. Cal. Mar.

24, 2020). The court rejected the defendant’s argument that it had not “commence[d] any

proceedings” within the meaning of the forum selection clause because it was merely asserting

counterclaims: “It is well established that a counterclaim results in shifting the parties so that the

party counterclaiming becomes the plaintiff on the counterclaim and the original plaintiff

becomes the defendant.” Id. (quoting Polimaster Ltd. v. RAE Sys., 623 F.3d 832, 839 (9th Cir.

2010)). The court then applied the reasoning from Publica, which it found “persuasive,” and

held that the forum selection clause applied to the defendant’s counterclaim. Id.

Other courts have similarly dismissed or transferred counterclaims that are subject to a

forum selection clause:

Ten-X, Inc. v. Pasha Realty Holdings, LLC, No. SACV 20-02004JVS(ADSx),

2021 WL 971153, at *7 (C.D. Cal. Mar. 3, 2021) (finding the transfer of five

counterclaims “appropriate” under the forum selection clause).

Bancroft Life & Cas. ICC, Ltd. v. FFD Res. III, LLC, No. CIV.A. H-11-2382,

2012 WL 2368302, at *4 (S.D. Tex. June 21, 2012) (“Nor is there merit to

Counter–Plaintiffs’ argument that their claims to enforce the benefits of the

insurance policy are compulsory counterclaims and therefore must be brought in

this Court. Assuming without deciding that Counter–Plaintiffs’ Policy claims fall

within the ambit of Rule 13(a) because they “arise[ ] out of the transaction or

occurrence that is the subject matter of the opposing party’s claim,” FED. R. CIV.

P. 13(a)(1)(A), the Court may not ignore the forum-selection clause.”).

Mayfield v. Crawford, No. 5:07CV2775, 2008 WL 11378853, at *3 (N.D. Ohio

July 3, 2008) (“By filing their counterclaim in this Court, USF and North River

violated the contractual provision for which the parties freely bargained. All

claims arising out of the BBPUA must be litigated in San Diego, California. Since

the only claims asserted by USF and North River derive from their rights under

the BBPUA, and they are not named as defendants in Mayfield’s complaint, their

counterclaims are dismissed without prejudice, and they are dismissed as parties

to this action.”).

Diesel Props S.r.L. v. Greystone Bus. Credit II LLC, No. 07 CIV. 9580 (HB),

2008 WL 4833001, at *16 (S.D.N.Y. Nov. 5, 2008) (“For the foregoing reasons,

all of GBMI’s counterclaims and all of the counterclaims brought by Greystone as

the alleged assignee of GBMI’s rights are dismissed due to the forum selection

clauses.”).

Sch.-Link Techs., Inc. v. Applied Res., Inc., No. 05-2088-JWL, 2005 WL

2269182, at *2 (D. Kan. Sept. 16, 2005) (“For essentially the reasons stated in the

court’s prior order—namely, that the mandatory forum selection clause is valid

and enforceable as to Applied Resources’ fifth counterclaim—School-Link’s

motion to dismiss is granted.”).

FASTI USA v. FASTI Farrag & Stipsits GmbH, No. 02 C 8191, 2003 WL

1581472, at *2 (N.D. Ill. March 26, 2003) (“[W]hether FASTI Austria’s

counterclaims are compulsory under Rule 13(a) does not bear on the

enforceability of the forum selection clause . . . FASTI Austria agreed to litigate

claims arising from the licensing agreement in Austria. Rule 13(a) does not

override that agreement.”).

Karl Koch Erecting Co. v. New York Convention Ctr. Dev. Corp., 838 F.2d 656,

659 (2d Cir. 1988) (“Koch, on the other hand, would not be permitted to assert

counterclaims in federal court because they are an ‘action or proceeding . . .

commenced by’ Koch and subject to the clause. Koch’s action against NYCCDC

would therefore have to proceed in state court.”).

PMP II, LLC v. D.B. Zwirn Real Est. Credit Partners, LLC, CIVIL NO. 08-00583

DAE-KSC, 2009 WL 10677194, at *2 (D. Haw. Apr. 10, 2009) (“[E]ven

assuming the Lenders’ claim is a compulsory counterclaim, they must bring the

claim in a forum specified by the clause, assuming the clause is valid and

applicable.”).

See also 6 FED. PRAC. & PROC. CIV. § 1412 (3d ed., April 2021 update) (“Similar reasoning has

led to the conclusion that the need to uphold forum-selection clauses alters the impact of the

compulsory-counterclaim rule so that a party need not file a compulsory counterclaim in an

improper forum to avoid having the claim barred in a proper forum.”); Reading Rock Ne., LLC.

v. Russel, No. Civil No. 20-5728 (RBK/KMW), 2021 WL 870642, at *5 (D.N.J. Mar. 8, 2021)

(“Indeed, courts have recognized that claims arising from separate contracts are not compulsory

counterclaims and therefore can be tried in separate forums.”).

Thus, applying the reasoning of the cases above, it is arguably defendant’s counterclaim,

not plaintiff’s claims, that is subject to dismissal or transfer pursuant to the ICA’s forum

selection clause.7 While plaintiff has not filed such a motion to dismiss or transfer, case law

nevertheless does not support defendant’s argument that because it has brought a “compulsory”

counterclaim arising under the ICA, this court must dismiss or transfer plaintiff’s claims that are

based on events arising outside the ICA. Defendant’s counterclaim is not “compulsory”—

because defendant’s counterclaim is subject to the ICA’s forum selection clause, plaintiff will

not be able to argue claim preclusion if defendant brings this claim in Ohio. See Publica, 132

F.3d at 366 (“If the parties promise to litigate a dispute only in a particular forum, a party to the

contract cannot seek to bar the litigation in that forum because the claim was not presented in

some other forum.”). Although one could argue that this result is less efficient for the court and

7 Courts have found dismissal without prejudice is preferable to transfer where the forum

selection clause permits suit in either state or federal court. See GMAC Commercial Credit, LLC

v. Dillard Dept. Stores, Inc., 198 F.R.D. 402, 408-09 (S.D.N.Y. 2001); Mayfield v. Crawford,

No. 5:07CV2775, 2008 WL 11378853, at *3 (N.D. Ohio July 3, 2008) (dismissing without

prejudice).

But here, the forum selection clause states that the claims must be brought in the “courts

of the State of Ohio,” which defendant argues means state court. Mot. 12, ECF 64. Therefore,

dismissal is arguably more appropriate.

the parties, the parties have negotiated a narrow forum selection clause, and there is a “strong

presumption in favor of the plaintiff’s choice of forum.” Piper Aircraft Co. v. Reyno, 454 U.S.

235, 255-56 (1981). Moreover, defendant’s suggested approach would allow a party to

unilaterally circumvent a narrow forum selection by bringing a counterclaim that arises under a

contract, in contravention of what the parties previously negotiated.

Finally, plaintiff argues that defendant has waived any objection to venue by

affirmatively seeking relief through counterclaims for damages. Resp. 5, ECF 76 (citing cases).

While this argument may have merit, the court does not need to reach this issue.

V. Forum Non Conveniens and 28 U.S.C. § 1404(a)

Having determined plaintiff’s claims are not subject to the forum selection clause, the

court turns to the forum non conveniens factors.

A. Adequate Alternative Forum

“An alternative forum ordinarily exists when defendants are amenable to service of

process in the foreign forum and when the entire case and all parties can come within the

jurisdiction of that forum.” Gutierrez v. Adv. Med. Optics, Inc., 640 F.3d 1025, 1029 (9th Cir.

2011) (quoting Dole Foods Co., Inc. v. Watts, 303 F.3d 1104, 1118 (9th Cir. 2002) (quotation

marks omitted). “An alternative forum is adequate if the intended forum is capable of ‘providing

the plaintiff with a sufficient remedy for his wrong.’” Id. (quoting Dole Foods, 303 F.3d at

1118) (simplified). It is only in “rare circumstances . . . that this requirement is not met.” Lueck,

236 F.3d at 1143 (quoting Lockman Found. v. Evangelical Alliance Mission, 930 F.2d 764, 768

(9th Cir. 1991)) (alteration added).

Defendant has met its burden of establishing that Ohio state and federal courts are an

adequate alternative forum.

B. Deference to Plaintiffs’ Choice of Forum

“[T]here is ordinarily a strong presumption in favor of the plaintiff’s choice of forum,

which may be overcome only when the private and public interest factors clearly point towards

trial in the alternative forum.” Piper Aircraft, 454 U.S. at 255-56. Moreover, “[w]hen the home

forum has been chosen, it is reasonable to assume that this choice is convenient.” Id. at 256.

Here, plaintiff chose its home forum and that choice is entitled to deference.

C. Balance of Private and Public Interest Factors

1. Private Interest Factors

Courts consider the following private interest factors: (1) the residence of the parties and

witnesses, (2) the forum’s convenience to the litigants, (3) access to physical evidence and other

sources of proof, (4) whether unwilling witnesses can be compelled to testify, (5) the cost of

bringing witnesses to trial, (6) the enforceability of the judgment, and (7) all other practical

problems that make trial of a case easy, expeditious, and inexpensive. Lueck, 236 F.3d at 1145

(quoting Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508 (1947)). The “court’s focus should not rest

on the number of witnesses or quantity of evidence in each locale. Rather, a court should

evaluate the materiality and importance of the anticipated evidence and witnesses’ testimony and

then determine their accessibility and convenience to the forum.” Id. at 1146 (simplified)

(citation omitted).

Here, key witnesses for defendant and plaintiff reside in Ohio and Oregon, respectively.

Defendant represents that other potential witnesses reside near Pittsburgh, Pennsylvania, Atlanta,

Georgia, or Jacksonville, Florida. Also, one of defendant’s potential witnesses suffers from

ALS, which would make travel to Oregon difficult and might preclude that witness from

traveling to Oregon for trial.

This factor does not weigh more heavily in favor of defendants than plaintiffs. If any

witnesses are unable to travel, their testimony could be perpetuated or they could testify

remotely. The court has the capability to accommodate such remote testimony.

Additionally, a judgment could be enforced in either jurisdiction. In sum, the private

factors do not favor defendant over plaintiff.

2. Public Interest Factors

Courts consider the following public interest factors: (1) local interest in the lawsuit, (2)

the court’s familiarity with governing law, (3) burden on local courts and juries, (4) congestion

in the court, and (5) costs of resolving a dispute unrelated to this forum. Lueck, 236 F.3d at 1145

(citing Piper Aircraft, 454 U.S. at 259-61, and Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508-09

(1947)).

a. Local Interest in Lawsuit

“In determining if there is a local interest in resolving the dispute, the court must ask if

the State of Oregon has an identifiable interest in this case.” Chengwu (Kevin) Zhao v. Guo

Qiang Ye (William), No. 3:14-cv-00157-MO, 2014 WL 4851666, at *4 (D. Or. Sept. 29, 2019)

(citing Piper Aircraft, 454 U.S. at 261); Carijano v. Occidental Petroleum Corp., 643 F.3d 1216,

1232 (9th Cir. 2011) (holding that the “aim of determining if the forum in which the lawsuit was

filed has its own identifiable interest in the litigation which can justify proceeding in spite of [the

remaining public interest factors]”).

It does not appear that Oregon has any identifiable interest in resolving this lawsuit.

b. Court’s Familiarity with Governing Law

Under the ICA, defendant’s breach-of-contract counterclaim is governed by Ohio law.

See ICA ¶ 18, ECF 10. It is less clear whether Oregon or Ohio law applies to plaintiff’s fraud

and quantum meruit claims.

“When a federal court sits in diversity to hear state law claims, the conflicts laws of the

forum state—here [Oregon]—are used to determine which state’s substantive law applies.” CRS

Recovery, Inc. v. Laxton, 600 F.3d 1138, 1141 (9th Cir. 2010). “The threshold question in a

choice-of-law problem is whether the laws of the different states actually conflict.” Spirit

Partners, LP v. Stoel Rives LLP, 212 Or. App. 295, 301 (2007) (citations omitted). If there is no

material difference, Oregon law applies. Portfolio Recovery Assocs., LLC v. Sanders, 366 Or.

355, 372-73 (2020).

Oregon’s choice-of-law methodology for torts and other noncontractual claims governs

which law applies to plaintiff’s claims for fraud and quantum meruit. See O.R.S. 15.400–460.

“Section 15.440—the general approach—ties the applicable law to the location of the injury, the

location of the injurious conduct, and the domicile of the parties.” R.M. v. Am. Airlines, Inc., 338

F. Supp. 3d 1203, 1210 (D. Or. 2018). “Where the parties are domiciled in different states, the

applicable law depends on the locations of the injury and the injurious conduct.” Id.

Here, plaintiff is domiciled in Oregon, and defendant is domiciled in Ohio. The injurious

conduct occurred in Ohio, but the resulting injury occurred in Oregon. Thus, O.R.S.

15.440(3)(c) instructs that Ohio law applies unless it was both foreseeable that the conduct

would cause an injury in the state of injury and “the injured person formally requests the

application of that state’s law in a pleading.” Plaintiff has formally requested application of

Oregon law, and although neither party has addressed foreseeability, it seems reasonable to infer

that defendant’s alleged conduct would cause injury to plaintiff in Oregon. As such, Oregon law

applies. But even assuming Ohio law applies, the elements of common law fraud and quantum

meruit under Ohio law do not appear to be markedly different from Oregon law or so complex

that this court could not apply them.8

c. Remaining Public Interest Factors

Generally, the burden on local courts and juries and congestion in the court are neutral

factors, as courts everywhere are burdened in these ways.

Also, this court cannot conclude that this dispute is unrelated to this forum. Plaintiff

performed work for defendant primarily in this state and traveled to Ohio very rarely, and

plaintiff received its few 15% commission payments on the Home Depot house account from

defendant here.

In sum, the private and public interest factors weigh evenly for both parties. Defendant

has not sufficiently demonstrated that the private and public interest factors “strongly favor

dismissal.” See Tuazon v. R.J. Reynolds Tobacco Co., 433 F.3d 1163, 1180 (9th Cir. 2006)

(“Even when an adequate alternative forum exists, we will not disturb the plaintiff’s original

choice of forum ‘unless the ‘private interest’ and the ‘public interest’ factors strongly favor’

dismissal.”) (quoting Lueck, 236 F.3d at 1146).

ORDER

Defendant’s motion to dismiss or transfer (ECF 64) is DENIED.

DATED July 8, 2021.

/s/ Youlee Yim You

Youlee Yim You

United States Magistrate Judge

8 Ohio limits punitive damages to twice the amount of the compensatory damages under

circumstances that might be implicated here. See O.R.C. 2315.21(D)(2)(b).