Dayhoff Inc. v. H.J. Heinz Co.

Opinions of the United

1996 Decisions States Court of Appeals

for the Third Circuit

6-24-1996

Dayhoff Inc v. HJ Heinz Co

Precedential or Non-Precedential:

Docket 95-3404,96-3250

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` UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

Nos. 95-3404 and 96-3250

DAYHOFF INC.,

a California corporation;

Appellant

v.

H.J. HEINZ CO., a Pennsylvania corporation;

HEINZ ITALIA S.p.A., an Italian corporation;

HEINZ DOLCIARIA S.p.A., formerly known as

SPERLARI S.p.A., an Italian corporation;

SPERLARI s.r.l., an Italian corporation;

and HERSHEY FOODS CORPORATION,

a Delaware corporation.

On Appeal from the United States District Court

for the Western District of Pennsylvania

(D.C. Civil Action No. 93-cv-01794)

Argued May 10, 1996

BEFORE: GREENBERG, ALITO, and MCKEE, Circuit Judges

(Filed: 1996)

William B. Mallin (argued)

Mary K. Austin

Joseph M. Ramirez

Eckert, Seamans, Cherin &

Mellott

42nd Floor, 600 Grant Street

Pittsburgh, PA 15219

Attorneys for Appellant

Thomas L. Allen (argued)

Carla L. Campbell

Reed, Smith, Shaw, & McClay

435 Sixth Avenue

Pittsburgh, PA 15219

Attorneys for Appellees

OPINION OF THE COURT

GREENBERG, Circuit Judge.

I. INTRODUCTION

Appellant Dayhoff, Inc. initiated this diversity of

citizenship action on October 29, 1993, alleging breach of

contract, tortious interference with contract, fraud, and civil

conspiracy against various of the appellees. The action arose

out of the termination of three contracts between Dayhoff and

appellee Heinz Dolciaria S.p.A. involving the manufacture and

sale of candies in the United States. The terminations followed

the sale of the Heinz Dolciaria candy business to appellee

Hershey Foods Corporation. The district court dismissed

Dayhoff's claims related to two of the contracts because of

arbitration and forum selection clauses, and dismissed all claims

for lack of personal jurisdiction against appellee Heinz Italia

S.p.A. Heinz Italia is the parent corporation of Heinz Dolciaria

and, in turn, is a subsidiary of appellee H.J. Heinz Co. After

additional discovery with respect to the third contract, the

court granted appellees' motion for summary judgment on all

remaining claims. After Dayhoff appealed, the district court

directed entry of a final judgment under Fed. R. Civ. P. 54(b),

and Dayhoff then appealed again. We have consolidated the

appeals for disposition in this opinion.

Dayhoff is a California corporation with its principal

place of business in California. H.J. Heinz Co. is a

Pennsylvania corporation with its principal place of business in

Pennsylvania. Hershey Foods Corporation is a Delaware

corporation with its principal place of business in Pennsylvania.

Appellees Heinz Italia S.p.A., Heinz Dolciaria S.p.A., and

Sperlari s.r.l. are Italian corporations, with their principal

places of business in Italy. As the monetary threshold for

diversity jurisdiction was met, the district court had

jurisdiction under 28 U.S.C. 1332. We have jurisdiction under

28 U.S.C. 1291.

II. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

A. FACTUAL BACKGROUND

1. The License Agreement

Dayhoff Australia Pty, Ltd., and Sperlari S.p.A.

entered into a License Agreement on October 19, 1989, pursuant to

which Sperlari S.p.A. granted Dayhoff Australia the exclusive

license to make and sell Frutteto candy in the United States as

of June 1990. Dayhoff Australia has assigned its rights and

obligations under the agreement to Dayhoff. The ten-year term of

the License Agreement expires October 19, 1999, but the agreement

permits Dayhoff to continue thereafter to manufacture and market

Frutteto candy in the United States under a non-exclusive,

royalty-free license. Article 21 of the agreement provides that

Italian law will govern its interpretation and Article 22

provides that any disputes relating to it will be adjudicated in

an arbitration proceeding in Italy:

22. ARBITRATION

All controversies arising from the present

contract or relating to the same will be

definitively settled according to the

Reconciliation and Arbitration Rules of the

International Chamber of Commerce, excluding

recourse to the common law courts, by one or

more arbitrators appointed in accordance with

these Rules.

The arbitration tribunal will decide on its

competence to decide the matter and on the

validity of the arbitration clause.

Each party can apply to the relevant Law

Courts to confirm the arbitration sentence or

enforce execution of the same.

Arbitration proceedings will take place in

Milan.

App. at 46.

2. The Frutteto Distribution Agreement

On July 26, 1990, Dayhoff and Sperlari S.p.A. signed

the Frutteto Distribution Agreement, which provides that Dayhoff

will be the exclusive United States distributor of Frutteto

candy. The contract does not have a set term, but, like the

License Agreement, contains a governing law clause:

B. GOVERNING LAW

This Agreement shall be governed and

constructed in accordance with the laws of

Italy and the parties hereto irrevocably

submit to the exclusive jurisdiction of the

Court of Cremona (Italy).

App. at 49. In April 1992, Sperlari S.p.A. assigned its rights

under the 1989 Frutteto Licensing Agreement and the 1990 Frutteto

Distribution Agreement to Heinz Dolciaria. App. at 198.

3. The Bulk Candy Distribution Agreement

Dayhoff and Heinz Dolciaria executed the Bulk Candy

Distribution Agreement on July 17, 1992. Pursuant to this

agreement, Dayhoff became Heinz Dolciaria's exclusive United

States distributor of certain candies other than Frutteto candy.

The Bulk Candy Distribution Agreement has an eight-year term that

expires at the earliest on July 17, 2000. The agreement provides

that disputes arising from it are to be litigated in the United

States District Court for the Western District of Pennsylvania

and that the agreement will be construed in accordance with

Pennsylvania law. App. at 50-67. Thus, the three agreements

provide for three different fora for adjudicating disputes and

provide for the law of two countries to apply to their

interpretation. As we shall see, this fractured approach to

dispute resolution under related contracts has led to great

expense and confusion and, we are afraid, will continue to do so.

Because some of Dayhoff's claims are based on events

surrounding the negotiation of the 1992 Distribution Agreement,

the facts relating to the negotiation of that agreement require

further discussion. The district court rejected Dayhoff's claims

related to this agreement on summary judgment; therefore, we will

present the facts pertaining to these claims in the light most

favorable to Dayhoff. See Petruzzi's IGA Supermarkets, Inc. v.

Darling-Delaware Co., 998 F.2d 1224, 1230-32 (3d Cir.), cert.

denied, 114 S.Ct. 554 (1993); see also Berner Int'l Corp. v. Mars

Sales Co., 987 F.2d 975, 978 (3d Cir. 1993).

The parties negotiated the Bulk Candy Distribution

Agreement through numerous facsimiles between the United States

and Italy. On June 4, 1992, Luigi Volta, then a long-time

employee of Heinz Dolciaria and currently employed by Sperlari

s.r.l., a successor corporation to Heinz Dolciaria, informed

Dayhoff that "[t]his is our last and final proposition." Sealed

app. at 1011-12. On June 8, 1992, Volta informed Dayhoff that an

agreement was "reachable" and invited Uday Lele, president of

Dayhoff, to come to Cremona, Italy, to "finalize" the agreement.

Id. at 1013.

Shortly thereafter, Lele traveled to Cremona to sign

the agreement. According to Dayhoff, Lele understood that the

negotiations were virtually over and that the contract terms

would follow the facsimiles. However, when he arrived in Italy

to sign the contract, Lele learned that Antonella Giacobone, an

attorney for Heinz Italia, would be at the meeting, as would

Volta and Franco Seletti. Seletti, also a former employee of

Heinz Dolciaria, now employed by Sperlari s.r.l., is above Volta

in the corporate ladder.

Lele never had met or dealt with Giacobone, and there

had never been an attorney present during previous negotiations

between Dayhoff and Heinz Dolciaria or their predecessors, or at

the execution of their previous contracts. Lele had not been

given advance notice that Giacobone would be at the meeting, and

no one had suggested that he might want to bring his own lawyer.

Dayhoff alleges that when Lele asked Giacobone why she was

present, she advised him that she would protect Dayhoff's

interests as well as those of Heinz Dolciaria, and that she was

Dayhoff's de facto attorney in connection with the negotiation of

the contract.

At the meeting, Giacobone presented Lele with a draft

of the Bulk Candy Distribution Agreement that he had not seen

during the parties' previous negotiations. The draft contained a

termination provision similar to section 14.3, the one

ultimately incorporated into the final agreement. According to

Dayhoff, Heinz Dolciaria had not discussed the termination

provision with it previously. Thus, the provision had not been

incorporated in the parties' prior drafts or agreements.

At his deposition, Lele testified that he inquired into

the meaning of this provision at the meeting:

I asked Antonella Giacobone what this

meant, and she said, Mr. Lele, you are

operating in the American market. Heinz USA

is one of the most well-known food companies,

we don't want you to use the Heinz name to

sell your company to somebody else and become

a rich man and we get left holding the baby

and having to deal with somebody we don't

want to deal with. That is what she told me.

Sealed app. at 743-44. Dayhoff alleges that when Lele asked

Giacobone specifically what the termination provision meant, she

did not tell him that the appellees could invoke the clause when

Heinz Italia rather than Dayhoff sold its business. Instead,

Dayhoff alleges, she advised him that the provision protected

Heinz Dolciaria in the event that Dayhoff was sold or its assets

assigned. Moreover, Dayhoff alleges that in connection with

Giacobone's explanation of the clause, she told Lele that "[s]he

would be taking care of both our interests." Br. at 9. Dayhoff

further claims that Volta confirmed Giacobone's representations

as to the meaning of the termination clause by telling Lele that

the provision was intended to protect Heinz Dolciaria in the

event that Dayhoff sold or assigned its assets to another

company.

Dayhoff thus asserts that no one informed Lele that the

clause would entitle Heinz Dolciaria to terminate the contract

without compensation in the event that Heinz Dolciaria underwent

a change of control or sold its assets. Indeed, Dayhoff claims

that explanatory statements to Lele by Giacobone and Volta were

inconsistent with such an interpretation. Dayhoff states that

Lele understood the agreement to mean that Heinz Dolciaria would

not have the right to terminate the contract if Heinz Dolciaria

sold or transferred its assets to another corporation.

Dayhoff claims that only after it initiated this

litigation did the appellees assert that the termination clause

entitled Heinz Dolciaria to terminate the contract without

compensation when Heinz Italia sold the confectionery business.

Giacobone then testified that she had included the clause for

this specific purpose. At her deposition, Giacobone further

claimed that she "intended to cover every possible . . . legal or

financial way in which our [Heinz Italia's] confectionery

business could be sold . . . ." Sealed app. at 1032-33. Dayhoff

claims that Giacobone did not deny, however, that she failed to

disclose this information when Lele specifically questioned the

meaning of section 14.3.

4. Performance of the Three Contracts

Dayhoff consistently performed its obligations under

the three contracts and created a market for Heinz Dolciaria's

candies in the United States. Dayhoff claims to have invested

more than $1.6 million in performing the contracts. As proof of

its satisfactory performance, Dayhoff asserts that as recently as

September 30, 1993, Heinz Dolciaria asked Dayhoff to expand its

operations to distribute additional Heinz Dolciaria candies.

Dayhoff expected enormous financial returns from its substantial

investment.

5. Termination of the Three Contracts

According to Dayhoff, as early as March 1993, H.J.

Heinz and Heinz Italia, without Dayhoff's knowledge, began

negotiating the sale of Heinz Dolciaria's business to Hershey.

Dayhoff alleges that when it learned about this impending

transaction and inquired as to its effect on its contracts, Heinz

Dolciaria assured it that there would be no effect and that there

was no reason to terminate the contracts. Yet, according to

Dayhoff, H.J. Heinz, Heinz Italia, and Hershey even then were

searching for ways to terminate the contracts. On September 13,

1993, Giacobone sent a letter to Hershey discussing the contracts

in detail with particular reference to the termination

provisions. The letter indicated that Lele was "well known and

appreciated" by Sperlari S.p.A.'s (i.e., Heinz Dolciaria's) sales

managers. Sealed app. at 59-60.

On September 14, 1993, Heinz Italia sold virtually all

of its confectionery business to Hershey Holding Company, a

subsidiary of Hershey Foods Corporation, for $133,000,000. Heinz

Italia accomplished the sale through the formation of a new

company, Sperlari s.r.l.; the transfer of substantially all the

assets and liabilities of the confectionery business to Sperlari

s.r.l.; and the sale of Sperlari's stock to Hershey Holding

Company. As a condition of that sale, Hershey insisted on

termination of the Dayhoff contracts, and thus when Hershey

purchased the confectionery business the Dayhoff contracts were

not included. The closing memorandum of the sale shows that

Hershey's purchase did not include the contracts, Heinz Italia

agreed to terminate the Dayhoff contracts, and Heinz Italia

agreed to indemnify Hershey from any liabilities arising from the

termination of the contracts. Sealed app. at 940-41.

According to Dayhoff, Seletti deliberately decided to

conceal the termination decision from it. Hence, Dayhoff claims

that it was not informed of the termination and continued to

devote itself exclusively to the promotion of the Sperlari name

and products and continued to inform Seletti and Volta of its

efforts. Dayhoff alleges that, even as Lele was invited to visit

Milan to discuss the parties' continuing business relationship

and the extension of the Bulk Candy Distribution Agreement to

include additional candies, Seletti and Volta were providing

Hershey with confidential information concerning Dayhoff's

business.

By letter dated September 28, 1993, at Hershey's

direction and insistence, Heinz Italia issued a letter

terminating Heinz Dolciaria's three contracts with Dayhoff:

As you may have heard, we recently sold all

our confectionery business to the Hershey

Group. As a consequence, we hereby notify

you [of] our decision to forthwith terminatethe [License

Agreement, Frutteto Distribution

Agreement, and Bulk Candy Distribution

Agreement]. The Frutteto Distributorship and

the Bulk Candies Distributorship are

terminated also for your failure to attain

respectively the Minimum Quantities and the

Minimum Purchases.

Sealed app. at 950 (emphasis in original). Dayhoff notes that

Heinz Italia did not mention section 14.3 of the Bulk Candy

Distribution Agreement in the September 28, 1993 termination

letter.

Giacobone called Volta after she saw the September 28,

1993 termination letter to express her concern regarding

Dayhoff's likely reaction. Volta assured Giacobone that there

was no problem with terminating the Bulk Candy Distribution

Agreement because of the contract's termination provision. On

the other hand, Volta expressed concern that there was no

justification for terminating the Frutteto Distribution

Agreement. Dayhoff alleges that at that time Giacobone reassured

Volta by reminding him of the contract clause providing for an

Italian forum, and stating that Dayhoff might not be willing to

pursue its rights in Italy. Sealed app. at 1101-04. Dayhoff

reacted to the termination letter by informing Heinz Dolciaria

that the purported terminations were invalid and had no effect

because there were no grounds for the terminations and because

Heinz Italia, which was not a party to the contracts, could not

terminate them.

Since the termination, Hershey has announced to

Dayhoff's customers that Hershey soon would begin selling candies

in the United States where Dayhoff has exclusive United States

rights. As a result, Dayhoff claims that its sales have declined

dramatically and its standing in the United States candy market

has been shattered.

B. PROCEDURAL HISTORY

Dayhoff initiated this action on October 29, 1993. In

its amended complaint, Dayhoff alleged claims against Heinz

Dolciaria for breach of all three contracts. Dayhoff also

asserted breach of contract claims against Sperlari s.r.l. on the

ground that it took over Heinz Dolciaria's business when Heinz

Dolciaria effectively was stripped of its assets. Dayhoff does

not assert breach of contract claims against Hershey, H.J. Heinz,

or Heinz Italia. Dayhoff, however, asserts claims for tortious

interference with contract against all appellees except Heinz

Dolciaria. Dayhoff asserts claims against all appellees for

fraud and conspiracy, and seeks the imposition of a constructive

trust on all proceeds from the sale of Heinz Italia's

confectionery business and all proceeds from the manufacture and

sale of Heinz Dolciaria or Sperlari s.r.l. candies in the United

States. It also seeks restitution from Hershey, Sperlari s.r.l.,

and Heinz Dolciaria, and reformation of the change of control

termination provision of the Bulk Candy Distribution Agreement.

Dayhoff Australia originally was a plaintiff in the suit;

however, Dayhoff Australia prior to the institution of the suit

had transferred and assigned to Dayhoff its rights under the 1989

License Agreement. Thus, it was dropped as a plaintiff.

On March 14, 1994, the appellees made a joint motion to

dismiss or for summary judgment. On October 3, 1994, the court,

through Judge Ambrose, dismissed Dayhoff's claims relating to the

License Agreement on the ground that the agreement compelled

Dayhoff to arbitrate all claims arising from it against all

appellees, including those who had not signed it. The district

court also dismissed all of Dayhoff's claims relating to the

Frutteto Distribution Agreement on the ground that Dayhoff was

compelled to litigate those claims in the courts of Cremona,

Italy. Finally, the district court dismissed all claims against

Heinz Italia for lack of personal jurisdiction. Thus, this

initial disposition left outstanding only Dayhoff's claims under

the Bulk Candy Distribution Agreement against the appellees other

than Heinz Italia.

The case then was transferred to Judge Cindrich, who,

on July 10, 1995, granted summary judgment in favor of the

appellees on Dayhoff's remaining claims related to the Bulk Candy

Distribution Agreement. Dayhoff then appealed. We are

exercising plenary review.

We note that insofar as we are aware, notwithstanding

the October 3, 1994 order, the parties have not instituted

arbitration or litigation proceedings in Italy. Dayhoff claims

that Hershey, Sperlari s.r.l., and H.J. Heinz did not consent to

jurisdiction of the arbitration in Milan or litigation in the

courts of Cremona until after the district court conditioned its

dismissal of Dayhoff's claims on that consent. Dayhoff's consent

neither was sought nor given.

III. DISCUSSION

A. THE 1989 AND 1990 AGREEMENTS

Dayhoff's initial argument is that the district court

erred in dismissing its claims related to the 1989 and 1990

Frutteto agreements because, in Dayhoff's view, the arbitration

and forum selection clauses of those agreements, on which the

district court relied in reaching its result, do not apply to all

of the appellees and, indeed, are not effective at all. Dayhoff

bases its argument that the clauses are not effective as to all

the appellees principally on our opinion in Kaplan v. First

Options of Chicago, Inc., 19 F.3d 1503 (3d Cir. 1994), which the

Supreme Court affirmed in First Options of Chicago, Inc. v.

Kaplan, 115 S.Ct. 1920 (1995).

Dayhoff asserts that the Supreme Court's opinion in

Kaplan strongly emphasized that parties cannot be required to

arbitrate a dispute unless they specifically and expressly have

agreed to arbitration. It claims that the district court's

holding that Dayhoff was required to arbitrate its claims with

Hershey under the License Agreement because that was

"reasonable," even though Hershey was not a party to the

contract, was erroneous and inconsistent with Kaplan. Dayhoff

further claims that in crafting its standard of reasonableness,

the district court ignored the threshold issue of whether it is

proper, as a matter of law, to compel Dayhoff to arbitrate its

claims against Hershey, a stranger to the License Agreement,

where Dayhoff has not agreed to arbitrate with Hershey. Dayhoff

asserts that Kaplan unequivocally held that such compulsion is

improper where, as here, there is no agreement to arbitrate

between the relevant parties.

In Kaplan, the Supreme Court affirmed our decision

directing the district court to vacate an arbitration award

against a party who had not agreed to arbitrate. 115 S.Ct. at

1926. Exercising de novo review, we held that the Kaplans could

not be compelled to arbitrate claims made pursuant to various

contracts because they individually had not signed the specific

contract containing the arbitration clause, although they had

signed related contracts. Kaplan, 19 F.3d at 1516.

The Kaplans were not obligated to arbitrate because

they had not agreed to do so. As the Supreme Court wrote:

[A]rbitration is simply a matter of contract

between the parties; it is a way to resolve

those disputes -- but only those disputes --

that the parties have agreed to submit to

arbitration.

115 S.Ct. at 1924 (citations omitted). Further, the Court stated

that:

After all, the basic objective in this area

is not to resolve disputes in the quickest

manner possible, no matter what the parties'

wishes, but to ensure that commercial

arbitration agreements, like other contracts,

'are enforced according to their terms.'

Id. at 1925 (citations omitted).

Dayhoff claims that Kaplan is particularly significant

because one of the individual defendants in that case, Manuel

Kaplan, was the president, director, and the sole shareholder of

the defendant corporation, which was obligated to arbitrate

because Kaplan had signed a contract containing an arbitration

clause on its behalf. Nonetheless, Kaplan himself was not

obligated to arbitrate the claims against him because he had not

entered into an agreement to arbitrate individually, although he

had signed related agreements. Dayhoff points out that if

reasonableness or a close relationship were sufficient cause to

compel a non-party to arbitrate, Kaplan would have been a prime

candidate for arbitration. However, Dayhoff notes that we

rejected any test for determining whether a party had to

arbitrate other than a determination of what the contract's terms

provided:

Arbitration is fundamentally a creature of

contract . . . 'arbitrators derive their

authority to resolve disputes only because

the parties have agreed in advance to submit

such grievances to arbitration.'

19 F.3d at 1512 (quoting AT & T Techs., Inc. v. Communications

Workers, 475 U.S. 643, 648-49, 106 S.Ct. 1415, 1418 (1986)).

Dayhoff argues that Kaplan thus discredits the theory that as

long as an arbitration clause is applicable to the contracting

parties, it is proper to bring into the arbitration all of the

parties to the dispute even though they are not parties to the

agreement, and thus have not agreed to arbitrate. Accordingly,

since Dayhoff and Hershey did not agree to arbitrate, Dayhoff

asserts that it cannot be required to do so.

Further, Dayhoff notes that a year after it commenced

this litigation, Hershey gave its consent to arbitration in

Italy, but only after the district court had required such

consent as a condition of dismissing the action against it.

Dayhoff claims that the very existence of this consent

underscores its point that there is no legal basis for requiring

either Hershey or Dayhoff to arbitrate in Italy, because the mere

fact that Hershey cannot be compelled to do so demonstrates that

Dayhoff should not be required to take its claims there either.

Dayhoff applies its arguments relating to the

arbitration clause of the 1989 Licensing Agreement to the forum

selection clause of the 1990 Frutteto Distribution Agreement,

arguing that Kaplan would not countenance sending the parties to

a foreign court, absent a valid agreement selecting that court.

Dayhoff claims that the rationale of Kaplan thus governs the

forum selection clause, and that Hershey's belated consent to the

jurisdiction of the Italian courts is simply irrelevant, except

that it shows that there was no agreement between Dayhoff and

Hershey to resort to the Italian forum.

In response, appellees argue that the 1989 Licensing

Agreement and the 1990 Frutteto Distribution Agreement contained,

respectively, a valid arbitration clause and a valid forum

selection clause. Appellees claim that the district court

correctly relied on these clauses in dismissing Dayhoff's claims

relating to these two agreements, and thereby acted consistently

with precedent that upholds the enforceability of such clauses.

Further, appellees argue that these clauses not only apply to

breach of contract claims, but also to tort claims arising from

contractual relations. Br. at 15. Appellees principally rely

upon the decision of the Court of Appeals for the Ninth Circuit

in Manetti-Farrow, Inc. v. Gucci America, Inc., 858 F.2d 509 (9th

Cir. 1988).

Manetti-Farrow involved claims arising from the

termination of the North American distributor of Gucci

Accessories. The distribution agreement between the North

American distributor and a Gucci Italian affiliate (Gucci

Parfums) included a forum selection clause requiring litigation

of "any controversy regarding interpretation or fulfillment of

the present contract" in Italy. Id. at 511. Following its

termination, the North American distributor commenced litigation

in the United States against Gucci Parfums, its Italian parent

(Guccio Gucci), an American Gucci affiliate (Gucci America), and

various employees and directors of the corporate defendants. The

North American distributor asserted a variety of claims against

these defendants, including tortious interference with

contractual relations. Id.

The North American distributor argued that the forum

selection clause should not apply to its tort claims,

particularly those claims it was asserting against parties other

than Gucci Parfums who were not parties to the forum selection

clause. The district court rejected this argument, and the court

of appeals affirmed. The court of appeals concluded first that

the forum selection clause did apply to the tort claims asserted

by the North American distributor, stating that "[w]hether a

forum selection clause applies to tort claims depends on whether

resolution of the claims relates to interpretation of the

contract." Id. at 514. The court concluded that all of the

North American distributor's claims required interpretation of

the contract and therefore fell within the scope of the forum

selection clause. The court further concluded that the forum

selection clause applied to all defendants, even those who were

not parties to the forum selection clause. It reasoned that "the

alleged conduct of the non-parties is so closely related to the

contractual relationship that the forum selection clause applies

to all defendants." Id. at 514 n.5.

Relying upon the reasoning of the court of appeals in

Manetti-Farrow, appellees argue that the district court

correctly concluded that all of Dayhoff's claims relating to the

1989 and 1990 Frutteto agreements should be dismissed. SeeDayhoff, Inc.

v. H.J. Heinz Co., No. 93-1794, slip op. at 9 (W.D.

Pa. Oct. 3, 1994) ("Although Heinz, Heinz Italia, Sperlari s.r.l.

and Hershey are not parties to the Agreements, their conduct is

so closely related to the contractual relationship between Heinz

Dolciaria and Dayhoff that we find that the forum selection

clause applies to all Defendants."). Appellees further rely on

similar decisions of other courts. See br. at 18 (citing Coastal

Steel Corp. v. Tilghman Wheelabrator Ltd., 709 F.2d 190, 203 (3d

Cir.) ("[T]he law of contracts . . . has long recognized that

third-party beneficiary status does not permit the avoidance of

contractual provisions otherwise enforceable."), cert. denied,

464 U.S. 938, 104 S.Ct. 349 (1983); Bonny v. Society of Lloyd's,

3 F.3d 156, 162 (7th Cir. 1993) (noncontracting defendants

subject to forum selection clause because integrally related to

contracting defendants such that suit should be kept in a single

forum), cert. denied, 114 S.Ct. 1057 (1994); TAAG Linhas Aereas

de Angola v. Transamerica Airlines, Inc., 915 F.2d 1351, 1354

(9th Cir. 1990) (forum selection clause can restrict third-party

beneficiary to designated forum; it is not unreasonable or unjust

to enforce clause when all other defendants agree to jurisdiction

in the selected forum); J.J. Ryan & Sons, Inc. v. Rhone Poulenc

Textile, S.A., 863 F.2d 315, 320-21 (4th Cir. 1988) ("When the

charges against a parent company and its subsidiary are based on

the same facts and are inherently inseparable, a court may refer

claims against the parent to arbitration even though the parent

is not formally a party to the arbitration agreement.")).

Appellees claim that neither the decision of the

Supreme Court nor that of this court in Kaplan controls the

result of this case. Appellees assert that Kaplan involved

different legal issues and different factual circumstances from

those here. First, appellees read the Supreme Court's opinion in

Kaplan narrowly, claiming that the case solely addressed two

questions relating to standards of review to be applied to

district court decisions by courts of appeals. More generally,

however, appellees claim that the case did not present the issue

before us. In particular, appellees claim that:

Mr. & Mrs. Kaplan did not agree to

arbitration of any disputes involving their

agreement with First Options. Here, by

contrast, Dayhoff explicitly agreed to

adjudicate all claims relating to the 1989

Frutteto License Agreement and the 1990

Frutteto Distribution Agreement in Italy

under Italian law. Unlike Kaplan where the

issue was whether Mr. & Mrs. Kaplan had

agreed to arbitrate any claims, the issue

here is the scope of the arbitration and

forum selection clauses entered into by

Dayhoff.

Br. at 21.

We agree with Dayhoff that the arbitration clause in

the 1989 Licensing Agreement and the forum selection clause in

the 1990 Distribution Agreement can be enforced only by the

signatories to those agreements. The opinions in Kaplan are the

controlling precedent and thus we decline to follow the reasoning

of the Court of Appeals for the Ninth Circuit in Manetti-Farrow.

Nor do we believe any of the other cases cited by appellees are

persuasive here, as those cases all may be distinguished from

that before us. We also point out that Heinz Italia and H.J.

Heinz should not by reason of their corporate relationship with

Heinz Dolciaria be able to invoke the arbitration and forum

selection clauses, for there is no more reason to disregard the

corporate structure with respect to such claims as there would be

to disregard it with respect to other legal matters. If Heinz

Italia and H.J. Heinz wanted to be able to invoke the arbitration

and forum selection clauses, they should have directed Heinz

Dolciaria to include appropriate language in the 1989 and 1990

agreements allowing them to do so.

Of course, we recognize that Dayhoff did agree to the

arbitration and forum selection clauses, whereas in Kaplan the

Kaplans had not agreed to any arbitration or forum selection

clause. However, we find appellees' position unacceptable, in

that under it Hershey (as well as the other non-signatories to

the agreement) has the option to accept or reject the arbitration

and forum selection clauses, while Dayhoff, under the district

court's opinion, is compelled to accede to Hershey's wishes.

The very fact that Hershey would have such a choice belies the

existence of an agreement between Dayhoff and Hershey, an

agreement that purportedly lies at the basis of appellees'

argument. For this reason, we will reverse the decision of the

district court to dismiss all of Dayhoff's claims related to the

1989 and 1990 Frutteto agreements against the non-signatories to

those agreements, except for Sperlari, s.r.l., the successor to

Heinz Dolciaria.

Dayhoff next urges us to hold that the arbitration

clause in the License Agreement and the forum selection clause in

the Frutteto Distribution Agreement should not be enforced in

favor of even Heinz Dolciaria or Sperlari s.r.l. Dayhoff claims

that such clauses will not be enforced where "`trial in the

contractual forum will be so gravely difficult and inconvenient

that [the party] will for all practical purposes be deprived of

[its] day in court.'" Br. at 27 (quoting M/S Bremen v. Zapata

Off-Shore Co., 407 U.S. 1, 18, 92 S.Ct. 1907, 1917 (1972)).

Dayhoff asserts that appellees seek precisely that result: to

prevent it from pursuing its rights and to evade all liability

for their wrongful conduct. Br. at 27.

The district court addressed these claims in its

October 3, 1994 opinion. In that court Dayhoff stated, interalia, that

the enforcement of the forum selection clause would be

unreasonable because Italian courts would have no authority to

enforce preliminary or permanent injunctive relief in the United

States, and that only in the United States courts could Dayhoff

receive complete, consistent, and meaningful relief. Dayhoff,

Inc. v. H.J. Heinz Co., No. 93-1794, slip op. at 6 (W.D. Pa. Oct.

3, 1994). After carefully reviewing these arguments, the

district court found that it is not unreasonable to enforce the

forum selection clauses:

The parties to the Agreements were

sophisticated business people and there is no

indication that Plaintiff was not aware, or

could not have made itself aware, of the

consequences that would result from including

the forum selection clauses in the Agreements

including whether the chosen forum was

adequate and convenient. Simply because

Plaintiff is unhappy, in retrospect, about

the forum it designated is insufficient to

warrant a finding that the clauses are

unenforceable. It would be patently unfair

to allow Plaintiff to avoid the mandates of

the forum selection clauses due to

inconvenience because we would merely be

shifting the burden of inconvenience to the

other party to the Agreement, an Italian

corporation. We also believe that factors

which weigh heavily in favor of enforcing the

forum selection clauses include the fact that

the parties agreed that Italian law would

govern the Agreements and that the Agreements

are international in character and have, at

most, a tenuous relationship to the Western

District of Pennsylvania.

Id. at 7.

We agree with the district court's analysis of this

issue, except that we think the agreements have more than a

tenuous relationship to the Western District of Pensylvania, as

the contracts contemplate performance in the United States. But

this narrow area of disagreement does not lead us to reject the

district court's conclusions that the arbitration and forum

selection clauses are enforceable. Therefore, we will affirm its

finding that Dayhoff must litigate any claim relating to the 1989

and 1990 Frutteto agreements according to the arbitration and the

forum selection clauses of those agreements. However, unlike the

holding of the district court, our holding will apply only to

Dayhoff's claims against Heinz Dolciaria (and its successor,

Sperlari s.r.l.), because of our earlier holding that the clauses

do not apply to non-signatories of the agreement.

In reaching our result on this point, we recognize that

Dayhoff emphasizes it may have to litigate its claims in three

different fora with three different sets of rules, and it asserts

that it has "no reasonable expectation of being able to enforce

its rights even after it has secured favorable rulings." Br. at

28. We are not impressed by these arguments. While we agree

with Dayhoff that it did not agree on arbitration and forum

selection clauses with respect to all the appellees, it did agree

to litigate with Sperlari S.p.A. and Heinz Dolciaria in three

different fora. Furthermore, we do not see why, if it is

successful in any forum, it could not enforce its rights, though

enforcement might require ancillary litigation and the extension

of comity to foreign judgments. Undoubtedly, the procedural

problems facing Dayhoff are daunting but Dayhoff's bargaining

when it entered into the three agreements is the cause of that.

B. THE 1992 AGREEMENT

Dayhoff next asserts that the resolution of its claims

regarding the unlawful termination of the Bulk Candy Distribution

Agreement and the fraud that allegedly accompanied that

termination centers on factual disputes, including credibility

issues, and that the district court therefore should not have

decided its claims relating to that agreement on a summary

judgment motion. As presented by Dayhoff, the facts supporting

its claim that the termination clause was included in the

executed contract by fraud include the following. Heinz

Dolciaria invited Lele to come to Italy for the final

negotiations and execution of an agreement that he had been led

to believe was essentially a "done deal." Upon his arrival, Lele

was confronted with Giacobone, an attorney for Heinz Italia, who

told him that she would be representing Dayhoff's interests as

well as those of Heinz Dolciaria.

At this meeting, Lele saw the termination provision for

the first time. Lele did not understand what it meant, and

therefore asked Giacobone to clarify its meaning. She explained

that it was there to protect Heinz Dolciaria in case Dayhoff

underwent a change of control. Volta confirmed that meaning to

Lele. Based upon this explanation, Dayhoff accepted the clause

and devoted its energies to the exclusive distributorship

provided by the contract. Giacobone subsequently testified that,

contrary to what Lele claims she told him, she had put the

provision in the contract so that Heinz Dolciaria could get out

of the contract in the event that its business was sold.

Moreover, Volta later took this position as to the meaning of the

provision as well. This evidence, according to Dayhoff, supports

the conclusion that there was "fraud in the execution of the

contract, or at least a jury could so find after weighing the

evidence and assessing credibility." Br. at 33.

In its July 10, 1995 opinion, the district court

addressed these arguments in assessing the appellees' summary

judgment motion regarding the 1992 agreement. The dispute

revolves around section 14.3 of the agreement, the final

termination clause executed by the parties, which states:

Either party shall have the right to

terminate this Agreement upon written notice

to the other party in the event that the

other party becomes bankrupt, insolvent, or

goes into liquidation, or in the event that

either party assigns the whole or any

substantial part of its business or assets or

merges with another company or undergoes a

change of control.

See Dayhoff, Inc. v. H.J. Heinz Co., No. 93-1794, slip op. at 7

(W.D. Pa. July 10, 1995). The appellees have contended that this

provision is straightforward and directly applicable to the

situation here involved. Since a transfer of assets took place

from Heinz Dolciaria to Sperlari s.r.l., whose stock Hershey

acquired on September 14, 1993, appellees argue that the

conditions triggering the application of section 14.3 were

satisfied; that Heinz Italia's September 28, 1993 letter

effectively terminated the three agreements with Dayhoff; and

that all Dayhoff's claims relating to termination of the 1992

Agreement therefore are foreclosed. In response, Dayhoff relies

upon its factual allegations presented above and asserts that

fraud bars the termination of the 1992 Distribution Agreement.

As the district court noted, appellees point out that

the 1992 Distribution Agreement contains an integration clause

that bars any attempt to modify the terms of the agreement by

reference to pre-agreement discussions or negotiations -- that

is, by prohibiting parol evidence. Dayhoff, Inc. v. H.J. Heinz

Co., No. 93-1794, slip op. at 9 (W.D. Pa. July 10, 1995).

Dayhoff responds that the parol evidence rule does not apply

because Heinz Dolciaria fraudulently obtained the inclusion of

the termination provision. Br. at 34.

The district court correctly found that Dayhoff's

argument conflicts with two recent decisions of the Pennsylvania

courts, which state's law the parties agree is controlling on

this issue. In HCB Contractors v. Liberty Place Hotel Assoc.,

652 A.2d 1278 (Pa. 1995), the appellant general contractor filed

mechanics' liens against four buildings it had helped erect.

Appellees, the building owners, successfully demurred to the

claims on the ground that HCB in two separate provisions in the

contract documents had agreed not to file such liens, instead

limiting its potential recovery to the owners' interests. HCB

argued on appeal that it had been induced fraudulently to sign

the waiver of liens. The question on appeal was whether

allegedly false oral representations could alter the express

waiver of liens in the contract. The contract in question

contained an integration clause.

The Supreme Court of Pennsylvania found that the parol

evidence rule barred consideration of prior representations

concerning matters covered in the written contract, even those

alleged to have been made fraudulently, unless the

representations were fraudulently omitted from the contract.

Otherwise, the parol evidence rule "`would become a mockery,'"

id. at 1279 (quoting Nicolella v. Palmer, 248 A.2d 20 (Pa.

1968)), and integrated contracts could be avoided or modified by

claims of differing prior representations.

The second decision relied upon by the district court,

1726 Cherry St. Partnership v. Bell Atlantic Properties, Inc.,

653 A.2d 663 (Pa. Super. Ct.), appeal denied, 664 A.2d 976 (Pa.

1995), addressed the same issue found in HCB and here. 1726

Cherry St. concerned Bell's acquisition of several parcels of

land. Appellants, the owners of one of the parcels, wanted

theirs to be the last acquired, believing that this order of sale

would bring them a better price than they otherwise would obtain.

They were persuaded to sell their land sooner by the inclusion of

a so-called "most favored nation" clause in the contract which

retroactively would adjust their price upward if Bell acquired

certain other specified parcels at higher prices. Id. at 664.

Bell later acquired and paid a higher price for land

known as the CIGNA Parcel. The parties had not named the CIGNA

Parcel in the 1726 Cherry St. contract so Bell did not consider

itself bound to raise the price paid to the 1726 Cherry St.

owners. The owners brought suit for fraud, reformation, or

rescission, claiming that Bell orally had misrepresented its

intention not to purchase the CIGNA Parcel; otherwise, they would

have insisted on the inclusion of the CIGNA Parcel in the list of

properties subject to most-favored-nation treatment. The trial

court applied the parol evidence rule in entering judgment for

Bell.

The Superior Court affirmed, 1726 Cherry St., 653 A.2d

at 670, explaining Pennsylvania's distinction between fraud in

the execution and fraud in the inducement. Fraud in the

execution applies to situations where parties agree to include

certain terms in an agreement, but such terms are not included.

Thus, the defrauded party is mistaken as to the contents of the

physical document that it is signing. Parol evidence is

admissible in such a case only to show that certain provisions

were supposed to be in the agreement but were omitted because of

fraud, accident, or mistake. Fraud in the inducement, on the

other hand, does not involve terms omitted from an agreement, but

rather allegations of oral representations on which the other

party relied in entering into the agreement but which are

contrary to the express terms of the agreement. It is clear that

Dayhoff alleges fraud in the inducement in this case, despite its

protestations to the contrary.

In seeking to distinguish HCB and 1726 Cherry St.,

Dayhoff argues that the facts here differ, particularly in its

claim that "an attorney said something that simply was not true,

and moreover, this attorney stated that she was representing

Dayhoff, another untruth." Br. at 35-36. However, we agree with

the district court that the differing facts here do not affect

the broad holdings of HCB or 1726 Cherry St. in any significant

way. Alternatively, Dayhoff again asserts, as it did in the

district court, that the Supreme Court of Pennsylvania has not

expressly rejected fraud in the inducement as an exception to the

parol evidence rule. Again agreeing with the district court, we

find this argument meritless. Accordingly, because the plain

terms of section 14.3 cannot be altered by Dayhoff's factual

claims of fraud in the inducement, even if Dayhoff's assertions

are true, we agree with the holding of the district court that

the termination provision of the 1992 Bulk Distribution Agreement

is binding upon the parties. Consequently, as the termination

provision is absolutely clear and is applicable here, we will

affirm the summary judgment granted against Dayhoff on its claims

that Heinz Italia improperly terminated the 1992 Bulk Candy

Distribution Agreement.

Our result on this issue also leads us to affirm the

district court's judgment dismissing Dayhoff's tortious

interference with contract, constructive trust, civil conspiracy,

and restitution claims predicated on the termination of the 1992

agreement. There is no doubt that the conditions for the

termination of the 1992 agreement were met. Furthermore,

Hershey did nothing wrong in requesting that the agreement be

terminated. After all, it was acquiring Heinz Italia's candy

business and it did not want Dayhoff as a candy distributor.

There was no reason why it had to retain Dayhoff in that role, at

least with respect to the 1992 agreement. Furthermore, we will

not allow the claim for reformation to proceed either, as Dayhoff

was well aware that section 14.3 was being included in the 1992

agreement.

Dayhoff claims, however, that appellees' fraud was not

limited to the execution of the contract, but that there also was

fraud when Dayhoff falsely was assured that the sale to Hershey

would not affect its contracts. The district court rejected that

claim as well when it granted appellees summary judgment. Dayhoff

relies in part on the following allegations in making this second

claim of fraud. Seletti and Volta constantly reassured Lele that

there was no reason to terminate Dayhoff's contracts and that the

sale of Heinz Italia's confectionery business would have no

effect on those contracts. Dayhoff claims that, in fact, Volta

told Lele that he should not worry. Dayhoff thus claims that

appellees made fraudulent statements and that the district court

improperly attempted to interpret and weigh the evidence

concerning these allegations. Dayhoff asserts that numerous

genuine issues of fact relate to the fraudulent conduct of

appellees with regard to the termination of the Bulk Candy

Distribution Agreement. Dayhoff claims that these issues of fact

directly relate to Dayhoff's claims for imposition of a

constructive trust and for damages for civil conspiracy, tortious

interference, and restitution.

We partially agree with Dayhoff. Viewing the facts in

the light most favorable to it as the non-moving party, we cannot

say that there are no genuine issues of material fact that a jury

should evaluate in this case. Thus, in this respect, unlike the

district court, we are not satisfied that summary judgment should

have been granted against Dayhoff on this particular claim

related to the 1992 Bulk Distribution Agreement. Therefore, we

will reverse the district court's grant of summary judgment to

the limited extent that it precluded Dayhoff from proceeding with

its fraud claim predicated on the allegations that it was

defrauded when it was assured that the sale to Hershey would not

affect its contracts with Heinz Dolciaria. However, we limit

Dayhoff's possible recovery with respect to the 1992 agreement to

damages, as that agreement, after all, was terminated lawfully.

We otherwise will affirm the summary judgment entered on the 1992

agreement. At this time, we do not consider the effect of our

reversal on claims relating to the 1989 and 1990 agreements, as

the court dismissed those claims without considering them on

their merits. To the extent that litigation regarding those

agreements continues in the district court, the effect of the

reversal may be considered on remand.

C. PERSONAL JURISDICTION OVER HEINZ ITALIA

Finally, Dayhoff disputes the district court's decision

to dismiss all claims against Heinz Italia for lack of personal

jurisdiction. Dayhoff notes that the transaction that serves as

the predicate for all of its claims in this litigation is the

$133,000,000 sale of Heinz Italia's confectionery business (Heinz

Dolciaria) to Hershey, with the advance approval and

participation of H.J. Heinz in Pittsburgh. Dayhoff claims that

Heinz Italia directly participated in all aspects of this

transaction, which participation it claims to be sufficient to

confer specific jurisdiction over Heinz Italia under

Pennsylvania's long-arm statute.

In deciding a motion to dismiss for lack of personal

jurisdiction, we take the allegations of the complaint as true.

Narco Avionics, Inc. v. Sportsman's Mkt., Inc., 792 F. Supp. 398,

402 (E.D. Pa. 1992). But once a defendant has raised a

jurisdictional defense, a plaintiff bears the burden of proving

by affidavits or other competent evidence that jurisdiction is

proper. Id. (citing North Penn Gas Co. v. Corning Natural Gas

Corp., 897 F.2d 687, 689 (3d Cir.), cert. denied, 498 U.S. 847,

111 S.Ct. 133 (1990)); see also Mellon Bank (East) v. Diveronica

Bros., 983 F.2d 551, 554 (3d Cir. 1993).

Under Fed. R. Civ. P. 4(e), we will apply Pennsylvania

law to the jurisdictional issue. Pennsylvania's long-arm statute

authorizes the exercise of personal jurisdiction over

nonresidents "to the fullest extent allowed under the

Constitution of the United States . . . based on the most minimum

contact with this Commonwealth allowed under the Constitution of

the United States." 42 Pa. Cons. Stat. Ann. 5322(b) (1981).

Section 5322(a) sets forth a variety of examples of sufficient

contact, such as "[t]ransacting any business in this

Commonwealth." Id. 5322(a)(1) (Purdon's Supp. 1995). Section

5322(b) further expands the potential bases for jurisdiction.

When personal jurisdiction is based solely on minimum contacts

under the long-arm statute, it is limited to "a cause of action

or other matter arising from acts" which confer jurisdiction.

Id. 5322(c). As the district court noted, "[s]pecific

jurisdiction arises when the plaintiff's claim is related to or

arises out of the defendant's contacts with the forum." Dayhoff,

Inc. v. H.J. Heinz Co., No. 93-1794, slip op. at 13 (W.D. Pa.

Oct. 3, 1994) (quoting Mellon Bank (East) PSFS, N.A. v. Farino,

960 F.2d 1217, 1221 (3d Cir. 1992)). A plaintiff must

demonstrate that a defendant purposefully has established

"sufficient minimum contacts with the forum state that it `should

reasonably anticipate being haled into court there.'" Diveronica

Bros., 983 F.2d at 554.

Dayhoff argues that Heinz Italia has had a wide range

of contacts in Pennsylvania that would support the district

court's exercise of jurisdiction over it. The district court

found, however, that even assuming that all of Dayhoff's

allegations are true, none of the contacts gave rise to or

related, in any way, to this litigation. Dayhoff, Inc. v. H.J.

Heinz Co., No. 93-1794, slip op. at 14 (W.D. Pa. Oct. 3, 1994).

The court concluded that the contacts between Heinz Italia and

Hershey regarding the sale of the confectionery business could

not properly be considered in a determination of whether there

was personal jurisdiction, because "the sale of the Heinz Italia

confectionery business is not the subject of this litigation."

Id. Moreover, the court found that Dayhoff had "provided no

evidence which would indicate that any activities relating to the

formation or breach of this agreement or the actions on the part

of Dayhoff or Heinz Italia (who is not even a party to the

Agreements) were directed toward this forum." Id. at 14-15.

We disagree with the conclusion of the district court.

We conclude, instead, that the court took too narrow a view of

the "subject of this litigation." In our view, this litigation

is concerned intimately with Heinz Italia's sale of its

confectionery business to Hershey in that Dayhoff alleges,

apparently with good reason, that the sale itself precipitated

the termination of its agreements. Furthermore, the agreements

were performed in the United States, and Heinz Italia was the

party who sent the letter of September 28, 1993, terminating

them. Moreover, Dayhoff accuses Heinz Italia, inter alia, of

tortious interference with contract, alleging that Heinz Italia

interfered with its contracts with Heinz Dolciaria in order to

sell that business to Hershey. It seems to us that these very

claims against Heinz Italia are the "subject of this litigation,"

not merely the contracts between Dayhoff and Heinz Dolciaria. We

see no need to discuss this point further because we think it

clear that according to our view of the "subject of this

litigation," Dayhoff has demonstrated that Heinz Italia has many

contacts with Pennsylvania. Accordingly, we will reverse the

order of the district court dismissing all claims against Heinz

Italia for lack of personal jurisdiction.

IV. CONCLUSION

For the foregoing reasons, we will affirm the court's

orders of October 3, 1994, and July 10, 1995, to the extent that

those orders reflect the district court's conclusions that

Dayhoff is bound by the arbitration and forum selection clauses

of the 1989 and 1990 agreements with respect to its claims

against Heinz Dolciaria and its successor, Sperlari s.r.l. We

also will affirm the summary judgment against Dayhoff on its

claims based upon the 1992 agreement, except on its claim of

fraud with respect to the alleged assurance to it that the sale

to Hershey would not affect its contracts with Heinz Dolciaria.

However, we limit recovery for that fraud, if it is established,

to damages. Otherwise, we will reverse the orders of October 3,

1994, and July 10, 1995, and will remand the case to the district

court for further proceedings consistent with this opinion. In

particular, the case may proceed against the appellees other than

Heinz Dolciaria and Sperlari s.r.l. in the district court without

regard for the arbitration and forum selection clauses of the

1989 and 1990 agreements, and the district court will exercise

jurisdiction over Heinz Italia. The action may proceed for fraud

claims related to the termination of the 1992 agreement to the

limited extent we have described. The parties will bear their

own costs on this appeal.