International Chemical Supplies, Inc., et al. v. Restoration Energy, LLC, et al.

Filing 50

MEMORANDUM and ORDER signed by Chief Judge Morrison C. England, Jr on 7/28/15 ORDERING that the Defendants' Motion to Dismiss (ECF No. 27 ) is GRANTED, and this action is DISMISSED. The Clerk of the Court is directed to close this action. CASE CLOSED. (Becknal, R)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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INTERNATIONAL CHEMICAL
SUPPLIES (ICS), INC., a Delaware
corporation, and PETROVERDE
CARIBE, S.A., a Panamanian
Corporation,

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No. 1:14-cv-01645-MCE-JLT

MEMORANDUM AND ORDER

Plaintiffs,
v.
RESTORATION ENERGY, LLC, a
limited liability company, SOUTHWEST
EOR OPERATING, LLC, a Texas
limited liability company; and DOES 1
through 10 inclusive,

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Defendants.

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Plaintiffs International Chemical Supplies (“ICS”) and Petroverde Caribe, S.A.

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(“Petroverde”) (collectively, “Plaintiffs”) allege several causes of action against

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Defendants Restoration Energy (“RELLC”) and Southwest EOR Operating (“SWEOR”)

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(collectively, “Defendants”) stemming from an alleged breach of contract. Currently

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before the Court is Defendants’ Motion to Dismiss (ECF No. 27), which seeks dismissal

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of the action on the grounds of forum non conveniens. For the reasons set forth below,

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Defendants’ Motion to Dismiss is GRANTED and this action is DISMISSED.1

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Because oral argument would not have been of material assistance, the Court ordered this

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BACKGROUND2

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Petroverde develops and produces environmentally friendly degreasers. In

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January 2014, Petroverde and RELLC reached an oral agreement for the completion

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and financing of a pre-production facility of a degreaser known as “ICS-0509.”

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Petroverde and RELLC subsequently memorialized their agreement in a Memorandum

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of Understanding (“MOU”).3
RELLC partnered with SWEOR to assist in securing the pre-production facility in

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Bakersfield, California; Petroverde partnered with ICS to manufacture the degreaser and

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to obtain a license to conduct business in California.4 ICS began producing the

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degreaser at the Bakersfield facility on February 25, 2014. Between then and March 17,

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2014, ICS produced approximately fifty totes of the degreaser on behalf of Petroverde.

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On March 17, 2014, however, SWEOR, on its own behalf and as authorized by RELLC,

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forcibly took control and locked Plaintiffs out of the Bakersfield production facility.

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Defendants have refused to pay for forty-seven totes of finished product that remain at

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the Bakersfield facility, and they have offered to sell the product to third parties without

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compensating Plaintiffs.
Plaintiffs seek damages, declaratory relief, and injunctive relief on causes of

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action for breach of contract, unjust enrichment, conversion, promissory estoppel, and

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negligent misrepresentation. Defendants seek dismissal of the action on the grounds of

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forum non conveniens because the forum selection clause in the MOU requires that

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“[a]ny dispute arising under [the] Agreement will be resolved exclusively by submission

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to the courts of the State of New York . . . .” MOU, ECF No. 28-1, ¶ 54.

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///

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matter submitted on the briefs. E.D. Cal. Local R. 230(g).

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The following statement of facts is based on the allegations in Plaintiffs’ Complaint (ECF No. 2).

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The MOU is attached as Exhibit A to the Declaration of Peter Schaefer (ECF No. 28).

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None of the parties have their principal place of business in California.

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STANDARD

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“[T]he appropriate way to enforce a forum-selection clause pointing to a state or

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foreign forum is through the doctrine of forum non conveniens.” Atlantic Marine Const.

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Co., Inc. v. U.S. Dist. Ct. for W. Dist. of Tex., ___ U.S. ___, 134 S. Ct. 568, 580 (2013).

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Generally, when a defendant seeks dismissal of an action on grounds of forum non

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conveniens, the court must consider both private and public-interest factors. Id. at 581.

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However, when the defendant establishes that the parties agreed to a contractually valid

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forum-selection clause,5 a court should (1) give no weight to the plaintiff’s choice of

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forum, (2) not consider arguments about the parties’ private interests, and (3) “consider

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arguments about public-interest factors only.” Id. at 581-82.
“Public-interest factors may include the administrative difficulties flowing from

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court congestion; the local interest in having localized controversies decided at home;

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and the interest in having the trial of a diversity case in a forum that is at home with the

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law.” Id. at 581 n.6 (internal bracketing and quotation marks omitted). As the party

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defying the forum-selection clause, the plaintiff bears the burden of establishing that

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dismissal is unwarranted. Id. at 581.

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ANALYSIS

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A. Validity of the MOU

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Plaintiffs do not dispute that the MOU contains a forum-selection clause that

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designates the New York state courts as the exclusive forum. Plaintiffs, however,

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contend that the MOU is unenforceable because it is merely “an agreement to agree”

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and because neither ICS nor SWEOR were parties to the MOU.

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“A forum selection clause is presumptively valid; the party seeking to avoid a forum selection
clause bears a ‘heavy burden’ to establish a ground upon which [the court] will conclude the clause is
unenforceable.” Doe 1 v. AOL LLC, 552 F.3d 1077, 1083 (9th Cir. 2009) (per curiam).

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Although the MOU indicates that the parties contemplated a future finalized

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agreement, the MOU also provides that it “shall be binding upon and inure to the benefit

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of the Parties, and to each party’s successors, and permitted assigns.” MOU, ECF

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No. 28-1, ¶ 57 (emphasis added); see also id. at ¶ 58 (“All parties acknowledge that a

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facsimile copy of this Agreement may be executed and shall have the same binding

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force and effect”). Additionally, although only the chief executive officers of Petroverde

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and RELLC signed the MOU, Plaintiff’s factual allegations indicate that ICS and SWEOR

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are sufficiently related to the contractual relationship to justify subjecting those parties to

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the forum-selection clause. See Holland Am. Line, Inc. v. Wartsila N.A., Inc., 485 F.3d

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450, 456 (9th Cir. 2007) (“The forum selection clauses apply equally to BVNA and BV

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Canada because any transactions between those entities and Holland America took

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place as part of the larger contractual relationship between Holland America and Bureau

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Veritas.”); Manetti-Farrow, Inc. v. Gucci Am., Inc., 858 F.2d 509, 514 n.5 (9th Cir. 1988)

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(“We agree with the district court that the alleged conduct of the non-parties is so closely

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related to the contractual relationship that the forum selection clause applies to all

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defendants.”).

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Accordingly, the MOU is enforceable as to both Defendants.

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B. Public-Interest Factors

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The public-interest factors weigh in favor of dismissing this action. As to

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administrative difficulties flowing from court congestion, judges in the Eastern District of

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California carry the heaviest caseloads in the nation. Although the parties have not

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made any representations about the congestion of the New York state courts, this factor

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likely favors dismissal.

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As to the second public-interest factor identified in Atlantic Marine, there is little

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local interest in this action. Although the pre-production facility is in the Eastern District

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of California, all of the parties in this case have their principle place of business in a

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foreign state or country. See Compl. at 2. Nevertheless, because this action would not

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be any more of a local interest for the New York state courts, this factor is neutral.
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The third public-interest factor identified in Atlantic Marine also favors dismissal of

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this action. In addition to the forum-selection clause providing the New York state courts

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as the mandatory forum, the MOU provides that “[t]his Agreement shall be governed by

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and construed and interpreted in accordance with the laws of the State of New York.”

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MOU, ECF No. 28-1, ¶ 54. The New York state courts are indisputably more “at home”

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with New York state law than this Court. Accordingly, this factor favors dismissal.

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Thus, one public-interest factor is neutral and the two other factors favor

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dismissal. Because Plaintiffs have not established that the forum-selection clause in the

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MOU is unenforceable or that dismissal is unwarranted, the Court must dismiss this

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action.

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CONCLUSION

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Accordingly, Defendants’ Motion to Dismiss (ECF No. 27) is GRANTED, and this
action is DISMISSED. The Clerk of the Court is directed to close this action.
IT IS SO ORDERED.
Dated: July 28, 2015

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