Nanotex LLC v. Schroeter et al

Filing 23

ORDER TRANSFERRING CASE to the Western District of Michigan. Signed by District Judge Stephen J. Murphy, III. (DPer)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
NANOTEX LLC,
Plaintiff,

Case No. 2:15-cv-12479

v.

HONORABLE STEPHEN J. MURPHY, III

JOHN SCHROETER and APPLIED
TEXTILES, INC.,
Defendants.
/
ORDER GRANTING MOTION TO TRANSFER VENUE (document no. 11)
Plaintiff Nanotex LLC (“Nanotex”) sued the Defendants for allegedly selling fabrics
they falsely described as treated with Nanotex’s proprietary treatment. Compl., ECF No.
1. The Defendants filed a Motion to Dismiss under several provisions of Rule 12(b), or in
the alternative to transfer the case to the Western District of Michigan. Having carefully
reviewed the parties’ filings, the Court finds that the forum selection clause found in the
Exclusive Distribution Agreement (“Agreement”) is valid and enforceable. Therefore, the
Court will dismiss the case for improper venue.
BACKGROUND
In 2008, the parties signed the Agreement, in which Applied Textiles was to buy
quantities of Nanotex's product and to treat its fabrics for sale in the contract interior and
furniture markets. Resp. 4, ECF No. 15. The Agreement also gave Applied Textiles a
license to use Nanotex's marks in advertising the treated fabric. Id. at 4–5. The contract
covered confidentiality, intellectual property issues, the right to use Nanotex's proprietary
material, manufacturing and shipping, purchase obligations, orders and deliveries,
warranties and obligations, indemnification and other common contract provisions. Falconer

Aff., Ex. 1, ECF No. 11-1. Finally, and most pertinent for the present question, the
Agreement included a forum selection clause: "[a]ny controversy or claim arising out of or
related to this Agreement or any breach thereof shall be litigated in state or federal court
in Alameda County, California if the claim is filed by Applied Textiles, or in Kent County,
Michigan if the claim is filed by Nano-Tex." Id.
Nanotex alleges that it has tested fabrics sold by Applied Textiles using the Nanotex
marks, and that many of the fabrics have not been treated with Nanotex's proprietary
chemistry. Compl. 7–8, ECF No. 1. Nanotex brought the Complaint, and the Defendants
filed the present Motion to Dismiss or Transfer Venue.
STANDARD OF REVIEW
At the motion to dismiss stage, a court “may consider the Complaint and any exhibits
attached thereto, public records, items appearing in the record of the case and exhibits
attached to defendant’s motion to dismiss so long as they are referred to in the Complaint
and are central to the claims contained therein.” Bassett v. Nat’l Collegiate Athletic Ass’n,
528 F.3d 426, 430 (6th Cir. 2008); Greenberg v. Life Ins. Co. of Va., 177 F.3d 507, 514 (6th
Cir. 1999).
"For the convenience of parties and witnesses, in the interest of justice, a district court
may transfer any civil action to any other district or division where it might have been
brought or to any district or division to which all parties have consented." 28 U.S.C. §
1404(a).
DISCUSSION
The pivotal issue is whether to enforce the forum selection clause contained in the
parties' Exclusive Distribution Agreement. Both parties agree that California law governs
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interpretation of the Agreement. Resp. 7, ECF No. 15. Forum selection clauses "generally
are enforced by modern courts unless enforcement is shown to be unfair or unreasonable."
Sec. Watch, Inc. v. Sentinel Sys., Inc., 176 F.3d 369, 374 (6th Cir. 1999). A forum selection
clause may be unenforceable if it was (1) obtained by fraud or duress, (2) the selected
forum would not handle the suit, or do so effectively or fairly, or (3) the selected forum
would be unjustly inconvenient for the plaintiff. Id. (citing Restatement (Second) of Conflict
of Laws § 80 cmt. c (1971)).
Nanotex does not argue that the clause is unfair, unreasonable, or unenforceable for
any of the reasons outlined above. Rather, Nanotex contends that the Agreement does not
contemplate the Defendants' sale of counterfeit goods, and therefore the complaint "falls
outside the scope of the distribution of genuine Nanotex products set forth in the Exclusive
Distribution Agreement." Resp. 1, ECF No. 15. The contention is unavailing.
The Agreement considered a broad range of rights and obligations between the
parties, including the use of trademarks and the sale of goods treated with Nanotex's
chemistry. It was the legal expression of the commercial relationship between the parties.
Nanotex's claim that the Defendants have been selling counterfeit goods wrongfully using
Nanotex's mark is "related to" a primary subject of the Agreement: the Defendants' rights
to and proper use of Nanotex's marks.
The caselaw makes it clear that when a forum selection clause uses the phrase
"arising out of or related to" the underlying contract, the clause will be interpreted broadly.
See Simlula, Inc. v. Autoliv, Inc., 175 F.3d 716, 721 (9th Cir. 1999). A claim is "related to"
a contract when one has a significant relationship to the other. Cedars-Sinai Med. Ctr. v.
Global Excel Mgmt., Inc., No. CV 09-3627, 2009 WL 7322253, at *5 (C.D. Cal. Dec. 30,
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2009). Nanotex's claim that Defendants wrongfully used its marks is "significantly related"
to the contract that gave Defendants the rights to (and obligations of) the marks originally.
Nanotex would have a stronger argument if the forum selection clause was applicable
only to claims "arising under" the Agreement, a common and much narrower provision. See
id. (citing Mediterranean Enters., Inc. v. Ssangyong Corp., 708 F.2d 1458, 1464 (9th Cir.
1983)). But "every court that has construed the phrase 'arising in connection with' [similar
to "related to"] has interpreted that language broadly." Simula, Inc., 175 F.3d at 721. The
Court will do so as well.
The cases cited by Nanotex are inapt. As noted above, Cedars-Sinai states that a
claim "related to" a contract need only have a significant relationship to it, and not concern
the contract itself. The Southern District of New York and Second Circuit cases they cite
not only do not involve California law, but were based on narrow forum selection clauses.
Agrotiki Viomichania Galaktos Ipirou Dodoni A.E. v. Fantis Foods, Inc., No. 14-cv-9179,
2015 WL 1029651 (S.D.N.Y. Mar. 10, 2015) (considering clause limited to claims "arising
from the enforcement and operation of this agreement"); Philips v. Audio Active Ltd., 494
F.3d 378 (2d Cir. 2007) (considering clause limited to "legal proceedings that may arise out
of" the contract at issue).
CONCLUSION
Rather than dismiss the case for improper venue under Fed. R. Civ. P. 12(b)(3), the
Court will transfer the case to the United States District Court for Western District of
Michigan, as is proper under 28 U.S.C. § 1404(a). The valid forum selection clause
mandates that Nanotex's claims be brought in the courts of Kent County, Michigan, and the
case should be heard at the District Courthouse in Grand Rapids.
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ORDER
WHEREFORE, it is hereby ORDERED that Defendants' Motion to Transfer Venue
(document no. 11) is GRANTED.
IT IS FURTHER ORDERED that the case be TRANSFERRED to the Southern
Division of the United States District Court for the Western District of Michigan.
SO ORDERED.

s/Stephen J. Murphy, III
STEPHEN J. MURPHY, III
United States District Judge
Dated: December 17, 2015
I hereby certify that a copy of the foregoing document was served upon the parties and/or
counsel of record on December 17, 2015, by electronic and/or ordinary mail.
s/Carol Cohron
Case Manager

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