PolyOne Corporation v. Teknor Apex Company

Filing 20

Opinion and Order. Defendant's Motion to Dismiss (Related doc # 11 ) is granted. The Court finds the parties bargained for Singapore as the chosen forum to resolve the disputes found in Plaintiff's Complaint. The Court dismisses without prejudice Plaintiff's claims. Judge Christopher A. Boyko on 8/25/2014. (H,CM)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION

POLYONE CORPORATION,
Plaintiff,
Vs.
TEKNOR APEX COMPANY,
Defendant.

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CASE NO.1:14CV0078
JUDGE CHRISTOPHER A. BOYKO

OPINION AND ORDER

CHRISTOPHER A. BOYKO, J:
This matter is before the Court on Defendant Teknor Apex Company’s Motion to
Dismiss (ECF # 11). For the following reasons, the Court grants Defendant’s Motion.
Plaintiff’s Complaint alleges Plaintiff PolyOne Corp. (“PolyOne”), a specialized
polymer materials company operating on four continents, developed and sells a technology
for making polyvinyl chloride custom injection molding polymer compounds. Defendant
Teknor Apex Company (“Teknor”) misappropriated this technology and sells a competing
product, resulting in damages to Plaintiff. Plaintiff is an Ohio company based in Avon Lake,
Ohio and Defendant is a Delaware company based in Rhode Island. Plaintiff alleges the
Court has diversity jurisdiction based on the parties’ residences and the value of the claims
exceed $75,000. Plaintiff further alleges the Court has personal jurisdiction over Defendant

because it sells the offending product in Ohio.
Background Facts
According to PolyOne, its polyvinyl chloride polymer (CIM compound) is used to
manufacture plastic parts by injection molding. It is used largely in the appliance market.
The CIM technology includes compound formulations, manufacturing procedures and
scientific technical information for the compounds. PolyOne and its predecessor, The Geon
Company, maintained this technology as a trade secret and any employee that needed to know
the trade secret was required to sign a confidentiality agreement, as were third-parties to
whom Plaintiff disclosed the secret. The trade secret is not generally known in the industry
and it is not readily ascertainable by inspecting or testing the product.
In 1996, Geon formed a joint venture with Singapore Polymer Corp., (“SPC”) called
SPCGEON, wherein Geon would disclose the technology to SPC so that SPC could
manufacture the product to sell in the Asian markets. In 2001, Defendant Teknor Apex
purchased SPC and changed its name to Teknor Apex Asia Pacific. In 2003, PolyOne and
SPC assigned the joint venture’s rights and obligations under the 1996 agreement to a wholly
owned subsidiary of PolyOne called PolyOne Singapore.
Since 1996, Geon, PolyOne, SPC, SPCGEON and PolyOne Singapore executed
several agreements related to the trade secret technology. At least one of these agreements
restricts SPC from disclosing the technology to others or using it for itself, aside from what
was agreed, and obligated SPC to keep the technology secret. As a successor to Geon,
PolyOne owns all rights to the technology.
Upon information and belief, Plaintiff alleges Teknor misappropriated the trade secret

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technology from SPC and is now selling it in the US and possibly abroad. As a result, several
PolyOne customers have switched to Teknor.
Plaintiff alleges claims under Ohio law for trade secret misappropriation, unfair
competition and unjust enrichment.
Defendant’s Motion to Dismiss
On February 25, 2014, Teknor filed a Motion to Dismiss, alleging that the license
agreement between Geon and SPCGeon licensed the CIM technology to SPCGeon.
SPCGeon then sublicensed the CIM technology to SPC to manufacture the compound in
1996. The Sublicense Agreement contains a binding forum selection clause naming
Singapore as the forum for litigating all disputes. In Section 10.3 of the Sublicense
Agreement (“Agreement”), it reads:
In relation to any legal action or proceedings arising out of or in connection
with this Agreement …, each of the parties hereby irrevocably submits to the
exclusive jurisdiction of the courts of the Republic of Singapore.
Geon consolidated with another polymer company in 2000 forming PolyOne. In
2001, Teknor purchased SPC. In 2003, SPC and SPC-Geon, PolyOne Corp and Teknor
modified the Sublicense Agreement (“Amendment”). The Amendment specifically
incorporated the forum selection clause reaffirming Singapore as the agreed upon forum for
any disputes. Pursuant to the recent United States Supreme Court case of Atlantic Marine
Construction Co., Inc. v. United States District Court for the Western District of Texas, -----US------, 134 S. Ct. 568 (2013), Defendant contends the Court must dismiss the case as the
parties expressly contracted for a forum in Singapore.
Defendant further argues that if the Court declines to dismiss the action, Plaintiff’s

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claims for unfair competition and unjust enrichment must be dismissed because they merely
reiterate the misappropriation of trade secrets claim and are duplicative.
Plaintiff filed its Opposition brief on April 14, 2014, alleging Teknor’s 2012 product
has a nearly identical, if not completely identical, formulation to Plaintiff’s, including a
dummy substrate that serves no purpose in the formulation.
Plaintiff argues Defendant relies on an inapplicable forum selection clause found in an
agreement to which neither PolyOne nor Teknor are signatories. The applicable forum
selection clause is found in the Amendment that limits the applicability of the forum selection
clause to contractual disputes. Since no contract claim is alleged, the forum selection clause
is not triggered.
Plaintiff further alleges that, even if applicable, the forum selection clause is invalid
because it would have the effect of depriving Plaintiff of a fair day in court due to logistical
and legal difficulties in litigating in Singapore.
Lastly, Plaintiff alleges public interest factors weigh in favor of rejecting Singapore as
the appropriate forum.
On May 15, 2014, Defendant filed its Reply, contending that PolyOne cannot disavow
the clear contractual obligation to resolve any legal dispute in Singapore.
Standard of Review
The United States Supreme Court recently issued a decision on the weight a district
court should give a forum selection clause when considering dismissal or transfer. In Atlantic
Marine Construction Co. Inc. v. United States District Court for the Western District of
Texas, et al., 134 S. Ct. 568 (2013), the Supreme Court first held that the proper mechanism

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for enforcing a forum selection clause is 28 U.S.C. § 1404(a).
The Supreme Court further held “[w]hen a defendant files such a motion, we
conclude, a district court should transfer the case unless extraordinary circumstances
unrelated to the convenience of the parties clearly disfavor a transfer.” Id. at 581. When a
valid and enforceable forum selection clause evidences the parties’ intent to bring an action in
a particular federal district, the forum selection clause must be given “controlling weight in
all but the most exceptional circumstances.” Atlantic Marine at 581. “Only under
extraordinary circumstances unrelated to the convenience of the parties should a § 1404a
motion be denied.” Id.
The Supreme Court considered the usual analysis of a § 1404 motion to transfer.
In the typical case not involving a forum-selection clause, a district court
considering a § 1404(a) motion (or a forum non conveniens motion) must
evaluate both the convenience of the parties and various public-interest
considerations. Ordinarily, the district court would weigh the relevant factors
and decide whether, on balance, a transfer would serve “the convenience of
parties and witnesses” and otherwise promote “the interest of justice.”
§1404(a).
In Stewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22, (1988), the Supreme Court
outlined the following factors for courts to consider:

1) the convenience of parties;
2) the fairness of the transfer in light of the forum selection clause;
3) the relative bargaining power of the parties to the forum selection clause;
4) convenience of witnesses; and
5) public interest in systemic integrity and fairness
Id. at 29,30.

The existence of a valid forum selection clause changes the above analysis.

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The calculus changes, however, when the parties' contract contains a valid
forum-selection clause, which “represents the parties' agreement as to the most
proper forum.” (Internal citation omitted). The “enforcement of valid forumselection clauses, bargained for by the parties, protects their legitimate
expectations and furthers vital interests of the justice system.” For that reason,
and because the overarching consideration under § 1404(a) is whether a
transfer would promote “the interest of justice,” “a valid forum-selection
clause [should be] given controlling weight in all but the most exceptional
cases.” (Internal citations omitted).
Atlantic Marine, at 581.
The Supreme Court described three ways the usual venue analysis changes when there
exists a valid forum selection clause. First, plaintiff’s choice of forum is accorded no weight
because plaintiff is presumed to have expressed its desired forum in the forum selection
clause. Second, courts cannot entertain arguments on the parties’ private interests as those are
now deemed to weigh “entirely” in favor of the choice of forum contained in the forum
selection clause. Finally, the law of the state wherein the suit was filed, if different from the
forum agreed to in a forum selection clause, will not follow the case upon transfer.
Id at 581-82.
The first question the Court must address, prior to an analysis of the Stewart factors, is
whether the Singapore forum selection clause applies to the dispute at hand and is valid and
enforceable.
Neither party alleges any issues concerning the validity of the forum selection clauses
in either the Agreement or the Amendment, nor do the parties allege the clauses are
unconscionable or were entered into under duress. In short, the validity and enforceability of
the agreements are unchallenged.
Plaintiff relies primarily on its argument that the forum selection clause is inapplicable

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because the original forum selection clause is inapplicable because neither Plaintiff nor
Defendant are signatories to it. Plaintiff contends the Amendment incorporates the forum
selection clause from the Agreement but limits its application to contractual disputes
concerning the Amendment. Since Plaintiff only alleges tort claims, the disputes do not arise
from or concern the parties’ agreements, therefore, the forum selection clause is inapplicable.
Defendant argues the Complaint clearly alleges that the duties Teknor has allegedly
breached all arise from the underlying contracts. The Complaint alleges: 1) SPC had a duty
not to disclose the CIM formula to third parties, 2) SPC disclosed the CIM formula to Teknor
and 3) Teknor manufactures and sells CIM molding compounds that incorporate PolyOne’s
technology Teknor improperly acquired from SPC. All three of the above duties or
restrictions were set out in the Agreement and subsequent Amendment. Therefore, all
Plaintiff’s claims arise from the Agreement and Amendment which requires all disputes be
litigated in Singapore.
Upon consideration of the Agreement and Amendment, the Court holds the claims
raised by Plaintiff in its Complaint are governed by the forum selection clause contained in
Section 10.3 of the Agreement and incorporated by reference into the Amendment. The
forum selection clause in the Agreement reads;
In relation to any legal action or proceedings arising out of or in connection with this
Agreement …, each of the parties hereby irrevocably submits to the exclusive
jurisdiction of the courts of the Republic of Singapore.
The subsequent Amendment of 2003 reads at Section 14:
Disputes with respect to the foregoing provisions shall be resolved in accordance with
Section 10.3 of the Agreement.

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Plaintiff tries to distinguish its claims as having no relation to the Agreement and
Amendment but the Court agrees with Defendant that the language of the forum selection
clauses encompasses Plaintiff’s claims. First, Geon (predecessor to PolyOne) entered into the
joint venture agreement with Singapore based Singapore Polymer Corp (“SPC”) so that the
new joint venture company SPCGeon could manufacture and sell CIM based compounds in
the Asian market. The Agreement contained the nondisclosure language binding SPC to
secrecy. When, in 2001, Teknor acquired SPC there was a desire amongst the relative parties
to continue manufacturing and selling CIM based compounds. This resulted in the 2003
Amendment to the Agreement which now included PolyOne and Teknor as additional
signatories. This Amendment prohibited Teknor and SPC from making, selling or
distributing any CIM molding compounds anywhere in the world for a ten year period. After
the expiration of the contract term (approximately March 2013), Section 12 of the
Amendment expressly states:
After the expiry of the Contract Manufacturing Agreement, both SPC and
Teknor and/or their Affiliates are not prohibited from acquiring a controlling
equity interest in a third party who owns their own established and proven
third party proprietary technology for the manufacture of competing CIM
Molding Compounds ("Third Party compounds") which are already being sold
in
significant commercial quantities and after such acquisition of such controlling
interest thereafter continuing, whether directly or through such third party
manufacturing, promoting marketing and/or selling Third party compounds
anywhere in the world; provided that in the Exclusive Territory, such right
shall extend only to such third party's existing customers at the time of
acquisition of such controlling interest for the ten year period set forth in
Section 10 supra.
Following the acquisition of such control1ing interest in such third party,
Teknor, SPC, the third party, and/or Affiliate may further develop and improve
upon the Third Party technology, but under no circumstances may such
development utilize any material present in CIM Molding Compounds but
not in the Third Party compounds (measured as to the Third Party
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Compounds at the time of and prior to such acquisition of such controlling
interest), and may not in any manner incorporate, modify or utilize in whole
or in part either POLYONE's or SPCGeon's CIM technology as conveyed to
SPC under the Agreement and/or the Contract Manufacturing Agreement,
or utilize the knowledge, knowhow or resources of any individual having
contract at any time with the information conveyed under this Agreement or
the Contract Manufacturing Agreement to SPC. (Emphasis added).
Plaintiff’s Complaint alleges:
1)

Teknor Apex is now selling CIM compounds... that could only have been
manufactured through access to and the use of PolyOne’s Technology.
(Complaint at 24.)

2)

Upon information and belief, SPC disclosed the CIM Technology to Teknor
Apex or, alternatively, Teknor Apex misappropriated the CIM Technology
from SPC. (Complaint at 25.)

The crux of Plaintiff’s Complaint against Teknor is that Teknor is selling competing
products using Plaintiff’s CIM Technology that Teknor obtained from SPC all the while
knowing SPC was obliged to keep the information confidential. Each of these allegations
correspond to contracted for obligations found in the Agreement and Amendment.1 The
Amendment, to which the parties are all signatories, reaffirms SPC’s obligation to maintain
the secrecy of Plaintiff’s CIM compound, prohibits Teknor from selling competing CIM
products for the term of the contract and for an undisclosed period thereafter and prohibits

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The Amendment’s forum selection clause incorporates the broader language of
the forum selection clause found in the Agreement. While the Court holds that
the Amendment’s language that “disputes concerning these provisions” is broad
enough to encompass Plaintiff’s claims, the broader language of the Agreement’s
forum selection clause further expands the scope of the forum selection clause
and encompasses all claims.
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Teknor from acquiring a third party competitor of PolyOne and disclosing PolyOne’s
proprietary CIM technology to its newly acquired company.

These matters involve

“disputes” regarding the provisions of the Amendment, placing them squarely within the
ambit of the forum selection clause. The general rule in this circuit is that “regardless of the
duty sought to be enforced in a particular cause of action, if the duty arises from the contract,
the forum selection clause governs the action.” Tritt v. Category 5 Records, LLC, 570 F.
Supp2d 977, 981 (M.D. Tenn. 2008) citing Gen. Envtl. Sci. Corp. v. Horsfall, 1994 WL
228256 at *8 (6th Cir. May 25, 1994). “This rule includes tort or consumer protection claims
related to the contract’s purpose.” Tritt, 570 F.Supp.2d at 981. The “provisions” in the
Amendment govern SPC’s obligations not to disclose PolyOne’s CIM Technology and
Teknor’s recognition of those obligations; Teknor’s agreement not to sell CIM molding
products for a defined term and defined area and Teknor’s and SPC’s obligations not to use
Polyone’s or its employees’ knowledge of PolyOne’s CIM Technology in products developed
by any company subsequently acquired by Teknor or SPC. Therefore, Plaintiff’s claims fall
within the broad language of the forum selection clause which encompasses any disputes over
its provisions.
Having determined that the forum selection clause encompasses the disputes raised in
Plaintiff’s Complaint the Court must examine the public factors for enforcing such a clause.
In light of the new analysis ordered by the Supreme Court in Atlantic Marine, the Court finds
the relevant factors militate strongly in favor of transfer. All private interest considerations
such as convenience of parties and witnesses and fairness to the parties in light of the forum
selection clause are deemed to favor enforcement of the forum selection clause in light of

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Atlantic Marine. Contrary to Plaintiff’s arguments, the parties are both sophisticated entities
who will not be disadvantaged by the transfer. They willingly sought to enter the Asian
markets by purchasing or contracting with companies doing business in Singapore. Finally,
the public interest favors Singapore since “the public has a strong interest in applying
contracts as they are written.” First Solar, LLC v. Rohwedder, Inc., No. 3:04CV7518, 2004
WL 2810105 (N.D.Ohio Dec. 8, 2004).
Therefore, for the foregoing reasons the Court finds the parties bargained for
Singapore as the chosen forum to resolve the disputes found in Plaintiff’s Complaint.
Therefore, the Court dismisses without prejudice Plaintiff’s claims.
IT IS SO ORDERED.

s/ Christopher A. Boyko
CHRISTOPHER A. BOYKO
United States District Judge
Dated: August 25, 2014

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