Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_06-cv-00844/USCOURTS-cand-5_06-cv-00844-7/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 28:2201 Declaratory Judgement

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 This disposition is not designated for publication and may not be cited.

Case No. C 06-00844 JF

ORDER DENYING MOTION TO DISMISS OR TRANSFER

(JFEX2)

NOT FOR CITATION

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

ACCLARENT, INC., EXPLORAMED II, INC.,

and ADVANCED POLYMERS, INC.,

 Plaintiff,

 v.

QUEST MEDICAL, INC. and BRUCE B.

BECKER, M.D.,

 Defendants.

Case Number C 06-00844 JF

ORDER1 DENYING DEFENDANT’S

MOTION TO DISMISS OR

TRANSFER

[re: docket no. 8]

On February 8, 2006, Plaintiffs Acclarent, Inc. (“Acclarent”), ExploraMedII, Inc.

(“ExploraMed”), and Advanced Polymers, Inc. (“API”) filed the instant complaint against

Defendants Quest Medical, Inc. (“Quest”) and Bruce B. Becker, M.D. (“Becker”). Plaintiffs

allege four claims for declaratory relief: (1) no infringement of the ‘667 design patent, (2) no

**E-filed 10/17/06**

Case 5:06-cv-00844-JF Document 49 Filed 10/17/06 Page 1 of 8
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Case No. C 06-00844 JF

ORDER DENYING MOTION TO DISMISS OR TRANSFER

(JFEX2)

tortious interference with a business contract, (3) no breach of contract and (4) no

misappropriation of trade secrets. Plaintiffs allege that they are entitled to costs of suit and any

further relief this Court may deem proper. On July 24, 2006, Defendants filed the instant motion

to dismiss on the ground of improper venue based on FRCP 12(b)(3) and 28 U.S.C. § 1406(a), or

in the alternative, to transfer on the ground of 28 U.S.C. § 1404(a) and forum non conveniens.

Plaintiffs filed an opposition on August 25, 2006. Defendants filed a reply on September 5, 2006.

The Court has considered the parties’ briefs as well as the oral argument presented at the hearing

on September 15, 2006. For the reasons set forth below, the motion will be denied. 

I. BACKGROUND

Plaintiff alleges the following: Plaintiff is a Delaware corporation with its

principal place of business in Menlo Park, California. Complaint, (hereinafter “Compl.”) ¶ 8.

Plaintiff ExploraMed also is a Delaware corporation with its principal place of business in

Mountain View, California. Id. at ¶ 9. Plaintiff API is a New Hampshire corporation with its

principal place of business in Salem, New Hampshire. Id. at ¶ 10. 

Under an agreement with Atrion, the parent company of Quest, Becker developed the

Dilation Balloon Catheter, Patent No. D501,667 (“667 Patent”). Ex. A, Defendant’s Motion to

Dismiss or, in the Alternative, to Transfer, (hereinafter “Dismiss”) 2. Atrion entered into a

mutual non-disclosure agreement with API in April 2002. Id. The purpose of the agreement was

to allow Atrion to disclose confidential information to aid API in production of the dilation

balloon catheter. Id., Ex. A. Atrion then entered into a purchase agreement with API in late 2002

that included a forum selection clause designating Texas as the appropriate venue for dispute

resolution. Dismiss, 2-3. Quest has taken the place of Atrion in both contracts. Ex. A. Defendants

allege that Acclarent’s Relieva products are substantially equivalent to Quest’s dilation balloon

catheter. Id. Defendants allege that Acclarent had approached Becker numerous times with

incentives for Becker to terminate his agreement with Quest. Id. Defendants also allege that

Acclarent induced API to stop supplying Quest with the key components and to disclose Quest’s

trade secrets about the Quest design to Acclarent. Id. On September 30, 2005, Defendants filed

suit against Plaintiffs in the United States District Court for the Eastern District of Texas (“Texas

Case 5:06-cv-00844-JF Document 49 Filed 10/17/06 Page 2 of 8
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Case No. C 06-00844 JF

ORDER DENYING MOTION TO DISMISS OR TRANSFER

(JFEX2)

Action”) for alleged direct and contributory patent infringement, tortious contract interference,

contract breach and misappropriation of trade secrets. Compl., ¶ 2. 

The Texas Action was dismissed on June 2, 2006 for lack of timely service by Quest.

Plaintiffs’ Joint Opposition to Defendants’ Motion to Dismiss or, in the Alternative, to Transfer,

(hereinafter “Opposition”) 8. Subsequently, Plaintiffs filed the instant complaint to obtain

declaratory judgment on February 8, 2006. Opposition, 9. Defendants have appealed the

dismissal of the Texas Action, and they also filed another complaint in the Eastern District of

Texas on July 20, 2006 (“Pending Texas Action”), asserting the same claims against the same

parties. Id., 10. The second complaint has been assigned to the same presiding Judge as the Texas

Action and Plaintiffs have requested that the Pending Texas Action be transferred to this Court

under the “first-filed” rule. Id.

II. CONTRACTUAL FORUM SELECTION

A. Legal Standard

The Ninth Circuit holds that a forum-selection clause is an appropriate ground to dismiss

for improper venue under Rule 12(b)(3). Argueta v. Banco Mexicano, S.A., 87 F.3d 320, 324 (9th

Cir. 1996). In considering a Rule 12(b)(3) motion based on a forum selection clause, the Court

must resolve factual conflicts in favor of the non-moving party. Murphy v. Schneider Nat’l, Inc.,

362 F.3d 1133, 1139 (9th Cir. 2004). The United States Supreme Court set forth three exceptions

that would make enforcement of a forum selection clause unreasonable: (1) “if the inclusion of

the clause in the agreement was the product of fraud or overreaching”; (2) “if the party wishing to

repudiate the clause would effectively be deprived of his day in court were the clause enforced”;

and (3) “if enforcement would contravene a strong public policy of the forum in which suit is

brought.” Richards v. Lloyd’s of London, 135 F.3d 1289, 1294 (9th Cir. 1998) (citing M/S

Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 12-13, 15, 18 (1972)). 

Should the Court find that the parties are bound by the forum selection clause and that

venue in this Court is improper, the Court must dismiss or transfer the action to the proper court

under 28 U.S.C. § 1406(a). 

Case 5:06-cv-00844-JF Document 49 Filed 10/17/06 Page 3 of 8
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1The parties redacted the complete purchase number in submitted pleadings. The Court

has done likewise in order to respect the parties’ apparent wish to keep the purchase number

confidential. 

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Case No. C 06-00844 JF

ORDER DENYING MOTION TO DISMISS OR TRANSFER

(JFEX2)

B. Discussion

Defendants assert that Plaintiffs are entitled to little or no deference to their choice of a

California forum because Plaintiffs are bound by the forum selection clause contained in

Purchase Order No. ‘6401 (“‘640 Order”) between Quest and API. Defendants allege that API

breached the confidentiality relationship between Quest and API by sharing confidential

information with Acclarent. Defendants assert that Acclarent’s infringing Relieva product uses

confidential knowledge that Acclarent improperly obtained from API. The ‘640 Order contained

a confidentiality clause that prohibited API from disclosing confidential information received

from Quest. 

Defendants contend that all Plaintiffs are bound by the forum selection clause even

though the ‘640 Order was signed only by API because Acclarent and ExploraMed induced and

benefitted from API’s breach of contract. Defendants assert that Acclarent and ExploraMed’s

alleged conduct of aiding, abetting, and benefitting from API’s confidentiality breach is so

closely related to API’s contractual relationship with Quest that even as non-signatories, they

should be bound by the terms of the ‘640 Order. Plaintiffs maintain that the ‘640 Order terms are

not binding because the ‘640 Order is not in dispute in the present action. Defendant’s Complaint

in the Texas Action had raised issues regarding breach of the Non-Disclosure Agreement

between Quest and API, not the ‘640 Order. 

Plaintiffs seek a judicial declaration that they did not breach the April 2002 NonDisclosure Agreement (“NDA”). It is the April 2002 NDA, not the ‘640 Order, that is in dispute

in the instant case. Defendants’ argument that the forum selection clause applies to the

confidential relationship between Quest and API as a whole is directly refuted by the affidavit of

Mark Saab, President of API, stating that the terms and conditions of the ‘640 Order apply

specifically to that order alone. Defendants provide no factual support for their argument that the

general contractual relationship between Quest and API was meant to be subjected to this

Case 5:06-cv-00844-JF Document 49 Filed 10/17/06 Page 4 of 8
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Case No. C 06-00844 JF

ORDER DENYING MOTION TO DISMISS OR TRANSFER

(JFEX2)

specific forum selection clause. A contract cannot be validly formed without mutual assent from

the parties involved. Rennick v. O.P.T.I.O.N. Care, Inc., 77 F.3d 309, 315 (9th Cir. 1996) (“It is

a basic tenet of contract law that creation of a valid contract requires mutual assent.”). API

presents an email indicating specifically that API intended for the terms and conditions of the

‘640 Order to apply only to the ‘640 Order. The evidence shows API did not consent for the

forum selection clause in the ‘640 Order to apply beyond the transaction that was subject of the

‘640 Order. Because it concludes that the ‘640 Order is not presently in dispute, the Court finds it

unnecessary to discuss whether Acclarent and ExploraMed are bound to the’640 Order as

beneficiaries of API’s alleged breach. 

III. BALANCE OF CONVENIENCE

A. Legal Standard

 28 U.S.C. § 1404(a) permits the Court in its discretion to transfer an action to an

alternative venue for the convenience of parties and witnesses and in the interest of justice.

Factors that may be relevant in the consideration of a transfer under 28 U.S.C. § 1404(a) are: “(1)

the location where the relevant agreements were negotiated and executed, (2) the state that is

most familiar with the governing law, (3) the plaintiff’s choice of forum, (4) the respective

parties’ contacts with the forum, (5) the contacts relating to the plaintiff’s cause of action in the

chosen forum, (6) the differences in the costs of litigation in the two forums, (7) the availability

of compulsory process to compel attendance of unwilling non-party witnesses, and (8) the ease of

access to sources of proof.” Jones v. GNC Franchising, Inc., 211 F.3d 495, 498-99 (9th Cir.

2000). 

When there are two mirror-image actions pending in different districts, the “first to file”

rule may be invoked to give the first filed action priority. This rule was developed and followed

by Courts to “serve[] the purpose of promoting efficiency well and should not be disregarded

lightly.” Church of Scientology v. United States Dep’t of the Army, 611 F.2d 738, 750 (9th Cir.

1979). Three prerequisites that must be met to invoke the “first to file” rule are chronology,

identical parties, and identical issues. See Alltrade, Inc. v. Uniweld Prods., Inc., 946 F.2d 622,

625 (9th Cir. 1991). However, even if these prerequisites are met, the application of the first-toCase 5:06-cv-00844-JF Document 49 Filed 10/17/06 Page 5 of 8
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Case No. C 06-00844 JF

ORDER DENYING MOTION TO DISMISS OR TRANSFER

(JFEX2)

file rule is discretionary. Id. at 628. The Court may examine factors of forum convenience to

make its determination. Id. The Ninth Circuit has held that the “first to file” rule may be

disregarded when a plaintiff engages in bad faith, anticipatory suits, or forum shopping. Stomp,

Inc. v. NeatO, LLC, 61 F.Supp. 2d 1074, 1082 (C.D. Cal. 1999) (citing Alltrade at 628). The

“first to file” rule also may be relaxed “if the balance of convenience weighs in favor of the laterfiled action.” Ward v. Follett Corporation, 158 F.R.D. 645, 648 (N.D. Cal. 1994). 

B. Discussion

 Defendants urge the transfer and consolidation of this action to the Eastern District of

Texas, where their second Texas Action is pending. Defendants assert that analysis of the

applicable Jones factors favors a transfer to Texas under 28 U.S.C. § 1404(a) to Texas. 

Court concludes, however, that the majority of the factors appear to favor Plaintiffs. First,

the April 2002 Non-Disclosure Agreement was executed in Alabama and contains no choice of

law provisions. This Court already has concluded that the ‘640 Order is not at issue in this action

and thus, the forum selection clause of that order has no effect on this analysis. Second, the

Plaintiffs’ choice of forum is this district. Third, it is not clear that ExploraMed has sufficient

contacts with Texas to permit assertion of general jurisdiction over it there. Finally, there is

evidence that because Plaintiffs’ Relieva products are manufactured in California, the costs of

litigation and availability of witnesses and discovery would weigh strongly in favor of

adjudicating the dispute in California. 

Defendants maintain that the first Texas Action in fact is the first filed action and that

accordingly, their Pending Texas Action should be granted priority over the instant complaint.

Defendants allege that the first Texas Action was not served, and thus was dismissed because

they reasonably believed that settlement negotiations were taking place. Even if the instant

complaint is regarded as the first filed action, Defendants urge this Court to disregard the “first to

file” rule on the basis that Plaintiffs engaged in bad faith forum shopping. Defendants allege that

the parties were scheduled to meet on February 2, 2006 and indeed met on February 9, 2006 to

engage in settlement negotiations. Plaintiffs, however, note the specific determination by the

Texas Court that the purported settlement negotiations were merely phone calls exchanged

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Case No. C 06-00844 JF

ORDER DENYING MOTION TO DISMISS OR TRANSFER

(JFEX2)

between parties inquiring about service. 

“A dismissal without prejudice of a party’s claims over that party’s objection is normally

a final, appealable order.” H.R. Technologies, Inc. v. Astechnologies, Inc., 275 F.3d 1378, 1383

(Fed. Cir. 2002). The Texas Action concluded when it was dismissed without prejudice.

Defendants’ Pending Texas Action cannot take on the original filing date of the Texas Action as

its own. See id. The instant complaint was filed on February 8, 2006; the Pending Texas Action

was filed on July 20, 2006. Both actions involve identical parties and claims. The prerequisites of

the “first to file” rule have been satisfied, and the instant action as the first filed action. 

Defendants have not shown that Plaintiffs were engaged in bad faith forum shopping,

particularly since as described above, the balance of convenience weighs in favor of adjudication

in California. This Court is the home forum for Acclarent and ExploraMed. A Plaintiffs’

“decision to sue in its home forum of California doesn’t amount to impermissible forum

shopping.” Stomp Inc. v. NeatO, 61 F.Supp. 2d 1074, 1082 (C.D. Cal. 1999). Defendants would

need to make a “strong showing of inconvenience to warrant upsetting the plaintiff’s choice of

forum,” which they have not done. Id. (citing Decker Coal Co. v. Commonwealth Edison Co.,

805 F.2d 834, 843 (9th Cir. 1986)). The Court also notes that the judge presiding over the Texas

Action concluded that Defendants would not suffer injustice from the dismissal of that action

because the instant declaratory judgment action involves of identical parties and issues. 

IV. ORDER

Good cause therefore appearing, IT IS HEREBY ORDERED that the instant motion to

dismiss, or in the alternative, to transfer is DENIED. Defendants shall file their answer within

twenty (20) days from the date this order is filed. 

DATED: October 13, 2006

_____________________________ 

JEREMY FOGEL

United States District Judge

Case 5:06-cv-00844-JF Document 49 Filed 10/17/06 Page 7 of 8
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Case No. C 06-00844 JF

ORDER DENYING MOTION TO DISMISS OR TRANSFER

(JFEX2)

This Order has been served upon the following persons:

Casey L. Griffith allen@cclaw.com

Carstens & Cahoon, L.L.P. reynolds@cclaw.com

13760 Noel Road carstens@cclaw.com

Suite 900 tolnay@cclaw.com

Dallas, TX 75240 gourley@cclaw.com

 morgan@cclaw.com

 nbruno@shepardmullin.com

 jgorsi@sheppardmullin.com

 nsmith@sheppardmullin.com

 jnakaso@sheppardmullin.com

Michael Morin lily.lim@finnegan.com

Finnegan Henderson Farabow Garrett & Dunner LLP karen.reimer@finnegan.com

901 New York Avenue nancy.oshea@finnegan.com

Washington, DC 20001-4413 randal.holderfield@finnegan.com

 robert.mccauley@finnegan.com

 molly.melcher@finnegan.com

 matthew.tueller@finnegan.com

 colleen.martin@finnegan.com

 jennifer.spencer@finnegan.com

 dawn.butler@finnegan.com

 gail.selburn@finnegan.com

 ddavison@fulbright.com

 kevans@fulbright.com

 rsyoung@fulbright.com

 jomalley@fulbright.com

Case 5:06-cv-00844-JF Document 49 Filed 10/17/06 Page 8 of 8