Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-04809/USCOURTS-cand-3_05-cv-04809-3/pdf.json

Nature of Suit Code: 840
Nature of Suit: Trademark
Cause of Action: 15:1127 Trademark Infringement

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

LUMASCAPE USA, INC.; LUMASCAPE

INDUSTRIES (PTY) LTD; MICHAEL

AGUSTIN,

Plaintiffs,

 v.

VERTEX LIGHTING, INC.; FABRICE

PELLEGRINO; DANIEL MERCILLE;

MICHEL SANSCARTIER,

Defendants. /

No. C 05-04809 WHA

ORDER STAYING ACTION

PENDING EXHAUSTION OF

REMEDIES UNDER

FORUM-SELECTION CLAUSE

INTRODUCTION

In this action by a manufacturer against a former distributor, the main issue is whether to

enforce a forum-selection clause. Defendant Vertex Lighting, Inc. moves to dismiss for lack of

personal jurisdiction, improper venue or alternatively forum non conveniens. At a hearing on

March 23, 2006, plaintiffs withdrew their claims against all individual defendants. This order

holds that personal jurisdiction over Vertex has been sufficiently shown as to certain claims. 

The action, however, will be stayed pending exhaustion by plaintiff of its remedies under the

forum-selection clause. To what extent it will be dismissed will be determined after the

exhaustion process.

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STATEMENT

Plaintiff Lumascape Industries, Ltd. (“Lumascape”), an Australia corporation,

manufactures lighting fixtures. Plaintiff Michael Agustin is the managing director and an

Australian citizen. Plaintiff Lumascape USA is a subsidiary of Lumascape and has an office in

San Carlos, California. It was incorporated in 2004 to distribute Lumascape products in the

United States. Defendant Vertex Lighting, Inc., a Canada corporation, is a lighting distributor. 

In May 2000, Lumascape and Vertex entered into a manufacturer-distributor agreement. 

Under the agreement Vertex was appointed the exclusive sales representative for Lumascape in

the United States. The agreement contained a forum-selection clause which subjected

Lumascape and Vertex to the Australia courts. It stated:

This agreement is subject to the courts of Australia and actions

bought [sic] by either party must be heard in Australian courts.

Agustin Decl., Exh. B at 3.

Over the course of the relationship, Vertex made $1.5 million in sales of Lumascape

product in California. The relationship ended in acrimony on December 31, 2004, when

Lumascape terminated the agreement. Lumascape accused Vertex of not properly paying. 

Vertex, on the other hand, accused Lumascape of seeking to insinuate itself into Vertex’s

network of sales representatives. Lumascape is currently suing Vertex and its president in an

Australia court alleging breach of contract and misleading and deceptive conduct in connection

with the terminated agreement.

In February 2005, Vertex sent a letter from its offices in Canada to Graybar Electric, a

customer in Las Vegas. Copies were sent to Vertex’s agent in Los Angeles and a lighting

designer in Los Angeles involved on a project with Graybar Electric. The letter referred to a

purchase order for lighting fixtures ordered through Vertex prior to the termination of the

Lumascape-Vertex agreement. The letterhead included the text “Lumascape North America”

below Vertex’s logo. In the letter, Vertex explained that it was unable to fulfill the order

because the lights were unsuitable for the customer’s intention of using the lights underwater. 

The letter stated that Vertex was “forced to decline supplying such a product due to public

safety issues or the legal ramifications or liabilities that may arise from a misapplication of the

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product” (Agustin Decl., Exh. C). Graybar Electric subsequently cancelled its order of

$19,266.00.

In a separate alleged incident, Vertex sold counterfeit Lumascape lighting fixtures to an

Indiana distributor who in turn sold them to a project in Texas. The lights were found

defective. The Indiana distributor has now brought suit against both Vertex and Lumascape in

Indiana district court. Claims between the latter two are expected.

Plaintiffs’ complaint alleges ten claims covering federal and state statutes. The claims

include trademark infringement, trademark dilution, unfair competition, intentional interference

with economic relationship, trade libel and misappropriation of trade secrets.

Vertex now moves to dismiss for lack of personal jurisdiction, improper venue based on

the forum-selection clause in the Lumascape-Vertex agreement or alternatively on grounds of

forum non conveniens. At a hearing on March 23, 2006, as stated, plaintiffs withdrew their

claims against all individual defendants.

ANALYSIS

1. PERSONAL JURISDICTION.

This order recognizes that the issue of personal jurisdiction can be skipped over if there

is a more direct means to dispose of the case. Leroy v. Great W. United Corp., 443 U.S. 173,

180 (1979) (holding that “when there is a sound prudential justification for doing so, . . . a court

may reverse the normal order of considering personal jurisdiction and venue”). The difficulty

in this case is that there is no direct dispositive way to dispose of the case in light of this order’s

resolution on the issue involving the forum-selection clause. Therefore, this order will address

the challenge to personal jurisdiction.

A. General Jurisdiction.

In order for a court to exercise general jurisdiction over a nonresident defendant, the

plaintiff must demonstrate that the defendant’s contacts with the forum state are “substantial”

or “continuous and systematic.” Helicopteros Nacionales de Columbia, S. A. v. Hall, 466 U.S.

408, 416 (1984). “[I]n a controversy unrelated to a defendant’s contacts with the forum, a court

may exercise general jurisdiction only where ‘continuous corporate operations within a state are

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thought so substantial and of such a nature as to justify suit against the defendant on causes of

action arising from dealings entirely distinct from those activities.’” Tauzon v. R.J. Reynolds

Tobacco Co., 433 F.3d 1163, 1169 (9th Cir. 2006) (quoting Int’l Shoe v. Washington, 326 U.S.

310, 318 (1945)). “The standard for establishing general jurisdiction is ‘fairly high,’ and

requires that the defendant’s contacts be of the sort that approximate physical presence.” 

Bancroft & Masters, Inc. v. Augusta Nat’l, Inc., 223 F.3d 1082, 1086 (9th Cir. 2000). When a

defendant moves to dismiss for lack of personal jurisdiction, the plaintiff carries the burden of

demonstrating that personal jurisdiction exists. Cubbage v. Merchent, 744 F.2d 665, 667

(9th Cir. 1984).

Defendant Vertex’s contacts with California include $1.5 million in sales to twenty

California customers during the period from May 2000 to January 2005. “Most” of these sales

were Lumascape products. Although Vertex had no office or distribution facility in California,

its website included a Santa Ana address. According to Vertex, it has never used the address to

meet with customers, has never had an employee or furniture there and has never received

business correspondence there. Instead, the Santa Ana address is the address of an unrelated

company owned by a friend of Vertex’s president. It was inserted on Vertex’s website in the

spring of 2004 when Vertex decided that it would be good for business to include an address in

the United States. Finally, Vertex maintained four independent sales representatives in

California. Vertex’s relationship with three of them ended after the Lumascape-Vertex

agreement was terminated. Vertex’s only remaining sales representative in California was

responsible for revenues of approximately $20,000 during 2005, the year following termination

of the Lumascape-Vertex agreement. No Lumascape product was sold during this period.

Vertex cites to Congoleum Co. v. DLW Aktiengesellschaft, 729 F.2d 1240 (9th Cir.

1984), and argues that sales through independent, non-exclusive sales representatives are not

enough to subject an out-of-state company to general jurisdiction. There, the activities of the

defendant’s hired consultant in the forum consisted of soliciting orders, recommending other

sales agents, ordering samples, promoting the defendant’s products through the mail and

through a showroom display in the forum and attending trade shows and sales meetings. In

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refusing to find general jurisdiction, Congoleum noted that, “no court has ever held that the

maintenance of even a substantial sales force within the state is sufficient contact to assert

jurisdiction in an unrelated cause of action.” Id. at 1242 (emphasis added). Congoleum left

open the possibility that similar contacts may be sufficient to support jurisdiction over a claim

related to the contacts.

Plaintiffs rely on two decisions outside our circuit. Neither decision is on point. In

Metropolitan Life Insurance Co. v. Robertson-Ceco Corp., 84 F.3d 560 (2d Cir. 1996), the

defendant’s contacts with the forum state included sales of four million dollars over a four-year

period, ongoing relationships with five independent authorized dealers, registration to do

business, payment of forum income and sales tax, national advertising, direct marketing to at

least three firms in the forum, an employee who resided and maintained an office in the forum

and more than one hundred visits by the defendant’s employees to the forum. Metropolitan Life

acknowledged that it was “a close case” but held that “when taken together [the contacts were]

sufficient to establish general jurisdiction.” Id. at 570, 572. Metropolitan Life is

distinguishable. It involved a defendant having greater contacts with the forum than Vertex had

with California. For example, the defendant in Metropolitan Life, unlike Vertex, registered to

do business in the forum and stationed an employee there.

The other reference is Michigan National Bank v. Quality Dinette, Inc., 888 F.2d 462

(6th Cir. 1989). There, the defendants’ contacts included hiring an independent sales

representative in the forum, mail order solicitations of business in the forum and 409 sales from

1987 to 1986 which totaled $627,525. This figure represented three percent of the defendants’

total sales. The defendants had no real estate, bank accounts or telephone listings in the forum. 

Michigan National found that the defendants’ contacts and the “fact that [the defendants] made

at least one sale in [the forum] each and every month during 1986 and 1987, indicate that [the

defendants] have conducted a continuous and systematic part of their general business in the

forum.” Id. at 466. Michigan National is also distinguishable. Here, plaintiffs have not

alleged, for example, facts suggesting the pervasiveness of Vertex’s solicitation of business in

California that is on par with the defendants in Michigan National or Metropolitan Life.

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On the present record, it seems tenuous to conclude that personal jurisdiction has been

established. In light of the holdings below, however, it is unnecessary to make a final decision

on that question. If the stay described below is ever lifted plaintiffs will be allowed to take

discovery on the issue of general jurisdiction. This could be important as to claims for which

this order holds specific jurisdiction has not yet been shown.

B. Specific Jurisdiction Over Graybar-Letter Claims.

Specific jurisdiction over a defendant exists where (1) the defendant has purposefully

availed himself of the benefits and protections of the forum; (2) the claim arose directly out of

the defendant’s contacts with the forum; and (3) the exercise of jurisdiction is reasonable. 

Ballard v. Savage, 65 F.3d 1495, 1498 (9th Cir. 1995). Again, plaintiff carries the burden of

demonstrating that personal jurisdiction exists. Cubbage, 744 F.2d at 667.

(1) Purposeful Availment through Forum-Related Activities.

“[T]o have purposefully availed oneself of conducting activities in the forum, the

defendant must have performed some type of affirmative conduct which allows or promotes the

transaction of business within the forum state.” Sinatra v. Natl Enquirer, Inc., 854 F.2d 1191,

1195 (9th Cir. 1988). When an intentional tort claim is asserted, the “effects test” is utilized for

the purposeful-availment analysis. The “effects test” requires that “the defendant allegedly

have (1) committed an intentional act, (2) expressly aimed at the forum state, (3) causing harm

that the defendant knows is likely to be suffered in the forum state.” Dole Food Co., Inc. v.

Watts, 303 F.3d 1104, 1111 (9th Cir. 2002). 

It is undisputed that Vertex acted intentionally in copying the Graybar letter to its agent

in California and a lighting designer in California. The Graybar letter appears to form the basis

of plaintiffs’ first through seventh claims for unfair competition, trademark infringement,

intentional interference with economic relationship and trade libel. Plaintiffs’ allegations are

sufficient as to the intentional act requirement. 

The express aiming requirement “is satisfied when the defendant is alleged to have

engaged in wrongful conduct targeted at a plaintiff whom the defendant knows to be a resident

of the forum state.” Bancroft & Masters, Inc. v. Augusta Nat’l, Inc., 223 F.3d 1082, 1087

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(9th Cir. 2000). Plaintiffs allege that Vertex’s use of the name “Lumascape North America” on

the Graybar letter was wrongful. Plaintiffs contend that it was “confusing to the average

consumer [as to] who is the authorized distributor of Lumascape’s products in California,

Lumascape USA, Inc., a California corporation, or ‘Lumascape North America’” (Opp. 11–12). 

Plaintiffs further assert wrongful conduct with respect to the content of the letter which was “a

blatant attempt to interfere with Lumascape USA’s business in the state” (ibid.). The prima

facie jurisdictional analysis requires a court to accept the plaintiff’s allegations as true. 

Bancroft, 223 F.3d at 1087. Consequently, plaintiffs have properly alleged that the Graybar

letter was expressly aimed at California because, according to plaintiffs, it individually targeted

plaintiff Lumascape USA, a California corporation, and it was sent into the state to two firms.

Vertex argues Peterson v. Kennedy, 771 F.2d 1244, 1262 (9th Cir. 1985), requires a

different result. There the plaintiff, a member of the National Football League Players

Association (“union”), sued the union’s attorney for professional malpractice. The plaintiff

claimed mismanagement of its grievance claim. The plaintiff sought to establish personal

jurisdiction on the basis of the defendant’s telephone calls and letters to the plaintiff in

California. Peterson found no personal jurisdiction over the defendant and stated that “use of

the mails, telephone, or other international communications simply do not qualify as purposeful

activity invoking the benefits and protections of the [forum] state.” 771 F.2d at 1262 (citation

omitted). 

Peterson is distinguishable. Unlike the Graybar letter here, the letters and phone calls in

Peterson did not form the basis for the plaintiff’s claim. Instead, it was the allegedly negligent

acts of the attorney in Washington D.C. that formed the basis of the plaintiff’s claim for

professional malpractice.

The final prong of the “effects test” requires an allegation that the defendant “caus[ed]

harm that the defendant [knew was] likely to be suffered in the forum state.” Dole, 303 F.3d at

1111; see also Yahoo! Inc. v. La Ligue Contre Le Racisme Et L’Antisemitisme, 433 F.3d 1199,

1207 (9th Cir. 2006) (stating that “the ‘brunt’ of the harm need not be suffered in the forum

state”). Plaintiffs assert that “Defendant’s direction of the letter to, inter alia, one of its

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California distributors, disparaging plaintiff’s product, and leading to the cancellation of at least

one existing contract, was and is a blatant attempt to interfere with Lumascape USA’s business

in the state . . .” (Opp. 12). Continuing, plaintiffs argue that “[i]t is more than rhetorical to ask

what purpose could be served by directing commercially critical — and false — comments to a

distributor in California, a distributor which is itself in direct competition with plaintiffs in this

State” (ibid.). Plaintiffs’ allegations with respect to the Graybar-letter claims are sufficient.

(2) Claims Arising Out of Vertex’s Activities.

Plaintiffs’ initial seven claims arise directly out of Vertex’s contacts with the forum. As

described above, the Graybar letter, which undergirds the claims, was sent to persons in

California.

(3) Reasonableness.

“Once it has been decided that a defendant purposefully established minimum contacts

with a forum, ‘he must present a compelling case that the presence of some other considerations

would render jurisdiction unreasonable’ in order to defeat personal jurisdiction.” The Ninth

Circuit has identified seven factors relevant to the reasonableness inquiry. They include: (1)

the extent of the defendant’s purposeful injection into the forum state’s affairs; (2) the burden

on the defendant of defending in the forum; (3) the extent of conflict with the sovereignty of the

defendant’s state; (4) the forum state’s interest in adjudicating the dispute; (5) the most efficient

judicial resolution of the controversy; (6) the importance of the forum to the plaintiff’s interest

in convenient and effective relief; and (7) the existence of an alternative forum. Dole, 303 F.3d

at 1114.

Vertex has directed its activities to the forum to a degree sufficient to satisfy the

purposeful availment requirement. The first factor thus weighs in favor of jurisdiction.

Though Vertex as a Canada corporation is a nonresident, several facts mitigate the

burden of litigating in California. First, Vertex’s president and director have made business

trips to California. Second, Vertex still has a sales representative in California (Reply Br. 4). 

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The extent of conflict with the sovereignty of defendant’s state is unclear. Vertex

resides in Canada. Yet, the acts in question occurred California and at present, no action has

been brought in Canada. This factor favors neither party.

California certainly has a strong interest in providing a forum for its residents and

citizens who are tortiously injured. Yet this interest is slight when the only fact supporting

plaintiffs’ initial seven claims is a single letter sent to two persons in California. This factor

only weakly favors plaintiffs.

It is difficult to determine whether California would be the most efficient forum for

resolution of the dispute. The sources of proof are in California, Canada and Australia. Some

recipients of the Graybar letter are in California. Only California can produce California

witnesses, live at trial and only California can produce California witnesses at depositions

without the burden of the Hague Convention. On the other hand, there is already on-going

litigation in Australia between Vertex and Lumascape concerning their now-terminated

agreement. At this stage, this factor favors neither party.

Australia certainly seems to be a more convenient forum for plaintiffs. Lumascape is an

Australia corporation. Presumably convenience was why Lumascape wanted the forumselection clause in the first place. Oddly, it is Vertex that is insisting on litigation one third of

the way around the globe from its home. On the other hand, Lumascape USA is in California. 

It was recently incorporated in 2004. 

Both sides agreed only a few years ago that Australia was convenient. Certainly it

would be a reasonable alternative. That does not mean, however, that California would be

unreasonable. In the Australia forum, Vertex might well seek to frustrate resolution of claims

based on American law, as the Court has seen occur in other cases in this posture. At the

hearing on this motion, Vertex counsel was evasive in how the American claims would be

handled in the Australia court.

The factors do not overwhelmingly favor either party. Vertex has not met its burden to

present a compelling case that would render jurisdiction unreasonable as to plaintiffs’ seven

claims based on the Graybar letter.

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C. Specific Jurisdiction Over Counterfeiting Claims.

Plaintiffs’ eighth through tenth claims for misappropriation and unfair competition

appear to be based on allegedly counterfeit Lumascape lights that Vertex sent from Canada to

an Indiana lighting distributor who in turn sold the lights to a project in Texas. Plaintiffs claim

that “[Vertex’s] counterfeiting of products, are acts on their face which are directed to, and can

have no other effect, than to damage the reputation of plaintiffs, causing consumers to question

the credibility or quality of the products being distributed by Lumascape USA” (Opp. 12).

While these allegations satisfy the intentional act requirement, they do not satisfy the

express aiming requirement. Plaintiffs do not sufficiently allege that these lights were also sent

to California. On point is Amba Marketing Systems, Inc. v. Jobar International, Inc., 551 F.2d

784 (9th Cir. 1977). In Amba, the plaintiff brought an action in Arizona district court for unfair

competition, trademark infringement, false designation of origin and patent infringement based

on the California defendant’s importation of allegedly counterfeit goods. Amba found that:

With no showing that the imitations actually made their way into

Arizona through either [defendant] or the California mail order

houses to which it sold, personal jurisdiction over [defendant is] . . .

lacking.

Id. at 787–88.

Similarly, plaintiffs here have not made a showing that Vertex’s allegedly counterfeit

lights “actually made their way into” California. As Amba explained, “[a] bare allegation of

harm or injury suffered in the forum state does not . . . by itself confer personal

jurisdiction . . . .” Id. at 788.

Gordy v. Daily News, L. P., 95 F.3d 829 (9th Cir. 1996), is distinguishable. Gordy

found personal jurisdiction over the Daily News, a New York publisher, in a libel suit

concerning a California plaintiff. The cornerstone of Gordy was that the California plaintiff

was “targeted”, i.e., “[the defendants] wrote and published their allegedly defamatory column

intentionally directing it at [the plaintiff], a California resident.” Id. at 833. Here, Vertex’s

allegedly counterfeit lights “targeted” not California, but Indiana.

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D. Pendent Personal Jurisdiction.

Aside from the Graybar incident, the rest of the case concerns the separate IndianaTexas story. This order holds that, standing alone, personal jurisdiction has not been shown as

to the Indiana-Texas events. This leads to the issue of pendent personal jurisdiction: 

Where . . . a plaintiff raises . . . separate causes of action, the court

must have in personam jurisdiction over the defendant with respect

to each claim. However, if the court determines that there has been

a sufficient showing of personal jurisdiction to reach trial with

regard to one claim, but not the other, it may or may not be

appropriate to assume jurisdiction over the other claim under

principles analogous to the doctrine of pendent jurisdiction.

Data Disc, Inc. v. Sys. Tech. Assocs., Inc., 557 F.2d 1280, 1289 n.8 (9th Cir. 1977) (citations

omitted).

[U]nder the doctrine of pendent personal jurisdiction, a defendant

may be required to defend a claim for which there is no independent

basis of personal jurisdiction so long as it arises out of a common

nucleus of operative facts with a claim in the same suit over which

the court does have personal jurisdiction.

CE Distribution, LLC v. New Sensor Corp., 380 F.3d 1107, 1113 (9th Cir. 2004) (citation

omitted).

In CE Distribution, the plaintiff brought a claim for intentional interference with

contract, a claim for breach of contract and a claim for declaratory relief. CE Distribution

applied the “effects test” and found specific jurisdiction as to the intentional tort claim based on

the defendant’s related purchases and sales in the forum. The plaintiff’s remaining claims

failed the “effects test.” Nevertheless, pendent jurisdiction saved these remaining claims. 

CE Distribution stated:

[the defendant’s] purchases and sales [in the forum], however, had

little relation to the breach of contract claim that [the plaintiff] now

seeks to bring. Despite these limited contacts, we conclude that the

district court had discretion to exercise personal jurisdiction over

the contract claim under the doctrine of pendent personal

jurisdiction, because personal jurisdiction existed as to [the

plaintiff’s] intentional tort claim.

* * *

Although the facts underlying the declaratory relief claim do not

exactly track the facts underlying the claims for intentional

interference with contract and breach of contract, the core facts of

the allegations are the same. The allegations and counterallegations

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concern the same basic facts — competing sales of electronic

products — and are sufficiently connected to support pendent

personal jurisdiction.

Id. at 1113–14; see also Channell v. Citicorp Nat’l Svcs., Inc., 89 F.3d 379, 385 (7th Cir. 1996).

In light of the stay that will issue in connection with the forum-selection clause, it is

unnecessary to resolve this issue at this time, especially since litigation in Indiana is already

underway between the two parties as to the counterfeit goods.

2. FORUM-SELECTION CLAUSE.

A motion to enforce a forum-selection clause is treated as a motion to dismiss for

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

(9th Cir. 1996). The pleadings need not be accepted as true and facts outside the pleadings may

be considered. 

[F]orum-selection clauses can be equally applicable to contractual

and tort causes of action. Whether a forum-selection clause applies

to tort claims depends on whether resolution of the claims relates to

interpretation of the contract. 

* * *

Forum-selection clauses are prima facie valid, and are enforceable

absent a strong showing by the party opposing the clause that

enforcement would be unreasonable or unjust, or that the clause is

invalid for such reasons as fraud or overreaching. The opposing

party has the burden to show that trial in the contractual forum

would be so gravely difficult and inconvenient that he will for all

practical purposes be deprived of his day in court (citations

omitted).

Manetti-Farrow, Inc. v. Gucci Am., Inc., 858 F.2d 509, 514–15 (9th Cir. 1988).

Here, all claims require resort to the Lumascape-Vertex agreement. Plaintiffs’ first

through fifth claims make sweeping assertions of trademark infringement and violations of

unfair competition law. The alleged misconduct seems to distill to this: Vertex sent a letter

concerning a pre-termination order using Lumascape’s trademark. On the letterhead stationary

the words “LUMASCAPE North America” was printed below Vertex’s mark (Agustin Decl.,

Exh. C). Plaintiffs claim that “[a]t no time was Vertex authorized to . . . advertise it self [sic] as

‘Lumascape North America’” (Agustin Decl. ¶ 13). According to plaintiffs this constituted

trademark violation, trade name infringement and dilution of their mark. 

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The agreement provided that “Lumascape Products shall be entitled to state of the art

representation practices” and that “Vertex shall apply proper business ethics throughout sales

and marketing activities performed by Vertex” (Agustin Decl., Exh. B at 1). Whether Vertex

was authorized to represent itself by affixing the text “Lumascape North America” on its

letterhead below the Vertex logo necessarily requires reference to the parties’ contract.

Claims six and seven allege intentional interference with economic relationship and

trade libel, respectively. Undergirding these claims is the same letter. Plaintiffs assert that the

letter falsely stated that the lighting fixture was unsuitable for submersible applications and

improperly warned of liabilities from misuse. Plaintiffs claim that Vertex knew that these

statements were false and that the letter was sent so that the customer would cancel its order. 

Subsequently, the customer did cancel its order of $19,266.00.

The agreement, in addition to providing that “Vertex shall apply proper business ethics

throughout sales . . .” also stated that “[i]t is a Vertex responsibility to ensure the customer is

properly educated” (id. at 3). Again, reference to the contract is necessary to determine, for

example, whether Vertex applied “proper business ethics throughout sales” and “ensure[d]

[that] the customer [was] properly educated.”

On point is Omron Healthcare, Inc. v. Maclaren Exports, Ltd., 28 F.3d 600 (7th Cir.

1994). Omron examined whether the plaintiff’s trademark infringement claim was subject to a

forum-selection clause. The clause provided that “all disputes arising out of [the distribution

agreement] shall be referred to the High Court of Justice in England which will have exclusive

jurisdiction . . . .” Id. at 601–02. The plaintiff argued that its claim arose out of trademark

infringement, not out of contract and was therefore not subject to the forum-selection clause. 

Omron rejected that argument. Omron held that “all disputes the resolution of which arguably

depend on the construction of an agreement ‘arise out of’ that agreement” for purposes of a

forum-selection clause. Id. at 602. Omron further held that: (1) resolution of the dispute

depended upon an understanding of the written distribution agreement between the parties and

its implied terms, (2) the plaintiff’s claim of trademark infringement was subject to the forumselection clause, and (3) the plaintiff’s claim had to be litigated in England. Id. at 601, 604.

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Plaintiffs argue that Omron is distinguishable. Plaintiffs assert that their claims are not

covered by the forum-selection clause as they arose after the contract was terminated and are

independent of the contract. While the letter followed the termination, it was soon thereafter

and it torpedoed an order that preceded the termination. The inquiry, moreover, is not the

timing per se of the alleged offense but “whether resolution of the claims relates to

interpretation of the contract.” Manetti-Farrow, 858 F.2d at 514. The contract seems central to

the Graybar dispute. 

As for the Indiana-Texas episode concerning the sale of counterfeit goods, the same

ultimate holding applies. Whether Vertex improperly used plaintiffs’ information to forge

phony copies of its lights necessarily requires resort to the contract. Plaintiffs concede that

Vertex was authorized to possess information on plaintiffs’ lighting designs and manufacturing

process and to utilize the information in a limited manner (Compl. ¶ 56). 

Plaintiff cites Corcovado Music Corp. v. Hollis Music, Inc., 981 F.2d 679, 682 (2d Cir.

1993), for the proposition that “where a plaintiff sues for copyright infringement and asserts no

rights under a contract with defendant containing a forum-selection clause, the forum-selection

clause has no effect.” Corcovado is distinguishable. In that decision, no party was subject to

the agreement containing the forum-selection clause. See Graham Technology Solutions, Inc. v.

Thinking Pictures, Inc., 949 F.Supp. 1427 (N.D. Cal. 1997) (similarly distinguishing and

rejecting Corcovado and finding that “the better view, and the one that is consistent with the

Ninth Circuit approach adopted in Manetti-Farrow, is the one which upholds the forumselection clause where the claims alleged in the complaint relate to the interpretation of the

contract”) (emphasis in original).

Plaintiffs’ final argument is that the forum-selection clause should not be enforced

because Australia has no interest in and is highly unlikely to enforce violations of United States

federal and California state laws committed outside of Australia. We must remember, however,

that it was Lumascape who inserted the forum-selection clause in the manufacturer-distributor

agreement. There will be no injustice in requiring Lumascape to resort to Australia courts.

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Plaintiffs correctly note that a forum-selection clause is unenforceable if enforcement is

unreasonable and unjust, or where litigation in the designated forum would be so gravely

difficult that the party would be deprived of his day in court. On the other hand, the party

challenging the forum-selection clause bears a “heavy burden” of establishing the existence of

the exceptions to enforcing a forum-selection clause. Fireman’s Fund Ins. Co. v. M. V. DSR

Atl., 131 F.3d 1336, 1338 (9th Cir. 1998) (as amended) (holding that the unavailability of in

rem proceedings in Korea was insufficient to invalidate the forum-selection clause).

Counsel state that “the courts of Australia would usually decline to exercise jurisdiction

when the infringement occurred exclusively in a foreign jurisdiction” (Opp. 10). Yet, as Vertex

points out, counsel qualified his assertion with the statement “unless the Defendant is resident

in Australia or consents to its jurisdiction” (Reply Br. 5) (emphasis added). Vertex has

consented to jurisdiction in Australia.

There is one potential unfairness, however. Once plaintiffs assert these claims in

Australia, the court there may decline to adjudicate them. At our hearing, Vertex was evasive

as to whether it would defend in Australia on procedural grounds so as to deflect the claims on

the merits, as this Court has seen in parallel circumstances in the past when parties were

remitted to a foreign country to adjudicate American claims. Rather than dismiss, this order

will stay the action. If plaintiffs diligently seek to enforce their claims via the forum in

Australia and are denied their day in court, then this Court shall entertain a motion to re-activate

this case. And, the Australia court may wish to ask for this Court’s assistance in facilitating

discovery as to the Graybar matter (rather than fuss with the protracted procedures under the

Hague Convention).

3. FORUM NON CONVENIENS.

To obtain a dismissal for forum non conveniens, a defendant must prove that an

alternative forum exists, and that the balance of private and public interest factors strongly favor

dismissal. Lueck v. Sundstrand Corp., 236 F.3d 1137, 1142 (9th Cir. 2001) (citation omitted). 

As explained above, it is yet unclear whether Australia will provide an alternative forum as to

any and all issues.

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CONCLUSION

Due to the ambiguity over whether the Australia courts will exercise jurisdiction and

whether Vertex’s consent was unqualified, a stay rather than a dismissal is proper. Should the

Australia courts fail to provide an adequate forum despite diligence by plaintiffs, then this Court

will consider whether to proceed with plaintiffs’ claims. A further case management

conference will be held on SEPTEMBER 28, 2006, AT 11:00 A.M.

IT IS SO ORDERED.

Dated: March 29, 2006. 

WILLIAM ALSUP

UNITED STATES DISTRICT JUDGE

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