Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_07-cv-00412/USCOURTS-caed-1_07-cv-00412-1/pdf.json

Nature of Suit Code: 150
Nature of Suit: Overpayments &amp; Enforcement of Judgments
Cause of Action: 28:1332 Diversity-Contract Dispute

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IN THE UNITED STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF CALIFORNIA

VISION TECHNOLOGY DESIGN & )

MANUFACTURING, INC., )

)

)

)

Plaintiff, )

)

vs. )

)

)

GENERAL WIRE SPRING COMPANY, )

)

)

Defendant. )

)

)

No. CV-F-07-412 OWW/WMW

MEMORANDUM DECISION GRANTING

IN PART WITH LEAVE TO AMEND

AND DENYING IN PART

DEFENDANT'S MOTION TO

DISMISS (Doc. 7)

Before the Court is Defendant General Wire Spring Company’s

motion to dismiss the Complaint for Damages and Declaratory

Relief filed by Plaintiff Vision Technology Design &

Manufacturing, Inc. on March 14, 2007. Defendant moves for

dismissal or transfer for improper venue pursuant to Rule

12(b)(3), Federal Rules of Civil Procedure, and for failure to

state a claim upon which relief can be granted pursuant to Rule

12(b)(6), Federal Rules of Civil Procedure.

A. ALLEGATIONS OF COMPLAINT.

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The Complaint alleges that Vision Tech is in the business of

manufacturing sewer line cameras, sewer line leak detectors and

other similar products. General Wire is alleged to be a

distributor and seller of sewer line maintenance and inspection

products, including sewer line cleaners, cameras and leak

detectors, who sells its products to individuals and businesses

in the plumbing industry. The Complaint further alleges:

8. In 2002, Vision Tech and General Wire

entered into a business relationship wherein

General Wire agreed that it would exclusively

purchase from Vision Tech all of General

Wire’s requirements for certain sewer line

inspection and maintenance products. That

business relationship continued until mid2006.

9. Before General Wire began to use Vision

Tech as its exclusive manufacturer, General

Wire used another manufacturer. When General

Wire chose to use Vision Tech as its

manufacturer, General Wire requested that

Vision Tech change the appearance of Vision

Tech’s pre-existing products to mimic the

appearance of General Wire’s products. 

General Wire asserted that the purpose for

this request was to facilitate the transition

between the prior manufacturer and Vision

Tech and to ensure that repair parts would be

compatible. Vision Tech incurred various

costs to accommodate General Wire’s needs,

including without limitation hiring

professionals to redesign its products,

create molds and drawings of General Wire’s

housings, and other actions, all in order to

manufacture products to match General Wire’s

exclusive needs.

10. In connection with their business

relationship, General Wire loaned Vision Tech

approximately $400,000. That loan was

secured by a chattel mortgage on Vision

Tech’s inventory, and was repaid in fully in

August 2006.

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11. In or about September 2002, General Wire

began ordering products from Vision Tech. 

The course of dealing between the parties was

that General Wire would issue written

purchase orders to Vision Tech approximately

six (6) months in advance of General Wire’s

requested ship date for those products. The

parties also agreed upon prices for these

products in advance, which prices changed

from time to time by mutual agreement.

12. General Wire also regularly provided

Vision Tech with sales projections for the

three (3) to six (6) months that followed, so

that Vision Tech could order and have on hand

sufficient quantities of component parts for

the manufacture of General Wire’s products. 

Vision Tech did in fact pre-order these

components from its vendors pursuant to

General Wire’s sales projections. Most of

the components had to be specially

manufactured by Vision Tech’s vendors,

because they contained General Wire’s logo,

product name, specific product color scheme,

and other General Wire-specific features.

13. Vision Tech and General Wire also agreed

that Vision Tech would give volume discounts

for certain products if, in a particular

twelve-month period, General Wire ordered at

or above a minimum number of these certain

products. Not all products had volume

discounts, and no discount applied to any

product where General Wire’s monthly

purchases for that product did not meet or

exceed the minimum monthly amount.

14. Beginning in September 2005, General

Wire sent sales projections and purchase

orders to Vision Tech for delivery of

products during the months of November 2005

through August 2006. After receiving these

sales projections and purchase orders, Vision

Tech ordered sufficient parts from its

vendors to manufacture General Wire’s

products, and where a purchase order was

issued, began manufacturing products per

General Wire’s purchase orders.

15. However, beginning in May 2006, General

Wire stopped making payments to Vision Tech

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on products that it had ordered, including in

some cases products that Vision Tech had

already manufactured and shipped to General

Wire.

16. Also commencing in May 2006, General

Wire told Vision Tech not to ship any more

products, despite the fact that Vision Tech

had manufactured such products pursuant to

General Wire’s purchase orders.

17. At the time General Wire ceased making

payments and accepting shipments, General

Wire knew that Vision Tech had ordered

components from its vendors according to

General Wire’s sales projections. In some

cases, Vision Tech was able to cancel its

orders for these components. In other cases,

however, Vision Tech was unable to cancel

orders from its vendors. Where Vision Tech

was able to cancel its component orders from

its vendors, Vision Tech incurred

cancellation fees. Where Vision Tech was

unable to cancel its component orders, Vision

Tech was forced to purchase hundreds of

thousands of dollars worth of components,

many of which were specially manufactured

with General Wire’s name, the name of General

Wire’s products, and/or General Wire-specific

characteristics.

18. General Wire’s failure and refusal to

pay for products Vision Tech had

manufactured, and General Wire’s

unwillingness to make further manufacturing

orders based on General Wire’s prior sales

projections, was the proximate cause of

severe financial damage to Vision Tech.

19. Following the termination of the

exclusive supplier relationship between

Vision Tech and General Wire, Vision Tech

designed and created new products for sale

under its own name, including its Intruder

and Intruder Elite (formerly ProCam) video

inspection units. Vision Tech began to

market these products to the public in or

around February 2007.

20. By letter dated March 2, 2007, General

Wire, through its attorney, demanded that

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Vision Tech ‘cease and desist from ...

designing, manufacturing and promoting’ its

Intruder and Intruder Elite products. A true

and correct copy of General Wire’s cease and

desist letter is attached to this Complaint

as Exhibit A.

21. In its demand letter, General Wire

asserts: ‘As a result of both the

similarities with products and components of

General Wire and the attendant confusion in

the marketplace created by Vision Tech’s

promotional efforts, we have discovered the

following: (1) Vision’s ProCam closely

resembles General Wire’s Gen-Eye Junior; (2)

Vision’s ProCam includes, as component parts,

two custom springs that were specially

designed and manufactured by General Wire for

use in a General Wire product and for which

Vision never received licensing from General

Wire or in any way paid for the use of the

same; (3) Vision’s ProCam includes a custom

General Wire-developed instruction label on

the inside cover of command module cover

door; (4) the drum, with the exception of a

slight color modification and name change, is

identical to the drum used in General Wire’s

Gen-Eye Junior; (5) Vision is using a command

module that was developed in accordance with

custom specifications generated by General

Wire following significant time involvement

and investment in the development, trouble

shooting, and direction of the product by

General Wire.’

22. General Wire further contends in its

cease and desist letter that Vision Tech ‘is

violating state and federal law, including,

but not limited to, federal copyright law.’

23. The allegations contained in General

Wire’s cease and desist letter are false. 

Vision Tech and its agents designed the

custom springs, instruction label and command

module. General Wire has no proprietary

rights in Vision Tech’s Intruder or Intruder

Elite products or any of their component

parts.

24. There is no likelihood of confusion

between Vision Tech’s products and General

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Wire’s products.

25. No actionable infringement or dilution

claim arises from Vision Tech’s promotion and

sale of its Intruder and Intruder Elite

products.

26. No unfair competition claim arises from

Vision Tech’s promotion and sale of its

Intruder and Intruder Elite products.

Based on these general allegations, the Complaint alleges the

following causes of action:

1. First Cause of Action - breach of contract - breach of 

exclusive requirements contract;

2. Second Cause of Action - breach of contract - breach of

purchase orders;

3. Third Cause of Action - promissory estoppel;

4. Fourth Cause of Action - unjust enrichment;

5. Fifth Cause of Action - common count - goods sold and

delivered;

6. Sixth Cause of Action - declaratory judgment.

B. MOTION TO DISMISS OR TRANSFER FOR IMPROPER VENUE. 

In moving to dismiss the Complaint for improper venue,

General Wire relies on the forum selection clause in its purchase

orders:

19. LAW GOVERNING - Any contract resulting

from acceptance of this offer shall be

governed by the laws of the Commonwealth of

Pennsylvania. Venue for any suit by Seller

shall be in and only in the Pennsylvania

state court of proper jurisdiction in

Allegheny County, Pennsylvania, or the United

States District Court for the Western

District of Pennsylvania.

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(Exh. 1 to Motion to Dismiss).

Rule 12(b)(3) provides that the defense of improper venue

may be asserted by pre-trial motion. A motion to dismiss for

improper venue based on a forum selection clause is properly

based on Rule 12(b)(3). See Argueta v. Banco Mexicano, S.A., 87

F.3d 320, 324 (9 Cir. 1996). In resolving such a motion, the th

pleadings need not be accepted as true and the court may consider

facts outside of the pleadings. Murphy v. Schneider National,

Inc., 349 F.3d 1224, 1229 (9 Cir. 2003). In resolving a Rule th

12(b)(3) motion based upon a forum selection clause, the district

court must draw all reasonable inferences in favor of the nonmoving party and resolve all factual conflicts in favor of the

non-moving party. Murphy, id. 

A forum selection clause is “prima facie valid and should be

enforced unless enforcement is shown by the resisting party to be

‘unreasonable’ under the circumstances.” The Bremen v. Zapata

Off-Shore Co., 407 U.S. 1, 10 (1972). The party challenging the

forum selection clause bears a “heavy burden of proof” and must

“clearly show” that enforcement would be unreasonable. Id. at

15. As explained in Murphy, supra, 349 F.3d at 1231-1232:

Even though Bremen created a presumption in

favor of enforcing forum selection clauses,

Bremen recognized three reasons 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

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policy of the forum in which suit is

brought.’ ....

Vision Tech argues that this motion should be denied for

several reasons.

First, Vision Tech contends, the evidence of the forum

selection clause attached as Exhibit 1 to the motion to dismiss

is a blank purchase order form and General Wire offers no

evidence that the forum selection condition was attached to each

of the purchase orders sent to Vision Tech. 

In its reply brief, General Wire submits copies of some of

the purchase orders issued to Vision Tech during the years 2002

to 2006, all of which contain the forum selection clause. 

General Wire does not submit copies of all of the purchase orders

issued to Vision Tech during these years, contending that they

are too voluminous and would be unnecessarily repetitive.

Secondly, Vision Tech argues, the forum selection clause in

the purchase orders does not govern the other disputes alleged in

its Complaint. Vision Tech contends that its claim that General

Wire failed to pay for products shipped pursuant to the purchase

orders does not relate to its claims that General Wire induced

Vision Tech to purchase specially manufactured component parts in

order the meet General Wire’s sales projections and to Vision

Tech’s request for declaratory relief regarding the intellectual

property rights of the parties with respect to the Intruder and

Intruder Elite.

Vision Tech asserts that a forum selection clause need not

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be enforced where only some of the claims alleged in a Complaint

are subject to the forum selection clause. 

In support of this contention, Vision Tech cites three

cases, Frigate Limited v. Damia, 2007 WL 127996 (N.D.Cal.2007),

Farmland Industries v. Frazier-Parrott Commodities, Inc., 806

F.2d 848 (8 Cir.1987), and Pegasus Transportation, Inc. v. th

Lynden Air Freight, Inc., 152 F.R.D. 574 (N.D.Ill.1993).

In Frigate Limited v. Damia, Damia established two family

trusts into which they placed their assets, including interests

in a number of convalescent hospitals located in Northern

California. The trustee of the family trusts was Frigate

Limited, an Isle of Man company. The trust agreements contained

a forum selection clause which provided that any lawsuits arising

under the trust agreements be submitted to the jurisdiction of

the High Court of the Isle of Man. Following establishment of

the family trusts, Damia entered into several contractual

agreements with the trustee whereby the trustee gave her large

sums of money out of the assets of the family trusts. When Damia

failed to comply with these contractual agreements, the trustee

filed suit against her. Damia filed a counterclaim against the

trustee, including a counterclaim that the trustee breached its

fiduciary duty under the trust agreements. The trustee moved to

dismiss this specific counterclaim pursuant to the forum

selection clause in the trust agreements. In denying the motion

to dismiss, Judge Breyer held in pertinent part:

Here, the Court concludes that enforcement of

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the forum selection clause in the Trust

Agreements would be ‘unreasonable under the

circumstances’ of this particular case. 

Bremen, 407 U.S. at 10. If the Court

dismisses Damia’s counterclaim, she will be 

forced to litigate the case simultaneously in

the Isle of Man. Moreover, because Damia

asserts the basis for the counterclaim as an

affirmative defense against the trustee’s

claims, this Court may address and decide

many of the issues presented in the

counterclaim. Under these circumstances,

the instant proceedings may well have

preclusive effect on any subsequent

proceedings in the Isle of Man, and Damia may

be effectively ‘deprived of [her] day in

court’ as to that counterclaim. See Argueta,

87 F.3d at 325.

For similar reasons, the Court also finds

that the enforcement of the forum selection

clause in the Trust Agreements would be

contrary to sound judicial policy. A

plethora of legal rules and doctrines are

designed to promote the efficient resolution

of controversies. See, e.g., Fed.R.Civ.P. 18

(permitting joinder of related claims and

remedies); Fed.R.Civ.P. 19 (requiring the

joinder of persons needed for just

adjudication of a controversy); Fed.R.Civ.P.

20 (permitting joinder); Fed.R.Civ.P. 22

(allowing interpleader for interested

parties); 28 U.S.C. § 1291 (requiring a

‘final order’ by the district court so as to

avoid piecemeal or unnecessary litigation of

appeals). Compelling Damia to litigate the

same issues in a different jurisdiction

halfway around the world, when this Court is

adjudicating those very same issues at the

trustee’s own behest, is needlessly

inconvenient and burdensome; requiring such

duplicitous litigation is plainly contrary to

the policy of the federal judiciary of

promoting the consistent and complete

adjudication of disputes. To the extent that

it has been deprived of the benefit of the

forum selection clause in the Trust

Agreements, the trustee has only itself to

blame - by entering into contracts with the

settlor, even though she may have been acting

in a distinct and unrelated role, the trustee

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itself created the specter that its fiduciary

duty under the Trust Agreements would be

invoked in a dispute. The trustee cannot

enter into multiple agreements, all of which

pertain to the same set of assets and bind

the same parties (albeit perhaps acting in

different roles), and then complain that they

contain mutually incompatible forum selection

clauses ... The trustee has identified no

case, and this Court is aware of none, in

which a plaintiff first filed suit and then

successfully invoked a forum selection clause

to exclude counterclaims as to the very same

subject matter.

In Farmland Industries, Inc. v. Frazier-Parrott Commodities,

Inc., Farmland sued Frazier-Parrott alleging fraud, breach of

fiduciary duty and violations of the federal securities laws and

RICO. Frazier-Parrott moved to dismiss or transfer for improper

venue based on a forum selection clause. The district court

refused to dismiss because the suit was much broader than

contemplated by Farmland when it signed the agreement containing

the forum selection clause. The Eighth Circuit affirmed, ruling

in part:

As to the scope of the forum selection clause

we agree with the district court that the

suit is broader than the clause. The court

found that

[t]his matter involves more than a

dispute between plaintiff,

Heinhold, and those associated with

Heinhold. Plaintiff has alleged an

elaborate scheme of fraud involving

not only Heinhold and individuals

associated with Heinhold, but also

involving other individuals outside

the securities brokerages, sham

corporations, and other matters not

subject to the agreement between

plaintiff and Heinhold.

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...

The district court stated that Farmland’s

causes of action do not all arise directly or

indirectly from the agreement and that

Farmland could not have anticipated having to

litigate these claims in Illinois. The court

also found that Farmland’s multiple claims

were not intended to evade the forum

selection clause. We agree.

Defendants argue that even if we find the

suit to be broader than the clause, the

clause should still be enforced to the extent

it applies. In support of this position,

defendants cite Dean Witter Reynolds Inc. v.

Byrd, 470 U.S. 213 ... (1985). In this case

the court held that ‘Arbitration Act [9

U.S.C. § 1 et seq. (1982)] requires district

courts to compel arbitration of pendent

arbitrable claims when one of the parties

files a motion to compel, even where the

result would be the possibly inefficient

maintenance of separate proceedings in

different forums.’ ... The court stressed the

fact that the Arbitration Act is mandatory;

the district court must order arbitration on

issues covered by an arbitration agreement

even if this involves severing a lawsuit. 

However, in the present case there is no

mandatory federal statute. Absent the strong

policy of the Arbitration Act, we see no

reason to require piecemeal resolution of

this case. The district court found that

under the circumstances enforcement of the

forum selection clause would not be

reasonable. We can not say that this was an

abuse of discretion.

806 F.2d at 852.

In Pegasus Transportation, Inc. v. Lynden Air Freight, Inc., 

Pegasus brought suit in state court against Lynden for additional

tariff fees. The district court remanded the action based upon a

forum selection clause contained in Pegasus’ filed tariff. 

Lynden moved for reconsideration of the remand based on the fact

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that just over half of the shipments occurred prior to the

effective date of the forum selection clause. Lynden argued that

the forum selection provision should not operate as a waiver of

the right to remove those claims and that the district court

should exercise supplemental jurisdiction over that portion of

the suit involving shipments after the effective date of the

forum selection clause. The district court granted the motion

for reconsideration, holding in pertinent part:

The party seeking to set aside a forum

selection clause has a heavy burden of proof

and absent a very strong showing of

unreasonableness, forum selection clauses

should be enforced. Carnival Cruise Lines,

Inc. v. Shute, 499 U.S. 585, 591-92 ...

(1991). Lynden has, albeit belatedly, made

such a showing in this case. Pegasus, as

plaintiff, chose to include 221 claims in its

complaint relating to periods prior to the

effective date of the forum selection clause

and now wishes to enforce that clause with

respect to the remaining claims. Over half

of Pegasus’s claims were properly removable

by Lynden. Pegasus could not bury them with

post-effective-date claims, in an

undifferentiated count, in an attempt to

broaden the scope of the forum selection

clause and thereby defeat Lynden’s removal

right. Once properly removed, this court

must exercise jurisdiction over the 211

preeffective date claims. 

... [S]imultaneously adjudicating identical

claims in both federal and state court ‘would

be a pointless waste of judicial resources.’

... This court was unable to locate any cases

involving an attempt by a defendant to avoid

the application of a forum selection clause

based on the overbreadth of plaintiff’s

complaint. However, courts have held that

where a plaintiff’s suit is truly broader

than the forum selection clause and the

structure of the complaint is not an attempt

to avoid the forum selection clause,

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enforcement of the forum selection clause

would be unreasonable. See e.g., Farmland

Indus., Inc. v. Frazier-Parrott Commodities,

Inc., 806 F.2d 848, 852 (9 Cir.1986); th

General Environmental Science Corp. v.

Horsfall, 753 F.Supp. 664, 668 (N.D.Ohio

1990). In Farmland Indus., defendants made

an argument similar to the one made by

Pegasus. If the plaintiff’s claims were

indeed much broader than the applicable forum

selection clause, defendants argued, the

clause should be enforced to the extent it

applies. 806 F.2d at 852. Rejecting this

argument, the Farmland Indus. court stated

that ‘[a]bsent ... strong policy [reasons

(e.g., a statutory requirement)], we see no

reason to require piecemeal resolution of

this case in two courts. Id.

Defendant seeks to avoid the forum selection

clause and it was Pegasus that structured the

complaint. Under these circumstances,

enforcement of the forum selection clause by

remanding less that half of Pegasus’s

identical claims to the state court would be

unreasonable. Therefore, Pegasus’s claims

for shipments made after the effective date

of the tariff’s forum selection clause will

not be remanded and the entire case will

proceed in this court.

152 F.R.D. at 576-577.

General Wire argues that Vision Tech’s reliance on these

cases to defeat application of the purchase orders’ forum

selection clause is misplaced because five of the six causes of

action advanced by Vision stem directly from the various purchase

orders that defined the parties’ relationship. General Wire

further contends that the Sixth Cause of Action for declaratory

relief stems indirectly from the purchase orders because, without

the purchase orders, the parties would not have had a

relationship. General Wire argues that Vision Tech’s case 

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is not broader, in terms of the time period

covered by the forum selection clause, the

parties, or in any other way, than the

applicable purchase orders. All of Vision

Tech’s claims relate either directly or

indirectly to the purchase orders. Vision

Tech has failed to, and cannot, demonstrate

any unreasonableness of the agreed upon forum

selection clause. Enforcement of the forum

selection clause will neither deprive Vision

Tech of its day in court nor contradict sound

judicial policy. Frigate Ltd. ...,

Enforcement will not subject claims to the

forum selection clause which originated prior

to the forum selection clause’s effective

date. Pegasus Transp., 152 F.R.D. at 575. 

Enforcement also will not subject any

individuals or entities to the forum

selection clause which were not parties to he

underlining [sic] purchase orders. Farmland

Indus., Inc., 806 F.2d at 852.

This analysis is misplaced. Taking the Complaint’s

allegations as true, Vision Tech alleges that a broader

contractual arrangement was formed, only a portion of which was

represented by purchase orders. General Wire is alleged to have

agreed to exclusively purchase from Vision Tech all General

Wire’s requirements for sewer line inspection and maintenance

products. An additional contract, executed by part performance

that caused Vision Tech to purchase large numbers of parts to its

economic detriment, is also alleged.

The motion to dismiss or transfer this action based on the

forum selection clause is DENIED. As Vision Tech argues, not all

of its claims are based on breach of the purchase orders and its

claim for declaratory relief as to an intellectual property

dispute is not based on a contract resulting from a purchase

order. Because the declaratory relief claim is validly brought

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in the Eastern District of California, enforcement of the forum

selection clause is unreasonable. 

C. MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM UPON

WHICH RELIEF CAN BE GRANTED.

General Wire moves to dismiss the six causes of action

alleged in the Complaint for failure to state a claim upon which

relief can be granted.

1. GOVERNING STANDARDS.

A motion to dismiss under Rule 12(b)(6) tests the

sufficiency of the complaint. Novarro v. Black, 250 F.3d 729,

732 (9 Cir.2001). Dismissal of a claim under Rule 12(b)(6) is th

appropriate only where “it appears beyond doubt that the

plaintiff can prove no set of facts in support of his claim which

would entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 45-

46 (1957). Dismissal is warranted under Rule 12(b)(6) where the

complaint lacks a cognizable legal theory or where the complaint

presents a cognizable legal theory yet fails to plead essential

facts under that theory. Robertson v. Dean Witter Reynolds,

Inc., 749 F.2d 530, 534 (9 Cir.1984). In reviewing a motion to th

dismiss under Rule 12(b)(6), the court must assume the truth of

all factual allegations and must construe all inferences from

them in the light most favorable to the nonmoving party. 

Thompson v. Davis, 295 F.3d 890, 895 (9 Cir.2002). However, th

legal conclusions need not be taken as true merely because they

are cast in the form of factual allegations. Ileto v. Glock,

Inc., 349 F.3d 1191, 1200 (9 Cir.2003). Immunities and other th

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affirmative defenses may be upheld on a motion to dismiss only

when they are established on the face of the complaint. See

Morley v. Walker, 175 F.3d 756, 759 (9 Cir.1999); Jablon v. th

Dean Witter & Co., 614 F.2d 677, 682 (9 Cir. 1980) When ruling th

on a motion to dismiss, the court may consider the facts alleged

in the complaint, documents attached to the complaint, documents

relied upon but not attached to the complaint when authenticity

is not contested, and matters of which the court takes judicial

notice. Parrino v. FHP, Inc, 146 F.3d 699, 705-706 (9th

Cir.1988).

3. CAUSES OF ACTION FOR EQUITABLE RELIEF.

General Wire moves to dismiss the causes of action for

equitable relief because the Complaint demonstrates that Vision

Tech has an available remedy at law for damages and the Complaint

is devoid of any allegations indicating that its remedy at law is

inadequate. 

Vision Tech opposes this ground for dismissal, referring to

Rule 8(e)(2), Federal Rules of Civil Procedure:

A party may set forth two or more statements

of a claim or defense alternately or

hypothetically, either in one count or

defense or in separate counts or defenses. 

When two or more statements are made in the

alternative and one of them if made

independently would be sufficient, the

pleading is not made insufficient by the

insufficiency of one or more of the

alternative statements. A party may also

state as many separate claims or defenses as

the party has regardless of consistency and

whether based on legal, equitable, or

maritime grounds. All statements shall be

made subject to the obligations set forth in

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Rule 11.

In reply, General Wire asserts that, “to the extent that

this Court decides to treat General Wire’s Motion to Dismiss as a

Motion for Summary Judgment, it is proper to consider Vision

Tech’s inability to maintain, over and above its ability to

plead, the various causes of action asserted by Vision Tech as a

matter of law.” For example, General Wire contends, Vision

Tech’s available remedy at law precludes maintenance of the

claims for promissory estoppel and unjust enrichment. General

Wire “does not dispute Vision Tech’s ability to plead alternative

theories, but rather challenges Vision Tech’s ability to

maintain, and prevail under, these alternative theories, should

this Court look beyond the pleadings.”

As noted above, in resolving a Rule 12(b)(6) motion, the

court may consider documents attached to the complaint and

documents relied upon but not attached to the complaint when

authenticity is not contested, and matters of which the court

takes judicial notice. Parrino v. FHP, Inc, supra, 146 F.3d 699

at 705-706. However, beyond this, the court may not consider

“matters outside the pleading” without treating the motion to

dismiss as one for summary judgment pursuant to Rule 56, Federal

Rules of Civil Procedure, and providing “all parties ...

reasonable opportunity to present all material made pertinent to

such a motion by Rule 56.” Rule 12(b), Federal Rules of Civil

Procedure. No such notice has been provided.

Here, General Wire presents no “matters outside the

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pleading” pertaining to damages and the sufficiency of damages. 

Consequently, there is no basis upon which to convert this motion

to dismiss to a motion for summary judgment and no basis for

dismissal under Rule 12(b)(6) for failure to state a claim. The

motion to dismiss the causes of action for equitable relief is

DENIED.

2. FIRST CAUSE OF ACTION FOR BREACH OF EXCLUSIVE

REQUIREMENTS CONTRACT.

The First Cause of Action, after incorporating the general

factual allegations set forth above, alleges in pertinent part:

28. Vision Tech and General Wire entered

into an exclusive requirements contract,

which contract was partially written,

partially oral and partially implied in fact. 

Pursuant to that contract, General Wire

agreed to order and purchase its requirements

of all sewer line maintenance and inspection

products exclusively from Vision Tech, and

Vision Tech agreed to exclusively manufacture

such products for General Wire. Pursuant to

this contract, General Wire ordered products

from Vision Tech generally using individual

purchase orders.

29. To enable Vision Tech to manufacture and

ship products to meet General Wire’s

requirements, General Wire usually provided

Vision Tech with its sales projections at

least three (3) months in advance of any

purchase orders. Vision Tech would then

order from its vendors the components

necessary to be able to manufacture

sufficient General Wire products to meet

those projections. This special manufacture

took time, and could not wait to be done

until Vision Tech actually received a

purchase order from General Wire. Vision

Tech is informed and believes and thereon

alleges that General Wire knew that it was

necessary for Vision Tech to order components

for General Wire’s products from its vendors

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in advance of Vision Tech’s receipt of

General Wire’s purchase orders.

30. Pursuant to the requirements contract,

between March and August 2006 General Wire

issued purchase orders to Vision Tech for

sewer line maintenance and inspection

products. General Wire also provided Vision

Tech with sales projections for those months,

and Vision Tech ordered from its vendors

sufficient quantities of components to be

able to manufacture General Wire’s products

pursuant to those projections.

31. Vision Tech performed its obligations

under its requirements contracts with General

Wire. It ordered components from its vendors

pursuant to General Wire’s sales projections,

commenced and completed manufacture of

General Wire products pursuant to General

Wire purchase orders, and shipped products to

General Wire pursuant to General Wire’s

purchase orders.

32. General Wire breached its requirements

contract with Vision Tech by failing to pay

for the products it had ordered from Vision

Tech and ceasing to order products from

Vision Tech, knowing that Vision Tech had

already ordered the component parts and that

General Wire was Vision Tech’s only customer.

33. General Wire had reason to know that as

a result of its conduct, Vision Tech would

suffer consequential damages including lost

profits on the sale of the goods.

34. As a proximate result of General Wire’s

breach of, and failure to perform under, the

requirements contract, Vision Tech has

suffered damages in an amount to be proven at

trial but including the principal balance of

$588,951.78 for the products manufactured,

shipped and invoiced to General Wire;

interest on open invoices at the contract

rate of 1.5 percent per month from the due

date of each invoice; hundreds of thousands

of dollars for the cost of non-reusable

component parts purchased by Vision Tech; and

lost profits.

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a. Failure to Allege Breach of Exclusive

Requirements Contract.

General Wire moves to dismiss this cause of action on the

ground that these allegations do not constitute a breach of an

exclusive requirements contract as a matter of law. Citing

Paramount Lithographic Plate Service, Inc. v. Hughes Printing

Co., 2 Pa. D.& C.3d 677 (Pa.Com.Pl.1977), General Wire asserts

that “conduct constituting a breach of an exclusive requirements

contract entails a purchaser’s failure to exercise good faith in

setting its requirements or a purchaser’s violating the

exclusivity covenant of a particular contract.” General Wire

contends that the Complaint is devoid of any allegations that

General Wire engaged an alternative seller. With regard to the

allegation that General Wire was Vision Tech’s only customer

General Wire contends

that even a requirements contract would not

have prohibited Vision Tech from having

additional customers. Vision Tech has

seemingly confused a requirements contract

with an output contract, only the latter of

which, if pled, would have prohibited Vision

Tech from having customers in addition to

General Wire.

In Paramount Lithographic Plate Service, supra, at 691, the

Pennsylvania Court held in the context of ruling on a motion for

new trial and judgment n.o.v., in pertinent part as follows:

A requirements contract, like any other

contract, requires the parties to carry out

its provisions as anticipated in good faith. 

Unless there is good faith and an appropriate

effort on the part of the seller, the buyer’s

contract is meaningless. Whether this good

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faith effort to carry out the terms of the

contract is to be phrased as ‘due diligence’

is a semantic quibble. Clearly, a buyer

cannot enter into a contract, induce the

seller in reliance thereon to expend money

and change his position, and then without

ever endeavoring to perform, abandon the

project. The Uniform Commercial Code

requires a good faith effort to carry out the

contract. This is the law of Pennsylvania

irrespective of the explicit requirements of

the UCC cases.

Vision Tech refers to the allegations in the General

Allegations Section of the Complaint and the First Cause of

Action. Vision Tech also refers to the allegations in the Third

Cause of Action for promissory estoppel:

42. General Wire promised Vision Tech that

it would use Vision Tech as its exclusive

manufacturer of all sewer line maintenance

and inspection products, and that it would in

good faith and on a regular basis inform

Vision Tech of its future product needs.

43. General Wire made these promises

reasonably expecting that they would induce

Vision Tech to act in accordance with them by

performing such manufacturing tasks, altering

its products to meet the needs of General

Wire, and reorganizing its business to be an

exclusive manufacturer of General Wire’s

products.

44. Vision Tech reasonably relied upon

General Wire’s promises. It changed its

product design to suit General Wire’s needs;

it ordered components, some of which were

specially manufactured, from its vendors to

manufacture General Wire’s products; and it

manufactured and shipped specially

manufactured products to General Wire.

45. Beginning in May 2006, General Wire

failed and refused to pay Vision Tech for the

products General Wire ordered. General Wire

also failed to place further orders at or

near the level suggested by its sales

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projections. Vision Tech is informed and

believes and thereon alleges that General

Wire’s failure to order or purchase products

from Vision Tech did not result from external

forces beyond General Wire’s control.

These allegations, Vision Tech contends, support the claim

alleged against General Wire in the First Cause of Action.

General Wire’s motion to dismiss the First Cause of Action

on this ground is GRANTED WITH LEAVE TO AMEND. The factual basis

for the alleged contractual relationship between the parties is

unclear, making it difficult to ascertain to whether that

relationship was a requirements contract, an outputs contract, or

a hybrid. Without clarifying amendment, it cannot be determined

whether Vision Tech has stated a claim upon which relief can be

granted against General Wire. 

b. STATUTE OF FRAUDS AND STATUTE OF LIMITATIONS.

General Wire further moves for dismissal of the First Cause

of Action as barred by the Pennsylvania statute of frauds, citing

13 Pa.C.S.A. § 2201, which provides in pertinent part:

(a) General rule. - Except as otherwise

provided in this section a contract for the

sale of goods for the price of $500 or more

is not enforceable by way of action or

defense unless there is some writing

sufficient to indicate that a contract for

sale has been made by the parties and signed

by the party against whom enforcement is

sought or by his authorized agent or broker. 

A writing is not insufficient because it

omits or incorrectly states a term agreed

upon but the contract is not enforceable

under this subsection beyond the quantity of

goods shown in such writing.

(b) Writing confirming contract between

merchants. - Between merchants if within a

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reasonable time a writing in confirmation of

the contract and sufficient against the

sender is received and the party receiving it

has reason to know its contents, it satisfies

the requirements of subsection (a) against

such party unless written notice of objection

to its contents is given within ten days

after it is received.

(c) Enforceability of contracts not

satisfying general requirements. - A contract

which does not satisfy the requirements of

subsection (a) but which is valid in other

respects is enforceable:

(1) if the goods are to be 

specially manufactured for the buyer and are

not suitable for sale to others in the

ordinary course of the business of the seller

and the seller, before notice of repudiation

is received and under circumstances which

reasonably indicate that the goods are for

the buyer, has made either a substantial

beginning of their manufacture or commitments

for their procurement;

(2) if the party against whom 

enforcement is sought admits in his pleading,

testimony or otherwise in court that a

contract for sale was made, but the contract

is not enforceable under this provision

beyond the quantity of goods admitted; or

(3) with respect to goods for which

payment has been made and accepted or which

have been received and accepted (section

2606). 

General Wire asserts that “even if the Court concluded that

a valid requirements contract was properly pled and existed, the

statute of frauds, not to mention the statute of limitations as

to the 2002 agreement, would preclude enforcement of the same.” 

General Wire’s motion to dismiss based on the affirmative

defense of the statute of frauds is DENIED. 13 Pa.C.S.A. §

2201(c)(1), provides an exception to the statute of frauds in a 

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contract for specially manufactured goods where the seller,

before repudiation makes a substantial beginning of their

manufacture or commitments for their manufacture. Section

2201(c)(1) arguably applies to the allegations of the Complaint

and, if so, the statute of frauds defense fails. The motion as

to the statute of frauds is DENIED. 

General Wire’s elliptical reference to a statute of

limitations affirmative defense with regard to the 2002 agreement

does not compel dismissal and the motion is DENIED on this

ground. First, General Wire does not advise the court exactly

which statute of limitations applies or its duration. Secondly,

the alleged breaches of the 2002 agreement occurred in mid-2006. 

This action was commenced on March 14, 2007, well within any

applicable statute of limitations. 

c. CONSEQUENTIAL DAMAGES. 

Vision Tech prays for consequential damages in connection

with the First Cause of Action. General Wire moves to strike

this prayer for relief. 

In Sonfast Corp. v. York Intern. Corp., 875 F.Supp. 1088,

1096 (M.D.Pa.1994), the District Court held:

[Consequential damages] ‘[d]o not arise

within the scope of the immediate buyerseller transaction but rather stem from the

losses incurred by the nonbreaching party in

its dealings, often with third parties, which

were reasonably foreseeable by breaching

party at time of contracting.’ ... It is

well-settled under Pennsylvania law that an

aggrieved seller may not be awarded

consequential damages under the Pennsylvania

Commercial Code.

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See also 13 Pa.C.S.A. § 2703:

Where the buyer wrongfully rejects or revokes

acceptance of goods or fails to make a

payment due on or before delivery or

repudiates with respect to a part or on the

whole, then with respect to any goods

directly affected and, if the breach is of

the whole contract (section 2612), then also

with respect to the whole undelivered

balance, the aggrieved seller may:

(1) Withhold delivery of such goods.

(2) Stop deliver by any bailee as provided in

section 2705.

(3) Proceed under section 2704 (relating to

right of seller to identify goods to contract

notwithstanding breach or to salvage

unfinished goods).

(4) Resell and recover damages as hereafter

provided (section 2706) (relating to resale

by seller including contract for resale)).

(5) Recover damages for nonacceptance (2708)

or in a proper case the price (section 2709).

(6) Cancel.

General Wire’s motion to dismiss is GRANTED to the extent 

the First Cause of Action prays for consequential damages as

defined by Pennsylvania law under the causes of action based

solely on the purchase orders. If the evidence establishes a

broader contract, not limited to the purchase orders, it is

possible that the general measure of foreseeable contract damages

will apply; to this extent the motion is DENIED.

3. SECOND CAUSE OF ACTION FOR BREACH OF PURCHASE

ORDERS, FOURTH CAUSE OF ACTION FOR UNJUST ENRICHMENT, AND FIFTH

CAUSE OF ACTION FOR GOODS SOLD AND DELIVERED.

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After incorporating all preceding allegations, the Second

Cause of Action for breach of the purchase orders alleges in

pertinent part:

36. From March through August 2006, General

Wire and Vision Tech entered into express

contracts under which General Wire agreed to

buy from Vision Tech, and Vision Tech agreed

to manufacture and sell to General Wire,

certain sewer line maintenance and inspection

products. These contracts were memorialized

in writing by, among other documents,

purchase orders that set forth the

description and quantity of products General

Wire desired and an agreed price list.

37. Vision Tech fully performed its

obligations under these contracts. 

38. General Wire has breached its contracts

with Vision Tech by refusing to pay for the

products it ordered from Vision Tech pursuant

to these contracts.

39. As a proximate result of General Wire’s

breach of, and failure to perform under, the

above contracts, Vision Tech has suffered

damages in an amount not less than

$588,951.78 plus interest accruing at the

rate of 1.5 percent per month from the due

date of each invoice.

The Fourth Cause of Action for unjust enrichment and the Fifth

Cause of Action for goods sold and delivered are based on these

allegations.

General Wire moves to dismiss these causes of action on the

ground that the termination condition set forth in Paragraph 4 of

the purchase orders precludes these claims for relief.

Paragraph 4 of the purchase orders provides:

TERMINATION - Buyer shall have the right to

terminate this Purchase Order or any part

thereof at any time by written or telegraphic

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notice or verbal notice confirmed in writing.

(a) Without cause - In case of termination by

Buyer of all or any part of this Purchase

Order without cause, any termination claim

must be submitted to Buyer within sixty (60)

days after the effective date of termination. 

The provisions of this subparagraph shall not

limit or affect the right of Buyer to

terminate this Purchase Order for cause and

shall not apply to a termination with cause.

(b) For Cause - If Seller fails to make any

delivery in accordance with the agreed

delivery date or schedule or otherwise fails

to observe or comply with any of the other

instructions, terms, conditions or warranties

applicable to this Purchase Order or fails to

make progress so as to endanger performance

of this Purchase Order or in the event of any

proceedings by or against Seller in

bankruptcy or insolvency or appointment of a

receiver or trustee or an assignment for the

benefit of creditors, Buyer may, in addition

to any other right or remedy provided by this

Purchase Order or by Law, terminate all or

any party [sic] of this Purchase Order by

telegraphic or other written notice to Seller

without any liability by Buyer to Seller on

account thereof. Buyer may require a

financial statement from Seller at any time

during the term of this Purchase Order for

the purpose of determining Seller’s financial

responsibility. In the event of termination

for cause, Buyer may produce or purchase or

otherwise acquire supplies or services

elsewhere on such terms or in such manner as

Buyer may deem appropriate and Seller shall

be liable to Buyer for any excess cost or

other expenses incurred by Buyer.

General Wire contends that “[i]n light of, inter alia,

quality control issues that it was experiencing with the products

supplied by Vision Tech, General Wire, consistent with the plain

meaning of Paragraph 4, could have terminated its relationship

and cancelled certain purchase orders with Vision Tech in the

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middle of 2006.

Vision Tech does not specifically respond to this aspect of

the motion to dismiss. It its reply brief, General Wire contends

that this failure constitutes a concession that dismissal of the

Second, Fourth and Fifth Causes of Action for failure to state a

claim upon which relief can be granted is appropriate.

Notwithstanding Vision Tech’s failure to respond to this

ground for dismissal, General Wire’s motion is not well-taken. 

General Wire’s position is not based solely on the plain meaning

of Paragraph 4 of the purchase orders. It is also based on

defensive facts, evidence of which has not been provided by

General Wire. Further, even if General Wire provided evidence to

support cause for the cancellation of these purchase orders, the

motion before the court is for dismissal pursuant to Rule

12(b)(6). As noted, in resolving a Rule 12(b)(6) motion, the

court may consider documents attached to the complaint and

documents relied upon but not attached to the complaint when

authenticity is not contested, and matters of which the court

takes judicial notice. Parrino v. FHP, Inc, supra, 146 F.3d 699

at 705-706. Beyond this, the court may not consider “matters

outside the pleading” without treating the motion to dismiss as

one for summary judgment pursuant to Rule 56, Federal Rules of

Civil Procedure, and providing “all parties ... reasonable

opportunity to present all material made pertinent to such a

motion by Rule 56.” Rule 12(b), Federal Rules of Civil

Procedure. General Wire essentially requests that the court do

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this “in an effort to both avoid subsequent, duplicative briefing

efforts and resolve this litigation in an efficient manner.” 

General Wire does not present evidence to support its version of

events. 

It is not clear that the purchase order termination

provision is applicable to the entire contract alleged by Vision

Tech. General Wire’s motion to dismiss the Second, Fourth and

Fifth Causes of Action is DENIED.

4. THIRD CAUSE OF ACTION FOR PROMISSORY ESTOPPEL.

After incorporating all preceding allegations, the Third

Cause of Action for promissory estoppel alleges in pertinent

part:

42. General Wire promised Vision Tech that

it would use Vision Tech as its exclusive

manufacturer of all sewer line maintenance

and inspection products, and that it would in

good faith and on a regular basis inform

Vision Tech of its future product needs.

43. General Wire made these promises

reasonably expecting that they would induce

Vision Tech to act in accordance with them by

performing such manufacturing tasks, altering

its products to meet the needs of General

Wire, and reorganizing its business to be an

exclusive manufacturer of General Wire’s

products.

44. Vision Tech reasonably relied upon

General Wire’s promises. It changed its

product design to suit General Wire’s needs;

it ordered components, some of which were

specially manufactured, from its vendors to

manufacture General Wire’s products; and it

manufactured and shipped specially

manufactured products to General Wire.

45. Beginning in May 2006, General Wire

failed and refused to pay Vision Tech for the

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products General Wire ordered. General Wire

also failed to place further orders at or

near the level suggested by its sales

projections. Vision Tech is informed and

believes and thereon alleges that General

Wire’s failure to order or purchase products

from Vision Tech did not result from external

forces beyond General Wire’s control.

46. As a proximate result of General Wire’s

actions, Vision Tech has incurred damages in

an amount to be proven at trial for products

Vision Tech manufactured but for which

General Wire has not paid Vision Tech; in

purchasing components from vendors for orders

that General Wire promised it would make but

never did; and in cancellation costs in

attempting to cancel prior orders to Vision

Tech’s vendors for components for General

Wire’s products.

47. It would be unjust not to enforce

General Wire’s promises to Vision Tech. 

Vision Tech agreed to become General Wire’s

exclusive manufacturer. Vision Tech cannot

mitigate its damages because many of the

components it purchased are specially

manufactured and bear General Wire’s product

color, logos, and other General Wire-specific

features.

General Wire moves to dismiss the Third Cause of Action,

contending that this section of the motion to dismiss mirrors its

request for dismissal of the First Cause of Action:

Whereas Vision Tech, in its first cause of

action, alleges that General Wire agreed to

exclusivity, Vision Tech, in its third cause

of action for promissory estoppel, alleges

that General Wire promised exclusivity ...

Vision Tech’s claim for promissory estoppel

boils down to General Wire’s alleged promises

of exclusivity in purchasing certain products

from Vision Tech and General Wire’s acting in

good faith in determining its corresponding

‘requirements.’ Vision Tech’s Complaint is

devoid of any allegations that General Wire

breached its promises of exclusivity and good

faith in the context of its purchase and sale

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relationship with Vision Tech. To the

contrary, Vision Tech alleges that General

Wire breached its promises of exclusivity and

good faith merely by refusing to pay for

certain products and ceasing to order other

products.

General Wire’s motion to dismiss the Third Cause of Action

is DENIED. The basis for dismissal is hypertechnical and based

on semantics as discussed above.

5. SIXTH CAUSE OF ACTION FOR DECLARATORY RELIEF.

After incorporating all preceding allegations, the Sixth

Cause of Action alleges in pertinent part:

57. As a result of General Wire’s cease and

desist letter, an actual case or controversy

exists between General Wire and Vision Tech

relating to Vision Tech’s promotion and sale

of its Intruder and Intruder Elite products.

58. As Vision Tech is being threatened with

an action for damages and other relief,

Vision Tech is in need of, and entitled to, a

judicial declaration of each party’s

respective rights and liabilities as they

pertain to Vision Tech’s continued promotion

and sale of its Intruder and Intruder Elite

products, pursuant to 28 U.S.C. § 2201.

General Wire moves to dismiss the Sixth Cause of Action as

premature, citing Osram Sylvania Products, Inc. v. Comsup

Commodities, Inc., 845 A.2d 846, 848 (Pa.Super.2004):

“[D]eclaratory relief should be withheld when the request for

relief is an attempt to adjudicate the validity of a defense in a

future lawsuit.”

As Vision Tech points out, General Wire’s cease and desist

letter asserts that “[i]n as much as Vision’s current promotional

efforts are creating confusion in the marketplace, Vision is

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violating state and federal law, including, but not limited to,

federal copyright law.” Vision Tech contends that these

representations require application of the Declaratory Judgment

Act, 28 U.S.C. § 2201. Further, Vision Tech contends, the only

basis for the application of Pennsylvania law set forth in the

purchase orders is to “[a]ny contract resulting from the

acceptance of this offer.” 

Because General Wire cites only federal law in its reply

brief and made no argument at the hearing that Pennsylvania law

applied, General Wire concedes that federal law applies in

determining whether dismissal of the Sixth Cause of Action is

appropriate. 

28 U.S.C. § 2201(a) provides that “in a case of actual

controversy within its jurisdiction ... any court of the United

States ... may declare the rights and other legal relations of

any interested party seeking such declaration, whether or not

further relief is or could be sought.” 

In determining whether declaratory relief can be granted, an

inquiry must be made as to whether there is a case or controversy

between the parties. Principal Life Ins. Co. v. Robinson, 394

F.3d 665, 669 (9 Cir.2005); American States Ins. Co. v. Kearns,

th

15 F.3d 142, 144 (9 Cir.1994). The requirement is identical to th

the Article III’s constitutional case or controversy requirement. 

Kearns, 15 F.3d at 144. In order for a case to be justiciable

under Article III of the Constitution, it must be ripe for

review. Id. A controversy in this sense must be definite and

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concrete, touching the legal relations of the parties having

adverse legal interests. West v. Secretary of the DOT, 206 F.3d

920, 924 (9 Cir.2000). It must be a real and substantial th

controversy, admitting of a specific relief through a decree of

conclusive character, as distinguished from an opinion advising

what the law would be upon a hypothetical state of facts. Id. 

The party invoking federal jurisdiction bears the burden of

establishing the existence of an actual case or controversy. See

Gov’t Employees Ins. Co. v. Dizol, 133 F.3d 1220, 1228 (9th

Cir.1998). The Ninth Circuit has held that something less than

an “actual threat” of litigation is required to meet the “case or

controversy” requirement; instead, courts must focus on whether a

declaratory plaintiff has a “reasonable apprehension” that he or

she will be subjected to liability. Paramount Pictures Corp. v.

Replay TV, 298 F.Supp.2d 921, 924 (citing Societe de

Conditionnement en Aluminum v. Hunter Engineering Co., Inc., 655

F.2d 938, 944 (9 Cir.1981).). th

Because the content of the cease and desist letter is

critical to resolution of the motion to dismiss, it is quoted in

full. The cease and desist letter dated March 2, 2007 is

addressed by General Wire’s attorney to Vision Tech’s attorney. 

The cease and desist letter states:

On behalf of General Wire Spring Company

(‘General Wire’), we are writing to place you

on notice of General Wire’s intention to

enforce their contractual and intellectual

property rights. As you know, General Wire

is a supplier of products designed and

manufactured for the pipe cleaning industry. 

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In this regard, General Wire has invested, as

the Settlement Agreement on behalf of our

respective clients in October, 2006,

acknowledges, a great deal of time and money

into the development of its products. As a

result, it is recognized in the marketplace

that General Wire’s products include, but are

not limited to, certain identifiable pipe

inspection video equipment (e.g., the Gen-Eye

Pipe Inspection/Location System).

We recently became aware that your client,

Vision Technology Design & Manufacturing,

Inc. (‘Vision’), has been promoting, among

other products, units that they call the

ProCam Mini and Micro System and an

‘Intruder’ Video Inspection System in the

marketplace, including at a recent Cole

Publishing-sponsored trade show in Nashville,

Tennessee in early February, 2007. Further,

we have learned that Vision has entered into

an arrangement with Rycom Instruments, Inc.

(‘Rycom’) to sell the ProCam either under the

name ‘ProCam’ or some other name (e.g., PipeSight). As a result of both the similarities

with products and components of General Wire

and the attendant confusion in the

marketplace created by Vision Tech’s

promotional efforts, we have discovered the

following: (1) Vision’s ProCam closely

resembles General Wire’s Gen-Eye Junior; (2)

Vision’s ProCam includes, as component parts,

two custom springs that were specially

designed and manufactured by General Wire for

use in a General Wire product and for which

Vision never received licensing from General

Wire or in any way paid for the use of the

same; (3) Vision’s ProCam includes a custom

General Wire-developed instruction label on

the inside cover of command module cover

door; (4) the drum, with the exception of a

slight color modification and name change, is

identical to the drum used in General Wire’s

Gen-Eye Junior; (5) Vision is using a command

module that was developed in accordance with

custom specifications generated by General

Wire following significant time involvement

and investment in the development, trouble

shooting, and direction of the product by

General Wire. We can only speculate as to

what additional and similar unlawful

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practices Vision may be engaged in.

In as much as Vision’s current promotional

efforts are creating confusion in the

marketplace, Vision is violating state and

federal law, including, but not limited to,

federal copyright law. Further, in as much

as Vision’s current promotional efforts are

‘supplying, or attempting to supply, products

attributable to and/or identifiable with

General Wire,’ Vision is violating the

aforementioned Settlement Agreement. That

agreement, in pertinent part, provides:

It is expressly understood and

agreed that Vision recognizes and

represents that General Wire Spring

Company has devoted substantial

time, effort, and monetary

resources to securing its products,

including but not limited to, its

Gen-Eye products a competitive and

advantageous position in the

marketplace. Vision recognizes and

represents that it will refrain

from supplying, or attempting to

supply, products attributable to

and/or identifiable with General

Wire Spring Company, including, but

not limited to, General Wire Spring

Company’s Gen-Eye products. Vision

recognizes and represents that

General Wire Spring Company has

contributed significant monies

towards the development of the GenEye product line, including having

paid for a large portion of the

molds for General Wire Spring

Company’s Gen-Eye products.

Given the seriousness of this matter, we

demand that Vision cease and desist from

engaging in any further misleading and

illegal practices of designing,

manufacturing, and promoting products that,

although marketed by Vision under a new name

(e.g., ProCam), were originally developed for

General Wire (e.g., Gen-Eye Junior). Vision

must refrain from infringing upon General

Wire’s intellectual property rights. Please

confirm, in writing, Vision’s intention to

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comply with this demand no later than ten

business days from the date of this

correspondence. Please be advised that if

Vision does not immediately cease and desist

from their unlawful practices, we will seek

all appropriate legal remedies, without prior

notification. Additionally, General Wire

will treat Vision’s failure to cease and

desist, as requested, as a further breach of

the aforementioned Settlement Agreement,

thereby solidifying General Wire’s ability to

send correspondence, similar to this one, to

entities such as Rycom without violating the

confidentiality provision contained therein.

We thank you and look forward to your prompt

response and cooperation.

In Chesebrough-Pond’s, Inc. v. Faberge, Incorporated, 666

F.2d 393 (9 Cir.), cert. denied, 459 U.S. 967 (1982), the Ninth th

Circuit, relying on Societe de Conditionnement en Aluminum, supra

655 F.2d 938, ruled:

We held that the requirements of the

Declaratory Judgment Act were satisfied ‘if

the plaintiff has a real and reasonable

apprehension that he will be subject to

liability ....’ ... In applying, this

standard, we focused upon the position and

perceptions of the plaintiff, declining to

identify specific acts or intentions of the

defendant that would automatically constitute

a threat of litigation. The acts of the

defendant were instead to be examined in view

of their likely impact on competition and the

risks imposed upon the plaintiff, to

determine if the threat perceived by the

plaintiff were real and reasonable. 

Societe thus requires a flexible approach

that is oriented to the reasonable

perceptions of the plaintiff.

666 F.2d at 396.

In E. & J. Gallo Winery v. Pernod Ricard USA, LLC, 2006 WL

2849830 (E.D.Cal.2006), the defendant’s motion to dismiss a

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declaratory judgment action was denied. In so doing, the Court

ruled in pertinent part:

Pernod’s outside patent litigation counsel

sent Gallo a demand letter on June 20, 2006

stating that Gallo’s new packaging system

effectively adopted an identical design

concept and color theme as the Pernod

packaging. Further, Pernod accused Gallo of

‘invading Pernod’s rights’ and of creating

confusion among the two ‘cooler’ brands. In

contrast to Shoom, Pernod’s letter includes

specific accusations that Gallo’s packaging

constituted trademark and trade dress

infringement in violation of the United

States Trademark Act, 15 U.S.C. § 1051 as

well as ‘various unfair competition laws.’

Pernod’s letter threatened that it would ‘not

tolerate the poaching of (its) label and

packaging.’ As a result, Gallo was given

eight days to provide a substantive response

to the letter and thirty days to discontinue

use of the packaging. In the alternative,

Pernod would permit Gallo to use the

packaging through September 30, 2006 so long

as Gallo changed its packaging and

reincorporated the black rim on its bottles

that was present prior to 2005 (capitulation

to the charged infringement claim).

The letter was written in aggressive and

traducing language, setting forth a strict 30

day deadline for Gallo to cease the use of

its beach theme and existing packaging. 

While Pernod’s counsel used the term

‘amicable resolution,’ this was contingent

upon Gallo acquiescing in Pernod’s demands,

which required Gallo discontinuing use of

existing packaging and inferentially removing

the allegedly infringing packaging from the

marketplace within the 30 day demand period. 

Although the letter did not expressly say:

‘comply or be sued,’ the statement that

Pernod would not ‘tolerate’ continued use and

Pernod’s express reference to Gallo’s alleged

violations of the Lanham Act, coupled with

the aggressive deadlines imposed on Gallo to

comply, provide ample basis for an

objectively reasonable belief that litigation

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would follow if Gallo did not comply. 

As in Chesebrough, Gallo and Pernod are

competitors in the same market for ‘coolers.’ 

Pernod’s letter accused Gallo of infringing

Pernod’s trademark by creating confusion

among ‘cooler’ consumers. Pernod’s lack of

response to Gallo’s subsequent emails is

inconsistent with an attempt to amicably

resolve the dispute. Pernod made no attempt

to dispel any of Gallo’s fears that Gallo

faced an intractable demands [sic] and

imminent infringement action if it did not

meet the deadlines Pernod had imposed. When

counsel for Gallo requested further

information, Pernod’s counsel simply referred

him back to Pernod’s original letter and

stated that Pernod’s investigation as to

specific instances of consumer confusion was

ongoing. When Gallo’s counsel requested

additional time to provide a substantive

response, Pernod refused to modify its

deadline. Under the principles of Societe de

Conditionnement, the initial Pernod letter,

the subsequent email exchange between the

parties, and Pernod’s unyielding conduct,

which did not invite or suggest a standstill

while the status quo was maintained, gave

Gallo a reasonable apprehension that an

infringement action by Pernod was imminent.

2006 WL at * 8-9. Pernod’s reliance on Dunn Computer Corp. v.

Loudcloud, Inc., 133 F.Supp.2d 823 (E.D.Va 2001) was disregarded

in resolving the motion to dismiss because “in this circuit

Societe de Conditionnement and its progeny are binding authority”

and because the plaintiff in Dunn “filed a three count complaint

eight days after receiving the letter without so much as

responding to the letter or contacting defendant.” Id. at * 7

n.2. 

General Wire argues that Dunn Computer Corp. v. Loudcloud is

not distinguishable from the allegations in this action and

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should be applied to require dismissal of the Sixth Cause of

Action.

In Dunn Computer, the cease and desist letter sent by Dunn

Computer to Loudcloud stated in pertinent part:

It has come to our attention that your

company recently began using the trademark

STEELCLOUD for services similar to those of

Loudcloud, which you market to the same class

of customers as Loudcloud .... Your company

competes directly with Loudcloud in providing

packaged back-end services for businesses

engaged in e-commerce, including the

provision of hardware, software, systems

analysis and expert consultation services

....

The STEELCLOUD mark is confusing similar to

LOUDCLOUD. In addition to the identical

‘CLOUD’ portion, ‘LOUD’ and ‘STEEL’ both

connote power and strength .... Consequently,

your company’s adoption of STEELCLOUD is

likely to cause confusion in the marketplace

and therefore constitutes a violation of our

client’s rights in its trademark LOUDCLOUD.

In short, your adoption of STEELCLOUD is

likely to confuse the public and dilute the

strength of the LOUDCLOUD mark; it is thus a

violation of Loudcloud’s rights under federal

and state trademark and unfair competition

laws. We therefore demand that your company

immediately:

1. Cease and desist all use of the trade

name, company name and trademark STEELCLOUD

...;

2. Cease and desist all use of the Internet

domain name ‘steelcloud.com’ ..., and assign

any such domain names to Loudcloud;

3. Publish ... a corrective notice, and

issue a press release, stating that neither

your company, nor its products or services,

are in any way affiliated with, sponsored or

endorsed by Loudcloud, Inc., and that you

have ceased all use of the STEELCLOUD mark.

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Our client considers protection of its

intellectual property to be a critical part

of its business. It has already successfully

persuaded the owners of the marks

THUNDERCLOUD and LAUNCHCLOUD to change their

names. We hope you will amicably agree to do

the same.

We look forward to your response on or before

October 27, 2000, indicating your compliance

with the demands of this letter.

133 F.Supp.2d at 825-826. The district court held in pertinent

part:

Analysis ... properly begins with whether

plaintiff’s apprehension of being sued by

defendant was objectively real and

reasonable. Put another way, this prong is

established ‘if defendant’s actions create in

plaintiff a “reasonable apprehension” of

being sued for infringement.’ ... And, the

proper focus in this regard is on the

defendant’s conduct and statements, because

‘apprehension alone, if not inspired by

defendant’s actions, does not give rise to an

actual controversy.’ Furthermore, while

direct evidence of threatening contacts

initiated by the defendant or a background of

litigation between the parties is strong

evidence of a reasonable apprehension of

litigation, an objectively reasonable

apprehension of imminent litigation must be

determined from the totality of the

circumstances.

These principles, applied here, point

persuasively to the absence of a case or

controversy, as the record falls short of

establishing an objectively reasonable

apprehension of imminent litigation. Simply

put, one cease and desist letter does not a

case or controversy make where, as here, that

letter invites negotiation, but does not

explicitly threaten litigation, and was

defendant’s sole act directed at plaintiff. 

These meager facts fall short of the

constitutional case or controversy threshold. 

More is required. Specifically, courts

finding a case or controversy in analogous

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circumstances have relied on various

additional factors, including:

(i) a cease-and-desist letter

threatening litigation and setting

forth the elements of a prima facie

claim of trademark infringement

against the declaratory judgment

plaintiff;

(ii) a cease-and-desist letter

coupled with formal opposition of

the declaratory judgment

plaintiff’s trademark application

to the PTO;

(iii) a response to the filing of a

declaratory judgment action that

includes a counterclaim for

trademark infringement;

(iv) a cease-and-desist letter

followed by a failed attempt to

settle the dispute prior to

initiating litigation;

(v) a cease-and-desist letter

coupled with ongoing litigation

between the parties.

None of these additional factors is present

here. First, while defendant’s letter

references the likelihood of confusion

standard - the basis of a trademark

infringement suit - defendant has not and

cannot state a prima facie case of federal

trademark infringement because defendant has

no registered trademarks on which to rely. 

Second, defendant has not filed a

counterclaim in the instant action. Finally,

the cease-and-desist letter indicated

defendant’s desire to settle and invited

plaintiff to respond to the letter. These

facts are insufficient to create a reasonable

apprehension of an imminent suit for

trademark infringement.

133 F.Supp.2d at 827-828.

General Wire’s reliance on Dunn Computer is misplaced and

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the motion to dismiss the Sixth Cause of Action is DENIED. This

court is not bound by any decision of another district court. 

General Wire’s cease and desist letter does not invite

negotiation but, rather, specifically states, “Please be advised

that if Vision does not immediately cease and desist from their

unlawful practices, we will seek all appropriate legal remedies,

without prior notification.” General Wire also states: a) “we

demand that Vision cease and desist from engaging in any further

misleading and illegal practices ....”; b) “[p]lease confirm, in

writing, Vision’s intention to comply with this demand no later

than ten business days from the date of this correspondence”; c)

“General Wire will treat Vision’s failure to cease and desist ...

as a further breach of the aforementioned Settlement Agreement,

thereby solidifying General Wire’s ability to send

correspondence, similar to this one, to entities such as Rycom

....” Although General Wire argues that the cease and desist

letter was not coupled with ongoing litigation, the reference in

the cease and desist letter to the “Settlement Agreement” between

the parties implies that there has been litigation between

General Wire and Vision Tech in the fairly recent past. As in

E.& J. Gallo Winery, all these demands and threats demonstrate

that Vision Tech had a real and reasonable apprehension that it

will be sued and subject to liability if it fails to comply with

General Wire’s demands. An actual case or controversy exists 

between it and General Wire for purposes of the Declaratory

Judgment Act. 

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 CONCLUSION

For the reasons stated above, 

1. General Wire’s motion to dismiss is GRANTED IN PART WITH

LEAVE TO AMEND AND DENIED IN PART. 

2. Counsel for GENERAL WIRE shall prepare and lodge a form

of order that reflects the specific rulings on each issue

addressed by this decision within five (5) days following the

date of service of this decision.

3. Within ten (10) days of the filing of the Order, Vision

Tech shall file a First Amended Complaint in compliance with the

rulings set forth herein.

IT IS SO ORDERED.

Dated: July 13, 2007 /s/ Oliver W. Wanger 

668554 UNITED STATES DISTRICT JUDGE

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