Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_04-cv-00708/USCOURTS-cand-3_04-cv-00708-1/pdf.json

Nature of Suit Code: 195
Nature of Suit: Contract Product Liability
Cause of Action: 28:1441 Petition for Removal- Contract Dispute

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United States District Court

For the Northern District of California

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1 Sabaté USA, Inc. is a California corporation with its

principal place of business in Napa County, California, and is a

wholly-owed subsidiary of Sabaté, SAS. Plaintiff's State Court

Complaint at 1-2. Defendants Sabaté, SAS, Sabaté, SA, Altec, SA,

and Sabaté-Diosos Group, SA, are foreign corporations organized

under the laws of France. Id. at 2. 

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

MCDOWELL VALLEY VINEYARDS, INC., a

California corporation,

Plaintiff,

 v.

SABATÉ USA INC., SABATÉ SAS, SABATÉ

SA, SABATÉ DIOSOS GROUP SA, and

DOES 1 through 100, inclusive,

Defendants. 

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No. C-04-0708 SC

ORDER DENYING

DEFENDANTS' MOTION

FOR SUMMARY JUDGMENT

AND DISMISSING CASE

WITHOUT PREJUDICE 

I. INTRODUCTION

McDowell Valley Vineyards, Inc. ("Plaintiff" or "McDowell")

brought this action against Sabaté USA Inc., Sabaté SAS, Sabaté

SA, Sabaté Diosos Group SA, and Does 1-100 ("Defendants" or

"Sabaté")1 in The Superior Court for the County of Napa,

California, alleging causes of action for, among others, breach of

contract, breach of express and implied warranties, and fraud. 

Plaintiff's Complaint at 1 ("Compl."). 

Presently before the Court is Defendants' motion for partial

summary judgment. The Court, having reviewed the parties'
United States District Court

For the Northern District of California

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2 "[C]ork taint is generally described in the wine industry as

a musty, moldy, wet cardboard odor in bottled wine. Most cork

taint is associated with 2, 4, 6-trichloranisole ("TCA"). TCA is

created when naturally occurring molds metabolize chlorophenols,

which can be present in natural cork in certain circumstances." 

Compl. at 5. 

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submissions, finds that it lacks subject matter jurisdiction over

this matter and hereby DENIES in its entirety Defendants' motion

for summary judgment and DISMISSES the case without prejudice. 

II. BACKGROUND

Because Plaintiff is the non-moving party, the following

allegations are taken from Plaintiff's submissions and will be

assumed as true for purposes of the present motion. 

Plaintiff is a California corporation in the business of

producing and selling premium wines, with its principal place of

business in Napa County, California. Compl. at 1. Defendants are

engaged in the manufacture, marketing, distribution and sale of

closures used for closing wine bottles. Id. at 2. These closures

are non-agglomerated corks known by the trade name of Altec. Id. 

 Defendants marketed the Altec closures to Plaintiff and a

number of other wineries. Id. at 3. According to Plaintiff,

Defendants' advertising materials made the following

representations regarding the Altec closures: (1) Altec closures

prevent cork taint2; (2) the closures were "without risk of cork

taint"; (3) the closures offered "near perfect protection against

cork taint"; (4) there is "no cork taint" with these closures; 

(5) the Altec closure is "the only pure cork which is capable of

relieving wine producers from the risk of cork taint"; and (6) the

closures were free from defects and of a type and quality fit for
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For the Northern District of California

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bottling premium quality wine. Compl. at 3. Additionally, Bill

Crawford and Gary Leonard, Plaintiff's president and purchasing

manager, respectively, were told specifically by representatives

of Sabaté that the Altec closure would prevent cork taint. Id. at

3-4. 

Based on these representations, Plaintiff purchased

approximately 287,000 Altec closures from Defendants in June of

2000 for a total purchase price of roughly $33,000. Id. at 4. 

Plaintiff used the Altec closures in bottling several of its wines

in July, August, and October of 2000. Id. 

According to Plaintiff, it began to develop concerns with the

Altec closures in early 2001, which Plaintiff immediately

expressed to Defendants. Id. Defendants appeased these concerns

by again representing that the Altec closures would perform as

advertised. Id. 

In the fall of 2001 and spring of 2002, Plaintiff received

reports that a high percentage of its wines bottled with Altec

closures were suffering from cork taint. Id. As a result,

Plaintiff was forced to recall a significant number of these wines

from its buyers at a great expense to Plaintiff. Id. at 4-5.

Plaintiff alleges that the recall is attributable to the Altec

closures being defective and the presence of an unacceptable level

of TCA in the closures. Id. at 6. 

In December of 2003, Plaintiff brought suit in The Superior

Court for the County of Napa, California against Defendants

alleging eight causes of action: (1) breach of contract; (2)

breach of express warranty; (3) breach of implied warranty; (4)

fraud; (5) negligent misrepresentation; (6) negligence; 
United States District Court

For the Northern District of California

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(7) unfair business practices under California Business and

Professions Code section 17200 et seq.; and (8) strict liability. 

Compl. at 1. Defendants timely removed the action to Federal

Court based on federal question jurisdiction, under 28 U.S.C. 

§ 1441(b). Notice of Removal at 2. 

Defendants now move the Court to grant partial summary

judgment. Defendants' Memorandum in Support of Motion for Partial

Summary Judgment at 25 ("Defs' Mem."). For reasons that will be

discussed more fully below, the Court hereby DENIES Defendants'

motion and DISMISSES the case without prejudice. 

III. LEGAL STANDARD

The federal courts have "original jurisdiction over all civil

actions arising under the Constitution, laws or treaties of the

United States." 28 U.S.C. § 1331.

A Federal Court may examine the question of subject matter

jurisdiction sua sponte. See Steel Company v. Citizens for a

Better Environment, 523 U.S. 83, 94 (1998). Federal Courts must

normally determine issues of subject matter jurisdiction before

considering a case on its merits. Id. When a court lacks

jurisdiction, the "only function remaining to the court is that of

announcing the fact and dismissing the cause." Id., quoting Ex

parte McCardle, 7 Wall. 506, 514 (1868). 

IV. DISCUSSION

Defendants contend that this Court has jurisdiction to hear

this case under federal question jurisdiction, pursuant to 

28 U.S.C. § 1331. Defendants' Reply Brief in Support of Partial
United States District Court

For the Northern District of California

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3 Defendants removed to Federal Court on the basis of federal

question jurisdiction. Diversity does not exist because Plaintiff

and Sabaté USA are citizens of California. Therefore, if there is

no federal question at issue the Court will deny the motion and

dismiss the case. 

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Summary Judgment at 1-2 ("Defs' Reply").3 Specifically,

Defendants contend that The Convention on Contracts for the

International Sale of Goods ("CISG"), a federally-adopted treaty,

applies wherever the buyer and seller of goods are from different

countries, which have adopted CISG, and the parties have not opted

out of CISG. Id. Defendant contends that the seller (Sabaté

France) is a French company and the buyer (Plaintiff) is a U.S.

company and that both countries have adopted CISG. Id. Finally,

Plaintiff contends that the parties did not opt out of CISG. Id.

at 2. 

Plaintiff contends that Defendants have not demonstrated that

CISG applies to this case. Plaintiff's Memorandum in Opposition

to Sabaté Inc.'s Motion for Summary Judgment at 9-10 ("Pl.'s

Mem."). 

CISG "sets out substantive provisions of law to govern the

formation of international sales contracts and the rights and

obligations of the buyer and seller." U.S. Ratification of 1980

United Nations Convention on Contracts for the International Sale

of Goods: Official English Text, 15 U.S.C. App, Public Notice

1004. CISG applies to "sales contracts between parties with their

places of business in different countries bound by the Convention,

provided the parties have left their contracts silent as to the

applicable law." Id.

This case turns on the determination of Defendants' place of
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For the Northern District of California

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business. Again, CISG applies only when a contract is "between

parties whose places of business are in different States." 

15 U.S.C. App. Art. 1 (1)(a). "If a party has more than one place

of business, the place of business is that which has the closest

relationship to the contract and its performance, having regard to

the circumstances known to or contemplated by the parties at any

time before or at the conclusion of the contract." 15 U.S.C. App.

Art. 10(a). 

Defendants contend that Sabaté SAS was a French entity, that

Sabaté USA had "limited involvement" in the transaction, and never

took possession of the Altec closures, which were shipped from

France directly to Plaintiff. Defs' Mem. at 3-4. 

The crucial question is from where the representations about

the product came. The Court took up this issue in Asante

Technologies, Inc. v. PMC-Sierra, Inc., 164 F.Supp. 2d 1142 (N.D.

Cal. 2001), a case on which Defendants heavily rely. In Asante

Technologies, the plaintiff, a Delaware corporation, sued the

defendant, a Delaware corporation which conducted the bulk of its

business in and from Canada. Id. at 1144-1145. The plaintiff

purchased the defendant's product through the defendant's

authorized and nonexclusive U.S. distributor. Id. at 1145, 1148. 

 The Court in Asante Technologies determined that CISG applied

to the sales contracts based on the particular facts of the case. 

Id. at 1149. The District Court found it significant that (1) the

plaintiff did not allege that the U.S. distributor made any

representations about the product, (2) the plaintiff did not

mention the distributor in its complaint, (3) the plaintiff's

claims concerned breaches of representations by the defendant from
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For the Northern District of California

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Canada, (4) the products were manufactured in Canada, (5) the

plaintiff corresponded with the defendant at the defendant's

Canadian address and (6) the plaintiff did not "identif[y] any

specific representations or correspondence emanating" from the

defendant's U.S. branch. Id. The Court concluded that the U.S.

contacts between the plaintiff and the defendant were "not

sufficient to override the fact that most if not all of the

defendant's representations regarding the technical specifications

of the products emanated from Canada." Id. 

The Court finds that the instant case presents a crucially

different set of facts from those discussed in Asante

Technologies. Looking at Plaintiff's exhibits, the Court notes

that a letter proposing a sale of Altec closures to Plaintiff is

printed on Sabaté USA letterhead, which gives a San Francisco,

California address and telephone number. Compl., Ex. B at 1. In

relevant part, the letter, which is addressed to Gary Leonard,

Purchasing Manager for McDowell Valley Vineyards, reads: 

After talking with you the other day I could easily sense

your frustration with corks and cork taint. As you know our

Altec© corks are doing very well in solving the two biggest

concerns when it comes to cork, Cork [sic] leakage and cork

taint...Due to our eagerness to work with you, below you can

find a price structure specifically formulated for MCDOWELL

[sic] and the volumes you are currently doing. 

Id. 

The invoice appears on Sabaté USA letterhead and gives a

Napa, California address and telephone number. Compl., Ex. C at

1. Another letter regarding "your recent order" appears on Sabaté

USA letterhead. Id. at 2. Finally, some advertising literature,

which is printed on Sabaté USA letterhead and gives a San

Francisco, California address and telephone number, gives a list
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For the Northern District of California

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 The Court notes that some of the advertising literature

indicates that central control over Sabaté's international entities

resides in France. Id. at 9-15. 

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of California wineries using Altec closures and at one point

states: "For more information and a personal demonstration, call

[a San Francisco, California telephone number]." Id., Ex. A at 1-

3, 5, 7.4 Also, according to Plaintiff, the corks were delivered

to "C-Line shipping in the U.S. who maintains a warehouse for

Sabaté USA...near Sabaté USA's Napa office." Pl.'s Mem. at 10. 

Finally, according to Plaintiff, "after Sabaté USA was put on

notice that McDowell has had [sic] some problems with Altec in

2001, Sabaté USA did in fact take possession of the corks in

question" and that "Sabaté USA initiated this latter action and

was not directed by Sabaté S.A.S." Id. 

The central issue in the instant case, as in Asante

Technologies, is from where the representations about the product

came. Based on the evidence submitted by the parties, the Court

finds that the representations regarding the specifications of the

product - both in number and in substance - came largely, if not

entirely, from California. 

Because Defendants' place of business, taking into account

the circumstances known or contemplated by the parties before and

at the conclusion of the contract, is in California, the parties

are not from different states and therefore CISG does not apply. 

Because CISG does not apply, there is no federal jurisdiction over

the case. Diversity does not exist because Plaintiff and Sabaté

USA are citizens of California. Accordingly, the Court will deny

the motion for summary judgment and dismiss the case. 
United States District Court

For the Northern District of California

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V. CONCLUSION

 The Court finds that the majority of the representations about

the product came from California. Therefore, under CISG, the

parties' places of business are in the same state. CISG is,

therefore, inapplicable to the sale and consequently the Court

lacks jurisdiction over the case. Accordingly, Defendants' motion

for summary judgment is DENIED in its entirety. The Court

DISMISSES the case without prejudice.

If the parties refile with the Court, they will be obliged to

establish that the Court has jurisdiction over the matter. 

IT IS SO ORDERED.

Dated: November 1, 2005

 

UNITED STATES DISTRICT JUDGE