Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_09-cv-02041/USCOURTS-casd-3_09-cv-02041-1/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Breach of Contract

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

CENTAUR CORPORATION,

Plaintiff,

CASE NO. 09 CV 2041 JM (BLM)

ORDER GRANTING MOTION TO

DISMISS

Doc. No. 11

vs.

ON SEMICONDUCTOR COMPONENTS

INDUSTRIES, LLC,

Defendant.

Plaintiff Centaur Corporation (“Centaur”) filed this diversity action against Defendant ON

Semiconductor Components Industries, LLC (“ON Semiconductor”) alleging (1) breach of contract,

(2) breach of the implied covenant of good faith and fair dealing, (3) quantum meruit, (4) unjust

enrichment, (5) accounting, and (6) violation of Arizona Statute Title 44, Chapter 11, Article 15, 44-

1798.02. (Doc. No. 1). ON Semiconductor moves to dismiss the complaint on grounds that (1)

Centaur has failed to comply with the dispute resolution procedure agreed to in the parties’ contract,

and (2) for improper venue due to a forum selection clause. (Doc. No. 11). The court finds this matter

appropriate for decision without oral argument. See CivLR 7.1(d)(1). For the following reasons, the

court hereby GRANTS Defendant’s motion to dismiss.

I. BACKGROUND

In January 2008, Centaur entered into a sales representative agreement with ON

Semiconductor to be the exclusive sales representative for a territory including much of the

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southwestern United States. (Doc. No. 10, Second Amended Complaint, hereinafter “SAC,” ¶ 6).

ON Semiconductor terminated the sales representative agreement effective January 31, 2009. (SAC

¶ 8).

The sales representative agreement required ON Semiconductor to pay any unpaid

commissions to Centaur upon termination. (SAC ¶ 9). In March 2009, ON Semiconductor paid

$111,992.28 to Centaur in outstanding commissions. In April 2009, ON Semiconductor paid an

additional $2,839.45 in commissions. (SAC ¶ 14). Nonetheless, Centaur sought further information,

particularly ON Semiconductor’s sales data, to verify whether the paid commissions were accurate.

(SAC ¶ 11). ON Semiconductor’s alleged refusal to provide that information precipitated the current

dispute. 

The sales representative agreement binding the parties provides the following dispute

resolution procedure:

9.20 Alternate Dispute Resolution: Except for claims or controversies

involving intellectual property, which are exempt from this paragraph,

ON Semiconductor and Representative will attempt to settle any claim

or controversy arising out of the Agreement through consultation and

negotiation in good faith and a spirit of mutual cooperation.

9.20.1 Resolution Through Mediation: If those attempts fail, then the dispute will be

mediated by a mutually acceptable mediator to be chosen by ON

Semiconductor and Representative within forty-five (45) days after written

notice by either ON Semiconductor or Representative demanding mediation.

Neither ON Semiconductor nor Representative may unreasonably withhold

consent to the selection of a mediator, and ON Semiconductor and

Representative will share the costs of the mediation equally. By mutual

agreement, however, ON Semiconductor and Representative may postpone

mediation until ON Semiconductor and Representative have completed some

specified but limited discovery about the dispute. ON Semiconductor and

Representative may also agree to replace mediation with some other form of

alternative dispute resolution (ADR), such as neutral fact-finding or a minitrial.

9.20.2 Unsuccessful Resolution: Any dispute which ON Semiconductor and

Representative cannot resolve through negotiation, mediation or other form of

ADR within six (6) months of the date of the initial demand for it by either ON

Semiconductor or Representative may then be submitted to the courts within

Arizona for resolution. The use of any ADR procedures will not be construed

under the doctrines of laches, waiver or estoppel to affect adversely the rights

of either party. Nothing in this section will prevent either ON Semiconductor

or Representative from resorting to judicial proceedings if (a) good faith efforts

to resolve the dispute under these procedures have been unsuccessful or (b)

interim relief from a court is necessary to prevent serious and irreparable injury

to a party or to others.

(SAC, Ex. A at 11-12). 

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On August 5, 2009, an attorney for Centaur sent a letter to ON Semiconductor stating, 

In accordance with Section 9.20.1 of the Sales Representative Agreement, Centaur is

willing to submit this dispute over unpaid commissions to a mutually acceptable

mediator. Please provide us with the names of three mediators that are acceptable to

you for resolution of this dispute within fifteen days of receipt of this letter.

(Doc. No. 11, Ex. 3 at 26). Nonetheless, no mediation took place, and Centaur filed its complaint in

this case on September 18, 2009. (See Doc. No. 1). 

II. LEGAL STANDARDS

A motion to dismiss based on a forum selection clause is treated as a motion to dismiss for

improper venue pursuant to Federal Rule of Civil Procedure 12(b)(3). Argueta v. Banco Mexican,

S.A., 87 F.3d 320, 324 (9th Cir. 1996). Federal law governs the validity of a forum selection clause.

Id. (citing Manett-Farrow, Inc. v. Gucci America, Inc., 858 F.2d 509, 513 (9th Cir. 1988)). 

The court treats the motion to dismiss for failure to mediate as a motion to dismiss for failure

to state upon which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6). In

testing the complaint’s legal adequacy, the court may consider material properly submitted as part of

the complaint, including exhibits attached thereto, or material subject to judicial notice. Swartz v.

KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007). Furthermore, under the “incorporation by reference”

doctrine, the court may consider documents “whose contents are alleged in a complaint and whose

authenticity no party questions, but which are not physically attached to the [plaintiff’s] pleading.”

Janas v. McCracken (In re Silicon Graphics Inc. Sec. Litig.), 183 F.3d 970, 986 (9th Cir. 1999)

(internal quotation marks omitted). 

III. DISCUSSION

A. Improper Venue

ON Semiconductor contends that venue is improper in the Southern District of California

because the parties’ sales representative agreement, in Section 9.20.2, provides that “[a]ny dispute

which [the parties] cannot resolve through negotiation, mediation or other form of ADR . . . may then

be submitted to the courts within Arizona for resolution.” Mandatory forum selection clauses are

enforceable. See Nor. Cal. Dist. Council of Laborers v. Pittsburg-Des Moines Steel Co., 69 F.3d

1034, 1036-37 (9th Cir. 1995). “To be mandatory, a clause must contain language that clearly

designates a forum as the exclusive one.” Id. at 1037. 

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In Northern California District Council of Laborers, the Ninth Circuit considered the phrase,

“shall be enforceable . . . in the Superior Court . . . of San Francisco” and found it to be permissive

rather than mandatory. Id. at 1036-37. In Hunt Wesson Foods, Inc. v. Supreme Oil Co., the Ninth

Circuit considered a clause that provided that the courts of Orange County, California “shall have

jurisdiction over the parties in any action” and likewise found that it was permissive. 817 F.2d 75,

77 (9th Cir. 1987). 

Section 9.20.2 of the parties’ sales representative agreement contains a forum selection clause

that is no more mandatory than either Northern California District Council of Laborers or Hunt

Wesson. Although Section 9.20.2 may indicate an exclusive forum, it is just as readily understood to

merely indicate an optional forum to which both parties admit jurisdiction. Because either

interpretation is apt, Section 9.20.2 falls shorts of “language that clearly designates a forum as the

exclusive one.” Nor. Cal. Dist. Council of Laborers, 69 F.3d at 1037. Therefore, ON

Semiconductor’s motion for dismissal for improper venue is denied. 

B. Failure to Mediate

“Failure to mediate a dispute pursuant to a contract that makes mediation a condition precedent

to filing a lawsuit warrants dismissal.” Brosnan v. Dry Cleaning Station Inc., No. C-08-02028, 2008

WL 2388392, at *1 (N.D. Cal., June 6, 2008); see also HIM Portland, LLC v. DeVito Builders, Inc.,

317 F.3d 41, 44 (1st Cir. 2003). To determine whether a contract makes mediation a condition

precedent to filing a lawsuit, a court applies standard principles of contract construction. See HIM

Portland, 317 F.3d at 43. 

The Federal Arbitration Act, although it does not explicitly govern the mediation clause in the

parties’ contract, creates a federal policy in favor of alternative dispute resolution. See Moses H. Cone

Mem’l. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). Therefore, just as “any doubts

concerning the scope of arbitrable issues should be resolved in favor of arbitration,” id. at 24-25, the

court resolves any doubts about the parties’ mediation clause in favor of mediation. 

Section 9.20.1 of the sales representative agreement provides that, if good faith negotiations

fail to resolve a dispute, “then the dispute will be mediated by a mutually acceptable mediator.” In

the next section, 9.20.2, the sales representative agreement provides that, “[a]ny dispute with [the

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parties] cannot resolve through negotiation, mediation or other form of ADR . . . may then be

submitted to the courts within Arizona for resolution.” Section 9.20.1 is phrased in mandatory terms:

“the dispute will be mediated.” Section 9.20.2 emphasizes the mandatory language, by creating a

structure in which litigation becomes appropriate after “negotiation, mediation or other form of ADR”

fails to resolve the dispute. Therefore, these clauses create a requirement that the parties mediate

disputes before engaging in litigation. Cf. HIM Portland, 317 F.3d at 43-44. 

There is no dispute that the parties have not engaged in mediation. As mediation is a condition

precedent to litigation between the parties, the current lawsuit is premature. 

IV. CONCLUSION

For the foregoing reasons, ON Semiconductor’s motion to dismiss is GRANTED WITHOUT

PREJUDICE. The Clerk of the Court is directed to close the file. 

IT IS SO ORDERED.

DATED: February 2, 2010

 Hon. Jeffrey T. Miller

 United States District Judge

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