Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_05-cv-00101/USCOURTS-caed-1_05-cv-00101-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1441 Petition for Removal- Contract Dispute

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IN THE UNITED STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF CALIFORNIA

E. & J. GALLO WINERY, a California )

corporation, )

)

Plaintiff, )

)

v. )

)

ANDINA LICORES S.A., a corporation )

organized under the laws of Ecuador, )

)

Defendant )

____________________________________)

CV F 05-0101 AWI LJO

MEMORANDUM OPINION

AND ORDER DENYING

DEFENDANTS MOTION TO

DISMISS PURSUANT TO

RULE 12(b)(2); AND DENYING

PLAINTIFF’S CROSSMOTIONS FOR TRO,

PRELIMINARY INJUNCTION,

AND ISSUANCE OF LETTER

ROGATORY

Documents #21, #26, and #36

INTRODUCTION

This is a case that arises out of a distributorship contract between the parties wherein

Andina Licores S.A. (“Andina”) agreed to be a distributor of certain products of E. &J. Gallo

Winery (“Gallo”) in Ecuador. In August of 2004, Andina commenced a civil proceeding in

the Second Civil Court of Guayaquil, Ecuador (the “Ecuador action”) alleging Gallo

breached its distributorship contract with Andina. On October 26, 2005, Gallo filed a suit

against Andina in the Superior Court of Stanislaus County for declaratory relief, abuse of

process, unfair competition, and breach of contract (the “California action”). The California

action was removed to this court by Andina on January 25, 2005. 

In the instant motion, Andina moves for dismissal of the California action pursuant to

Rule 12(b)(2) of the Federal Rules of Civil Procedure. Gallo cross-moves for a Preliminary

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Injunction to prevent Andina from pursuing the Ecuador action and requests that the court

issue a letter rogatory to the court in Ecuador requesting their cooperation in enforcing the

order.

FACTUAL AND PROCEDURAL BACKGROUND

Gallo alleges that in 1978 it entered into an agreement with Andina, then a limited

liability company, to distribute two of Gallo’s products in Ecuador. In 1987 Andina changed

its structure to become a corporation and updated its distributor agreement with Gallo to

reflect the change. Gallo contends the distributor agreement grants non-exclusive rights to

distribute specified Gallo products. Andina contends the distributor agreement grants

exclusive rights. The parties agree that the distributor agreement designated California law

as governing and provided that the forum for any adjudication of issues arising under the

contract would be either the Superior Court of Stanislaus County or this court.

According to Gallo’s moving papers, in 1976 the then-military dictatorship of

Ecuador issued Decree No. 1038-A, which, among other things, invalidated forum selection

clauses in contracts, and altered the terms of contracts so that a party to a contract could not

“terminate, impair, amend or refuse to renew” the contract except that just cause be proven

before a competent (presumably Ecuadorian) judge. Decree 1038-A remained in effect until

1997 when it was repealed by the Ecuadorian National Congress in a piece of legislation

known as Law No. 22. The parties do not dispute the existence of Decree 1038-A during the

time both of the distributor agreements were executed, or is there any dispute as to the repeal

of the Decree. The parties dispute the effect of the repeal on the validity of forum selection

clauses that were incorporated into contracts that were executed during the period of time

Decree 1038-A was in effect. 

Gallo contends the effect of the repeal was to render valid the previously invalidated

terms of contracts, including forum selection clauses that were incorporated into contracts

that were executed while Decree 1038-A was in effect. Andina contends that those

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provisions of contracts that were modified or prevented by Decree 1038-A remained

modified or prevented after the repeal of the Decree. In other words, Andina contends the

effect of the repeal by Law 22 was not retroactive and Gallo contends the repeal had

retroactive effect.

In 2004 a dispute arose between Andina and Gallo. In an exchange of letters that

occurred in April and May of 2004, Andina claimed exclusive distribution rights under the

agreement and alleged that Gallo had breached the agreement by (1) selling its products

directly to Ecuador’s largest supermarket chain, Supermaxi; (2) by making late deliveries on

three shipments; and (3) by charging higher prices to Andina. Gallo refuted each of the three

allegations by return letter to Andina, noting that under the terms of the distributor agreement

Andina did not have sole distributorship rights and that any delays in shipment had been

caused by Andina. 

Andina filed the Ecuador action on August 11, 2004, alleging the same breaches of

contract it alleged in the letters that were sent to Gallo. In its motions for temporary

restraining order (TRO) and preliminary injunction, Gallo alleges Andina, in bringing the

action in Ecuadorian court invoked the provisions of Decree No. 1038-A. In addition to the

provisions of Decree 1038-A noted above, the Decree also allegedly provides a formula for

the calculation of damages that multiplies the distributor’s annual revenue derived from the

distribution of a producers product times the total number of years the distribution contract

has been in existence. Using this formula, Andina claims a total of $75 million in damages in

the Ecuador action. 

According to Gallo’s allegations, article 5 of Decree 1038-A provides for a drastically

foreshortened “verbal summary trial,” which compresses the time during which the defendant

may respond into only eight days and compresses the time for production of evidence into

only six days. Gallo alleges no discovery is allowed under this provision, and there is no

opportunity to examine or cross-examine witnesses.

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Gallo also alleges that Andina willfully ignored Gallo’s designation of counsel in

Ecuador for purposes of notice and in bad faith moved for appointment of a guardian ad litem

(curador) under Ecuadorian Civil Code Article 512. Gallo alleges Andina could only have

successfully petitioned for the appointment of a curador if Andina wrongfully represented to

the court that it did not know the whereabouts of Gallo and Gallo failed to appoint a

representative to receive service in Ecuador (which Gallo alleges they did do). Gallo alleges

that, because Andina mislead the Ecuadorian court into the appointment of the curador and

because the curador failed to notify Gallo timely of the suit or of the limited time for

response to Andina’s complaint, Gallo was denied the opportunity to raise valid defenses to

Andina’s action. Specifically, Gallo alleges that the appointed curador, a recent law school

graduate with no practical experience, answered Andina’s complaint omitting, among other

things, the affirmative defense of the forum selection clause in ¶ 8 of the distributor contract. 

Gallo retained its own counsel after it discovered what had happened.

The California action commenced in this court with the removal of the case from the

Stanislaus Superior Court on January 24, 2005. In the California action, Gallo requests

declaratory judgment on the validity and enforceability of the terms of the distributorship

agreement. Gallo also alleges claims for abuse of process, unfair competition under

California law, and breach of contract. Andina filed a motion to dismiss for lack of personal

jurisdiction on the same day the case was removed to this court. Andina’s motion to dismiss

was denied without prejudice because Andina failed to properly notice the motion. Gallo

filed a motion to remand on February 23, 2005, which was subsequently denied on April 15,

2005. Andina filed its second motion to dismiss on April 28, 2005. Gallo filed its opposition

to Andina’s motion and a cross-motion for preliminary injunction and letter rogatory on May

23, 2005. Gallo filed the instant motion for TRO two days later, on May 25, 2005. 

Apparently, the motivating factor behind Gallo’s motion for TRO was their receipt of

notification that the Second Civil Court in Guayaquil had requested final argument from the

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parties in that action, from which Gallo infers that a judgment is possibly imminent in the

Ecuador action.

In letter communications to Gallo and copied to the court, Andina initially announced

it will not be present at oral argument on Gallo’s TRO request because it does not wish to

risk waiver of general jurisdiction by making an appearance in court. The letter generally

communicated Andina’s contentions with respect to this motion. Subsequently, On June 1,

2005, Andina filed notice of special appearance to oppose Gallo’s motion for summary

judgment and filed its memorandum in opposition to Gallo’s motion.

The hearing on Andina’s motion to dismiss and on Gallo’s cross-motion for

preliminary injunction and letter rogatory was held on June 6, 2005. Both parties were

represented by counsel.

LEGAL STANDARD

The purpose in issuing a temporary restraining order is to preserve the status quo for a

short time pending a fuller hearing. Case law contains limited discussion of the standards for

issuing a temporary restraining order due to the fact that very few such orders can be

appealed prior to the hearing on a preliminary injunction. It is apparent however, that

requests for temporary restraining orders which are not ex parte and without notice are

governed by the same general standards that govern issuance of a preliminary injunction. 

See, Motor Vehicle Board of Cal. v. Orrin W. Fox, 434 U.S. 1345, 1347 n. 2, (1977); Los

Angeles Unified School District v. United States District Court, 650 F.2d 1004, 1008 (9th

Cir. 1981); Century Time Ltd. v. Interchron, 729 F. Supp. 366, 368 (S.D.N.Y. 1990). Since

the court has deemed Andina’s letter correspondence with Gallo and the court as opposition

to Gallo’s motion for TRO, and because Andina subsequently submitted (albeit belatedly) a

formal brief in opposition, the court finds Gallo’s request is not ex parte and will therefore

apply standards appropriate to issuance of a preliminary injunction. 

The legal principles applicable to a request for preliminary injunctive relief are well

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established. To prevail, the moving party must show either: “(1) a likelihood of success on

the merits and the possibility of irreparable injury; or (2) that serious questions going to the

merits were raised and the balance of hardships tips sharply in its favor.” Walczak v. EPL

Prolong, Inc., 198 F.3d 725, 731 (9th Cir.1999); Oakland Tribune, Inc. v. Chronicle

Publishing Company, Inc., 762 F.2d 1374, 1376 (9th Cir. 1985). The two formulations

represent two points on a sliding scale with the focal point being the degree of irreparable

injury shown. Walczak, 198 F.3d at 731; Oakland Tribune, 762 F.2d at 1376. The greater

the relative hardship to [the moving party], the less probability of success must be shown. 

Walczak, 198 F.3d at 731. “Under either formulation of the test, plaintiff must demonstrate

that there exists a significant threat of irreparable injury.” Oakland Tribune, 762 F.2d at 1376.

 In the absence of a significant showing of irreparability, the court need not reach the issue of

likelihood of success on the merits. Id.

It is well established in the Ninth Circuit that federal courts have the power to enjoin

those subject to their personal jurisdiction from proceeding with an action in a court of 

foreign jurisdiction. Seattle Totems Hockey Club, Inc. v. Nat’l Hockey League, 652 F.2d

852, 855 (9th Cir. 1981); Quaak v. Klynveld Peat Marwick Goerdeler Bedrijfsrevisoren, 361

F.3d 11, 16 (1st Cir. 2004). “[T]he power to enjoin should be ‘used sparingly.’ [Citation.]

‘The issue is not one of jurisdiction, but one . . . of comity.’ [Citation.]” Seattle Totems, 652

F.2d at 855. 

DISCUSSION

I. Jurisdiction and Andina’s Motion to Dismiss

Central to Andina’s defense in Gallo’s underlying action in this court and prominent

in their opposition to Gallo’s request for an antisuit injunction, is their claim this court lacks

personal jurisdiction over them. Gallo contends Andina consented to personal jurisdiction. 

Andina contends there was no consent because the laws of Ecuador rendered the forum

selection clause unenforceable. There is no doubt that consent is a traditional basis for the

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assertion of personal jurisdiction over a foreign party. Carnival Cruse Lines v. Shute, 499

U.S. 585 (1991). Therefore, the primary inquiry is whether the forum selection clause in the

Distributorship Contract is enforceable.

The Agreement of Distributorship provides, in pertinent part:

8. This agreement is entered into under the laws of the State of

California and shall be and shall be construed thereunder, and

any cause of action arising between the parties, whether under

this agreement or otherwise, shall be brought only in a court

having jurisdiction and venue at the home office of [Gallo].

[Gallo] and Distributor each hereby designate CT Corporation

System, 235 Montgomery Street, San Francisco, California

94104 as agent for service of process in any such cause of

action.

In its opposition to Gallo’s motion for temporary injunction, Andina makes no actual

argument for lack of personal jurisdiction, but refers to their argument in their motion for

dismissal of Gallo’s action pursuant to FRCP 12(b)(2). With respect to the issue of whether

the forum selection clause confers personal jurisdiction, Andina contends in their motion to

dismiss that personal jurisdiction is not conferred primarily by the forum selection clause

because the forum selection clause was invalid at the time the contract was executed in

Ecuador and remains invalid as a matter of Ecuadorian law to the present time. Gallo

vigorously contests this representation of controlling Ecuadorian law. The remainder of

Andina’s argument with regard to their consent to jurisdiction in the United States is their

claim that the forum selection clause is part of an “adhesion contract” and is unenforceable

because the clause places an unconscionable burden on Andina. The latter two argument are

not compelling. 

While the contract is a simple, preprinted, two page fill-in-the-blanks type contract. 

Andina presents no compelling argument that a contract is an adhesion contract simply

because its language is dictated by Gallo and is included in their standard, pre-printed

distributorship contracts. The forums selection clause has been used widely by Gallo and is

an integral part of their strategy of focusing their legal actions at their home office. Adhesion

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contracts are normally associated with consumer items, such as computer programs, and are

not normally associated with ongoing service relationships such as Gallo’s distributorship

agreement with Andina. The court concludes the Distributorship contract is not an adhesion

contract.

The forum selection clause in the Distributorship Agreement is also not

unconscionable. Andina’s main argument in this regard is that Andina is small and Gallo is

large. While this is true, this is not a recognized reason for the invalidation of forum

selection clauses. As Andina points out, Gallo sells its products through distributors on every

continent in the world except Africa and Antarctica. The invalidation of the forum selection

clause on the ground Andina proposes would have the effect of invalidating the forum

selection clauses in essentially all Gallo’s distributorship agreements and force upon Gallo

the unconscionable burden of litigating issues that arise under its distributorship agreements

in every corner and country of the world. The effect of invalidation of the forum selection

clause would impose a relatively greater burden on Gallo than on Andina.

This leaves the issue of whether forum selection clauses generally, and this one in

particular, are currently enforceable under Ecuadorian law. In terms of Andina’s motion to

dismiss, Andina has merely asserted the applicability of Decree 1038-A to invalidate the

forum selection clause without really addressing Gallo’s contention the decree was

subsequently repealed and is no longer in force. To avoid dismissal for lack of personal

jurisdiction under Rule 12(b)(2), Gallo need only make a prima facie showing of personal

jurisdiction. Lake v. Lake, 817 F.2d 1416, 1420 (9th Cir.1987). As Gallo has pointed out, a

forum selection clause in a written agreement is prima facie evidence that personal

jurisdiction has been established by consent. Kevlin Services v. Lexington State Bank, 46

F.3d 13, 15 (5th Cir 1995). Given the presumption of validity that is courts accord forum

selection clauses, Andina has not, at the present time established that the forum selection

clauses is not enforceable and that personal jurisdiction has not been consented to.

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The court need not address the other bases of personal jurisdiction at this point. 

Andina has failed to present a compelling argument that the forum selection clause, which is

presumed valid, is not enforceable in Ecuador. The forum selection clause may not be held

invalid on any of the other equitable grounds Andina asserts. By consenting to the clause in

the Distributorship Agreement, Andina consented to personal jurisdiction in a court having

Venue at Gallo’s home office in Modesto, California.

II. Gallo’s Motion for Preliminary (Antisuit) Injunction

The court begins by noting there is a division of opinion between the circuits as to the

proper standard to employ in determining the propriety of an antisuit injunction. See Quaak,

361 F.3d at 17 (discussing the more “permissive” approach of the Fifth and Ninth Circuits

and the more “restrictive” approach of the Second, Third, Sixth and D.C. Circuits). In the

Ninth and Fifth Circuits, the district court does not abuse its discretion in issuing an antisuit

injunction “when it has determined ‘that allowing simultaneous prosecution of the same

action in a foreign forum thousands of miles away would result in “inequitable hardship” and

“frustrate and delay the speedy determination of the cause.”’ [Citation.]” Kaepa, Inc. v.

Achilles Corp., 76 F.3d 624, 627 (5th Cir. 1996); Seattle Totems, 652 F.2d at 855. The

Kaepa court noted the application of traditional equitable factors to determine whether

simultaneous prosecution in the foreign court would amount to an “inequitable hardship.” 

Kaepa, 76 F.3d at 627 n.9. The equitable factors employed in Ninth Circuit cases assess

whether the foreign litigation “would: (1) frustrate a policy of the forum issuing the

injunction, (2) be vexatious or oppressive, (3) threaten the issuing court’s in rem or quasi in

rem jurisdiction; or (4) prejudice other equitable considerations.” Seattle Totems, 652 F.2d at

855 (citing In re Unterweser Reederei, Gmbh, 296 F.Supp. 733, 735-736 (M.D. Fla. 1969)).

A. Considerations of Comity

Courts in circuits employing the more restrictive analysis for the issuance of antisuit

injunctions place relatively greater emphasis on the principle of comity. See, e.g. Gau Shan

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Co. Ltd. v. Bankers Trust Co., 956 F.2d 1349, 1354 (6th Cir. 1992) (“Comity dictates that

foreign antisuit injunctions be issued sparingly and only in the rarest of cases.”). Although

some courts in circuits employing the more restrictive test have opined that the Ninth Circuit

test requires only that the foreign litigation duplicate the parties and issues in the home

forum, see, e.g. Laker Airways, Ltd. v. Sabena Airlines, 731 F.2d 909, 928 (D.C. Cir. 1984),

that opinion overstates the holdings in Fifth and Ninth Circuit cases. Both the Seattle Totems

and Kaepa courts recognized that considerations of comity play a role in the determination of

the appropriateness of antisuit injunctions. Seattle Totems, 652 F.2d at 855; Kaepa, 76 F.3d

at 627 (although “the standard espoused in Unterweser and [Bethell v. Peace, 441 F.2d 495

(5th Cir. 1971)] focuses on the potentially vexatious nature of foreign litigation, it by no

means excludes the consideration of principles of comity”). Similarly, other courts using the

more restrictive standard have observed that considerations of comity remain part of the

determination in antisuit injunctions in the Fifth and Ninth Circuits. Quaak, 361 F.3d at 17.

In the context of parallel actions within the United States, the mirror image issues of

antisuit injunction and abstention are regulated primarily by the intertwined concepts of

comity and federalism. See Younger v. Harris,401 U.S. 37, 44 (1971) (describing “comity”

as proper federal respect for state functions within a federal system). Outside the jurisdiction

of the United States where federalism is not a consideration, the same general principles of

comity are applied with respect to parallel proceedings in a foreign court. See AAR

International, Inc. v. Nimelias Enter. Inc., 250 F.3d 510, 518 (7 Cir. 2001) (applying principle

of comity to issue of abstention under Colorado River doctrine). In the context of parallel

actions in domestic and foreign jurisdictions, comity has been defined variously as “a kind of

‘golden rule’ which commands respect for foreign law, Access Telecom, Inc. v. MCI

Telecommunications Corp., 197 F.3d 694, 708 (5th Cir. 1999), or as a “blend of courtesy and

expedience.” Medtronic, Inc. v. Catalyst Research Corp., 518 F.Supp. 946, 955 (D. Minn.

1981). 

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Although comity is a principle that evades precise definition, it clearly implicates two

concerns. The first concern is the relative authority of the foreign and domestic courts to

speak to the issue raised by the action. The acts of foreign sovereigns taken within their own

jurisdiction is deemed valid. W.S. Kirkpatrick & Co., Inc. v. Environmental Tectonics Corp.,

Int’l, 493 U.S. 400, 409 (1990). In the context of contract disputes, for example, concerns of

comity weigh heavily where a contract provision that is legal in the United States, is not legal

in the country where the contract is to be primarily performed. See, e.g., Access Telecom,

197F.3d at 708 (a contract legal in the U.S. but illegal in Mexico raises concerns of comity). 

The second concern is the investment of time and resources invested by the foreign court in

the resolution of the matter. Thus, the avoidance of interference with an action that was

previously commenced in a foreign jurisdiction implicates concerns of comity. Medtronic,

518 F.Supp. at 954.

Because this case raises concerns about both non-interference in cases that have been

previously commenced in foreign courts and of the relative competence of this court and the

Ecuadorian court to decide the underlying issues, the principle of comity looms larger in this

case than in the Fifth and Ninth Circuit cases that have place relatively little emphasis on the

principle. 

In this case, unlike the factual situations in Seattle Totems, Kaepa, and Unterweser,

the foreign forum is where the underlying dispute was first filed. In Seattle Totems, Kaepa,

and Unterweser the issue of comity was relatively less important because the foreign actions

were, in each case, filed significantly later than the case filed in the home forum. In contrast,

in this case the action was filed several months earlier in the foreign forum, but the instant

California action was not filed until the Ecuadorian case was nearing a point of completion. 

What Gallo is essentially asking this court to do is bring the Ecuadorian action to a halt at a

point where the legal process has nearly run its course so that Gallo can litigate its claims in

what it perceives to be a more favorable forum. The intrusion into the sovereignty of the

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Ecuadorian court is substantially greater here, where the Ecuadorian court has allegedly

progressed to the final phase of its proceeding. 

The district court cases Gallo relies heavily upon, Sun World, Inc. v. Olivarria, 804

F.Supp. 1264 E.D. Cal. 1992), and Farrell Lines v. Columbus Cello-Poly Corp., 32 F.Supp.

2d 118(S.D. N.Y. 1997), add nothing to the analysis. In both cases the United States court

that eventually issued the antisuit injunction was the court where the action that was the

subject of the foreign suit was first filed. The analysis in these cases is otherwise not

different from the appellate cases cited.

Of the cases relied upon by Gallo, this court can find only one case, Bethell v. Peace,

441 F.2d 495 (5th Cir. 1971), where district court granted an antisuit injunction to prevent a

party from prosecuting a suit in the first-filed forum. In Bethel, the action was first filed in

the Bahamas in accordance with a forum selection clause in the contract that gave rise to the

dispute. In Bethel, however, the contract in question was previously found to have been

fraudulent and the complaint filed in the Bahamian court was found to have been filed for the

purpose of furthering a fraudulent real estate scheme. In addition, the court in Bethel relied

on the fact that all of the parties in the second-filed Florida action (including the plaintiff in

the Bahamian action) were Florida citizens. The facts of Bethel are rather convoluted but it is

clear that the outcome of that case turned on the finding of a fraudulent contract and on the

common citizen ship of all the parties in the forum issuing the antisuit injunction. These

facts distinguish Bethel from the case at bar.

With respect to the relative abilities of the U.S. court and the Ecuadorian court to

decide the underlying controversy in the case, it is evident the Ecuadorian court is more

competent to decide the key issue; that is, whether the provisions of Decree No. 1038-A

apply or not. According to Gallo’s allegations, the Decree No. 1038-A is central to the

Ecuador action. Andina has allegedly relied on the “summary verbal trial” procedure that is

authorized by that decree and relies on the decree to invalidate the forum selection clause of

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the contract, among other things. Gallo alleges the decree is invalid, having been repealed by

Ecuadorian legislature. The court admits to more than just a little puzzlement at how a court

can employ a judicial process that is authorized by an enactment that has been invalidated

several years in the past. Either Decree No. 1038-A has been invalidated and the effect of the

invalidation is retroactive under Ecuadorian law, or it has not been invalidated or the effect of

any invalidation is not retroactive. It is certain that the Ecuadorian court is competent to

decide this key underlying issues and this court is not. 

The court concludes the principle of comity is implicated on the facts of this case to a

greater extent that other Fifth and Ninth Circuit cases relied upon by Gallo and that

considerations of comity weigh in favor of non-interference in the Ecuador action.

A. “Inequitable Hardship”

The court next considers whether Gallo would suffer an “inequitable hardship” if an

antisuit injunction did not issue. Gallo contends that the facts of this case implicate three of

the four factors in Unterwesser. However, when the court considers the three Unterweser

Gallo contends are implicated in this case, the court cannot conclude Gallo suffers an

inequitable hardship if the injunction does not issue. 

1. Frustration of a Policy of the Court

The first Unterwesser factor is whether a policy of the court will be frustrated if

injunction does not issue. Gallo contends the Ecuador action will frustrate the policy of the

court to enforce contractually established forum selection clauses and to assure the due

process rights of its citizens. Gallo is unpersuasive on both points. 

As the court in Seattle Totems pointed out, antisuit injunctions invoke issues of

comity, not jurisdiction. Forum selection clauses implicate the jurisdictionally related issues

of venue or forum non conveniens, but not issues of comity. The fact there exists a forum

selection clause does not prohibit a party from filing a suit either in the United States or

abroad in a court not designated by the forum selection clause. While courts having

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jurisdiction in a particular case will give effect to forum selection clauses where issue of

proper venue are raised, the cases cited by Gallo do not support the contention that

enforcement of a forum selection implicates a policy so compelling as to justify the

encroachment of one court on the jurisdiction of another. The remedy for a party who is

called to defend a complaint in a forum other than the one designated by the forum selection

clause is by petition to the court where the action was brought for change of venue. So far as

this court is aware, there is no support for the proposition that a party seeking to enforce a

forum selection clause should do so by seeking an injunction in the court designated by the

forum selection clause rather than by petition for change of venue in the first-filed forum.

While this court has a strong policy to preserve the due process rights of parties

within its jurisdiction, Gallo presents no authority for the proposition this court has authority

to assure the preservation of rights in foreign jurisdictions where parties may place

themselves through contractual arrangements. While procedures in foreign courts may

potentially amount to due process violations from the standpoint of American courts and

district courts in particular, courts in this country are not empowered to act as guarantors of

due process in foreign jurisdictions where United States citizen companies may find

themselves litigating. Here again, comity looms large in the analysis. While the proceeding

before the Ecuadorian court may violate our notions of due process, and may be based on a

decree that has been invalidated, considerations of comity should prompt us to allow the

foreign jurisdiction to make its own determinations concerning the fairness and validity of the

proceeding before it.

Further, the underlying policy at play here is the parties’ freedom to contract. 

Although the facts are not complete here, the court assumes Gallo mailed the form

distributorship contract to Ecuador where it was signed and returned. Gallo is no stranger to

contracting across state and national boundaries and is presumed to have knowledge of the

laws of foreign jurisdictions that exist at the time of contract execution that could modify

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provisions of contracts. In short, the court must assume Gallo knew what it was doing when

it initially signed, and then later renewed the distributorship contract, and that it did so

voluntarily, understanding that the laws of the distributor’s county could have an effect on the

enforceability of the contract’s provisions. 

2. Vexatious or Oppressive

Second, the Ecuador action is not vexatious or oppressive in the sense contemplated

by Unterweser or Seattle Totems. In those cases, the defendants in the first-filed cases filed

suit in distant jurisdictions to litigate the same issues that were already under litigation in the

home forum. The foreign cases were filed for the purpose of derailing or impeding the

plaintiff’s ability to litigate the claims in the first-filed action. That is not the case here. As

previously discussed, Andina filed first in Ecuador, and Gallo did not file this case until

several months later. In addition, Gallo’s request to restrain Andina’s participation in the

first-filed Ecuadorian case was not filed because of difficulties caused by the foreign case in

Gallo’s prosecution of this case, it was filed solely because the foreign case is coming to a

close and Gallo wants to forestall the issuance of a possibly adverse judgment. The fact that

the Ecuadorian action is coming to a conclusion and Gallo has waited until the end of the

case to request an injunction argues strongly the Ecuador action is not oppressive or

vexatious within the meaning of governing case authority.

In the previously discussed case of Bethell v. Peace, the only case cited by the parties

where the court found the first-filed action was vexatious, the finding of vexatiousness was

based on the court prior finding that the filing of the first complaint in the Bahamas was an

integral part of a scheme to defraud. Presumably, the idea in Bethel was that the defrauding

party filed a claim in the Bahamas on claims that the plaintiff in the Bahamian case knew

would be the mirror image of those that would inevitably be filed in Florida by the aggrieved

victims of the fraudulent scheme. The idea was thus to file preemptively in order to frustrate

the litigation of the case in a forum that was plainly more convenient to all parties. There is

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no such finding of fraudulent intent in the present case, and the court has no basis upon which

it could conclude the action for breach in Ecuador was filed to frustrate the litigation of issues

that were inevitably going to be raised by Gallo in this forum.

In their motion for temporary injunction and in their reply brief supporting the

motion, Gallo relies heavily on the district court cases of Sun World, Inc. v. Olivarria, 804

F.Supp. 1264 E.D. Cal. 1992), and Farrell Lines v. Columbus Cello-Poly Corp., 32 F.Supp.

2d 118(S.D. N.Y. 1997). These cases add nothing to the analysis. In both cases the United

States court that eventually issued the antisuit injunction was the court where the action that

was the subject of the foreign suit was first filed. The analysis in these cases is otherwise not

different from the appellate cases cited.

3. Other Equitable Considerations

Gallo argues that there are several “other equitable considerations will be prejudiced”

within the meaning of the fourth Unterweser factor. Gallo points primarily to the lack of due

process in the Ecuador action that was exploited to Gallo’s detriment such that Gallo was

unable to raise valid defenses or conduct meaningful discovery. Gallo also points out that

information relating to Gallo’s prices, shipments and other relevant matters is located in

Modesto. 

Assuming the validity of Gallo’s allegations concerning the civil procedure in the

Ecuador action, the court agrees that Gallo could possibly be subject to a civil procedure that

can best be described as a “kangaroo court.” The result is not as prejudicial as Gallo

contends, however.

First, as discussed previously, concerns of comity favor non-interference by this court

in the Ecuadorian action. At its core, the Ecuadorian action is a dispute as to whether the

distributorship agreement makes Andina the exclusive or non-exclusive distributor of the

products sold by Gallo. In this regard the contract speaks for itself and this court must

assume the Ecuadorian court can discern the meaning of “non-exclusive distributor” as well

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as this court can. Thus damage to Gallo as resulting from an adverse judgment seems

somewhat remote or speculative given the apparent straightforwardness of the terms of the

contract. Further, to the extent Gallo is subject to a legal process that fails to conform to

current Ecuadorian law or to considerations of fundamental fairness, the principle of comity

dictates the Ecuadorian court should be presumed able to assure the rights of parties before

that court. This court cannot presume the Ecuadorian court incapable of fair proceedings.

However, to the extent Gallo may be subject to a judgment for damages on the scale

alleged by Gallo, if the judgment is acquired by gross abrogation of due process rights, it

would clearly be unenforceable in this country. In light of the alleged glaring due process

shortcomings in the Ecuador action, this court would be compelled to find the Ecuadorian

court was not a court of competent jurisdiction and the issues adjudicated in that court would 

not have preclusive effect on issues before this court. See Rein v. Providian Financial Corp.,

270 F.3d 895, 899 (9th Cir. 2001) (claim preclusion is appropriate where judgment in prior

adjudication rendered by court of competent jurisdiction). Thus, whatever impediments

Gallo might suffer as a result of a judgment in the Ecuador action would only apply within

the jurisdiction of the Ecuadorian court, whose jurisdiction and processes this court has no

power to alter or direct. 

The issue of records and witnesses does not tip strongly in favor of Gallo either. The

facts presented tend to indicate the Ecuadorian action implicates Andina’s records and

witnesses to about the same extent the action in this court would. There is nothing in the

facts presented that established that the burdens of prosecution of all the issues in this case

would weigh any heavier on Gallo in Ecuador that it would on Andina in this court.

4. Imminent Irreparable Harm

Gallo contends the traditional requirements of injunctive relief are satisfied because

Gallo is in imminent danger of suffering irreparable harm as a result of the impending

judgment in the Ecuadorian court. The allegation of imminent irreparable harm, however,

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requires this court accept the notion that the Ecuadorian court is incapable of contemplating

Gallo’s allegations of fundamental unfairness resulting from Andina’s alleged bad-faith

manipulation of the proceedings. Implicit in the concept of comity is the notion that foreign

courts are not fundamentally corrupt and are capable of rendering sound judgment. The

concept of comity, in other words, requires that this court, absent some affirmative showing

of incompetence of the Ecuadorian court, is capable of rendering a decision that will not

impair Gallo’s fundamental rights. In light of that notion, this court cannot find imminent

and irreparable harm based solely on the fact a cause will be tried in a foreign court.

B. Frustration and Delay of Proceedings

What has been hinted at by Andina, but never directly addressed by the parties is the

fact that the vitality of the California action ultimately depends on the willingness of Andina

to submit to jurisdiction in this court. This court can find there is jurisdiction over Andina on

the basis of Andina’s consent, but this court cannot enforce its judgments on Ecuadorian

nationals in Ecuador or in Ecuadorian courts any more than a court in Ecuador could enforce

its judgements here on American nationals. Stated another way, even if the facts of this case

warranted an antisuit injunction, this court is not aware of any means by which the injunction

could be enforced. 

Ultimately, Andina’s willingness to submit to the jurisdiction of this court is going to

depend on whether the Ecuadorian court finds the protectionist provisions of Decree 1038-A

are applicable to the distributorship contract. As previously discussed, this court is not

empowered to make a decision on the applicability of the protectionist provisions of Decree

1038-A that would be enforceable in Ecuador. With respect to the enforceability of the

forum selection clause, Gallo argues that Decree 1038-A was repealed and the repeal was

retroactive. Gallo does not argue that a foreign jurisdiction may not make and enforce

protectionist laws that invalidate forum selection clauses. If the Ecuadorian court finds the

provisions of the contract are valid in light of the repeal of Decree 1038-A, then Andina will

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be required to come to this court in order to settle its grievances with Gallo. If, on the other

hand, the Ecuadorian court decides the protectionist provisions of Decree 1038-A are

applicable to contracts that were executed while that decree was in effect, there is nothing

this court can do to invalidate that decision and Gallo will have to decide whether it wants to

continue doing business under the conditions imposed by the decree. Either way, it is the

Ecuadorian court that is a position of authority with respect to the laws of that nation and

proceedings in this court will depend, to a great degree on proceedings in the Ecuadorian

court that this court is without power to influence.

It is clear from the above discussion that the impending decision of the court in the

Ecuador action will not frustrate or delay the speedy determination of the cause before this

court. If anything, the decision of the Ecuadorian court has the potential to make the outcome

of the issues pending in this case clearer, or, at worst, the outcome of the Ecuador action will

have little effect on the outcome of this case. It does Gallo little good for this court to rule

the forum selection clause valid if the Ecuadorian court rules it invalid as a result of the

continued applicability of Decree No. 1038-A. 

In addition, the case filed in this court by Gallo is not the mirror image of the case

filed in Ecuador by Andina. Essentially Gallo, in the California action, is suing Andina for

breaching the distributorship contract by suing Gallo in the Ecuadorian action. The

Ecuadorian case is essentially a complaint for damages arising out of the same contract but

from different alleged acts. In Seattle Totems, Kaepa, and Unterweser as well as in Bethel,

the antisuit injunction was issued to prevent litigation in a suit that raised identical issues as

the suit in the first filed forum. Thus, even if the standard for issuance of an antisuit

injunction in the Ninth Circuit abandoned the issue of comity entirely and required only that

the foreign litigation duplicate the parties and issues in the home forum, Laker Airways, 731

F.2d at 928, Gallo’s action in this forum would not fulfil that requirement. 

It does not matter that, as Gallo alleges, Andina would be required to bring their

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claims in this court as compulsory counterclaims. The point is the identity of claims

requirement exists to satisfy the requirement that the foreign action be for the purpose of

“frustrat[ing] and delay[ing] the speedy determination of the cause.”’ [Citation.]” Kaepa, Inc.,

76 F.3d at 627. In the present context, the purpose of the Ecuadorian action is not to prevent

timely resolution of the claims in this court; rather, the action in this court is for the purpose

of preventing timely resolution of the issues in the Ecuadorian court. This court may not now

enjoin that action merely because Gallo now finds themselves in an unfavorable situation.

On the basis of the consideration of both principles of comity and equity, the court

finds Gallo has failed to assert reasons sufficient to support is request for TRO or injunction

of Andina’s action in Ecuador.

THEREFORE, in consideration of the foregoing, it is HEREBY ORDERED that

Andina’s motion to dismiss pursuant to Rule 12(b) of the Federal Rules of Civil Procedure is

hereby DENIED. Gallo’s motion for preliminary Injunction or TRO is also DENIED.

IT IS SO ORDERED.

Dated: June 24, 2005 /s/ Anthony W. Ishii 

h2ehf UNITED STATES DISTRICT JUDGE

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