Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_07-cv-00412/USCOURTS-caed-1_07-cv-00412-7/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/GSA

MEMORANDUM DECISION AND

ORDER DENYING DEFENDANT'S

SECOND MOTION TO DISMISS OR

TRANSFER (Doc. 30) AND

GRANTING PLAINTIFF’S

COUNTERMOTION TO FILE SECOND

AMENDED COMPLAINT (Doc. 33)

By Memorandum Decision filed on July 17, 2007, Defendant

General Wire Spring Company’s (General Wire) motion for dismissal

or transfer for improper venue pursuant to Rule 12(b)(3), Federal

Rules of Civil Procedure, was denied. General Wire’s motion to

dismiss for failure to state a claim pursuant to Rule 12(b)(6)

was denied in part and granted in part with leave to amend. 

(Doc. 13). Thereafter, Plaintiff Vision Technology Design &

Manufacturing, Inc. (Vision Tech) filed a First Amended Complaint

(FAC). 

Case 1:07-cv-00412-OWW -GSA Document 45 Filed 02/05/08 Page 1 of 23
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The FAC alleges that Vision Tech, a California corporation,

has been in the business of manufacturing sewer line cameras,

sewer line leak detectors and other similar products; that, prior

to 2002, Vision Tech sold its products to distributors and to

ultimate consumers; and that General Wire, a Pennsylvania

corporation, is a distributor and seller of sewer line

maintenance and inspection products, including sewer line

cleaners, cameras and leak detectors, which it sells to

individuals and businesses in the plumbing industry. The FAC

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

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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 full in

August 2006.

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 those 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 those

sales projections and purchase orders, Vision

Tech ordered sufficient parts from its

vendors to manufacture General Wire’s

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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

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 specifically manufactured

with General Wire’s name, the name of General

Wire’s products, and/or other General Wirespecific 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 damages

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

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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

Vision Tech ‘cease and desist from ...

designing, manufacturing and promoting’ its

Intruder and Intruder Elite products ....

21. In its demand letter, General Wire

asserts: ‘As a result of both the

similarities 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. 

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24. There is no likelihood of confusion

between Vision Tech’s products and General

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.

The FAC alleges the following causes of action:

1. First Cause of Action for breach of

contract - exclusive requirements contract;

2. Second Cause of Action for breach of

contract - purchase orders;

3. Third Cause of Action for promissory

estoppel;

4. Fourth Cause of Action for unjust

enrichment;

5. Fifth Cause of Action for common count - 

goods sold and delivered;

6. Sixth Cause of Action for declaratory

judgment.

The Sixth Cause of Action alleges in pertinent part:

58. 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.

59. 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.

A Scheduling Order was filed on August 21, 2007 (Doc. 23). 

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Also on August 21, 2007, General Wire filed its Answer,

Affirmative Defenses, and Counterclaim (Doc. 24). The TwentySecond Affirmative Defense is captioned “Intellectual Property,

Including Trade Dress Claims.” 

Attached to General Wire’s motion is a copy of a letter

dated August 21, 2007 from General Wire’s attorney, Steven

Zoffer, to Benjamin Hall, then counsel for Vision Tech. The

August 21, 2007 states:

By way of follow-up to our discussions at the

time of our Rule 26(f) Conference and

Conference before Judge Wanger, General Wire

would be agreeable to not assert its

intellectual property claims regarding the

similarities between General Wire’s Gen-Eye

products and Vision Tech’s Intruder and

Intruder Elite products, which it would

otherwise intend to include by way of

counterclaim in this matter. In exchange,

and with the understanding that the only

basis for Vision Tech’s declaratory judgment

action is the assertion of General Wire’s

intellectual property rights, we would

propose an agreement by which General Wire

will forego its intellectual property claims

in exchange for a withdrawal of the

Plaintiff’s declaratory judgment claim, as

set forth in the Complaint [sic]. This

proposal would have the effect of not only

narrowing the rather diverse disputes which

currently exist between the parties in an

effort to move this matter toward resolution,

but would also, we believe, significantly

conserve the parties’ respective resources

which would be needed for discovery and

pursuing these claims through litigation.

As you know, including from General Wire’s

March 2, 2007 correspondence, General Wire

takes the protection of its intellectual

property very seriously. Further, General

Wire strongly believes that Vision Tech’s

Intruder and Intruder Elite products, as they

exist in their current versions, infringe

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upon General Wire’s intellectual property

rights. General Wire, however, also

understands that intellectual property

litigation is expensive and will entail

engineering experts, market confusion

experts, and surveys of the parties’

respective customers. To the extent the

parties currently are able to resolve the

declaratory judgment/intellectual property

component of this litigation, General Wire

would agree not to advance its current trade

dress, trade secret, and unfair competition

counterclaims which are directed to the

Intruder and Intruder Elite products being

offered by Vision Tech.

In this way, General Wire would not object to

Vision Tech’s continued promotion and sale of

its current Intruder and Intruder Elite

products. In exchange, we would propose that

Vision Tech simply agree to the enclosed

Consent Motion, or, in the alternative, work

with General Wire to otherwise resolve the

declaratory judgment/intellectual property

component of this litigation at the current

time. Notwithstanding this proposal, General

Wire reserves the right to amend its Answer,

New Matter, and Counterclaim to include its

trade dress, trade secret, unfair competition

claims, as well as any related intellectual

property claims, in the event that General

Wire and Vision Tech cannot currently resolve

this issue.

Attached to Mr. Zoffer’s letter is a pleading captioned “Consent

Motion to Withdraw Plaintiff’s Declaratory Judgment Claim”, which

states in pertinent part:

8. The parties have agreed to resolve [the

Sixth Cause of Action] ... and, accordingly,

request this Court enter the attached Order.

9. Specifically, in exchange for General

Wire’s agreement to forego its intellectual

property counterclaims regarding the

similarities which General Wire believes to

exist between General Wire’s Gen-Eye products

and Vision Tech’s Intruder and Intruder Elite

products, Vision Tech, in turn, agrees to

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withdraw its sixth cause of action requesting

a declaratory judgment.

10. General Wire specifically agrees not to

object to Vision Tech’s continued promotion

and sale of the Intruder and Intruder Elite

products, as those products currently exist.

11. Vision Tech, therefore, no longer

requires a declaration from this Court

regarding its continued promotion and sale of

its Intruder and Intruder Elite products.

Attached to the Consent Motion is the following Order granting

the Consent Motion, withdrawing the Sixth Cause of Action, and

striking Paragraphs 57-59 of the FAC and Paragraph 10 of the

Prayer. 

By letter dated September 13, 2007, Daniel Jamison, present

counsel for Vision Tech, responded:

Vision Tech[] ... will not enter into your

proposed Consent Motion. However, if General

Wire ... willing to stipulate to judgment in

Vision Tech’s favor with respect to the trade

dress issue, adequately protecting Vision

Tech from any such future claims, we may be

able to work out an arrangement along those

lines, provided that General Wire also

stipulate that the remaining disputes

continue to be litigated in the Eastern

District of California. In the alternative,

the entire lawsuit could be resolved

immediately by (1) sufficient payment by

General Wire to Vision Tech and (2) an

agreement fully and finally resolving the

trade dress claims, so that each party can

proceed with its respective business without

interference from the other party.

A. General Wire’s Motion to Dismiss or Transfer.

General Wire moves the Court “to enter the proposed Order of

Court attached to General Wire’s Motion, disposing of Vision

Tech’s claim for a declaratory judgment, entering a declaration

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in favor of Vision Tech, and dismissing or transferring this

matter to the United States District Court for the Western

District of Pennsylvania on the basis of improper venue.” The

proposed Order attached to General Wire’s instant motion states

in pertinent part:

1. Plaintiff’s sixth cause of action for a

declaratory judgment is dismissed, and

paragraphs 57, 58, and 59 of Plaintiff’s

Amended Complaint, was well as paragraph 10

of Plaintiff’s Prayer following Plaintiff’s

Amended Complaint, are stricken.

2. Plaintiff may continue to promote and

sell its Intruder and Intruder Elite

products, as those products currently exist

and in their current versions, with the

understanding that Plaintiff’s products shall

neither resemble the color or markings of

Defendant’s Gen-Eye products nor display

Defendant’s corporate or trade name.

3. The remainder of this action is

transferred to the United States District

Court for the Western District of

Pennsylvania. Because Plaintiff’s

declaratory relief claim is moot and,

therefore, no longer validly existing in the

Eastern District of California, enforcement

of the forum selection clause contained in

the parties’ purchase orders is reasonable.

As discussed in the July 17, 2007 Memorandum Decision, there

is a forum selection clause in General Wire’s 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.

The July 17, 2007 Memorandum Decision ruled in pertinent part:

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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 

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

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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 in the

Eastern District of California, enforcement

of the forum selection clause is

unreasonable. 

In support of the instant motion, General Wire contends:

In light of General Wire’s current

willingness to forego its intellectual

property claims so that the choice of law and

venue in its purchase orders may be given the

intended effect, Vision Tech’s declaratory

judgment claim is now moot. To the extent

that General Wire will not object to Vision

Tech’s continued promotion and sale of its

Intruder and Intruder Elite products, as

those products currently exist in their

current versions, Vision Tech no longer

requires the requested declaration. 

Accordingly, and consistent with the Court’s

prior ruling, enforcement of the forum

selection clause contained in the parties’

purchase order terms and conditions is no

longer unreasonable, and the remainder of

this action properly should be transferred to

the Western District of Pennsylvania. 

Vision Tech opposes General Wire’s motion.

First, Vision Tech contends, the motion is “procedurally

defective”. Although the motion is based on Rule 12(b)(3),

Vision Tech argues that it is confusing and appears to be a

motion to strike and/or for summary judgment because of language

in the proposed Order striking allegations of the FAC and the

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language in the proposed Order withdrawing Vision Tech’s Sixth

Cause of Action as long as Vision Tech’s products do not resemble

General Wire’s products. Vision Tech contends that the motion

does not comply with Rule 7(b)(1), Federal Rules of Civil

Procedure, because it does not state the grounds with

particularity; and the proposed Order purports to withdraw the

infringement claim but then requests the court to protect General

Wire from infringement. Vision Tech contends that, if the motion

is characterized as one to strike, it is untimely. If the motion

is characterized as one for partial summary judgment in favor of

Vision Tech, it is not authorized by Rule 56, Federal Rules of

Civil Procedure, which authorizes “motions for summary judgment

by a party making a claim against the opposing party in the

former’s favor and by a party opposing a claim against the party

making the claim in favor of the party opposing the claim, not in

favor of the party making the claim!” 

While General Wire’s motion is awkwardly worded, it is clear

that General Wire is attempting to remove what it believes is the

only obstacle to enforcement of the forum selection clause in the

purchase orders. Therefore, although the motion and proposed

Order uses the term “strike”, the motion clearly is not a Rule

12(f) motion. Vision Tech’s reference to summary judgment is

meaningless given the context of General Wire’s motion.

Vision Tech further argues that General Wire has misread the

July 17, 2007 Memorandum Decision. As Vision Tech correctly

notes, denial of the motion to dismiss or transfer was not based

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Vision Tech further argues that a partial summary judgment in 1

Vision Tech’s favor on the Sixth Cause of Action will not remove

the claim from the case because the Court could later reconsider

unless judgment pursuant to Rule 54(b), Federal Rules of Civil

Procedure, is granted. General Wire is not moving for partial

summary judgment but is seeking an order withdrawing the Sixth

Cause of Action and transferring the case to Pennsylvania. Vision

Tech further notes that General Wire’s Twenty-Second Affirmative

Defense relates to its intellectual property claims. However,

General Wire’s responsive pleading can be amended if the motion is

granted.

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solely on the existence of the Sixth Cause of Action.1

General Wire replies that the July 17, 2007 Memorandum

Decision “determined that the propriety of venue in the Eastern

District of California was contingent upon Vision Tech’s seeking

declaratory relief” and that the Court “indicated that Vision

Tech’s declaratory relief claim was broader than the parties’

agreed upon forum selection clause that properly governed Vision

Tech’s remaining contractually based claims.” 

General Wire’s reading of the July 17, 2007 Memorandum

Decision is incorrect. To repeat, the July 17, 2007 Memorandum

Decision ruled: 

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

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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 in the

Eastern District of California, enforcement

of the forum selection clause is

unreasonable. 

General Wire’s basic premise, that its stipulation to

resolution of the declaratory relief claim mandates transfer of

venue of this action pursuant to the forum selection clause in

the purchase orders, is without merit. General Wire’s second 

motion to dismiss or transfer is DENIED.

B. Vision Tech’s Countermotion to File Second Amended

Complaint.

Vision Tech moves for leave to file a Second Amended

Complaint to add causes of action for inducement of breach of

contract, and intentional and negligent interference with

prospective economic advantage, respecting the alleged damage

done to Vision Tech in 2007 when General Wire in bad faith

falsely told Rycom Instruments, Inc. and other vendors that

Vision Tech was infringing on General Wire’s intellectual

property. Vision Tech contends that General Wire’s “judicial

concession at this time that Vision Tech should have judgment on

its declaratory relief claim confirms GWS’s misconduct and

defamation.” In addition, the proposed Second Amended Complaint

alleges a claim against Arthur Silverman and General Wire for

breach of fiduciary duty:

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The acts of GWS and Arthur Silverman were

part of a scheme on the part of GWS and

Arthur Silverman, who was GWS’s Chief

Executive Officer, to take advantage of

Arthur Silverman’s fiduciary position as a

member of Vision Tech’s Board of Directors

and his access to Vision Tech’s confidential

information to enable GWS to bankrupt Vision

Tech and take over Vision Tech’s California

business. GWS’s conduct not only included

Mr. Silverman’s breach of his fiduciary

duties, but included defaming Vision Tech to

Rycom and others ....

Vision Tech contends that leave to amend should be granted

“because it is early in this case and there has been no

prejudicial delay.” If leave to file the Second Amended

Complaint is granted, Vision Tech argues, the new causes of

action described above negate any reliance on the forum selection

clause in the purchase orders to dismiss or transfer venue of the

action pursuant to the cases cited in the July 17, 2007

Memorandum Decision. 

Rule 15(a), Federal Rules of Civil Procedure, provides that

“leave [to amend] shall be freely given when justice so

requires.” “The purpose of pleading is ‘to facilitate a proper

decision on the merits’ ... and not erect formal and burdensome

impediments to the litigation process. Unless undue prejudice to

the opposing party will result, a trial judge should ordinarily

permit a party to amend its complaint.” Howey v. United States,

481 F.2d 1187, 1990 (1973). However, “[t]his strong policy

toward permitting the amendment of pleadings ... must be tempered

with considerations of ‘undue delay, bad faith or dilatory motive

on the part of the movant, repeated failure to cure deficiencies

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by amendments previously allowed, undue prejudice to the opposing

party by virtue of allowance of the amendment, futility of

amendment, etc.’ Foman v. Davis, 371 U.S. 178, 182 ... (1962).” 

Schlacter-Jones, 936 F.2d 455, 443 (9 Cir. 1991). th

General Wire argues that leave to amend should be denied. 

General Wire asserts that the basis for Vision Tech’s motion for

leave to amend is its recognition that the remaining

contractually based claims should be transferred to the Western

District of Pennsylvania pursuant to the forum selection clause

and that Vision Tech feels compelled “to invent new theories of

tort liability against General Wire and now its CEO ... for the

purpose of improperly bootstrapping this litigation to the

Eastern District of California.” General Wire contends that

Vision Tech’s motion for leave to amend “emit[s] themes of bad

faith, dilatory motive, prior amendments, futility of currently

sought amendment, and undue delay.” 

As discussed above, even if the stipulation sought by

General Wire with regard to the declaratory relief claim is

accepted, the July 17, 2007 Memorandum Decision denied transfer

on other grounds. General Wire’s claim of bad faith in seeking

leave to amend fails for this reason. 

General Wire’s contention that leave to amend should be

denied because of Vision Tech’s dilatory motive and undue delay

is unpersuasive given the circumstances of this litigation. The

parties have not completed discovery, the discovery cut-off date

being July 30, 2008. Jury trial is set for December 9, 2008.

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The fact that Vision Tech has already filed an amended

complaint in response to the July 17, 2007 Memorandum Decision

does not compel denial of this motion. In DCD Programs, Ltd. v.

Leighton, 833 F.2d 183, 186 n.4 (9 Cir.1987), the Ninth Circuit th

noted:

Another factor occasionally considered when

reviewing the denial of a motion for leave to

amend is whether the plaintiff has previously

amended her complaint. In Mir v. Fosberg,

646 F.2d 342 (9 Cir.1980), the plaintiff th

had amended his complaint once. Both the

original complaint and the amended one were

dismissed for lack of jurisdiction. When the

plaintiff requested leave to file a second

amended complaint, the district court denied

the motion. In affirming the denial, this

court held that a district court’s discretion

over amendments is especially broad ‘where

the court has already given a plaintiff one

or more opportunities to amend his complaint

....’ ....

Here, the FAC was filed in response to the Memorandum Decision

addressing General Wire’s first motion to dismiss for failure to

state a claim. The proposed Second Amended Complaint is not

another effort to state a claim in response to that motion to

dismiss but, rather seeks to allege new and different claims for

relief. This is not a situation in which a plaintiff repeatedly

tries unsuccessfully to state a claim. 

General Wire argues that leave to amend should be denied on

the ground of futility. General Wire argues that the proposed

Seventh Cause of Action for inducement of breach of contract, the

Eighth Cause of Action for intentional interference with

prospective economic advantage, and the Ninth Cause of Action for

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negligent interference with prospective economic advantage, are

futile because these claims “are intertwined with the parties’

contractual relationship, including the purchase orders.” 

General Wire cites eToll, Inc. v. Elias/Savion Advertising,

Inc., 811 A.2d 10 (Pa.Super.2002), for the proposition that

Pennsylvania’s “gist of the action” doctrine precludes these

causes of action:

Generally, the doctrine is designed to

maintain the conceptual distinction between

breach of contract claims and tort claims ...

As practical matter, the doctrine precludes

plaintiffs from re-casting ordinary breach of

contract claims into tort claims ... The Bash

Court explained the difference between

contract claims and tort claims as follows:

[a]lthough they derive from a

common origin, distinct differences

between civil actions for tort and

contract breach have developed at

common law. Tort actions lie for

breaches of duties imposed by law

as a matter of social policy, while

contract actions lie only for

breaches of duties imposed by

mutual consensus agreements between

particular individuals ... To

permit a promisee to sue his

promisor in tort for breaches of

contract inter se would erode the

usual rules of contractual recovery

and inject confusion into our wellsettled forms of actions. 

...

Thus, ‘[a]though mere nonperformance of a

contract does not constitute a fraud[,] it is

possible that a breach of contract also gives

rise to an actionable tort[.] To be construed

as a tort, however, the wrong ascribed to

defendant must be the gist of the action, the

contract being collateral ... ‘The important

difference between contract and tort actions

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is that the latter lie from the breach of

duties imposed as a matter of social policy

while the former lie for the breach of duties

imposed by mutual consensus.’ ... ‘In other

words, a claim should be limited to a

contract claim when “the parties’ obligations

are defined by the terms of the contracts,

and not by the larger social policies

embodied in the law of torts.’ 

811 A.2d at 14. 

General Wire asserts that California recognizes a similar

doctrine, “the economic loss doctrine.” The case cited by

General Wire, Apollo Group, Inc. v. Avnet, Inc., 58 F.3d 477 (9th

Cir.1995), involved Arizona law, not California law. 

In Robinson Helicopter Co., Inc. v. Dana Corp., 34 Cal.4th

979 (2004), the California Supreme Court explained the “economic

loss doctrine”:

[T]he economic loss rule provides: ‘”’[W]here

a purchaser’s expectations in a sale are

frustrated because the product he bought is

not working properly, his remedy is said to

be in contract alone, for he has suffered

only “economic” losses.’” This doctrine

hinges on a distinction drawn between

transactions involving the sale of goods for

commercial purposes where economic

expectations are protected by commercial and

contract law, and those involving the sale of

defective products to individual consumers

who are injured in a manner which has

traditionally been remedied by resort to the

law of torts.’ ... The economic loss rule

requires a purchaser to recover in contract

for purely economic loss due to disappointed

expectations, unless he can demonstrate harm

above and beyond a broken contractual promise

... Quite simply, the economic loss rule

‘prevent[s] the law of contract and the law

of tort from dissolving into the other.’ ....

34 Cal.4th at 988. 

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As Vision Tech argues, the proposed Seventh, Eighth and

Ninth Causes of Action do not recast breach of contract claims

into tort claims:

GWS’s interference with Vision Tech’s

contract and prospective relations with

Rycom, having occurred after Vision Tech’s

contractual relationship with GWS had ended

and having resulted from GWS’s false

assertions that Vision Tech was infringing on

GWS’ intellectual property, are obviously

distinct torts from the claims for breach of

the Exclusive Requirements Contract and

Breach of Purchase Orders. 

General Wire argues that the proposed amendment to add

Arthur Silverman as a defendant violates Rule 20(a), Federal

Rules of Civil Procedure:

... All persons ... may be joined in one

action as defendants if there is asserted

against them jointly, severally, or in the

alternative, any right to relief in respect

of or arising out of the same transaction,

occurrence, or series of transactions or

occurrences and if any question of law or

fact common to all defendants will arise in

the action.

General Wire contends that Vision Tech’s proposed Tenth Cause of

Action against Arthur Silverman for breach of fiduciary duty in

his individual capacity as a member of Vision Tech’s board of

directors, is unrelated to this case and does not arise out of

the related transactions or occurrences.

The proposed Second Amended Complaint alleges that Silverman

was the CEO and principal owner of General Wire; that it was

agreed by Vision Tech and General Wire that Silverman would

become a member of Vision Tech’s board of directors; that

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Silverman was a member of Vision Tech’s board of directors from

July 2002 to November 2006; that, during his tenure as a member

of Vision Tech’s board of directors, Silverman disclosed to

General Wire confidential proceedings of Vision Tech’s board of

directors, disclosed Vision Tech’s confidential proprietary trade

secrets and information to General Wire, sought to use his

position as a member of Vision Tech’s board to the advantage of

General Wire over Vision Tech, and, during the period 2005-2006,

sought to use his position as board member of Vision Tech to

bankrupt Vision Tech and drive it out of business so that General

Wire would acquire Vision Tech’s business and assets in

California at little or no cost. 

Rule 20(a) is satisfied because the claims against General

Wire and Silverman involve the same transactions or occurrences,

referring to the allegation in the proposed Tenth Cause of Action

that Silverman breached his fiduciary duties to Vision Tech by:

assisting General Wire to obtain Vision

Tech’s confidential pricing and other

information from Vision Tech vendors who were

subject to confidentiality agreements so that

General Wire could use the confidential

information to obtain cost savings from

Vision Tech; assisted General Wire with

taking advantage of Vision Tech’s reliance on

and vulnerability from, the exclusive

requirements contract alleged above; stymied

and interfered with Vision Tech’s ability to

correct, resist, and rebut the overreaching

of General Wire.

Vision Tech’s motion for leave to file the proposed Second

Amended Complaint is GRANTED. Pursuant to Rule 15(a), leave

should be freely granted and General Wire is not persuasive in

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contending that the factors militating against leave to amend are

present.

CONCLUSION

For the reasons set forth above:

1. Defendant General Wire Spring Company’s motion to

dismiss or transfer is DENIED;

2. Plaintiff Vision Technology Design & Manufacturing

Inc.’s motion for leave to file that proposed Second Amended

Complaint is GRANTED; and

3. Plaintiff shall file the proposed Second Amended

Complaint within five court days of the filing date of this

Memorandum Decision and Order.

IT IS SO ORDERED.

Dated: February 4, 2008 /s/ Oliver W. Wanger 

668554 UNITED STATES DISTRICT JUDGE

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