Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_07-cv-00140/USCOURTS-cand-4_07-cv-00140-2/pdf.json

Parties Involved:
Dreyer's Grand Ice Cream, Inc.
Petitioner
Edy's Grand Ice Cream
Petitioner
Ice Cream Distributors of Evansville
Respondent

Document Text:

United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

DREYER'S GRAND ICE CREAM, INC., a

Delaware Corporation, and EDY'S GRAND

ICE CREAM, a California Corporation,

Petitioners,

v.

ICE CREAM DISTRIBUTORS OF EVANSVILLE,

an Indiana limited liability company,

Respondent.

 /

No. C 07-00140 CW

ORDER DENYING

PETITIONERS'

MOTION TO COMPEL

ARBITRATION, AND

DENYING

RESPONDENT'S

MOTION TO DISMISS

Petitioners Dreyer's Grand Ice Cream, Inc., and Edy's Grand

Ice Cream have filed a motion to compel arbitration of their claims

against Respondent, Ice Cream Distributors of Evansville. 

Respondent opposes this motion. Respondent has filed a motion to

dismiss Petitioners' suit, for lack of personal jurisdiction and

for failure to state a claim. Petitioners oppose this motion. The

matter was heard on July 26, 2007. Having considered all of the

papers filed by the parties and oral argument on the motions, the

Court DENIES without prejudice Petitioners' motion to compel

Case 4:07-cv-00140-CW Document 36 Filed 09/19/07 Page 1 of 10
United States District Court

For the Northern District of California

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arbitration and DENIES Respondent's motion to dismiss.

BACKGROUND

Petitioners are manufacturers and nation-wide distributors of

ice cream products. They distribute their products through a

company-owned distribution network and through independent

authorized distributors. The independent distributors enter into

one of two types of distribution agreements: a Preferred

Distributor Agreement which is reserved for distributors who have

had a lengthy relationship with Petitioners and a Standard

Distributor Agreement for all other distributors. The main

difference between the two agreements is that the Standard

Agreement is terminable upon thirty days notice, whereas the

Preferred Agreement is typically for a two year term. Both the

Standard Agreement and the Preferred Agreement contain a mandatory

arbitration clause which survives the termination of the agreement

and a California venue and choice of law clause. Hagan Dec., Ex. B

(Standard Distributor Agreement) at ¶¶ 8.5, 14.3-4 and Ex. A

(Preferred Distributor Agreement) at ¶¶ 6.6, 12.4-5.

In March, 2004, Petitioners executed a Preferred Agreement

with a company called Ice Cream Distributors, Inc., which

authorized that company to distribute Petitioners' products

throughout Kentucky and parts of Indiana. Amended Petition to

Compel Arbitration at ¶ 9. The Preferred Agreement allowed Ice

Cream Distributors, Inc., to assign its rights and obligations, but

only with Petitioners' prior written consent. Id. at ¶ 10. On

June 15, 2004, Respondent purchased the assets of Ice Cream

Distributors, Inc. Petitioners did not give prior written consent

Case 4:07-cv-00140-CW Document 36 Filed 09/19/07 Page 2 of 10
United States District Court

For the Northern District of California

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1 Petitioners do not explain what these terms mean.

3

to the assignment of the Preferred Agreement to Respondent. Id. at

¶ 11. Petitioners allege that in August, 2004, they sent

Respondent two Standard Distributor Agreements, one for the

"Grocery" class of trade and one for the "New Channel" class of

trade.1 Motion to Compel Arbitration at 2:20-3:1. Petitioners

claim that Respondent signed and returned the Grocery Standard

Distributor Agreement but did not sign the New Channel agreement. 

Id. at 3:1-4. Petitioners concede that after a diligent search,

they cannot find a signed copy of the Grocery Standard Agreement. 

Hagan Dec. at ¶ 8. It is undisputed that on July 2, 2004

Respondent signed an Application for Credit, containing a

California forum selection clause. Tadlock Dec. at ¶ 2.

In 2005, Petitioners notified Respondent by letter that its

distributorship was terminated and it was no longer authorized to

distribute Petitioners' products. Hagan Dec., Ex. D, Termination

of Distributorship Letter. On November 9, 2006, Respondent filed

suit in Kentucky state court alleging causes of action against

Petitioners for tortious interference with contract and tortious

interference with prospective business advantage. Motion to

Dismiss at 3:14-17. On December 22, 2006, Petitioners removed that

action to the United States District Court for the Western District

of Kentucky. Id. at 3:17-19.

On January 9, 2007, Petitioners filed suit in this Court to

compel arbitration to resolve three claims against Respondent. 

Petitioners allege that Respondent owes them approximately $225,000

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United States District Court

For the Northern District of California

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for their products, that Respondent is continuing to distribute

their products without authorization, and that Respondent owes them

approximately $19,500 for freezers that were leased from them and

not returned. Each of these three allegations is based upon the

Grocery Standard Agreement. Hagan Dec., Ex. B at ¶¶ 1-5, 8.4, and

¶ 15-17. On January 10, 2007, in the Kentucky action, Petitioners

moved to enforce the forum selection and arbitration clause and to

have the case transferred to California and arbitrated based on the

Grocery Standard Agreement. In both actions, the parties agreed to

stay proceedings pending the outcome of mediation, which took place

on May 7, 2007. The mediation was unsuccessful. Thereafter,

Petitioners filed an Amended Petition to Compel Arbitration with

this Court. Petitioners also filed an amended motion to enforce

the forum selection and arbitration clause with the Kentucky

District Court, which remains pending as of the date of this order.

JUDICIAL NOTICE

Under Rule 201 of the Federal Rules of Evidence, a court may

take judicial notice of facts that are not subject to reasonable

dispute because they are either generally known or capable of

accurate and ready determination. See, e.g., Lee v. City of Los

Angeles, 250 F.3d 668, 688-690 (9th Cir. 2001); Interstate Natural

Gas Co. v. Southern California Gas Co., 209 F.2d 380, 385 (9th Cir.

1953).

Respondent has requested that the Court take judicial notice

of its suit in Kentucky against Petitioners. Plaintiff has not

objected. Therefore, the request for judicial notice is GRANTED.

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United States District Court

For the Northern District of California

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DISCUSSION

I. Personal Jurisdiction

 Respondent argues that this petition should be dismissed for

lack of personal jurisdiction. Petitioners respond that the Court

has specific jurisdiction over Respondent because Respondent

executed the Standard Agreement and the Application for Credit,

both of which provide that the parties agree to personal

jurisdiction in California.

The United States Supreme Court has held that "in the

commercial context, parties frequently stipulate in advance to

submit their controversies for resolution within a particular

jurisdiction." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472

n.14. If those stipulations "have been obtained through 'freely

negotiated' agreements and are not 'unreasonable and unjust,' their

enforcement does not offend due process." Id.

Petitioners argue that, even if Respondent did not sign the

Standard Agreement, Respondent's Application for Credit, with its

forum selection clause, provides an independent basis for the

assertion of specific jurisdiction. The Court agrees.

II. Agreement to Arbitrate

Under the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq.,

written agreements that controversies between the parties shall be

settled by arbitration are valid, irrevocable, and enforceable. 9

U.S.C. § 2. A party aggrieved by the refusal of another to

arbitrate under a written arbitration agreement may petition the

district court which would, save for the arbitration agreement,

have jurisdiction over that action, for an order directing that

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arbitration proceed as provided for in the agreement. 9 U.S.C. 

§ 4. If the court is satisfied "that the making of the arbitration

agreement or the failure to comply with the agreement is not in

issue, the court shall make an order directing the parties to

proceed to arbitration in accordance with the terms of the

agreement." Id. The FAA reflects a "liberal federal policy

favoring arbitration agreements." Gilmer v. Interstate/Johnson

Lane Corp., 500 U.S. 20, 25 (1991) (quoting Moses H. Cone Mem.

Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)). A district

court must compel arbitration under the FAA if it determines that:

1) there exists a valid agreement to arbitrate; and 2) the dispute

falls within its terms. Stern v. Cingular Wireless Corp., 453 F.

Supp. 2d 1138, 1143 (C.D. Cal. 2006) (quoting Chiron Corp. v. Ortho

Diagnostic Sys., 207 F.3d 1126, 1130 (9th Cir. 2000)).

"If the making of an arbitration agreement . . . be in issue,

the court shall proceed summarily to the trial thereof. If no jury

trial be demanded by the party alleged to be in default, . . . the

court shall hear and determine such issue. Where such an issue is

raised, the party alleged to be in default may, . . . demand a

jury trial of such issue . . . . If the [trier of fact] finds that

no agreement in writing for arbitration was made or that there is

no default in proceeding thereunder, the proceeding shall be

dismissed. If the [trier of fact] finds that an agreement for

arbitration was made in writing and that there is a default in

proceeding thereunder, the court shall make an order summarily

directing the parties to proceed with the arbitration in accordance

with the terms thereof." 9 U.S.C. § 4. 

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As noted above, Petitioners concede that they cannot find a

copy of the Standard Agreement that they claim Respondent executed. 

Nevertheless, Petitioners argue that the existence of the Standard

Agreement and its arbitration clause can be proved.

Where the issue is whether there is a valid and enforceable

arbitration agreement, a court must look to the contract law of the

State governing the agreement. First Options v. Kaplan, 514 U.S.

938, 944 (1995); Circuit City Stores v. Adams, 279 F.3d 889, 892

(9th Cir. 2002). The contents of a written contract that has been

lost or destroyed may be proved by extrinsic evidence once there

has been sufficient proof that a contract has been formed. See

Cal. Evid. Code §§ 1400-01.

Petitioners present the sworn declaration of Mark Hagan, their

sales manager for the region served by Respondent, as evidence that

Respondent executed a Standard Agreement. Mr. Hagan asserts, "I

specifically recall receiving a signed copy of the Standard

Distributor Agreement, Grocery Channel, from Dave Garrett, one of

the owners of [Respondent Ice Cream Distributors of Evansville]." 

Hagan Supp. Dec. at ¶¶ 2, 7. Mr. Hagan asserts that it is

Petitioners' "standard business practice to enter into and finalize

a contract as soon as possible with all distributors" and that "all

distributors under my responsibility operate only with either a

Preferred or Standard Distributor Agreement. All of these

agreements include the same forum selection clause and arbitration

clause." Id. at ¶ 10. 

On December 13, 2004, Mr. Hagan sent an email to Mr. Garrett,

stating, "I cannot process the Grocery contract you've already

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given me until I have the [New Channel] contract." Hagan Dec., Ex.

C at 1. On December 14, 2004, Mr. Garrett replied, "I think our

attorney still has this, let me find it." Mr. Hagan states that he

does not "recall the reasoning for the reference to 'processing' in

the statement, but [does] recall forwarding the agreement signed by

[Respondent]" to Petitioners' regional headquarters for a

signature. Hagan Supp. Dec. at ¶ 9. Petitioners argue that this

interchange supports their position.

On June 30, 2005, Mr. Garrett wrote in a letter to Mr. Hagan

that "ICD's offer to step us to Preferred Distributor status . . .

still stands." Hagan Supp. Dec., Ex. 2 (June 30, 2005, letter) at

2. Petitioners argue that this implies that there was an agreement

to "step" from and therefore also lends support to Petitioners'

assertion that Respondent had executed a Standard Agreement. 

However, Respondent submits Mr. Garrett's declaration that "ICD's

records indicate that I never executed [a Standard Distribution

Agreement Grocery Channel]. . . . it was my practice to return all

agreements to Dreyer's unsigned requesting that they execute the

same and return it to me for execution. . . . if I had executed a

Standard Distribution Agreement Grocery Channel on behalf of ICD, I

would have kept a copy in ICD's files. . . . I have reviewed my

files and I do not have a copy of the Standard Distribution

Agreement Grocery Channel, therefore I believe I returned the

unsigned agreement to Dreyer's requesting that Dreyer's execute the

same." Garrett Supp. Dec. at ¶¶ 2-6.

The Court finds that, in spite of Mr. Hagan's declaration and

the circumstantial evidence, Mr. Garrett's declaration is

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sufficient to create a genuine issue of material fact on the issue

of whether a contract containing an arbitration clause exists. 

Therefore, under 9 U.S.C. § 4, the Court must proceed

summarily to trial to determine whether a contract to arbitrate has

been formed. 

III. Doctrine of Comity

Respondent argues that because the United States District

Court for the Western District of Kentucky obtained jurisdiction

over its claims before Petitioners filed their suit in this Court,

the Court should dismiss Petitioners' claims under the doctrine of

federal comity. 

The doctrine of federal comity allows a district court "to

decline judgment on an issue which is properly before another

district [court]." Church of Scientology v. United States Dep't of

Army, 611 F.2d 738, 749 (9th Cir. 1979). Here, because there is a

dispute of fact, the Court cannot decide without a trial whether

Petitioners' claims are subject to a California forum selection

clause and an arbitration agreement. If they are, they could not

be "properly before another district." Id. Therefore, the Court

denies this motion without prejudice to refiling if it is

determined that no contract with a forum selection clause and

arbitration agreement was executed.

CONCLUSION

For the foregoing reasons, the Court DENIES without prejudice

Petitioners' motion to compel arbitration and DENIES without

prejudice Respondent's motion to dismiss. Both parties must inform

the Court within a week of the date of this order whether or not

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they will waive jury. They shall also indicate whether they

consent to trial, be it a bench trial or a jury trial, before a

Magistrate Judge. A trial will be scheduled promptly.

 IT IS SO ORDERED.

Dated: 9/19/07 

CLAUDIA WILKEN

United States District Judge

Case 4:07-cv-00140-CW Document 36 Filed 09/19/07 Page 10 of 10