FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

APPLIED MEDICAL DISTRIBUTION 

CORPORATION, a California

corporation, No. 09-55155

Plaintiff-Appellant, D.C. No.

v.  8:07-cv-01420-

DOC-MLG THE SURGICAL COMPANY BV, a

Netherlands limited liability OPINION

company,

Defendant-Appellee. 

Appeal from the United States District Court

for the Central District of California

David O. Carter, District Judge, Presiding

Argued and Submitted

September 4, 2009—Pasadena, California

Filed November 3, 2009

Before: Raymond C. Fisher and Ronald M. Gould,

Circuit Judges, and Morrison C. England, Jr.,

District Judge.*

Opinion by Judge Gould

*The Honorable Morrison C. England, Jr., United States District Judge

for the Eastern District of California, sitting by designation. 

14815
COUNSEL

Richard J. Grabowski, Brian M. Hoffstadt (argued) and

Edward S. Chang, Jones Day, Irvine, California, for the

plaintiff-appellant.

Bruce H. Jackson (argued) and Jerry Salcido, Baker &

McKenzie LLP, San Francisco, California, for the defendantappellee.

OPINION

GOULD, Circuit Judge:

Applied Medical Distribution Corporation appeals the district court’s judgment in its diversity action against the SurgiAPPLIED MEDICAL v. THE SURGICAL COMPANY 14819
cal Company BV denying injunctive relief that would have

prevented Surgical from pursuing its suit in Belgium for statutory termination damages allegedly available under Belgian

law. The issue is whether the district court abused its discretion in denying the anti-suit injunction. We have jurisdiction

under 28 U.S.C. § 1291. We reverse and remand for the district court to enter an anti-suit injunction.

I

Applied Medical Distribution Corporation (“Applied”), a

California corporation, and the Surgical Company BV

(“Surgical”), a Netherlands limited liability company, entered

a relationship whereby Surgical would purchase surgical supply products from Applied for distribution in Belgium, the

Netherlands, and Luxembourg. The relationship began without a written agreement in 1999, and in 2000 the parties

agreed in a written contract that Surgical would be the exclusive distributor of Applied’s products in the three countries.

In 2006, the parties entered a new distribution agreement

(“Agreement”), effective retroactively to January 1, 2005. The

parties negotiated for more than a year regarding the terms of

the Agreement. These terms include the following four provisions important here:

Paragraph 9(a): “Unless extended by mutual agreement in

writing,” the Agreement would terminate on December 31,

2007. The parties could also terminate the Agreement before

then for any reason or no reason with 90 days notice. See

Paragraph 9(e).

Paragraph 9(f), entitled “Limitation on Liability”: “In the

event of termination by either Party in accordance with any of

the provisions of this Agreement, neither Party shall be liable

to the other, because of such termination, for compensation,

reimbursement of damages on account of the loss of prospective profits or anticipated sales or on account of expenditures,

14820 APPLIED MEDICAL v. THE SURGICAL COMPANY
inventory, investments, leases or commitments in connection

with the business or goodwill of either Party. Termination

shall not, however, relieve either Party of obligations incurred

prior to termination.”

Paragraph 10(a), entitled “Governing Law and Jurisdiction”: “This Agreement shall be governed by and construed

under the laws of the State of California. The federal and state

courts within the State of California shall have exclusive

jurisdiction to adjudicate any dispute arising out of this

Agreement.” 

Paragraph 10(f), entitled “Legal Expenses”: “The prevailing Party in any legal action brought by one Party against the

other and arising out of this Agreement shall be entitled, in

addition to any other rights and remedies it may have, to reimbursement for its expenses, including court costs and reasonable attorneys’ fees.” 

Mr. van Schil, Surgical’s CEO, claims that he objected to

the forum selection clause, but signed the Agreement and

accepted it in order to maintain the business relationship. He

also claims that he thought the Agreement’s choice-of-law

and limitation-on-liability provisions would not limit Surgical’s rights under Belgian law, but he did not assert that such

an understanding was ever discussed with Applied. 

Around June 2007, Applied notified Surgical that under

Paragraph 9(a) of the Agreement, Applied would not be

renewing the Agreement, which was then scheduled to expire

on December 31, 2007. Surgical replied in writing on November 9, 2007, asserting that Surgical was entitled to protection

under the Belgian Act of 1961 (“Belgian Act”) in the form of

compensation. Next, Applied filed a complaint seeking

declaratory relief against Surgical on December 7, 2007, in

the United States District Court for the Central District of California. Surgical thereafter filed suit in Belgium on January

29, 2008.

APPLIED MEDICAL v. THE SURGICAL COMPANY 14821
In its declaratory action in district court, Applied filed a

motion for summary judgment—the motion underlying this

appeal—requesting that the court: “(1) enjoin Surgical from

pursuing relief in Belgium or any other non-California forum

under non-California law; (2) declare that the Agreement terminated pursuant to its terms on December 31, 2007; (3)

declare that ‘goodwill indemnities’ are precluded and that

Surgical will take nothing due to termination of the Agreement; and (4) award Applied its costs, expenses, and attorneys

fees.” 

Before addressing the anti-suit injunction, the district court

made several holdings that are not appealed by Surgical. The

district court held that “the dispute over goodwill indemnities

arises out of the Agreement” because the determination of

whether goodwill indemnities may be recovered requires

passing on the applicability of Paragraph 9(f)’s limitation on

liability for damages resulting from termination. The district

court concluded that the choice-of-law and forum selection

clauses in the Agreement were valid because they were

reached through extensive, arms-length bargaining between

sophisticated parties and there was no evidence of fraud or

deceit. Therefore, the court held that “California law and a

California forum apply to the instant dispute” and that “Belgian law is inapplicable to the interpretation of the Agreement.” 

The district court next held that the Agreement had terminated under its terms when Applied elected not to renew it,

and concluded that according to Paragraph 9(f), Applied

could not be liable “for compensation, reimbursement of damages on account of the loss of prospective profits or anticipated sales or on account of expenditures, inventory,

investments, leases or commitments in connection with the

business or goodwill of either Party.” The district court specifically held that “goodwill indemnities are precluded and

that Surgical shall take nothing due to the termination of the

Agreement.”

14822 APPLIED MEDICAL v. THE SURGICAL COMPANY
The district court rejected Surgical’s argument that Paragraph 9(f) did not apply to goodwill indemnities. Surgical had

argued that goodwill indemnities accrued “prior to the termination” of the Agreement and only happened to become due

when the Agreement terminated. The district court rejected

this argument because the only way that Applied could potentially incur goodwill liability would be upon a termination of

the Agreement, and such liability, as the district court saw it,

is expressly foreclosed by Paragraph 9(f). 

Next, the district court declined to enjoin Surgical from

pursuing relief in Belgium. The district court determined that

“the Belgian Action alleges that certain pre-termination damages are due aside from termination-related goodwill indemnities and other termination-related damages,” and that the

Belgian claims under the Belgian Act were “potentially

broader” than the issues under consideration by the district

court. The district court did not explain further which claims

were not dependent on the termination of the Agreement or

otherwise did not “aris[e] out of th[e] Agreement” so as to be

exempt from the contract’s forum selection clause. Because it

concluded that the Belgian claims were “potentially broader,”

the district court held that an anti-suit injunction would be

inappropriate. 

Finally, the district court held that Applied was entitled to

its costs, expenses, and attorneys’ fees because it prevailed on

its motion for declaratory relief and the Agreement expressly

provided for fees to a prevailing party. 

The district court entered a final judgment on January 20,

2009. Only Applied appeals, and it appeals only the district

court’s denial of the anti-suit injunction.

II

We review a district court’s denial of an anti-suit injunction

for abuse of discretion. E. & J. Gallo Winery v. Andina

APPLIED MEDICAL v. THE SURGICAL COMPANY 14823
Licores S.A., 446 F.3d 984, 989 (9th Cir. 2006). A district

court’s factual findings in connection with a denial of an antisuit injunction are reviewed for clear error. Id. The district

court’s interpretation of the underlying legal principles, however, is reviewed de novo. Id. When a district court makes an

error of law, it is an abuse of discretion. Id.

[1] In Gallo, at various stages of our analysis, we held that

a district court, in evaluating a request for an anti-suit injunction, must determine (1) “whether or not the parties and the

issues are the same, and whether or not the first action is dispositive of the action to be enjoined”; (2) whether the foreign

litigation would “frustrate a policy of the forum issuing the

injunction”; and (3) “whether the impact on comity would be

tolerable.” Id. at 991, 994 (quotation marks and citations

omitted). 

Because we conclude that Gallo is controlling, a discussion

of that case is helpful to illuminate our analysis. In Gallo, the

large California winemaker Gallo entered a distribution agreement with Ecuadorian alcohol distributor Andina Licores. Id.

at 987. The distribution agreement contained forum selection

and choice-of-law clauses in favor of California. Id. Disputes

arose between Gallo and Andina regarding some allegedly

late shipments and whether Andina was an exclusive distributor of Gallo wine. Andina filed suit in Ecuador under an Ecuadorian “decree” that was intended to protect Ecuadorians who

entered into distribution agreements with foreign entities. Id.

After Andina engaged in procedural machinations in the

Ecuadorian courts, Gallo filed suit in California state court,

seeking declaratory and injunctive relief and damages;

Andina removed the case to federal court. Of relevance to this

case, Gallo filed a motion for a preliminary injunction

restraining Andina from pursuing the action in Ecuador. Id. at

988. The district court denied Gallo’s request for an anti-suit

injunction primarily because the claims arose under different

laws—one under California law and the other under the Ecuadorian decree. Id. at 991. We reversed.

14824 APPLIED MEDICAL v. THE SURGICAL COMPANY
In applying the first prong of the test outlined above, we

determined that the issues were the same because both causes

of action focused on whether the distributorship agreement

had been breached. Id. Andina argued that the issues were not

the same because an anti-suit injunction would deprive it of

its broader rights under Ecuadorian law, but we rejected this

argument: “First, it is not clear that Andina has claims under

Ecuadorian law, as the contract contains a choice-of-law

clause in favor of California. Second, to the degree that Ecuadorian law does apply, federal courts are capable of applying

it to Andina’s claims.” Id. (citations omitted).

We then turned to considerations of policy and comity

respectively. We stressed the strong policy in favor of enforcing forum selection clauses that the United States Supreme

Court has developed over the years. Id. at 992 (citing Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585 (1991)). We

explained that “[w]ithout an anti-suit injunction in this case,

the forum selection clause effectively becomes a nullity.” Id.

Turning to comity, we reasoned that “where private parties

have previously agreed to litigate their disputes in a certain

forum, one party’s filing first in a different forum would not

implicate comity at all.” Id. at 994. We pointed out that a rule

that “any party seeking to evade the enforcement of an

otherwise-valid forum selection clause need only rush to

another forum and file suit . . . could also have serious deleterious effects for international comity.” Id. We also dismissed

the district court’s reasoning that the Ecuadorian court was

more competent to decide whether the Ecuadorian decree

applied or not: “[T]he contract clearly contains a California

choice-of-law clause; thus, the validity of the forum selection

clause should be decided by California law, as the law of the

contract, rather than by Ecuadorian law.” Id. And, “to the

degree Ecuadorian law is applicable, the district court is capable of applying it.” Id.

III

With this background on the applicable law as explained in

Gallo, we address whether the district court abused its discreAPPLIED MEDICAL v. THE SURGICAL COMPANY 14825
tion in denying the anti-suit injunction. Despite our general

inclination to affirm when feasible on matters within a district

court’s discretion, we nonetheless conclude here that the district court did abuse its discretion in denying such relief. We

in turn rest our decision primarily on the following two reasons: First, the district court applied the wrong legal standard

by requiring that the claims in the domestic and foreign action

be “identical” instead of engaging in the more functional

inquiry concerning dispositiveness required by Gallo. Second,

the district court relied on the clearly erroneous factual determination that Surgical’s Belgian claims, other than goodwill

indemnities, were available apart from termination. Because

all of Surgical’s claims, like goodwill indemnities, as a practical matter depend on termination of the Agreement, they all

“aris[e] out of th[e] Agreement” and are subject to the forum

selection clause. Under Gallo, the claims in the two actions

are functionally the same and the first action is dispositive of

the action to be enjoined in the sense that all of the Belgian

claims fall under the contract’s forum selection clause and can

be litigated and resolved in the California action. Furthermore, we recognize California’s strong policy in favor of

enforcing forum selection clauses and note the comity concerns that would arise if a party to a contract containing a

forum selection clause were permitted to proceed with duplicative litigation challenging the rightful authority of the

contractually-designated forum court. Accordingly, an injunction restraining Surgical from pursuing its Belgian action is

appropriate. A contrary result would effectively nullify the

forum selection and choice-of-law clauses, thereby eliminating the certainty of a contractual result that is necessary to

foster international trade and commerce.

A

The first step under Gallo in deciding if an anti-suit injunction is appropriate is determining “whether or not the parties

and the issues are the same, and whether or not the first action

is dispositive of the action to be enjoined.” Gallo, 446 F.3d

14826 APPLIED MEDICAL v. THE SURGICAL COMPANY
at 991 (citations omitted). Applied and Surgical argue a great

deal about exactly how “identical” the issues must be between

the domestic and foreign action. Confusion on this point is

understandable because in Gallo the local action encompassed

the sole issue raised in the Ecuadorian suit: breach of contract.

Id. Surgical argues that Gallo requires that all the issues be

identical in both actions. Applied argues that complete overlap between issues is not required and that Gallo’s holding

disfavors litigants who attempt to evade forum selection

clauses by bringing foreign actions.

We concluded in Gallo that “whether or not the parties and

issues are the same, and whether or not the first action is dispositive of the action to be enjoined” are both part of the “first

step” of the test. Id. (citations omitted). In cases like this

where the parties are the same, whether the issues are the

same and the first action dispositive of the action to be

enjoined are interrelated requirements; that is, to the extent

the domestic action is capable of disposing of all the issues in

the foreign action and all the issues in the foreign action fall

under the forum selection clause, the issues are meaningfully

“the same.” These interrelated requirements are sensible

because the fundamental question the Gallo test is designed

to address is whether a requested anti-suit injunction should

issue under a contractual forum selection agreement. Moreover, our conclusion in Gallo that this first-step analysis was

equivalent to both the Second Circuit’s formulation (which

asked if the domestic action was dispositive) and the First Circuit’s formulation (which asked if the issues were the same)

rested on our recognition that issues are functionally the same

if one action is dispositive of the other. Id. (citing Paramedics

Electromedicina Comercial, Ltda v. GE Medical Sys. Info.

Techs., Inc., 369 F.3d 645, 652 (2d Cir. 2004); Quaak v. Klynveld Peat Marwick Goerdeler Bedrijfsrevisoren, 361 F.3d 11,

18 (1st Cir. 2004)).

[2] Therefore, the crux of the functional inquiry in the first

step of the analysis is to determine whether the issues are the

APPLIED MEDICAL v. THE SURGICAL COMPANY 14827
same in the sense that all the issues in the foreign action fall

under the forum selection clause and can be resolved in the

local action. Instead, the district court focused too narrowly

on the fact that “not all of the issues are identical.” (Emphasis

added.) Gallo did not impose such a specific requirement. For

example, it was irrelevant in that case that the Ecuadorian suit

was under an Ecuadorian decree whereas the domestic action

was based on California law, because both clearly depended

upon the same alleged violation of a distribution agreement.

Id.

Moreover, requiring issues to be precisely and verbally

identical would lead to counterproductive, and perhaps unintended, results. For example, forum selection clauses would

lose their reliability and robustness if a party could avoid

them simply by waiting until a local suit is filed, and then file

a foreign action that, despite being easily disposed of by resolution of the local action, is in some way not identical in form,

a likely possibility because the verbal form of laws in different countries will inevitably differ. Such language differences

across national systems, if they invariably allowed competing

international litigation, would wholly frustrate the normal purposes of clauses selecting a forum and applicable law.

[3] So-called globalization has enhanced the significance of

international trade, and those in business who would trade

across national lines confront many varying legal systems in

different countries. If we do not give primacy to parties’

choice of forum and choice of law, there will be insufficient

certainty to foster international trade relations. Conversely, so

long as the parties have no gross disparity in bargaining

power, it is difficult to see how holding them to their agreed

forum and law is not beneficent. 

B

[4] There is no dispute that the parties are the same in this

action and the Belgian action. Therefore, we turn to “whether

14828 APPLIED MEDICAL v. THE SURGICAL COMPANY
or not . . . the issues are the same, and whether or not the first

action is dispositive of the action to be enjoined.” Gallo, 446

F.3d at 991. We hold that the present action is dispositive of

the Belgian action because all of the claims in the Belgian

action “arise[ ] out of th[e] Agreement,” are subject to the

forum selection clause, and therefore must be disposed of in

the California forum if at all. Therefore, the issues are functionally the same. Interpreting the forum selection clause, the

district court already held that disputes concerning the applicability of the limitation-on-liability provision “aris[e] out of

th[e] Agreement.” However, the district court denied the antisuit injunction on the basis of its conclusion that the issues

involved in Surgical’s Belgian action were not identical to the

issues that Applied raised in the California action. The proper

question, however, was whether the issues in the Belgian suit

were the same as the issues before the district court in the

functional sense articulated above. So framed, it is apparent

that Surgical’s Belgian claims, like its claim for goodwill

indemnities, seek damages that occur “only as a result of termination,” concern the applicability of the limitation-onliability provision, and therefore are disputes “arising out of

th[e] Agreement” that are subject to the “exclusive jurisdiction” of “the federal and state courts within the State of California” under the forum selection clause.

[5] The record indicates that Surgical seeks in its Belgian

action damages for (1) indemnity in lieu of notice, (2) goodwill indemnity, (3) costs and other indemnities, and (4) repurchase of stock.1

 The district court determined that “[i]t was

1

In Surgical’s writ concerning the Belgian action, Surgical refers to

these categories alternatively as (1) just and equitable compensation, (2)

just and equitable complementary compensation, (3) costs incurred, and

(4) repurchase of stock. These categories are referred to in Surgical’s

November 9, 2007, demand letter to Applied and in its brief as damages

for (1) indemnity in lieu of notice, (2) goodwill indemnity, (3) costs and

other indemnities, and (4) repurchase of stock. Despite the incongruous

nomenclature, our examination of the record leads us to conclude that

these categories of damages are synonymous and in any event, that none

of them could be asserted except upon a termination of the Agreement.

We adopt, for purposes of our discussion, the terms as used in Surgical’s

letter as they are more descriptive. 

APPLIED MEDICAL v. THE SURGICAL COMPANY 14829
only as a result of termination that Applied potentially

incurred any goodwill indemnity obligations” and “[t]he

Agreement specifically exempts Applied from such obligations through Paragraph 9(f).” Similarly, Surgical’s claims for

indemnity in lieu of notice, costs and other indemnities, and

repurchase of stock occur “only as a result of termination”

and are precluded by the language of the contract. Surgical

argues that these claims do not depend on termination of the

Agreement and instead arise from Applied’s failure to comply

with the pre-termination notice provisions in the Belgian Act.

However, Surgical prefaced its demand for these damages in

its November 9, 2007, letter by stating that “[t]he Act provides for the following protection in the case of unilateral termination by the manufacturer without cause.” (Emphasis

added.) Surgical repeats that these claims are available “in the

case of unilateral termination” in its brief. Thus, just as the

district court reasoned with regard to the goodwill indemnities

(a holding that Surgical did not appeal), none of Surgical’s

other Belgian claims could arise but for the termination of the

Agreement. Nothing that Surgical argues establishes otherwise. The district court’s disparate treatment of goodwill

indemnities and Surgical’s other Belgian claims, to this

extent, was clearly erroneous.

In support of its argument that its claims under the Belgian

Act do not arise out of the Agreement, Surgical relies heavily

on the following sentence in Paragraph 9(f): “Termination

shall not, however, relieve either Party of obligations incurred

prior to termination.” Surgical argues that any damages—like

goodwill indemnities—that accrue during the Agreement are

recoverable without regard to the Agreement’s limitation-onliability provision, even if triggered by termination of the

Agreement. The district court already expressly rejected that

argument, stating as follows: 

Even though goodwill payments increase over time,

they are not actually due until termination occurs.

Thus, the actual obligation to pay damages resulting

14830 APPLIED MEDICAL v. THE SURGICAL COMPANY
from loss of goodwill does not arise prior to termination, but instead arises upon termination. If the parties had ultimately decided to continue the

relationship, Applied would not have incurred any

obligations for goodwill indemnities. It was only as

a result of termination that Applied potentially

incurred any goodwill indemnity obligations. The

Agreement specifically exempts Applied from such

obligations through Paragraph 9(f).

As the district court reasoned, the disputed clause in Paragraph 9(f) must be read in conjunction with the rest of the

paragraph, which provides unequivocally that “neither Party

shall be liable to the other, because of such termination” for

a nearly exhaustive list of potential liabilities. Surgical’s reading of the last clause of Paragraph 9(f) would essentially eviscerate the entire paragraph as to most termination-related

damages.

[6] Surgical next argues that the district court’s ruling only

addressed damages and that “the district court neglected to

consider the numerous other substantive issues, including

jurisdictional issues and liability issues that arise under the

1961 Belgian Distributor Act.” This argument is misplaced;

the district court already held—and Surgical did not appeal

that holding—that California law controls interpretation of the

Agreement and that “Belgian law is inapplicable to the interpretation of the Agreement.” The district court’s logic that

“any determination whether goodwill indemnities are proper

requires a determination as to the applicability of the contract

provision in 9(f),” bringing the dispute within the ambit of the

California choice-of-law and forum selection provisions,

applies equally to Surgical’s other Belgian claims. Thus,

despite Surgical’s tangential claim that the Belgian Act

requires the Belgian court to disregard the Agreement’s

limitation-on-liability provision, the binding contractual language providing for California law and a California forum

controls in the first instance, Belgian law notwithstanding. See

APPLIED MEDICAL v. THE SURGICAL COMPANY 14831
Gallo, 446 F.3d at 991 (rejecting the argument that an injunction would deprive Andina of rights under Ecuadorian law

because “it is not clear that Andina has claims under Ecuadorian law, as the contract contains a choice-of-law clause in

favor of California”). 

Surgical relies on the Eleventh Circuit case, Canon Latin

America, Inc. v. Lantech (CR), S.A., which held that a Florida

action based on common law contract claims was not dispositive of an earlier action brought in Costa Rica for violation of

a Costa Rican law creating liability for unlawful termination

of an exclusive distributorship. 508 F.3d 597, 601–02 (11th

Cir. 2007). Even if we were to adopt its reasoning, Canon is

inapposite. In Canon, the district court did not grant Canon’s

summary judgment claim as to a declaration that the Florida

choice-of-law provision was valid and enforceable, id. at 600

n.7; but here, the enforceability of the choice-of-law provision

and applicability of California law to interpretation of the

Agreement is law of the case and not appealed. Moreover,

Canon is not Ninth Circuit precedent and explicitly recognized that the Ninth Circuit does not require foreign claims to

be identical in form to the local claims. Id. at 601 n.8. 

Surgical further argues that the Belgian suit should not be

enjoined because “Applied seeks no declaratory relief based

on the specific unwaivable rights” under the Belgian Act, and

thus the issues in the two suits are different. This argument

imposes an unjustifiably narrow view of how issues can overlap. In its complaint for declaratory relief, Applied sought a

declaration that any disputes arising out of the Agreement

must be adjudicated in a California forum under California

law and Surgical never urged that California law required

application of the Belgian Act. Applied’s claim that Surgical

should “take nothing due to termination of the Agreement,”

a determination ultimately adopted by the district court, is dispositive of Surgical’s Belgian claims in the sense that those

claims arise out of termination of the Agreement and could

have been asserted in the district court, whether or not they

14832 APPLIED MEDICAL v. THE SURGICAL COMPANY
have any merit. Applied was not required to invoke the specific language of the Belgian Act in seeking declaratory relief.

Instead, it is sufficient that the federal action in the United

States District Court for the Central District of California as

a whole is the proper action and forum for disposing of the

Belgian action. Contrary to Surgical’s claims, differences

between foreign and domestic law do not necessarily make

the “issues” different. Just as the local and foreign issues were

functionally the same in Gallo even though the foreign action

asserted claims under a foreign statute, see Gallo, 446 F.3d at

991, the issues are not different here merely because Surgical

framed its Belgian action in terms of the Belgian Act. Again,

there are many countries in the world with disparate legal systems and declining to enforce the forum selection and choiceof-law provisions here would foster uncertainty detrimental to

international business relations.

C

[7] The second step in deciding if an anti-suit injunction is

appropriate is determining if the continuation of the foreign

litigation would “frustrate a policy of the forum issuing the

injunction.” Gallo, 446 F.3d at 992 (quoting Seattle Totems

Hockey Club v. Nat’l Hockey League, 652 F.2d 852, 855 (9th

Cir. 1981)). The district court, having erroneously concluded

that the threshold requirements in Gallo were not met,

declined to discuss this factor. As we noted in Gallo and reaffirm here, there is a strong policy favoring robust forum selection clauses. Id. at 992–93. But without the availability of

anti-suit injunctions, the vitality of forum selection clauses

would be impermissibly and improvidently jeopardized.

Although a foreign court might eventually agree that a forum

selection clause controls, there is no guarantee that such a resolution would be reached in a timely fashion or at all, and this

uncertainty would impair the parties’ ability to enforce a

forum selection clause. Anti-suit injunctions may be the only

viable way to effectuate valid forum selection clauses:

APPLIED MEDICAL v. THE SURGICAL COMPANY 14833
Forum selection clauses are increasingly used in

international business. When included in freely

negotiated commercial contracts, they enhance certainty, allow parties to choose the regulation of their

contract, and enable transaction costs to be reflected

accurately in the transaction price. We have also

repeatedly stressed the importance of forum selection clauses and have held that they should be

enforced absent strong reasons to set them aside.

Without an anti-suit injunction in this case, the

forum selection clause effectively becomes a nullity.

The potential implications for international commerce are considerable.

Id. at 992 (internal quotation and citations omitted).

[8] Surgical argues that the Belgian action does not frustrate California policy to enforce forum selection clauses

because the Belgian claims arise out of the Belgian Act, not

out of the Agreement, and therefore are not subject to the

Agreement’s forum selection clause. However, as discussed,

the district court’s unappealed holding that the dispute over

goodwill indemnities arises out of the Agreement is equally

applicable to Surgical’s other Belgian claims. The district

court held that a dispute over goodwill indemnities arises out

of the Agreement because it “requires a determination as to

the applicability of the contract provision in Paragraph 9(f).”

Likewise, Surgical’s claim of entitlement to the other damages it seeks in its Belgian action requires the same determination whether Paragraph 9(f)’s limitation-on-liability

provision applies and likewise arises out of the Agreement.

Any continuation of the Belgian action denigrates the integrity of the parties’ prior written commitment that disputes

concerning the Agreement would be litigated in California.

Therefore, California’s strong policy favoring enforcement of

14834 APPLIED MEDICAL v. THE SURGICAL COMPANY
forum selection clauses militates in favor of the anti-suit injunction.2

D

The third step in deciding if an anti-suit injunction is appropriate is determining “whether the impact on comity would be

tolerable.” Gallo, 446 F.3d at 994. The district court summarily concluded that an injunction would undermine the doctrine of comity. We disagree. The district court’s conclusion

on comity appears to have been based on its prior erroneous

conclusion that an anti-suit injunction here would be overly

broad. The district court’s conclusion that the anti-suit injunction would undermine comity was in error; enjoining Surgical’s Belgian action would not have an intolerable impact on

comity. 

[9] “[T]he extent to which the United States, or any state,

honors the judicial decrees of foreign nations is a matter of

choice, governed by the comity of nations” and the

“[e]xtension of comity to a foreign judgment is neither a matter of absolute obligation, on the one hand, nor of mere courtesy and good will, upon the other.” Asvesta v. Petroutsas,

580 F.3d 1000, 1010–11 (9th Cir. 2009) (internal quotations

and citations omitted). Recognizing that anti-suit injunctions

may implicate comity concerns, we have urged that they be

issued sparingly. Gallo, 446 F.3d at 989. However, Surgical

and Applied are both private parties that previously agreed to

litigate disputes arising out of their contract in California, so

2Surgical points out that the forum selection clause in Gallo provided

for a California forum for “any cause of action arising between the parties,

whether under this agreement or otherwise,” 446 F.3d at 987, and that this

is broader than the Agreement’s forum selection clause which provides for

a California forum for disputes arising out of the Agreement. However,

the difference in the forum selection language does not detract from the

interest that California has in the vigorous enforcement of forum selection

clauses that require resolving disputes about an agreement in California

under California law. 

APPLIED MEDICAL v. THE SURGICAL COMPANY 14835
Surgical’s filing of the Belgian action, in violation of the

forum selection clause, should not impede comity. Id. at 994.

We concluded in Gallo that under its facts enjoining a firstfiled foreign suit that contravened a forum selection clause

“did not implicate comity at all.” Id. Here, enjoining Surgical’s subsequently-filed foreign suit which contravenes the

Agreement’s forum selection clause, a fortiori, does not

implicate comity. 

[10] Surgical makes much of what it claims is Belgium’s

interest, expressed through the Act, of “protect[ing] distributors who provide services in the Belgium territory against

manufacturers who use their unequal bargaining power to

cause distributors to make investments in time, money, and

personnel to develop a client base only to cut them off after

the distributor provided the ground work.” Even assuming

that Surgical has accurately depicted Belgium’s interest, Surgical’s reliance on it is misplaced. The district court, in holding that the forum selection and choice-of-law clauses were

valid, enforceable and governed the dispute over goodwill

indemnities, explicitly rejected Surgical’s argument that the

forum selection clause was “unenforceable due to undue

influence or overweening bargaining power.” Surgical did not

appeal this holding, which is now the law of the case, see

United States v. Washington, 235 F.3d 438, 441 (9th Cir.

2000), but Surgical seeks, by implication, to collaterally

attack the underlying findings. The record provides no basis

to undermine the district court’s conclusion that the Agreement was reached as a result of arms-length bargaining and

protracted negotiation. Furthermore, whereas Surgical argues

that Belgium has an “important state interest” in not enjoining

a “Belgian distributor from pursuing enforcement of the . . .

rights and protections afforded it by the 1961 Belgian Distributor Act,” Surgical admits elsewhere in its brief that it is still

in issue “[w]hether the 1961 Belgium Distributor Act applies

to a Dutch distributor [such as Surgical] engaged in distribution activities in Belgium.” (Emphasis added.) Surgical also

conflates the interest Belgium has in protecting its exclusive

14836 APPLIED MEDICAL v. THE SURGICAL COMPANY
distributors through judicial application of its substantive law

with its interest in providing a forum. Surgical does not contend that Belgium’s interest in protecting its exclusive distributors through application of Belgian law cannot be vindicated

by other fora applying Belgian law where appropriate. It warrants repeating that federal judges are quite capable of applying foreign law. Gallo, 446 F.3d at 991 (“[T]o the degree that

[foreign] law does apply, federal courts are capable of applying it.”) (citing Fed. R. Civ. P. 44.1; Republic of the Philippines v. Marcos, 862 F.2d 1355, 1361 (9th Cir. 1988) (en

banc)). Therefore, it is not clear what interest Belgium has, if

any, in providing a forum to a Dutch company to litigate its

dispute with a California company concerning their contract,

a contract that was freely entered after exhaustive, armslength negotiation. Accordingly, it cannot be said that enjoining Surgical’s Belgian action would intolerably impact comity

(if it would have any impact at all).

Surgical next argues that Gallo involved extreme facts distinguishable from this case and so an injunction is less appropriate here. We characterized the foreign action in Gallo as

“messy, protracted, and potentially fraudulent” in part

because the defunct decree Andina relied on was promulgated

by a military dictatorship. Id. at 995. Surgical argues that its

Belgian action, however, is in good faith and is founded on

legitimate Belgian law. Surgical’s attempt to distinguish

Gallo on these bases is misplaced. While the extreme facts in

Gallo tilted the balance “even further in favor of granting an

injunction,” we made clear in Gallo that demonstration of

such extreme facts was not necessary to conclude that an

injunction would not have an intolerable impact on comity.

Id. at 993. Instead, we concluded that where there is “no public international issue raised,” a foreign government is not

involved in the litigation, and the litigation involves private

parties concerning disputes arising out of a contract, not only

would an anti-suit injunction not have an intolerable impact

on comity, but allowing foreign suits to proceed in such cirAPPLIED MEDICAL v. THE SURGICAL COMPANY 14837
cumstances would seriously harm international comity. Id. at

994. 

[11] Surgical’s subsequent filing of its Belgian action also

raises the concern that it is attempting to evade the rightful

authority of the district court. See id. at 995. Notably, a substantial portion of the monetary damages Surgical seeks in its

Belgian action is comprised of Surgical’s claim for goodwill

indemnities, which the district court already held Surgical was

not entitled to (along with any other damages due to termination). Surgical opted to proceed with its claim for goodwill

indemnities and other damages in its Belgian action in spite

of the fact that its entitlement to goodwill indemnities was

already being litigated in the district court. We reject Surgical’s argument that enjoining the subsequent Belgian action

would intolerably impact comity. Surgical does not so much

as acknowledge that allowing it to proceed in its Belgian

action would effectively abrogate the United States District

Court’s judgment that Surgical is not entitled to goodwill

indemnities and shall take nothing due to termination. At

most, there are competing comity concerns, so it cannot fairly

be said that granting the anti-suit injunction, thereby preserving the authority of the district court and the force of its final

judgment, would have an intolerable impact on comity.

IV

[12] We conclude that the district court erred as a matter of

law in its application of the Gallo test, which requires, as the

first step, a functional analysis concerning whether issues are

the same in the sense that the issues in the action to be

enjoined come within the terms of the forum selection clause

and the local action is capable of disposing of them. The district court’s treatment of Surgical’s Belgian claims, other than

goodwill indemnities, as being available apart from termination was clearly erroneous. The district court’s denial of the

anti-suit injunction was an abuse of discretion. We

14838 APPLIED MEDICAL v. THE SURGICAL COMPANY
REVERSE and REMAND to the district court for it to order

an anti-suit injunction.3

3The panel expresses no opinion whether Surgical can, at this late stage

in the proceedings after a final judgment, subsequently seek to assert Belgian Act claims in the district court, on the theory that California law

might embrace and apply Belgian law in part. 

APPLIED MEDICAL v. THE SURGICAL COMPANY 14839