Omron Healthcare, Inc. v. Maclaren Exports Ltd.

• Decision Date: 27 June 1994
• Docket Number: No. 93-2965,93-2965
• Citation: 28 F.3d 600
• Parties: OMRON HEALTHCARE, INC., Plaintiff-Appellant, v. MACLAREN EXPORTS LIMITED, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 600

28 F.3d 600

31 U.S.P.Q.2d 1376

OMRON HEALTHCARE, INC., Plaintiff-Appellant, v. MACLAREN EXPORTS LIMITED, Defendant-Appellee.

No. 93-2965.

United States Court of Appeals Seventh Circuit.

Argued March 31, 1994.

Decided June 27, 1994.

Marcia E. Goodman, Marian C. Haney, Jeffrey S. Fowler (argued), Mayer, Brown & Platt, Chicago, IL, for plaintiff-appellant.

John L. Conlon (argued), Schwartz, Cooper, Greenberger & Krauss, Chicago, IL, for defendant-appellee.

Before POSNER, Chief Judge, and CUMMINGS and EASTERBROOK, Circuit Judges.

EASTERBROOK, Circuit Judge.

A few years ago the Marshall Baby Products Division of Omron Healthcare became the exclusive distributor, in the United States, of baby strollers manufactured by Restair Maclaren Limited, a British firm. The contract allowed Maclaren to cancel on 90 days' notice. Disappointed by Omron's sales, Maclaren gave notice terminating the distributorship as of January 22, 1993. One of Omron's employees left to create a new firm, KidCo, which became Maclaren's U.S. distributor. Omron noticed that KidCo's strollers identified Omron as the distributor, and it sued Maclaren for trademark infringement.

When Omron's distributorship ended, Maclaren had on hand 2,300 strollers that had been manufactured with trademarks identifying Omron as the seller. (Each stroller also, and more prominently, identified Maclaren as the manufacturer.) Maclaren blames Omron for this situation, contending that after receiving notice of termination Omron placed firm orders for the strollers, demanded that Maclaren build them, and then refused to accept delivery; Omron denies that it is responsible for the excess inventory. Maclaren and its new distributor pasted labels over the Omron marks and included literature identifying KidCo as the reseller but did not succeed in obliterating all traces of Omron's trademarks. Omron demands a remedy. Maclaren moved to dismiss, relying on this portion of its contract with Omron:

The parties hereto agree that all disputes arising out of this Agreement which cannot be resolved amicably between the parties shall be referred to the High Court of Justice in England which will have exclusive jurisdiction to determine such disputes.

Omron protested that this dispute arose out of trademark infringement, not out of the contract, and that Maclaren would have been equally (if not more) liable for its conduct had there never been an agreement. To this the district court replied:

Because the instant dispute would not have arisen if Omron and Maclaren Exports had never entered into their Distribution Agreement, the case at bar "arises out of" the Distribution Agreement. The forum selection clause in the Distribution Agreement therefore deprives this court of jurisdiction over the matter. Accordingly, the case is dismissed with prejudice.

But-for causation is an unsatisfactory understanding of language referring to "disputes arising out of" an agreement. Let us suppose that while inspecting Omron's facilities, a manager of Maclaren stepped on a baby rattle and fell. Would the ensuing tort litigation go to the High Court of Justice in the United Kingdom just because, but for the distribution agreement, none of Maclaren's employees would have been on Omron's premises? "Arising out of" and "arising under" are familiar phrases, and courts have resisted the siren call of collapsing them to but-for causation. An example: but for the existence of federal drug safety standards, it would not be possible to contend that noncompliance with the standards is tortious, but it does not follow that a tort suit "arises under" those standards and thus activates federal jurisdiction. Merrell Dow Pharmaceuticals, Inc. v. Thompson, 478 U.S. 804, 106 S.Ct. 3229, 92 L.Ed.2d 650 (1986). See also, e.g., Spearman v. Exxon Coal USA, Inc., 16 F.3d 722 (7th Cir.1994).

Nonetheless, the parties' dispute arises out of the agreement. Maclaren contends that its conduct in selling the 2,300 strollers bearing Omron's marks is justified by orders Omron placed under the agreement, coupled with its refusal to accept delivery. Although the distribution agreement does not provide expressly for the means of wrapping up the parties' affairs and disposing of unsold inventory, courts regularly imply such terms--not as legal rules independent of the contract, but as implicit terms under the contract. When the contracting parties have not provided explicitly for some contingency, courts impute to their contract the provisions that they probably would have adopted had they focused on the subject and resolved it explicitly. These imputed terms are justified not only by a desire to make contract a more productive institution by holding down the costs of bargaining, but also by the parties' knowledge of the common law history of judicial gap-filling. Because these parties did not provide expressly for the disposition of unsold inventory, they invited a process of construction that will resolve their dispute. A court might say that the agreement implicitly licensed Maclaren to use the marks incident to a commercially reasonable means of selling the inventory. There are other possible outcomes, but all depend on an understanding of the parties' written bargain and of its implied terms.

Omron's claim engages both the parties' compact and the rules of trademark law, but the fact that the parties' designated forum would have to interpret federal law is no obstacle to the reference. E.g., Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991) (arbitration of claims under the Age Discrimination in Employment Act); Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 111 S.Ct. 1522, 113 L.Ed.2d 622 (1991) (forum selection clause sending admiralty case to Florida); Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477, 109 U.S. 1917, 104 L.Ed.2d 526 (1989) (arbitration of claims under the Securities Act of 1933); Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 107 S.Ct. 2332, 96 L.Ed.2d 185 (1987) (arbitration of claims under the Securities Exchange Act of 1934 and the Racketeer Influenced and Corrupt Organizations Act); Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985) (arbitration in Japan of claims under U.S. antitrust laws); Scherk v. Alberto-Culver Co., 417 U.S. 506, 94 S.Ct. 2449, 41 L.Ed.2d 270 (1974) (arbitration in France of claims under the Securities Exchange Act of 1934); The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972) (forum selection clause sending admiralty case to High Court of Justice in England); Bonny v. Society of Lloyd's, 3 F.3d 156 (7th Cir.1993) (forum selection clause sending fraud and securities claims to England).

We concluded in Sweet Dreams Unlimited, Inc. v. Dial-A-Mattress International, Ltd., 1 F.3d 639, 642-43 (7th Cir.1993), that all disputes the resolution of which arguably depend on the construction of an agreement "arise out of" that agreement for purposes of an arbitration clause. See also Hugel v. Corporation of Lloyd's, 999 F.2d 206 (7th Cir.1993...