Dayhoff Inc. v. H.J. Heinz Co.

• Decision Date: 24 July 1996
• Docket Number: Nos. 95-3404,96-3250,s. 95-3404
• Citation: 86 F.3d 1287
• Parties: DAYHOFF INC., a California corporation, Appellant, v. H.J. HEINZ CO., a Pennsylvania corporation; Heinz Italia S.p.A., an Italian corporation; Heinz Dolciaria S.p.A., formerly known as Sperlari S.p.A., an Italian corporation; Sperlari s.r.l., an Italian corporation; and Hershey Foods Corporation, a Delaware corporation.
• Court: U.S. Court of Appeals — Third Circuit

Page 1287

86 F.3d 1287

DAYHOFF INC., a California corporation, Appellant, v. H.J. HEINZ CO., a Pennsylvania corporation; Heinz Italia

S.p.A., an Italian corporation; Heinz Dolciaria S.p.A.,

formerly known as Sperlari S.p.A., an Italian corporation;

Sperlari s.r.l., an Italian corporation; and Hershey Foods

Corporation, a Delaware corporation.

Nos. 95-3404, 96-3250.

United States Court of Appeals, Third Circuit.

Argued May 10, 1996.

Decided June 24, 1996.

As Amended on Limited Grant of Rehearing July 24, 1996.

William B. Mallin (argued), Mary K. Austin, Joseph M. Ramirez, Eckert, Seamans, Cherin & Mellott, Pittsburgh, PA, for Appellant.

Thomas L. Allen (argued), Carla L. Campbell, Reed, Smith, Shaw, & McClay, Pittsburgh, PA, for Appellees.

Before GREENBERG, ALITO, and McKEE, Circuit Judges.

OPINION OF THE COURT

GREENBERG, Circuit Judge.

I. INTRODUCTION

Appellant Dayhoff, Inc. initiated this diversity of citizenship action on October 29, 1993, alleging breach of contract, tortious interference with contract, fraud, and civil conspiracy against various of the appellees. The action arose out of the termination of three contracts between Dayhoff and appellee Heinz Dolciaria S.p.A. involving the manufacture and sale of candies in the United States. The terminations followed the sale of the Heinz Dolciaria candy business to appellee Hershey Foods Corporation. The district court dismissed Dayhoff's claims related to two of the contracts because of arbitration and forum selection clauses, and dismissed all claims for lack of personal jurisdiction against appellee Heinz Italia S.p.A. Heinz Italia is the parent corporation of Heinz Dolciaria and, in turn, is a subsidiary of appellee H.J. Heinz Co. After additional discovery with respect to the third contract, the court granted appellees' motion for summary judgment on all remaining claims. After Dayhoff appealed, the district court directed entry of a final judgment under Fed.R.Civ.P. 54(b), and Dayhoff then appealed again. We have consolidated the appeals for disposition in this opinion. ¹

Dayhoff is a California corporation with its principal place of business in California. H.J. Heinz Co. is a Pennsylvania corporation with its principal place of business in Pennsylvania. Hershey Foods Corporation is a Delaware corporation with its principal place of business in Pennsylvania. Appellees Heinz Italia S.p.A., Heinz Dolciaria S.p.A., and Sperlari s.r.l. are Italian corporations, with their principal places of business in Italy. As the monetary threshold for diversity jurisdiction was met, the district court had jurisdiction under 28 U.S.C. § 1332. We have jurisdiction under 28 U.S.C. § 1291.

II. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

A. FACTUAL BACKGROUND

1. The License Agreement

Dayhoff Australia Pty, Ltd., and Sperlari S.p.A. entered into a License Agreement on October 19, 1989, pursuant to which Sperlari S.p.A. granted Dayhoff Australia the exclusive license to make and sell Frutteto candy in the United States as of June 1990. Dayhoff Australia has assigned its rights and obligations under the agreement to Dayhoff. The ten-year term of the License Agreement expires October 19, 1999, but the agreement permits Dayhoff to continue thereafter to manufacture and market Frutteto candy in the United States under a non-exclusive, royalty-free license. Article 21 of the agreement provides that Italian law will govern its interpretation and Article 22 provides that any disputes relating to it will be adjudicated in an arbitration proceeding in Italy:

22. ARBITRATION

All controversies arising from the present contract or relating to the same will be definitively settled according to the Reconciliation and Arbitration Rules of the International Chamber of Commerce, excluding recourse to the common law courts, by one or more arbitrators appointed in accordance with these Rules.

The arbitration tribunal will decide on its competence to decide the matter and on the validity of the arbitration clause.

Each party can apply to the relevant Law Courts to confirm the arbitration sentence or enforce execution of the same.

Arbitration proceedings will take place in Milan.

App. at 46.

2. The Frutteto Distribution Agreement

On July 26, 1990, Dayhoff and Sperlari S.p.A. signed the Frutteto Distribution Agreement, which provides that Dayhoff will be the exclusive United States distributor of Frutteto candy. The contract does not have a set term, but, like the License Agreement, contains a governing law clause:

B. GOVERNING LAW

This Agreement shall be governed and constructed in accordance with the laws of Italy and the parties hereto irrevocably submit to the exclusive jurisdiction of the Court of Cremona (Italy).

App. at 49. In April 1992, Sperlari S.p.A. assigned its rights under the 1989 Frutteto Licensing Agreement and the 1990 Frutteto Distribution Agreement to Heinz Dolciaria. App. at 198.

3. The Bulk Candy Distribution Agreement

Dayhoff and Heinz Dolciaria executed the Bulk Candy Distribution Agreement on July 17, 1992. Pursuant to this agreement, Dayhoff became Heinz Dolciaria's exclusive United States distributor of certain candies other than Frutteto candy. The Bulk Candy Distribution Agreement has an eight-year term that expires at the earliest on July 17, 2000. The agreement provides that disputes arising from it are to be litigated in the United States District Court for the Western District of Pennsylvania and that the agreement will be construed in accordance with Pennsylvania law. App. at 50-67. Thus, the three agreements provide for three different fora for adjudicating disputes and provide for the law of two countries to apply to their interpretation. As we shall see, this fractured approach to dispute resolution under related contracts has led to great expense and confusion and, we are afraid, will continue to do so.

Because some of Dayhoff's claims are based on events surrounding the negotiation of the 1992 Distribution Agreement, the facts relating to the negotiation of that agreement require further discussion. The district court rejected Dayhoff's claims related to this agreement on summary judgment; therefore, we will present the facts pertaining to these claims in the light most favorable to Dayhoff. See Petruzzi's IGA Supermarkets, Inc. v. Darling-Delaware Co., 998 F.2d 1224, 1230-32 (3d Cir.), cert. denied, --- U.S. ----, 114 S.Ct. 554, 126 L.Ed.2d 455 (1993); see also Berner Int'l Corp. v. Mars Sales Co., 987 F.2d 975, 978 (3d Cir.1993).

The parties negotiated the Bulk Candy Distribution Agreement through numerous facsimiles between the United States and Italy. On June 4, 1992, Luigi Volta, then a long-time employee of Heinz Dolciaria and currently employed by Sperlari s.r.l., a successor corporation to Heinz Dolciaria, informed Dayhoff that "[t]his is our last and final proposition." Sealed app. at 1011-12. On June 8, 1992, Volta informed Dayhoff that an agreement was "reachable" and invited Uday Lele, president of Dayhoff, to come to Cremona, Italy, to "finalize" the agreement. Id. at 1013.

Shortly thereafter, Lele traveled to Cremona to sign the agreement. According to Dayhoff, Lele understood that the negotiations were virtually over and that the contract terms would follow the facsimiles. However, when he arrived in Italy to sign the contract, Lele learned that Antonella Giacobone, an attorney for Heinz Italia, would be at the meeting, as would Volta and Franco Seletti. Seletti, also a former employee of Heinz Dolciaria, now employed by Sperlari s.r.l., is above Volta in the corporate ladder.

Lele never had met or dealt with Giacobone, and there had never been an attorney present during previous negotiations between Dayhoff and Heinz Dolciaria or their predecessors, or at the execution of their previous contracts. Lele had not been given advance notice that Giacobone would be at the meeting, and no one had suggested that he might want to bring his own lawyer. Dayhoff alleges that when Lele asked Giacobone why she was present, she advised him that she would protect Dayhoff's interests as well as those of Heinz Dolciaria, and that she was Dayhoff's de facto attorney in connection with the negotiation of the contract.

At the meeting, Giacobone presented Lele with a draft of the Bulk Candy Distribution Agreement that he had not seen during the parties' previous negotiations. The draft contained a termination provision similar to section 14.3, ² the one ultimately incorporated into the final agreement. According to Dayhoff, Heinz Dolciaria had not discussed the termination provision with it previously. Thus, the provision had not been incorporated in the parties' prior drafts or agreements.

At his deposition, Lele testified that he inquired into the meaning of this provision at the meeting:

I asked Antonella Giacobone what this meant, and she said, Mr. Lele, you are operating in the American market. Heinz USA is one of the most well-known food companies, we don't want you to use the Heinz name to sell your company to somebody else and become a rich man and we get left holding the baby and having to deal with somebody we don't want to deal with. That is what she told me.

Sealed app. at 743-44. Dayhoff alleges that when Lele asked Giacobone specifically what the termination provision meant, she did not tell him that the appellees could invoke the clause when Heinz Italia rather than Dayhoff sold its business. Instead, Dayhoff alleges, she advised him that the provision protected Heinz Dolciaria in the event that Dayhoff was sold or its assets assigned. Moreover, Dayhoff alleges that in connection with Giacobone's explanation of the clause, she told Lele that "[s]he would be taking care of both our interests." Br. at 9. Dayhoff further claims that Volta confirmed Giacobone's representations as to the meaning of the termination clause by telling Lele that the provision was intended to protect Heinz Dolciaria in the event that Dayhoff sold or...