ESC-Toy Ltd. v. Sony Interactive Entm't LLC

• Decision Date: 28 January 2021
• Docket Number: Case No.: 2:20-cv-00726-GMN-VCF
• Parties: ESC-TOY LTD., Plaintiff, v. SONY INTERACTIVE ENTERTAINMENT LLC, Defendant.
• Court: U.S. District Court — District of Nevada

ESC-TOY LTD., Plaintiff, v. SONY INTERACTIVE ENTERTAINMENT LLC, Defendant.

Case No.: 2:20-cv-00726-GMN-VCF

UNITED STATES DISTRICT COURT DISTRICT OF NEVADA

January 28, 2021

ORDER

Pending before the Court is Defendant Sony Interactive Entertainment LLC's ("Defendant's") Motion to Change Venue, (ECF No. 62). Plaintiff ESC-Toy Ltd. ("Plaintiff") filed a Response, (ECF No. 72), and Defendant filed a Reply, (ECF No. 83). For the reasons discussed below, the Court GRANTS Defendant's Motion to Change Venue.

I. BACKGROUND

This case arises out of an alleged breach of contract between the parties. (See generally Compl., ECF No. 1). Plaintiff is a Nevada corporation providing collectible merchandising works in the gaming and entertainment industries. (Id. ¶ 1). Defendant, a subsidiary of Sony Corporation of America, is a California limited liability company that develops interactive and digital entertainment, as well as performs research, development, and sales relating to PlayStation videogames, accessories, and online services. (Id. ¶ 2); (Mot. Change Venue ("MCV") 2:14-17, ECF No. 62). In January 2014, the parties executed a Merchandise License Agreement ("MLA"), which is a written agreement.¹ (MLA, Ex. A to Hottinger Decl., ECF No.45). The MLA, and its accompanying Merchandise Schedule, gave Plaintiff a non-exclusive license to design, manufacture, and sell merchandise, such as collectible pins and lanyards, for various PlayStation videogames. (See id.); (Compl. ¶¶ 42-45). The MLA contains a forum selection clause, stating: "Any action or proceeding brought to enforce the terms of this agreement or a Merchandise Schedule or to adjudicate any dispute arising under this agreement must be heard in the courts of San Mateo County, California, or the Northern District of California." (MLA ¶ 16.7, Ex. A to Hottinger Decl.).

Plaintiff asserts that on October 2, 2017, the parties orally entered into another agreement, termed the Exclusive Vendor Agreement ("EVA"). (Compl. ¶ 74). Under the EVA, Plaintiff would be the exclusive vendor providing collectible pins to Defendant; Defendant would include these pins with videogame pre-orders as a promotion to incentivize sales for PlayStation videogames. (Id. ¶¶ 59-74). Plaintiff alleges that the EVA is a new oral contract, separate from the MLA. (Pl. Resp. to MCV 1:4-10, ECF No. 72). Defendant counters that the EVA is an impermissible oral modification of the MLA. (MCV 6:4-10). In any case, Plaintiff claims that Defendant breached the terms of the EVA by not using Plaintiff to provide the collectible pins, in violation of the EVA's alleged exclusivity provision. (Compl. ¶ 105).

Plaintiff filed its Complaint on April 22, 2020, bringing the following causes of action against Defendant: (1) breach of oral contract; (2) unjust enrichment; (3) breach of the implied covenant of good faith and fair dealing; and (4) breach of written contract. (Compl. ¶¶ 102-128). On August 18, 2020, Defendant filed the instant Motion to Change Venue, (ECF No. 62), alleging that the MLA's forum selection clause applies to this action, and thus, the case should be transferred to the Northern District of California. (MCV 1:17-2:12).

II. LEGAL STANDARD

"For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have beenbrought." See 28 U.S.C. § 1404(a). "Under § 1404(a), the district court has discretion "to adjudicate motions for transfer according to an 'individualized, case-by-case consideration of convenience and fairness.'" Jones v. GNC Franchising, Inc., 211 F.3d 495, 498 (9th Cir. 2000) (quoting Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 23 (1988)). "Ordinarily, the district court would weigh the relevant factors and decide whether, on balance, a transfer would serve 'the convenience of the parties and witnesses' and otherwise promote 'the interest of justice.'" Atl. Marine Const. Co., Inc., v. U.S. Dist. Ct. W.D. Tex., 571 U.S. 49, 63 (2013) (quoting 28 U.S.C. § 1404(a)).

However, the analysis changes when the contract at issue contains a valid forum selection clause representing "the parties' agreement as to the most proper forum." See id. (quoting Stewart, 487 U.S. at 31). Forum selection clauses are "presumptively valid." Doe 1 v. AOL LLC, 552 F.3d 1077, 1083 (9th Cir. 2009). "Because a valid forum selection clause is bargained for by the parties and embodies their expectations as to where disputes will be resolved, it should be 'given controlling weight in all but the most exceptional cases.'" In re Orange, S.A., 818 F.3d 956, 961 (9th Cir. 2016) (quoting Atl. Marine Constr. Co., Inc., 571 U.S. at 60).

Accordingly, while a motion under § 1404(a) is the proper vehicle to enforce a valid forum selection clause, the district court's § 1404(a) analysis changes in three ways. See Atl. Marine Const. Co., Inc., 571 U.S. at 59. "First, the plaintiff's choice of forum merits no weight." Id. at 63. "Second, [the Court] . . . should not consider arguments about the parties' private interests." Id. at 64. The Court "may consider arguments about public-interest factors only." Id. Nonetheless, "[b]ecause those factors will rarely defeat a transfer motion, the practical result is that forum-selection clauses should control except in unusual cases." Id. Third, "when a party bound by a forum-selection clause flouts its contractual obligation and files suit in a different forum, § 1404(a) transfer of venue will not carry with it the originalvenue's choice-of-law rules—a factor that in some circumstances may affect public-interest considerations." Id. at 64-65. "The party seeking to avoid a forum selection clause bears a 'heavy burden' to establish a ground upon which [the court] will conclude the clause is unenforceable." Doe 1, 552 F.3d at 1083 (quoting M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 17 (1972)).

III. DISCUSSION

A. Motion to Change Venue

Defendant puts forth two arguments in support of its request to transfer this case to the Northern District of California: (1) Plaintiff's claims fall within the scope of the MLA and are therefore subject to the MLA's forum selection clause; or in the alternative: (2) an analysis of the convenience and fairness factors found in Jones still favors transfer. See 211 F.3d at 498; (MCV 5:26); (Reply to MCV 5: 17-18, ECF No. 83). Below, the Court will address each argument in turn.

1. The MLA's Forum Selection Clause

In the present case, the parties entered into an agreement, the MLA, containing a forum selection clause, which the Court presumes valid. Doe 1, 552 F.3d at 1083. The clause provides: "Any action or proceeding brought to enforce the terms of this agreement or a Merchandise Schedule or to adjudicate any dispute arising under this agreement must be heard in the courts of San Mateo County, California, or the Northern District of California." (MLA ¶ 16.7, Ex. A to Hottinger Decl.).

However, Plaintiff claims that the forum selection clause of the MLA does not apply to this action because the contract that Defendant allegedly breached, the EVA, is separate from the MLA, and thus, the MLA's provisions do not govern this dispute. (Pl. Resp. to MCV 1:4-10). In contrast, Defendant posits that the MLA's forum selection clause does apply to this action because the EVA is merely a modification of the MLA, and thus, the MLA's provisionsgovern this dispute.² (MCV 6:4-10). Accordingly, the Court will first determine whether the MLA's forum selection clause governs this dispute.

An analysis of a forum selection clause begins with an examination of its wording to determine the scope. In general, forum selection clauses covering disputes "arising under" or "stemming from" the agreement are interpreted narrowly, while forum selection clauses containing language such as "arising out of or relating to" the agreement are interpreted more broadly. See Rey v. Rey, 666 Fed. Appx. 675, 676 (9th Cir. 2016); ("stemming from"); Mediterranean Enters., Inc. v. Ssangyong Corp., 708 F.2d 1458, 1464 (9th Cir. 1983) ("arising under"); Cape Flattery Ltd. v. Titan Maritime, LLC, 647 F.3d 914, 922 (9th Cir. 2011) ("arising out of or relating to"). In this case, the MLA's forum selection clause utilizes only the "arising under" language, meaning that the forum selection clause is narrow in scope. (See MLA ¶ 16.7, Ex. A to Hottinger Decl.).

"A narrow forum selection clause covers claims that cannot be adjudicated without analyzing whether the parties were in compliance" with the agreement containing the clause. Rey, 666 Fed. Appx. at 676 (quoting Manetti-Farrow, Inc. v. Gucci America, Inc., 858 F.2d 509, 514 (9th Cir. 1988)). This narrow scope extends to disputes and controversies "relating to the interpretation and performance of the contract itself." Mediterranean Enters., 708 F.2d at 1464. In sum, a narrow forum selection clause applies when the resolution of the Plaintiff's claims requires examination of the agreement containing the clause. See, e.g., Rey, 666 Fed. Appx. at 676 (finding the forum selection clause inapplicable because "the court does not necessarily need to examine [the Agreement] to resolve [Plaintiff's] claims").³

Here, the MLA's narrow forum selection clause favors transfer because Plaintiff's claims require the Court to examine the scope of the MLA. The threshold issue in this case is whether the EVA is a separate contract or a modification of the MLA. For example, the EVA and MLA cover seemingly identical subject matter: Plaintiff's production of collectible pins for Defendant's videogames. (See MLA ¶ 16.7, Ex. A to Hottinger Decl.); (Compl. ¶¶ 72-74). The EVA could be construed as simply a modification of the MLA's Merchandise Schedule, adding an exclusivity term and covering additional videogames, or it could be construed as a completely separate contract, distinct from the MLA's non-exclusivity and subject matter.⁴ Regardless, to resolve this dispute, the...