Jack Winter, Inc. v. Koratron Company

• Decision Date: 09 March 1971
• Docket Number: 51654,50854,51691.,49558,Civ. A. No. 49392,51653,47273,50063,51301,49913,51650,49671,51281,50827
• Parties: JACK WINTER, INC., a corporation, Plaintiff, v. KORATRON COMPANY, Inc., Defendant, and Consolidated Cases. OXFORD INDUSTRIES, INC., Wright Manufacturing Company, corporations, Plaintiffs, v. KORATRON COMPANY, Inc., a corporation, et al., Defendants.
• Court: U.S. District Court — Northern District of California

326 F. Supp. 121

JACK WINTER, INC., a corporation, Plaintiff, v. KORATRON COMPANY, Inc., Defendant, and Consolidated Cases.

OXFORD INDUSTRIES, INC., Wright Manufacturing Company, corporations, Plaintiffs, v. KORATRON COMPANY, Inc., a corporation, et al., Defendants.

Civ. A. Nos. 49392, 47273, 49558, 49671, 49913, 50063, 50827, 50854, 51281, 51301, 51650, 51653, 51654, 51691.

United States District Court, N. D. California, San Francisco Division.

March 9, 1971.

Brobeck, Phleger & Harrison, by Moses Lasky, Robert S. Daggett, Richard C. Wydick, San Francisco, Cal., Lyon & Lyon, by James W. Geriak, Los Angeles, Cal., for Koratron Co., Inc.

King & Spalding, by Charles M. Kidd, Atlanta, Ga., for Oxford Industries, Inc.

MEMORANDUM OPINION AND ORDER

WILLIAM E. DOYLE, District Judge.

I. BACKGROUND FOR THIS MOTION

On or about August 1, 1964, plaintiff, Oxford Industries, Inc., (a garment manufacturer) entered into an agreement with defendant, Koratron Company, Inc., the wholly-owned subsidiary of defendant, Koracorp Industries, Inc., to license Koratron's permanent press process. This 1964 license agreement allegedly contained a provision in which Koratron agreed to give Oxford the benefit of any more favorable license agreement granted to any other licensee and covenanted to notify Oxford promptly of any such more favorable license agreement.

On or about October 14, 1965, defendant Koratron entered into an agreement with Dan River Mills, Inc. (a fabric manufacturer), in which Koratron allegedly agreed to grant in effect a royalty-free license to Dan River and to garment manufacturers purchasing cloth from Dan River. It is alleged that Koratron did not notify Oxford of this more favorable agreement, but to the contrary, had agreed with Dan River that neither party to the "secret" agreement would make any disclosure of it.

On or about March 20, 1968, Koratron issued a press release announcing the existence of and to some extent describing the nature of the 1965 Dan River agreement. Copies of said press release were mailed by Koratron, on or about that date, to all of the United States garment manufacturer licensees of Koratron, including Oxford Industries, Inc. Thereafter, the 1965 Dan River agreement was the subject of news articles which appeared in the Daily News Record on April 3, 1968, and in the Woman's Wear Daily on April 4, 1968 — trade journals which are commonly known as the two most widely read periodicals of the garment industry.

Thereafter, in mid-1968, Koratron and Oxford entered into a new form of patent license agreement which supplanted the old one. In this so-called old patent license agreement which governed the relations of the parties between 1964 and mid-1968, there was a provision that disputes arising thereunder were to be resolved by arbitration in San Francisco. The new agreement also provided for arbitration, but stipulated in addition thereto that

If either party elects, by written notice to the other, that the controversy or claim should be resolved by suit or action in court, in which event such suit or action shall be brought only in a court of competent jurisdiction, state or federal, sitting in San Francisco, California. Licensee agrees to accept venue in California. * * *

Oxford sued Koratron and Koracorp in the County Court of Fulton, Georgia, in February of 1969. Its complaint was limited essentially to a claim for breach of contract based on the contention that the 1965 Dan River agreement gave Oxford a right to a lesser royalty under the "most favored royalty" provisions of its license with Koratron, and that Koratron had fraudulently failed to disclose the agreement to Oxford. A month later the action was removed from Fulton County to the federal court at Atlanta. Then, in May of 1969, Koratron and Koracorp filed motions in the Georgia federal court, asserting, among other things, that Koratron should be dismissed for lack of jurisdiction under Rule 12(b) (2), or that, since Oxford has agreed in its license to sue only in San Francisco, the action must be transferred to this Court pursuant to the mandatory provisions of 28 U.S.C. § 1406, and, in any event, should be transferred under the discretionary provision of § 1404(a). Before that court heard the motions, the case was transferred to this Court for pretrial purposes by the Judicial Panel on Multidistrict Litigation pursuant to 28 U.S.C. § 1407. Then, in February of 1970, after certain discovery was completed, Oxford amended its complaint to allege that Koratron and Koracorp had misused Koratron's patent rights, had obtained the patent in question by fraudulent misrepresentation on and failure to disclose certain pertinent information to the patent office, that Koratron and Koracorp have violated Sections 1 and 2 of the Sherman Act, and that the patent was invalid for various other reasons. We have heretofore denied the motion of Koratron to quash the service. Our holding was that Koratron was transacting business in Georgia.

All of the questions raised by defendants' present motions have been decided by this Court, except for the issue whether the provision in the license agreement requiring litigation (if either party elects litigation) in a court of competent jurisdiction in San Francisco, California should be enforced.

II. JURISDICTION OF THIS COURT TO DETERMINE THE PRESENT PENDING MOTIONS

Oxford submits that it has not waived its right to contest the Transferee Court's jurisdiction to decide a Motion to Transfer under 28 U.S.C. § 1404. The basis for the present motion to transfer is the contract between the parties providing for venue of the action to be laid in a court of competent jurisdiction in San Francisco, California. 28 U.S.C. § 1406 is relied on.

The contention that this Court, as transferee court under § 1407, lacks jurisdiction to determine either such motion is answered by the response of the Judicial Panel on Multidistrict Litigation to a similar contention (that a transferee court has no jurisdiction to decide a class action question):

namely, that pretrial, as an adjective, means before trial—that all judicial proceedings before trial are pretrail proceedings. This is known not only by lawyers and judges, but is known or can be readily learned by laymen. See Random House Dictionary of the English Language, unabridged ed. 1141. See also "Pretrial Calendar" 33 Words and Phrases, p. 511.

We take the position that the issue is properly before us.

III. THE GENERAL VALIDITY OF A CONTRACTUAL PROVISION LIMITING PLACE OR COURT IN WHICH ACTION MAY BE BROUGHT

The traditional and the numerical majority rule as to validity of such a stipulation is stated in Annot., 46 A.L.R.2d 300, 306 (1957):

In what would appear to be a majority of jurisdictions (and by what is clearly the numerical weight of the decisions), contractual agreements by which it is sought to limit particular causes of action which may arise in the future to a specified court, or to a court or courts in a specified place, are held invalid, or, at least, they are not viewed as barring litigation of the causes in courts or places different from those specified in the agreements.

See cases cited, Id., and Later Case Service (1967).¹ The basis of the holdings appears to be that such agreements are contrary to public policy, as attempts to oust the jurisdiction of the courts (or certain courts).

However, in what is now a leading case on the subject, Wm. H. Muller & Co. v. Swedish American Line, Ltd., 224 F.2d 806 (2d Cir. 1955), the court sustained a contractual provision purporting to limit jurisdiction of "any claim against the carrier arising under this bill of lading," to the Swedish courts. In so doing the court accepted the conclusion of Judge L. Hand stated in his concurring opinion in Krenger v. Pennsylvania R. Co., 174 F.2d 556, 561 (2d Cir. 1949):

In truth, I do not believe that, today at least, there is an absolute taboo against such contracts at all; in the words of the Restatement (of Contracts, § 558), they are invalid only when unreasonable * * *.

Although the Muller case itself has been overruled, because of its inconsistency with the Carriage of Goods by Sea Act, 46 U.S.C. §§ 1300-1315, by Indussa Corp. v. S.S. Ranborg, 377 F.2d 200 (2d Cir. 1967), many authorities hold that its rationale as to venue of actions is still good and highly persuasive where COGSA does not apply. See, e. g., Geiger v. Keilani, 270 F.Supp. 761, 764 n. 3 (E.D.Mich.1967). Indeed, a substantial number of cases have followed the Muller decision. See Central Contracting Co. v. Maryland Cas. Co., 367 F.2d 341 (3d Cir. 1966); Goff v. AAMCO Automatic Transmission, Inc., 313 F.Supp. 667 (D.Md.1970); A. C. Miller Concrete Prod. Corp. v. Quikset Vault Sales Corp., 309 F.Supp. 1094 (E.D.Pa.1970); Matthiessen v. National Trailer Convoy, Inc., 294 F.Supp. 1132 (D.Minn. 1968); National Equipment Rental, Ltd. v. Sanders, 271 F.Supp. 756 (E.D.N.Y. 1967); Geiger v. Keilani, 270 F.Supp. 761 (E.D.Mich.1967); General Electric Co. v. City of Tacoma, 250 F.Supp. 125 (W.D.Wash.1966); Hernandez v. Koninklijke Nederlandsche Stoomboot Maat., 252 F.Supp. 652 (S.D.N.Y.1965); Pakhuismeesteren, S.A. v. S.S. Goettingen, 225 F.Supp. 888 (S.D.N.Y.1965); Euzzino v. London & Edinburgh Ins. Co., Ltd., 228 F.Supp. 431 (N.D.Ill.1964); Takemura & Co. v. The S.S. Tsuneshima Maru, 197 F.Supp. 909 (S.D.N.Y.1961). See also, National Equipment Rental, Ltd. v. Szukhent, 375 U.S. 311, 315-316, (opinion of the court), 326-327 (Black, J., dissenting), 84 S.Ct. 411, 11 L.Ed.2d 354 (1964).

Under this view, the Court may in its discretion refuse to assert its jurisdiction if, upon the facts of the case before it, the agreement does not appear unreasonable. In answer to the argument that a forum agreement is necessarily an attempt to oust the jurisdiction of the court, it was said in Geiger v. Keilani, supra, 270 F.Supp. at 765:

With this proposition² there can be no quarrel. However, the

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