Manetti-Farrow, Inc. v. Gucci America, Inc.

• Decision Date: 28 September 1988
• Docket Number: INC,No. 87-1988,MANETTI-FARRO,87-1988
• Citation: 858 F.2d 509
• Parties: , a California corporation, Plaintiff-Appellant, v. GUCCI AMERICA, INC., a New York corporation; Gucci Parfums S.p.A., an Italian corporation; Guccio Gucci S.p.A., an Italian corporation; Maurizio Gucci, Dr.; Domenico De Sole; Giovanni Vittorio Pilone, Dr., Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 509

858 F.2d 509

MANETTI-FARROW, INC., a California corporation, Plaintiff-Appellant, v. GUCCI AMERICA, INC., a New York corporation; Gucci Parfums S.p.A., an Italian corporation; Guccio Gucci S.p.A., an Italian corporation; Maurizio Gucci, Dr.; Domenico De Sole; Giovanni Vittorio Pilone, Dr., Defendants-Appellees.

No. 87-1988.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Feb. 10, 1988.

Decided Sept. 28, 1988.

Richard D. Rosenberg, Alioto & Alioto, San Francisco, Cal., for plaintiff/appellant.

Edwin B. Mishkin, Cleary, Gottlieb, Steen & Hamilton, New York City, for defendant/appellee Gucci America.

Patrick J. Mahoney, Cooley, Godward, Castro, Huddleson & Tatum, San Francisco, Cal., for remaining defendants/appellees.

Appeal from the United States District Court for the Northern District of California.

Before FARRIS, BRUNETTI and THOMPSON, Circuit Judges.

DAVID R. THOMPSON, Circuit Judge:

Manetti-Farrow, Inc. ("Manetti-Farrow") appeals the dismissal of its complaint against Gucci Parfums, S.p.A. ("Gucci Parfums"), Gucci America, Inc. ("Gucci America"), Guccio Gucci, S.p.A. ("Guccio Gucci"), and three individual directors of the various Gucci enterprises.

Manetti-Farrow entered an exclusive dealership contract with Gucci Parfums. The contract included a forum selection clause which designated Florence, Italy as the forum for resolution of any controversy "regarding interpretation or fulfillment" of the contract. Manetti-Farrow contends the forum selection clause does not apply to tort claims, and that the district court has jurisdiction to hear these claims. The district court dismissed the complaint. It concluded that the parties' forum selection clause required them to litigate their dispute in Florence, Italy. We have jurisdiction under 28 U.S.C. Sec. 1291, and we affirm.

I FACTS

In 1906, Signor Guccio Gucci opened a saddlery in Florence, Italy that eventually gained world-wide acclaim for its quality leather craftsmanship. The parent corporation of the Gucci empire, Guccio Gucci, S.p.A. ("Guccio Gucci") expanded its market to the United States in the 1950s. As the Gucci reputation spread, Gucci America was incorporated in New York to distribute Gucci products throughout the United States. Gucci America owns the American rights to the Gucci trademark, and owns and licenses retail stores across the country specializing in sales of Gucci merchandise.

Guccio Gucci formed a subsidiary, Gucci Parfums, to market a new line of perfumes and accessory items. Gucci Parfums is incorporated in Florence, Italy, and is 80%-owned by Guccio Gucci. The Gucci Accessory Collection ("Collection") launched by Gucci Parfums includes handbags, cosmetic bags, wallets, key rings and pens, all bearing the distinctive red and green Gucci stripe. Gucci Parfums sells the Collection to distributors around the world.

Manetti-Farrow, a California corporation, entered an exclusive dealership contract with Gucci Parfums in 1979. The contract designated Manetti-Farrow as the exclusive U.S. distributor of the Collection. Gucci America, the owner of the American rights to the Gucci trademark, was not a party to the exclusive dealership contract, but entered a separate Consent and Ratification Agreement, consenting to the terms of the contract.

In 1983, in Florence, Manetti-Farrow renewed its exclusive dealership contract with Gucci Parfums for an additional five years on substantially the same terms as the 1979 agreement. Due to Manetti-Farrow's success in marketing the Collection, its dealership territory was extended to include Puerto Rico, the Virgin Islands, and Tahiti. The 1979 and 1983 contracts included identical forum selection clauses, which provided: "For any controversy regarding interpretation or fulfillment of the present contract, the Court of Florence has sole jurisdiction." Gucci America signed a second Consent and Ratification Agreement, consenting to the 1983 contract between Manetti-Farrow and Gucci Parfums.

Sales of the Collection merchandise boomed. Manetti-Farrow's wholesale purchases from Gucci Parfums increased from $480,000 in 1979 to $15 million in 1985. The Manetti-Farrow distribution network expanded to over 500 points of sale. In 1985, Gucci Parfums signed a written agreement waiving its right to withdraw from the exclusive dealership contract in 1988, and extending Manetti-Farrow's contract for another five years.

Meanwhile, a power struggle was taking place within the Gucci empire. Manetti-Farrow alleges certain factions of the Gucci family sought to terminate its exclusive dealership relationship with Gucci Parfums, and to bring North American distribution of the Collection within the Gucci corporate structure. In July, 1986, Gucci Parfums terminated the exclusive dealership agreement, and brought suit against Manetti-Farrow in Florence for breach of contract.

One month later, Manetti-Farrow brought suit in the United States District Court for the Northern District of California, alleging eight causes of action against: Guccio Gucci; Gucci America; Gucci Parfums; Dr. Maurizio Gucci (Chairman of the Board of Gucci America, and director of Gucci Parfums and Guccio Gucci); Domenico De Sole (President and Director of Gucci America); and Dr. Giovanni Pilone (President of Gucci Parfums and director of Gucci America and Guccio Gucci). Six of these causes of action are at issue in this appeal: ¹ (1) conspiracy to interfere with contractual relations (against all defendants); (2) conspiracy to interfere with prospective economic advantage (against all defendants); (3) tortious interference with contractual relations (against Gucci America, Dr. Gucci, and De Sole); (4) tortious interference with prospective economic advantage (against Gucci America, Dr. Gucci, and De Sole); (5) breach of implied covenant of good faith and fair dealing (against Gucci America); and (6) unfair trade practices (against Gucci America). The district court held that all of these claims were covered by the forum selection clause, and dismissed the case. Manetti-Farrow appeals.

II APPLICABLE LAW

Our initial task is to decide whether state or federal law applies in our analysis of the effect and scope of the forum selection clause. Our approach to this threshold question is dictated by the doctrine of Erie Railroad v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), and its progeny. The Supreme Court has explained that in diversity suits such as the case before us, federal district courts should apply state law to substantive issues, and federal law to procedural issues. The application of the Erie doctrine to forum selection clauses, however, has led to a split among the circuit courts of appeals as to whether state or federal law should be applied. ² In this circuit, the issue has been squarely addressed only once. In Visicorp v. Software Arts, Inc., 575 F.Supp. 1528 (N.D.Cal.1983), the district court decided that federal law applies to interpret a forum selection clause, because forum selection is primarily a venue matter. Id. at 1532. The Visicorp court applied the standard announced in The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972). In The Bremen, the Supreme Court stated that forum selection clauses are to be specifically enforced unless the party opposing the clause clearly shows "that enforcement would be unreasonable and unjust, or that the clause was invalid for such reasons as fraud or overreaching." The Bremen, 407 U.S. at 15, 92 S.Ct. at 1916. Although The Bremen was an admiralty case, its standard has been widely applied to forum selection clauses in general. See e.g., Scherk v. Alberto-Culver Co., 417 U.S. 506, 518-19, 94 S.Ct. 2449, 2456-57, 41 L.Ed.2d 270 (1974) (applying The Bremen standard to an agreement to arbitrate disputes).

Other Ninth Circuit opinions interpreting forum selection clauses have applied federal law without discussing whether state or federal law applies. See, e.g., Pelleport Investors v. Budco Quality Theaters, 741 F.2d 273, 279 (9th Cir.1984); Crown Beverage Co. v. Cerveceria Moctezuma, S.A., 663 F.2d 886, 888 (9th Cir.1981); Republic Int'l Corp. v. Amco Eng'rs, Inc., 516 F.2d 161, 168 (9th Cir.1975). But see Colonial Leasing Co. v. Pugh Bros. Garage, 735 F.2d 380, 382 (9th Cir.1984) (applying Oregon law to enforce a forum selection clause). Other circuit courts of appeals have reached conflicting results. The Third Circuit treats interpretation of forum selection clauses as a contract issue, to be resolved according to state law. General Eng'g Corp. v. Martin Marietta Alumina, Inc., 783 F.2d 352, 356-57 (3d Cir.1986); see also Snider v. Lone Star Art Trading Co., Inc., 672 F.Supp. 977, 982 (E.D.Mich.1987), aff'd, 838 F.2d 1215 (6th Cir.1988). The Eleventh Circuit holds that forum selection clauses involve venue issues, are procedural and therefore federal law applies. Stewart Org., Inc. v. Ricoh Corp., 810 F.2d 1066, 1068 (11th Cir.) (per curiam) (en banc), aff'd on other grounds, --- U.S. ----, 108 S.Ct. 2239, 101 L.Ed.2d 22 (1988); accord Karl Koch Erecting Co. v. New York Convention Center Dev. Corp., 838 F.2d 656, 659 (2d Cir.1988); Luce v. Edelstein, 802 F.2d 49, 57 (2d Cir.1986); Bryant Elec. Co. v. City of Fredericksburg, 762 F.2d 1192, 1196-97 (4th Cir.1985); Bense v. Interstate Battery Sys. of America Inc., 683 F.2d 718 (2d Cir.1982); Freidman v. World Transp., Inc., 636 F.Supp. 685, 689 (N.D.Ill.1986). ³

In making an Erie choice between applying federal or state law, Hanna v. Plumer, 380 U.S. 460, 471, 85 S.Ct. 1136, 1144, 14 L.Ed.2d 8 (1965) teaches that our decision must be guided by "the twin aims of the Erie rule: discouragement of forum-shopping and avoidance of inequitable administration of the laws." Id. at 468, 85 S.Ct. at 1142. The Erie choice is best accomplished by balancing the federal and state interests. See, e.g., Byrd v. Blue Ridge Rural Elec. Coop., 356 U.S. 525, 78 S.Ct. 893, ...