Sims Snowboards, Inc. v. Kelly, No. 88-3591

• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)
• Writing for the Court: Before BROWNING, TANG and FARRIS; FARRIS
• Citation: 863 F.2d 643
• Parties: SIMS SNOWBOARDS, INC., a California corporation, Plaintiff-Appellee, v. Craig KELLY and the Burton Corp., a Vermont corporation dba Burton Snowboards, Defendants-Appellants.
• Docket Number: No. 88-3591
• Decision Date: 06 December 1988

Page 643

863 F.2d 643 12 Fed.R.Serv.3d 188 SIMS SNOWBOARDS, INC., a California corporation, Plaintiff-Appellee,
v.
Craig KELLY and the Burton Corp., a Vermont corporation dba
Burton Snowboards, Defendants-Appellants. No. 88-3591. United States Court of Appeals,
Ninth Circuit. Argued and Submitted Nov. 2, 1988.
Decided Dec. 6, 1988.

Page 644

Michael G. Hanlon, Portland, Or., J.W. Jeff Karford II, Peter A. Kalat, Curtis, Mallet-Prevost, Colt & Mosle, New York City, for defendants-appellants.

Roger L. Meyer, Meyer, Habernigg & Wyse, Portland, Or., for plaintiff-appellee.

Appeal from the United States District Court for the District of Oregon.

Before BROWNING, TANG and FARRIS, Circuit Judges.

FARRIS, Circuit Judge:

I.

Craig Kelly and Burton Snowboards, defendants-appellants, appeal the district court's grant of a preliminary injunction to Sims Snowboards, plaintiff-appellee. The injunction prevents Kelly from using or endorsing any snowboard other than a Sims or an unidentified snowboard and from using or endorsing accessory products identified as Burton products. We reverse and vacate the injunction.

II.

Our review of an order granting a preliminary injunction is limited to determining whether the order is an abuse of discretion, or based on clearly erroneous findings of fact or on an erroneous legal standard. Portland Feminist Women's Health Center v. Buhler, 859 F.2d 681, 684 (9th Cir.1988); Chalk v. United States District Court, 840 F.2d 701, 704 (9th Cir.1988). We review a district court determination of the state law underlying a preliminary injunction de novo. Trans Meridian Trading Inc. v. Empresa Nacional de Comercializacion de Insumos, 829 F.2d 949, 953 (9th Cir.1987); In re McLinn, 739 F.2d 1395, 1397-1403 (9th Cir.1984) (en banc). A district court's determination of the appropriate choice of law is reviewed de novo. Pereira v. Utah Transport, Inc., 764 F.2d 686, 689 (9th Cir.1985), cert. dismissed, 475 U.S. 1040, 106 S.Ct. 1253, 89 L.Ed.2d 362 (1986). We review the district court's application of the facts to determine the appropriate choice of law de novo because

Page 645

the district court's determination of choice of law are not in dispute. See United States v. McConney, 728 F.2d 1195, 1202 (9th Cir.) (en banc), cert. denied, 469 U.S. 824, 105 S.Ct. 101, 83 L.Ed.2d 46 (1984).

III.

A.

In a diversity case, a federal court must apply the choice of law rules of the state in which the action was filed. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021, 85 L.Ed. 1477 (1941); Trans Meridian, 829 F.2d at 953. Determining which state's law applies in this case matters because California law differs from Oregon law in one important respect. California law would bar the granting of an injunction against Kelly or Burton.

An injunction can not be granted: ...

Fifth--To prevent the breach of a contract, other than a contract in writing for the rendition or furnishing of personal services from one to another where the minimum compensation for such service is at the rate of not less than six thousand dollars per annum and where the promised service is of a special, unique, unusual, extraordinary or intellectual character, which gives it peculiar value the loss of which can not be reasonably or adequately compensated in damages in an action at law, the performance of which would not be specifically enforced; ...

Cal.Civ.Code Sec. 3423. The statute provides that unless a personal service contract (i.e., a contract whose performance would not be specifically enforced) guarantees payments of at least six thousand dollars yearly, which Kelly's contract does not, no injunction may be granted to prevent a breach of the contract. See Motown Record Corp. v. Brockert, 160 Cal.App.3d 123, 207 Cal.Rptr. 574 (1984). The statute has been interpreted to bar enjoining the prospective employer in a tort suit as well. Beverly Glen Music, Inc. v. Warner Communications, Inc., 178 Cal.App.3d 1142, 224 Cal.Rptr. 260 (1986).

As the forum state, Oregon will apply its own law if the issue is one that is "procedural"--concerned with judicial administration, such as the methods of presenting facts to a court or the way a jury operates. See Equitable Life Assurance Soc'y v. McKay, 861 F.2d 221, 222 (9th Cir.1988); Equitable Life Assurance Soc'y v. McKay, 306 Or. 493, 760 P.2d 871, 873 (1988) (en banc) (determining Washington Deadman's Statute to be procedural). If the issue is "substantive"--concerned with the legal rights of the parties--then a choice of law analysis must be made. See McKay, 760 P.2d at 873-74; Lilienthal v. Kaufman, 239 Or. 1, 395 P.2d 543, 545 (1964) (en banc) (validity of contract matter of substance). Oregon has not decided whether an injunction is a procedural tool that should be governed by its law as the forum state. We find that the availability of the California anti-injunction statute would not be considered "procedural" by the Oregon courts, because it affects the substantive rights of the parties and not merely the methodology of litigation. See Seattle-First National Bank v. Schriber, 51 Or.App. 441, 625 P.2d 1370, 1372-74 (1981) (finding award of attorney's fees to be substantive issue); see also Leflar, McDougal & Felix, American Conflicts Law...