Warren Envtl., Inc. v. Source One Envtl., Ltd.
| Decision Date | 15 July 2020 |
| Docket Number | CIVIL ACTION NO. 18-11513-RGS |
| Parties | WARREN ENVIRONMENTAL, INC. v. SOURCE ONE ENVIRONMENTAL, LTD. |
| Court | U.S. District Court — District of Massachusetts |
STEARNS, D.J.
Defendant Source One Environmental, Ltd., successor in interest to Fernco Environmental, Ltd. (Source One) - the remaining defendant in this case - moves to dismiss Warren Environmental, Inc. (WEI)'s claims against it for breach of contract, breach of the duty of good faith and fair dealing, and negligence. For the reasons stated below, the motion will be GRANTED in part and DENIED in part.
The court writes for the parties and assumes the readers' familiarity with the facts alleged in the First Amended Complaint (FAC) (Dkt # 4). In short, WEI, headquartered in Massachusetts, owns a U.S. patent for a spray epoxy application known as the Warren Environmental System. In 2006, WEI filed an international patent application for its epoxy products and spray system. In 2008, Source One, based in England, entered into a licensing agreement with WEI.1 The agreement granted Source One "directly or through its agent Flex-Seal Couplings, LTD, . . . [the exclusive right] to use and sub-license WEI's patented pumping system and its epoxy products in an '[A]greed [T]erritory' which included Europe, Australia, New Zealand and Norway." Id. ¶ 30; Dkt # 31-1 ¶ 16.1. Among other obligations, Source One agreed to be held "responsible for the maintenance and policing of the Warren patent within its territories." Dkt # 31-1 ¶ 14.3.
In July of 2008, on the same date that WEI and Source One signed the licensing agreement, WEI and Flex-Seal Couplings, Ltd. (Flex-Seal), executed a Deed of Assignment in which WEI assigned to Flex-Seal its patent rights in the "Agreed Territories." See id. at 16-17. Flex-Seal, as the assignee of the patent rights, was designated to act as the agent for its subsidiary Source One in assuring protection of the patent rights. FAC ¶ 34. In fulfilling that role, Flex-Seal engaged Wilson Gunn, an English law firm, to prosecutethe patent before the European Patent Office (EPO) and designated its Commercial Director, Steve Riding, as the liaison with Wilson Gunn.
In June of 2015, the patent lapsed. Wilson Gunn sought to re-instate the patent with the EPO in November of 2015, but the EPO provisionally declined the request. On March 5, 2018, the EPO rejected a request to re-establish the patent after concluding that Flex-Seal had "not taken all the due care required by the circumstances." Dkt # 4-4 ¶ II.21. At the same time, the EPO concluded that WEI for its part had "fulfilled the prerequisite of all due care," id. ¶ II.10, as had Wilson Gunn. Id. ¶ II.23.
WEI alleges other contractual breaches apart from those involving the loss of its European patent. WEI alleges that Source One "secretly designed, engineered and created drawings for a spray system to compete with WEI's system [and] filed for a patent application in Australia for their system." FAC ¶ 116. WEI further alleges that Source One "attempted to design and test a knock-off epoxy," and "solicited, bought, sold and/or manufactured a copycat epoxy product." Id. ¶ 118. WEI also asserts that Source One was directed "to have WEI epoxies reverse[] engineered and/or manufactured by a German company who then produced copycat epoxy resins for the defendants." Id. ¶ 119. WEI contends that Source One "secretly sold knock-off, non-WEI epoxies to its European licensees under the Ultracoat name foruse with WEI's licensed spray system," id. ¶ 120, and "also manufactured, built, sold and/or used competing spray systems other than the WEI's systems." Id. ¶ 121.
The licensing agreement that Source One signed with WEI contains the following provision:
Dkt # 31-1 ¶ 23. "The parties agree that the 'Applicable Law' provision of the [a]greement is a forum selection clause." Pl.'s Opp'n (Dkt # 64) at 7.
Source One argues that, by its terms, the forum selection clause requires WEI to have brought the present action in a British court. Specifically, Source One maintains that because "[a]ll of the remaining claims are based on Source One's business in the Territory [consisting of parts of Europe, Australia, and New Zealand]," these claims "fall within theexclusive jurisdiction of the Courts of England." Def.'s Mem. (Dkt # 51) at 15. WEI counters that the contractual language "compels that this dispute be heard in the United States." Pl.'s Opp'n at 6. According to WEI, "[m]aintenance of the WEI patent is not 'business conducted' in Europe; rather, it is conformance with the express terms of the parties' contract, which required Source One to perform such patent maintenance." Id. at 8. Source One responds that "maintenance and policing of the European patent application before the European Patent Office is business conducted in Europe," Def.'s Reply (Dkt # 67) at 2 - because such maintenance allegedly "was necessary to the stated business of marketing and selling the products within the Territory, and that the ability to market and sell the products in Europe, specifically, was diminished by the patent's lapse." Id. at 3. Source One also underscores that several of WEI's allegations extend beyond patent maintenance, addressing Source One's work "with a German manufacturer," FAC ¶ 90, sales to "European licensees," id. ¶ 91, and Source One's allegedly having "manufactured, built, sold and/or used competing spray systems" as gleaned from "information provided by . . . European and other foreign licensees." id. ¶ 92. See Def.'s Reply at 3. In the alternative, Source One argues that this action should be dismissed under the doctrine of forum non conveniens.
Forum selection clause
"Ordinarily, a motion to dismiss on the basis of a forum selection clause is judged according to a Fed. R. Civ. P. 12(b)(6) standard." Hebert v. Vantage Travel Serv., Inc., 2018 WL 1156225, at *3 (D. Mass. Mar. 2, 2018). "The prevailing view towards contractual forum-selection clauses is that 'such clauses are prima facie valid and should be enforced unless enforcement is shown by the resisting party to be 'unreasonable' under the circumstances.'" Xiao Wei Yang Catering Linkage in Inner Mongolia Co., Ltd. v. Inner Mongolia Xiao Wei Yang USA, Inc., 150 F. Supp. 3d 71, 76 (D. Mass. 2015), quoting Silva v. Encyclopedia Britannica Inc., 239 F.3d 385, 386 (1st Cir. 2001). "The 'enforcement of valid forum-selection clauses, bargained for by the parties, protects their legitimate expectations and furthers vital interests of the justice system.'" Atl. Marine Const. Co. v. U.S. Dist. Court for W. Dist. of Texas, 571 U.S. 49, 63 (2013), quoting Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 33 (1988) (Kennedy, J., concurring). Accordingly, "'a valid forum-selection clause [should be] given controlling weight in all but the most exceptional cases.'" Id. (alteration in original) quoting Stewart, 487 U.S. at 33 (Kennedy, J., concurring).
"'Under federal law, the threshold question in interpreting a forum selection clause is whether the clause at issue is permissive ormandatory.'" Autoridad de Energía Eléctrica de Puerto Rico v. Vitol S.A., 859 F.3d 140, 145 (1st Cir. 2017), quoting Claudio-De León v. Sistema Universitario Ana G. Méndez, 775 F.3d 41, 46 (1st Cir. 2014). "'[M]andatory forum selection clauses contain clear language indicating that jurisdiction and venue are appropriate exclusively in the designated forum.'" Id., quoting Claudio-De León, 775 F.3d at 46 (alterations in original). "'[T]ypical mandatory terms' [include] 'shall,' 'exclusive,' 'only,' or 'must'. . . ." Id. at 146 (alterations in original), quoting Rivera v. Centro Médico de Turabo, Inc., 575 F.3d 10, 17 n.5 (1st Cir. 2009).
The parties' forum selection clause at issue here is not limited in its intent - the chosen words are "shall be governed" and "will be used" - in conferring "exclusive" jurisdiction in the courts of the United States or those of England, "whichever is relevant as noted above." The forum selection clause requires that an action be brought in a United States court when it is premised upon "the contract and issues pertaining to the Parties undersigned" and in the courts of England "for issues relating to business conducted by [Source One] in its territories."
"Under Massachusetts law, a breach of contract claim requires the plaintiff to show that (1) a valid contract between the parties existed, (2) theplaintiff was ready, willing, and able to perform, (3) the defendant was in breach of the contract, and (4) the plaintiff sustained damages as a result." Bose Corp. v. Ejaz, 732 F.3d 17, 21 (1st Cir. 2013), citing Singarella v. City of Boston, 342 Mass. 385, 387 (1961). Intrinsically, "[e]very contract implies good faith and fair dealing between the parties to it." Warner Ins. Co. v. Comm'r of Ins., 406 Mass. 354, 362 n.9 (1990), quoting Kerrigan v. Boston, 361 Mass. 24, 33 (1972). "The covenant requires 'that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract. . . .'" Nile v. Nile, 432 Mass. 390, 398 (2000), quoting Druker v. Roland Wm. Jutras Assocs., 370 Mass. 383, 385 (1976). Where a duty of good faith and fair dealing is alleged to arise from a contractual relationship, a...
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