United States District Court, N.D. Ohio
OPINION AND ORDER [RESOLVING DOC. 12]
S. GWIN UNITED STATES DISTRICT JUDGE.
March 3, 2017, Plaintiff Q Holding Company filed a fraudulent
inducement claim against Defendant Repco, Inc., otherwise
known as Peterson Enterprises
(“Peterson”). The parties are currently involved in
arbitration in Minnesota.
April 28, 2017, Defendant Peterson filed a motion to dismiss
or in the alternative to stay the action pending arbitration
or decline jurisdiction.
following reasons, the Court DENIES Defendant's motion to
stay or decline jurisdiction and DENIES Defendant's
motion to dismiss.
case involves a sales representative agreement between
Plaintiff Q Holdings and Defendant Peterson. Plaintiff claims
Peterson fraudulently induced it to enter the contract.
Q Holdings is a rubber and plastic manufacturer for medical
and automotive devices. Defendant Peterson is a sales and
marketing company. In 2016, the parties were negotiating a
potential sales agreement. However, in March 2016, Defendant
informed Plaintiff that Defendant was obligated to do sales
work exclusively for Plaintiff's primary
competitor, Flexan Corporation. Defendant Peterson's
negotiations with Plaintiff were on hold pending Defendant
breaking ties with Flexan.
in June 2016, Defendant representative Steve Fischer told
Plaintiff representative Craig Stark that Defendant was
“free and clear” to do sales work for
Plaintiff. The parties signed the sales agreement on
September 7, 2016.
December 16, 2016, Plaintiff received a letter from its
competitor Flexan informing Plaintiff that Defendant was
still obligated to work for Flexan. The letter said the
arrangement between Plaintiff and Defendant violated
Defendant's non-compete agreement with
states that its non-compete with Flexan did not apply when it
entered the contract with Plaintiff. Defendant and Flexan are
currently arbitrating that issue.
sent Defendant a notice of termination of their relationship
on March 3, 2017.
has commenced arbitration against Plaintiff in Minnesota
under the Minnesota Termination of Sales Representative Act
(“MTSRA”). Defendant argues that the MTSRA
limits Plaintiff's right to terminate the relationship
and to litigate in this Court.
March 3, 2017, Plaintiff Q Holding filed a fraudulent
inducement claim against Defendant Peterson. Plaintiff
seeks a declaratory judgment that their contract was invalid
from the outset.
April 28, 2017, Defendant Peterson filed a motion to dismiss
or in the alternative to stay the action or decline
jurisdiction. Defendant argues that the fraudulent
inducement claim underlying Plaintiff's declaratory
judgment action cannot survive. In the alternative,
Defendant asks this Court to stay the action pending
resolution of the parties' Minnesota arbitration or
decline jurisdiction altogether.
Motion to Stay or Decline Jurisdiction
Court will not dismiss the case, Defendant argues the Court
should decline jurisdiction or impose a stay pending
arbitration. Because sending the case to arbitration or
declining jurisdiction would make Defendant's merits
dismissal arguments irrelevant, the Court first considers the
motion to stay or decline jurisdiction first.
Motion to Stay
seeks to arbitrate the dispute under the Minnesota
Termination of Sales Representative Act
(“MTSRA”). The MTSRA provides: “[t]he sole
remedy for a manufacturer, wholesaler, assembler, or importer
who alleges a violation of any provision of this section is
to submit the matter to arbitration.”
Plaintiff argues the MTSRA does not apply here because the
parties' agreement includes an Ohio choice-of-law
provision and an Ohio forum selection clause.
Court agrees with Plaintiff Q Holding. The choice-of-law
provision selecting Ohio law defeats Defendant's
courts in diversity cases apply the forum state choice-of-law
principles. The Ohio Supreme Court has adopted the
Restatement (Second) of Conflict of Laws, which provides:
of the state chosen by the parties to govern their
contractual rights and duties will be applied, even if the
particular issue is one which the parties could not have
resolved by an explicit provision in their agreement directed
to that issue, unless either
(a) the chosen state has no substantial relationship to the
parties or the transaction and there is no other reasonable
basis for the parties' choice, or
(b) application of the law of the chosen state would be
contrary to a fundamental policy of a state which has a
materially greater interest than the chosen state in the
determination of the particular issue and which, under the
rule of § 188, would be the state of the applicable law
in the absence of an effective choice of law by the
exception applies here.
Ohio has a substantial relationship to the case-Plaintiff has
its principle place of business in North Canton, Ohio and
Defendant does business here.
Minnesota also has an interest in the case because Defendant
is a Minnesota corporation and has its principal place of
business in Minneapolis. However, Minnesota's interest is
not “materially greater” than Ohio's
neither exception to the Restatement applies, the
parties' choice-of-law provision controls and the MTSRA
does not apply. The Court also notes that that where the
parties agree to non-Minnesota law in a choice-of-law
provision, courts routinely find that the MTSRA does not
apply. Accordingly, the Court DENIES
Defendant's motion to stay pending
Motion to Decline Jurisdiction
Declaratory Judgment Act provides that “[i]n a case of
actual controversy within its jurisdiction . . . any court of
the United States . . . may declare the rights and other
legal relations of any interested party seeking such
declaration, whether or not further relief is or could be
sought.” The Act is “an enabling Act, which
confers discretion on the court rather than an absolute right
upon the litigant.” “Federal courts, and
federal district courts in particular, have ‘unique and
substantial discretion in deciding whether to declare the
rights of litigants.'”
Peterson argues the Court should decline jurisdiction because
after Plaintiff realized Defendant wanted to arbitrate in
Minnesota, Plaintiff forum shopped. Specifically, Plaintiff
rushed to file in ...