Carter's of New Bedford, Inc. v. Nike, Inc.
2015 U.S. App. LEXIS 10692
| 1st Cir. | 2015Background
- Carter's of New Bedford (a family-owned retailer) sold Nike products for ~28 years; Nike notified Carter's in March 2013 that it was terminating the parties' business relationship.
- Carter's sued in Massachusetts Superior Court asserting breach of the parties' invoice-based Agreement, breach of the implied covenant of good faith and fair dealing, a UCC §2-309 claim (failure to give reasonable time for termination), and a Chapter 93A claim for unfair business practices.
- The Complaint attached Nike's invoice labeled "Terms and Conditions of Sale," which included a forum selection clause requiring litigation in Oregon; Carter's admitted the Agreement partially governed the relationship.
- Nike removed to federal court and moved to dismiss under Fed. R. Civ. P. 12(b)(6) based on the invoice forum selection clause; Carter's opposed, arguing unconscionability and that Nike unilaterally inserted the clause without notice.
- Carter's attempted to introduce pre-amendment invoices showing the clause was added later; the district court struck those exhibits (Carter's did not oppose the motion to strike) and dismissed the Complaint for failure to overcome the forum clause.
- On appeal, the First Circuit reviewed de novo, applied Bremen factors (assuming their continued applicability post-Atlantic Marine), and affirmed enforcement of the Oregon forum clause, rejecting Carter's public-policy and hardship arguments.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of forum selection clause | Clause was unilaterally added, contract of adhesion, unconscionable, not bargained for | Invoice clause is part of the Agreement attached to complaint and requires Oregon jurisdiction | Enforced; Carter's failed to meet heavy burden to set it aside |
| Scope of clause (does it cover Chapter 93A claim) | Chapter 93A claim should be outside scope or limited to specific invoices | Clause covers "any action arising out of or in connection with the Agreement" so it includes Chapter 93A claim tied to termination | Clause is broad and covers the Chapter 93A claim |
| Hardship / practical impossibility of litigating in Oregon | Cross-country litigation against large corporation would be unduly burdensome and practically impossible | Carter's is a multi-million dollar company; enforcement is not practically impossible or unjust | Not unreasonable or unjust; no practical impossibility shown |
| Procedural vehicle (use of 12(b)(6) and striking exhibits) | District court should have converted to summary judgment or admitted pre-amendment invoices | Motion to strike exhibits was proper; Carter's failed to oppose/ask to convert or to amend complaint | No error: Carter's failed to preserve or adequately develop procedural arguments; dismissal under 12(b)(6) was proper |
Key Cases Cited
- Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (forum selection clauses enforceable absent strong showing to set aside)
- Atlantic Marine Constr. Co. v. U.S. Dist. Court, 134 S. Ct. 568 (forum-selection enforcement principles for federal courts)
- Huffington v. T.C. Grp., LLC, 637 F.3d 18 (1st Cir.) (application of Bremen factors)
- Claudio-De León v. Sistema Univ. Ana G. Méndez, 775 F.3d 41 (1st Cir.) (plaintiff bears heavy burden to oppose forum clause)
- Rivera v. Centro Médico de Turabo, Inc., 575 F.3d 10 (1st Cir.) (scope of forum clauses and pleading rules)
- Feeney v. Dell, Inc., 908 N.E.2d 753 (Mass.) (Mass. public policy on arbitration/class actions discussed)
- Jacobson v. Mailboxes Etc. U.S.A., Inc., 646 N.E.2d 741 (Mass.) (distinguishing pre-contractual 93A claims from claims arising from the contract)