Stability Solutions, LLC v. Medacta USA, Inc.
3:22-cv-07412
N.D. Cal.Jan 20, 2023Background
- Stability Solutions, a Wyoming sales-agent company owned by Ash Shalaan, entered an April 2021 independent-sales-agent agreement with Medacta USA to sell Medacta joint-replacement devices in the Bay Area. The written agreement included a $2 million first-year minimum sales volume, a notice-and-opportunity-to-cure default process, a Delaware choice-of-law clause, and a forum-selection clause requiring suit in the U.S. District Court for the Middle District of Tennessee.
- Stability alleges Medacta assured the quota was a "soft goal," provided initial support, then withdrew support after a personnel change, raised quotas unilaterally, and terminated the agreement in July 2022 without giving notice or an opportunity to cure. Medacta allegedly then hired Stability’s contractors and continued dealing with surgeons Stability developed.
- Stability sued in San Francisco Superior Court asserting seven claims, including violations of California’s Independent Wholesale Sales Representative Act (IWSRA), breach of contract, breach of the covenant of good faith, and UCL violations. Medacta removed the case to federal court on diversity grounds.
- Medacta moved to dismiss for improper venue (Rule 12(b)(3)) or, alternatively, to transfer under 28 U.S.C. § 1404(a) to the Middle District of Tennessee relying on the forum-selection clause.
- The court rejected dismissal (venue was proper after removal) but held the forum-selection clause enforceable and granted Medacta’s § 1404(a) motion to transfer, finding Stability failed to show the public-interest factors overwhelmingly disfavor enforcement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Venue proper under Rule 12(b)(3) | Stability argued venue in Northern District of California is proper and the forum clause should not control. | Medacta moved to dismiss for improper venue and argued transfer would be futile. | Denied dismissal: removal from state court made venue proper; futility argument insufficient. |
| Authentication of the agreement | Stability argued the agreement attachment was unauthenticated (counsel lacked personal knowledge). | Medacta provided declarations (including from its GC) establishing personal knowledge and authenticity. | Court accepted authentication evidence and considered the agreement. |
| Enforceability of forum-selection clause given CA public policy / IWSRA and choice-of-law | Stability contended the clause (plus Delaware choice-of-law) waived unwaivable CA rights under IWSRA and contravened CA public policy, so it is unenforceable. | Medacta argued federal law governs enforcement; forum clause is valid and Stability has adequate remedy in Tennessee. | Forum-selection clause enforceable: IWSRA/public-policy challenge fails because Stability was not foreclosed from a remedy in transferee forum and did not make a strong showing of contravening CA public policy. |
| Whether to transfer under § 1404(a) | Stability argued private-interest factors weigh against transfer (plaintiff’s forum, convenience). | Medacta relied on the enforceable forum-selection clause; court should apply only public-interest factors and transfer. | Transfer granted: with a valid forum-selection clause, private-interest factors give way; Stability did not show public-interest factors overwhelmingly disfavor transfer. |
Key Cases Cited
- Atlantic Marine Constr. Co. v. U.S. Dist. Ct. for W. Dist. of Tex., 571 U.S. 49 (2013) (forum-selection clauses enforceable via § 1404(a); valid clauses control except in unusual cases)
- M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972) (forum-selection clauses unenforceable only if they contravene strong public policy)
- Sun v. Advanced China Healthcare, Inc., 901 F.3d 1081 (9th Cir. 2018) (plaintiff must make a strong showing that enforcement contravenes a clear public policy; remedy availability in transferee forum matters)
- Doe 1 v. AOL LLC, 552 F.3d 1077 (9th Cir. 2009) (courts may consider combined effect of forum-selection and choice-of-law clauses when assessing public-policy challenges)
- DePuy Synthes Sales, Inc. v. Howmedica Osteonics Corp., 28 F.4th 956 (9th Cir. 2022) (state law governs contract-formation questions about forum-selection clauses)
- Jones v. GNC Franchising, Inc., 211 F.3d 495 (9th Cir. 2000) (California policy requiring local venue for franchisees as an example of venue-related public-policy concern)
- Simula, Inc. v. Autoliv, Inc., 175 F.3d 716 (9th Cir. 1999) (forum-selection clauses may be enforced where reasonable recourse exists in the chosen forum)
- Piedmont Label Co. v. Sun Garden Packing Co., 598 F.2d 491 (9th Cir. 1979) (plaintiff bears burden to show venue is proper)