United States District Court, E.D. North Carolina
C. DEVER III Chief United States District Judge
November 23, 2016, Apple Inc. ("Apple") moved to
stay the above-captioned action pending resolution of
Inter Partes Review ("IPR") of U.S. Patent
Nos. 8, 886, 269 ("the '269 Patent"), 8, 923,
941 ("the '941 Patent"), 8, 929, 965 ("the
'965 Patent"), 8, 989, 830 ("the '830
Patent"), before the Patent Trial and Appeal Board
("PTAB") [D.E. 96] and filed a memorandum in
support [D.E. 97]. On December 14, 2016, Valencell, Inc.,
("Valencell") responded in opposition [D.E. 103].
On December 27, 2016, Apple replied [D.E. 109].
reasons set forth in Apple's memorandum in support and
reply, as well as the PTAB's institution of IPR for the
patents [D.E. 195], a stay this action is warranted. Thus,
the court grants Apple's motion to stay.
February 6, 2017, the court denied Apple's motion to
transfer [D.E. 127], OnMarch31, 2017, Apple moved for
reconsideration of the court's order denying Apple's
motion to transfer [D.E. 149], filed a memorandum in support
[D.E. 150], and moved to seal its memorandum in support [D.E.
151]. On April 21, 2017, Valencell responded in opposition
[D.E. 169]. On May 4, 2017, Apple replied [D.E. 174].
moves for reconsideration under Federal Rule of Civil
Procedure 54(b). See [D.E. 150] 8. Under Rule 54(b),
"any order or other decision, however designated, that
adjudicates fewer than all the claims or the rights and
liabilities of fewer than all the parties does not end the
action as to any of the claims or parties and may be revised
at any time before the entry of a judgment" Courts may
grant such orders within their discretion, and the standard
for reconsidering a non-final order is less demanding than
the standard for reconsidering a final judgment. See,
e.g.. Carlson v. Boston Sci. Corp.. 856 F.3d 320, 325
(4th Cir. 2017). A court may revise an interlocutory order if
substantially new facts come to light, if the applicable law
changes, or if the court determines it made a clear error
resulting in a manifest injustice. See id.
court's order denying Apple's motion to transfer, the
court held that the forum-selection clause in the second
confidentiality agreement did not cover this case. See [D.E.
127] 3-4. Apple argues that the court failed to apply
California law to interpret the forum-selection clause in its
second confidentiality agreement with Valencell.
law does not help Apple. The forum-selection clause in the
second confidentiality agreement covered "any litigation
arising out of this Agreement." [D.E. 31-1] 12-13.
Numerous courts have held that "arising out of
forum-selection clauses are narrower than forum-selection
clauses that cover, for example, litigation "arising out
of or related to" an agreement, or "arising out of
or in connection with" an agreement. See [D.E. 127] 3-4.
The former apply to disputes that involve the interpretation,
performance, or non-performance of an underlying contract;
the latter apply more broadly to claims with substantial
relationships to an underlying contract. See Id.
Although neither Apple nor Valencell cites a case in which a
California court analyzes an "arising out of
forum-selection clause, this court predicts, based on the
weight of precedent from other courts, that California courts
would interpret the clause the same way. See Cape
Flattery Ltd. v. Titan Mar.. LLC. 647 F.3d 914, 921-22
(9th Cir. 2011); Phillips v. Audio Active. Ltd.. 494
F.3d 378, 389-90 (2d Cir. 2007); Am. Recovery Corp. v.
Computerized Thermal Imaging. Inc.. 96 F.3d 88, 92-93
(4th Cir. 1996); Omron Healthcare. Inc. v. MaclarenExps.
Ltd.. 28 F.3d 600, 602 (7th Cir. 1994);
Mediterranean Enters, v. Ssangvong Corp.. 708 F.2d
1458, 1463-64 (9th Cir. 1983); Harley v. Bank of N.Y.
Mellon. No. 1:15-CV-1384, 2015 WL 6956564, at *3 (M.D.
Pa. Nov. 10, 2015) (unpublished).
California precedent Apple cites does not compel the
conclusion that the forum-selection clause in the second
confidentiality agreement applies in this case. In
Nedlloyd Lines B.V. v. Superior Court of San Mateo
County. 3 Cal.4th 459, 462-63, 834 P.2d 1148, 1149-1150
(1992), the Supreme Court of California considered a
forum-selection clause stating that a contract would be
"governed by" the law of Hong Kong. The Supreme
Court of California considered the application of the
forum-selection clause to a suit "alleging in essence
that [the defendant] breached express and implied obligations
under" the contract. Id. at 463, 834 P.2d at
1150. The court used familiar language to explain the broad
scope of that provision, holding that it covered "all
causes of action arising from or related to [the]
agreement, regardless of how they are characterized,
including tortious breaches of duties emanating from the
agreement or the legal relationship it creates."
Id. at 470, 834 P.2d at 1155 (emphasis added); see
Cal-State Bus. Prods. & Servs.. Inc. v. Ricoh.
12 Cal.App.4th 1666, 1676 (Ct. App. 1993). Like many other
courts, the Supreme Court of California in Nedlloyd
apparently recognized that "arising from or related to,
" was the way to describe a forum-selection clause's
broad coverage. The Supreme Court of California did not hold
that all forum-selection clauses govern related claims as
well as directly contractual claims, and it did not address a
forum-selection clause using the "arising under"
language. Therefore, Apple has failed to demonstrate that
this court's interpretation of the "arising
under" forum-selection clause was incorrect, and
reconsideration on this basis is denied.
August 1, 2016, Valencell amended its complaint and added
allegations that Apple willfully infringed Valencell's
patents. 2d Am. Compl. [D.E. 53] ¶¶ 16, 23, 30, 36.
The court did not address these amendments in its February
2017 order denying Apple's motion to transfer. Apple
argues that the amendment brings Valencell's lawsuit
within the scope of the second confidentiality
agreement's "arising under" forum-selection
clause because proof of willful infringement would involve
showing knowledge Apple gained while the parties'
relationship was governed by the second confidentiality
agreement, which contained the forum-selection clause. [D.E.
150] 3-8. In support, Apple cites Valencell's attempts to
obtain through discovery records of communications between
the parties made while the second confidentiality agreement
was in effect. See id.
because the parties spoke with each other pursuant to a
confidentiality agreement does not bring within the scope of
an "arising under" forum-selection clause any cause
of action for which the facts include the parties'
communications. Rather, to fall within the scope of an
"arising under" clause, the cause of action must be
based on the contract itself. See, e.g.. Cape Flattery
Ltd.. 647 F.3d at 921-22; Phillips. 494 F.3d at
389-90; Am. Recovery Corp.. 96 F.3d at 92-93;
Qmron Healthcare. Inc.. 28 F.3d at 602;
Mediterranean Enters.. 708 F.2d at 1463-64;
Harlev. 2015 WL 6956564, at *3. Therefore, Apple has
failed to demonstrate that Valencell's amendment of its
complaint to include claims that Apple willfully infringed
Valencell's patents sweeps this action within the scope
of the second confidentiality agreement's forum-selection
clause, and reconsideration on this basis is denied.
the court GRANTS Apple's motion to stay [D.E. 96]. The
action is STAYED pending completion of the IPR. Magistrate
Judge Gates retains authority to resolve any pending
discovery matters. Apple's motions for summary judgment
[D.E. 79], to supplement its invalidity contentions [D.E.
110], and to file a supplemental memorandum in support of its
motion for summary judgment [D.E. 202] are DENIED without
prejudice. Apple's motion for reconsideration [D.E. 149]
is DENIED. Apple's motion to seal [D.E. 151] is GRANTED.