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Kettler Int'l, Inc. v. Starbucks Corp.

United States District Court, E.D. Virginia, Norfolk Division

October 21, 2014


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[Copyrighted Material Omitted]

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For Kettler International, Inc., Plaintiff: John C. Lynch, LEAD ATTORNEY, David Michael Gettings, Troutman Sanders LLP, Virginia Beach, VA.

For Starbucks Corporation, Defendant: Christopher E. Hassell, LEAD ATTORNEY, Washington, DC; Danielle Christine Loss, Malcolm Donald Schick, Thomas Kelly Cox, LEAD ATTORNEYS, PRO HAC VICE, G & P/Schick, PC, San Diego, CA; Craig Lawrence Sarner, Washington, DC.

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Henry Coke Morgan, Jr., Senior United States District Judge.

This matter was before the Court upon Defendant Starbucks Corporation's (" Defendant" or " Starbucks" ) Motions to Dismiss and/or Transfer Venue. Docs. 5, 7. A hearing was held on October 16, 2014. The Court DENIED the Motions, and now issues this Opinion and Order explaining its reasoning.


a. Factual Background[1]

This declaratory judgment action arises out of allegedly defective patio furniture sold by Plaintiff Kettler Int'l, Inc. (" Plaintiff or " Kettler" ) to Defendant Beginning in approximately 2009. Plaintiff began selling " Carlo" chairs to Starbucks, its agent, and/or its contractors.[2] Compl. ¶ 1. These chairs were shipped for use in Starbucks stores in California and Arizona. Id. Ex. A. Delivery continued until 2013. Id. ¶ 15. Starbucks never refused a delivery of Carlo chairs. Id. ¶ 16.

In 2010, Kettler's Vice President of Finance, Stephen Mannix, signed an acknowledgement agreeing to terms contained in Starbucks' Supplier Handbook (the " Agreement" ).[3] Doc. 5-1. The handbook contained provisions concerning the

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warranties that Seller (in this case, Kettler) guaranteed to Starbucks. These include that the goods " are free from defects in design, workmanship, and materials[.]" Doc. 16-1 at 33. Additionally, the " [w]arranties contained in the Agreement are in addition to all other warranties, express, implied, or statutory and in addition to all obligations contained in the Agreement." Id. at 34.

The Agreement also contains a choice of law and forum selection clause, which states in its entirety:

Terms and conditions of the Agreement shall be governed by and construed in accordance with the laws of the state of Washington, without reference to conflicts of law principles. None of the provisions of the United Nations Convention on Contracts for the International Sale of Goods shall be applied to the interpretation or enforcement of the Agreement. Any legal proceeding relating to the Agreement shall be brought only in a court of competent jurisdiction in the state of Washington.

Doc. 16-1 at 36. There was also a standard merger clause, stating that " [t]he Agreement and any other provisions incorporated into the Agreement by reference, constitute the entire agreement of the parties with respect to Starbucks purchase of Goods from Seller and supersede all prior agreements between the parties, whether oral or written." Id.

Litigation has developed concerning alleged defects in the chairs. In December 2012, Starbucks was sued in California state court by Hae Jee for an injury that resulted from the alleged malfunctioning of one of the chairs. Doc. 16-1 at 21. In September 2013, Starbucks filed a third-party complaint against Kettler and Stanislaus Funding, Inc. for indemnity, as well as for failure to obtain insurance, as was required by the Agreement between the parties. Id. at 23-26. Starbucks did not assert Washington law in its third-party complaint. Moreover, this case is centered only on one chair.

Thereafter, on April 8, 2014, Starbucks sent Kettler a letter titled " Notice of Breach of Warranty (Commercial Code Section 2607)." Compl. ¶ 18. In the letter, Starbucks informed Kettler that it had experienced failures in some of the Carlo chairs, and that third-party laboratory testing confirmed these failures. Id. ¶ 20. As a result, Starbucks stated it had begun removing the Carlo chairs from its stores, that it was collecting and recycling the chairs, and that it would retain a " discrete sampling" of the chairs for inspection. Id. ¶ 21. Starbucks claimed that in this process, it incurred over one million dollars in expenses. Id. ¶ 23. The letter also informed Kettler that Starbucks' counsel was " instructed to initiate legal proceedings against Kettler to compel Kettler to make good on the warranties and misrepresentation" pertaining to the sale of the chairs. Id. ¶ 24. Furthermore, Starbucks informed Kettler that it would " pursue its remedies arising from the purchase of all Carlo chairs, plus consequential and incidental damages related to the removal, storage and recycling of said Carlo chairs." Id. Ex. A. The letter contained no reference to the Agreement, nor any reference to Washington law. Id.

On April 10, 2014, Kettler replied to this letter. Compl. ¶ 27. Kettler asked Starbucks to provide test results, incident reports, an exact count of the defective chairs, further explanation of the alleged breach of contract and warranties, and all other relevant information. Id. ¶ 28. Starbucks did not respond to this letter. Id. ¶ 29. On April 21, 2014, Kettler again mailed a letter to Starbucks, asking it to provide proof that the allegedly defective chairs were purchased within the last year,

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and thus covered by the one year warranty. Id. Ex. C.

Counsel for the parties exchanged phone calls on April 22, and Kettler sent another letter following this conversation. Id. Ex. D. According to the letter, counsel for Starbucks informed Kettler he did not know when the chairs Starbucks had preserved were manufactured or how many of the 7500 Carlo chairs Starbucks had already recycled.[4] Id. The letter also referenced a discovery dispute in the California state case. Id.

Starbucks sent another letter to Kettler on May 2, 2014. Doc. 16-1 at 14. This letter references the Agreement for the first time. Id. at 17. However, this letter made no reference to any threat of future litigation, and focused on Kettler's demands that Starbucks preserve any evidence of allegedly defective chairs. Id. at 14-18.

b. Procedural Background

On May 2, 2014, Kettler filed its three-count Complaint seeking a declaratory judgment that (1) it has not breached any warranty; (2) it has not breached any contractual term; (3) and that Starbucks is not entitled to rescission. Doc. 1. On May 28, 2014, Defendant filed a Motion to Dismiss and/or Transfer Venue. Doc. 5. On May 29, 2014, Defendant filed a Motion to Change Venue. Doc. 7. Plaintiff responded to both motions on June 12, 2014. Docs. 15, 16. Defendant filed its replies on June 16, 2014. Docs. 17, 18.

On September 25, 2014, the Court entered its Rule 16(b) Scheduling Order. Doc. 24. Trial is set to ...

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