Argued and Submitted February 12, 2001 — Pasadena, California.
BERZON, Circuit Judge:
Orion Tire Corp. ("Orion") and China Tire Holdings Ltd. ("CTHL") appeal the district court's (i) dismissal of CTHL's RICO claim for failure to state a claim under Chinese law; (ii) dismissal of CTHL's trade libel and defamation claims on grounds of forum non conveniens; and (iii) grant of summary judgment to defendants on Orion's claims of trade libel and intentional interference with prospective economic advantage. We affirm in part, reverse in part, and remand.
Facts and Procedural History
Plaintiffs-Appellants Orion, a California corporation, and CTHL, a Bermuda corporation with headquarters in Hong Kong,
The district court determined that California law governed Orion's state claims and that Chinese law governed CTHL's state claims and federal RICO claim. Having so determined, the district court dismissed Orion's state claims and RICO claim without prejudice, for failure to state a claim, but dismissed with prejudice, for failure to state a claim under Chinese law, CTHL's claims for tortious interference with prospective economic advantage (claim 2), tortious interference with contractual relationship (claim 4), conspiracy to induce breach of contract (claim 6) and RICO (claim 13).
Orion and CTHL filed an amended complaint asserting six causes of action, all under California state law. Orion did not replead its RICO cause of action. Goodyear moved to dismiss all six claims for failure to state a claim. The district court granted in part and denied in part Goodyear's motion, dismissing Orion's claim of tortious interference with contract, after determining that Orion had no agreements legally enforceable under Chinese law.
Two and one-half years later, Goodyear moved for summary judgment, arguing (i) that Orion lacked standing to bring its claims, because its predecessor in interest had not properly assigned the claims to Orion, and (ii) that CTHL's remaining claim, for trade libel/defamation, should be dismissed on forum non conveniens grounds. The district court granted Goodyear's motion on both grounds and entered final judgment in Goodyear's favor. Plaintiffs-Appellants timely appealed, challenging both aspects of the summary judgment order as well as the district court's dismissal of CTHL's RICO claim for failure to state a claim under Chinese law.
While this appeal was pending, CTHL filed a duplicative action in the United States District Court for the Northern District of Ohio. That court dismissed CTHL's complaint, holding that CTHL's claims were barred by claim preclusion. China Tire Holdings Ltd. v. Goodyear Tire & Rubber Co., 91 F.Supp.2d 1106 (N.D.Ohio 2000). The Ohio District Court also remarked that were it not required to dismiss on claim preclusion grounds, it "would adopt the [California] district court's reasoning and independently dismiss the plaintiff's claims on the ground of forum non conveniens." China Tire, 91 F.Supp.2d at 1111 n. 4.
Goodyear contends, as an initial matter, that CTHL's appeal should be barred by claim preclusion based on the Ohio judgment.
The doctrine of claim preclusion establishes that "an adverse judgment from which no appeal has been taken is res
Indeed, Goodyear's argument turns res judicata on its head. The doctrine is founded on the principle that "[a] judgment merely voidable because based upon an erroneous view of the law is not open to collateral attack, but can be corrected only by a direct review and not by bringing another action upon the same cause." Federated, 452 U.S. at 398, 101 S.Ct. 2424 (emphasis added). To permit another action upon the same cause to displace the direct review of the first judgment would be to invert the doctrine's precepts. It is therefore no wonder that, as far as we can ascertain, there is no case in which res judicata has been applied as Goodyear proposes.
Reed v. Allen, 286 U.S. 191, 52 S.Ct. 532, 76 L.Ed. 1054 (1932), cited by Goodyear, is not to the contrary. The petitioner in Reed obtained an equity judgment against Allen respecting the right to collect rents from a property, which Allen appealed. During the pendency of that appeal, Reed brought an action in ejectment with respect to the property, which he won because the second court accorded res judicata effect to the first judgment. Allen did not appeal the second unfavorable judgment, but prevailed in his appeal on the first. Allen then brought a third action seeking to eject Reed from the property.
The Supreme Court held that this third action — in essence a collateral attack on the second judgment — was barred by res judicata. Reed offers no solace to Goodyear, as we are not here confronted with a third action, but with an appeal from the judgment in the first. Rather, Reed supports our understanding of res judicata: Far from suggesting that the appeals court that heard Allen's appeal of the first judgment ought to have rejected that appeal based on the "res judicata" effect of the second judgment, the Court in Reed appears to have assumed the contrary — that is, that the reversal of the first judgment was within the power of the appeals court.
B. CTHL's RICO claim
The district court determined that Chinese law governed CTHL's state law causes of action and federal RICO claim, and dismissed those claims for failure to
The district court's choice of law analysis was proper with respect to the general question whether the law of California or China governed the dispute between CTHL and Goodyear. Where a federal statute is involved, however, a choice of law analysis does not apply in the first instance. The initial question, rather, is whether Congress intended the statute in question to apply to conduct occurring outside the United States. This is a question of statutory interpretation, see Equal Employment Opportunity Comm'n v. Arabian American Oil Co., 499 U.S. 244, 247, 111 S.Ct. 1227, 113 L.Ed.2d 274 (1991), not a question of choice of law. The district court therefore erred in dismissing CTHL's RICO claim with prejudice, without making the appropriate statutory inquiry.
Goodyear argues that even if the district court erred in failing to consider the statutory question, we should affirm dismissal of the RICO claim because amendment would be futile. Because of the manner in which it viewed the matter, the district court did not inquire into the futility of amendment, instead dismissing without providing leave to amend. CTHL's Reply Brief represents that CTHL could amend its complaint to allege facts that would state a RICO cause of action both substantively and with regard to the requisite connection to the United States delineated in applicable cases. See Butte Mining PLC v. Smith, 76 F.3d 287, 291-92 (9th Cir.1996) (holding that RICO did not apply to allegations of conduct in United States that was "merely preparatory" to the predicate acts of fraud, where it was undisputed that the fraud itself occurred entirely outside the United States); cf. Republic of the Philippines v. Marcos, 862 F.2d 1355, 1358-59 (9th Cir.1988) (en banc) (permitting application of RICO in case of fraudulent scheme to expropriate money from Philippines and invest it in United States); see also United States v. Kim, 246 F.3d 186, 190 (2d Cir.2001); North South Finance Corp. v. Al-Turki, 100 F.3d 1046, 1051-53 (2d Cir.1996); Concern Sojuzvneshtrans v. Buyanovski, 80 F.Supp.2d 273, 277-78 (D.N.J.1999).
The general representations in CTHL's Reply Brief regarding possible amendments, considered without regard to an extra-record declaration,
Where counsel is able to posit possible amendments that would be consistent with the operative complaint and could also possibly state a claim for relief, the complaint should not be dismissed on its face with prejudice. See Orthmann v. Apple River Campground, Inc., 757 F.2d 909, 914 (7th Cir.1985); see also Pegram v. Herdrich, 530 U.S. 211, 230 & n. 10, 120 S.Ct. 2143,
We are therefore unwilling to affirm the dismissal on the ground of futility at this stage. We leave to the district court on remand, after further discovery if necessary, the task of determining whether CTHL's allegations and evidence support extraterritorial application of RICO under the facts of this case.
C. Assignment of claims to Orion
The Orion Tire Corporation that is a party to this action ("New Orion" or "Orion") was incorporated in 1994, after many of the events giving rise to the complaint occurred. The entity of the same name that existed at the time of the alleged defamation ("Old Orion") sold certain of its assets in 1994 to the OTDC Acquisition Corporation, which then renamed itself Orion Tire Corporation. So New Orion is a successor corporation to Old Orion.
The district court granted summary judgment for Goodyear on Orion's state law trade libel/defamation and intentional interference with prospective economic advantage causes of action after determining that they were not among the assets that Old Orion transferred to New Orion. At issue, consequently, is whether the "Asset Purchase Agreement" executed between Old Orion and New Orion on April 25, 1994 included the present lawsuit as one of the assets conveyed to New Orion.
Under the terms of that agreement, New Orion agreed to purchase, and Old Orion agreed to sell, in addition to other specifically enumerated assets, "[a]ll other intangible assets and goodwill of Seller related to its tire distribution business in the United States...." The parties contest whether the quoted language includes the causes of action asserted by New Orion against Goodyear. The district court granted summary judgment based on its finding that, as a matter of law, neither the terms of the Asset Purchase Agreement nor the surrounding circumstances support "a finding that Old Orion transferred to New Orion any choses of action that arose from Old Orion's business dealings in [China]."
Orion argues that there was a triable issue as to the parties' intent with respect to whether the phrase "all other intangible assets and goodwill of Seller related to its tire distribution business in the United States" encompasses the state law causes of action. We agree, and reverse the grant of summary judgment.
Under California law, the interpretation of an assignment clause, like the interpretation of contract terms generally, is a question of the intent of the parties and is typically a question of fact for the jury. See McCown v. Spencer, 8 Cal.App.3d 216, 87 Cal.Rptr. 213, 219 (1970) ("If from the entire transaction and the conduct of the parties it clearly appears that the intent of the parties was to pass title to the chose in action, then an assignment will be held to have taken place.... [I]ntent is of major significance."); Knott v. McDonald's Corp., 147 F.3d 1065, 1067 (9th Cir.1998) (noting broad rule that "the intent of the parties to an [ambiguous] assignment is a question of fact to be derived not only from the instrument executed
With respect to both intangible assets generally and goodwill specifically, the district court interpreted the quoted language to convey only that existing "in the United States," and thus not to encompass alleged injury to Orion's reputation among officials of the Chinese government. But this is not the most natural reading of the Assignment Agreement. The Agreement applies not to intangible assets and goodwill existing in the United States, but to intangible assets and goodwill "related to [Orion's] tire distribution business in the United States." The plain meaning of this language encompasses more than the district court recognized.
For instance, goodwill existing in China but related to Orion's competence to distribute tires in the United States — precisely the goodwill alleged to have been injured — would seem plainly to fall within the language of the Assignment. At the very least, a jury could reasonably have read the agreement to indicate that the parties intended to assign such goodwill. Thus, the defamation alleged in the complaint, pertaining generally to Orion's competence as a tire distributor, cannot be said, as a matter of law, to cause no injury to that portion of Old Orion's intangible assets and goodwill acquired by New Orion.
Similarly, New Orion and Old Orion could reasonably have expected (and a jury could reasonably find) that the general assignment clause included the cause of action for intentional interference with prospective economic advantage. It is not evident as a matter of law that Old Orion's prospect of a commercially advantageous tire-manufacturing opportunity in China, with tires to be distributed worldwide, including in the United States, was not part of the "other intangible assets and goodwill related to Orion's tire distribution business in the United States" which New Orion acquired from Old Orion.
D. CTHL's state-law claims
The district court dismissed CTHL's state law claims on forum non conveniens grounds. Goodyear argues that the district court lacked diversity jurisdiction over CTHL's state law claims, and that, in the alternative, the forum non conveniens dismissal was proper.
In light of the rulings announced above, it would be inappropriate for us to review at this juncture either the diversity jurisdiction or forum non conveniens issues. If CTHL's RICO action goes forward on remand, there may be supplemental jurisdiction to decide CTHL's state law claims as well, under 28 U.S.C. § 1367, making determination of the novel issue of diversity jurisdiction raised by this case unnecessary.
By pretermitting the forum non conveniens inquiry, we mean to state no view as to whether the RICO claim will be adequately repleaded on remand or whether the forum non conveniens analysis will necessarily reach a different result because of today's rulings. We leave those issues for the district court to address in the first instance.
The judgment of the district court is REVERSED with respect to Orion's state law trade libel/defamation and intentional interference with prospective economic advantage causes of action and CTHL's RICO claim, and REMANDED for further proceedings. The judgment is VACATED with respect to the forum non conveniens dismissal and REMANDED for reconsideration of that issue in light of this opinion.
REVERSED in part, VACATED in part, and REMANDED. Costs are awarded to the appellant.