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Carter's of New Bedford, Inc. v. Nike, Inc.

United States Court of Appeals, First Circuit

June 24, 2015

NIKE, INC., and NIKE USA, INC., Defendants, Appellees


Philip N. Beauregard, with whom Law Offices of Beauregard, Burke & Franco, was on brief, for appellant.

Nicholas D. Stellakis, with whom Martin F. Gaynor III and Manion Gaynor & Manning LLP, were on brief, for appellees.

Before Lynch, Torruella, and Kayatta, Circuit Judges.


Page 290

TORRUELLA, Circuit Judge.

This case arises out of a contract dispute between Plaintiff-Appellant Carter's of New Bedford, Inc. (" Carter's" ), a family-owned retail clothing and footwear business with two stores in Massachusetts, and Defendant-Appellee Nike, Inc. (" Nike" ). In an attempt to stop Nike from terminating the parties' business relationship, Carter's filed suit in Massachusetts state court, bringing a host of contractual claims as well as a claim under Mass. Gen. Laws ch. 93A, § § 2 and 11 (" Chapter 93A" ). Nike removed the suit to federal court and then moved to dismiss under Federal Rule of Civil Procedure 12(b)(6). According to Nike, its invoices (the " Agreement" ) included a forum selection clause that regulated the relationship between it and Carter's and required the latter to bring any claim in Oregon, not Massachusetts. The district court agreed with Nike and dismissed Carter's claims. We now affirm that decision.

I. Background

Carter's has sold Nike footwear for approximately twenty-eight years. Over that period, Nike products have accounted for a substantial portion of Carter's revenue. In March 2013, Nike notified Carter's that it was terminating the parties' business relationship. Carter's theorizes that Nike did so as part of a new marketing strategy that favors large national retailers over small locally-owned businesses. In an attempt to forestall Nike's termination, Carter's sued Nike in Bristol Superior Court alleging that Nike: (1) breached its Agreement with Carter's; (2) breached the implied covenant of good faith and fair dealing; (3) violated Mass. Gen. Laws ch. 106, § 2-309 (enacting the Uniform Commercial Code (" U.C.C." ) in Massachusetts), which provides a default " reasonable time" requirement for terminating agreements of successive performance with indefinite duration; and (4) violated Chapter 93A, which broadly prohibits " unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade."

Carter's recognized in its Complaint that the parties' business relationship was at least " partially defined" by Nike's invoices and appended a copy of one of these invoices, entitled " Terms and Conditions of Sale," to said Complaint. The document defines itself as " the Agreement" and establishes that " [e]ach Order, together with these Terms and Conditions and, if applicable Customer's credit application and account agreement, may be referred to collectively as the 'Agreement.'" Carter's pleaded " always hav[ing] performed its obligations under such Agreement." While the Agreement includes a clause that states that it " contains the entire agreement and understanding between the parties . . . and supersedes prior and contemporaneous oral and written agreements, commitments and understandings," Carter's Complaint did not explain whether there are any unwritten portions (prior, contemporaneous, or post-Agreement) of the parties' understandings or how exactly Nike breached those. Carter's did claim, however, that the business relationship was governed by various instructional materials and guidelines on product advertising, as well as " other customs and procedures . . . that reflect the expectations and arrangements between Nike and Carter's in conducting their business together." In addition to that, Carter's asserted that it had become a " de facto franchise" of Nike.

Page 291

Therefore, Carter's argued that terminating the relationship was a breach of the implied covenant of good faith and fair dealing and that such conduct was in violation of Massachusetts law.

Once removed to federal court, Nike moved to dismiss under Federal Rule of Civil Procedure 12(b)(6). According to Nike, a forum selection clause in the Agreement required Carter's to file its claims in Oregon.[1] Carter's opposed the motion, arguing that the Agreement was unconscionable and an unenforceable contract of adhesion. In support of that assertion, Carter's claimed that it did not have the opportunity to bargain, and that the Agreement unfairly constrained Carter's possibilities while allowing Nike to litigate in the forum of its choosing. Carter's also argued that Nike had changed the invoice to include the forum selection clause only three years prior to termination, and without notifying Carter's. As proof, Carter's attempted to introduce a preamendment copy of the Nike invoice as an exhibit to its memorandum in opposition to Nike's motion to dismiss. Nike moved to strike that exhibit, arguing that district courts are required to confine their 12(b)(6) inquiry to the complaint and the exhibits attached thereto. Carter's never objected to Nike's motion to strike the exhibits, so the district court struck the pre-amendment invoices.

The district court dismissed Carter's Complaint. It noted that Carter's had never alleged that the invoice agreement was unconscionable in its Complaint. In fact, Carter's admitted that the parties' business relationship was partially governed by the Agreement and attached the invoice in the first instance. The district court further noted that while Carter's alleged that the business relationship was also governed by the parties' course of dealing, it never explained what terms such course of dealing created. The district court determined that Carter's did not meet its burden ...

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