Opinions of the United
1996 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


6-24-1996

Dayhoff Inc v. HJ Heinz Co
Precedential or Non-Precedential:

Docket 95-3404,96-3250




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`                UNITED STATES COURT OF APPEALS
                     FOR THE THIRD CIRCUIT


                    Nos. 95-3404 and 96-3250


                        DAYHOFF INC.,
                 a California corporation;

                                      Appellant

                              v.

        H.J. HEINZ CO., a Pennsylvania corporation;
        HEINZ ITALIA S.p.A., an Italian corporation;
         HEINZ DOLCIARIA S.p.A., formerly known as
          SPERLARI S.p.A., an Italian corporation;
          SPERLARI s.r.l., an Italian corporation;
               and HERSHEY FOODS CORPORATION,
                 a Delaware corporation.



     On Appeal from the United States District Court
         for the Western District of Pennsylvania
            (D.C. Civil Action No. 93-cv-01794)


                      Argued May 10, 1996

    BEFORE:   GREENBERG, ALITO, and MCKEE, Circuit Judges

                    (Filed:           1996)


                              William B. Mallin (argued)
                              Mary K. Austin
                              Joseph M. Ramirez
                              Eckert, Seamans, Cherin &
                              Mellott
                              42nd Floor, 600 Grant Street

                              Pittsburgh, PA      15219

                                      Attorneys for Appellant

                              Thomas L. Allen (argued)
                              Carla L. Campbell
                              Reed, Smith, Shaw, & McClay
                              435 Sixth Avenue
                              Pittsburgh, PA 15219

                                      Attorneys for Appellees
                       OPINION OF THE COURT



GREENBERG, Circuit Judge.

                         I. INTRODUCTION
         Appellant Dayhoff, Inc. initiated this diversity of
citizenship action on October 29, 1993, alleging breach of
contract, tortious interference with contract, fraud, and civil
conspiracy against various of the appellees. The action arose
out of the termination of three contracts between Dayhoff and
appellee Heinz Dolciaria S.p.A. involving the manufacture and
sale of candies in the United States. The terminations followed
the sale of the Heinz Dolciaria candy business to appellee
Hershey Foods Corporation. The district court dismissed
Dayhoff's claims related to two of the contracts because of
arbitration and forum selection clauses, and dismissed all claims
for lack of personal jurisdiction against appellee Heinz Italia
S.p.A. Heinz Italia is the parent corporation of Heinz Dolciaria
and, in turn, is a subsidiary of appellee H.J. Heinz Co. After
additional discovery with respect to the third contract, the
court granted appellees' motion for summary judgment on all
remaining claims. After Dayhoff appealed, the district court
directed entry of a final judgment under Fed. R. Civ. P. 54(b),
and Dayhoff then appealed again. We have consolidated the
appeals for disposition in this opinion.
         Dayhoff is a California corporation with its principal
place of business in California. H.J. Heinz Co. is a
Pennsylvania corporation with its principal place of business in
Pennsylvania. Hershey Foods Corporation is a Delaware
corporation with its principal place of business in Pennsylvania.
Appellees Heinz Italia S.p.A., Heinz Dolciaria S.p.A., and
Sperlari s.r.l. are Italian corporations, with their principal
places of business in Italy. As the monetary threshold for
diversity jurisdiction was met, the district court had
jurisdiction under 28 U.S.C.   1332. We have jurisdiction under
28 U.S.C.   1291.

         II.  FACTUAL BACKGROUND AND PROCEDURAL HISTORY
                     A. FACTUAL BACKGROUND
                   1. The License Agreement
         Dayhoff Australia Pty, Ltd., and Sperlari S.p.A.
entered into a License Agreement on October 19, 1989, pursuant to
which Sperlari S.p.A. granted Dayhoff Australia the exclusive
license to make and sell Frutteto candy in the United States as
of June 1990. Dayhoff Australia has assigned its rights and
obligations under the agreement to Dayhoff. The ten-year term of
the License Agreement expires October 19, 1999, but the agreement
permits Dayhoff to continue thereafter to manufacture and market
Frutteto candy in the United States under a non-exclusive,
royalty-free license. Article 21 of the agreement provides that
Italian law will govern its interpretation and Article 22
provides that any disputes relating to it will be adjudicated in
an arbitration proceeding in Italy:
         22. ARBITRATION
         All controversies arising from the present
         contract or relating to the same will be
         definitively settled according to the
         Reconciliation and Arbitration Rules of the
         International Chamber of Commerce, excluding
         recourse to the common law courts, by one or
         more arbitrators appointed in accordance with
         these Rules.

         The arbitration tribunal will decide on its
         competence to decide the matter and on the
         validity of the arbitration clause.

         Each party can apply to the relevant Law
         Courts to confirm the arbitration sentence or
         enforce execution of the same.
         Arbitration proceedings will take place in
         Milan.
App. at 46.
            2. The Frutteto Distribution Agreement
         On July 26, 1990, Dayhoff and Sperlari S.p.A. signed
the Frutteto Distribution Agreement, which provides that Dayhoff
will be the exclusive United States distributor of Frutteto
candy. The contract does not have a set term, but, like the
License Agreement, contains a governing law clause:
         B. GOVERNING LAW
         This Agreement shall be governed and
         constructed in accordance with the laws of
         Italy and the parties hereto irrevocably
         submit to the exclusive jurisdiction of the
         Court of Cremona (Italy).
App. at 49. In April 1992, Sperlari S.p.A. assigned its rights
under the 1989 Frutteto Licensing Agreement and the 1990 Frutteto
Distribution Agreement to Heinz Dolciaria. App. at 198.
           3. The Bulk Candy Distribution Agreement
         Dayhoff and Heinz Dolciaria executed the Bulk Candy
Distribution Agreement on July 17, 1992. Pursuant to this
agreement, Dayhoff became Heinz Dolciaria's exclusive United
States distributor of certain candies other than Frutteto candy.
The Bulk Candy Distribution Agreement has an eight-year term that
expires at the earliest on July 17, 2000. The agreement provides
that disputes arising from it are to be litigated in the United
States District Court for the Western District of Pennsylvania
and that the agreement will be construed in accordance with
Pennsylvania law. App. at 50-67. Thus, the three agreements
provide for three different fora for adjudicating disputes and
provide for the law of two countries to apply to their
interpretation. As we shall see, this fractured approach to
dispute resolution under related contracts has led to great
expense and confusion and, we are afraid, will continue to do so.
         Because some of Dayhoff's claims are based on events
surrounding the negotiation of the 1992 Distribution Agreement,
the facts relating to the negotiation of that agreement require
further discussion. The district court rejected Dayhoff's claims
related to this agreement on summary judgment; therefore, we will
present the facts pertaining to these claims in the light most
favorable to Dayhoff. See Petruzzi's IGA Supermarkets, Inc. v.
Darling-Delaware Co., 

, 1230-32 (3d Cir.), cert.
denied, 

(1993); see also Berner Int'l Corp. v. Mars
Sales Co., 

, 978 (3d Cir. 1993).
         The parties negotiated the Bulk Candy Distribution
Agreement through numerous facsimiles between the United States
and Italy. On June 4, 1992, Luigi Volta, then a long-time
employee of Heinz Dolciaria and currently employed by Sperlari
s.r.l., a successor corporation to Heinz Dolciaria, informed
Dayhoff that "[t]his is our last and final proposition." Sealed
app. at 1011-12. On June 8, 1992, Volta informed Dayhoff that an
agreement was "reachable" and invited Uday Lele, president of
Dayhoff, to come to Cremona, Italy, to "finalize" the agreement.

         Shortly thereafter, Lele traveled to Cremona to sign
the agreement. According to Dayhoff, Lele understood that the
negotiations were virtually over and that the contract terms
would follow the facsimiles. However, when he arrived in Italy
to sign the contract, Lele learned that Antonella Giacobone, an
attorney for Heinz Italia, would be at the meeting, as would
Volta and Franco Seletti. Seletti, also a former employee of
Heinz Dolciaria, now employed by Sperlari s.r.l., is above Volta
in the corporate ladder.
         Lele never had met or dealt with Giacobone, and there
had never been an attorney present during previous negotiations
between Dayhoff and Heinz Dolciaria or their predecessors, or at
the execution of their previous contracts. Lele had not been
given advance notice that Giacobone would be at the meeting, and
no one had suggested that he might want to bring his own lawyer.
Dayhoff alleges that when Lele asked Giacobone why she was
present, she advised him that she would protect Dayhoff's
interests as well as those of Heinz Dolciaria, and that she was
Dayhoff's de facto attorney in connection with the negotiation of
the contract.
         At the meeting, Giacobone presented Lele with a draft
of the Bulk Candy Distribution Agreement that he had not seen
during the parties' previous negotiations. The draft contained a
termination provision similar to section 14.3, the one
ultimately incorporated into the final agreement. According to
Dayhoff, Heinz Dolciaria had not discussed the termination
provision with it previously. Thus, the provision had not been
incorporated in the parties' prior drafts or agreements.
         At his deposition, Lele testified that he inquired into
the meaning of this provision at the meeting:
              I asked Antonella Giacobone what this
         meant, and she said, Mr. Lele, you are
         operating in the American market. Heinz USA
         is one of the most well-known food companies,
         we don't want you to use the Heinz name to
         sell your company to somebody else and become
         a rich man and we get left holding the baby
         and having to deal with somebody we don't
         want to deal with. That is what she told me.
Sealed app. at 743-44. Dayhoff alleges that when Lele asked
Giacobone specifically what the termination provision meant, she
did not tell him that the appellees could invoke the clause when
Heinz Italia rather than Dayhoff sold its business. Instead,
Dayhoff alleges, she advised him that the provision protected
Heinz Dolciaria in the event that Dayhoff was sold or its assets
assigned. Moreover, Dayhoff alleges that in connection with
Giacobone's explanation of the clause, she told Lele that "[s]he
would be taking care of both our interests." Br. at 9. Dayhoff
further claims that Volta confirmed Giacobone's representations
as to the meaning of the termination clause by telling Lele that
the provision was intended to protect Heinz Dolciaria in the
event that Dayhoff sold or assigned its assets to another
company.
         Dayhoff thus asserts that no one informed Lele that the
clause would entitle Heinz Dolciaria to terminate the contract
without compensation in the event that Heinz Dolciaria underwent
a change of control or sold its assets. Indeed, Dayhoff claims
that explanatory statements to Lele by Giacobone and Volta were
inconsistent with such an interpretation. Dayhoff states that
Lele understood the agreement to mean that Heinz Dolciaria would
not have the right to terminate the contract if Heinz Dolciaria
sold or transferred its assets to another corporation.
         Dayhoff claims that only after it initiated this
litigation did the appellees assert that the termination clause
entitled Heinz Dolciaria to terminate the contract without
compensation when Heinz Italia sold the confectionery business.
Giacobone then testified that she had included the clause for
this specific purpose. At her deposition, Giacobone further
claimed that she "intended to cover every possible . . . legal or
financial way in which our [Heinz Italia's] confectionery
business could be sold . . . ." Sealed app. at 1032-33. Dayhoff
claims that Giacobone did not deny, however, that she failed to
disclose this information when Lele specifically questioned the
meaning of section 14.3.
             4. Performance of the Three Contracts
         Dayhoff consistently performed its obligations under
the three contracts and created a market for Heinz Dolciaria's
candies in the United States. Dayhoff claims to have invested
more than $1.6 million in performing the contracts. As proof of
its satisfactory performance, Dayhoff asserts that as recently as
September 30, 1993, Heinz Dolciaria asked Dayhoff to expand its
operations to distribute additional Heinz Dolciaria candies.
Dayhoff expected enormous financial returns from its substantial
investment.
             5. Termination of the Three Contracts
         According to Dayhoff, as early as March 1993, H.J.
Heinz and Heinz Italia, without Dayhoff's knowledge, began
negotiating the sale of Heinz Dolciaria's business to Hershey.
Dayhoff alleges that when it learned about this impending
transaction and inquired as to its effect on its contracts, Heinz
Dolciaria assured it that there would be no effect and that there
was no reason to terminate the contracts. Yet, according to
Dayhoff, H.J. Heinz, Heinz Italia, and Hershey even then were
searching for ways to terminate the contracts. On September 13,
1993, Giacobone sent a letter to Hershey discussing the contracts
in detail with particular reference to the termination
provisions. The letter indicated that Lele was "well known and
appreciated" by Sperlari S.p.A.'s (i.e., Heinz Dolciaria's) sales
managers. Sealed app. at 59-60.
         On September 14, 1993, Heinz Italia sold virtually all
of its confectionery business to Hershey Holding Company, a
subsidiary of Hershey Foods Corporation, for $133,000,000. Heinz
Italia accomplished the sale through the formation of a new
company, Sperlari s.r.l.; the transfer of substantially all the
assets and liabilities of the confectionery business to Sperlari
s.r.l.; and the sale of Sperlari's stock to Hershey Holding
Company. As a condition of that sale, Hershey insisted on
termination of the Dayhoff contracts, and thus when Hershey
purchased the confectionery business the Dayhoff contracts were
not included. The closing memorandum of the sale shows that
Hershey's purchase did not include the contracts, Heinz Italia
agreed to terminate the Dayhoff contracts, and Heinz Italia
agreed to indemnify Hershey from any liabilities arising from the
termination of the contracts. Sealed app. at 940-41.
         According to Dayhoff, Seletti deliberately decided to
conceal the termination decision from it. Hence, Dayhoff claims
that it was not informed of the termination and continued to
devote itself exclusively to the promotion of the Sperlari name
and products and continued to inform Seletti and Volta of its
efforts. Dayhoff alleges that, even as Lele was invited to visit
Milan to discuss the parties' continuing business relationship
and the extension of the Bulk Candy Distribution Agreement to
include additional candies, Seletti and Volta were providing
Hershey with confidential information concerning Dayhoff's
business.
         By letter dated September 28, 1993, at Hershey's
direction and insistence, Heinz Italia issued a letter
terminating Heinz Dolciaria's three contracts with Dayhoff:
         As you may have heard, we recently sold all
         our confectionery business to the Hershey
         Group. As a consequence, we hereby notify
         you [of] our decision to forthwith terminatethe [License
Agreement, Frutteto Distribution
         Agreement, and Bulk Candy Distribution
         Agreement]. The Frutteto Distributorship and
         the Bulk Candies Distributorship are
         terminated also for your failure to attain
         respectively the Minimum Quantities and the
         Minimum Purchases.
Sealed app. at 950 (emphasis in original). Dayhoff notes that
Heinz Italia did not mention section 14.3 of the Bulk Candy
Distribution Agreement in the September 28, 1993 termination
letter.
         Giacobone called Volta after she saw the September 28,
1993 termination letter to express her concern regarding
Dayhoff's likely reaction. Volta assured Giacobone that there
was no problem with terminating the Bulk Candy Distribution
Agreement because of the contract's termination provision. On
the other hand, Volta expressed concern that there was no
justification for terminating the Frutteto Distribution
Agreement. Dayhoff alleges that at that time Giacobone reassured
Volta by reminding him of the contract clause providing for an
Italian forum, and stating that Dayhoff might not be willing to
pursue its rights in Italy. Sealed app. at 1101-04. Dayhoff
reacted to the termination letter by informing Heinz Dolciaria
that the purported terminations were invalid and had no effect
because there were no grounds for the terminations and because
Heinz Italia, which was not a party to the contracts, could not
terminate them.
         Since the termination, Hershey has announced to
Dayhoff's customers that Hershey soon would begin selling candies
in the United States where Dayhoff has exclusive United States
rights. As a result, Dayhoff claims that its sales have declined
dramatically and its standing in the United States candy market
has been shattered.

                      B. PROCEDURAL HISTORY
         Dayhoff initiated this action on October 29, 1993. In
its amended complaint, Dayhoff alleged claims against Heinz
Dolciaria for breach of all three contracts. Dayhoff also
asserted breach of contract claims against Sperlari s.r.l. on the
ground that it took over Heinz Dolciaria's business when Heinz
Dolciaria effectively was stripped of its assets. Dayhoff does
not assert breach of contract claims against Hershey, H.J. Heinz,
or Heinz Italia. Dayhoff, however, asserts claims for tortious
interference with contract against all appellees except Heinz
Dolciaria. Dayhoff asserts claims against all appellees for
fraud and conspiracy, and seeks the imposition of a constructive
trust on all proceeds from the sale of Heinz Italia's
confectionery business and all proceeds from the manufacture and
sale of Heinz Dolciaria or Sperlari s.r.l. candies in the United
States. It also seeks restitution from Hershey, Sperlari s.r.l.,
and Heinz Dolciaria, and reformation of the change of control
termination provision of the Bulk Candy Distribution Agreement.
Dayhoff Australia originally was a plaintiff in the suit;
however, Dayhoff Australia prior to the institution of the suit
had transferred and assigned to Dayhoff its rights under the 1989
License Agreement. Thus, it was dropped as a plaintiff.
         On March 14, 1994, the appellees made a joint motion to
dismiss or for summary judgment. On October 3, 1994, the court,
through Judge Ambrose, dismissed Dayhoff's claims relating to the
License Agreement on the ground that the agreement compelled
Dayhoff to arbitrate all claims arising from it against all
appellees, including those who had not signed it. The district
court also dismissed all of Dayhoff's claims relating to the
Frutteto Distribution Agreement on the ground that Dayhoff was
compelled to litigate those claims in the courts of Cremona,
Italy. Finally, the district court dismissed all claims against
Heinz Italia for lack of personal jurisdiction. Thus, this
initial disposition left outstanding only Dayhoff's claims under
the Bulk Candy Distribution Agreement against the appellees other
than Heinz Italia.
         The case then was transferred to Judge Cindrich, who,
on July 10, 1995, granted summary judgment in favor of the
appellees on Dayhoff's remaining claims related to the Bulk Candy
Distribution Agreement. Dayhoff then appealed. We are
exercising plenary review.
         We note that insofar as we are aware, notwithstanding
the October 3, 1994 order, the parties have not instituted
arbitration or litigation proceedings in Italy. Dayhoff claims
that Hershey, Sperlari s.r.l., and H.J. Heinz did not consent to
jurisdiction of the arbitration in Milan or litigation in the
courts of Cremona until after the district court conditioned its
dismissal of Dayhoff's claims on that consent. Dayhoff's consent
neither was sought nor given.

                        III. DISCUSSION
                A. THE 1989 AND 1990 AGREEMENTS
         Dayhoff's initial argument is that the district court
erred in dismissing its claims related to the 1989 and 1990
Frutteto agreements because, in Dayhoff's view, the arbitration
and forum selection clauses of those agreements, on which the
district court relied in reaching its result, do not apply to all
of the appellees and, indeed, are not effective at all. Dayhoff
bases its argument that the clauses are not effective as to all
the appellees principally on our opinion in Kaplan v. First
Options of Chicago, Inc., 

(3d Cir. 1994), which the
Supreme Court affirmed in First Options of Chicago, Inc. v.
Kaplan, 

(1995).
         Dayhoff asserts that the Supreme Court's opinion in
Kaplan strongly emphasized that parties cannot be required to
arbitrate a dispute unless they specifically and expressly have
agreed to arbitration. It claims that the district court's
holding that Dayhoff was required to arbitrate its claims with
Hershey under the License Agreement because that was
"reasonable," even though Hershey was not a party to the
contract, was erroneous and inconsistent with Kaplan. Dayhoff
further claims that in crafting its standard of reasonableness,
the district court ignored the threshold issue of whether it is
proper, as a matter of law, to compel Dayhoff to arbitrate its
claims against Hershey, a stranger to the License Agreement,
where Dayhoff has not agreed to arbitrate with Hershey. Dayhoff
asserts that Kaplan unequivocally held that such compulsion is
improper where, as here, there is no agreement to arbitrate
between the relevant parties.
         In Kaplan, the Supreme Court affirmed our decision
directing the district court to vacate an arbitration award
against a party who had not agreed to 

. Exercising de novo review, we held that the Kaplans could
not be compelled to arbitrate claims made pursuant to various
contracts because they individually had not signed the specific
contract containing the arbitration clause, although they had
signed related contracts. 

.
         The Kaplans were not obligated to arbitrate because
they had not agreed to do so. As the Supreme Court wrote:
         [A]rbitration is simply a matter of contract
         between the parties; it is a way to resolve
         those disputes -- but only those disputes --
         that the parties have agreed to submit to
         

(citations omitted). Further, the Court stated
that:
         After all, the basic objective in this area
         is not to resolve disputes in the quickest
         manner possible, no matter what the parties'
         wishes, but to ensure that commercial
         arbitration agreements, like other contracts,
         'are enforced according to their terms.'

(citations omitted).
         Dayhoff claims that Kaplan is particularly significant
because one of the individual defendants in that case, Manuel
Kaplan, was the president, director, and the sole shareholder of
the defendant corporation, which was obligated to arbitrate
because Kaplan had signed a contract containing an arbitration
clause on its behalf. Nonetheless, Kaplan himself was not
obligated to arbitrate the claims against him because he had not
entered into an agreement to arbitrate individually, although he
had signed related agreements. Dayhoff points out that if
reasonableness or a close relationship were sufficient cause to
compel a non-party to arbitrate, Kaplan would have been a prime
candidate for arbitration. However, Dayhoff notes that we
rejected any test for determining whether a party had to
arbitrate other than a determination of what the contract's terms
provided:
         Arbitration is fundamentally a creature of
         contract . . . 'arbitrators derive their
         authority to resolve disputes only because
         the parties have agreed in advance to submit
         such grievances to 

(quoting AT & T Techs., Inc. v. Communications
Workers, 

, 648-49, 

, 1418 (1986)).
Dayhoff argues that Kaplan thus discredits the theory that as
long as an arbitration clause is applicable to the contracting
parties, it is proper to bring into the arbitration all of the
parties to the dispute even though they are not parties to the
agreement, and thus have not agreed to arbitrate. Accordingly,
since Dayhoff and Hershey did not agree to arbitrate, Dayhoff
asserts that it cannot be required to do so.
         Further, Dayhoff notes that a year after it commenced
this litigation, Hershey gave its consent to arbitration in
Italy, but only after the district court had required such
consent as a condition of dismissing the action against it.
Dayhoff claims that the very existence of this consent
underscores its point that there is no legal basis for requiring
either Hershey or Dayhoff to arbitrate in Italy, because the mere
fact that Hershey cannot be compelled to do so demonstrates that
Dayhoff should not be required to take its claims there either.
         Dayhoff applies its arguments relating to the
arbitration clause of the 1989 Licensing Agreement to the forum
selection clause of the 1990 Frutteto Distribution Agreement,
arguing that Kaplan would not countenance sending the parties to
a foreign court, absent a valid agreement selecting that court.
Dayhoff claims that the rationale of Kaplan thus governs the
forum selection clause, and that Hershey's belated consent to the
jurisdiction of the Italian courts is simply irrelevant, except
that it shows that there was no agreement between Dayhoff and
Hershey to resort to the Italian forum.
         In response, appellees argue that the 1989 Licensing
Agreement and the 1990 Frutteto Distribution Agreement contained,
respectively, a valid arbitration clause and a valid forum
selection clause. Appellees claim that the district court
correctly relied on these clauses in dismissing Dayhoff's claims
relating to these two agreements, and thereby acted consistently
with precedent that upholds the enforceability of such clauses.
Further, appellees argue that these clauses not only apply to
breach of contract claims, but also to tort claims arising from
contractual relations. Br. at 15. Appellees principally rely
upon the decision of the Court of Appeals for the Ninth Circuit
in Manetti-Farrow, Inc. v. Gucci America, Inc., 

(9th
Cir. 1988).
         Manetti-Farrow involved claims arising from the
termination of the North American distributor of Gucci
Accessories. The distribution agreement between the North
American distributor and a Gucci Italian affiliate (Gucci
Parfums) included a forum selection clause requiring litigation
of "any controversy regarding interpretation or fulfillment of
the present contract" in Italy. 

Following its
termination, the North American distributor commenced litigation
in the United States against Gucci Parfums, its Italian parent
(Guccio Gucci), an American Gucci affiliate (Gucci America), and
various employees and directors of the corporate defendants. The
North American distributor asserted a variety of claims against
these defendants, including tortious interference with
contractual relations. 

American distributor argued that the forum
selection clause should not apply to its tort claims,
particularly those claims it was asserting against parties other
than Gucci Parfums who were not parties to the forum selection
clause. The district court rejected this argument, and the court
of appeals affirmed. The court of appeals concluded first that
the forum selection clause did apply to the tort claims asserted
by the North American distributor, stating that "[w]hether a
forum selection clause applies to tort claims depends on whether
resolution of the claims relates to interpretation of the
contract." 

The court concluded that all of the
North American distributor's claims required interpretation of
the contract and therefore fell within the scope of the forum
selection clause. The court further concluded that the forum
selection clause applied to all defendants, even those who were
not parties to the forum selection clause. It reasoned that "the
alleged conduct of the non-parties is so closely related to the
contractual relationship that the forum selection clause applies
to all defendants." 

n.5.
         Relying upon the reasoning of the court of appeals in
Manetti-Farrow, appellees argue that the district court
correctly concluded that all of Dayhoff's claims relating to the
1989 and 1990 Frutteto agreements should be dismissed. SeeDayhoff, Inc.
v. H.J. Heinz Co., No. 93-1794, slip op. at 9 (W.D.
Pa. Oct. 3, 1994) ("Although Heinz, Heinz Italia, Sperlari s.r.l.
and Hershey are not parties to the Agreements, their conduct is
so closely related to the contractual relationship between Heinz
Dolciaria and Dayhoff that we find that the forum selection
clause applies to all Defendants."). Appellees further rely on
similar decisions of other courts. See br. at 18 (citing Coastal
Steel Corp. v. Tilghman Wheelabrator Ltd., 

, 203 (3d
Cir.) ("[T]he law of contracts . . . has long recognized that
third-party beneficiary status does not permit the avoidance of
contractual provisions otherwise enforceable."), cert. denied,

, 

(1983); Bonny v. Society of Lloyd's,

, 162 (7th Cir. 1993) (noncontracting defendants
subject to forum selection clause because integrally related to
contracting defendants such that suit should be kept in a single
forum), cert. denied, 

(1994); TAAG Linhas Aereas
de Angola v. Transamerica Airlines, Inc., 

, 1354
(9th Cir. 1990) (forum selection clause can restrict third-party
beneficiary to designated forum; it is not unreasonable or unjust
to enforce clause when all other defendants agree to jurisdiction
in the selected forum); J.J. Ryan & Sons, Inc. v. Rhone Poulenc
Textile, S.A., 

, 320-21 (4th Cir. 1988) ("When the
charges against a parent company and its subsidiary are based on
the same facts and are inherently inseparable, a court may refer
claims against the parent to arbitration even though the parent
is not formally a party to the arbitration agreement.")).
         Appellees claim that neither the decision of the
Supreme Court nor that of this court in Kaplan controls the
result of this case. Appellees assert that Kaplan involved
different legal issues and different factual circumstances from
those here. First, appellees read the Supreme Court's opinion in
Kaplan narrowly, claiming that the case solely addressed two
questions relating to standards of review to be applied to
district court decisions by courts of appeals. More generally,
however, appellees claim that the case did not present the issue
before us. In particular, appellees claim that:
         Mr. & Mrs. Kaplan did not agree to
         arbitration of any disputes involving their
         agreement with First Options. Here, by
         contrast, Dayhoff explicitly agreed to
         adjudicate all claims relating to the 1989
         Frutteto License Agreement and the 1990
         Frutteto Distribution Agreement in Italy
         under Italian law. Unlike Kaplan where the
         issue was whether Mr. & Mrs. Kaplan had
         agreed to arbitrate any claims, the issue
         here is the scope of the arbitration and
         forum selection clauses entered into by
         Dayhoff.
Br. at 21.
         We agree with Dayhoff that the arbitration clause in
the 1989 Licensing Agreement and the forum selection clause in
the 1990 Distribution Agreement can be enforced only by the
signatories to those agreements. The opinions in Kaplan are the
controlling precedent and thus we decline to follow the reasoning
of the Court of Appeals for the Ninth Circuit in Manetti-Farrow.
Nor do we believe any of the other cases cited by appellees are
persuasive here, as those cases all may be distinguished from
that before us. We also point out that Heinz Italia and H.J.
Heinz should not by reason of their corporate relationship with
Heinz Dolciaria be able to invoke the arbitration and forum
selection clauses, for there is no more reason to disregard the
corporate structure with respect to such claims as there would be
to disregard it with respect to other legal matters. If Heinz
Italia and H.J. Heinz wanted to be able to invoke the arbitration
and forum selection clauses, they should have directed Heinz
Dolciaria to include appropriate language in the 1989 and 1990
agreements allowing them to do so.
         Of course, we recognize that Dayhoff did agree to the
arbitration and forum selection clauses, whereas in Kaplan the
Kaplans had not agreed to any arbitration or forum selection
clause. However, we find appellees' position unacceptable, in
that under it Hershey (as well as the other non-signatories to
the agreement) has the option to accept or reject the arbitration
and forum selection clauses, while Dayhoff, under the district
court's opinion, is compelled to accede to Hershey's wishes.
The very fact that Hershey would have such a choice belies the
existence of an agreement between Dayhoff and Hershey, an
agreement that purportedly lies at the basis of appellees'
argument. For this reason, we will reverse the decision of the
district court to dismiss all of Dayhoff's claims related to the
1989 and 1990 Frutteto agreements against the non-signatories to
those agreements, except for Sperlari, s.r.l., the successor to
Heinz Dolciaria.
         Dayhoff next urges us to hold that the arbitration
clause in the License Agreement and the forum selection clause in
the Frutteto Distribution Agreement should not be enforced in
favor of even Heinz Dolciaria or Sperlari s.r.l. Dayhoff claims
that such clauses will not be enforced where "`trial in the
contractual forum will be so gravely difficult and inconvenient
that [the party] will for all practical purposes be deprived of
[its] day in court.'" Br. at 27 (quoting M/S Bremen v. Zapata
Off-Shore Co., 

, 18, 

, 1917 (1972)).
Dayhoff asserts that appellees seek precisely that result: to
prevent it from pursuing its rights and to evade all liability
for their wrongful conduct. Br. at 27.
         The district court addressed these claims in its
October 3, 1994 opinion. In that court Dayhoff stated, interalia, that
the enforcement of the forum selection clause would be
unreasonable because Italian courts would have no authority to
enforce preliminary or permanent injunctive relief in the United
States, and that only in the United States courts could Dayhoff
receive complete, consistent, and meaningful relief. Dayhoff,
Inc. v. H.J. Heinz Co., No. 93-1794, slip op. at 6 (W.D. Pa. Oct.
3, 1994). After carefully reviewing these arguments, the
district court found that it is not unreasonable to enforce the
forum selection clauses:
         The parties to the Agreements were
         sophisticated business people and there is no
         indication that Plaintiff was not aware, or
         could not have made itself aware, of the
         consequences that would result from including
         the forum selection clauses in the Agreements
         including whether the chosen forum was
         adequate and convenient. Simply because
         Plaintiff is unhappy, in retrospect, about
         the forum it designated is insufficient to
         warrant a finding that the clauses are
         unenforceable. It would be patently unfair
         to allow Plaintiff to avoid the mandates of
         the forum selection clauses due to
         inconvenience because we would merely be
         shifting the burden of inconvenience to the
         other party to the Agreement, an Italian
         corporation. We also believe that factors
         which weigh heavily in favor of enforcing the
         forum selection clauses include the fact that
         the parties agreed that Italian law would
         govern the Agreements and that the Agreements
         are international in character and have, at
         most, a tenuous relationship to the Western
         District of Pennsylvania.

         We agree with the district court's analysis of this
issue, except that we think the agreements have more than a
tenuous relationship to the Western District of Pensylvania, as
the contracts contemplate performance in the United States. But
this narrow area of disagreement does not lead us to reject the
district court's conclusions that the arbitration and forum
selection clauses are enforceable. Therefore, we will affirm its
finding that Dayhoff must litigate any claim relating to the 1989
and 1990 Frutteto agreements according to the arbitration and the
forum selection clauses of those agreements. However, unlike the
holding of the district court, our holding will apply only to
Dayhoff's claims against Heinz Dolciaria (and its successor,
Sperlari s.r.l.), because of our earlier holding that the clauses
do not apply to non-signatories of the agreement.
         In reaching our result on this point, we recognize that
Dayhoff emphasizes it may have to litigate its claims in three
different fora with three different sets of rules, and it asserts
that it has "no reasonable expectation of being able to enforce
its rights even after it has secured favorable rulings." Br. at
28. We are not impressed by these arguments. While we agree
with Dayhoff that it did not agree on arbitration and forum
selection clauses with respect to all the appellees, it did agree
to litigate with Sperlari S.p.A. and Heinz Dolciaria in three
different fora. Furthermore, we do not see why, if it is
successful in any forum, it could not enforce its rights, though
enforcement might require ancillary litigation and the extension
of comity to foreign judgments. Undoubtedly, the procedural
problems facing Dayhoff are daunting but Dayhoff's bargaining
when it entered into the three agreements is the cause of that.

                     B. THE 1992 AGREEMENT
         Dayhoff next asserts that the resolution of its claims
regarding the unlawful termination of the Bulk Candy Distribution
Agreement and the fraud that allegedly accompanied that
termination centers on factual disputes, including credibility
issues, and that the district court therefore should not have
decided its claims relating to that agreement on a summary
judgment motion. As presented by Dayhoff, the facts supporting
its claim that the termination clause was included in the
executed contract by fraud include the following. Heinz
Dolciaria invited Lele to come to Italy for the final
negotiations and execution of an agreement that he had been led
to believe was essentially a "done deal." Upon his arrival, Lele
was confronted with Giacobone, an attorney for Heinz Italia, who
told him that she would be representing Dayhoff's interests as
well as those of Heinz Dolciaria.
         At this meeting, Lele saw the termination provision for
the first time. Lele did not understand what it meant, and
therefore asked Giacobone to clarify its meaning. She explained
that it was there to protect Heinz Dolciaria in case Dayhoff
underwent a change of control. Volta confirmed that meaning to
Lele. Based upon this explanation, Dayhoff accepted the clause
and devoted its energies to the exclusive distributorship
provided by the contract. Giacobone subsequently testified that,
contrary to what Lele claims she told him, she had put the
provision in the contract so that Heinz Dolciaria could get out
of the contract in the event that its business was sold.
Moreover, Volta later took this position as to the meaning of the
provision as well. This evidence, according to Dayhoff, supports
the conclusion that there was "fraud in the execution of the
contract, or at least a jury could so find after weighing the
evidence and assessing credibility." Br. at 33.
         In its July 10, 1995 opinion, the district court
addressed these arguments in assessing the appellees' summary
judgment motion regarding the 1992 agreement. The dispute
revolves around section 14.3 of the agreement, the final
termination clause executed by the parties, which states:
         Either party shall have the right to
         terminate this Agreement upon written notice
         to the other party in the event that the
         other party becomes bankrupt, insolvent, or
         goes into liquidation, or in the event that
         either party assigns the whole or any
         substantial part of its business or assets or
         merges with another company or undergoes a
         change of control.
See Dayhoff, Inc. v. H.J. Heinz Co., No. 93-1794, slip op. at 7
(W.D. Pa. July 10, 1995). The appellees have contended that this
provision is straightforward and directly applicable to the
situation here involved. Since a transfer of assets took place
from Heinz Dolciaria to Sperlari s.r.l., whose stock Hershey
acquired on September 14, 1993, appellees argue that the
conditions triggering the application of section 14.3 were
satisfied; that Heinz Italia's September 28, 1993 letter
effectively terminated the three agreements with Dayhoff; and
that all Dayhoff's claims relating to termination of the 1992
Agreement therefore are foreclosed. In response, Dayhoff relies
upon its factual allegations presented above and asserts that
fraud bars the termination of the 1992 Distribution Agreement.
         As the district court noted, appellees point out that
the 1992 Distribution Agreement contains an integration clause
that bars any attempt to modify the terms of the agreement by
reference to pre-agreement discussions or negotiations -- that
is, by prohibiting parol evidence. Dayhoff, Inc. v. H.J. Heinz
Co., No. 93-1794, slip op. at 9 (W.D. Pa. July 10, 1995).
Dayhoff responds that the parol evidence rule does not apply
because Heinz Dolciaria fraudulently obtained the inclusion of
the termination provision. Br. at 34.
         The district court correctly found that Dayhoff's
argument conflicts with two recent decisions of the Pennsylvania
courts, which state's law the parties agree is controlling on
this issue. In HCB Contractors v. Liberty Place Hotel Assoc.,

(Pa. 1995), the appellant general contractor filed
mechanics' liens against four buildings it had helped erect.
Appellees, the building owners, successfully demurred to the
claims on the ground that HCB in two separate provisions in the
contract documents had agreed not to file such liens, instead
limiting its potential recovery to the owners' interests. HCB
argued on appeal that it had been induced fraudulently to sign
the waiver of liens. The question on appeal was whether
allegedly false oral representations could alter the express
waiver of liens in the contract. The contract in question
contained an integration clause.
         The Supreme Court of Pennsylvania found that the parol
evidence rule barred consideration of prior representations
concerning matters covered in the written contract, even those
alleged to have been made fraudulently, unless the
representations were fraudulently omitted from the contract.
Otherwise, the parol evidence rule "`would become a mockery,'"

(quoting Nicolella v. Palmer, 

(Pa.
1968)), and integrated contracts could be avoided or modified by
claims of differing prior representations.
         The second decision relied upon by the district court,
1726 Cherry St. Partnership v. Bell Atlantic Properties, Inc.,

(Pa. Super. Ct.), appeal denied, 

(Pa.
1995), addressed the same issue found in HCB and here. 1726
Cherry St. concerned Bell's acquisition of several parcels of
land. Appellants, the owners of one of the parcels, wanted
theirs to be the last acquired, believing that this order of sale
would bring them a better price than they otherwise would obtain.
They were persuaded to sell their land sooner by the inclusion of
a so-called "most favored nation" clause in the contract which
retroactively would adjust their price upward if Bell acquired
certain other specified parcels at higher prices. 

         Bell later acquired and paid a higher price for land
known as the CIGNA Parcel. The parties had not named the CIGNA
Parcel in the 1726 Cherry St. contract so Bell did not consider
itself bound to raise the price paid to the 1726 Cherry St.
owners. The owners brought suit for fraud, reformation, or
rescission, claiming that Bell orally had misrepresented its
intention not to purchase the CIGNA Parcel; otherwise, they would
have insisted on the inclusion of the CIGNA Parcel in the list of
properties subject to most-favored-nation treatment. The trial
court applied the parol evidence rule in entering judgment for
Bell.
         The Superior Court affirmed, 1726 Cherry 

, explaining Pennsylvania's distinction between fraud in
the execution and fraud in the inducement. Fraud in the
execution applies to situations where parties agree to include
certain terms in an agreement, but such terms are not included.
Thus, the defrauded party is mistaken as to the contents of the
physical document that it is signing. Parol evidence is
admissible in such a case only to show that certain provisions
were supposed to be in the agreement but were omitted because of
fraud, accident, or mistake. Fraud in the inducement, on the
other hand, does not involve terms omitted from an agreement, but
rather allegations of oral representations on which the other
party relied in entering into the agreement but which are
contrary to the express terms of the agreement. It is clear that
Dayhoff alleges fraud in the inducement in this case, despite its
protestations to the contrary.
         In seeking to distinguish HCB and 1726 Cherry St.,
Dayhoff argues that the facts here differ, particularly in its
claim that "an attorney said something that simply was not true,
and moreover, this attorney stated that she was representing
Dayhoff, another untruth." Br. at 35-36. However, we agree with
the district court that the differing facts here do not affect
the broad holdings of HCB or 1726 Cherry St. in any significant
way. Alternatively, Dayhoff again asserts, as it did in the
district court, that the Supreme Court of Pennsylvania has not
expressly rejected fraud in the inducement as an exception to the
parol evidence rule. Again agreeing with the district court, we
find this argument meritless. Accordingly, because the plain
terms of section 14.3 cannot be altered by Dayhoff's factual
claims of fraud in the inducement, even if Dayhoff's assertions
are true, we agree with the holding of the district court that
the termination provision of the 1992 Bulk Distribution Agreement
is binding upon the parties. Consequently, as the termination
provision is absolutely clear and is applicable here, we will
affirm the summary judgment granted against Dayhoff on its claims
that Heinz Italia improperly terminated the 1992 Bulk Candy
Distribution Agreement.
         Our result on this issue also leads us to affirm the
district court's judgment dismissing Dayhoff's tortious
interference with contract, constructive trust, civil conspiracy,
and restitution claims predicated on the termination of the 1992
agreement. There is no doubt that the conditions for the
termination of the 1992 agreement were met. Furthermore,
Hershey did nothing wrong in requesting that the agreement be
terminated. After all, it was acquiring Heinz Italia's candy
business and it did not want Dayhoff as a candy distributor.
There was no reason why it had to retain Dayhoff in that role, at
least with respect to the 1992 agreement. Furthermore, we will
not allow the claim for reformation to proceed either, as Dayhoff
was well aware that section 14.3 was being included in the 1992
agreement.
         Dayhoff claims, however, that appellees' fraud was not
limited to the execution of the contract, but that there also was
fraud when Dayhoff falsely was assured that the sale to Hershey
would not affect its contracts. The district court rejected that
claim as well when it granted appellees summary judgment. Dayhoff
relies in part on the following allegations in making this second
claim of fraud. Seletti and Volta constantly reassured Lele that
there was no reason to terminate Dayhoff's contracts and that the
sale of Heinz Italia's confectionery business would have no
effect on those contracts. Dayhoff claims that, in fact, Volta
told Lele that he should not worry. Dayhoff thus claims that
appellees made fraudulent statements and that the district court
improperly attempted to interpret and weigh the evidence
concerning these allegations. Dayhoff asserts that numerous
genuine issues of fact relate to the fraudulent conduct of
appellees with regard to the termination of the Bulk Candy
Distribution Agreement. Dayhoff claims that these issues of fact
directly relate to Dayhoff's claims for imposition of a
constructive trust and for damages for civil conspiracy, tortious
interference, and restitution.
         We partially agree with Dayhoff. Viewing the facts in
the light most favorable to it as the non-moving party, we cannot
say that there are no genuine issues of material fact that a jury
should evaluate in this case. Thus, in this respect, unlike the
district court, we are not satisfied that summary judgment should
have been granted against Dayhoff on this particular claim
related to the 1992 Bulk Distribution Agreement. Therefore, we
will reverse the district court's grant of summary judgment to
the limited extent that it precluded Dayhoff from proceeding with
its fraud claim predicated on the allegations that it was
defrauded when it was assured that the sale to Hershey would not
affect its contracts with Heinz Dolciaria. However, we limit
Dayhoff's possible recovery with respect to the 1992 agreement to
damages, as that agreement, after all, was terminated lawfully.
We otherwise will affirm the summary judgment entered on the 1992
agreement. At this time, we do not consider the effect of our
reversal on claims relating to the 1989 and 1990 agreements, as
the court dismissed those claims without considering them on
their merits. To the extent that litigation regarding those
agreements continues in the district court, the effect of the
reversal may be considered on remand.

          C. PERSONAL JURISDICTION OVER HEINZ ITALIA
         Finally, Dayhoff disputes the district court's decision
to dismiss all claims against Heinz Italia for lack of personal
jurisdiction. Dayhoff notes that the transaction that serves as
the predicate for all of its claims in this litigation is the
$133,000,000 sale of Heinz Italia's confectionery business (Heinz
Dolciaria) to Hershey, with the advance approval and
participation of H.J. Heinz in Pittsburgh. Dayhoff claims that
Heinz Italia directly participated in all aspects of this
transaction, which participation it claims to be sufficient to
confer specific jurisdiction over Heinz Italia under
Pennsylvania's long-arm statute.
         In deciding a motion to dismiss for lack of personal
jurisdiction, we take the allegations of the complaint as true.
Narco Avionics, Inc. v. Sportsman's Mkt., Inc., 

,
402 (E.D. Pa. 1992). But once a defendant has raised a
jurisdictional defense, a plaintiff bears the burden of proving
by affidavits or other competent evidence that jurisdiction is
proper. 

Penn Gas Co. v. Corning Natural Gas
Corp., 

, 689 (3d Cir.), cert. denied, 

,

(1990)); see also Mellon Bank (East) v. Diveronica
Bros., 

, 554 (3d Cir. 1993).
         Under Fed. R. Civ. P. 4(e), we will apply Pennsylvania
law to the jurisdictional issue. Pennsylvania's long-arm statute
authorizes the exercise of personal jurisdiction over
nonresidents "to the fullest extent allowed under the
Constitution of the United States . . . based on the most minimum
contact with this Commonwealth allowed under the Constitution of
the United States." 42 Pa. Cons. Stat. Ann.    5322(b) (1981).
Section 5322(a) sets forth a variety of examples of sufficient
contact, such as "[t]ransacting any business in this
Commonwealth." 

Supp. 1995). Section
5322(b) further expands the potential bases for jurisdiction.
When personal jurisdiction is based solely on minimum contacts
under the long-arm statute, it is limited to "a cause of action
or other matter arising from acts" which confer jurisdiction.

the district court noted, "[s]pecific
jurisdiction arises when the plaintiff's claim is related to or
arises out of the defendant's contacts with the forum." Dayhoff,
Inc. v. H.J. Heinz Co., No. 93-1794, slip op. at 13 (W.D. Pa.
Oct. 3, 1994) (quoting Mellon Bank (East) PSFS, N.A. v. Farino,

, 1221 (3d Cir. 1992)). A plaintiff must
demonstrate that a defendant purposefully has established
"sufficient minimum contacts with the forum state that it `should
reasonably anticipate being haled into court there.'" Diveronica

.
         Dayhoff argues that Heinz Italia has had a wide range
of contacts in Pennsylvania that would support the district
court's exercise of jurisdiction over it. The district court
found, however, that even assuming that all of Dayhoff's
allegations are true, none of the contacts gave rise to or
related, in any way, to this litigation. Dayhoff, Inc. v. H.J.
Heinz Co., No. 93-1794, slip op. at 14 (W.D. Pa. Oct. 3, 1994).
The court concluded that the contacts between Heinz Italia and
Hershey regarding the sale of the confectionery business could
not properly be considered in a determination of whether there
was personal jurisdiction, because "the sale of the Heinz Italia
confectionery business is not the subject of this litigation."

court found that Dayhoff had "provided no
evidence which would indicate that any activities relating to the
formation or breach of this agreement or the actions on the part
of Dayhoff or Heinz Italia (who is not even a party to the
Agreements) were directed toward this forum." 

         We disagree with the conclusion of the district court.
We conclude, instead, that the court took too narrow a view of
the "subject of this litigation." In our view, this litigation
is concerned intimately with Heinz Italia's sale of its
confectionery business to Hershey in that Dayhoff alleges,
apparently with good reason, that the sale itself precipitated
the termination of its agreements. Furthermore, the agreements
were performed in the United States, and Heinz Italia was the
party who sent the letter of September 28, 1993, terminating
them. Moreover, Dayhoff accuses Heinz Italia, inter alia, of
tortious interference with contract, alleging that Heinz Italia
interfered with its contracts with Heinz Dolciaria in order to
sell that business to Hershey. It seems to us that these very
claims against Heinz Italia are the "subject of this litigation,"
not merely the contracts between Dayhoff and Heinz Dolciaria. We
see no need to discuss this point further because we think it
clear that according to our view of the "subject of this
litigation," Dayhoff has demonstrated that Heinz Italia has many
contacts with Pennsylvania. Accordingly, we will reverse the
order of the district court dismissing all claims against Heinz
Italia for lack of personal jurisdiction.

                         IV. CONCLUSION
         For the foregoing reasons, we will affirm the court's
orders of October 3, 1994, and July 10, 1995, to the extent that
those orders reflect the district court's conclusions that
Dayhoff is bound by the arbitration and forum selection clauses
of the 1989 and 1990 agreements with respect to its claims
against Heinz Dolciaria and its successor, Sperlari s.r.l. We
also will affirm the summary judgment against Dayhoff on its
claims based upon the 1992 agreement, except on its claim of
fraud with respect to the alleged assurance to it that the sale
to Hershey would not affect its contracts with Heinz Dolciaria.
However, we limit recovery for that fraud, if it is established,
to damages. Otherwise, we will reverse the orders of October 3,
1994, and July 10, 1995, and will remand the case to the district
court for further proceedings consistent with this opinion. In
particular, the case may proceed against the appellees other than
Heinz Dolciaria and Sperlari s.r.l. in the district court without
regard for the arbitration and forum selection clauses of the
1989 and 1990 agreements, and the district court will exercise
jurisdiction over   Heinz Italia. The action may proceed for fraud
claims related to   the termination of the 1992 agreement to the
limited extent we   have described. The parties will bear their
own costs on this   appeal.