Opinion
NO. CIV. S-05-0761 FCD/GGH.
September 29, 2006
MEMORANDUM AND ORDER
This matter comes before the court on Javier Estaban Lopez's ("Lopez") and Viveros El Pinar's ("VEP") (collectively "defendants") motion to dismiss for lack of personal jurisdiction and on forum non conveniens grounds. Ekland Marketing Company of California ("Ekland" or "plaintiff") opposes the motion, asserting that this court has specific jurisdiction over defendants and that this is a proper forum for litigation. For the reasons set forth below, defendants' motion is DENIED.
Because oral argument will not be of material assistance, the court orders this matter submitted on the briefs. E.D. Cal. Local Rule 78-230(h).
BACKGROUND
For the purposes of this motion, the court recounts plaintiff's version of the facts. In deciding whether plaintiff has met its burden of establishing personal jurisdiction, the court accepts plaintiff's allegations as true. Core-Vent Corp. v. Nobel Industries AB, 11 F.3d 1482, 1485 (9th Cir. 1993) (citation omitted).
Plaintiff is in the business of implementing, licensing, and marketing alternate sources of strawberry varieties into the world market. In 1993, plaintiff entered into a contract with the Florida Strawberry Growers Association ("FSGA") to perform specific services related to promoting new strawberry varieties in the international market. (Pl.'s First Am. Compl., filed Dec. 29, 2005 ["FAC"], ¶ 11.) In 2000, plaintiff entered into a similar contract with California Giant, Inc. ("CalGiant"). (Id. ¶ 14.) CalGiant maintains a proprietary strawberry breeding program in Watsonville, California. (Id.)
On or about February 1, 2001, in Butte County, California, plaintiff and defendant VEP entered into two Propagation Agreements. (FAC ¶ 16.) Plaintiff licensed the right to propagate, distribute, and sell certain proprietary strawberry varieties derived from FSGA and CalGiant plant breeding programs to defendants. (Id.) In addition, defendant VEP agreed to follow certain agricultural practices of the international strawberry industry. (Id. ¶ 17.) These obligations included accounting for all planting stock produced and sold and paying royalties based on the number of plants sold to third-party producers or utilized by defendants in their own fruit production. (Id.)
The first Propagation Agreement included a forum selection clause under which defendants expressly consented to the jurisdiction of the courts of California. (First Propagation Agreement, Ex. B to Decl. of Roy Ekland in Opp'n to Defs.' Mot. to Dismiss, filed Aug. 29, 2006 ["Ekland Decl."].) This Propagation Agreement had an express duration of one year. (Id.) The second Propagation Agreement — entered into by the parties on the same day — did not contain a forum selection clause or consent from defendants to submit to jurisdiction in a California court. (Second Propagation Agreement, Ex. C to Ekland Decl.)
During the summer of 2002, plaintiff negotiated an expansion of its variety trial program with FSGA and CalGiant. (FAC ¶ 23.) Until that time, plaintiff only had licenses to strawberry varieties receiving patent protection in the United States and the European Union ("EU"). (Id.) Plaintiff convinced CalGiant to allow access to strawberry varieties that did not have EU patent protection. (Id.) In return, plaintiff and defendants planned to generate data that would permit an early evaluation of these advanced selection cultivars. (Id.)
On December 8, 2002, Ekland and defendant Lopez met in San Francisco, California to negotiate the basic terms of the advanced selection contracts concerning the CalGiant and University of Florida varieties. (Ekland Decl. ¶ 15.) Ekland asserts that Lopez agreed to extend the Propagation Agreements until December 31, 2004. (Id.; Ex. D to Ekland Decl.)
In March 2003, in Butte County, California, plaintiff and defendants formalized their commitment to the advanced selection program with two additional contracts, the Advanced Selection Contracts. (Ekland Decl. ¶ 16.) The Advanced Selection Contracts were backdated to January 1, 2003, and complemented the Propagation Agreements, but were not replacements for the Propagation Agreements. (Id.) Under the Advanced Selection Contracts, defendants agreed to evaluate advanced selection cultivars of strawberries selected by FSGA and CalGiant with the objective of determining the competitive characteristics and commercial viability of these cultivars in Spain. (FAC ¶ 24.)
Defendants continued to perform under the Propagation Agreements by accounting for and paying royalty fees to plaintiff in California on strawberry varieties and cultivars produced through 2003. (Id. ¶ 29.) The royalty payments for 2001 through 2003 totaled over $100,000 for approximately 4.3 million cultivars. (Ekland Decl. ¶ 18.) All of these cultivars were propagated from mother stock defendants obtained from California nurseries. (Id.) Additional royalties of over $100,000 for approximately 12 million cultivars were invoiced for 2004, but have never been paid. (Id.)
In addition to the unpaid royalties, plaintiff claims that defendants failed to fulfill other obligations under the Propagation Agreements and Advanced Selection Contracts. Among other things, plaintiff alleges that defendants failed to order mother plants for the 2004 nursery season and failed to deliver the required reports on the performance of either the advanced selection or the commercial varieties that defendants placed with fruit growers in October and November of 2003. (Id. ¶ 35.) Plaintiff contacted defendants to remind them of their obligations to deliver these reports. (Id. ¶ 38.) The reports establish plaintiff's competitive position in the marketplace. (Id. ¶ 40.)
Plaintiff filed this action in this court alleging eight causes of action, including: breach of contract of the Propagation Agreements and the Advanced Selection Contracts, breach of fiduciary duty, negligence, declaratory relief, intentional interference with contract, interference with prospective economic advantage, and negligent interference with prospective economic advantage. Defendants have filed an action for breach of contract in a Spanish court. (Decl. of Javier Esteban Lopez in Supp. of Defs.' Mot. to Dismiss, filed Apr. 24, 2006 ["Lopez Decl."], ¶¶ 17-20.) The Spanish court found jurisdiction over plaintiff and has issued a preliminary injunction. (Id.) Defendants now move to dismiss the case for lack of personal jurisdiction and on forum non conveniens grounds.
ANALYSIS
A. Personal Jurisdiction
Under Rule 12(b)(2) of the Federal Rules of Civil Procedure, a defendant may seek dismissal of an action for lack of personal jurisdiction. "Where, as here, there is no applicable federal statute governing personal jurisdiction, the law of the state in which the district court sits applies." Core-Vent, 11 F.3d at 1484 (citation omitted). "California's long-arm statute allows courts to exercise personal jurisdiction over defendants to the extent permitted by the Due Process Clause of the United States Constitution." Id. at 1484 (citation omitted). Thus, only constitutional principles constrain the jurisdiction of a federal court in California. Sher v. Johnson, 911 F.2d 1357, 1361 (9th Cir. 1990).
A court may exercise either general or specific jurisdiction over a non-resident defendant. "General jurisdiction exists when a defendant is domiciled in the forum state or his activities there are `substantial' or `continuous and systematic.'"Panavision Int'l, L.P. v. Toeppen, 141 F.3d 1316, 1320 (9th Cir. 1998) (quoting Helicopteros Nacionales de Columbia, S.A. v. Hall, 466 U.S. 408, 414-416 (1984)).
When general jurisdiction does not exist, the court may determine whether it has specific jurisdiction over the defendant. Specific jurisdiction exists when the defendant has sufficient "minimum contacts" with the forum and when "assertion of personal jurisdiction would comport with fair play and substantial justice." Burger King v. Rudzewciz, 471 U.S. 462, 476 (1985) (internal quotation omitted). The Ninth Circuit articulates the requirements sufficient to satisfy due process as follows:
(1) the nonresident defendant must purposefully direct [its] activities or consummate some transaction with the forum or resident thereof; or perform some act by which [it] purposefully avails [itself] of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws;
(2) the claim must be one which arises out of or relates to the defendant's forum-related activities; and
(3) the exercise of jurisdiction must comport with fair play and substantial justice, i.e. it must be reasonable.Core-Vent, 11 F.3d at 1485 (citation omitted).
Once a defendant challenges jurisdiction, the burden of proof to show that jurisdiction is appropriate lies with the plaintiff.Sher, 911 F.2d at 1361. When a defendant's motion to dismiss is to be decided on the pleadings, affidavits, and discovery materials, the plaintiff need only make a prima facie showing that personal jurisdiction exists in order for the action to proceed. Id. In deciding whether plaintiff has met this burden, the court accepts plaintiff's allegations as true. Id.
The purposeful availment prong of the minimum contacts analysis may be satisfied when a defendant purposefully directs its activities at the forum or its residents. Core-Vent, 11 F.3d at 1485 (citation omitted). Here, defendants entered into contracts with plaintiff — Propagation Agreements and Advanced Selection Contracts — in California to purchase strawberry plants. Under the Propagation Agreements, defendants paid royalties to plaintiff on strawberry varieties and cultivars produced through 2003. All of these cultivars were propagated from mother stock defendants obtained from California nurseries through plaintiff. Therefore, the court finds that defendants purposefully directed activity toward this forum.
The Ninth Circuit relies "on a `but for' test to determine whether a particular claim arises out of forum-related activities and thereby satisfies the second requirement for specific jurisdiction." Ballard v. Savage, 65 F.3d 1495, 1500 (9th Cir. 1995) (citation omitted). Here, plaintiff's claims arise out of the alleged breach of the Propagation Agreements and Advanced Selection Contracts between plaintiff and defendants. But for defendants' agreement with plaintiff, a California corporation, plaintiff's claims for breach of contract, breach of fiduciary duty, and negligence would not have arisen. See Hirsch v. Blue Cross, Blue Shield of Kan. City, 800 F.2d 1474, 1480 (9th Cir. 1986) (holding that where a contract constitutes defendant's contacts with a forum, breach of that contract satisfies the "arising out of" requirement). Thus, the causation element of the minimum contacts analysis is satisfied.
"Once it has been decided that a defendant purposefully established minimum contacts within the forum State, these contacts may be considered in light of other factors to determine whether the assertion of personal jurisdiction would comport with `fair play and substantial justice.'" Burger King, 471 U.S. at 476 (citation omitted). Defendant has the burden to show that it would not. Sher, 911 F.2d at 1164. Courts in the Ninth Circuit apply this requirement by weighing seven factors:
(1) the extent of the defendant['s] purposeful interjection into the forum state's affairs;
(2) the burden on the defendant of defending in the forum;
(3) the extent of conflict with the sovereignty of the defendant['s] state;
(4) the forum state's interest in adjudicating the dispute;
(5) the most efficient [forum for] judicial resolution of the controversy;
(6) the importance of the forum to the plaintiff's interest in convenient and effective relief; and,
(7) the existence of an alternative forum.Core-Vent, 11 F.3d at 1487-88 (citation omitted).
Defendants admit that California has an interest in adjudicating the present dispute.
The court must weigh the extent of defendants' purposeful interjection into the affairs of the forum state, even if the purposeful availment prong is satisfied. Id. at 1488 (citation omitted). In the present case, defendants' interjection is significant. Since 2000, defendants have purchased over six million California mother plants, and reported production of at least 49.5 million cultivars from these California mother plants. Defendants are required to pay royalties on these 49.5 million cultivars to California companies, which in turn must pay royalties to other California entities that own plant rights to subject plant varieties. Moreover, defendant Lopez sought out plants from nearly every major nursery in California and attempted to purchase mother plants from each of them. Defendants continue to purchase mother plants from California nurseries to this day.
In order for a defendant to demonstrate that defending a suit in this forum is unreasonable, the defendant must show that jurisdiction in California would make the litigation "so gravely difficult and inconvenient that a party unfairly is at a severe disadvantage in comparison to his opponent." Sher, 911 F.2d at 1365. Defendants contend that this case concerns a dispute that arose entirely in Spain. (Defs.' Mem. of P. A. in Supp. of Mot. to Dismiss, filed Apr. 10, 2006 ["Mot."], at 6:20-21.) Further, defendants assert that the burden of bringing all of the witnesses and the evidence located in Spain to the United States, translate it, and present it in a California court is immense, and thus unreasonable. However, in a case where an out-of-state defendant alleged similar hardships, the Ninth Circuit found that jurisdiction in the forum was nonetheless reasonable. Sher, 911 F.2d at 1365. In Sher, defendant, a Florida law firm, asserted that jurisdiction in California would be unreasonable because defendant would be unable to run its law practice if it were required to defend a suit in California. Id. at 1364. The defendant in Sher also argued that all the evidence and most of the witnesses were located in Florida. Id. The Ninth Circuit found that "[i]n this era of fax machines and discount air travel, requiring [defendant] to defend itself in California under the circumstances as it alleges them would not be so unreasonable as to violate due process." Id. at 1365. Defendants have not demonstrated that the burden of litigating this claim in a California forum would be place them at an unfair disadvantage.
Defendants also argue that the existence of its suit against plaintiff in a Spanish court presents potential conflict with Spanish sovereignty, "as the outcome of this action [as adjudicated by this court] could conflict with the outcome of the Spanish action, in which a preliminary injunction has already been issue[d]." (Mot. at 7:3-6.) The government of Spain clearly has an interest in resolving disputes that involve its citizen. However, although this factor is important, the Ninth Circuit has stated that the potential affront to the sovereignty of the defendants' state is not dispositive to the determination of whether the exercise of jurisdiction is reasonable since it "would always prevent suit against a foreign national in a United States court." Gates Learjet Corp. v. Jensen, 743 F.2d 1325, 1333 (9th Cir. 1984).
Defendants contend that Spain is the most efficient forum for judicial resolution of this action because the present dispute arose in Spain, where the strawberry plants under the Advanced Selection contracts were planted and all the activity that plaintiff alleges to constitute a breach of contract took place. Conversely, plaintiff argues that California is the most efficient forum to resolve this matter due to the choice of law provision in the Propagation Agreements. (Ex. B to Ekland Decl. ¶ 15). At the current stage of the litigation, California would appear to be the more efficient forum to resolve this dispute. This court is in a better position than a Spanish court to apply California law.
Plaintiff alleges that the present dispute arises under both the Propagation Agreements and the Advanced Selection Contracts. The first Propagation Agreement included a forum selection clause under which defendants expressly consented to the jurisdiction of the courts of California. The second Propagation Agreement and the Advanced Selection Contracts did not contain a choice of forum provision. Defendants admit that the first Propagation Agreement contained a choice of forum clause, but asserts that the present dispute arose from the Advanced Selection Contracts. The court does not reach the merits of this issue. However, the court accepts the plaintiff's allegations as true for purposes of this motion.
Plaintiff's interest in convenient and effective relief favors this forum. A California court certainly provides Ekland with the most convenient forum for seeking relief. Defendants argue that effective relief is difficult because defendants have no assets in California and this court cannot impact orders issued in a Spanish court. However, effective relief is available to plaintiff in the form of hindering defendants' ability to transact business in California. As such, the existence of defendants' business activities in California is motivation for defendants to abide by a judgment issued by this court. Therefore, this factor weighs in favor of plaintiff.
Finally, defendants assert that a Spanish court would be an alternate forum to litigate this case. A Spanish court has ruled that it can assert jurisdiction over plaintiff. Plaintiff is silent on this issue and has not carried its "burden of proving the unavailability of an alternative forum." Core-Vent, 11 F.3d at 1490 (citation omitted). In light of the other factors, however, this factor is not dispositive.
Considering all the relevant factors, the court finds that exercise of personal jurisdiction over defendants is reasonable. Defendants' purposeful interjection into the forum is significant, and thus, weighs strongly in favor of finding jurisdiction. Further, California has an interest in the litigation and is the most efficient forum. In weighing these factors, the court is not convinced that adjudication of this dispute in California will affront the sovereignty of the Spain. Although the availability of an alternative forum supports defendants' position, the other factors weigh more strongly in plaintiff's favor. Defendants assert that litigating the case in California would be an undue hardship. To violate due process, however, defendants "must show that jurisdiction in California would make the litigation `so gravely difficult and inconvenient that a party unfairly is at a severe disadvantage compared to [its] opponent.'" Sher, 911 F.2d at 1365 (quoting Burger King, 471 U.S. at 478.) Defendants have not made such a showing. Therefore, the court finds that it has specific jurisdiction over defendants.
B. Forum Non Conveniens
A court has "the discretion to decline jurisdiction in a case where litigation in foreign forum would be more convenient for the parties." Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 504 (1947). A party moving for dismissal on forum non conveniens grounds has the burden of showing: (1) whether an adequate alternative forum exists; and (2) whether the balance of private and public interest factors favors dismissal. Ceramic Corp. of America v. Inka Maritime Corp., 1 F.3d 947, 949 (9th Cir. 1993).
There is a strong presumption to honor a plaintiff's choice of forum, but a court may balance that presumption against the "private interests" and "public interests" of litigating in a foreign country. Lueck v. Sundstrand Corp., 236 F.3d 1137, 1145 (9th Cir. 2001). The Ninth Circuit considers the following "private interests" in its analysis:
(1) the residence of the parties and the witnesses;
(2) the forum's convenience to the litigants;
(3) access to physical evidence and other sources of proof;
(4) whether unwilling witnesses can be compelled to testify;
(5) the cost of bringing witnesses to trial;
(6) the enforceability of the judgment; and
(7) all other practical problems that make trial of a case easy, expeditious, and inexpensive.Id. (citing Gulf Oil, 330 U.S. at 508). In addition, the Ninth Circuit considers the following "public interests":
(1) local interest of lawsuit;
(2) the court's familiarity with governing law;
(3) burden on local courts and juries;
(4) congestion in the court; and
(5) the costs of resolving a dispute unrelated to this forum.Id. at 1147 (citing Piper Aircraft Co. v. Reyno, 454 U.S. 235, 259-61 (1981)). A court should consider the "private interest" and "public interest" factors applicable to a case before it and give appropriate weight to each factor. Id. at 1145 (citing Gulf Oil, 330 U.S. at 508 (citations omitted)). A court "should consider [these factors] together in arriving at a balanced conclusion." Id.
Defendants admit that some of the private interest factors are neutral, such as the residences of the parties and the forum's convenience to the litigants. Defendants assert that nearly all of the evidence is in Spain because all of the activity took place there. However, the court's analysis of this factor does not rest on the number of witnesses or quantity of evidence in Spain; rather, the court must look at "the materiality and importance of the anticipated [evidence and] witnesses' testimony and then determine[s] their accessibility and convenience to the forum." Gates Learjet, 743 F.2d at 1335-36. Defendants identify a number of witnesses — business leaders, managers of nurseries, and buying agents — that will have to travel to California. (Lopez Decl. at 6:1-6.) Defendants assert that the case will require expert witness evaluation and testimony, "experts that logically will be found in Europe, not in the United States." (Mot'n at 9:13-15.)
However, plaintiff has also identified witnesses — employees, representatives from California nurseries, and representatives from entities holding rights to various strawberry varieties — that will be summoned for trial but cannot be compelled to travel to Spain. Plaintiff asserts that significant evidence necessary to the resolution of this dispute is in California, including documents relating to exclusive distribution rights plaintiff has over certain protected strawberry plants in question. Based upon the submissions of the parties, crucial documents and witnesses exist in both fora. Thus, this private interest factor, at best, is neutral since both defendants and plaintiff have identified witnesses that would have to travel abroad for this action or for the pending action in Spain.
Similar to the private interest factors, the court considers any or all of the public interest factors that are relevant to the dispute and gives appropriate weight to each when arriving at a balanced conclusion. Id. at 1145-46 (citing Piper Aircraft, 454 U.S. at 255). Of the public interest factors listed above, defendants emphasize that Spain has a much higher interest in this dispute than California. Defendants contend that California's interests in this dispute are solely monetary in nature. They argue that Spain has a greater interest in this dispute because the present dispute not only affects the defendants, but the preliminary injunction issued by the Spanish court also impacts the entire Spanish strawberry market, as no one can do business relating to the strawberry varieties covered by the Advanced Selection Agreements.
However, California has a significant interest in resolving this controversy in a local forum. Defendants knowingly and explicitly subjected themselves to the application of California law under the Propagation Agreement. Defendants purposefully interjected themselved into this forum when they purchased millions of strawberry plants from California nurseries to be distributed in Spain. California's interest in this litigation concerns the protection of its strawberry industry. Moreover, if the court finds that California law is applicable to this controversy, then California has a significant interest in interpreting its own law. See Gates Learjet, 743 F.2d at 1336-37. This public interest factor therefore cuts in favor of plaintiff.
On balance, the relevant private and public interest factors support the court's dismissal of defendants' motion to dismiss based on forum non conveniens grounds. The relevant private interest factor of access to physical evidence and other sources of proof is, at best, neutral. Defendants and plaintiff both have witnesses that would have to travel abroad for this action or for the pending action in Spain. The relevant public interest factor of local interest in this dispute weighs in favor of plaintiff due to its impact on California's strawberry industry. Therefore, the court finds that this court is a proper forum for the dispute.
CONCLUSION
For the foregoing reasons, defendants' motion to dismiss for lack of personal jurisdiction and on forum non conveniens grounds is DENIED.
IT IS SO ORDERED.