Opinion
Case No. 2:20-cv-07774-FLA (AFMx)
2022-10-11
Walter MORGAN, et al., Plaintiffs, v. Jim MCMILLIN, et al., Defendants.
Ronda R. Dixon, Dixon Justice Center, Marina Del Rey, CA, for Plaintiffs. Robert D. Arkin, Pro Hac Vice, Robert Arkin LLC, Atlanta, GA, Shane W. Tseng, Victor T. Fu, Prospera Law LLP, Los Angeles, CA, for Defendants.
Ronda R. Dixon, Dixon Justice Center, Marina Del Rey, CA, for Plaintiffs. Robert D. Arkin, Pro Hac Vice, Robert Arkin LLC, Atlanta, GA, Shane W. Tseng, Victor T. Fu, Prospera Law LLP, Los Angeles, CA, for Defendants.
ORDER DENYING DEFENDANTS' MOTION TO DISMISS [DKT. 54]
FERNANDO L. AENLLE-ROCHA, United States District Judge
RULING
Before the court is Defendants Jim L. McMillin, Sr., also known as Jimbo, ("McMillin, Sr."); James L. McMillin, Jr., also known as Logan ("McMillin, Jr."); Karen Davidson McMillin ("Davidson"); and Blok Industries, Inc.'s ("Blok") (collectively, "Defendants") Motion to Dismiss Plaintiff UBU Holdings, Inc.'s ("UBU" or "Plaintiff") First Amended Complaint. Dkt. 54 ("Mot."). On November 11, 2021, the court found this matter appropriate for resolution without oral argument and vacated the hearing set for November 19, 2021. Dkt. 58; see Fed. R. Civ. P. 78(b); Local Rule 7-15.
For the reasons stated herein, the court DENIES Defendants' Motion to Dismiss. Defendants shall file their Answer within 21 days of this Order.
BACKGROUND
For purposes of the subject Motion, the court treats the following factual allegations of the FAC as true. See Wilson v. Hewlett-Packard Co., 668 F.3d 1136, 1140 (9th Cir. 2012).
UBU is a California corporation with its principal place of business in California. Dkt. 50 ("FAC") ¶ 1. Walter Morgan ("Morgan") is the principal shareholder, President, Chief Executive Officer ("CEO"), and Chief Financial Officer ("CFO") of UBU. Id. Blok is a Georgia corporation with its principal place of business in Georgia. Id. ¶ 3. Defendants McMillin, Sr., McMillin, Jr., and Davidson are citizens of Georgia. Id. ¶¶ 4-6. Davidson is the principal shareholder, CEO, CFO, and Secretary of Blok. Id. ¶ 6.
On July 31, 2018, UBU emailed its network of brokers, distributors, and suppliers with a request to purchase a minimum of three to five container loads of Hellmann's mayonnaise and Ragu spaghetti sauce on a regular, monthly, ongoing basis. Id. ¶ 8. That same day, Blok and McMillin, Sr. sent an email to UBU stating they could "supply this." Id. ¶ 9. Following the initial communication, UBU, Morgan, Blok, and McMillin, Sr. continued to engage in discussions regarding the supply of Hellmann's, Ragu, and Campbell brand food products. Id. ¶ 11. On August 4, 2018, Blok issued a Pro Forma Invoice, to which UBU agreed, for the purchase of 1,456 cases of Hellmann's mayonnaise in exchange for $43,680. Id. ¶ 12.
On August 6, 2018, McMillin, Jr. sent photographs providing authentication of the purchased products to UBU. Id. ¶ 13. McMillin, Sr. sent a text message to Morgan on August 7, 2018, stating he would place the order once he received payment from Morgan, after which the order would be ready for pickup in one to two days. Id. ¶ 14. That same day, UBU deposited $43,680 in the form of a cashier's check in Blok's Wells Fargo Bank account. Id. ¶ 15.
On August 10, 2018, Plaintiff became concerned about timely delivery and emailed Blok, McMillin, Sr., and McMillin, Jr. to inquire about the status of the late delivery. Id. ¶ 17. Between August 10, 2018, and August 19, 2018, Morgan had a series of telephone communications with McMillin, Sr., during which McMillin, Sr. made a series of excuses, deceptions, and/or lies, to try to explain the lack of timely delivery. Id. ¶ 18. On August 19, 2018, McMillin, Jr. emailed McMillin, Sr. fraudulent photographs of the order, which McMillin, Sr. forwarded to Plaintiff. Id. ¶ 19.
On August 27, 2018, McMillin, Sr. sent Morgan a text message which indicated the order could be picked up at 2850 White Sulphur Rd, Gainesville, GA 30501, provided a pick-up information number, and instructed UBU to "contact Chip in the warehouse." Id. ¶ 21. When Morgan contacted the Tatsumi Intermodal Warehouse, which was located at the provided address, Arrik Williams ("Williams") responded, "It is absolute fraud," and informed Morgan that he did not have information regarding the goods and that Morgan should contact Bruce Nguyen ("Nguyen"), the warehouse manager. Id. ¶¶ 21-22. Nguyen sent a text message to Morgan stating:
We are a Logistics Warehouse that has only 1 client that Mfg. Tractors [sic]. Tatsumi serve (sic) this client by exporting their products out io (sic) the country. We don't warehouse any type of food products, only machinery.Id. ¶ 23. Upon receipt of this information, UBU contacted Blok and McMillin, Sr. asking for a return of its deposit. Id. ¶ 24. Plaintiff has not received a refund of its deposit to date. Id. ¶ 29.
Additionally, Plaintiff paid a commission to Blok and the McMillins on April 20, 2017, for introducing UBU to a California corporation, LHG Corporation, with which McMillin, Sr. had done substantial business. Id. ¶ 10.
DISCUSSION
I. Legal Standard
Under Fed. R. Civ. P. 12(b)(2) ("Rule 12(b)(2)"), "[w]hen a defendant moves to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of demonstrating that the court has jurisdiction." In re W. States Wholesale Nat. Gas Antitrust Litig. (Western States), 715 F.3d 716, 741 (9th Cir. 2013). Where the motion is based on written material rather than on an evidentiary hearing, the plaintiff need only make a prima facie showing of jurisdictional facts. Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004).
"Federal courts ordinarily follow state law in determining the bounds of their jurisdiction over persons." Daimler AG v. Bauman, 571 U.S. 117, 125, 134 S.Ct. 746, 187 L.Ed.2d 624 (2014). "Because 'California's long-arm statute allows the exercise of personal jurisdiction to the full extent permissible under the U.S. Constitution,' our inquiry centers on whether exercising jurisdiction comports with [constitutional] due process." Picot v. Weston, 780 F.3d 1206, 1211 (9th Cir. 2015); see Cal. Code Civ. Proc. § 410.10 ("A court of this state may exercise jurisdiction on any basis not inconsistent with the Constitution of this state or of the United States.").
"Federal due process permits a court to exercise personal jurisdiction over a nonresident defendant if that defendant has at least 'minimum contacts' with the relevant forum such that the exercise of jurisdiction 'does not offend traditional notions of fair play and substantial justice.' " Glob. Commodities Trading Grp., Inc. v. Beneficio de Arroz Choloma, S.A., 972 F.3d 1101, 1106 (9th Cir. 2020) (quoting Schwarzenegger, 374 F.3d at 801) (quotation marks omitted). "Those contacts may be so continuous and systematic as to render a defendant essentially at home in the forum state and amenable to any suit there. Alternatively, a court may exercise jurisdiction over 'issues deriving from, or connected with, the very controversy that establishes jurisdiction.' " Id. (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919, 131 S.Ct. 2846, 180 L.Ed.2d 796 (2011)). "The Supreme Court has referred to these different bases for personal jurisdiction as 'general' and 'specific' jurisdiction." Id. at 1106-07 (citing Bristol-Myers Squibb Co. v. Super. Ct., 582 U.S. 255, 137 S. Ct. 1773, 1779-80, 198 L.Ed.2d 395 (2017)).
It is undisputed that Defendants are not citizens of California, and Plaintiff concedes that Defendants are not subject to general jurisdiction in this state. Dkt. 56 ("Opp'n") at 5. The court, therefore, finds there is no general jurisdiction over Defendants in this forum. See Menken v. Emm, 503 F.3d 1050, 1056-57 (9th Cir. 2007) ("Unless a defendant's contacts with a forum are so substantial, continuous, and systematic that the defendant can be deemed to be 'present' in that forum for all purposes, a forum may exercise only 'specific' jurisdiction . . . .").
A. Specific Jurisdiction
For a court to exercise specific personal jurisdiction over a defendant, "the suit must arise out of or relate to the defendant's contacts with the forum." Bristol-Myers, 137 S. Ct. at 1780 (internal brackets and quotation marks omitted). The Ninth Circuit has established a three-prong test for analyzing a claim of specific jurisdiction:
(1) The non-resident defendant must purposefully direct his activities or consummate some transaction with the forum or resident thereof; or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws;Schwarzenegger, 374 F.3d at 802. Purposeful availment and purposeful direction are two distinct concepts. Id. A purposeful availment analysis is most often used in suits sounding in contract, while a purposeful direction analysis is most often used in suits sounding in tort. Id.
(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.
"A showing that a defendant purposefully availed himself of the privilege of doing business in a forum state typically consists of evidence of the defendant's actions in the forum, such as executing or performing a contract there. By taking such actions, a defendant 'purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.' " Id. "In return for these 'benefits and protections,' a defendant must - as a quid pro quo - 'submit to the burdens of litigation in that forum.' " Id.
"[A] defendant purposefully directs its activities toward the forum when the defendant has '(1) committed an intentional act, (2) expressly aimed at the forum state, (3) causing harm that the defendant knows is likely to be suffered in the forum state.' " Ayla, LLC v. Alya Skin Pty. Ltd., 11 F.4th 972, 980 (9th Cir. 2021) (citation omitted).
Plaintiff argues Defendants are subject to specific personal jurisdiction in California because they (1) expressly responded in writing to a request by UBU for a large recurring order of products, including Hellmann's mayonnaise and Ragu sauce; (2) engaged in discussions and negotiations with UBU knowing the products would be shipped to California and paid for from California; and (3) caused damage to UBU, which is a California corporation. Opp'n 6.
The FAC alleges Defendants provided a pick-up location in Georgia. FAC ¶ 21. The FAC does not contain allegations regarding an anticipated delivery in California.
Defendants argue they are not subject to specific personal jurisdiction in California because the FAC alleges only a "lone transaction for the sale of one item." Mot. 5-6. Defendants cite Boschetto v. Hansing, 539 F.3d 1011, 1016 (9th Cir. 2008), to argue that a lone transaction for the sale of one item is insufficient to establish Defendants purposefully availed themselves of the privilege of doing business in California. However, Defendants' reliance on Boschetto is misplaced because the action there sounded primarily in contract; whereas here, as Defendants acknowledge, this action sounds primarily in tort. See Mot. 4. Thus, the purposeful direction standard applies. Schwarzenegger, 374 F.3d at 802 ("A purposeful direction analysis . . . is most often used in suits sounding in tort.").
In Boschetto, 539 F.3d at 1017-18 n. 3, the Ninth Circuit expressly recognized that even a "single act" by a defendant can support jurisdiction if that act creates a "substantial connection" with the forum. As the court explained: "it is not the fact that Defendants may have entered into only one contract with a California resident that is dispositive. Rather, it is the fact that the nature of the contract entered into did not create any 'substantial connection' between Boschetto and the Defendants beyond the contract itself." Id. Here, in contrast, Plaintiff alleges Defendants contacted UBU in connection with Plaintiff's "request to buy a minimum of 3-5 container loads of Hellman's mayonnaise and Ragu spaghetti sauce on a regular, monthly, ongoing basis," and communicated with Plaintiff repeatedly regarding establishing an ongoing business relationship. FAC ¶¶ 8-11. Unlike in Boschetto, it is Defendants who are alleged to have initiated the parties' communications, thereby availing themselves of doing business with a California corporation and the privileges of conducting activities in this state. See Schwarzenegger, 374 F.3d at 802. Defendants' argument, thus, also fails under a purposeful availment analysis.
The FAC alleges Defendants committed an intentional act when they engaged in a conspiracy to defraud Plaintiff by falsely representing they would supply Plaintiff with 1,456 cases of Hellman's mayonnaise. FAC ¶¶ 60, 69. Further, Plaintiff alleges Defendants reached out to Plaintiff when they responded to Plaintiff's request regarding a recurring order of Hellmann's mayonnaise and Ragu sauce. Id. ¶ 9. Accordingly, the court finds step one is satisfied, as Plaintiff alleges Defendants intentionally directed activities toward this forum on multiple occasions, including to enter into a business relationship with Plaintiff to the alleged detriment of Plaintiff. Defendants do not argue that Plaintiff's claim does not arise out of or relate to the Defendants' forum-related activities or that the exercise of jurisdiction would not comport with fair play and substantial justice, and do not dispute that the second and third steps of the three-part test are satisfied. See generally Mot. The court, therefore, finds specific personal jurisdiction exists over Defendants under the purposeful direction test. See Schwarzenegger, 374 F.3d at 802.
For the first time on reply, Defendants argue the court lacks personal jurisdiction over the individual Defendants because a corporation's contacts with a forum generally cannot be imputed to its owners or officers. Dkt. 57 ("Reply") at 7 (citing Davis v. Metro Prods., Inc., 885 F.2d 515, 520 (9th Cir. 1989)). Arguments raised for the first time on reply are generally waived. See United States v. Gianelli, 543 F.3d 1178, 1184 n. 6 (9th Cir. 2008). Even if the court were to consider this argument, however, Defendants' argument fails.
In Davis, 885 F.2d at 521, the Ninth Circuit recognized that "[e]ach defendant's contacts with the forum State must be assessed individually." Id. While the court recognized that "a person's mere association with a corporation that causes injury in the forum state is not sufficient in itself to permit that forum to assert jurisdiction over the person," id. at 520, the Ninth Circuit also noted that a defendant's status as an employee of a company does not insulate him or her from jurisdiction. Id. at 521. The court, thus, found that the district court's assertion of personal jurisdiction over the individual defendants was proper in that action, as the defendants had purposefully directed their tortious actions toward the forum state. Id. at 516, 523-24.
Here, the FAC specifically alleges McMillin, Sr. and McMillin, Jr. made false and fraudulent representations to Plaintiff and Morgan in connection with the alleged purchase. E.g., FAC ¶¶ 9-11, 14, 18-19, 21. As to Davidson, the FAC alleges she was the principal shareholder, CEO, CFO, and Secretary of Blok, authorized McMillin, Sr. and McMillin, Jr. to act on behalf of Blok, conspired to defraud Plaintiff, disregarded the corporate entity and used Blok as an instrumentality for her own affairs, and refused to return UBU's deposit. E.g., id. ¶¶ 6-7, 69, 75, 107. These allegations are sufficient to establish purposeful direction under the first prong of the test for specific personal jurisdiction. See Schwarzenegger, 374 F.3d at 802. Accordingly, based on each Defendants' contacts with the forum state, the court finds the exercise of specific personal jurisdiction is reasonable.
CONCLUSION
For the foregoing reasons, the court DENIES Defendants' Motion to Dismiss (Dkt. 54). Defendants shall file their Answer within 21 days of this Order.
IT IS SO ORDERED.