Opinion
NOT TO BE PUBLISHED
APPEAL from an order of the Superior Court of Los Angeles County, No. BC392605, Conrad Aragon, Judge. Affirmed.
Ferruzzo & Ferruzzo, James J. Ferruzzo and John R. Pelle for Plaintiff and Appellant.
Sullivan, Workman & Dee, Robert Hampton Rogers and Theodore Khachaturian for Defendant and Respondent.
Epstein, P.J.
The issue in this case is whether the trial court erred in ruling that it lacked personal jurisdiction over David Woeller in this action for misappropriation of trade secret. We conclude the court had neither general nor specific jurisdiction over Woeller and affirm.
FACTUAL AND PROCEDURAL SUMMARY
Appellant Sage Engineering is a Texas corporation which designs, manufactures and sells equipment used to investigate and analyze subsurface soil structure. Its principals are Ronald Boggess and Jack Templeton. A cone penetrometer is a metal probe containing an electronic sensing device that acquires data describing the soil’s features as the cone is pushed through the soil. A mini-cone penetrometer is attached to one end of a coiled metal tube which encases wires that connect the mini-cone to a computer data acquisition system that analyzes the data and displays the results. A Sidewinder Thruster pushes the mini-cone penetrometer through soil below the surface. Sage’s package of mini-cone penetrometer, coiler, coiled tubing, thruster apparatus, and data acquisition system is called a “Mini-Cone Thruster Deployment System” (Thruster System). Sage did not patent the Thruster System, but maintained its design as a trade secret, requiring purchasers to agree not to reverse engineer or manufacture the system.
Respondent David Woeller and his wife own an 82 ½ percent interest in ConeTec Investigations Ltd. and Adara Systems Ltd., Canadian corporations. Woeller is an officer and director of both companies. He resides in or around Vancouver, British Columbia. The principal place of business of ConeTec and Adara is British Columbia. ConeTec conducts soil investigations using cone penetrometer technology. Adara builds soil investigation equipment and sells it to ConeTec and its affiliates. ConeTec has offices in Utah, Texas, South Carolina and New Jersey.
In 1992, ConeTec, through Woeller, and Gregg Drilling and Testing, Inc. (a California corporation) formed a new California corporation, Gregg In Situ, Inc. (GIS). Woeller’s activities in California in relation to GIS form the basis for appellant’s claims of personal jurisdiction over him in this action. ConeTec owned a little more than 30 percent and Gregg Drilling owned a little less than 70 percent of GIS. Originally, GIS was to conduct cone penetration technology soil investigations in California, but later expanded into the western and southeastern United States. ConeTec received profits from GIS in excess of $1.6 million between 1999 and 2003. From 1992 until 2006, GIS purchased virtually all of its cone penetrometer equipment and data acquisition software and hardware, as well as spare parts and repairs, from Adara.
In 1996, Gregg and Woeller met Ronald Boggess of Sage in Houston at a seminar hosted by Gregg Drilling and GIS. Boggess told Gregg and Woeller about Sage’s new Thruster System. After a visit to Sage’s shop in Houston to see the apparatus, Gregg (acting for GIS) and Woeller (acting for ConeTec) said they wanted to purchase a system. Woeller, on behalf of ConeTec, agreed by faxed memorandum “not to manufacture or reverse engineer the mini-cone deployment system.” Boggess later left Sage Engineering and joined Gregg Drilling and GIS where he managed their Houston office. Eventually, Boggess and Jack Templeton acquired 100 percent interest in Sage.
At some point not revealed by the record, Sage learned that Woeller and ConeTec hired Unique Industrial Design, Inc. (Unique ID) to reverse engineer the Thruster System. It obtained an advertising brochure distributed by Unique ID which stated that “ConeTec asked Unique ID to reverse engineer a hydraulic cone thruster... [o]ur job was to pull apart and recreate an existing mechanical system and redesign it using SolidWorks software.” Unique ID’s brochure announced that it had fabricated two “Cone Thruster” systems as well as a “complete drawing package” for ConeTec.
Sage filed the present action against ConeTec, Adara, and Woeller on June 13, 2008. It alleged causes of action for misappropriation of trade secret, breach of contract, fraud by false promise, and unfair competition arising from defendants’ reverse engineering of the trade secret Sidewinder Thruster, in violation of the express agreement with Sage. ConeTec and Adara were served in Vancouver in late June 2008 and filed an answer with a general denial. Woeller moved to quash or dismiss the action for lack of personal jurisdiction.
The trial court granted the motion to quash. Relying on Serafini v. Superior Court (1998) 68 Cal.App.4th 70, 80 (Serafini), the trial court concluded there was no basis for general jurisdiction because Woeller’s contacts with California ended in 2007 when he sold ConeTec’s interest in GIS and he no longer had continuous contacts with the state when served with the complaint. It found no basis for specific jurisdiction arising out of the Sage transaction because there was no relationship between that transaction, which arose in Texas, and California. (Ibid.) This timely appeal followed.
DISCUSSION
I
We begin with basic principles of personal jurisdiction and the applicable standard of review.
“‘Under [Code of Civil Procedure] section 410.10, a California court “may exercise jurisdiction on any basis not inconsistent” with the federal or state Constitutions. A state may constitutionally exercise personal jurisdiction over a nonresident defendant when the defendant “purposefully established ‘minimum contacts’ in the forum State.” [Citation.] Additionally, the defendant’s contacts with the forum must make it reasonable for the person to “anticipate being haled into court there” [citation] so it “‘does not offend “traditional notions of fair play and substantial justice.”’”’ [Citations.]” (Cadle Co. II, Inc. v. Fiscus (2008) 163 Cal.App.4th 1232, 1236 (Cadle).) We must determine jurisdiction based on the particular facts of each case rather than by applying a mechanical test or a precise formula. (Ibid.)
“‘On review, the question of jurisdiction is, in essence, one of law. When the facts giving rise to jurisdiction are conflicting, the trial court’s factual determinations are reviewed for substantial evidence. [Citation.] Even then, we review independently the trial court’s conclusions as to the legal significance of the facts. [Citations.] When the jurisdictional facts are not in dispute, the question of whether the defendant is subject to personal jurisdiction is purely a legal question that we review de novo. [Citation.]’ (Dorel Industries, Inc. v. Superior Court (2005) 134 Cal.App.4th 1267, 1273 (Dorel); see Vons [Companies, Inc. v. Seabest Foods, Inc. (1996)] 14 Cal.4th 434, 449.) The ultimate issue of whether an exercise of jurisdiction is fair and reasonable is a legal determination subject to de novo review on appeal. (In re Automobile Antitrust Cases I & II (2005) 135 Cal.App.4th 100, 111 (Automobile Antitrust).)” (Aquila, Inc. v. Superior Court (2007) 148 Cal.App.4th 556, 568.)
There are disputed factual issues regarding whether Woeller availed himself of the benefits of the forum to which the substantial evidence standard applies. We need not discuss this evidence because, as we explain below, Woeller failed to satisfy another prong of the test for specific jurisdiction.
“‘Once a defendant moves to quash out-of-state service of process for lack of jurisdiction, the plaintiff has the burden of proving jurisdiction by a preponderance of the evidence. [Citation.]’” (Cadle, supra, 163 Cal.App.4th at p. 1236.) “Once the plaintiff has met the burden of demonstrating facts justifying the exercise of jurisdiction, the burden shifts to the defendant to demonstrate that the exercise of jurisdiction would be unreasonable. (Vons Companies, Inc. v. Seabest Foods, Inc., supra, 14 Cal.4th 434, 449 (Vons); Serafini [,supra,] 68 Cal.App.4th 70, 77....)” (Paneno v. Centres For Academic Programmes Abroad Ltd. (2004) 118 Cal.App.4th 1447, 1454.)
Sage claims it established both general and specific jurisdiction over Woeller. We begin with the general jurisdiction arguments.
II
“‘A state has general jurisdiction over a nonresident defendant for all causes of action if the defendant’s activities within the state are “‘extensive or wide-ranging’” or “‘substantial... continuous and systematic.’” [Citation.]’” (Cadle, 163 Cal.App.4th at p. 1236.) The primary issue is the appropriate time period for determining general jurisdiction. Sage claims the relevant period is when the action arose. Woeller claims it is the time of service of process. Each cites supporting California authority.
Sage claims general jurisdiction over Woeller based on his 16 years of activity in California in connection with GIS, which ended in October 2007, some seven months before the action was filed. It provides extensive evidence of Woeller’s activities in California in relationship to GIS and ConeTec during that period. Woeller disagrees, arguing that the relevant time period is when the complaint was served.
In DVI, Inc. v. Superior Court (2002) 104 Cal.App.4th 1080, 1100-1101, the court held that the plaintiff had failed to demonstrate a basis for general jurisdiction over a particular defendant where it presented no evidence as to the dates of various contacts with California urged as a basis for jurisdiction. The court in DVI looked to both the time when the claim arose and the time of service of summons: “In analyzing general jurisdiction, we examine the defendant’s contacts when the alleged conduct occurred and at the time of service of summons. Several federal courts have held that in determining whether to exercise specific jurisdiction, ‘courts must examine the defendant’s contacts with the forum at the time of the events underlying the dispute....’ (Steel v. U.S. (9th Cir. 1987) 813 F.2d 1545, 1549; see also Farmers Ins. Ex. v. Portage La Prairie Mut. Ins. Co. (9th Cir. 1990) 907 F.2d 911, 913 [in analyzing purposeful availment, ‘[o]nly contacts occurring prior to the event causing the litigation may be considered’].) To determine whether to exercise general jurisdiction, it is also necessary to examine the defendant’s contacts at the time the complaint was served. Exercise of general jurisdiction comports with ‘“traditional notions of fair play and substantial justice”’ (Internat. Shoe Co. v. Washington [(1945)] 326 U.S. [310,] 316) and is ‘“reasonable” and “fair”’ (Kulko v. California Superior Court (1978) 436 U.S. 84, 92) when the defendant has substantial, continuous, and systematic contacts with the forum at the time the complaint is served on that defendant.” (DVI, Inc. v. Superior Court, supra, 104 Cal.App.4th at pp. 1100-1101, italics added.)
Sage relies on our opinion in Boaz v. Boyle & Co. (1995) 40 Cal.App.4th 700, in which we assumed, without discussing, that the relevant period to determine jurisdiction was 25 years before service of process, when the defendant’s predecessors were distributing the drug which was the basis of the action. (Id. at p. 717.) Sage also relies on Cadle, supra, 163 Cal.App.4th 1232. But in that case, the plaintiff did not claim general jurisdiction over the defendant, relying instead on a previous California judgment as a basis for specific personal jurisdiction in its action to renew that judgment. (Id. at p. 1237.) The language cited by plaintiff relates to the specific jurisdiction claim. (Id. at p. 1239.)
It is axiomatic that a case is not authority for a proposition not discussed. (Courtesy Ambulance Service v. Superior Court (1992) 8 Cal.App.4th 1504, 1517, fn. 10.) Neither Boaz nor Cadle supports Sage’s argument that the relevant time period is when the action arose. In any event, as we next discuss, Sage failed to carry its burden of proving a basis for general jurisdiction based on when the cause of action arose.
In its opening brief, without citation to the record on appeal, Sage asserts that the contract ConeTec and Woeller entered into with Unique ID to reverse engineer the Thruster System was executed on January 9, 2006. As Woeller points out in his reply brief, there is no evidence in the record to support this assertion. Sage conceded this deficiency and moved to augment the record on appeal, or to have us take new evidence on appeal, the Unique ID contract. It explained that the contract had not yet been produced in discovery when the motion to quash was briefed in the trial court. We denied the motion. Our review is confined to the record presented to the trial court. Sage should have sought a continuance of the motion to conduct the necessary discovery, but did not. “A trial court has the discretion to continue the hearing on a motion to quash service of summons for lack of personal jurisdiction to allow the plaintiff to conduct discovery on jurisdictional issues. (Goehring v. Superior Court (1998) 62 Cal.App.4th 894, 911.)” (Health Markets, Inc. v. Superior Court (2009) 171 Cal.App.4th 1160, 1173.)
We therefore need not resolve whether the period when the claim arose is relevant to the determination of general jurisdiction because Sage failed to present evidence establishing that time period. This leaves the alternative possible period, before service of the complaint on Woeller.
Woeller argues the proper analysis was set out in Serafini, supra, 68 Cal.App.4th 70. In that case, the Court of Appeal looked to the time of service of the complaint to determine general jurisdiction because the defendant had ceased his activities in California then. Defendant Serafini was an officer and director of a corporation which had a subsidiary in California. An employee of the subsidiary sued in California for wrongful termination. Although Serafini maintained his residence and office in Pennsylvania, he made a visit to the California office on one occasion for two hours. He denied any role in plaintiff’s termination. The plaintiff claimed that Serafini, as an officer and director of the parent company, was heavily involved in the management of the subsidiary, including the California office.
The Court of Appeal found no basis for general jurisdiction over Serafini, reasoning that his material contacts with the state arose exclusively from his role as an agent of the subsidiary. “But Serafini had unequivocally ceased his activities as a director and officer of [the parent company] before the service of process in this action. Assuming for the sake of discussion that he had been virtually present and ‘doing business’ because of his activities as an agent of the corporation, when he ceased that activity he absented himself and terminated any general jurisdiction of California over him. (See Rest.2d Conf. of Laws, § 35, com. d, p. 144.)” (Serafini, supra, 68 Cal.App.4th at p. 80, italics added.)
Woeller cites a May 2, 2006 declaration he executed in the GIS litigation. In it, he explained that a meeting had been called for May 5, 2006, to remove him from the board of directors of GIS, which would mean that ConeTec would have no role in the management of GIS from that point. Woeller cites this as evidence that he had no role as director of GIS from that point. Since the declaration was executed before the proposed vote, it does not establish the claimed fact. But it is undisputed that ConeTec’s interest in GIS ended in October 2007 when the prior action was settled by Gregg Drilling buying out ConeTec’s interest in GIS. As of that point, neither ConeTec nor Woeller had any role in GIS management or activities in California. In addition, as part of the settlement, Woeller and ConeTec executed a non-competition agreement which prevented them from engaging in competitive business activities in California for two years. Under the principles discussed in Serafini, supra, 68 Cal.App.4th at page 80, any general jurisdiction over Woeller based on his former activities here on behalf of GIS ended at that point, some seven months before the complaint in this action was filed.
Sage argues that Woeller’s activities in California were wide-ranging and continuous from 1991 through September 2007, when he sold ConeTec’s interest in GIS. It asserts that the fact that Woeller no longer came to California on a regular basis after the sale is not a reason to disregard the previous 16 years of continuous activity here (including initiating a lawsuit in California) as a basis for general jurisdiction. Quoting Cornelison v. Chaney (1976) 16 Cal.3d 143, 147, Sage notes that the legal standard for general jurisdiction is in the disjunctive; activity which is “‘extensive or wide-ranging’ ‘or’ ‘substantial... continuous and systematic.’” From this it argues that a defendant’s activities in California need not be continuous up to the day of service of process “so long as those activities were extensive and wide-ranging at the time the plaintiff’s claim arose.”
Sage also relies upon Perkins v. Benquet Consolidated Mining Co. (1952) 342 U.S. 437, in which the Supreme Court found a basis for general jurisdiction over a foreign corporation based upon activities of its president, who relocated to Ohio during World War II and conducted business on behalf of the foreign company during that period. Analogizing to the activities of the company president in Perkins, Sage argues that Woeller’s activities also are sufficient to support general jurisdiction over him. It contrasts Cornelison v. Chaney, supra, 16 Cal.3d 143, in which a California resident sued a Nebraska truck driver in California for wrongful death arising from an accident in Nevada. The truck driver was licensed by the California Public Utilities Commission and hauled freight into California 20 times a year. The accident occurred when he was en route to Long Beach. Although the court found the driver’s activities were not so substantial or wide-ranging to justify assertion of general jurisdiction, it concluded that specific jurisdiction over him was established. (Id. at pp. 148, 152.) Sage claims that Woeller’s activities in California were far more extensive than the activities of the driver in Cornelison. Cornelison is distinguishable because the defendant’s activities in California were ongoing, and had not been terminated as had Woeller’s.
We conclude Sage failed to carry its burden of demonstrating general personal jurisdiction over Woeller by a preponderance of the evidence. It provided no evidence to establish the date its claim for trade misappropriation arose, so that standard cannot be used to assess jurisdiction. Under Serafini, supra, 68 Cal.App.4th at page 80, any basis for general jurisdiction against Woeller expired in October 2007 when his activities in California on behalf of GIS ended.
III
“‘Less extensive activity may not support general jurisdiction, but may justify limited jurisdiction for the “purposes of a particular cause of action depending upon the nature and quality of the acts, the degree of relation to the asserted cause of action, and the balance between the convenience of the parties and the interest of the state in asserting jurisdiction. [Citations.]” [Citation.] “In cases where jurisdiction is based on the defendant’s occasional activities the United States Supreme Court has said that ‘... it is essential... that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.’” [Citations.]’ (As You Sow [v. Crawford Laboratories, Inc. (1996)] 50 Cal.App.4th [1859,] 1866-1867; see also Boaz v. Boyle & Co.[, supra, ] 40 Cal.App.4th 700.)” (Cadle, supra, 163 Cal.App.4th at p. 1237.)
“‘A court may exercise specific jurisdiction over a nonresident defendant only if: (1) “the defendant has purposefully availed himself or herself of forum benefits” [citation]; (2) “the ‘controversy is related to or “arises out of” [the] defendant’s contacts with the forum’” [citation]; and (3) “‘the assertion of personal jurisdiction would comport with “fair play and substantial justice”’” [citation].’ (Pavlovich [v. Superior Court (2002)] 29 Cal.4th [262,] 269.)” (Anglo Irish Bank Corp., PLC v. Superior Court (2008) 165 Cal.App.4th 969, 978.) We need only address the second prong of this test because Sage fails to demonstrate the necessary connection between its claims based on misappropriation of trade secret and Woeller’s contacts with California.
In its decision granting the motion to quash, the trial court drew a clear distinction between Woeller’s activities in relationship to GIS (termed the “GIS enterprise”) and the contract between ConeTec and Sage to purchase the Thruster System (termed “the Sage transaction”). The trial court characterized these two as “discrete and wholly unrelated transactions.” The court acknowledged that while there was a technological connection between what Sage sold ConeTec and the cone penetration operations of GIS, all of the negotiations between Woeller and Sage, including the purchase documentation regarding this transaction, took place in Texas, and none of the alleged trade secret misappropriations, or use of allegedly reverse-engineered thrusters, occurred in this state.
The court found no connection between the Sage transaction and Woeller’s activities in California: “It is abundantly clear that in connection with the Sage transaction, Woeller did absolutely nothing in this state to show purposeful availment of the privilege to do so. As noted, that transaction occurred mainly in Texas, and the thruster system was used in locales outside of California (in Virginia and in Canada).”
Substantial evidence supports these findings. Woeller provided a declaration in support of the motion to quash stating that all his contact with Sage was with its operations in Houston and that ConeTec used the disputed technology only in Virginia and in the Canadian arctic. The evidence presented by Sage does not contradict this showing.
Sage argues that the Supreme Court adopted a sliding scale approach to specific jurisdiction in Vons, supra, 14 Cal.4th 434, under which the greater the intensity of the defendant’s contacts with the forum state, the lesser connection is required between the contact and the claim. (Id. at pp. 452-453.) Based on Woeller’s extensive contacts with California through GIS, Sage contends little connection between its trade secret claim is required. Sage also cites language in Anglo Irish Bank Corp., PLC v. Superior Court, supra, 165 Cal.App.4th 969, 979, stating that in evaluating the nature of a defendant’s forum contacts, “we consider not only the conduct directly affecting the plaintiff, but also, the broader course of conduct of which it is a part.”
The court in Anglo Irish reiterated that a “substantial connection” between the defendant’s forum contacts and the plaintiff’s claim must be demonstrated to satisfy the second prong of the test for specific jurisdiction. (Anglo Irish Bank Corp., PLC. v. Superior Court, supra, 165 Cal.App.4th at p. 979.) That connection was not shown here. The contact between Sage and the defendants, including Woeller, was made in Texas; the agreement was executed there; and it was performed in locations outside of California. No connection between Woeller’s activities in California for GIS and the reverse engineering of the Thruster System was demonstrated.
Sage failed to demonstrate a basis for the exercise of specific personal jurisdiction over Woeller. There was no error in granting the motion to quash.
DISPOSITION
The order granting Woeller’s motion to quash is affirmed. Woeller is to have his costs on appeal.
We concur: Willhite, J., Manella, J.,