Opinion
No. C 04-1531 WDB.
August 17, 2004
On August 11, 2004, the Court conducted a hearing on defendants' motion to dismiss for lack of personal jurisdiction and the parties' cross-motions to transfer venue. For reasons articulated more fully on the record, the Court hereby GRANTS defendants' motion to dismiss for lack of personal jurisdiction, and DENIES both parties' motions to transfer venue.
I. Brief Background
This is a breach of contract case. Plaintiff, Vista USA, is a Wisconsin limited liability company that currently maintains is principal place of business in San Mateo County, California. Defendant Combex AB is a Swedish corporation. Defendant Combex Westhem is a Texas limited liability company that was founded as a joint business enterprise between Combex AB and a Texas low cost housing developer, Gibralter Homes. Both defendants manufacture construction components for low cost housing.
On April 20, 2004, plaintiff filed suit against defendants in the Northern District of California, alleging that this Court has personal jurisdiction over the defendants "in that defendants purposefully directed their activities to [California] and this lawsuit arises from injuries and/or damages that have occurred within [California]." Complaint, filed April 20, 2004, ¶ 6.
II. Motion to Dismiss for Lack of Personal Jurisdiction
Defendants move to dismiss this case for lack of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2). They assert that their respective contacts with California are insufficient to subject them to suit in this state. Plaintiff, in contrast, characterizes defendants' contacts with California as numerous and significant. It argues that defendants' conduct and connections with California are such that defendants should reasonably anticipate being haled into court in this state.
A. Applicable Legal Principles
1. Burden of Proof on Rule 12(b)(2) Motion
The plaintiff bears the burden of establishing that the Court has personal jurisdiction over the defendants. Data Disc, Inc. v. Systems Tech. Assoc., 557 F.2d 1280, 1285 (9th Cir. 1977). What kind of showing plaintiff must make to carry this burden depends on whether the court, in is discretion, elects to resolve the jurisdiction issue solely on the basis of pleadings, declarations, and discovery materials or after conducting an evidentiary hearing. Id. If the court relies exclusively on papers submitted, plaintiff need only make a prima facie showing that jurisdiction exists. Id. Thus, plaintiff would need only to allege facts sufficient to support a finding of jurisdiction and to submit competent evidence which, if credited, would permit those facts to be found. On the other hand, if the court elects to hold an evidentiary hearing the plaintiff must prove by a preponderance of the evidence the facts necessary to establish personal jurisdiction. Id.
In light of the facts and circumstances in this case, the Court finds that it is appropriate to resolve defendants' motion on the basis of the pleadings and declarations submitted by the parties. Accordingly, plaintiff need only make a prima facie showing that the Court has personal jurisdiction over defendants.
We are mindful that, when determining whether plaintiff has made a prima facie showing, allegations in the Complaint that are not directly controverted by competent evidentiary submissions must be taken as true. Schwarzenegger v. Fred Martin Motor Co., 2004 WL 1462444, *2 (9th Cir. 2004); A.T.T. Co. v. Compagnie Bruxelles Lambert, 94 F.3d 586, 588 (9th Cir. 1996). In addition, where a defendant submits apparently competent evidence that challenges facts alleged by plaintiff, it is sufficient for plaintiff to present declarations which, if credited, would support the jurisdictionally necessary findings of fact. Id. In other words, conflicts between parties over statements contained in affidavits must be resolved in the plaintiff's favor. Schwarzenegger, 2004 WL 1462444, *3,citing Bancroft Masters, Inc. v. August Nat'l Inc., 223 F.3d 1082, 1087 (9th Cir. 2000).
2. Specific Jurisdiction
Where, as here, there is no applicable federal statute governing personal jurisdiction, the district court applies the law of the state in which the district court sits.Schwarzenegger, 2004 WL 1462444, *3. California's long-arm statute permits courts to exercise personal jurisdiction to the full extent allowed by the Fourteenth Amendment of the United States Constitution. Cal. Code of Civ. Proc. § 410.10. For a court to exercise personal jurisdiction over a non-resident defendant, that defendant must have 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." International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (internal citations omitted).
Personal jurisdiction can be either general or specific. The Ninth Circuit has developed a three-prong test for analyzing a claim of specific personal 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;
(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.Schwarzenegger, 2004 WL 1462444, *4; citing Lake v. Lake, 817 F.2d 1416 (9th Cir. 1987).
Plaintiff appears to concede that California does not have general jurisdiction over either defendant.
As explained recently by the Ninth Circuit inSchwarzenegger, the purposeful availment prong can be met either by `purposeful availment' or `purposeful direction', which are "two distinct concepts." Schwarzanegger, 2004 WL 146244, *5.
"A showing that defendant purposefully availed himself 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.' Hanson v. Denckla, 357 U.S. 235, 253 (1958). 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 showing that the defendant purposefully directed his conduct toward a forum state, by contrast, usually consists of evidence of the defendant's actions outside the forum state that are directed at the forum, such as the distribution in the forum state of goods originating elsewhere." Id. A purposeful direction analysis is most often used in cases sounding in tort.
The plaintiff bears the burden of satisfying the first two prongs of the test. If the plaintiff fails to satisfy either of those prongs, personal jurisdiction is not established in the forum state. If the plaintiff succeeds in satisfying both of these prongs, the burden shifts to the defendant to "present a compelling case" that the exercise of jurisdiction would not be reasonable. Schwarzenegger, 2004 WL 1462444, *4, citing Burger King v. Rudzewicz, 471 U.S. 462, 476-78 (1985).
B. Analysis
1. Combex Westhem
Plaintiff's counsel primarily relies on two types of contacts to support his argument that this Court has specific jurisdiction over defendant Combex Westhem. We find that these contacts, examined individually or collectively, are not sufficient to establish specific jurisdiction.
Counsel first argues that defendant's on-line advertising activities are sufficient to subject it to specific personal jurisdiction in California. "Combex Westhem intentionally advertises via the Internet in California, and has listed its website on servers based in California. On its website, it . . . offers its construction products and a technology . . . to all comers." Memorandum of Points And Authorities In Opposition To Motion To Dismiss And/Or Transfer Venue, e-filed July 20, 2004, at p. 7.
We have carefully considered the pertinent authorities in this doctrinal arena, including Cybersell v. Cybersell, 130 F.3d 414 (9th Cir. 1997) and Compuserve v. Patterson, 89 F.3d 1257 (6th Cir. 1996). In our view, the cases do not support the notion that defendant's largely passive website constitutes purposeful availment of every forum in which the website can be accessed. We also find that plaintiff's breach of contract claims do not, in any meaningful sense, `arise out of' or `relate to' defendant's internet activities.
Defendant's web-site is not "highly commercial", nor does it "[operate] in many ways as a virtual store." Cf. Stomp v. Neato, 61 F.Supp.2d 1074, 1078 (C.D. Cal. 1999).
Plaintiff's counsel next argues that Combex Westhem is subject to suit in California because it owes (and has breached its contractual duty to make) monthly payments due under a Royalty Agreement to plaintiff, whose principal place of business is currently located in California. Defendant asserts that this argument fails because plaintiff was located in Wisconsin — not California — when the Royalty Agreement was executed, and that for this reason payments under the Royalty Agreement were neither required nor contemplated to be made in California.
Plaintiff also relies on the fact that defendant faxed a letter repudiating the Royalty Agreement to plaintiff's office in San Mateo, California. Use of the mails, telephone, or similar types of communication, however, "simply do not qualify as purposeful activity invoking the benefits and protections of the state." Gonzalez v. Consejo Nacional De Produccion De Costa Rica, 614 F.3d 1247 (9th Cir. 1980), citing Harkness v. Amezuca, 60 Cal.App.3d 687 (1976).
We must agree with defendant's position. In our view, plaintiff's move from Wisconsin to California (which occurred roughly one year after the Royalty Agreement was executed) constitutes `unilateral activity' as that phrase is used inWorld-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980);see also Hunt v. Erie Insurance Group, 728 F.2d 1244, 1248 (9th Cir. 1984) ("to predicate jurisdiction on the basis of [plaintiff's] move to California . . would `shift the focus of the inquiry from the relationship among the defendant, the forum, and the litigation to that among the plaintiff, the forum, and the litigation".) Given that defendant reasonably contemplated performance of the Royalty Agreement in Wisconsin, we cannot find that its actions (or lack thereof) with respect to that agreement constituted either `purposeful availment' or `purposeful direction' as to California.
In summary, we find that neither defendant's internet activities nor its obligations under (and alleged breach of) the Royalty Agreement satisfies the purposeful availment prong of the specific personal jurisdiction test. We further find that defendant's internet activities do not satisfy the `arising out of' prong. Because plaintiff has failed to satisfy the first two prongs of the test, we do not reach the reasonableness prong.
2. Combex AB
Plaintiff contends the following facts support specific personal jurisdiction over the Swedish corporation Combex AB in California: (i) defendant actively solicited plaintiff's incorporator, Mr. Shears, to create an American business partner, with full knowledge that the search would include California businesses and California opportunities; (ii) California was one of the states targeted for the proposed Combex AB venture; (iii) defendant held the key meeting that led to the formulation of its American subsidiary in California and stresses the significance of those meetings on its website, and (iv) defendant breached its first contract with plaintiff in California. Plaintiff also relies on defendant's internet-based contacts with California.
As explained above, we must accept all of plaintiff's factual allegations as true where supported by facially competent declarations. Schwarzenneger, 2004 WL 1462444, *2.
On close inspection, this apparently substantial list of forum contacts shrinks into legal insignificance. Defendant's contacts with California are simply too `random, fortuitous, and attenuated' to constitute `purposeful availment'. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985).
The formative contacts between Combex AB and Mr. Shears took place in Sweden, not in the United States. Neither the fact that defendant knew that Mr. Shears likely would look in California for prospective business partners, nor the fact that defendant knew that California might be the state in which a joint venture would be located, is sufficient to support an exercise of personal jurisdiction by California courts. These `facts' were mere possibilities — and defendant simultaneously knew that Mr. Shears would be looking in other sun-belt states for business partners and opportunities, and that California might well not be the place that anything pertinent to the contemplated venture occurred. In a setting like this, defendant would not reasonably have expected to be haled into a court in California until the merely possible facts matured into realities — which never happened.
Nor is it sufficient that a significant meeting on the route that led to the formation of the joint venture took place in California. The fact that the first of these meetings occurred in California was of no significance to the parties (Combex AB and Gibralter Homes) who subsequently entered the joint venture. There is no evidence that in their negotiations they contemplated basing any operations in California, or opening a factory or even a sales office there, or that their decision to launch their joint enterprise in any way turned on expectations about possibilities in the California market. The negotiations that began in California were not concluded there. The joint venture was actually formed in Texas, where Gibralter Homes was located. No California-based player became a participant. The joint venture's business activities remained centered in Texas. In fact, there is no evidence in the record that the venture has made a single sale to a California customer.
We also note that plaintiff is not suing on the contract that it claims defendant first breached by conducting negotiations on its own (instead of through its allegedly exclusive agent, Mr. Shears) during the California meeting. The rights on which plaintiff is suing here derive from the Notes and the subsequent royalty agreement.
Finally, for the reasons explained above, we find that defendant's internet-based contacts satisfy neither the purposeful availment prong nor the `arises out of or related to' prong. Because we find that plaintiff has failed to satisfy the first two prongs of the test, we do not reach the third.
To reiterate, we find that plaintiff has failed to demonstrate that this Court has specific jurisdiction over either defendant.
II. Motions to Transfer Venue
Having determined that this Court does not have personal jurisdiction over either defendant, we must now decide whether to dismiss plaintiff's lawsuit or transfer it to another venue. Plaintiff asks us to transfer the case to the Eastern District of Wisconsin. Defendants assert, in contrast, that the proper venue for this case (if one exists) is the Southern District of Texas.
Under the applicable statutes, a case may only be transferred to a district in which it could have been brought. 28 U.S.C. § 1406(a); 28 U.S.C. § 1404(a). In other words, a case can only be transferred to a court that, as of the filing date, would have had subject matter jurisdiction and personal jurisdiction and which would be an appropriate venue. See Schwarzer, Tashima Wagstaffe, Federal Civil Procedure Before Trial, ¶ 4:215 (The Rutter Group 2004).
We cannot find with confidence that this case "could have been brought" in Texas or Wisconsin. It is not clear that either of these potential fora would have personal jurisdiction over both parties and would be an appropriate venue.
It is possible that, if the record was augmented with sufficient additional evidence, a determination could appropriately be made that Texas or Wisconsin (or Texas and Wisconsin) are jurisdictions in which this case could have been brought. We believe, however, that this type of determination (and direction of the factual development necessary to support such a determination) is most appropriately accomplished by the courts within those jurisdictions.
Accordingly, we must DENY the parties' cross-motions to transfer venue.
IV. Conclusion
This case is hereby DISMISSED for lack of personal jurisdiction. The Clerk is instructed to close the case.
IT IS SO ORDERED.