Opinion
B156412.
7-10-2003
HAROLD BECK et al., Plaintiffs and Appellants, v. JOHN C. SHAW et al., Defendants and Respondents.
Cotchett, Pitre, Simon & McCarthy, Niall P. McCarthy, and Richard A. Dana for Plaintiffs and Appellants. Simpson Thacher & Bartlett, Barry R. Ostrager, Seth A. Ribner, Eric L. Webb, and Christopher A. Sant for Defendants and Respondents.
Plaintiffs and appellants Harold Beck ("Beck") and Chunilal Saha ("Saha") appeal the judgment entered after the trial court granted the motion of certain named defendants, the respondents herein, to quash service for want of personal jurisdiction. Finding no error, we affirm.
FACTS
This action arises out of an issuer tender offer transaction consummated in 1998, in which Wedgestone Financial ("Wedgestone"), a Massachusetts business trust headquartered in California, acquired its publicly-traded shares. Appellants Beck and Saha filed a class action complaint against Wedgestone, respondents and others, asserting nine state law claims on behalf of a purported nationwide class of 3,100 shareholders. In their complaint, appellants alleged that respondents, among others, made false and misleading statements in the Wedgestone tender offer prospectus and in two form letters sent to all Wedgestone shareholders in connection with the offering materials.
The facts upon which plaintiffs rely to establish personal jurisdiction over respondents are these: Respondent Shaw was the Chairman of the Board of Wedgestone and, in that capacity, traveled to California from time to time on Wedgestone business. He is also the president and sole shareholder of respondent JCS Management. Through various entities, Shaw had a beneficial ownership interest in Wedgestone of approximately 38 percent.
Shaw sent two letters to the minority shareholders of Wedgestone encouraging them to accept the tender offer. These two letters, although generated and mailed in Massachusetts, were on Wedgestone letterhead indicating an address of "Irwindale, California."
The remaining respondents comprise one of two groups: the "Majority Shareholders" who, together with certain of the other named defendants, remained as Wedgestones owners following the completion of the tender offer, and the "Independent Committee," members of Wedgestones Board of Trustees who, at the direction of the Board, investigated the feasibility of taking Wedgestone private. Each of the individual respondents resides in Massachusetts, Connecticut or New York, while none of the corporate respondents is domiciled in California, has operations, facilities or employees in California, or owns property or conducts business in California.
These include RAB Management Corp., JMS Holdings Co., and PFG Corporation, and their sole shareholders, respectively, Richard A. Bartlett, Jerry M. Seslowe, James Pinto.
This committee consisted of trustees Jeffrey S. Goldstein, Jeffrey A. Oberg, and John J. Doran. These trustees held no ownership interest in Wedgestone at the time of the tender offer.
PROCEDURAL HISTORY
This case was filed on February 9, 2001. On April 30, 2001, after the case had been removed to federal court, respondents filed a motion to dismiss for lack of personal jurisdiction. In response to that motion, appellants indicated that, if the court were inclined to grant the motion to dismiss, appellants wanted an opportunity to conduct discovery. On July 16, 2001, before that motion was heard, the case was remanded to Superior Court, where respondents filed a motion to quash, raising the same jurisdictional issues. Appellants opposed the motion to quash, without any attempt to take discovery on jurisdictional issues. Thereafter, at an initial status conference on October 11, 2001, the trial court set a November 7 hearing date for the motion to quash and stayed further discovery at the request of and with the consent of both sides. Appellants did not request additional discovery regarding the jurisdictional issues.
On November 26, 2001, the trial court granted respondents motion to quash. In its statement of decision, the court said: "The court has jurisdiction over defendants whose contacts show either general or specific jurisdiction. The court finds [that the appellants] have not shown facts sufficient to establish jurisdiction over the [respondents] on any cognizable basis. The alleged relevant contacts proffered do not rise to the level of substantial or continuous and systematic activity of a nature adequate to provide a basis for [general] jurisdiction. No specific acts are proffered which adequately satisfy the requirements for specific jurisdiction.
"No proffered conduct is specifically connected to [respondents] Bartlett, Seslowe, JCS Management, RAB Management, JMS Holdings, or PFG Corporation. Meetings and discussions involving [respondent] Pinto occurred in New York. Non-resident [respondents] Goldstein, Oberg and Doran were involved in deliberations of the Independent Committee, but those activities occurred out-of-state. [Respondent] Shaw participated in negotiations occurring in New York. While Shaw signed two letters bearing California return addresses, the letters were processed and mailed from a location outside California to a nationwide shareholder group by Bank Boston of Massachusetts. Evidence of unrelated business transactions with Wedgestone prior to the tender offer do not support the existence of jurisdiction in this analysis."
Appellants timely appealed.
DISCUSSION
"When a defendant moves to quash out-of-state service for lack of personal jurisdiction, the plaintiff has the burden of establishing by a preponderance of the evidence jurisdiction is proper." (Pennsylvania Life & Health Insur. Guar. Assn. v. Superior Court (1994) 22 Cal.App.4th 477, 480.) Where there is a conflict in the evidence, the findings of the trial court will not be disturbed on appeal if supported by substantial evidence. (Ibid.) Thus, in reviewing an order granting a motion to quash, we examine the jurisdictional facts in the light most favorable to the defendants. "When the evidence of jurisdictional facts is not conflicting, the question of whether a defendant is subject to personal jurisdiction is one of law." (Ibid.)
Californias long-arm statute, Code of Civil Procedure section 410.10, provides that a "court of this state may exercise jurisdiction on any basis not inconsistent with the Constitution of this state or of the United States." The statute "manifests an intent to exercise the broadest possible jurisdiction, limited only by constitutional considerations." (Sibley v. Superior Court (1976) 16 Cal.3d 442, 445, 128 Cal. Rptr. 34, 546 P.2d 322.) The "constitutional touchstone" for personal jurisdiction over a foreign defendant "remains whether the defendant purposefully established `minimum contacts in the forum State." (Burger King Corp. v. Rudzewicz (1985) 471 U.S. 462, 474, 85 L. Ed. 2d 528, 105 S. Ct. 2174, citing International Shoe Co. v. State of Washington (1945) 326 U.S. 310, 316, 90 L. Ed. 95, 66 S. Ct. 154; see also Simons v. Steverson (2001) 88 Cal.App.4th 693, 709; Pennsylvania Life & Health Ins. Guar. Assn. v. Superior Court, supra, 22 Cal.App.4th 477, 481.) For "each individual has a liberty interest in not being subject to [jurisdiction] of a forum with which he or she has established no meaningful minimum `contact, ties or relations. [Citation.] As a matter of fairness, a defendant should not be `haled into a jurisdiction solely as the result of `random, `fortuitous or attenuated `contact." (Simons v. Steverson, supra, 88 Cal.App.4th at pp. 709-710, internal citations omitted.)
Personal jurisdiction over a non-resident can be either general or specific. "General jurisdiction" exists when there are "substantial" or "systematic and continuous" contacts of the defendant with the forum of such an extent that the exercise of jurisdiction is "fair and reasonable" even though the jurisdictional contacts are not necessarily related to the operative facts from which plaintiffs claims arose. (Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 445, 926 P.2d 1085.) Appellants have apparently abandoned their claim of general jurisdiction.
Specific jurisdiction is based on the defendants contacts with the forum state that actually give rise to the cause of action. (See Pennsylvania Life & Health Insur. Guar. Assn. v. Superior Court, supra, 22 Cal.App.4th at p. 481.) In order to establish specific jurisdiction over each individual defendant, appellants must show that: (1) the defendant has purposefully availed itself of forum benefits with respect to the matter in controversy; (2) the controversy is related to or arises out of the defendants contacts with the forum; and (3) the forums exercise of personal jurisdiction would comport with fair play and substantial justice. (See Von Companies, Inc. v. Seabest Foods, Inc., supra, 14 Cal.4th 434, 446-447.)
Here, appellants failed to satisfy any of the three requisites for specific jurisdiction. We note initially that appellants do not argue that respondents are subject to personal jurisdiction solely due to their status as shareholders and/or trustees of a corporation headquartered in California. Rather, appellants implicitly acknowledge that they must establish that each defendant had contact with the forum state which rendered it subject to jurisdiction in California.
The only evidence proffered in support of respondent Shaws contacts with California were two letters on Wedgestone Financial letterhead, which included the companys Irwindale address, sent under Shaws name, encouraging the minority shareholders to accept the tender offer. Appellants acknowledge that the letters were neither written nor mailed in California, but were "actually handled by Wedgestones proxy solicitation firm Bank Boston, out of Massachusetts." Appellants nevertheless argue that "the letters must be judged by their content, which was to create the appearance that they emanated from Wedgestones headquarters in California." They conclude that "Respondents and Shaw should be estopped from arguing that the letters do not emanate from California."
We fail to see the significance of appellants conclusion that the letters "appear to emanate" from California. The proper focus of inquiry is the defendants contact with California, not the place from which letters were sent. The defendants had no contact with California, other than serving on the Board of Trustees, in the case of Shaw and the Independent Committee, and having a direct or indirect interest in the ownership of a corporation headquartered California, in the case of the Majority Shareholders.
Moreover, applying appellants theory, Shaw would not be subject to personal jurisdiction had the Wedgestone letterhead on which the letters were written contained the companys name alone, without its address. To base jurisdiction on such an insignificant fact does not comport with notions of fair play and substantial justice.
With respect to the respondents other than Shaw, appellants seek to impose jurisdiction based on their alleged bad conduct in misrepresenting the value of Wedgestone in the proxy materials, not on their conduct in or with the forum state. The only contact with California which appellants cite is a telephone call between the Independent Committee respondents, who were located outside the state, and two California defendants, Sharp and Lee, who conducted the conference from Wedgestones California headquarters. Appellants cites no case which permits personal jurisdiction over a non-resident defendant based on a single telephone call to the forum state.
In sum, the trial court properly concluded that appellants failed to satisfy the requirements for specific jurisdiction.
Appellants also contend that the trial court abused its discretion in denying their request to conduct discovery
Respondents filed their initial motion to dismiss for lack of personal jurisdiction on April 30, 2001 in federal court. Thus, since that time, appellants were on notice that respondents intended to challenge the courts jurisdiction over them. However, from that time until the time of the hearing on respondents motion to quash on November 7, 2001, appellants neither conducted discovery nor moved the trial court to permit discovery. Consequently, appellants request to conduct discovery, appearing in their motion for reconsideration of the trial courts order quashing service, was untimely.
Appellants rely on Goehring v. Superior Court (1998) 62 Cal.App.4th 894 for the proposition that the trial court abused its discretion in denying their tardy request for discovery. In Goehring, plaintiffs included in their opposition to a motion to dismiss a request that they be permitted "to conduct jurisdictional discovery if the trial court considered granting petitioners motion. The court never reached the issue because it determined there were sufficient minimum contacts on the record before it." (Id. at p. 911.) The appellate court disagreed, finding that the plaintiffs had not sustained their burden of showing that defendants had sufficient contacts with California to permit the exercise of jurisdiction over them. In their briefs on appeal, the plaintiffs "reiterated their request that they be provided the opportunity to conduct discovery if this court finds the record does not support the trial courts jurisdictional ruling." Appellants in the instant case had included similar language in their opposition to respondents motion to quash.
After noting that a "plaintiff is generally entitled to conduct discovery with regard to a jurisdictional issue before a court rules on a motion to quash," the Goehring court issued a writ of mandate directing the trial court to vacate the order denying the motion to dismiss, and to rule on the plaintiffs request for discovery. (Goehring v. Superior Court, supra, 62 Cal.App.4th 894, 911.) Appellants here rely on the Goehring courts remand of the discovery request to argue that the trial court here abused its discretion in denying appellants tardy request. The argument lacks merit.
Had appellants sought to conduct discovery on the jurisdictional issue prior to the hearing thereon, they could rely on the Goehring courts language that a "plaintiff is generally entitled to conduct discovery with regard to a jurisdictional issue before a court rules on a motion to quash" to support their position. Here, however, appellants did not seek to conduct discovery before the court ruled on the motion. The fact that the appellate court in Goehring referred the discovery ruling to the trial court is of no help to appellants. That court, in turn, had discretion to grant or deny the request. Here, the trial court denied the untimely request to conduct discovery, an act well within its discretion. (See, e.g., Tuchscher Development Enterprises, Inc. v. San Diego Unified Port District (2003) 106 Cal.App.4th 1219, 1248.)
DISPOSITION
The judgment is affirmed.
We concur: TURNER, P.J., and GRIGNON, J.