Opinion
No. C 02-2774 MJJ
October 10, 2002
ORDER
Before the Court are defendant Alcatel's Motion to Dismiss and defendant Alcatel Canada's Motion to Dismiss. The motions are based on improper service of process and on lack of personal jurisdiction. Although defendants now concede proper service of process, they lack the necessary contacts with California sufficient for the Court to exercise either general or specific jurisdiction over them. Because of the lack of personal jurisdiction, defendants' motions to dismiss are GRANTED.
FACTUAL BACKGROUND
The issues discussed in this order arise from Galen Investment Advisor's ("GIA") first amended complaint, which alleges that Newbridge Networks, a company later purchased by Alcatel and renamed Alcatel Canada, fraudulently breached an oral agreement between GIA and Newbridge. This agreement was entered into at a meeting of the Board of Directors of IronBridge Networks ("IronBridge"), a business engaged in manufacturing telecommunications and networking equipment. GIA is a registered investment advisor with its principal place of business in Oakland, California. IronBridge was located in Massachusetts.
GIA alleges that in mid-August 1999, it became aware of an opportunity to invest in the Series C financing round of IronBridge. GIA alleges that (GIA officers) David Alpert and Lon Williams were invited to participate in a September 1, 1999 conference call to discuss GIA's potential investment with IronBridge. Williams and Alpert allege that the purpose of the meeting was to ally their concerns regarding investing in IronBridge, and that the meeting was to provide them with an opportunity to speak directly with the Chairman of the Board of Ironbridge, and founder of Newbridge, Terence Matthews. This meeting, like many later meetings, was held in Massachusetts with Williams phoning in from California.
GIA alleges that Williams informed Matthews at the September 1, 1999 conference call that he would invest $1.5 Million in IronBridge only if Matthews personally promised to fund IronBridge's beta test of its Terabit Router. GIA alleges that Matthews agreed to this arrangement, and that he promised to fund the project personally if suitable investors were not found. GIA asserts that it invested $1 million on September 7, 1999 and the remaining $500,000 on October 15, 1999, relying on the strength of Matthews' promises. On December 14, 1999, the interim CEO of Ironbridge, Paul Lazay, informed Williams at an emergency IronBridge board meeting that IronBridge was preparing to file bankruptcy because the company was essentially out of money. However, according to GIA, despite these claims, Matthews invested more money in IronBridge, but well below what was promised.
GIA also alleges that in the early part of 2000, Matthews tried to convince GIA to invest an additional $100,000 in IronBridge. GIA contends that Matthews promised to repay GIA's investment if it were lost, and GIA invested $100,000 on March 15, 2000. GIA states that Matthews then informed the IronBridge Board of Directors and management that he would no longer fund the company at any level. IronBridge filed bankruptcy shortly thereafter and the IronCore Terabit Router was not completed. GIA alleges that, as a consequence, it lost $1.6 million.
After these events, Alcatel, a French holding company, acquired Newbridge Networks and changed its name to Alacatel Canada, with headquarters in Ottawa, Canada. GIA avers that both Alcatel and Alcatel Canada are subject to general jurisdiction because Newbridge Networks had sufficient continuous and systematic contacts with California such that exercise of general jurisdiction over it would be proper, and these contacts can be imputed to Alcatel and Alcatel Canada because they are the successors in interest to Newbridge.
GIA alternatively argues that defendants are subject to specific personal jurisdiction because Newbridge purposefully directed its activities toward GIA, a California resident, and because all of GIA's claims against Alacatel and Alcatel Canada arise out of Newbridge's forum-related contacts. Defendants argue that they have no contacts whatsoever with California, and that neither is the successor in interest to Newbridge Networks. Thus, no contacts supporting personal jurisdiction can be imputed to them, and there are no other bases for it.
I. ADEQUACY OF SERVICE OF PROCESS
At the hearing on the motion, defendants agreed to withdraw their contentions that plaintiff has not adequately served process upon them. Thus, this element of the motion to dismiss is no longer before the Court, and the motion will be considered solely on the grounds of personal jurisdiction.
II. LACK OF PERSONAL JURISDICTION
LEGAL STANDARD
Rule 12(b)(2) of the Federal Rules of Civil Procedure permits a defendant to move to dismiss a complaint for lack of personal jurisdiction. The plaintiff has the burden of proving that the Court has personal jurisdiction over the defendant. American Telephone Telegraph Co. v. Compagne Bruxelles Lambert, 94 F.3d 586, 588 (9th Cir. 1996). If the Court rules without holding an evidentiary hearing, dismissal for lack of personal jurisdiction is appropriate only if the plaintiff has not made a prima facie showing of personal jurisdiction. Id. In determining whether the plaintiff has met this burden, the uncontroverted allegations in the complaint must be taken as true, and conflicts between the facts contained in the parties' affidavits must be resolved in the plaintiff's favor. Id. at 588-89.There are two limitations on the Court's power to exercise personal jurisdiction over a nonresident defendant: the applicable state or federal personal jurisdiction statute and constitutional principles of due process. Sher v. Johnson, 911 F.2d 1357, 1360 (9th Cir. 1990). Where, as here, there is no applicable federal statute governing personal jurisdiction, the law of the state in which the district sits applies. See Core-Vent Corp. v. Nobel Industries AB, 11 F.3d 1482, 1484 (9th Cir. 1993). As California's long-arm statute allows courts to exercise personal jurisdiction to the extent permitted by the Due Process Clause of the United States Constitution, the Court need only determine whether personal jurisdiction in this case would meet the requirements of due process. Id.; see Cal. Code Civ. Proc. § 410.10.
Federal due process requires that a nonresident defendant have minimum contacts with the forum state such that the exercise of personal jurisdiction does not offend traditional notions of fair play and substantial justice. Decker Coal Co. v. Commonwealth Edison Co., 805 F.2d 834, 838 (9th Cir. 1986) (citing International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). The defendant's conduct and connection with the forum must be such that the defendant should reasonably anticipate being haled into court there. Sher, 911 F.2d at 1361 (citing World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980)).
The constitutional test may be satisfied in either of two ways: through general jurisdiction or specific jurisdiction. General jurisdiction exists if the nonresident's contacts with the forum are continuous and systematic and the exercise of jurisdiction satisfies traditional notions of fair play and substantial justice. Ziegler v. Indian River County, 64 F.3d 470, 473 (9th Cir. 1995) (quoting Reebok Int'l Ltd. v. McLaughlin, 49 F.3d 1387, 1391 (9th Cir. 1995)). If general jurisdiction exists, the Court has jurisdiction over the defendant even if the cause of action is unrelated to the defendant's forum activities. Omeluk v. Langsten Slip Batbyggeri A/S. 52 F.3d 267, 270 (9th Cir. 1995).
If general jurisdiction does not exist, the Court still may be able to assert specific jurisdiction over the defendant for a cause of action that arises out of the defendant's forum-related activities. Rano v. Sipa Press, Inc., 987 F.2d 580, 588 (9th Cir. 1993). The Court applies a three-part test in determining whether it may assert specific jurisdiction over the defendant: (1) the defendant must perform an act or consummate a transaction within the forum, purposefully availing himself of the privilege of conducting activities in the forum and invoking the benefits and protections of its laws; (2) the claim must arise out of or result from the defendant's forum-related activities; and (3) the exercise of jurisdiction must be reasonable. Id.
ANALYSIS
1) Alcatel: General and Specific JurisdictionAlcatel's argument against the exercise of personal jurisdiction is based on the fact that it is the parent company to numerous subsidiaries, and the parent-subsidiary relationship insulates it from any personal jurisdiction that may be exercised against those companies. Alcatel argues that even if its subsidiaries had sufficient contacts with this forum, personal jurisdiction over it may not be based upon them. See Doe v. Unocal Corporation, 248 F.3d at 925 (9th Cir. 2001); A. Reply at 5:18-19. The only time jurisdiction may be extended to a parent its when the subsidiary is acting as the parent's alter ego. ATT v. Lambert, 94 F.3d at 591. Plaintiff maintains that the acquisition of Newbridge Networks Corporation by Alcatel was a merger, with the implication that the two companies are now the same, and relies upon a Securities and Exchange Commission filing for support. See Declaration of Lon Williams In Support of Plaintiff's Opposition ("Williams Decl."), Ex. A. Considering this exhibit, the Court finds that Alcatel acquired Newbridge Networks Corporation through an option to purchase a percentage of Newbridge shares. Id. at 3. The structure of the acquisition is such that the relationship of Alacatel Canada — the new company formed by absorption of Newbridge Networks Corporation — and Alcatel itself is that of a subsidiary to a parent, as the SEC filing itself makes clear: "Newbridge Common Shares will no longer be traded on a national securities exchange and will only be held by a subsidiary of Alacatel." Id. at 6. Thus, there exists a division in identity between the two companies.
If insulated from the contacts of its subsidiaries, Alcatel also argues that it lacks any contacts of its own. Alcatel does not sell any products; it just owns stock in various subsidiaries, and it conducts business in the United States solely through those subsidiaries. See Declaration of Phillipe Boivin in Support of Alacatel [and Alcatel Canada's] Motion to Dismiss ("Boivin Decl.") at ¶ 4. Alcatel argues that acquisition of California companies that later became its subsidiaries is not enough to establish general jurisdiction, for a parent company cannot become subject to a court's jurisdiction merely because of the presence or contacts of its subsidiaries in that forum. See Unocal, 248 F.3d at 925. "The existence of a relationship between a parent company and its subsidiaries is not sufficient to establish personal jurisdiction over the parent on the basis of the subsidiaries' minimum contacts with the forum." Id. GIA cites no cases for the proposition that acquisition of companies in a state is sufficient to establish general jurisdiction. See Plaintiff's Opposition to Alcatel's Motion To Dismiss ("Opp. A"); Alcatel's Reply in Support of Motion to Dismiss ("A. Reply") at 8:3.
Alcatel further argues that specific jurisdiction may not be exercised over it because the company is not connected in any way with the actions that give rise to the present lawsuit. The act at issue is the investment of plaintiffs in Ironbridge, but there is no evidence that Alactel itself was involved in this arrangement, and the Deputy General of the Alcatel Group states that his company took no action related to it. Alcatel's Motion to Dismiss ("A. Motion") at 7:22-8:3; Boivin Decl. at ¶ 11. The only accusations of involvement concern the alleged activity of Alcatel subsidiaries, and Alcatel repeats that the Court cannot exercise jurisdiction over a parent company through the actions of its subsidiaries. Unocal, 248 at 925.
2) Alcatel Canada: General Jurisdiction
Alcatel Canada is a Canadian corporation that has no office in the United States and is not registered to do business in California. Alcatel Canada's Reply in Support of Motion to Dismiss ("A.C. Reply") at 5:6-7. The corporation it acquired, Newbridge Networks Corporation, was a Canadian corporation headquartered in Ontario, did not maintain an office in the United States, did not have a designated agent for general service of process under sections 1502 and 2105 of the California Corporations Code, did not contract to supply any services or materials in California, did not regularly solicit business in California, did not derive substantial revenue from goods used or consumed or services rendered in California, owned no real property in California, did not rent, lease, or otherwise possess real property in California, paid no taxes in California maintained no bank accounts in California, and transacted all its business in the United States through a United States subsidiary company, Newbridge Networks, Inc. See A.C. Reply at 6:22-7:5.
In effect, Alactel Canada argues that it demonstrates none of the continuous and systematic contacts courts consider in determining whether the exercise of jurisdiction satisfies traditional notions of fair play and substantial justice. See Ziegler v. Indian River County, 64 F.3d 470, 473 (9th Cir. 1995). It also claims not to be the successor in interest of Newbridge, an argument that will be considered below.
3) Alcatel Canada: Successor In Interest to Newbridge Networks
Since Alcatel Canada was formed by the purchase of Newbridge Networks, it must contend with plaintiff's arguments that a company's contacts to a forum may be imputed to its successor in interest. See Opp. A at 1:14-15; 9:1-2. The contacts of a predecessor can be attributed to a successor in interest if that successor would be liable for the actions of the predecessor under the law of the forum. See City of Richmond v. Madison Management Group, Inc., 918 F.2d 438, 454 (4th Cir. 1990) ("Because, as concluded above, there was evidence supporting the imposition upon GHA of successor liability, it was proper for the district court to assert personal jurisdiction over GHA."); see Select Creations, Inc. v. Paliafito America, Inc., 852 F. Supp. 740, 765 (E.D. Wis. 1994) ("If a court has personal jurisdiction over the predecessor in interest, once successor liability is established, personal jurisdiction over the successor in interest necessarily exists.").
The very same argument is made against Alcatel Canada, with the same citations in Plaintiff's Opposition to Alcatel Canada's Motion To Dismiss ("Opp. A.C."). See Opp. A.C., same page citations as above.
Plaintiff argues that Newbridge Networks Corporation had sufficient contacts with California to permit exercise of general jurisdiction over it. See Opp. A at 10:19-15:22. It claims that Newbridge is liable for fraudulently securing GIA's investment in Ironbridge, and as the successor in interest, Alcatel is liable for those same actions. Because successor liability can be found, plaintiff argues that Newbridge's contacts can be attributed to Alcatel. See Opp. A at 9:1-10:6. Defendants counter that liability and jurisdiction are two separate things: regardless of liability, the court must establish jurisdiction over the party. See Sher v. Johnson, 911 F.2d 1357, 1365 (9th Cir. 1990). "Liability and jurisdiction are independent. Liability depends upon the relationship between the plaintiff and the defendants and between the individual defendants; jurisdiction depends only upon each defendant's relationship to the forum." Id. This is correct, but if plaintiffs are able to establish that Newbridge Networks, Inc. (USA) had sufficient contacts with California such that general jurisdiction could be exercised over it, and that either Alcatel or Alcatel Canada is the successor in interest to Newbridge Networks, Inc., then those contacts can be imputed to the successor. See City of Richmond, 918 F.2d at 454; and Select Creations, 852 F. Supp. at 765.
Defendants' reply briefs argue that neither Alcatel nor Alcatel Canada are the successors in interest to Newbridge Networks, Inc. This company, Newbridge Networks, Inc., was the United States corporation that was a subsidiary of Newbridge Networks Corporation, the Canadian company Alcatel acquired and renamed Alcatel Canada. The key issue, then is who inherited the interests, contracts, and offices of Newbridge Networks, Inc. ("Newbridge USA").
It appears that Newbridge USA had extensive contacts with California. It entered into contracts with Pacific Bell and Ingram Micro; it attended trade shows in California; and it was responsible for sale of Newbridge products in the United States. See Williams Decl., Ex. C; Ex. E; Ex. F. In addition, some division of Newbridge acquired a California company called Stanford Telecommunications for $240 million, ( see id., Ex. G), and a Newbridge division entered into a volume purchasing agreement with California based Ditech Communications. See id., Ex. H. Plaintiff argues that these examples illustrate the type of "substantial, continuous and systematic" contacts with California sufficient to assert general jurisdiction over Newbridge. Id. at 13:3. However, defendants counter that regardless of whether these contacts can confer general jurisdiction, neither Alactel nor Alcatel Canada are successors in interest to Newbridge USA, and thus, none of the latter company's contacts with California may be imputed to it. The issue of who is the successor in interest to Newbridge Networks, Inc. is unresolved the briefing papers.
Plaintiff views the lack of clarity as to which company succeeds in interest to Newbridge USA as a conflict in the affidavits, a conflict that should be resolved in its favor in deciding whether a prima facie case for personal jurisdiction exists. See ATT v. Lambert, 94 F.3d at 588. The Court does not share this view, however. Plaintiff's opposition papers make no distinction between Newbridge USA and Newbridge Networks Corporation, the company that became Alcatel Canada. Plaintiff simply refers to "Newbridge Networks." See Opp. A at 12-15. The defendant asserts that Newbridge Networks Corporation maintained no office in the United States, was not registered to do business in California, did not regularly solicit or conduct business in California, did not own, lease, or rent real property in California, paid no taxes in California, and owned no bank accounts in the state. Reply Declaration of Michael G. Stewart at ¶¶ 7-11. Defendants state that Newbridge Networks Corporation and Newbridge USA maintained separate corporate existences, that Newbridge Networks Corporation was not involved in the daily operations of Newbridge USA, and that the former company conducted its business in the United States through the latter. Id. at ¶ 6.
Plaintiff's general allegations of Newbridge Networks' contacts in California are not contradicted by defendants' declarations; they are clarified. Defendants specify which of the two Newbridge companies was involved in the activities plaintiff points to in its opposition. Thus, there is no conflict in the evidence presented by the parties, and the Court is not directed to resolve such a supposed conflict in plaintiff's favor. See ATT, 94 F.3d at 588.
4) Alcatel Canada: Specific Jurisdiction
The only contacts related to specific jurisdiction plaintiff alleges are the invitation to a board meeting on September 1, 1999, attendance at conference calls while plaintiff's representatives were in California, and emails and telephone calls to these representative in California, (Opp. A at 16:21-24; Opp A.C. at 15:11-13). However, these alleged contacts are unsupported by reference to any evidence in the record. The Court is directed to no particular conference calls, phone calls, or email messages. All plaintiff does is assert that these things took place, but does not direct the Court to any factual support for these allegations. In a footnote at the beginning of the "Factual Background Relevant To This Motion," plaintiff states that "[t]he following facts are based upon the Declaration of Lon Williams which is submitted herewith and incorporated herein by this reference." Opp. A at 2, n. 1; Opp. A.C. at 2, n. 1. It is unclear whether evidence of the invitation, conference calls, telephone calls, and emails can be found in Williams's declaration or in any other affidavit or declaration. If evidence of these examples of specific contacts do exist, there is no citation to them. Just as the Court is not required to scour the record for triable issues of material fact in the context of summary judgment, ( see Keenan v. Allan, 91 F.3d 1275, 1279 (9th Cir. 1996) (citations omitted)), it is not the Court's task to mine the record for evidence of purposeful availment sufficient to assert personal jurisdiction.
In fact, reference to the record seems to hurt plaintiff's case. Citing the Declaration of Lon Williams in Support of Plaintiff's Opposition, defendants point out that it was the interim CEO of Ironbridge, Paul Lazay, who invited plaintiffs to attend the September 1, 1999 board meeting. See Opp. A.C. at 3:11; Declaration of Lon Williams In Support of Plaintiff's Opposition ("Williams Decl.") at ¶ 7. There are no allegations supporting any type of successor in interest liability or other imputation of the contacts of Ironbridge to Alcatel or Alcatel Canada. Thus, even if the Court could impute whatever California contacts of Newbridge Networks, Inc. to Alcatel, the invitation to the initial board meeting would not be one of them.
This leaves only the conference calls, telephone calls, and emails to which plaintiff refers, without directing the Court to any factual basis for their existence. In addition, plaintiff does not establish when the calls occurred, when the emails were sent, how many there were, what the subject matter may have been, or who the other parties were. Without this information, the Court cannot determine as a matter of law that these purported contacts evidence "deliberate action" within the forum state, purposeful availment, or continuing obligations to a forum resident. See Euroamerica, Inc. v. Catania-Spagna Corp., 1996 WL 557751 (N.D. Cal. 1996); Ballard v. Savage, 65 F.3d 1495, 1498 (9th Cir. 1995); see also Barrett v. Catacombs Press, 44 F. Supp.2d 717, 723 (E.D.Pa. 1999) (quoting Mellon Bank (East) P.S.F.S. v. Farino, 960 F.2d 1217, 1223 (3d Cir. 1992) (The Barrett court held that email communications must occur within the context of other "substantial" connections to the forum in order to constitute purposeful availment, noting that "minimal correspondence alone will not satisfy minimum contacts."). Accordingly, plaintiff's reference to the conference calls, telephone calls, and emails, especially with no evidence of their existence, does not support a finding that defendants have sufficient contacts to California such that a specific jurisdiction can be established.
CONCLUSION
The burden of proof is upon the plaintiff to establish the existence of personal jurisdiction over the defendants. ATT v. Bruxelles Lambert, 94 F.3d at 588. Plaintiffs have failed to establish that personal jurisdiction can be exercised over Alcatel or Alcatel Canada. For this reason, and the reasons outlined above, the defendants' motions to dismiss for lack of personal jurisdiction are GRANTED, without prejudice.