Opinion
No. C 07-3312 CW.
March 18, 2008
ORDER GRANTING DEFENDANTS' MOTIONS TO DISMISS WITHOUT LEAVE TO AMEND AND WITHOUT PREJUDICE
Defendants Equity Trust (Jersey) Limited, Candover Investments PLC, Insinger de Beaufort Holdings SA (IBH), Jardine Matheson Holdings Limited, Phillip Austin, Grant Brown, Melvyn Kalman, John Perkins and Caroline Bougeard move to dismiss the complaint. Plaintiffs Hana and Oliver Hilsenrath oppose the motions. The motions were submitted on the papers. Having considered the parties' papers, the Court grants Defendants' motions to dismiss without leave to amend and without prejudice to refiling the appropriate jurisdiction or jurisdictions.
Each Defendant moved separately except for Brown and Bougeard and Kalman and Perkins who filed joint motions.
BACKGROUND
Plaintiffs filed this case on June 25, 2007, alleging various claims based on a lawsuit entitled Janvrin Holdings Limited et al v. Hilsenrath et al, No. C 02-1068 (2002 suit), brought against them in 2002 by entities not party to this case. At issue in that suit was the propriety of the settlement agreement reached in an earlier suit between the same parties. The Hilsenraths had filed counterclaims against the plaintiffs in that suit, claiming that they improperly accessed the Hilsenraths' confidential personal information prior to the settlement of the earlier suit. The Hilsenraths further alleged that Equity Trust provided the confidential information to those plaintiffs, but the Hilsenraths did not include Equity Trust as a counter-claim defendant. The Hilsenraths now allege that Defendant Equity Trust brought the 2002 suit "by means of Janvrin et al" and that it breached its fiduciary duty to the Hilsenraths by disclosing their confidential information. FAC ¶ 68. This fiduciary duty was allegedly based on company management agreements (CMAs) Equity Trust entered into with Plaintiffs. It is undisputed that none of the current Defendants were party to the 2002 suit or to the earlier settlement.
For a complete history of the prior litigation underlying the current case, see the Court's concurrently filed order denying Plaintiffs' motion to disqualify Latham Watkins from representing Equity Trust.
A later motion to join Equity Trust as a counter-claim defendant in the 2002 suit was denied.
According to the present complaint, the other Defendants are entities that created Equity Trust or controlled it and individuals who were executives of Equity Trust and Janvrin. FAC ¶¶ 14-23. Each Defendant now moves to dismiss the complaint on various bases, including jurisdictional grounds, improper venue,forum non conveniens, failure to state a claim and defective service.
DISCUSSION
Because Defendants move to dismiss the case on individual jurisdictional bases, each motion is discussed separately below.
I. Candover Investments
Candover Investments moves to dismiss based on lack of personal jurisdiction. Under Federal Rule of Civil Procedure Rule 12(b)(2), when a defendant moves to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of demonstrating that jurisdiction exists. Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004). The plaintiff "need only demonstrate facts that if true would support jurisdiction over the defendant." Ballard v. Savage, 65 F.3d 1495, 1498 (9th Cir. 1995); Fields v. Sedgwick Assoc. Risks, Ltd., 796 F.2d 299, 301 (9th Cir. 1986). Uncontroverted allegations in the complaint must be taken as true. AT T v. Compagnie Bruxelles Lambert, 94 F.3d 586, 588 (9th Cir. 1996). However, the court may not assume the truth of such allegations if they are contradicted by affidavit.Data Disc, Inc. v. Systems Technology Associates, Inc., 557 F.2d 1280, 1284 (9th Cir. 1977). Conflicts in the evidence must be resolved in the plaintiff's favor. AT T, 94 F.3d at 588.
There are two independent limitations on a court's power to exercise personal jurisdiction over a non-resident defendant: the applicable state personal jurisdiction rule and constitutional principles of due process. Sher v. Johnson, 911 F.2d 1357, 1361 (9th Cir. 1990); Data Disc, Inc, 557 F.2d at 1286. California's jurisdictional statute is co-extensive with federal due process requirements; therefore, jurisdictional inquiries under state law and federal due process standards merge into one analysis. Rano v. Sipa Press, Inc., 987 F.2d 580, 587 (9th Cir. 1993).
The exercise of jurisdiction over a non-resident defendant violates the protections created by the due process clause unless the defendant has "minimum contacts" with the forum State so 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).
Personal jurisdiction may be either general or specific. General jurisdiction exists where the defendant's contacts with the forum State are so substantial or continuous and systematic that jurisdiction exists even if the cause of action is unrelated to those contacts. Bancroft Masters, Inc. v. Augusta Nat'l, Inc., 223 F.3d 1082, 1086 (9th Cir. 2000). The standard for establishing general jurisdiction is "fairly high." Id.; Brand v. Menlove Dodge, 796 F.2d 1070, 1073 (9th Cir. 1986). The defendant's contacts must approximate physical presence in the forum State. Schwarzenegger, 374 F.3d at 801. Factors considered in evaluating the extent of contacts include whether the defendant makes sales, solicits or engages in business, designates an agent for service of process, holds a license, or is incorporated in the forum State. Bancroft Masters, Inc., 223 F.3d at 1086.
Specific jurisdiction exists where the cause of action arises out of or relates to the defendant's activities within the forum.Data Disc, Inc, 557 F.2d at 1286. Specific jurisdiction is analyzed using a three-prong test: (1) the non-resident defendant must purposefully direct its activities or consummate some transaction with the forum or a resident thereof; or perform some act by which it purposefully avails itself 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 results from the defendant's forum-related activities; and (3) the exercise of jurisdiction must be reasonable. Lake v. Lake, 817 F.2d 1416, 1421 (9th Cir. 1987). Each of these conditions is required for asserting jurisdiction.Insurance Co. of N. Am. v. Marina Salina Cruz, 649 F.2d 1266, 1270 (9th Cir. 1981).
A showing that a defendant "purposefully availed" itself 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. Schwarzenegger, 374 F.3d at 802. The requirement of purposeful availment ensures that the defendant should reasonably anticipate being haled into the state court of the forum based on its contacts. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980). The purposeful availment test is met where "the defendant has taken deliberate action within the forum state or if he has created continuing obligations to forum residents." Ballard, 65 F.3d at 1498.
A showing that a defendant "purposefully directed" its conduct toward a forum State "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." Schwarzenegger, 374 F.3d at 803. Purposeful direction may be established under the "effects test" where the defendant (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. Dole Food Co. v. Watts, 303 F.3d 1104, 1111 (9th Cir. 2002).
The second factor requires that the claim arise out of or result from the defendant's forum-related activities. A claim arises out of a defendant's conduct if the claim would not have arisen "but for" the defendant's forum-related contacts.Panavision Int'l v. L.P.v. Toeppa, 141 F.3d 1316, 1322 (9th Cir. 1998).
Once the plaintiff has satisfied the first two factors, the defendant bears the burden of overcoming a presumption that jurisdiction is reasonable by presenting a compelling case that specific jurisdiction would be unreasonable. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472-73 (1985); Haisten v. Grass Valley Medical Fund, Ltd., 784 F.2d 1392, 1397 (9th Cir. 1986). Seven factors are considered in assessing whether the exercise of jurisdiction over a non-resident defendant is reasonable: (1) the extent of the defendant's purposeful interjection into the forum State's affairs, (2) the burden on the defendant, (3) conflicts of law between the forum State and the defendant's home jurisdiction, (4) the forum State's interest in adjudicating the dispute, (5) the most efficient judicial resolution of the dispute, (6) the plaintiff's interest in convenient and effective relief, and (7) the existence of an alternative forum. Caruth v. International Psychoanalytical Ass'n, 59 F.3d 126, 128 (9th Cir. 1995); Roth v. Garcia Marquez, 942 F.2d 617, 623 (9th Cir. 1991).
A. General Jurisdiction
According to the declaration of Company Secretary Andrew Moberly, Candover Investments PLC is a British holding company that organizes and invests in large European buyouts. Moberly Decl. ¶ 2. Its principal place of business is in the United Kingdom and it does not maintain an office, mailing address, bank account or employees in California. Id. at ¶¶ 2, 6. Candover is not registered or licensed to do business in California; nor does it solicit or conduct business in the State. Id. at ¶¶ 4, 5.
Nonetheless, Plaintiffs argue that general jurisdiction exists over Candover because it invests in various American companies, alleging that Candover owns and controls those companies. Only one of those companies, Lombard Investments, Inc., is a California corporation. However, as Candover notes, "engaging in commerce with residents of the forum state is not in and of itself the kind of activity that approximates physical presence within the state's borders." Bancroft Masters, 223 F.3d at 1086. Further, even taking as true Plaintiffs' allegation that Candover owns the American companies in which it invests, "[t]he 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."Doe v. Unocal Corp., 248 F.3d 915, 925 (9th Cir. 2001).
Plaintiffs also argue that each Defendant should be subject to nation-wide jurisdiction pursuant to Federal Rule of Civil Procedure 4(k)(2). However, Rule 4(k)(2) only allows nation-wide jurisdiction when "the exercise of jurisdiction is consistent with the Constitution and laws of the United States." Fed.R.Civ.P. 4(k)(2). Plaintiffs have not established that subjecting Defendants to personal jurisdiction in the United States would be consistent with the Constitution.
Similarly, Plaintiffs' second argument — that Candover and IBH's participation in commercial banking in the United States is sufficient to establish nation-wide federal jurisdiction — misinterprets the case on which it relies. That case holds only that a foreign state can be subject to jurisdiction in U.S. courts under the Foreign Sovereign Immunities Act based on the "commercial activities" exception when it participates in commercial banking. See First City, Texas-Houston, N.A. v. Rafidain Bank, 281 F.3d 48, 53 (2d. Cir. 2001).
Candover does not have sufficient contacts with California to establish general jurisdiction over it.
Plaintiffs also cite Mackey v. Compass Mktg., 391 Md. 117 (2006), in support of their argument that each of the Defendants is subject to jurisdiction in this Court because they are co-conspirators with Janvrin, which committed overt acts in this State during the underlying litigation. However, the Ninth Circuit has not adopted a conspiracy theory of personal jurisdiction, and district courts within the Ninth Circuit have rejected it. See, e.g., Kipperman v. McCone, 422 F. Supp. 860, 873 n. 14 (N.D. Cal. 1976) ("[P]ersonal jurisdiction over any non-resident individual must be premised upon forum-related acts personally committed by the individual. Imputed conduct is a connection too tenuous to warrant the exercise of personal jurisdiction.").
B. Specific Jurisdiction
In support of their argument that the Court should exercise specific jurisdiction over Candover, the Hilsenraths state only that it "acted as the de facto management" of Equity Trust. The Hilsenraths submit a variety of unauthenticated documents to support this allegation. However, even taking those documents as true, and assuming for purpose of argument that the Court has personal jurisdiction over Equity Trust, there is insufficient evidence to establish that Candover operated as the alter ego of Equity Trust. "[A] parent corporation may be directly involved in the activities of its subsidiaries without incurring liability so long as that involvement is 'consistent with the parent's investor status.'" Id. at 926 (quoting United States v. Bestfoods, 524 U.S. 51, 71 (1998)). Although the documents cited by the Hilsenraths state that Candover and the management of the companies it buys "act as partners to build long-term value for these businesses," Hilsenrath Decl., Ex. 21, this does not establish that Candover maintained "control of the subsidiar[ies'] internal affairs or daily operations" as required for alter ego status. Doe, 248 F.3d at 926.
The Court grants Candover's motion to dismiss for lack of personal jurisdiction.
II. Jardine Matheson Holdings Limited
Jardine moves to dismiss the complaint against it for lack of personal jurisdiction and for failure effectively to serve it.
A. General Jurisdiction
According to company secretary Charles Wilken, Jardine is a Bermuda company that has never conducted business or had property, bank accounts, assets, offices, officers, directors, agents or employees in California. Wilken Decl. ¶¶ 3, 4. As with Candover, Plaintiffs allege that the Court has general jurisdiction over Jardine because it is the "owner" of various companies that do business in the United States. However, Wilken declares that Jardine has no involvement in the day-to-day operations of the companies Plaintiffs cite. Wilken Reply Decl, ¶¶ 3-6. Jardine does not have sufficient contacts with California to support general jurisdiction over it.
B. Specific Jurisdiction
Plaintiffs argue that "Janvrin, Crossgar and Ryburn were owned and operated by Jardine Matheson" during 2000. Opposition at 16. However, the unauthenticated document they cite in support of this argument shows only that a company called C N Limited held one share in Ryburn in trust for the Matheson Trust Company (Jersey) Limited. Hilsenrath Decl., Ex. 7. This share was worth $1.00. Id. Even assuming that Matheson Trust Company is the same as Jardine Matheson, that Matheson Trust company had one share held in trust for it is insufficient to establish that it owned and operated Ryburn. Further, Wilken declares that "Jardine has never owned or operated Janvrin, Ryburn, or Crossgar." Wilken Reply Decl. ¶ 2.
Plaintiffs also argue, "Under Jardine Matheson they negotiated the original securities of Janvrin et al. [sic]." Opposition at 16. Neither of the unauthenticated documents cited in support of this argument mentions Janvrin, Ryburn or Crossgar.
The Court grants Jardine's motion to dismiss for lack of personal jurisdiction. Because the Court finds that it does not have jurisdiction over Janvrin, it need not reach the argument that Plaintiffs failed properly to serve Jardine.
III. Insinger de Beaufort Holdings S.A.
IBH moves to dismiss the complaint against it for lack of personal jurisdiction and for failure effectively to serve it.
A. General Jurisdiction
According to Chief Financial Officer Robert Mooij, IBH is a holding company with its principal place of business in Luxembourg. Mooij Decl. ¶ 2. IBH is not licensed or registered to do business in California and has no offices, property, bank accounts, employees or officers in California. Id. at ¶ 3-5. IBH does not advertise in California and does not have any contracts with California companies. Id. at ¶ 6. Plaintiffs argue that the Court has general jurisdiction over IBH because it is "an intensive player in the US federal legal system." Opposition at 26. However, each of the unauthenticated documents cited in support of this argument concern various IBH subsidiaries' contacts with the State of New York and the United States in general. Mooij declares that IBH "does not manage the affairs of its subsidiaries or investments," Mooij Decl. ¶ 1, and Plaintiffs do not provide any evidence that it does.
B. Specific Jurisdiction
Plaintiffs argue that "in the 2001/2 time frame [Janvrin, Crossgar and Ryburn] were operated and owned by Insinger de Beaufort." Opposition at 16. In support of this argument, the Hilsenraths submit documents indicating that the director of Insinger de Beaufort in Jersey approved the settlement at issue in the 2002 suit and participated in the meeting in London at which Equity Trust allegedly improperly disclosed Plaintiffs' confidential personal information. Hilsenrath Decl., Exs. 41, 44. Even assuming that these documents are sufficient to establish jurisdiction over Insinger de Beaufort in Jersey, Plaintiffs have not established that IBH is involved in the day-to-day operations of Insinger de Beaufort in Jersey. Therefore, there is no basis on which to exercise specific jurisdiction over IBH.
Because the Court grants IBH's motion to dismiss for lack of personal jurisdiction, it need not address the alternate ground for dismissal based on failure properly to serve IBH.
IV. Equity Trust, Kalman, Perkins, Bougeard, Brown and Austin
The remaining Defendants are Equity Trust and former and current Equity Trust employees and officers (collectively, the Equity Trust Defendants). Equity Trust is a Jersey company and the individuals are Jersey residents. The Equity Trust Defendants each move to dismiss the complaint based on improper venue, lack of personal jurisdiction, defective service and the doctrine offorum non conveniens. In addition, the individuals argue that Plaintiffs have failed to state a claim against each of them.
Although personal jurisdiction is generally a threshold issue to be determined before any other consideration of a case and all of the Equity Trust Defendants have argued that the Court lacks personal jurisdiction over them, the Court dismisses the claims against them on the basis of forum non conveniens without first determining questions of personal jurisdiction. The Supreme Court recently held that "where subject-matter or personal jurisdiction is difficult to determine, and forum non conveniens considerations weigh heavily in favor of dismissal, the court properly takes the less burdensome course." Sinochem Int'l Co. v. Malay. Int'l Shipping Corp., 127 S. Ct. 1184, 1194 (2007).
The Court finds that it would not be able to determine whether it has personal jurisdiction over the Equity Trust Defendants without granting the parties additional opportunities to supplement the record. Further, the Court finds that the factors it must consider in making a forum non conveniens determination weigh heavily toward dismissal.
As mentioned above, pro se Plaintiffs have filed extensive documents in support of their opposition to the motions to dismiss. And, as Defendants note in their joint evidentiary objections, the majority of those documents are not properly authenticated. In order to determine personal jurisdiction with respect to the Equity Trust Defendants, the Court likely would have to allow Plaintiffs an opportunity to re-submit and authenticate the evidence filed in support of their opposition to the motions to dismiss. Further, the Court would have to expend considerable effort determining the corporate structure of Equity Trust, a Jersey corporation. As discussed below, the Court finds that the agreements between Equity Trust and the Hilsenraths, and therefore the Hilsenraths' allegations which stem from those agreements, are governed by Jersey law. Therefore, the Court would have to determine Equity Trust's corporate structure based on Jersey law in order to decide whether it has personal jurisdiction over Equity Trust. This weighs toward dismissing this case on the basis of forum non conveniens without reaching the question of personal jurisdiction.
Under the doctrine of forum non conveniens, the district court has discretion to decline to exercise jurisdiction in a case where litigation in an alternative forum would be more convenient for the parties. Dismissal based on forum non conveniens is "an exceptional tool to be employed sparingly." Ravelo Monegro v. Rosa, 211 F.3d 509, 514 (9th Cir. 2000). The Supreme Court instructs that dismissal is ordinarily appropriate only where "the plaintiff's chosen forum imposes a heavy burden on the defendant or the court, and where the plaintiff is unable to offer any specific reasons of convenience supporting his choice."Piper Aircraft Co. v. Reyno, 454 U.S. 235, 249 (1981).
In deciding whether to dismiss an action due to forum non conveniens, the district court must "consider the availability of an adequate alternative forum, and then . . . whether several 'private' and 'public' interest factors favor dismissal." Leetsch v. Freedman, 260 F.3d 1100, 1103 (9th Cir. 2001). There is a strong presumption in favor of a domestic plaintiff's choice of forum, which can be overcome only when the private and public interest factors clearly point towards trial in the alternative forum. Piper Aircraft, 454 U.S. at 265-66; Ravelo Monegro, 211 F.3d 509 at 514.
The Equity Trust Defendants argue that Jersey is the proper forum for this case and that the Jersey courts provide a sufficient "avenue for redress." Creative Tech., Ltd. v. Aztech System PTE, Ltd., 61 F.3d 696, 702 (9th Cir. 1995). Although the Ninth Circuit has never addressed the ability of the Jersey courts to provide plaintiffs with an adequate remedy, other federal courts have. See, e.g., Kovzac Ltd. v. Westway Trading Corp., 2003 U.S. Dist. LEXIS 10767 (E.D. La.); Mayo Assoc. v. Union Bank of Switzerland, 1998 U.S. Dist. LEXIS 7791 (S.D.N.Y.).
Further, the Equity Trust Defendants argue that both private and public interest factors weigh in favor of dismissing this case. The Ninth Circuit holds that the private interest factors to be considered include:
(1) the residence of the parties and the witnesses; (2) the forum's convenience to the litigants; (3) access to physical evidence and other sources of proof; (4) whether unwilling witnesses can be compelled to testify; (5) the cost of bringing witnesses to trial; (6) the enforceability of the judgment; and (7) all other practical problems that make trial of a case easy, expeditious and inexpensive.Lueck v. Sundstrand Corp., 236 F.3d 1137, 1145 (9th Cir. 2001) (internal quotations omitted). All of the Equity Trust Defendants are Jersey residents. Further, the conspiracy that Plaintiffs allege only includes one California participant, the non-party law firm Nixon Peabody. Therefore the private interest factors related to the accessibility of witnesses and physical evidence weigh in favor of resolving this case in Jersey. As Equity Trust argues, it appears that the vast majority of the witnesses involved in the case would be outside this Court's subpoena power. See Fed.R.Civ.P. 45. Plaintiffs counter, "The events, the witnesses, the documentation and the agents of the US government who will be called to testify are all in California." Opposition at 41. However, Plaintiffs do not indicate who these witnesses are or what this evidence is.
The public interest factors to be considered are:
(1) local interest of lawsuit; (2) the court's familiarity with governing law; (3) burden on local courts and juries; (4) congestion in the court; and (5) the costs of resolving a dispute unrelated to this forum.Id. at 1147. Again, these factors weigh heavily in favor of resolution of this case in the Jersey courts. At the core of the case are allegations of a breach of fiduciary duties arising out of the CMAs, which specifically provide that they
shall be governed by[,] construed and interpreted in accordance with the laws of the Island of Jersey, and all parties shall submit to the jurisdiction of the courts of the said Island.
Austin Decl., Ex. F at 4; Id., Ex. G at 5. Not only are the Jersey courts better equipped to resolve the questions of Jersey law governing claims arising out of the Equity Trust agreements, but they have a stronger interest than this Court in the resolution of a dispute arising out of a Jersey corporation's agreement with an individual who held himself out to be an Israeli citizen at the time the agreement was made.
Equity Trust also argues that this clause requires a finding that venue is only proper in Jersey. However, Ninth Circuit case law clearly holds that such language is permissive rather than mandatory. See, e.g., Hunt Wesson Foods, Inc. v. Supreme Oil Co., 817 F.2d 75, 76-78 (9th Cir. 1987) (interpreting a similar clause indicating that a certain court "shall have jurisdiction" over the parties in any dispute arising out of the contract as permissive); see also Northern Cal. Dist. Council of Laborers v. Pittsburg-Des Moines Steel Co., 69 F.3d 1034, 1036-37 (9th Cir. 1995). Although this provision might prevent Plaintiffs from contesting personal jurisdiction if Equity Trust brought a suit against them in the Jersey court and it requires any interpretation of the agreements to be made under Jersey law, it does not require any case arising out of the contract to be tried in the courts of the Island of Jersey.
Plaintiffs argue that these forum selection clauses should not control because they were contained in adhesion contracts. However, the California courts have held, "A forum selection clause within an adhesion contract will be enforced as long as the clause provided adequate notice to the party that he was agreeing to the jurisdiction cited in the contract." Intershop Communic. AG v. Super. Ct. of San Francisco, 104 Cal. App. 4th 191, 201 (2002) (internal quotations and alterations omitted). Plaintiffs have not provided any evidence that they did not have adequate notice of the import of the forum selection clause.
The Court acknowledges that this case is based in part on facts related to earlier cases decided by this Court. However, the Court finds that the required application of Jersey law, the Jersey court's interest in the resolution of this case and the likely increase in cost associated with litigating in California outweigh this Court's interest in maintaining jurisdiction over any overlapping disputes. Further, neither Equity Trust nor any Individual Defendant was a party to any of those lawsuits.
CONCLUSION
For the foregoing reasons, the Court grants Defendants' motions to dismiss (Docket Nos. 4, 21, 40, 41, 45, 70, 83). The dismissal is without leave to amend and without prejudice to refiling in the appropriate jurisdiction or jurisdictions.
The Court DENIES as moot Defendants' objections to the exhibits filed in support of Plaintiffs' oppositions to the motions (Docket No. 84). The Court did not rely on any improper or inadmissible evidence in deciding these motions.
IT IS SO ORDERED.