Opinion
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
APPEAL from a judgment of the Superior Court of Los Angeles County. Super. Ct. No. BC 365455, Michael L. Stern, Judge. Reversed.
Law Offices of A. Tod Hindin, A. Tod Hindin and Karen L. Hindin for Plaintiffs and Appellants Gail Hollander and Stanley Hollander.
Steptoe & Johnson, Bennett Evan Cooper and Ruth D. Kahn for Defendants and Respondents XL Capital Ltd and XL Re Ltd.
ROTHSCHILD, J.
The issue in this appeal is whether a judgment of dismissal for lack of personal jurisdiction “without prejudice” is equivalent to a continuance to allow the plaintiffs to discover evidence supporting personal jurisdiction. We conclude it is not and reverse the judgment.
FACTS AND PROCEEDINGS BELOW
A. The Underlying Lawsuit
The Hollanders purchased three paintings by the artist Martin Kippenberger (1953-1997). They insured the paintings through XL Specialty Insurance (XL Specialty). The Hollanders obtained this policy through a California insurance broker working through a wholesale broker in New York.
The paintings were damaged while they were being hung and the Hollanders filed a claim with XL Specialty. A dispute arose between the Hollanders and XL Specialty over the amount of compensation due the Hollanders under their policy. Believing XL Specialty had failed to honor the terms of the policy, the Hollanders brought this action alleging breach of contract, fraud, negligence and violation of the statutory duty of good faith to persons 65 or older. (Ins. Code, § 785). The complaint named XL Specialty as a defendant along with several other defendants including XL Capital Ltd (XL Cap) and XL Re Ltd (XL Re). (For convenience we refer to XL Cap and XL Re together as “the defendants” because they are the only defendants in the action who are parties to this appeal.)
B. The Defendants’ Motion To Dismiss The Action For Lack Of Personal Jurisdiction.
Defendants moved to dismiss the complaint for lack of personal jurisdiction.
Henry French, the defendants’ Senior Vice President, provided a declaration in support of the motion to dismiss in which he explained the relationship between XL Specialty, XL Cap and XL Re. According to French, XL Cap is incorporated in the Cayman Islands and its principal place of business is in Bermuda. XL Cap functions as a holding company for subsidiaries who sell insurance, reinsurance and financial risk protection on an international basis. XL Re is a Bermudan limited liability company held by XL Cap through a subsidiary not named in the complaint. XL Re only sells reinsurance. It’s principal place of business is also in Bermuda. It does not sell reinsurance in California. French stated that XL Specialty is a Delaware corporation with headquarters in Connecticut. It is a subsidiary of XL America, Inc., a Delaware corporation, which is a subsidiary of XL Financial Holdings, an Irish corporation, which is a subsidiary of XL Insurance (Bermuda) Ltd. XL Insurance Bermuda is a subsidiary of XL Cap. XL Specialty, French maintained, is a subsidiary of XL America which “is an indirect subsidiary of XL Capital[.]”
XL Specialty did not contest personal jurisdiction.
French further testified: “XL Capital Ltd and XL Re Ltd do not do business in the United States. Neither entity has ever owned or leased any real or personal property in California. They have done no advertising there, sold no insurance or reinsurance there, provided no services there, have never had any employees or offices there, have had no phone listing there, have had no bank account there, have maintained no book or records there, and have convened no Board meetings there. [¶] . . . The insurance policies [issued to the Hollanders] were written by the insurance company XL Specialty Insurance Company. [¶] . . . XL Specialty Insurance Company is an entirely separate corporation from XL Capital Ltd and XL Re Ltd. . . . [¶] . . . XL Specialty Insurance Company maintains entirely separate offices, books of account, and financial statements from those of XL Capital Ltd and XL Re Ltd.” French also stated XL Specialty and XL Cap have separate boards of directors and currently have no board members in common.
In response, the Hollanders contended they were wrongfully denied the opportunity to conduct formal discovery regarding personal jurisdiction but argued nevertheless that sufficient evidence in the public domain, including XL Cap’s website, supported personal jurisdiction over defendants.
French filed a supplemental declaration responding to the Hollanders’ references to the XL Cap website. He stated that the California offices listed on the website are the offices of XL Cap insurance company subsidiaries, not offices of XL Cap or XL Re. He reiterated that neither XL Cap nor XL Re have offices in California or the United States and that neither of them is licensed to do business in California.
C. The Requests By The Hollanders To Continue The Hearing On Dismissal In Order To Complete Discovery Regarding Personal Jurisdiction.
The Hollanders filed their complaint in January 2007. In February they commenced discovery by noticing the deposition of the defendants’ custodian of records to be conducted in New York City in March. At defendants’ request, the deposition was rescheduled for April.
On March 6, the Hollanders noticed the deposition of French, defendants’ Senior Vice President, and the depositions of the “persons most knowledgeable” about the relationships between these two companies and their subsidiaries including XL Specialty. The depositions were scheduled for April 25 and 26 in Bermuda where the defendants have their headquarters. The Hollanders also served deposition subpoenas for certain documents to be produced at the time of the depositions.
On March 13, the Hollanders served interrogatories and requests for admissions on defendants regarding their corporate structure and relationships with their subsidiaries including XL Specialty.
On March 23, defendants filed their motion to dismiss the complaint for lack of personal jurisdiction. They supported their motion with the declaration of French, summarized above, and set the hearing on the motion for April 24, the day before the date scheduled for French’s deposition.
On April 6, the parties appeared before the trial court on the Hollander’s motion to continue the hearing on the motion to dismiss from April 24 to a date in October. The Hollanders argued that they needed this additional time in order to complete discovery on personal jurisdiction over defendants. They pointed out that the motion was scheduled to be heard one day prior to the date scheduled for their deposition of French, whose declaration provided the evidentiary basis for the motion to dismiss. The court continued the hearing on the motion for one week, to April 30.
Later on April 6, the Hollanders faxed a letter to counsel for defendants noting that even with the one-week continuance their opposition to the motion to dismiss would be due prior to the date scheduled for French’s deposition. The Hollanders requested that French’s deposition be advanced from April 25 to April 13 which would give the Hollanders four days in which to use the information acquired in the deposition to formulate their opposition to the motion. In a return fax defendants’ counsel refused the Hollanders’ request. In that same fax defendants’ counsel also noted that he had not agreed to produce French for the deposition scheduled for April 25.
On April 9, the parties appeared on the Hollander’s renewed motion for a continuance to allow them to depose French before their opposition to the motion to dismiss was due. They did not request an order shortening the time for filing their opposition. They did, however, request that, if the court was unwilling to grant a continuance, the court shorten the time for noticing French’s deposition and the production of documents so that this discovery could be completed by April 16 in time to be used in opposing the motion to dismiss. The court denied the requests for a continuance of the hearing and shortening of time for discovery.
Also on April 9, following the court’s denial of the Hollander’s request for a continuance, counsel for defendants informed the Hollanders that his clients would not produce any of the documents listed in the deposition subpoena.
On April 12, defendants served objections to all of the Hollanders’ interrogatories and requests for admissions.
On April 17, defense counsel advised the Hollanders that French would not appear for his deposition on April 25. Counsel offered to make French available on May 4 and to continue the hearing on the motion to dismiss to May 7. The Hollanders refused this offer.
On April 17, the Hollanders filed their opposition to the motion to dismiss along with another motion for a continuance of the hearing.
On April 23, defendants filed a reply to the Hollander’s opposition including a supplemental declaration by French.
On April 30, the trial court heard the motion to dismiss and the Hollander’s request for a continuance. All of the evidence described above regarding personal jurisdiction, the progress of discovery, and the request for a continuance was before the court. The court granted the motion to dismiss on the ground that the evidence of California contacts was insufficient to permit exercise of general or specific jurisdiction. In response to the Hollanders’ claim that they needed more time to complete their discovery the court responded: “Well, go out and do your discovery and come back and see us in September. That’s going to be about how long it’s going to take you to put together [your] case.” When the Hollanders pointed out that the court was in essence now agreeing that they needed a six-month continuance to conduct discovery, the court stated it would rehear the motion to dismiss “if and when you come back.”
The court entered a judgment of dismissal “without prejudice” as to these defendants and the Hollanders filed a timely appeal.
DISCUSSION
The Hollanders do not contend that they presented sufficient evidence to defeat the defendants’ motion to dismiss. Rather, they contend that they were denied the opportunity to obtain such evidence because the defendants stonewalled their discovery attempts and the trial court refused to grant them a reasonable continuance to allow them to complete their discovery.
Our review of the judgment is limited to the question whether the trial court abused its discretion in denying the Hollanders’ requests for a continuance. (Beckman v. Thompson (1992) 4 Cal.App.4th 481, 487 [“The granting of a continuance for discovery lies in the discretion of the trial court”].) Discretion is abused when, considering the relevant legal principles and the facts, the trial court acts beyond “‘the bounds of reason.’” (In re Cortez (1971) 6 Cal.3d 78, 85-86, quoting People v. Surplice (1962) 203 Cal.3d 784, 791.)
The relevant legal principles here are California’s intent to “exercise jurisdiction on any basis not inconsistent with the Constitution of this state or of the United States” (Code Civ. Proc., § 410.10), the plaintiff’s “right to conduct discovery with respect to the issue of jurisdiction” (Mihlon v. Superior Court (1985) 169 Cal.App.3d 703, 710) and the trial court’s statutory and inherent powers to control the scheduling of proceedings before it. (Code Civ. Proc., § 128, sub d. (a)(3), (8); Thurmond v. Superior Court (1967) 66 Cal.2d 836, 839.)
The record shows that facts relating to the defendants’ contacts with California were within the knowledge of French because he was the corporate official who filed a declaration in support of the motion to dismiss. Defendants maintain that the Hollanders had to accept French’s declaration at face value and were powerless to test his factual allegations in a deposition, citing Broadstone Realty Corp. v. Evans (S.D.N.Y. 1962) 13 F.Supp. 261, 266-267. Regardless of the rule in the Southern District of New York, in California the Hollanders were not required to accept French’s declaration at face value but were entitled to probe the veracity, accuracy and completeness of his statements. As our Supreme Court explained in 1880 Corp. v. Superior Court (1962) 57 Cal.2d 840, 843: “The facts relating to whether a corporation has been doing business in this state so as to make it amenable to suit . . . are ordinarily within the knowledge of the officers of the corporation, and there is no sound reason why a plaintiff should be deprived of this source of information.”
Defendants further argue that in deciding whether to permit discovery on jurisdictional issues California courts should be sensitive to unnecessary impositions on foreign nationals. We agree with defendants in principle. In this case, however, the Hollanders have shown cause to question the extent to which French’s declaration paints a complete picture of defendants’ operation. In support of their motion for a continuance, the Hollanders cited XL Cap’s website which advertizes the company as “one company” doing business “Worldwide.” Under the heading “Our Business” XL Cap states that “Insurance” and “Reinsurance” are two of the “five main business segments” of “the XL group of companies.” Under the heading “Global Capabilities” XL Cap describes itself as “‘One Company Without Borders’” (italics omitted) and states: “The XL group of companies, through their approximately 3,500 employees in 77 offices in 28 countries, are dedicated to providing valuable products and services to customers.” XL Cap further describes itself as “Your Global Partner with Local Expertise” explaining that “[f]or ease of transacting business, our operations are located throughout the world’s economies [enabling] us to provide local service and knowledge in 80+ countries.” The website lists XL Cap’s “Global Offices” including, under “Insurance-US-Western,” six offices in California. With respect to insurance of fine art the website declares: “The XL Insurance companies are unique among art insurers for our broad expertise, financial strength, and worldwide capabilities. . . . [¶] . . . [¶] . . . Policies can be written domestically through our US operations . . . .” Referring to “our fine art business” XL Cap promises “[c]laims are handled promptly and sensitively with an understanding of the aesthetic and market value of art . . . .” The website profiles Clive R. Tobin who is described as XL Cap’s “Executive Vice President and Chief Executive of Insurance Operations.” It notes Tobin was promoted to that position from his former position as Chief Executive of the “commercial risk management division of XL Insurance.” Finally, XL Cap invites visitors to its website to “Contact Us” via the website “or contact an XL insurance office near you.” (Underscoring omitted.)
http://www.xlcapital.com.
Generally, when a party has been unable to complete its discovery in opposition to a motion through no fault of its own the remedy is a continuance of the hearing on the motion. (See e.g. Lerma v. County of Orange (2004) 120 Cal.App.4th 709, 717.) The record shows that the Hollanders acted diligently. We therefore find that the court abused its discretion in denying them a continuance to conduct discovery.
In urging affirmance of the judgment, defendants cite two cases that found the trial courts did not abuse their discretion when they denied the plaintiffs additional time to conduct discovery on the issue of personal jurisdiction. (Beckman v. Thompson (1992) 4 Cal.App.4th 481; In re Automobile Antitrust Cases I & II (2005) 135 Cal.App.4th 100.) Those cases are in apposite, however, because the plaintiffs in those cases had already conducted discovery on the issue of personal jurisdiction and sought continuances to conduct further discovery. (Beckman v. Thompson, supra, 4 Cal.App.4th at p. 487; In re Automobile Antitrust Cases I & II, supra, 135 Cal.App.4th at p. 126.) In this case the Hollanders were unable to conduct any discovery on the issue of personal jurisdiction.
The trial court attempted to achieve what it perceived to be the same result as a continuance by dismissing the action “without prejudice” and inviting the Hollanders to pursue their discovery and refile their action if they procured evidence to support personal jurisdiction over the defendants. We find this substitute for a continuance unacceptable.
Dismissal with leave to refile after conducting discovery is not the equivalent of continuing the motion to dismiss to permit discovery. When a party refuses to cooperate with discovery the trial court can order compliance and can impose sanctions to force compliance. (Code Civ. Proc., § 2023.030, subds. (a), (b), (c).) Obtaining a non-party’s compliance with discovery, especially of one who resides in a foreign country, such as Bermuda which is not a signatory to the Hague Convention on Taking Evidence Abroad on Civil and Commercial Matters, is much more difficult. (28 U.S.C. § 1781; U.S. State Dept. (2006) Treaties in Force 2006, 449) Furthermore, should the Hollanders’ action be involuntarily dismissed as to the remaining defendants, conducting discovery without an action pending would be virtually impossible. (See Code Civ. Proc., § 2035.010, et seq.; Weil & Brown, Civil Procedure Before Trial (2005) Depositions, § 8:421, et seq.) We conclude, therefore, that the judgment dismissing the Hollanders’ action “without prejudice” was not a valid substitute for an order continuing the hearing to permit the Hollanders to complete their discovery.
DISPOSITION
The judgment is reversed. If defendants renew their motion to dismiss for lack of jurisdiction, the trial court is directed to allow the plaintiffs a reasonable time to conduct discovery on the issue, taking into consideration, among other things, both the complexity of the discovery sought and the defendants’ cooperation therewith. Plaintiffs are awarded their costs on appeal.
We concur: MALLANO, Acting P. J., VOGEL, J.