Opinion
6:21-cv-01592-MK
06-06-2023
NINKASI HOLDING COMPANY, INC., an Oregon corporation; and NINKASI BREWERY, LLC, an Oregon limited liability company, Plaintiffs, v. NUDE BEVERAGES, INC., a Colorado corporation; and MXM BEVERAGES LTD., doing business as NUDE BEVERAGES CO., a Canadian corporation, Defendants.
FINDINGS AND RECOMMENDATION
MUSTAFA T. KASUBHAI (HE / HIM) UNITED STATES MAGISTRATE JUDGE
Plaintiffs Ninkasi Holding Company, Inc., and Ninkasi Brewery LLC (“Ninkasi”) (collectively, “Plaintiffs”) filed this action against defendants Nude Beverages, Inc. (“NBI”) and MXM Beverages LTD (“MXM”) (collectively, “Defendants”). Plaintiffs' Complaint alleges breach of contract and breach of duty of good faith and fair dealing against Defendants and asks for declaratory and monetary relief. Now before the Court are MXM's Second Motion to Dismiss for Lack of Personal Jurisdiction (ECF No. 38) and Plaintiffs' Motion for Partial Summary Judgment (ECF No. 43). For the reasons below, MXM's Second Motion to Dismiss for Lack of Personal Jurisdiction should be DENIED, and Plaintiffs' Motion for Partial Summary Judgment should be DENIED.
PROCEDURAL BACKGROUND
Plaintiffs filed this action in November 2021 against Defendants. In December 2021, MXM filed a motion to dismiss for lack of personal jurisdiction, alleging that MXM did not have sufficient minimum contacts with Oregon for this Court to exercise jurisdiction. In an order dated July 18, 2022, the District Court denied MXM's motion to dismiss without prejudice and ordered the parties to conduct limited discovery on the issue of whether the Court has personal jurisdiction over MXM.
Defendant MXM filed a Second Motion to Dismiss for Lack of Personal Jurisdiction on February 28, 2023, again asking the Court to dismiss Plaintiffs' claims against them pursuant to Fed.R.Civ.P. 12(b)(2). On March 14, 2023, Plaintiffs filed a Motion for Partial Summary Judgment on their first and fifth claims for relief.
FACTUAL BACKGROUND
This case arises out of defendant NBI's alleged breach of two contracts executed between Plaintiffs and NBI, and the breach of a guaranty agreement by MXM. Defendant MXM is a Canadian corporation with its principal place of business in Vancouver, British Columbia, Canada. Compl. ¶3, ECF No. 1. Defendant NBI is a Colorado corporation with its principal place of business in Boulder, Colorado. Plaintiffs Ninkasi Holding Company and Ninkasi are based in Eugene, Oregon, where this lawsuit was filed. Compl. ¶¶1-3.
Contractual negotiations between MXM, Ninkasi, and NBI began in 2019, culminating in a letter of intent signed by Ninkasi and “Nude Vodka Soda,” doing business under the name MXM. ECF No. 40 at 4. The letter indicated that its purpose was “to create a working relationship/partnership between the companies to produce and distribute the Nude Vodka Soda brand of hard seltzer in the U.S. beginning in November 2019.” ECF No. 41. The parties also executed a confidentiality agreement, again signed by Ninkasi and MXM. These agreements facilitated negotiations between the parties, which culminated in two visits by MXM and NBI's shared employees to Eugene, Oregon to tour Ninkasi's facilities.
At issue in Plaintiffs' motion to dismiss are NBI's alleged breach of the Manufacturing Services Agreement and the Alternative Brewer and Proprietorship Agreement. Plaintiffs also allege breach of a guaranty agreement executed between Plaintiffs and MXM.
I. The Co-Packing Agreement and the Manufacturing Services Agreement (“MSA”)
On December 21, 2019, NBI and Plaintiffs entered into a Co-Packing Agreement, whereby Plaintiffs agreed to manufacture and package beverages for sale by NBI. Compl. ¶11. In November 2020, while NBI was in the process of qualifying as a brewer and obtaining licensure in the state of Oregon, NBI and Ninkasi entered into a second agreement, the Manufacturing Services Agreement, to replace the Co-Packing Agreement. The Co-Packing Agreement terminated effective November 19, 2020. Compl. ¶13.
The Manufacturing Services Agreement (“MSA”) was executed between Plaintiff Ninkasi and NBI on November 19, 2020. Compl. ¶13. It was signed on behalf of NBI by its president and chief executive officer Julius Makarewicz (“Makarewicz”). The MSA allowed Ninkasi to produce and co-pack alcoholic beverages under the brand name “Nude.” The MSA also provided that during a specified “Licensing Period,” NBI would engage Ninkasi to manufacture and package certain products at Ninkasi's facility in Eugene while NBI was in the process of obtaining regulatory approvals from state and federal licensing bodies. Compl. ¶12-16.
The term of the MSA extended through January 31, 2028 (the “Initial Term”). During the Initial Term, NBI did not have the option to terminate the MSA except “for cause” (as defined) or by paying a termination fee of $2,520,000 to Ninkasi. In Section 27 (“Notice”), the parties agreed that any notices required to be given under the MSA be directed to NBI's principal place of business in Boulder, Colorado, with a copy sent to defendant MXM's place of business in Vancouver, British Columbia. Compl. ¶17.
The MSA assigned obligations to both Ninkasi and NBI during the Licensing Period. Specifically, NBI agreed to “order one or more Products from Ninkasi.” Ninkasi agreed to “manufacture, package, sell, and make available the Products to [NBI] or its designee.” Following the Licensing Period, Ninkasi agreed to provide equipment and services to allow NBI to manufacture its products at Ninkasi's facility. Ninkasi and NBI agreed on a minimum volume forecast and minimum reserved line time for each quarter through January 2028. The MSA also provided a shortfall penalty in the event that NBI failed to order the agreed-upon minimum volume.
II. The Alternating Brewer and Proprietorship Agreement (“ABA”)
The second contract at issue in this case, the Alternating Brewer and Proprietorship Agreement (“ABA”), was also executed by Ninkasi and NBI via Makarewicz on November 19, 2020. Compl. ¶18. The ABA provided that NBI would “procure and install certain mutually agreed new equipment” at Ninkasi's facility in Eugene, and that Ninkasi would “alternate” its production lines between its own products and NBI products. Id. The “Initial Term” of the ABA extended through January 31, 2028, with two optional successive five-year terms. During the initial term specified in the ABA, unilateral termination by NBI was allowed “for cause,” or by paying a termination fee of $2,520,000 to Ninkasi.
III. The Guaranty Agreement (“2020 Guaranty”)
The third contract at issue in this case is a guaranty agreement (“Guaranty”) executed between Ninkasi and MXM. The Guaranty agreement was executed on the same day as the ABA and the MSA, November 19, 2020. Compl. ¶19. The Guaranty agreement was also signed by Makarewicz, this time in his capacity as president and chief executive officer of MXM. The Guaranty identified MXM as the “Guarantor” of NBI and provided that the Guarantor “absolutely and unconditionally guarantees payment to [Ninkasi]” on behalf of NBI in connection with NBI's obligations under the MSA. Under the Guaranty, MXM also represented that it had conducted its own independent “credit analysis” of NBI. Compl. ¶20.
IV. The Warehousing and Storage Agreement
The final agreement between the parties at issue in this case is the Warehouse and Storage Agreement. Compl. ¶23. This agreement was executed on April 12, 2021 and was signed by Makarewicz on behalf of NBI. Id. Under this agreement, Ninkasi agreed to repack NBI's products and provide dedicated warehousing services for NBI. In turn, NBI agreed to pay for these services according to a fee schedule and to remit payment within 30 days of any invoice issued by Ninkasi.
In reliance on the MSA and Guaranty Agreement, Plaintiffs incurred significant costs and purchased additional equipment to meet Defendant NBI's requested and projected production volumes. Ninkasi alleges that NBI failed to comply with the MSA and the ABA by failing to pay Ninkasi's invoices. After NBI failed to pay these invoices, Ninkasi requested that MXM pay these invoices on behalf of NBI, pursuant to the Guaranty. As of the filing of Plaintiffs' motion, neither Defendant has made any payment to Ninkasi pursuant to the MSA, the ABA, or the Guaranty agreement.
PERSONAL JURISDICTION OVER MXM
Defendant MXM filed a Second Motion to Dismiss for Lack of Personal Jurisdiction, alleging that they are not subject to this Court's jurisdiction because MXM has not met the minimum contacts standard for personal jurisdiction in Oregon. For the reasons discussed below, MXM's motion should be denied.
STANDARD OF REVIEW
A motion to dismiss under Federal Rule of Civil Procedure 12(b)(2) allows a defendant to move for dismissal on the grounds that the court lacks personal jurisdiction. The plaintiff bears the burden of establishing that the district court has personal jurisdiction over a defendant. Harris Rutsky & Co. Ins. Servs. v. Bell & Clements Ltd., 328 F.3d 1122, 1128 (9th Cir. 2003). “Personal jurisdiction over each defendant must be analyzed separately.” Id. at 1130; Brainerd v. Governors of the Univ. of Alta., 873 F.2d 1257, 1258 (9th Cir. 1989). All factual disputes are resolved in favor of the plaintiff. Lake v. Lake, 817 F.2d 1416, 1420 (9th Cir. 1987). A plaintiff cannot “simply rest on the bare allegations of its complaint,” however, uncontroverted allegations in the complaint must be taken as true. Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004) (quoting Amba Mktg. Sys., Inc. v. Jobar Int'l, Inc., 551 F.2d 784, 787 (9th Cir. 1977)).
DISCUSSION
Unless a federal statute governs personal jurisdiction, a district court applies the law of the forum state. See Boschetto v. Hansing, 539 F.3d 1011, 1015 (9th Cir. 2008). Oregon's long-arm statute is co-extensive with constitutional standards. Gray & Co. v. Firstenberg Mach. Co., 913 F.2d 758, 760 (9th Cir. 1990) (citing Or. R. Civ. P. 4(L)); Oregon ex rel. Hydraulic Servocontrols Corp. v. Dale, 657 P.2d 211, 212 (Or. 1982). Thus, this Court need only determine whether an exercise of personal jurisdiction over MXM would offend constitutional due process requirements. See Boschetto, 539 F.3d at 1015; see also Hydraulic Servocontrols, 657 P.2d at 212.
Due process requires that a defendant “have certain minimum contacts with [the forum] such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.'” Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (citations omitted). The Supreme Court has rejected the application of “mechanical” tests to determine personal jurisdiction. Id. at 319; see also Burger King Corp. v. Rudzewicz, 471 U.S. 462, 478 (1985). Rather, a court should consider the “quality and nature of the activity in relation to the fair and orderly administration of the laws which it was the purpose of the due process clause to insure.” Int'l Shoe, 326 U.S. at 319.
“There are two forms of personal jurisdiction that a forum state may exercise over a nonresident defendant general jurisdiction and specific jurisdiction.” Boschetto, 539 F.3d at 1016. A court has general personal jurisdiction over a defendant whose contacts with the forum are “continuous and systematic” even if those contacts are wholly unrelated to the plaintiff's claims. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 415-16 (1984). If the court lacks general personal jurisdiction, it may have specific personal jurisdiction if the defendant has certain minimum contacts with the forum state, the controversy arose out of those contacts, and the exercise of jurisdiction is reasonable. See Burger King, 471 U.S. at 472-74.
The Ninth Circuit applies a three-part test to determine if the exercise of specific jurisdiction over a nonresident defendant is appropriate:
(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. Brayton Purcell LLP v. Recordon & Recordon, 606 F.3d 1124, 1128 (9th Cir. 2010); Picot v. Weston, 780 F.3d 1206, 1211 (9th Cir. 2015). The plaintiff bears the burden as to the first two prongs, but if both are established, then “the defendant must come forward with a ‘compelling case' that the exercise of jurisdiction would not be reasonable.” Boschetto, 539 F.3d at 1016 (quoting Schwarzenegger, 374 F.3d at 802).
To determine whether MXM is subject to this Court's jurisdiction, the Court applies the three-part test articulated by the Ninth Circuit. Brayton Purcell, 606 F.3d at 1128; Picot, 780 F.3d at 1211. For the reasons discussed below, the Court finds that Plaintiffs have met their burden with respect to the first two prongs. The Court also finds that MXM has not made a compelling case that the exercise of jurisdiction would not be reasonable, and that the third prong is therefore satisfied. The Court therefore concludes that MXM is subject to personal jurisdiction in Oregon.
I. The First Prong
The first prong of the Ninth Circuit's test for specific jurisdiction embodies two distinct, although sometimes conflated, concepts: purposeful availment and purposeful direction. See Washington Shoe Co. v. A-Z Sporting Goods Inc., 704 F.3d 668, 672 (9th Cir. 2012); Brayton Purcell, 606 F.3d at 1128. “A purposeful availment analysis is most often used in suits sounding in contract. A purposeful direction analysis, on the other hand, is most often used in suits sounding in tort.” Schwarzenegger, 374 F.3d at 802 (internal citations omitted). As this is a contract case, the Court examines whether MXM availed itself of the privilege of conducting activities in Oregon.
Upon a careful review of the record, the Court first finds that, through its representatives Makarewics and Warren Spence, and consultant Angela Hilton, MXM availed itself of the privilege of conducting business activities in Oregon. The Ninth Circuit has addressed whether an individual who personally guaranteed a corporation's obligations in the forum state is subject to specific jurisdiction in that state, twice affirming that personal jurisdiction was proper. Forsythe v. Overmyer, 576 F.2d 779,782-84 (9th Cir. 1978) (citations omitted), Global Commodities Trading Grp., Inc. v. Beneficio de Arroz Choloma, S.A., 972 F.3d 1101, 1110 (9th Cir. 2020) (citations omitted). While those cases considered personal jurisdiction over an individual, the Court utilizes the analytical frameworks in Forsythe and Global Commodities to determine whether the purposeful availment prong of the Ninth Circuit's test for personal jurisdiction is met.
A. Forsythe v. Overmyer
In Forsythe, the Ninth circuit held that personal jurisdiction was proper over the owner of a corporation who personally guaranteed the corporation's obligations under a sale-and-leaseback agreement in the forum state of California. 576 F.2d at 782. The court found that personal jurisdiction was proper because: (1) the contract between the plaintiff and the owner of the corporation was “negotiated in California, and was expressly subject to interpretation under California law, by California courts”; and (2) the owner “participated personally to secure a benefit for his corporation, and indirectly, himself.” Id. at 783. The court concluded that the defendant “interjected himself into the transaction by assuming personal liability in the event of default on a contract expressly subject to jurisdiction in the California forum” and that the “guaranty was part of the negotiating strategy in California.” Id.
1. The parties' contracts were negotiated in Oregon and subject to Oregon law
Here, the course of dealings between MXM and Ninkasi indicates that MXM had multiple, intentional contacts with Oregon. Specifically, MXM had multiple contacts with Oregon through its representatives Makarewicz and Warren Spence. Makarewicz is the CEO of MXM, and Mr. Spence is MXM's agent and Head of Operations for both MXM and NBI. ECF No. 38 at 3-4. At all relevant times, Makarewicz had signing authority on behalf of MXM and NBI. MXM Dep. 14:25-15:3.
Mr. Spence and Makarewicz visited Oregon to tour the Ninkasi facility in Eugene. At the time, Makarewicz was the sole board member of NBI and Spence was also an officer of NBI. Makarewicz Decl. at 2-5. These visits occurred prior to the execution of the 2019 Co-Packing agreement and the 2019 guaranty. While the parties dispute whether Ninkasi entered into the 2019 Co-Packing agreement at the inducement of MXM's promise of the 2019 guaranty, the Court resolves all factual disputes in favor of Plaintiffs. Lake, 817 F.2d at 1420.
Makarewicz also signed the 2020 Guaranty agreement with Ninkasi via email, after it was emailed to Mr. Spence by Ninkasi's owner, Nikos Ridge. ECF No. 38 at 4. MXM and Ninkasi also exchanged emails regarding the 2020 Guaranty agreement and the 2019 guaranty agreement related to the 2019 Co-Packing Agreement. ECF No. 38 at 4. Like the defendant in Forsythe, MXM negotiated contracts with Ninkasi that were expressly subject to interpretation under Oregon law pursuant to a choice of law provision. 576 F.2d at 783. While an agreement to be subject to Oregon law alone is not sufficient to confer personal jurisdiction within Oregon, the Supreme Court has observed that “[n]othing in our cases ... suggests that a choice-of-law provision should be ignored in considering whether a defendant has ‘purposefully invoked the benefits and protections of a State's laws' for jurisdictional purposes.” Burger King, 471 U.S. at 482 (finding that, when combined with the interdependent relationship defendant established with forum state, choice-of-law provision reinforced defendant's deliberate affiliation with the forum state and the reasonable foreseeability of possible litigation there). The Court therefore finds that MXM's agreement to be bound by Oregon law weighs in favor of finding that MXM deliberately availed itself of doing business in Oregon and could reasonably foresee the possibility of litigation in that state.
The parties do not dispute that the second Guaranty, signed by Plaintiffs and MXM, contained an Oregon choice of law provision.
2. MXM's participation secured a benefit for MXM
The Court also finds that MXM's participation in contract negotiations and agreements with the Plaintiffs secured a benefit for MXM, and therefore satisfies the second factor of the analytical framework applied in Forsythe. 576 F.2d at 783. Here, the purpose of MXM's guaranties was clearly for the benefit of MXM, as both agreements guaranteed debts for NBI, MXM's wholly owned U.S. subsidiary. MXM thus executed the guaranty agreements for the purpose of obtaining benefits from an Oregon corporation via its subsidiary, NBI.
B. Global Commodities v. Beneficio
In Global Commodities, the Ninth Circuit examined whether the president and secretary of a foreign corporation who personally guaranteed a note was subject to personal jurisdiction in California. 972 F.3d at 1104-05. The court found that the plaintiff had made a prima facie showing of personal jurisdiction based on multiple factors, including (1) the parties' relationship “over several years, and hundreds of contracts”; (2) payments on a prior contracts made in the forum state; (3) the out-of-forum defendant's inducement of the plaintiff to continue business relations by guaranteeing a debt within in California; and (4) whether that promise was made for the “purpose of obtaining benefits from [the forum state's] corporation.” Id. at 1108.
1. Relationship between the parties
MXM argues that because they made far fewer contacts within Oregon than the “hundreds of contracts” at issue in Global Commodities, that case is inapposite. 972 F.3d 1108. While the Court recognizes this quantitative distinction, it notes that the court in Global Commodities indicated that these contacts far exceeded the sufficient minimum contact standard. Id. at 1110 (noting that defendant's contacts with the forum state were “extensive”). Further, the Ninth Circuit has “emphasized that courts must evaluate the parties' entire course of dealing, not solely the particular contract or tortious conduct giving rise to the claim, when assessing whether a defendant has minimum contacts with a forum.” Global Commodities, 972 F.3d. at 1108. In other words, none of the factors considered in Global Commodities was considered individually necessary for the Ninth Circuit to find that jurisdiction was proper. See Int'l Shoe Co., 326 U.S. at 319 (rejecting the application of “mechanical” tests to determine personal jurisdiction). As discussed above, the Court is satisfied that MXM, through its agents and representatives, made contacts with Oregon sufficient to establish a substantial business relationship between the parties.
2. Payments on prior contracts in Oregon
MXM also argues that personal jurisdiction is not proper because, unlike the defendants in Global Commodities, MXM made no payments in Oregon. In this case, however, MXM's failure to make payments to Ninkasi is the basis of Plaintiffs' cause of action against MXM. Therefore, the issue of MXM's prior payments in Oregon is not central to this Court's jurisdictional analysis. Int'l Shoe Co., 326 U.S. at 319 (mechanical tests should not be applied to determine personal jurisdiction). Further, while the Court recognizes that NBI made payments to Ninkasi from its U.S.-based bank account, NBI and MXM shared financial information, the two entities generated consolidated financial statements, and Makarewicz managed that accounting and electronic records of both NBI and MXM, all of which were stored at MXM's offices. ECF No. 40 at 3. Therefore to the extent that MXM's financial activities within the forum state are relevant to this Court's analysis of personal jurisdiction, the evidence weighs in favor of MXM's involvement in payments on prior contract in Oregon via its wholly owned subsidiary, NBI. See Global Commodities, 972 F.3d. at 1108 (courts must evaluate the parties' entire course of dealing ...when assessing whether a defendant has minimum contacts with a forum).
3. MXM's inducement of business relations
As noted above, MXM CEO Makarewicz signed the MSA and the 2020 Guaranty, which replaced the Co-packing agreement and the earlier guaranty executed between Ninkasi and MXM in 2019. MXM's assumption of liability played an integral role in facilitating and inducing contract negotiations between NBI and Ninkasi. Here, MXM assumed liability in the event of NBI's default on any of its contracts with Ninkasi. See id. Indeed, MXM signed the 2020 Guaranty on the same day as NBI executed the ABA and the MSA, consistent with Plaintiffs' allegation that MXM's guaranty induced their business activities with NBI, and that they relied on this guaranty to their detriment. Compl. ¶22 (“In reliance on the promises in the MSA, the Alternating Brewer Agreement and the Guaranty, Plaintiffs incurred significant costs to purchase and prepare the additional equipment needed to meet [NBI's] requested and projected beverage production volumes”); ¶24 (“in reliance on the promises in the MSA, the Alternating Brewer Agreement, the Warehousing Agreement and the Guaranty, [Plaintiffs] manufactured and packaged beverage products and issued invoices to NBI for its services”). Resolving all factual disputes in favor of Plaintiffs, the Court finds that, like in Global Commodities, MXM's inducement of Plaintiffs to continue business relations with NBI by guaranteeing a debt within Oregon mitigates in favor of this Court's jurisdiction over MXM. Lake, 817 F.2d at 1420; Global Commodities, 972 F.3d at 1110. It is clear from Plaintiffs' pleadings that MXM's representations in negotiations that culminated in the 2019 and 2020 Guaranty agreements induced Plaintiff to engage in business relations with NBI. This factor therefore weighs in favor of the Court's jurisdiction over MXM.
4. Purpose of guaranty agreements
Finally, the purpose of MXM's guaranty agreements was for the benefit of MXM, as both agreements guaranteed NBI's debts as MXM's wholly owned U.S. subsidiary. On this record, having carefully considered the factors analyzed in Forsythe and Global Commodities, the Court is satisfied that MXM availed itself of the privilege of conducting business activities in Oregon. While MXM makes much of the fact that the Global Commodities decision is more recent than the Ninth Circuit's decision in Forsythe, the Ninth Circuit made clear in Global Commodities that “our holding in Forsythe that a personal guaranty of a corporation's debt may give rise to personal jurisdiction over a corporate officer remains good law.” 972 F.3d at 1110. Here, MXM's multiple promises to guarantee NBI's debts, together with its agents' and consultant's dealings in Oregon, are sufficient to constitute purposeful availment of the forum state of Oregon. The first prong of the inquiry is therefore satisfied. 606 F.3d at 1128.
B. The Second and Third Prongs
The second and third prongs of the specific jurisdiction inquiry are also satisfied. As to the second prong, the parties do not dispute that the claims in this case, specifically Plaintiffs' allegations that MXM breached the 2020 Guaranty agreement, arise out of MXM's forum-related activities. As to the third prong, MXM has not made a compelling case that the exercise of jurisdiction would not be reasonable. Here, MXM argues that to hale them into court would disrespect the limited liability purposes of the corporate form, citing Uston v. Grand Resorts, Inc., 564 F.2d 1217 (9th Cir. 1977). In that case, the Ninth Circuit held that the “activities of a parent are irrelevant to the issue of jurisdiction of an absent subsidiary.” Id. at 1218 (emphasis added). Here, by contrast, NBI is not an absent party to this case, and was present throughout the course of dealings at issue. If MXM is held liable in this case, it will be due to MXM's breach of its promises as memorialized in the 2020 Guaranty agreement, consistent with ordinary principles of corporate liability. Because MXM has not shown that this Court's exercise of jurisdiction would not be reasonable, the third prong of the test for specific jurisdiction is satisfied.
In sum, Plaintiffs have presented evidence that MXM was present and influential in the course of dealings between the parties with respect to the agreements at issue in this breach of contract action. Because MXM purposefully availed itself of the privileges of doing business in Oregon through its forum-related activities, MXM could have reasonably foreseen that these actions would subject them to jurisdiction in Oregon's courts. MXM's motion to dismiss for lack of personal jurisdiction should therefore be denied.
MOTION FOR PARTIAL SUMMARY JUDGMENT
On March 14, 2023, Plaintiffs moved for summary judgment on Counts 1 and 2 of their First Claim for Relief against NBI for breach of the MSA and the ABA, and on their Fifth Claim for Relief against MXM for breach of the 2020 Guaranty agreement. ECF No. 43. For the reasons stated below, Plaintiffs' motion should be denied.
STANDARD OF REVIEW
Summary judgment is appropriate if the pleadings, depositions, answers to interrogatories, affidavits, and admissions on file, if any, show “that there is no genuine dispute as to any material fact and the [moving party] is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). Substantive law on an issue determines the materiality of a fact. T.W. Elec. Servs., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987). Whether the evidence is such that a reasonable jury could return a verdict for the nonmoving party determines the authenticity of the dispute. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
The moving party has the burden of establishing the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the moving party shows the absence of a genuine issue of material fact, the nonmoving party must go beyond the pleadings and identify facts which show a genuine issue for trial. Id. at 324.
Special rules of construction apply when evaluating a summary judgment motion: (1) all reasonable doubts as to the existence of genuine issues of material fact should be resolved against the moving party; and (2) all inferences to be drawn from the underlying facts must be viewed in the light most favorable to the nonmoving party. T.W. Elec., 809 F.2d at 630.
DISCUSSION
In their motion for partial summary judgment, Plaintiffs argue that they are entitled to summary judgment on (1) Count 1 of their First Claim for Relief claim for NBI's breach of the Manufacturing Services Agreement; (2) Count 2 of their First Claim of Relief for NBI's breach of the Alternating Brewer and Proprietorship Agreement (“ABA”); and (3) their Fifth Claim for Relief for MXM's breach of the Guaranty agreement. Because Plaintiffs' arguments and NBI's defenses with respect to NBI's alleged breach of the MSA and ABA contracts are substantially similar, the Court considers these arguments together.
I. Breach of the MSA and the ABA
Plaintiffs first argue that they are entitled to summary judgment on Counts 1 and 2 of their First Claim for Relief because there is no issue of material fact as to whether NBI breached the MSA and the ABA. Plaintiffs argue that because NBI failed to make any payments due to Plaintiffs under the MSA or the ABA, and full fact discovery has been made as to NBI as of February 17, 2023, there are no outstanding issues of material fact with respect to this Count and summary judgment is therefore appropriate.
Here, it is undisputed that NBI failed to make payments to Plaintiffs under the MSA and the ABA. The issue before the Court is therefore whether outstanding issues of material fact exist with respect to NBI's obligations under the contracts that would preclude summary judgment. Defendants argue that (1) summary judgment is premature and inappropriate because NBI has not had sufficient time to conduct discovery on potential defenses; (2) that the MSA is an unenforceable illusory contract; (3) that NBI is excused from performance under the force majeure clause of the MSA; (4) that NBI's performance under the ABA is excused by failure of condition precedent; and (5) that there are genuine issues of material fact that preclude summary judgment regarding NBI's affirmative defenses, which include breach of contract by Ninkasi and allegations of meddling, interference, and bad faith that excuse the alleged breach of the ABA. Because the Court finds that there are genuine issues of material fact regarding NBI's affirmative defenses, summary judgment should be denied as to Counts 1 and 2 of Plaintiffs' First Claim for Relief.
A. NBI's Affirmative Defenses
Defendants argue that NBI was excused from performance under the MSA and the ABA because of Plaintiffs' conduct, including (1) breach of contract by Ninkasi that excuses any alleged breach of the MSA; and (2) that Plaintiffs' employee Nikos Ridge engaged in meddling, interference, and bad faith that excused NBI's alleged breach of the ABA.
Defendants also argue that Plaintiffs failed to mitigate damages once NBI informed Defendants that they would not be able to perform on either contract. Because this argument goes to the amount of Plaintiffs' alleged damages and not the liability issues raised in Plaintiffs' summary judgment motion, the Court does not reach this issue.
1. Breach of contract by Ninkasi
Defendants note that Section 2(b) of the MSA required the parties to meet periodically to “review and confirm” the minimum purchase obligations. Defendants allege that Plaintiffs failed to respond to any of NBI's requests to negotiate, review, and confirm the minimum purchase obligations. Plaintiffs argue that they were under no obligation to agree to NBI's proposed modifications to reduce the minimum purchase obligations and provide a declaration from Nikos Ridge stating that Ridge had repeated telephone calls and email communications with NBI to review NBI's minimum purchasing obligations. ECF No. 53 at 2. Ridge states that he “proposed modifications to the MSA which would be acceptable to Ninkasi [and] never received confirmation that these proposed modifications were acceptable to [NBI] or MXM.” Id.
The contractual requirement to periodically “confirm” these obligations under the MSA arguably suggests that the parties were required to reach an agreement as to the ongoing minimum purchase obligations, and Plaintiffs' declaration confirms that the parties failed reach any agreement. On this record, resolving all reasonable doubts as to the existence of genuine issues of material fact against the moving party and drawing all inferences in the light most favorable to Defendants, the Court finds that Defendants have raised a genuine issue of material fact as to whether Plaintiffs failed to meet the requirements of Section 2(b) of the MSA. ECF No. 53. Consequently, Defendants have raised an issue of fact as to whether NBI's failure to pay the minimum purchase obligations under the MSA is excused by Plaintiffs' nonperformance. T.W. Elec., 809 F.2d at 630.
2. Interference with contract
Defendants also argue that Plaintiffs interfered with NBI's other contractual relationships in a manner that prevented NBI from performing on the ABA requirement to procure and install equipment. Here, Defendants allege that NBI was unable to obtain the licensure required to do business under the contract, which rendered their equipment “functionally worthless.” Defendants allege that Plaintiff's agent Nikos Ridge sent an email to an equipment supplier suggesting that NBI did not intend to perform on its agreement with the supplier, thereby interfering with NBI's ability to perform on its contractual obligations. The equipment supplier sued NBI and NBI was subsequently “driven out of business,” and thus unable to perform on its contracts with Ninkasi. ECF No. 48 at 11.
While Plaintiffs argue that there was no “implication” in Ridge's email to suggest that NBI did not intend to perform on its agreement with the equipment supplier, this is a question that cannot be resolved on a summary judgment motion. Because Defendants' allegations about Mr. Ridge's interference with NBI's contractual performance raise a genuine issue of material fact, summary judgment is precluded. T.W. Elec., 809 F.2d at 630. In sum, summary judgment on Counts 1 and 2 of Defendants' First Claim for Relief is inappropriate and should be denied.
II. Breach of the 2020 Guaranty Agreement
Plaintiffs next argue that they are entitled to summary judgment on their Fifth Claim for Relief because there is no issue of material fact as to whether MXM breached the 2020 Guaranty agreement. As an initial matter, discovery has not opened as to MXM's potential liability in this case. Under Oregon law, “[g]uarantors generally may assert defenses available to the party whose obligation is guaranteed.” Ochoa Lumber Co. v. Fibrex & Shipping Co., Inc., 164 Or.App. 769, 776 (2000). Here, NBI has asserted numerous defenses that would excuse MXM's performance under the 2020 Guaranty agreement, and MXM should be entitled to conduct full fact discovery as to these defenses. The Court therefore finds that any ruling on a summary judgment as to MXM's breach would be premature. Plaintiffs' motion for partial summary judgment on their Fifth Claim for Relief should therefore be denied.
RECOMMENDATION
For the reasons above, MXM's motion to dismiss for lack of personal jurisdiction (ECF No. 38) should be DENIED. Plaintiffs' motion for partial summary judgment (ECF No. 43) should be DENIED.
This recommendation is not an order that is immediately appealable to the Ninth Circuit Court of Appeals. Any notice of appeal pursuant to Federal Rule of Appellate Procedure 4(a)(1) should not be filed until entry of the district court's judgment or appealable order. The Findings and Recommendation will be referred to a district judge. Objections to this Findings and Recommendation, if any, are due fourteen (14) days from today's date. See Fed.R.Civ.P. 72. Failure to file objections within the specified time may waive the right to appeal the district court's order. Martinez v. Ylst, 951 F.2d 1153, 1157 (9th Cir. 1991).