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Turbo Wholesale Tires, Inc. v. Nankang Rubber Tire Corp.

COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION FOUR
Jan 5, 2012
B225911 (Cal. Ct. App. Jan. 5, 2012)

Opinion

B225911

01-05-2012

TURBO WHOLESALE TIRES, INC., Cross-complainant and Appellant , v. NANKANG RUBBER TIRE CORPORATION LTD., Cross-defendant and Respondent.

Briggs & Alexander, Andrew Do and Peter Sunukjian, for Cross-Complainant and Appellant. Locke Lord Bissell & Liddell, Stephen A. Tuggy and Silvia Huang, for Cross-Defendant and Respondent.


NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Los Angeles County Super. Ct. No. TC021529)

APPEAL from an order of the Superior Court of Los Angeles County, Rose Hom, Judge. Affirmed.

Briggs & Alexander, Andrew Do and Peter Sunukjian, for Cross-Complainant and Appellant.

Locke Lord Bissell & Liddell, Stephen A. Tuggy and Silvia Huang, for Cross-Defendant and Respondent.

Cross-complainant Turbo Wholesale Tires, Inc. (Turbo), appeals an order granting a motion to quash service of summons for lack of personal jurisdiction over Cross-defendant Nankang Rubber Tire Corporation, Ltd. (Nankang Taiwan). (Code Civ. Proc., § 418.10, subd. (a)(1).) We affirm.

FACTUAL AND PROCEDURAL SUMMARY

Turbo, a California corporation, is a wholesale distributor of wheels and tires in California and the United States. Nankang Taiwan is a Taiwanese company headquartered in Taipei. Nankang Taiwan and its wholly owned mainland subsidiary, Nankang Rubber Tire Corporation, Ltd. (Nankang China) (together Nankang), manufacture tires, which are sold to independent distributors free on board (F.O.B.) in Taiwan or China for resale in different parts of the world, including in California. Nankang has no offices or employees in California. For many years, Nankang Taiwan has supplied tires to Tireco, Inc. (Tireco), a California company, under an exclusive distributor agreement, which provides that it is to be interpreted according to Chinese law. Any disputes as to this agreement are subject to arbitration in Taiwan. Tireco, the plaintiff in this case, is not a party to this appeal.

Between 2006 and 2008, tires manufactured by Nankang China were sold F.O.B. in China to LQJ, Global Tire and Strata USA, distributor companies whose principal was Brian Chan. Chan's companies then resold these tires to others, including Turbo in California.

The business relationship between Nankang Taiwan, the entities controlled by Chan, and Turbo developed as follows. John Shaw, who was employed in Nankang Taiwan's export department, visited California in 2006 to discuss with Chan and Turbo representatives the possibility of manufacturing a private brand of tires. Shaw, Chan and Turbo's General Manager, Andre Cruz, subsequently engaged in e-mail correspondence. On March 11, 2006, after Shaw's California visit, Cruz expressed his hope of building a strong business relationship with Shaw's company, sent Shaw a list of tire sizes and units Turbo needed immediately, estimated a three to four time increase in demand "[o]nce the production in China takes place towards the fourth quarter of this year and we go to market throughout North America," and offered to send samples of tread patterns. Two days later, Shaw wrote Cruz and Chan: "We had the meeting discussing the Poweride Brand yesterday. [¶] First I am glad to inform you we are very interested in producing it and as advised the additional capacity we are building is 12,000 daily UHPT ex China.

[¶] Currently your information of monthly requirement is enough for me. You do not have to prepare the pattern design because we would like to show you our own design." On March 28, Shaw asked Cruz and Chan to confirm if a particular SUV pattern was suitable for the Poweride SUV. Shaw met with Turbo again in April 2006. On May 4, Shaw wrote Chan and Cruz that he reported "the current details of our Turbo business" at a management meeting. He asked for an investment of $88,000 in side rings, offered to send a sample tire, and asked for sizes and sales forecasts, as well as input on the SUV tire design. On June 21, 2006, Nankang Taiwan and LQJ by Chan signed a document authorizing Nankang to produce tires under the Strata brand name on LQJ's behalf. LQJ was to retain all rights to the brand. On June 30, Cruz sent Shaw a monthly demand forecast for what was now referred to as the Strata brand tires.

In October 2006, the correspondence shifted to concerns over Tireco's perceived attempts to block the Strata brand. Shaw wrote Cruz and Chan: "We would respect your decision of stopping deliveries. However this result is also what Tireco is expecting." In March 2007, Cruz expressed concern over a problem with tire measurements, claiming that Turbo had $600,000 worth of unsellable Nankang tires. In response, Shaw and two engineers visited Turbo's customer shops in California to demonstrate how the tires could be safely mounted. In May 2007, Shaw assured Cruz that a correction had been made to the SUV tires.

Shaw visited California again in June 2007. In anticipation of a meeting with Chan and Shaw, Cruz wrote: "Our main issue is how we are going to fix our Strata Brand tire issues[.] [¶] As you know this brand was started by our idea of Nankang Tires building an exclusive private brands tire for us by the name of Poweride, along the way we where [sic]convinced by both of you to change the name of the brand to Strata and now we have the issue of exclusivity. [¶] As you both know the reason we started this program was for the exclusive rights to the brand. Please check your records and correspondence of the past in order to refresh your memory." Chan responded that the agenda for the meeting would include the current shipping status and sizes Turbo needed immediately, new sizes requirement, payment issues, and a proposal for Turbo's investment in a new brand since it had not invested in the Strata brand. In November 2007, Cruz and Shaw discussed additional concerns about flawed tire measurements, and Shaw offered Turbo a 20 percent discount.

On January 8, 2008, Nankang and Tireco entered into a settlement agreement after Tireco had sued LQJ, Global Tire, and Chan, invoking the exclusivity clause of the distributor agreement, and Nankang had started arbitration proceedings in Taiwan under the arbitration clause of that agreement. In the settlement agreement, Nankang promised not to "sell or export" tires "directly or indirectly" to anyone other than Tireco within the territory covered by the distributor agreement, which included the United States and its territories, as well as Canada and Mexico. In April 2008, Tireco sued Turbo for intentional interference with its exclusive distributor agreement with Nankang. Turbo withheld payment on delivered tires, and Shaw wrote Cruz and Turbo's president to request that Turbo pay for the Strata tires Nankang had already delivered. Shaw threatened to "hold your shipment from now on" and suggested that "[i]f for some reason you do not want to pay Brian [Chan] you can pay us directly."

In 2009, Turbo filed a first amended cross-complaint against Tireco, alleging interference with economic interests and interference with contract. The cross-complaint included causes of action against Nankang for breach of oral contract, breach of duty of good faith and fair dealing, fraud and deceit, and indemnity. Nankang Taiwan moved to quash service of summons for lack of personal jurisdiction. The motion was heard in April 2010. The court's tentative ruling was that there was no personal jurisdiction. At the hearing, Turbo sought to introduce a spreadsheet prepared by Tireco indicating that Nankang shipped tires directly to California customers. The court continued the hearing to allow Turbo to lay a foundation for this evidence. At a second hearing, held in June 2010, Turbo attempted to offer evidence of Nankang's alleged advertising in the United States. The court, following its original tentative ruling, held that it had no personal jurisdiction over Nankang Taiwan. It refused to consider any evidence and briefing beyond the narrow issue for which the hearing had been continued. Turbo timely appealed.

DISCUSSION


I

"When a nonresident defendant challenges personal jurisdiction, the burden shifts to the plaintiff to demonstrate, by a preponderance of the evidence, that all necessary jurisdictional criteria have been met. The plaintiff can meet this burden only by the presentation of competent evidence in affidavits or declarations and authenticated documentary evidence. [Citation.] Affidavits or declarations consisting primarily of vague assertions of ultimate fact rather than specific evidentiary facts are not sufficient. [Citation.] Once the plaintiff has met the burden of demonstrating facts justifying the exercise of jurisdiction, the burden shifts to the defendant to demonstrate that the exercise of jurisdiction would be unreasonable. [Citations.] [¶] . . . [I]f there is conflicting evidence presented by the parties, we are called upon to determine whether the trial court's decision is supported by substantial evidence [citations], and, in doing so, we resolve all conflicts in the relevant evidence 'against the appellant and in support of the order' [citation]. If there is no conflict in the relevant evidence, the question is one of law as to which we exercise our independent judgment. [Citation.]" (Paneno v. Centres For Academic Programmes Abroad Ltd. (2004) 118 Cal.App.4th 1447, 1454.)

II

California's long-arm statute authorizes California courts to exercise personal jurisdiction over a nonresident defendant who has minimum contacts with the state in conformity with the due process clause of the federal Constitution. (Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 444 (Vons).) There are two types of personal jurisdiction: general and specific. (Id. at p. 445.) A court has general jurisdiction over a nonresident defendant whose contacts with the forum state are substantial, continuous and systematic. (Id. at p. 445.) The contacts must be "so wide-ranging that they take the place of physical presence in the forum as a basis for jurisdiction." (Id. at p. 446.) A court may exercise specific jurisdiction over a nonresident defendant if the defendant has purposefully availed himself or herself of forum benefits, the controversy relates to or arises out of the defendant's contacts with the forum, and other factors do not render jurisdiction unreasonable. (Id. at pp. 446-447, 476.) A. General Jurisdiction

General jurisdiction is necessary over claims unconnected to the defendant's business relationship with the forum. (Vons, supra, 14 Cal.4th at p. 445.) Turbo fails to establish the existence of such jurisdiction over Nankang Taiwan. It is undisputed that Nankang Taiwan has no actual presence in California. Turbo relies on Nankang Taiwan's substantial sales of tires through independent distributors in California, its communications with these distributors, and the distributors' advertising of Nankang products. Nankang Taiwan represents that its sales to California-based independent distributors are structured to minimize its contact with California, and it is the distributors who control the destination of shipments and advertise the products in the United States. The trial court refused to consider Turbo's late-submitted evidence regarding Nankang Taiwan's advertising and control over its distributors' sales. Our review is limited to the evidence the trial court considered, and we resolve controverted evidence in favor of the trial court's order. (Mihlon v. Superior Court (1985) 169 Cal.App.3d 703, 710.)

That tires Nankang sells F.O.B. in China or Taiwan are then independently distributed in California does not expose Nankang Taiwan to general liability in California. As the United States Supreme Court recently clarified, placing products in "the stream of commerce" is "[a] connection so limited between the forum and the foreign corporation [that it] is an inadequate basis for the exercise of general jurisdiction." (Goodyear Dunlop Tires Operations, S.A. v. Brown (2011) __ U.S. ___, 131 S.Ct. 2846, 2851; see also As You Sow v. Crawford Laboratories, Inc. (1996) 50 Cal.App.4th 1859, 1869 [no personal jurisdiction over foreign paint manufacturer who had no control over its products' ultimate destination].) The evidence properly before the trial court does not establish, and Turbo does not argue, that Nankang Taiwan controls the operations of its distributors to such an extent as to be subjected to general jurisdiction on an agency basis. (See DVI, Inc. v. Superior Court (2002) 104 Cal.App.4th 1080, 1094-1095 [general jurisdiction over foreign corporation proper when principal exercises pervasive control over agent].)

B. Specific Jurisdiction

In contract cases, purposeful availment of the forum by a nonresident defendant requires "a 'highly realistic' approach that recognizes that a 'contract' is 'ordinarily but an intermediate step serving to tie up prior business negotiations with future consequences which themselves are the real object of the business transaction.' [Citation.] It is these factors—prior negotiations and contemplated future consequences, along with the terms of the contract and the parties' actual course of dealing—that must be evaluated in determining whether the defendant purposefully established minimum contacts within the forum." (Burger King Corp. v. Rudzewicz (1985) 471 U.S. 462, 479 (Burger King).)

Specific jurisdiction over a non-resident defendant may be premised on acts committed while the defendant was physically present in California. (See Lundgren v. Superior Court (1980) 111 Cal.App.3d 477, 484.) Relying on this principle, Turbo premises its specific jurisdiction argument on two claims: that while present in California, Shaw, on behalf of his employer Nankang Taiwan, induced Turbo to enter into an oral agreement to be the exclusive distributor of Strata tires in North America, and he misrepresented to Turbo that such an agreement would not be inconsistent with Nankang's exclusive distributor agreement with Tireco. While Cruz's declaration supports these claims, Shaw's specifically denies them. "[W]here there is conflict between the declarations of the parties, the explicit and implicit resolution thereof by the trial court may not be reevaluated on appellate review." (Mihlon v. Superior Court, supra, 169 Cal.App.3d at p. 710.) The trial court implicitly resolved these evidentiary conflicts against Turbo. Since we may not reevaluate that resolution on appeal, specific jurisdiction over Nankang Taiwan cannot be premised on these disputed claims.

Although "the plaintiff need not establish the merits of the complaint in order to prove jurisdiction[,] . . . facts relevant to jurisdiction may also bear on the merits of the case. [Citation.]" (In re Automobile Antitrust Cases I & II (2005) 135 Cal.App.4th 100, 118].) At the jurisdictional stage, Turbo failed to establish that it had an oral contract with Nankang Taiwan. Shaw's correspondence with Turbo's representatives does not establish the existence of such a contract or its terms. The correspondence suggests a course of dealing between Nankang Taiwan, Turbo and entities controlled by Chan. While this course of dealing may imply a contractual relationship between Nankang Taiwan and Turbo, Turbo presents no argument that specific jurisdiction may be based on an implied contract, or that it should be in this case. Moreover, substantial evidence in the record before us supports the inference that Chan's various companies had a contractual relationship with Nankang Taiwan, and that the Strata brand was manufactured for Chan's company, LQJ, rather than for Turbo. Thus, Turbo's own relationship with Nankang Taiwan is too attenuated to support specific jurisdiction. (See Burger King, supra, 471 U.S. at p. 475 [purposeful availment "ensures that a defendant will not be haled into a jurisdiction solely as a result of 'random,' 'fortuitous,' or 'attenuated' contacts, [citations], or of the 'unilateral activity of another party or a third person'"].)

Specific jurisdiction is proper when the dispute relates to or has substantial connection to the defendant's forum activities. (Snowney v. Harrah's Entertainment, Inc. (2005) 35 Cal.4th 1054, 1068.) Turbo suggests that the financial benefit Nankang Taiwan derived from its contractual relationship with other California distributors— namely, Chan's companies and Tireco—establishes purposeful availment. But Turbo does not even attempt to argue that the controversy on which its own cross-complaint is based relates to or arises out of Nankang Taiwan's contracts with Chan's companies.

As to Nankang Taiwan's agreements with Tireco, their only connection to California is Tireco's location in the state and its status as Nankang Taiwan's exclusive distributor in North America. The forum selection and choice of law clauses in the distributor and settlement agreements indicate that Nankang Taiwan has not consented to litigate these agreements in California. Turbo's claims do not arise from any actual sales of tires under Nankang Taiwan's agreements with Tireco, so the fact that Tireco sells Nankang tires in California does not subject Nankang Taiwan to specific jurisdiction in this state. (Cf. Bridgestone Corp. v. Superior Court (2002) 99 Cal.App.4th 767, 777-778 [Japanese manufacturer derived substantial benefits from tire sales to consumers in California; its sale of defective tires in Japan for resale in California related to its forum contacts].)

We conclude that Turbo has not established that California courts may exercise general or specific jurisdiction over Nankang Taiwan.

DISPOSITION

The order is affirmed. Respondent shall recover its costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

EPSTEIN, P. J. We concur:

WILLHITE, J.

SUZUKAWA, J.


Summaries of

Turbo Wholesale Tires, Inc. v. Nankang Rubber Tire Corp.

COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION FOUR
Jan 5, 2012
B225911 (Cal. Ct. App. Jan. 5, 2012)
Case details for

Turbo Wholesale Tires, Inc. v. Nankang Rubber Tire Corp.

Case Details

Full title:TURBO WHOLESALE TIRES, INC., Cross-complainant and Appellant , v. NANKANG…

Court:COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION FOUR

Date published: Jan 5, 2012

Citations

B225911 (Cal. Ct. App. Jan. 5, 2012)