Menalco, FZE et al v. Buchan et al
Filing
209
ORDERgranting 162 Motion to Dismiss for Lack of Jurisdiction. Defendants Timothy Hanley Koster; Convergence Capital Limited and Christopher Ernest Eddy dismissed from this action for lack of personal jurisdiction. Signed by Judge Philip M. Pro on 3/16/09. (Copies have been distributed pursuant to the NEF - AXM)
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 P re se n tly before the Court is Defendants Convergence Capital Limited's, C h ris to p h e r Ernest Eddy's, and Timothy Hanley Koster's Renewed Motion to Dismiss P u rs u a n t to FRCP 12(b)(2) or, Alternatively, for Forum Non Conveniens (Doc. #162), filed o n October 8, 2008. Plaintiffs filed an Opposition (Doc. #169) on October 24, 2008. Defendants filed a Reply (Doc. #193) on January 1, 2009. I . BACKGROUND P la in tif f The International Investor ("TII") is a Kuwaiti corporation which wholly o w n s Plaintiff Menalco, FZE ("Menalco"), a United Arab Emirates limited liability c o rp o ra tio n . (Compl. (Doc. #1) at 2-3.) Plaintiffs are in the "loyalty" business, meaning th e y create systems to generate and retain customer loyalty to merchants and financial in s titu tio n s through, for example, rewards programs. (Id. at 3.) Plaintiffs developed a lo ya lty program called "selektpoints" through which customers earn points for using a bank c a rd and the points are redeemable for certain rewards, such as travel or special offers from v a rio u s merchants. (Id. at 5.) /// v. R O B E R T GORDON BUCHAN, et al., Defendants. M E N A L C O , FZE, et al., P la in tif f s , UNITED STATES DISTRICT COURT D IS T R IC T OF NEVADA *** ) ) ) ) ) ) ) ) ) ) )
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P la in tif f s obtained a license from Defendant Phoenix Technology Holdings, Inc. (" P h o e n ix " ) to utilize certain patented software owned by Defendant Smart Chip T e c h n o lo g ie s, d/b/a Schimatic Cash Transactions Network.com ("SCTN"). (Id. at 11.) Phoenix is a Turks and Caicos Islands company with its principal place of business in either O n ta rio , Canada or the Turks and Caicos Islands. (Id. at 4, Answer (Doc. #19) at 28.) SCTN is a Nevada corporation with its principal place of business in Las Vegas, Nevada. (Answer at 24.) Plaintiffs allege they hired Defendant Mark Bone-Knell ("Bone-Knell"), the S e c re ta ry of Defendant Convergence Capital Limited ("Convergence"), to file a patent in th e United Kingdom on Plaintiff Menalco's behalf. (Id. at 9.) Convergence is a United A ra b Emirates company. (Id. at 3.) Convergence's directors and major shareholders are D e f e n d a n ts Timothy Koster ("Koster") and Christopher Eddy ("Eddy"). (Id.) Koster and E d d y are residents of the United Arab Emirates. (Defs.' Mot. to Dismiss (Doc. #108), Exs. A , B.) Koster and Eddy later approached Plaintiffs about Convergence purchasing the s e le k tp o in ts program. (Id. at 10.) Plaintiffs engaged in negotiations, but ultimately d e c lin e d to enter any agreement with Convergence. (Id.) A few months after these negotiations concluded, Koster, Eddy, and two TII e m p lo ye e s , Defendant Edward Holmes ("Holmes") and Defendant Robert Buchan (" B u c h a n " ), allegedly formed Defendant Consumer Behavioral Data Corp. ("CBData"), a C a ym a n Islands corporation. (Id. at 3, 11.) In June 2007, Phoenix and SCTN negotiated a m e m o ra n d u m of understanding ("MOU") with CBData under which CBData would acquire P h o e n ix and SCTN. (Id. at 12.) The MOU never was executed. (Answer at 54 & Ex. 13.) The Complaint alleges Koster, Eddy, Holmes, and Buchan formed CBData to appropriate th e selektpoints program for themselves, and took such actions as trying to obtain patent p ro te c tio n for the selektpoints business model under CBData's name. (Compl. at 11.) Additionally, Plaintiffs contend these Defendants started to contact third parties on 2
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C B D a ta 's behalf, marketing the selektpoints program as CBData's and seeking investors. (Id. at 12-14.) Plaintiffs filed suit in this Court on August 30, 2007, asserting against D e f e n d a n ts claims for federal and Nevada civil RICO violations, misappropriation of trade s e c re ts , fraud, civil conspiracy to defraud, unjust enrichment, breach of contract, breach of f id u c ia ry duty, and unfair competition. Defendants Koster, Eddy, and Convergence previously moved to dismiss for lack o f personal jurisdiction (Doc. #108). Defendants argued they had no Nevada contacts to s u p p o rt either general or specific jurisdiction. Defendants also argued that if the Court f o u n d personal jurisdiction existed, the Court nevertheless should dismiss under the d o c trin e of forum non conveniens. In support of their motion, Defendants Koster and Eddy f ile d declarations indicating they have never conducted business or owned property in N e v a d a , nor has Convergence. (Defs.' Mot. to Dismiss, Exs. A, B.) Additionally, Koster a n d Eddy averred that they have never entered into an agreement with SCTN, nor has C o n v e rg e n c e . (Id.) In response, Plaintiffs argued Defendants had engaged in significant a c tiv ity directed at Nevada through their relationship with alleged co-conspirator SCTN. Plaintiffs also argued the Court should not dismiss on forum non conveniens grounds, as no a v a ila b le alternative forum existed, and Defendants had not shown the factors weighed in f a v o r of dismissal. The Court denied Defendants' motion without prejudice to renew after th e parties conducted jurisdictional discovery. (Mins. of Proceedings (Doc. #134).) Defendants now renew their motion to dismiss, arguing Plaintiffs cannot d e m o n s tra te sufficient contacts with Nevada to support either general or specific personal ju ris d ic tio n . Plaintiffs respond that Defendants have had significant contacts with the f o ru m through their efforts to purchase SCTN in furtherance of the conspiracy to m isa p p ro p ria te Plaintiffs' selektpoints program. Additionally, Plaintiffs argue Defendants o b s tru c te d jurisdictional discovery and failed to turn over discovery materials. Plaintiffs s u g g e s t the Court should infer that if Defendants had produced all relevant evidence, it 3
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w o u ld establish Defendants' contacts with Nevada. Plaintiffs also contend Defendants e n g a g e d in a scheme in which they agreed to be sued as Cross-Defendants in this action. Plaintiffs argue that having agreed to be named in collusive claims in this Court, D e f e n d a n ts should not be permitted to claim lack of personal jurisdiction. Finally, P la in tif f s argue Defendants have abandoned the forum non conveniens argument, as D e f e n d a n ts did not argue it in their renewed motion to dismiss and did not correct the d e f ic ie n c ie s this Court previously noted at the hearing on the prior motion. Defendants reply that they did not willfully obstruct discovery, as they relied on th e ir corporate secretary, Bone-Knell, to gather documents, and did not realize he had not p ro v id e d all relevant emails. Additionally, Defendants argue they have not agreed to be C ro s s -D e f e n d a n ts in this action. On the merits, Defendants argue they did not know SCTN w a s a Nevada-based company, as the telephone numbers they were given for SCTN were O n ta rio , Canada numbers. Finally, Defendants contend they have not abandoned their f o ru m non conveniens argument, and Dubai is an available alternative forum. I I . DISCUSSION " W h e n a defendant moves to dismiss for lack of personal jurisdiction, the p la in tif f bears the burden of demonstrating that the court has jurisdiction over the d e f e n d a n t." Pebble Beach Co. v. Caddy, 453 F.3d 1151, 1154 (9th Cir. 2006). To meet this b u rd e n , a plaintiff must demonstrate that personal jurisdiction over a defendant is (1) p e rm itte d under the applicable state's long-arm statute and (2) that the exercise of ju ris d ic tio n does not violate federal due process. Id. The Court must analyze whether p e rs o n a l jurisdiction exists over each defendant separately. Harris Rutsky & Co. Ins. S e rv s ., Inc. v. Bell & Clements Ltd., 328 F.3d 1122, 1130 (9th Cir. 2003). Where the issue is before the Court on a motion to dismiss based on affidavits a n d discovery materials without an evidentiary hearing, the plaintiff must make "a prima f a c ie showing of facts supporting jurisdiction through its pleadings and affidavits to avoid 4
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d is m is s a l." Glencore Grain Rotterdam B.V. v. Shivnath Rai Harnarain Co., 284 F.3d 1114, 1 1 1 9 (9th Cir. 2002). The Court accepts as true any uncontroverted allegations in the c o m p la in t and resolves any conflicts between the facts contained in the parties' evidence in th e plaintiff's favor. Id. However, for personal jurisdiction purposes, a court "may not a s s u m e the truth of allegations in a pleading which are contradicted by affidavit." Alexander v. Circus Circus Enters., Inc., 972 F.2d 261, 262 (9th Cir. 1992) (quotation o m itte d ). S u b je c t matter jurisdiction in this case is predicated both on a federal question a n d diversity. Where subject matter jurisdiction is based on a federal question, "the e x e rc ise of personal jurisdiction over a non-resident defendant must be authorized by a rule o r statute and consonant with the constitutional principles of due process." Glencore Grain, 2 8 4 F.3d at 1123. Where subject matter jurisdiction is based on diversity, "a federal court a p p lie s the personal jurisdiction rules of the forum state provided the exercise of ju ris d ic tio n comports with due process." Scott v. Breeland, 792 F.2d 925, 927 (9th Cir. 1 9 8 6 ). However, "federal law is controlling on the issue of due process under the United S ta te s Constitution." Data Disc, Inc. v. Sys. Tech. Assoc., Inc., 557 F.2d 1280, 1286 n.3 (9 th Cir. 1977); see also Dole Food Co., Inc. v. Watts, 303 F.3d 1104, 1110 (9th Cir. 2002). T o satisfy federal due process standards, a nonresident defendant must have " m in im u m contacts" with the forum state so that the assertion of jurisdiction does not o f f e n d traditional notions of fair play and substantial justice. Pebble Beach Co., 453 F.3d at 1 1 5 5 (citing Int'l Shoe Co. v. Washington, 326 U.S. 310, 315 (1945)). A federal district c o u rt may exercise either general or specific personal jurisdiction. See Helicopteros N a c io n a le s de Colombia, S.A. v. Hall, 466 U.S. 408, 414-15 (1984). T o establish general personal jurisdiction, the plaintiff must demonstrate the d e f e n d a n t has sufficient contacts to "constitute the kind of continuous and systematic g e n e ra l business contacts that `approximate physical presence.'" Glencore Grain, 284 F.3d 5
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a t 1124 (quoting Bancroft & Masters, Inc. v. Augusta Nat'l Inc., 223 F.3d 1082, 1086 (9th C ir. 2000), modified, Yahoo! Inc. v. La Ligue Contre Le Racisme Et L'Antisemitisme, 433 F .3 d 1199, 1207 (9th Cir. 2006) (en banc)). Courts consider such factors as whether the d e f e n d a n t makes sales, solicits or engages in business in the state, serves the state's m a rk e ts , designates an agent for service of process, holds a license, or is incorporated there. Bancroft, 223 F.3d at 1086. "[A] defendant whose contacts are substantial, continuous, and s ys te m a tic is subject to a court's general jurisdiction even if the suit concerns matters not a risin g out of his contacts with the forum." Glencore Grain, 284 F.3d at 1123 (citing H e lic o p te ro s , 466 U.S. at 415 n.9). A nonresident defendant's contacts with the forum state may permit the exercise o f specific jurisdiction if: (1) the defendant has performed some act or transaction within th e forum or purposefully availed himself of the privileges of conducting activities within th e forum, (2) the plaintiff's claim arises out of or results from the defendant's forumre la te d activities, and (3) the exercise of jurisdiction over the defendant is reasonable. Pebble Beach Co., 453 F.3d at 1155-56. "If any of the three requirements is not satisfied, ju ris d ic tio n in the forum would deprive the defendant of due process of law." Omeluk v. L a n g ste n Slip & Batbyggeri A/S, 52 F.3d 267, 270 (9th Cir. 1995). Under the first prong of the "minimum contacts test," the plaintiff must establish e ith e r that the defendant "(1) purposefully availed himself of the privilege of conducting his a c tiv itie s in the forum, or (2) purposefully directed his activities toward the forum." Pebble B e a c h Co., 453 F.3d at 1155. "Evidence of availment is typically action taking place in the f o ru m that invokes the benefits and protections of the laws in the forum." Id. Evidence of d ire c tio n usually consists of conduct taking place outside the forum that the defendant d ire c ts at the forum. Id. at 1155-56. The purposeful direction aspect of the first prong is satisfied when a foreign act is b o th aimed at and has effect in the forum. Id. In other words, the defendant "must have (1) 6
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c o m m itte d an intentional act, which was (2) expressly aimed at the forum state," and (3) c a u s e d a jurisdictionally sufficient amount of harm to be suffered in the forum state. Id.; Y a h o o ! Inc., 433 F.3d at 1207. To satisfy the second element of this test, the plaintiff must e s ta b lis h the defendant's conduct was "expressly aimed" at the forum; a "mere foreseeable e f f e c t" in the forum state is insufficient. Id. The express aiming requirement is satisfied " `w h e n the defendant is alleged to have engaged in wrongful conduct targeted at a plaintiff w h o m the defendant knows to be a resident of the forum state.'" Menken v. Emm, 503 F .3 d 1050, 1059 (9th Cir. 2007) (quoting Dole Food Co., Inc., 303 F.3d at 1111); see also B a n c ro f t, 223 F.3d at 1087. The second prong of the specific jurisdiction test requiring that the contacts c o n s titu tin g purposeful availment or purposeful direction give rise to the current action is m e a s u re d in terms of "but for" causation. Bancroft, 223 F.3d at 1088. "If the plaintiff e s ta b lis h e s both prongs one and two, the defendant must come forward with a `compelling c a s e ' that the exercise of jurisdiction would not be reasonable." Boschetto v. Hansing, 539 F .3 d 1011, 1016 (9th Cir. 2008) (quotation omitted). A. General Jurisdiction P la in tif f s have failed to establish a prima facie case that Defendants have c o n tin u o u s and systematic contacts with Nevada to support general jurisdiction. Plaintiffs p re s e n t no evidence Defendants have made sales in Nevada, solicited or engaged in b u s in e s s here, or served the state's markets. Defendants have not designated an agent for s e rv ic e of process or held a license in the state. Defendant Convergence is not incorporated in Nevada. Plaintiffs only evidence related to systematic contacts with the state consists of D e f e n d a n ts' communications with SCTN agent Nik Koriakinitis and Phoenix principal M ik i Radivojsa related to CBData possibly purchasing SCTN. While Defendants' efforts at n e g o tia tin g CBData's purchase of SCTN may qualify as attempts to do business with 7
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N e v a d a , they do not support a finding that Defendants were doing business in Nevada s u f f ic ie n t to approximate physical presence in the forum for general jurisdiction purposes. See Bancroft, 223 F.3d at 1086 (distinguishing between doing business with California e n titie s and doing business in the state). Plaintiffs argue Defendants are subject to general personal jurisdiction because S C T N is their co-conspirator, and therefore SCTN's Nevada contacts are attributable to D e f e n d a n ts. The conspiracy theory of personal jurisdiction is based on the premise that a c o n s p ira to r's acts in furtherance of a conspiracy are attributable to the other members of the c o n s p ira c y. Textor v. Bd. of Regents of N. Ill. Univ., 711 F.2d 1387, 1392 (7th Cir. 1983). Consequently, some courts attribute a conspirator's in-forum acts to his co-conspirators for p e rs o n a l jurisdiction purposes. T h e United States Court of Appeals for the Ninth Circuit has not expressly a c c e p te d or rejected the conspiracy theory of personal jurisdiction. In its only published o p in io n addressing the issue, the Ninth Circuit noted that the two district court opinions u p o n which the plaintiff relied required the plaintiff either to allege specific overt acts in the f o ru m state that furthered the conspiracy, or to allege substantial acts in furtherance of the c o n s p ira c y in the forum and that the co-conspirator knew or should have known his c o -c o n s p ira to r would perform those acts in the forum. Underwager v. Channel 9 Australia, 6 9 F.3d 361, 364 (9th Cir. 1995). Without expressing any opinion on the validity of the c o n s p ira c y theory of personal jurisdiction, the Ninth Circuit concluded the plaintiff alleged n o facts suggesting a conspiracy and failed to dispute the defendants' claims that they did n o t know certain acts would take place in the forum. Id. The Court therefore affirmed the d is tric t court's dismissal for lack of personal jurisdiction. Id. S in c e this case, the Ninth Circuit has noted that "a great deal of doubt" surrounds th e conspiracy theory's legitimacy. Chirila v. Conforte, 47 F. App'x 838, 842, 2002 WL 3 1 1 0 5 1 4 9 , at *3 (9th Cir. 2002) (unpublished). Although not in the personal jurisdiction 8
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c o n te x t, the Ninth Circuit has rejected a similar conspiracy theory in the venue context. Piedmont Label Co. v. Sun Garden Packing Co., 598 F.2d 491 (9th Cir. 1979) (rejecting c o n s p ira c y theory of venue). It is unclear whether and under what conditions the Ninth Circuit would find it c o n s is te n t with due process to attribute a conspirator's forum-related contacts to his c o -c o n s p ira to rs for personal jurisdiction purposes. However, general due process c o n s id e ra tio n s still would apply to outline the contours of a conspiracy theory of personal ju ris d ic tio n , if one is to exist at all. As this Court recently held, to the extent a conspiracy theory of personal ju ris d ic tio n is viable, it must be limited to the context of specific jurisdiction and cannot s u p p o rt general jurisdiction. See In re Western States Wholesale Natural Gas Antitrust L itig ., --- F. Supp. 2d ----, No. 2:03-CV-01431-PMP-PAL, Doc. #1530 at 24 (Feb. 26, 2 0 0 9 ). "To hold otherwise would create satellite litigation regarding conspiracies c o m p le te ly unrelated to the underlying claims simply to establish personal jurisdiction. Such a trial-within-a-trial situation based on an already tenuous basis to attribute a third p a rty's contacts to a defendant to support personal jurisdiction is untenable." 1 Id. The C o u rt therefore concludes Plaintiffs have not established Defendants are subject to general p e rs o n a l jurisdiction in Nevada. B . Specific Jurisdiction P la in tif f s also have failed to establish a prima facie case of specific jurisdiction. Under the first prong of the minimum contacts test, Plaintiffs have not shown Defendants
Plaintiffs cite Davis v. Eighth Judicial Dist. of State of Nevada, In and For County of Clark to argue Nevada's long-arm statute reaches out-of-state conspirators. 629 P.2d 1209, 1213-14 (Nev. 1981). Davis held specific jurisdiction existed where the plaintiff alleged the out-of-state defendants conspired to steal the Nevada assets of the estate of Howard Hughes and several related companies. Id. at 1211-1214. Davis did not suggest a conspiracy theory of personal jurisdiction would permit the exercise of general jurisdiction over an out-of-state defendant. Even if the Nevada long-arm statute would apply to Defendants under Davis, federal due process requirements still must be satisfied. 9
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p u rp o s e f u lly availed themselves of the privilege of conducting their activities in the forum. E v id e n c e of availment is typically action taking place in the forum, and Plaintiffs have p re s e n te d no evidence Defendants ever took any actions in Nevada. Plaintiffs' evidence s h o w s email exchanges between Defendants and representatives of a Nevada resident that u ltim a te ly did not result in a completed contractual arrangement with the Nevada resident. P la in tif f s also have not presented evidence Defendants purposefully directed their a c tiv itie s at Nevada. The express aiming needed to demonstrate purposeful direction re q u ire s Defendants to individually target a plaintiff who Defendants know to be a forum re s id e n t. Plaintiffs are not Nevada residents. Defendants therefore did not expressly aim th e ir activity at Nevada to support specific personal jurisdiction. Even if the conspiracy th e o ry of jurisdiction applied under these circumstances, Plaintiffs still would not be able to d e m o n s tra te the conspiracy was expressly aimed at a known forum resident because P la in tif f s are not Nevada residents. See id. at 25-26. P la in tif f s contend this Court should infer from Defendants' lack of cooperation d u rin g jurisdictional discovery that had Defendants produced all communications between th e m and SCTN, that evidence would establish minimum contacts with Nevada to support p e rs o n a l jurisdiction. The Court already has awarded fees to Plaintiffs for Defendants' c o n d u c t during jurisdictional discovery. (Order (Doc. #154), Judgment (Doc. #175).) Further, no amount of discovery from Defendants would alter the fact that Plaintiffs are not f o ru m residents and thus Defendants could not have directed their out-of-forum conduct at a k n o w n forum resident. F in a lly, Plaintiffs argue Defendants have engaged in a scheme with D e f e n d a n ts/C ro s s-P la in tif f s Phoenix and SCTN to agree to be named as Cross-Defendants in this action. However, for specific jurisdiction, the Court does not consider events o c c u rrin g after the Complaint is filed to determine whether Defendants are subject to
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p e rs o n a l jurisdiction in this action. See Farmers Ins. Exch. v. Portage La Prairie Mut. Ins. C o ., 907 F.2d 911, 913 (9th Cir. 1990); Steel v. United States, 813 F.2d 1545, 1549 (9th C ir. 1987). Defendants Koster, Eddy, and Convergence are not subject to either general or s p e c if ic jurisdiction in this Court. The Court therefore will grant these Defendants' motion to dismiss for lack of personal jurisdiction. As a result, the Court need not consider D e f e n d a n ts' forum non conveniens argument. I I I . CONCLUSION IT IS THEREFORE ORDERED that Defendants Convergence Capital Limited's, C h ris to p h e r Ernest Eddy's, and Timothy Hanley Koster's Renewed Motion to Dismiss P u rs u a n t to FRCP 12(b)(2) or, Alternatively, for Forum Non Conveniens (Doc. #162) is h e re b y GRANTED. Defendants Convergence Capital Limited, Christopher Eddy, and T im o th y Koster are hereby dismissed from this action for lack of personal jurisdiction.
DATED: March 16, 2009
_______________________________ PHILIP M. PRO United States District Judge
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