Wright et al v. Bloom et al, No. 3:2012cv00746 - Document 95 (N.D. Cal. 2012)

Court Description: ORDER DENYING MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION, GRANTING MOTION TO DISMISS FOR LACK OF PROPER SERVICE, AND VACATING HEARING by Hon. William Alsup granting in part and denying in part 79 Motion to Dismiss.(whalc2, COURT STAFF) (Filed on 11/27/2012)
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Wright et al v. Bloom et al Doc. 95 1 2 3 4 IN THE UNITED STATES DISTRICT COURT 5 FOR THE NORTHERN DISTRICT OF CALIFORNIA 6 7 8 10 Plaintiffs, 11 For the Northern District of California United States District Court 9 VERN WRIGHT, JUNE WRIGHT, and SUPERANTENNA CORPORATION, 12 13 14 15 No. C 12-00746 WHA v. MICHAEL BLOOM, JAIMEE BLOOM, KINGSBRIDGE CORPORATION, OFFSHORE SOLUTIONS, INC., SINOTECH CORPORATION, DIFONA COMMUNICATION GMBH, BULLIVANT HOUSER BAILEY PC, and DOES 1–10, ORDER DENYING MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION, GRANTING MOTION TO DISMISS FOR LACK OF PROPER SERVICE, AND VACATING HEARING Defendants. 16 / 17 INTRODUCTION 18 A German company moved to dismiss for lack for personal jurisdiction and failure to 19 effectuate proper service via the Hague Convention. The motion to dismiss for lack for personal 20 jurisdiction is DENIED. The motion to dismiss for lack of proper service is GRANTED. 21 22 STATEMENT The background facts of this action have been set forth in the order regarding the motion 23 to dismiss or transfer (Dkt. No. 77). Additional facts relevant to defendant Difona 24 Communications GmbH’s motion to dismiss for lack of personal jurisdiction and failure to 25 effectuate proper service via the Hague Convention are set forth below. 26 Plaintiffs Vern and June Wright started Super Antennas in 1999, a small business in 27 Lincoln, California, selling antennas to the amateur ham radio market. The Wrights later 28 established SuperAntenna Corporation, a California corporation headquartered in San Mateo. Dockets.Justia.com 1 SuperAntenna Corporation is entirely owned by the Wrights. This order refers to plaintiffs' 2 companies generally as “Super Antenna.” 3 Defendant Difona is a ham radio equipment distributor located in Germany. Difona had 4 an ongoing business relationship with plaintiffs over several years for the purchase and 5 distribution of Super Antenna products in Germany (Second Amd. Compl. ¶¶ 208–209). Difona 6 was the exclusive distributor for Super Antenna products in Germany during 2009 and 2010 (id. 7 ¶ 203). Plaintiffs also allege that they had an agreement with Difona “to become a worldwide 8 dealer and distributor for Super Antenna” (id. ¶ 206). In support of these allegations, plaintiffs 9 submitted invoices, emails, and shipping statements relating to the purchase and shipment of 11 For the Northern District of California United States District Court 10 Super Antenna products from California to Difona (Wright Decl., Exhs. 1-3). As part of a fraudulent scheme with defendants Michael and Jaimee Bloom, Difona sold 12 pirated Super Antenna products in Europe by directly contacting Super Antenna’s customers and 13 through retail sales from Difona’s website. Difona owner Alfred Kräemer approached Super 14 Antenna dealers in Europe, falsely stating that Super Antenna was out of business and offering to 15 sell “genuine Super Antenna products manufactured by the same factory to the same 16 specifications” (Second Amd. Compl. ¶ 212). 17 Plaintiffs filed a first amended complaint on May 16, 2012. Difona moved to dismiss the 18 complaint. On October 4, plaintiffs filed a second amended complaint. The second amended 19 complaint includes claims against Difona for (1) intentional or negligent misrepresentation or 20 fraud, and unjust enrichment and (2) misappropriation of trade secrets. Because the second 21 amended complaint contained additional allegations against Difona, an order issued requiring 22 Difona to file a new motion to dismiss (Dkt. No. 78). Difona now moves to dismiss the second 23 amended complaint based on lack of personal jurisdiction and defective service of process. For 24 the reasons discussed below, Difona’s motion to dismiss for lack of personal jurisdiction is 25 DENIED. 26 Difona’s motion to dismiss for lack of service is GRANTED. ANALYSIS 27 California’s long-arm jurisdiction statute is coextensive with federal due process 28 requirements, such that the jurisdiction analyses under state law and federal due process are the 2 1 same. Panavision Int’l, L.P. v. Toeppen, 141 F.3d 1316, 1320 (9th Cir. 1998) (citing Cal. Code 2 Civ. Proc. Section 410.10). Where a defendant moves to dismiss a complaint for lack of 3 personal jurisdiction, the plaintiff bears the burden of demonstrating that jurisdiction is 4 appropriate. Dole Foods Co., Inc. v. Watts, 303 F.3d 1104, 1108 (9th Cir. 2002). “If the motion 5 is based on written materials rather than an evidentiary hearing, the plaintiff need only make a 6 prima facie showing of jurisdictional facts.” Ibid. The plaintiff cannot “simply rest on the bare 7 allegations of its complaint,” but uncontroverted allegations in the complaint must be taken as 8 true. Ibid. 9 1. GENERAL JURISDICTION. To exercise general jurisdiction over Difona, its contacts with California must be 11 For the Northern District of California United States District Court 10 “substantial” or “continuous and systematic” such that Difona can be haled into court in 12 California in any action. See Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 13 415 (1984). Difona’s contacts with the forum state must be of the sort that approximate physical 14 presence. Gates Learjet Corp. v. Jensen, 743 F.2d 1325, 1331 (9th Cir. 1984). 15 According to the declaration of Alfred Kräemer, managing director of Difona, the 16 company is headquartered in Germany. Difona is owned and operated by Kräemer and his 17 family. Difona has no offices or employees in California, is not authorized to do business here, 18 does not pay California taxes, and has no registered agent for service of process in California 19 (Kräemer Decl. ¶¶ 3, 5). Kräemer further testified that Difona sells ham-radio equipment 20 exclusively in Europe and does not sell or offer for sale any products in California (id. ¶ 5). 21 Plaintiffs contend that general jurisdiction exists because Difona purchased products 22 from California, sells products in California, and “downloaded specifications from the website of 23 a California business.” The Supreme Court has made clear, however, that “mere purchases, even 24 if occurring at regular intervals, are not enough to warrant a State’s assertion of in personam 25 jurisdiction over a nonresident corporation in a cause of action not related to those purchase 26 transactions.” Helicopteros, 466 U.S. at 418. Moreover, plaintiffs’ allegation that Difona sells 27 products in California is contradicted by their own affidavits. Plaintiffs point to the declaration 28 of William Waters III, an individual who attempted to purchase an allegedly pirated product 3 1 from Difona’s website. Mr. Waters testified that, upon his attempt to purchase a product for 2 delivery to California, Difona contacted him to tell him the company was “not allowed to sell to 3 USA by law” (Waters Decl. ¶ 11). Difona contacted him a second time, referring to Vern 4 Wright’s lawsuit against Difona and stating that “we can not ship to California until this matter is 5 cleared” (id. ¶ 13). Difona refunded the payment and did not ship any product to Mr. Waters. 6 Plaintiffs set forth no other evidence that Difona sold any products in California. Lastly, 7 plaintiffs’ claim that Difona downloaded materials from plaintiffs’ website is insufficient to 8 establish general jurisdiction over Difona in California. See Mavrix Photo, Inc. v. Brand 9 Technologies, Inc., 647 F.3d 1218, 1226–27 (9th Cir. 2011). 2. 11 For the Northern District of California United States District Court 10 Even where general jurisdiction does not exist, personal jurisdiction may be established 12 13 14 15 16 SPECIFIC JURISDICTION. based on “specific jurisdiction” when the following requirements are met: (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 privileges 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 17 18 19 (3) the exercise of jurisdiction must comport with fair play and substantial justice, i.e. it must be reasonable. Dole Food, 303 F.3d at 1111 (internal quotation marks and citation omitted). 20 Plaintiffs’ claims against Difona are based on Difona’s sale of pirated Super Antenna 21 products in Europe, which competed with or displaced potential sales of plaintiffs’ products. 22 Plaintiffs also claim that, in order to steal plaintiffs’ customers, Kräemer made false or 23 misleading statements to European dealers of Super Antenna products that resulted in 24 competitive injury. “[A] major antenna dealer who previously sold Super Antenna products” 25 spoke with Kräemer via telephone in March 2012. Kräemer told the dealer, Martin Lynch, that 26 Super Antenna was “dead” and out of business, and that plaintiff Wright would no longer be able 27 28 4 1 to supply antennas again.* Difona “could now supply all of the Super Antenna products which 2 were made in exactly the same factory that supplied [plaintiff’s] products and that the antenna 3 products Difona were [sic] offering were identical” to those offered by plaintiffs (Second Amd. 4 Compl. ¶ 221). Plaintiffs further allege that they “have identified numerous other former 5 SuperAntenna dealers who were approached by Difiona and sold pirated versions of 6 SuperAntenna products” (id. ¶ 222). Difona’s fraudulent actions allegedly resulted in injury to 7 plaintiffs’ business relationships and damaged the world-wide market for Super Antenna 8 products. 9 Purposeful Availment and Direction. This prong “may be satisfied by purposeful availment of the privilege of doing business 11 For the Northern District of California United States District Court 10 A. in the forum; by purposeful direction of activities at the forum; or by some combination thereof.” 12 Yahoo! Inc. v. La Ligue Contre Le Racisme Et L'Antisemitisme, 433 F.3d 1199, 1206 (9th Cir. 13 2006) (en banc). In tort cases, a court should determine whether a defendant “purposefully 14 directs his activities” at the forum state, by applying an “effects” test, set forth by the Supreme 15 Court in Calder v. Jones, 465 U.S. 783 (1984). Our court of appeals has construed the Calder 16 effects test to require that “the defendant allegedly must have (1) committed an intentional act, 17 (2) expressly aimed at the forum state, (3) causing harm that the defendant knows is likely to be 18 suffered in the forum state.” Yahoo! Inc., 433 F.3d at 1206. 19 The parties do not dispute that defendant’s actions were intentional within the meaning of 20 the Calder effects test. Difona contends, however, that because it never marketed or attempted 21 to sell antennas in California, it is not subject to personal jurisdiction here. Difona argues that 22 this case is similar to Schwarzenegger v. Fred Martin Motor Co., 734 F.3d 797 (9th Cir. 2004). 23 There, the defendant was an Ohio resident who used Arnold Schwarzenegger’s image on an 24 advertisement for his Ohio car delearship. Our court of appeals found that there was no “express 25 aiming” at California, where Schwarzenegger resided, because the advertisement was directed to 26 Ohioans, was never circulated in California, and because the defendant “had no reason to believe 27 28 * Plaintiffs submitted the declaration of Martin Lynch, managing director and owner of Martin Lynch & Sons, Ltd. Martin Lynch & Sons was previously a defendant in this action but settled with plaintiffs in September 2012 (Lynch Decl. ¶ 2). 5 1 that any Californians would see it and pay a visit to the dealership.” Id. at 807. The court of 2 appeals found that defendant’s “express aim was local,” even if the defendant may have known 3 that Schwarzenegger lived in California, where the alleged harm was eventually felt. In this 4 case, Difona argues that its actions were similarly focused locally (on Europe) and that it never 5 exploited the California market. Difona contends that it is thus not subject to personal 6 jurisdiction in this forum. This order disagrees. 7 Our court of appeals has held that “wrongful conduct individually targeting a known 8 forum resident” constitutes “express aiming” under the Calder effects test. See Bancroft & 9 Masters, Inc. v. Augusta Nat., Inc., 223 F.3d 1082, 1087 (9th Cir. 2000). The “express aiming” inquiry focuses on whether “an intended impact that is either local or undifferentiated” or is 11 For the Northern District of California United States District Court 10 “targeted at a known individual who has a substantial, ongoing connection to the forum.” Fiore 12 v. Walden, 688 F.3d 558, 578 (9th Cir. 2012). In Bancroft, the defendant sent a letter to a third 13 party in Virginia, which forced the plaintiff, a California resident, to bring suit in California to 14 protect its intellectual property. The court of appeals determined that defendant’s intentional 15 action in sending the letter, even though to Virginia, individually targeted the plaintiff, a 16 California corporation. Therefore, the defendant’s act was “expressly aimed” at California. 17 Moreover, the effects of the letter were primarily felt in California, as the defendant knew they 18 would be. Bancroft, 223 F.3d at 1088. 19 Here, plaintiffs allege that Difona made knowingly false statements to Super Antenna 20 customers to induce them to stop buying products from plaintiffs and to instead buy them from 21 Difona. Plaintiffs further allege that Difona’s fraud was directed at harming plaintiffs’ 22 California business by stealing plaintiffs’ European customers. Difona purposefully targeted 23 plaintiffs and their business by soliciting plaintiffs’ customers, representing that Difona’s 24 products were the same, and informing customers that plaintiffs were out of business. Difona 25 knew that the effects of its intentional conduct would be felt in California, plaintiffs’ state of 26 residence. Unlike the defendant in Schwarzenegger, whose intentional acts were focused only 27 on Ohio, here plaintiffs have adequately alleged that Difona’s fraudulent activities were 28 6 1 expressly aimed at competing with plaintiffs through direct interference with plaintiffs’ customer 2 relationships. This is based on the record at present and is subject to proof at trial. 3 Turning to the third prong of the Calder effects test, this order finds that plaintiffs have 4 suffered “jurisdictionally sufficient” harm as a result of Difona’s intentional acts. “In 5 determining the situs of a corporation’s injury, our precedents recognize that in appropriate 6 circumstances a corporation can suffer economic harm both where the bad acts occurred and 7 where the corporation has its principal place of business.” Mavrix Photo, 647 F.3d at 1231-32 8 (citing Dole Food, 303 F.3d at 1113). Plaintiffs Vern and Judy Wright are residents of 9 California, and the principal place of business of plaintiff Super Antenna is California. Where, as here, “a forum in which a plaintiff corporation has its principal place of business is in the 11 For the Northern District of California United States District Court 10 same forum toward which defendant[] expressly aim[ed] [its] acts, the ‘effects’ test permits that 12 forum to exercise personal jurisdiction.” Dole Food, 303 F.3d at 1114. 13 B. Whether the claim arises out of or relates to the defendant’s forumrelated activities. 14 15 “The second requirement for specific jurisdiction is that the contacts constituting 16 purposeful availment must be the ones that give rise to the current suit.” Bancroft, 223 F.3d at 17 1088. Our court of appeals applies a “but for” causation standard. Ibid. This requirement is met 18 here. Plaintiffs allege that they would not have suffered an injury “but for” Difona’s false 19 statements to Super Antenna customers and sale of pirated Super Antenna products. These 20 allegations form the basis for plaintiffs’ claims against Difona in the current action. 21 22 C. Whether the exercise of jurisdiction is reasonable. “Once purposeful availment has been established, the forum’s exercise of jurisdiction is 23 presumptively reasonable. To rebut that presumption, a defendant ‘must present a compelling 24 case’ that the exercise of jurisdiction would, in fact, be unreasonable.” Roth v. Garcia Marquez, 25 942 F.2d 617, 625 (9th Cir. 1991). Our court of appeals has established a seven-factor test to 26 determine whether the exercise of jurisdiction would be reasonable: 27 28 (1) the extent of the defendants’ purposeful interjection into the forum state’s affairs; (2) the burden on the defendant of defending in the forum; (3) the extent of conflict with the sovereignty of the defendants’ state; (4) the forum state's interest in adjudicating the dispute; (5) the 7 1 most efficient judicial resolution of the controversy; (6) the importance of the forum to the plaintiff’s interest in convenient and effective relief; and (7) the existence of an alternative forum. 2 3 Menken v. Emm, 503 F.3d 1050, 1058 (9th Cir. 2007). 4 First, Difona argues there was no purposeful interjection into California because 5 defendant did not and does not market or sell products in California and does not have 6 employees or offices here. Plaintiffs, however, allege that Difona had a long-term business 7 relationship with plaintiffs and their company for the purchase and distribution of Super Antenna 8 products. Through this relationship, Difona gained access to and became aware of plaintiffs’ 9 alleged trade secrets, marketing information, and specifications of products that Difona later misappropriated. Plaintiffs claim that they had frequent telephone conversations and meetings 11 For the Northern District of California United States District Court 10 with Difona to discuss joint marketing strategy, and that Difona regularly purchased products 12 from Super Antenna in California over the course of several years. Difona purposefully 13 interjected itself into California through its ongoing business relationship with plaintiffs in 14 California, from which it received economic benefit. This factor weighs in favor of plaintiffs. Second, Difona argues that it would be extremely burdensome to require it to defend 15 16 itself in a California lawsuit. Difona is a German company, headquartered in Germany, with 17 employees who are all German citizens and speak German as their primary language (Kräemer 18 Decl. ¶¶ 3–4). Plaintiffs counter that Difona managing director Alfred Kräemer speaks English 19 and travels frequently to the United States. Although this factor weighs against the exercise of 20 jurisdiction, “[u]nless such inconvenience is so great as to constitute a deprivation of due 21 process, it will not overcome clear justifications for the exercise of jurisdiction.” Roth, 942 F.2d 22 at 623. 23 Third, Difona contends that the factor regarding “conflict with the sovereignty of the 24 defendants’ state” weighs against the reasonableness of exercising jurisdiction. Difona argues 25 that Germany has a significant interest in regulating the conduct of businesses that are 26 headquartered in and do business within its borders. Difona does not have an agent or offices in 27 the United States, is headquartered in Germany, and its employees are all German citizens. This 28 factor also tends to undermine the reasonableness of asserting jurisdiction over Difona. In this 8 1 regard, we must always remember that foreign courts will be entitled to hale in our citizens and 2 corporations to the same extent as we do theirs, so that this justification works both ways. 3 Nonetheless, “[t]he factor of conflict with the sovereignty of the defendant’s state is not 4 dispositive because, if given controlling weight, it would always prevent suit against a foreign 5 national in a United States court.” Id. at 623-24. 6 Fourth, California has a strong interest in adjudicating the dispute. Plaintiffs’ claims 7 against Difona are based on California law. Additionally, California has a strong interest in 8 providing redress for its citizens who suffered injury due to fraudulent conduct or 9 misappropriation. Fifth, a court must evaluate whether the United States is the most efficient forum to 11 For the Northern District of California United States District Court 10 resolve this dispute. Difona argues that a more efficient forum is China, where the products 12 were manufactured; England, where some of the products were sold by Difona; or Germany, 13 where Difona is located. Difona is the only foreign defendant in this action. Defendants 14 Michael and Jaimee Bloom, Kingsbridge Corporation, Offshore Solutions, Inc., Sinotech 15 Corporation, and Bullivant Houser Bailey PC are located in the United States. This factor is a 16 toss up, for it would also be reasonable to require plaintiffs to proceed against defendant in 17 Germany. 18 Sixth, plaintiffs contend that Germany is not an alternative forum for the adjudication of 19 the entire action. Plaintiffs allege that defendants were involved in a fraudulent scheme, 20 involving Difona as well as domestic defendants Michael and Jaimee Bloom, Sinotech, and 21 Offshore Solutions. It is unlikely that a German court would have jurisdiction over the domestic 22 defendants, against whom plaintiffs have alleged similar facts. Additionally, plaintiffs have 23 federal and state securities law claims against certain defendants that they could not bring in a 24 German court. Plaintiffs have sufficiently established that an alternative forum is not reasonably 25 available to adjudicate the entire controversy. 26 Seventh, plaintiffs’ choice of forum weighs in favor of the reasonableness of personal 27 jurisdiction here, although “the plaintiff’s convenience is not of paramount importance.” Dole 28 Food, 303 F.3d at 1116. 9 1 Weighing these factors together, this order finds that the exercise of personal jurisdiction 2 over Difona in this action is reasonable, although barely so. Again, this conclusion is based on 3 allegations that may fall short at trial and/or on summary judgment. 4 3. SERVICE UNDER THE HAGUE CONVENTION. 5 The Hague Convention governs service of summons on defendants in foreign countries 6 that are signatories to the treaty. Germany is a signatory to the Hague Convention. Difona 7 argues, and plaintiffs do not dispute, that plaintiffs must serve Difona under the Hague 8 Convention (Dkt. No. 40 at 19) 9 Plaintiffs state that a translation of the first amended complaint was delivered to the German government on September 27, 2012, for service through the Hague Convention (Opp. at 11 For the Northern District of California United States District Court 10 13). Difona maintains, and plaintiffs do not contest, that Difona has not yet been served. 12 Because plaintiffs have not completed proper service on Difona — likely due to delays 13 associated with the Hague Convention procedures — Difona’s motion to dismiss is GRANTED. 14 If, however, Difona is properly served with the first amended complaint, it must appear in this 15 action or risk default judgment being entered against it. 16 Plaintiffs originally filed this action on February 15, 2012. Normally, a plaintiff has 120 17 days to complete service on all defendants. Because of the additional time necessary for service 18 via the Hague Convention, the Court would normally extend this period once. Due to 19 inexcusable delay on the part of plaintiffs, no effort was made to use the Hague Convention 20 procedures until plaintiffs conceded in their filing on July 25, 2012, that they would begin the 21 process of service under the Hague Convention (Dkt. No. 52). In light of this delay, the Court 22 will impose a DEADLINE OF FEBRUARY 17, 2013, to complete service. This is the absolute 23 deadline for completing service on Difona under the Hague Convention. As plaintiffs state they 24 provided a translated copy of the first amended complaint to the German government two 25 months ago, this should provide ample time. 26 Difona contends that, because plaintiffs subsequently filed a second amended complaint, 27 plaintiffs must now translate the second amended complaint and begin the process of Hague 28 Convention service anew. Difona provides no authority to support this contention. Once the 10 1 summons and first amended complaint have been translated and served via the Hague 2 Convention, and counsel for Difona appear in this action, plaintiffs may serve the second 3 amended complaint on counsel, as it may do with other subsequent filings. 4 CONCLUSION 5 For the forgoing reasons, defendant’s motion to dismiss for lack of personal jurisdiction 6 is DENIED. Defendant’s motion to dismiss for insufficient service is GRANTED. Plaintiffs must 7 complete proper service on defendant by FEBRUARY 17, 2013. Defendant should be aware that 8 it must appear if it is timely served via the Hague Convention procedures or risk default 9 judgment. The hearing scheduled for November 29 is hereby VACATED. 11 For the Northern District of California United States District Court 10 IT IS SO ORDERED. 12 Dated: November 27, 2012. WILLIAM ALSUP UNITED STATES DISTRICT JUDGE 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 11
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