Free Motion to Dismiss/Lack of Jurisdiction - District Court of California - California

Case 3:07-cv-02405-L-CAB

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1 Gerald L. McMahon, Esq. (SBN 036050) 2 3 4 5 6

Monty A. McIntyre, Esq. (SBN 95796) G. Scott Williams, Esq. (SBN 226516) SELTZER CAPLAN McMAHON VITEK A Law Corporation 750 B Street, 2100 Symphony Towers San Diego, California 92101-8177 Telephone: (619) 685-3003 Facsimile: (619) 685-3100

7 Attorneys for Defendants LOWLIFE CORPORATION LIMITED (incorrectly sued as 8 LOWLIFE CORPORATION, LTD); DALE MASTERS; and EBTM plc 9 10 11

UNITED STATES DISTRICT COURT OF CALIFORNIA SOUTHERN DISTRICT REALLY LIKEABLE PEOPLE, INC., a CASE NO. 07 CV 2405 L CAB MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS PURSUANT TO RULE 12(b)(2)

) ) California Corporation, MACBETH, INC., a ) 13 California corporation, MACBETH OPTICS, ) ) 14 LP, a California limited partnership, and REALLY LIKEABLE PEOPLE II, INC. ) 15 (formerly ATTICUS CLOTHING, INC.), a ) ) 16 California corporation, ) 17 Plaintiffs, ) ) 18 vs. ) ) 19 LOWLIFE CORPORATION, LTD, an ) 20 English limited company, EVERYTHING ) ) 21 BUT THE MUSIC, plc, an English corporation, DALE MASTERS, an ) 22 individual, and DOES 1 through 25, ) inclusive, ) 23 ) ) Defendants. 24 )
12 Delaware corporation, LOSERKIDS, INC., a 25 26 27 28

Date: Time: Courtroom: Judge:

March 3, 2008 10:30 a.m. 14 Hon. M. James Lorenz

MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS PURSUANT TO RULE 12(b)(2)

CASE NO. 07 CV 2405 L CAB

Case 3:07-cv-02405-L-CAB

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Defendant EBTM plc (incorrectly sued as Everything But The Music, plc) ("EBTM")

2 submits the following memorandum of points and authorities in support of the motion to 3 dismiss. 4 5 6 I.

INTRODUCTION EBTM is a corporation organized under the laws of the United Kingdom that conducts

7 business in the United Kingdom and Europe. As of the dates alleged in the complaint, EBTM 8 did not have the required minimum contacts with California. 9

On approximately November 13, 2007, Plaintiffs filed their action in the San Diego

10 County Superior Court, Case No. 37-2007-00061582-CU-BC-CTL. On approximately 11 December 11, 2007, copies of the state court summons and complaint were delivered to the 12 EBTM office in London. On approximately December 14, 2007, copies of the summons and 13 complaint in this action were delivered to the London residence of Richard Breeden, the Chief 14 Executive of EBTM. 15

On December 21, 2007, EBTM took several actions. It filed in the San Diego Superior

16 Court a Motion to Quash Service of Summons as allowed by California Code of Civil 17 Procedure section 418.10(a)(1), and simultaneously filed a general denial alleging the 18 affirmative defense of lack of personal jurisdiction as allowed by California Code of Civil 19 Procedure section 418.10(e)(1). Later that same day on the 21st, Defendants removed this case 20 to the federal court. 21

Any claim or defense sufficiently raised in state court remains at issue once the case is

22 removed to federal court. Lally v. Allstate Ins. Co., 724 F. Supp. 760 (1989, S.D. Cal.). Federal 23 courts will accept as operative any papers served in state court which satisfy the notice-giving 24 provisions of the Federal Rules of Civil Procedure. Frank B. Hall & Co, Inc. v. American 25 Motorists Insurance Co., 276 F. Supp. 972 (1967, S.D.N.Y.). EBTM brings this motion to 26 dismiss under Rule 12(b)(2) to get a court determination on the issue of jurisdiction that it 27 28
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MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS PURSUANT TO RULE 12(b)(2)

CASE NO. 07 CV 2405 L CAB

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1 properly preserved when it filed the motion to quash and the answer in the state court before 2 the case was removed to the federal court. As shown below, the motion to dismiss should be 3 granted because this court cannot assert personal jurisdiction over EBTM. 4 5 6 II.

STATUTORY AUTHORITY Federal Rules of Civil Procedure, Rule 12(b)(2), authorizes a defendant to file a motion

7 to dismiss to assert the defense of lack of jurisdiction over the person. 8 9 10 11 A. 12 13 III.

THE MOTION TO DISMISS SHOULD BE GRANTED BECAUSE THIS COURT DOES NOT HAVE PERSONAL JURISDICTION OVER EBTM
Plaintiffs Cannot Carry Their Burden of Proving Defendant EBTM had Sufficient Contacts with California to Support the Exercise of Personal Jurisdiction

Although Defendant EBTM is the moving party on this motion to dismiss, Plaintiffs

14 bear the burden of proof on the necessary jurisdictional facts. Rio Properties, Inc. v. Rio Int'l 15 Interlink, 284 F.3d 1007, 1019 (9th Cir. 2002); Magnecomp Corp. v. Athene Co., Ltd., 209 Cal. 16 App. 3d 526, 533 (1989). To carry this burden, Plaintiffs must present admissible, credible 17 evidence demonstrating factually that the constitutionally mandated "minimum contacts" exist 18 between EBTM and California. (Ibid.) Plaintiffs must establish these facts by a preponderance 19 of the evidence in the form of declarations. Magnecomp Corp., supra, 209 Cal. App. 3d at 533; 20 Daniel v. American Emergency Bd. of Medicine, (W.D.N.Y. 1997) 988 F. Supp. 127, 201 21 (W.D.N.Y. 1997). Plaintiffs must submit competent evidence to support their claim that 22 Defendant EBTM is subject to personal jurisdiction. Data Disc, Inc. v. Systems Technology 23 Assocs., Inc., 557 F.2d 1280, 1289 (9th Cir. 1977), fn. 5 . Plaintiffs cannot "simply rest on the 24 bare allegations of the complaint." Amba Marketing Systems, Inc. v. Jobar Int'l, Inc., 551 F.2d 25 784, 787 (9th Cir. 1977).

This standard sets a high burden for Plaintiffs to succeed in

26 maintaining this action in California. 27 28
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MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS PURSUANT TO RULE 12(b)(2)

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1 B. 2 3

There is No Basis for This Court to Exercise Personal Jurisdiction Over Defendant EBTM Plaintiffs will not be able to satisfy their burden of proving there is any basis on which

4 this Court may exercise personal jurisdiction over Defendant EBTM. EBTM is a corporation 5 organized under the laws of the United Kingdom that conducts an online retail business in the 6 United Kingdom and Europe. Although EBTM is a resident of the United Kingdom with no 7 offices in the United States, Plaintiffs attempt to hale it into court in California. That effort is 8 improper under well-established principles of jurisdiction. Personal jurisdiction can only be 9 asserted over a foreign defendant if permitted by California's long-arm statute and if doing so 10 will not violate federal due process.

See Fireman's Fund Ins. Co. v. National Bank of

11 Cooperative, 103 F.3d 888, 893 (9th Cir. 1996). California's long-arm statute permits the 12 assertion of jurisdiction on any basis not inconsistent with the state or federal constitutions. 13 Cal. Code of Civ. Proc. § 410.10. For due process to be satisfied, a defendant, if not present in 14 the state, must have minimum contacts with the forum state such that the assertion of 15 jurisdiction "does not offend traditional notions of fair play and substantial justice."

See

16 International Shoe v. State of Washington Off. of Unempl., 326 U.S. 310, 315 (1945). The 17 nature and extent to which a court will exercise personal jurisdiction over a defendant is 18 largely dependent on which form of jurisdiction is sought, whether general jurisdiction or 19 specific jurisdiction, and the extent of the defendant's minimum contacts with the forum state. 20 21 22 1. Defendant EBTM's Contacts with California have been Neither Continuous nor Systematic so as to Justify the Exercise of General Personal Jurisdiction.

The Supreme Court has set a high standard for plaintiffs to meet in order to establish

23 general jurisdiction. General jurisdiction arises if a defendant's business contacts with the 24 forum state have been "continuous and systematic." Helicopteros Nacionales de Colombia v. 25 Hall, 466 U.S. 408, 416 (1984).

"This is a fairly high standard in practice." Fields v.

26 Sedgwick Associated Risks, Ltd., 796 F.2d 299, 301 (9th Cir. 1986). The Ninth Circuit has 27 "regularly...declined to find general jurisdiction even where the contacts were quite 28
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MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS PURSUANT TO RULE 12(b)(2)

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1 extensive." Amoco Egypt Oil Co. v. Leonis Navigation Co., Inc., 1 F.3d 848, 851 (9th Cir. 2 1993), fn. 3; see also Glencore Grain Rotterdam B.V. v. Shivnath Rai Harnarain Co., 284 F.3d 3 1114, 1125 (9th Cir. 2002) [declining to find personal jurisdiction even though the defendant 4 exported considerable amounts of products through California, stating "while it is clear that 5 [the defendant] has stepped through the door, there is no indication that it has sat down and 6 made itself at home"]. Specifically, courts have considered contacts such as residence, mailing 7 address, property, bank accounts, and office employees as the key indicia in a general 8 jurisdiction analysis. See, e.g., Figi Graphics, Inc. v. Dollar General Corp., 33 F. Supp. 2d 9 1263, 1265 (S.D. Cal. 1998) citing Helicopteros Nacionales, 466 U.S. at 415. 10

The "standard for establishing general jurisdiction is `fairly high' and requires that the

11 defendant's contacts be of the sort that approximate physical presence." Bancroft & Masters, 12 Inc. v. Augusta National, Inc., 223 F.3d 1082, 1086 (9th Cir. 2000) (internal citations omitted). 13 The court should also consider the "economic reality" of the Defendant's activities. See Gates 14 Learjet Corp. v. Jensen 743 F.2d 1325 (9th Cir. 1984). Occasional sales to California residents 15 are insufficient to confer general jurisdiction upon a foreign company. See Bancroft. "As with 16 traditional business contacts, the most reliable indicator of the nature and extent of...Internet 17 contact with the forum state will be the amount of sales generated in the state by or through the 18 interactive website." Coastal Video Communications Corp. v. Staywell Corp., 9 F. Supp. 2d 19 562, 572 (1999, E.D.Va.). Mere operation of a web site, even if interactive, "does not by itself 20 show any persistent course of conduct by the defendants in the (forum state)." GTE News 21 Media Services, Inc. v. BellSouth Corp., 199 F.3d 1343, 1349-1350 (2000, D.C. Cir.) 22 (parentheses added); Bird v. Parsons, 289 F.3d 865, 873 (6th Cir. 2002). 23

As shown in the declaration of Richard Breeden, out of the approximately 200,000 total

24 orders that EBTM has shipped since it started doing business in 2005, less than 200 orders (.1 25 percent of the total) have been shipped to California. These occasional sales to California are 26 / / / 27 / / / 28
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MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS PURSUANT TO RULE 12(b)(2)

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1 insufficient to create general jurisdiction over EBTM and the motion to dismiss should be 2 granted. 3

EBTM is the parent company of Lowlife Corporation Limited ("Lowlife"). Lowlife has

4 sufficient contacts for this court to exercise jurisdiction over it, and Lowlife does not contest 5 jurisdiction. Plaintiffs may argue that jurisdiction over Lowlife also gives this court jurisdiction 6 over EBTM. Such an argument, however, would be faulty because a subsidiary's ties to a 7 forum do not create personal jurisdiction over the parent corporation. See Cannon Mfg. Co. v. 8 Cudahy Packing Co., 267 U.S. 333 (1925) (foreign corporation, employing subsidiary 9 corporation as means of doing business within a state is not "doing business" in the state 10 sufficient to be sued there); Newport Components, Inc. v. N.E.C. Home Electronics (USA) Inc., 11 671 F. Supp. 1525 (C.D. Cal. 1987) ("It is firmly established that a non-resident parent 12 corporation is not subject to personal jurisdiction based solely on the independent activities of 13 its wholly-owned subsidiary."); Sonora Diamond Corp. v. Superior Court, 83 Cal. App. 4th 523 14 ((2000) "We start with the firm proposition that neither ownership nor control of a subsidiary 15 corporation by a foreign parent corporation, without more, subjects the parent to the 16 jurisdiction of the state where the subsidiary does business."). 17

For all these reasons, this court cannot assert general jurisdiction over EBTM and the

18 motion to dismiss should be granted. 19 20 21

2.

Defendant EBTM has not Purposefully Availed Itself of the Privileges of Conducting Activities in California Sufficient to Establish Specific Jurisdiction.

Plaintiff presumably will argue that specific jurisdiction should be exercised over

22 Defendant EBTM, but such an argument would be flawed in several respects. To establish 23 specific (or limited) personal jurisdiction, a plaintiff must provide competent evidence to 24 satisfy a three-part test: (1) that the defendant purposefully availed herself of the privileges of 25 conducting activities in the forum; (2) that the claim or cause of action arises out of or results 26 from the defendant's forum-related activities; and, (3) that the exercise of jurisdiction is 27 reasonable. Glencore Grain, 284 F.3d 114, 1123 (2002, 9th Cir.); Terracom v. Valley Nat'l 28
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1 Bank, 49 F.3d 555, 560 (9th Cir. 1995); Figi Graphics, 33 F. Supp. 2d 1263, 1266 (1998, S.D. 2 Cal.). 3

Because EBTM is an online retailer, the likelihood that personal jurisdiction can be

4 constitutionally exercised is directly proportionate to the nature and quality of commercial 5 activity that it conducts over the Internet. Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F. Supp. 6 1119, 1124 (W.D. Pa. 1997). EBTM's web site lists products that customers can buy online. 7 This type of online business was described in Zippo as the "middle ground ... where a user can 8 exchange information with the host computer. In these cases, the exercise of jurisdiction is 9 determined by examining the level of interactivity and commercial nature of the exchange of 10 information that occurs on the Web site." (Id.) 11

EBTM is a resident of the United Kingdom. It does business primarily in the United

12 Kingdom and Europe, although the internet allows customers to access its site from anywhere 13 in the world. As shown in the declaration of EBTM's CEO, Richard Breeden, EBTM did not 14 purposefully avail itself of the privileges and benefits of California. As of the date that the 15 complaint was filed on November 13, 2007, EBTM had not entered into any contracts with any 16 of the Plaintiffs, did not operate any retail stores in California, did not employ any California 17 residents, had not entered into any contracts with California residents, and had not performed 18 any marketing or advertising in California or targeted to California residents. Because EBTM 19 is an online retailer, it is possible for a California resident to visit the EBTM website and order 20 EBTM products. However, since EBTM started business in 2005, out of the approximately 21 200,000 total orders that EBTM has shipped, less than 200 orders (.1 percent of the total) have 22 been shipped to California. 23

Nonetheless, assuming arguendo that Plaintiffs were to establish that operation of

24 EBTM's website is sufficient to show that EBTM purposefully availed itself of the privileges 25 of conducting business in California, specific jurisdiction still would not lie because Plaintiffs' 26 causes of action do not arise out of EBTM's forum-related activities as required by the three27 part test set forth in Glencore Grain (supra) and Bancroft (supra). On the contrary, Plaintiffs' 28
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MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS PURSUANT TO RULE 12(b)(2)

CASE NO. 07 CV 2405 L CAB

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1 allegations are based on the business relationship and negotiations between Plaintiffs and 2 Defendants Dale Masters and Lowlife. In fact, EBTM's only connection to this matter is its 3 purchase of Lowlife, which occurred after Plaintiffs and Lowlife entered into the agreements at 4 issue in this case.

EBTM's subsequent purchase of Lowlife has no logical nexus to its

5 attenuated internet sales to California residents. 6

Dragging EBTM into court in California is not only unreasonable, and thus fails to meet

7 the third prong of the test for specific jurisdiction, but also offends the notions of "fair play and 8 substantial justice," as set forth in International Shoe (supra). Forcing EBTM, a British 9 company that was not a party to the negotiations and contracts at issue and that has only a scant 10 virtual presence in the United States, to accede to litigation in California is an affront to the 11 very definition of reasonableness and "fair play." Plaintiffs' claims really arise from the 12 interactions and agreements between plaintiffs, Lowlife and Masters. Plaintiffs could pursue 13 the full complement of remedies they seek from Lowlife and Dale Masters only. Considering 14 the very limited contacts of EBTM with California, which contacts are not really related to the 15 claims asserted by Plaintiffs, it would be inequitable to require EBTM to defend itself here. 16

Plaintiffs cannot establish contacts sufficient to create specific jurisdiction in California

17 over EBTM, their causes of action do not really arise from any of EBTM's very limited 18 contacts with California, and it would be unfair and unreasonable to assert jurisdiction over 19 EBTM related to this case. There is no basis for specific jurisdiction over EBTM, and for this 20 reason as well the motion to dismiss should be granted. 21 Dated: January 23, 2008 22 23 24 25 26 27 28
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SELTZER CAPLAN McMAHON VITEK

By: /s/ Monty A. McIntyre Gerald L. McMahon Monty A. McIntyre G. Scott Williams Attorney for Defendants LOWLIFE CORPORATION LIMITED, DALE MASTERS; and EBTM plc
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS PURSUANT TO RULE 12(b)(2) CASE NO. 07 CV 2405 L CAB