Atkins v. Calypso Systems Incorporated

Filing 16

ORDER that Defendant's Motion to Dismiss Complaint (Doc. 9 ) is granted to the extent that the purported service of process is quashed for insufficient service of process. FURTHER ORDERED that Plaintiff may serve process on Defendant no later than 05/01/15. If by 05/04/15, Plaintiff has not filed proof of service of process, the Clerk shall terminate this case. See order for complete details. Signed by Judge Neil V. Wake on 4/1/15. (NKS)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Barry M. Atkins,

No. CV-14-02706-PHX-NVW
Plaintiff,

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v.

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Calypso Systems Incorporated,

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ORDER

Defendant.

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Before the court are Defendant’s Motion to Dismiss Complaint (Doc. 9), the

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Response (Doc. 14), and the Reply (Doc. 15). For the reasons that follow, the Motion

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will be granted.

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On June 18, 2007, Defendant entered into a Memorandum of Understanding with

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Adventure Ventures, LLC, pursuant to which Adventure loaned Defendant $125,000 at

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an annual interest rate of 6%. (Doc. 1 at 2.) In return, Adventure received “a senior

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security interest in position to all other Notes or debt instruments of [Defendant],

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including but not limited to, series A – E convertible debentures, accrued salaries and

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wages, and commercial accounts payable.”

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additional $12,000 on February 19, 2008. (Id.) The Memorandum of Understanding was

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superseded on August 11, 2008, by an Extension Agreement that gave Defendant until

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December 17, 2008, to repay all outstanding principal and interest. (Id.) The Extension

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Agreement granted Adventure the right to convert any remaining principal and interest to

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common stock in the event that Defendant undertook an initial public offering. (Id. at 2-

(Id.)

Adventure loaned Defendant an

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3.) Adventure “assigned all of its right and title in the loan and security interests with

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[Defendant]” to Plaintiff on December 1, 2014. (Id. at 3.) When Defendant allegedly

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“failed to complete an Initial Public Offering or meet the conditions precedent,” Plaintiff

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filed this breach-of-contract action on December 17, 2014. (Id.)

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The instant Motion seeks dismissal of Plaintiff’s Complaint (Doc. 1) on the

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grounds that (1) Plaintiff failed to effect proper service of process, (2) the court lacks

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personal jurisdiction over Defendant, and (3) Plaintiff has not stated a claim upon which

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relief can be granted.

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“Service of process is the mechanism by which the court [actually] acquires the

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power to enforce a judgment against the defendant’s person or property. In other words,

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service of process is the means by which a court asserts its jurisdiction over the person.”

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Robinson v. Heritage Elementary Sch., No. CV-09-0541-PHX-LOA, 2009 U.S. Dist.

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LEXIS 50396, at *4-5 (D. Ariz. June 3, 2009) (brackets and emphasis in original)

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(citations and internal quotation marks omitted).

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When bringing suit against a corporation, a plaintiff must serve the defendant by

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either 1) “following state law for serving a summons in an action brought in courts of

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general jurisdiction in the state where the district court is located or where service is

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made,” or 2) “delivering a copy of the summons and of the complaint to an officer, a

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managing or general agent, or any other agent authorized by appointment or by law to

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receive service of process.” Fed. R. Civ. P. 4(h)(1) (cross-referencing Fed. R. Civ. P.

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4(e)(1)). Under Arizona law, service upon “a domestic or foreign corporation . . . from

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which a waiver has not been obtained and filed, shall be effected by delivering a copy of

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the summons and of the pleading to a partner, an officer, a managing or general agent, or

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to any other agent authorized by appointment or by law to receive service of process.”

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Ariz. R. Civ. P. 4.1(i).

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According to a Declaration sworn by Eden Kim, Defendant’s chief executive

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officer, no partner, officer, or authorized agent was personally served with Plaintiff’s

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Complaint. (Doc. 9-1 at 1-2.) On February 10, 2015, Kim “found the Complaint and

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related papers,” which “appeared to have been slid or forced under the door,” on the floor

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of Defendant’s office. (Id.) Kim also discovered a voicemail on the “company line”

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from someone purporting to be a process-server, who reported that “he had slid the

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Complaint under the door at the offices.” (Id. at 2.)

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Plaintiff attempts to rebut this evidence through an “Affidavit of Service” (Doc. 8)

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filed with the court on March 2, 2015. The process-server who signed that affidavit

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declares that on February 9, 2015, he visited Defendant’s principal place of business in

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Santa Clara, California, where he delivered the Summons and Complaint to “John Doe,

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Refused Name, Apparently In Charge.” (Doc. 8.) John Doe is described in the affidavit

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as “Age: 55, Sex: M, Race/Skin Color: Asian, Height: 5-9, Weight: 150, Hair: Black,

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Glasses: Y.” (Id.) In its Reply, Defendant asserts that Kim, the company’s only officer,

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does not match this description. (Doc. 15 at 3 n.1.)

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Even assuming the process-server delivered the Summons and Complaint in

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person, rather than stuffing then under the door of Defendant’s office, Plaintiff has not

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complied with the requirements for service of process. The affidavit provides no basis to

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conclude that the person who allegedly accepted process at Defendant’s office serves in

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any of the positions enumerated in the federal or Arizona rules. Without some indication

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that John Doe is a partner, officer, or managing or general agent for Defendant, Plaintiff

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cannot carry his burden of showing that service was effective. See Kruska v. Perverted

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Justice Found., No. CV-08-0054-PHX-SMM, 2009 U.S. Dist. LEXIS 112892, at *3 (D.

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Ariz. Nov. 16, 2009) (“Where the validity of service is disputed, the burden is on the

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party claiming proper service to establish the validity of service.” (citation omitted)).

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And contrary to Plaintiff’s suggestion, a defendant does not waive its objection to

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insufficient service of process by filing a motion to dismiss. See id. at *7-8 (citing Fed.

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R. Civ. P. 12(b)). Accordingly, the court will quash the purported service of process and

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permit Plaintiff to attempt to effect valid service.

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Even if Plaintiff succeeds in properly serving process, however, it is doubtful that,

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on the pleadings now before the court, Plaintiff could survive a motion to dismiss for lack

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of personal jurisdiction. “Where a defendant moves to dismiss a complaint for lack of

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personal jurisdiction, the plaintiff bears the burden of demonstrating that jurisdiction is

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appropriate. Where, as here, the motion is based on written materials rather than an

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evidentiary hearing, the plaintiff need only make a prima facie showing of jurisdictional

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facts. In such cases, [courts] only inquire into whether the plaintiff’s pleadings and

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affidavits make a prima facie showing of personal jurisdiction. Although the plaintiff

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cannot simply rest on the bare allegations of its complaint, uncontroverted allegations in

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the complaint must be taken as true. Conflicts between parties over statements contained

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in affidavits must be resolved in the plaintiff’s favor.” Schwarzenegger v. Fred Martin

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Motor Co., 374 F.3d 797, 800 (9th Cir. 2004) (alterations, citations and internal quotation

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marks omitted).

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“Where, as here, there is no applicable federal statute governing personal

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jurisdiction, the district court applies the law of the state in which the district court sits.

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Because [Arizona’s] long-arm jurisdictional statute is coextensive with federal due

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process requirements, the jurisdictional analyses under state law and federal due process

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are the same.” Id. at 800-01 (citations omitted); see also A. Uberti & C. v. Leonardo, 181

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Ariz. 565, 569, 892 P.2d 1354, 1358 (1995) (“Arizona will exert personal jurisdiction

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over a nonresident litigant to the maximum extent allowed by the federal constitution.”

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(citations omitted)). Personal jurisdiction can be either specific or general. “ ‘Specific’

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or ‘case-linked’ jurisdiction depends on an affiliation between the forum and the

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underlying controversy (i.e., an activity or an occurrence that takes place in the forum

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State and is therefore subject to the State’s regulation). This is in contrast to ‘general’ or

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‘all purpose’ jurisdiction, which permits a court to assert jurisdiction over a defendant

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based on a forum connection unrelated to the underlying suit (e.g., domicile).” Walden v.

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Fiore, 134 S. Ct. 1115, 1121 n.6 (2014) (alteration, citations and internal quotation marks

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omitted). On the current record, it is apparent that neither kind of personal jurisdiction

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exists.

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“For general jurisdiction to exist over a nonresident defendant . . . the defendant

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must engage in continuous and systematic general business contacts that approximate

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physical presence in the forum state. This is an exacting standard, as it should be, because

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a finding of general jurisdiction permits a defendant to be haled into court in the forum

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state to answer for any of its activities anywhere in the world.” Schwarzenegger, 374

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F.3d at 801 (citations and internal quotation marks omitted).

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Here, Plaintiff’s sparse three-page Complaint provides no basis for finding that the

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court has general jurisdiction over Defendant.

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Defendant “is a duly organized California corporation with its known principal place of

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business” in Santa Clara, California. (Doc. 1 at 1.) There is no allegation that Defendant

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has any offices in Arizona, that it regularly sends its employees here to transact business,

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or that it enters into contracts with Arizona residents on a regular basis. Plaintiff cannot

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show that Defendant’s “continuous and systematic general business contacts” with

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Arizona “approximate physical presence” in the state.

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The Complaint alleges only that

As for specific jurisdiction, courts focus on “the relationship

among the

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defendant, the forum, and the litigation.” Walden, 134 S. Ct. at 1121 (citations and

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internal quotation marks omitted).

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conduct . . . create[s] a substantial connection with the forum State,” courts consider two

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factors. Id. at 1121-22. “First, the relationship must arise out of contacts that the

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defendant himself creates with the forum State.” Id. at 1122 (emphasis in original)

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(citation and internal quotation marks omitted).

In deciding whether a “defendant’s suit-related

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Second, the defendant must have “minimum contacts” with the forum state, as

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evidenced by “the defendant’s contacts with the forum State itself, not the defendant’s

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contacts with persons who reside there. . . . Accordingly, [the Supreme Court] ha[s]

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upheld the assertion of jurisdiction over defendants who have purposefully reached out

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beyond their State and into another by, for example, entering a contractual relationship

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that envisioned continuing and wide-reaching contacts in the forum State.”

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(alterations, citations and internal quotation marks omitted). “But the plaintiff cannot be

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Id.

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the only link between the defendant and the forum. Rather, it is the defendant’s conduct

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that must form the necessary connection with the forum State that is the basis for its

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jurisdiction over him.” Id. (citations omitted). The Supreme Court has therefore rejected

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the idea that “an individual’s contract with an out-of-state party alone can automatically

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establish sufficient minimum contacts in the other party’s home forum.” Id. at 1122-23

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(emphasis in original) (citation and internal quotation marks omitted). “To be sure, a

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defendant’s contacts with the forum State may be intertwined with his transactions or

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interactions with the plaintiff or other parties. But a defendant’s relationship with a

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plaintiff or third party, standing alone, is an insufficient basis for jurisdiction.” Id. at

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1123 (citation omitted).

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In this case, Plaintiff’s Complaint alleges that Defendant, a California corporation,

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entered into a Memorandum of Understanding with Adventure Ventures. Because it is

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not clear in which states Adventure Ventures is incorporated or has its principal place of

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business, the Memorandum of Understanding cannot provide the basis for specific

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jurisdiction. (See Doc. 1 at 2.) Although the Complaint does not allege it, Defendant

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apparently acknowledges in its Motion that it engaged in some kind of transaction with

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Plaintiff, an Arizona resident, who converted Defendant’s unpaid debt into shares in the

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company. (Doc. 9 at 6.) But this transaction alone is insufficient to establish specific

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jurisdiction, as “the plaintiff cannot be the only link between the defendant and the

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forum.” Walden, 134 S. Ct. at 1122. The Complaint does not allege that Defendant’s

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transaction with Plaintiff “envisioned continuing and wide-reaching contacts” in Arizona,

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or that Defendant has any further contacts with Arizona. Id. A vague assertion that the

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“complaint arises out of events caused by [Defendant] that occurred in Maricopa County,

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Arizona” (Doc. 1 at 2) does not carry Plaintiff’s burden.

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It appears unlikely that the court possesses personal jurisdiction over Defendant.

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Nevertheless, Plaintiff will be permitted one more opportunity to serve the Summons and

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Complaint in conformity with the federal rules. Before service, Plaintiff may amend his

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complaint to allege facts sufficient to support the court’s exercise of jurisdiction over

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Defendant. If he manages to serve process properly and Defendant subsequently files

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another motion to dismiss, Plaintiff will bear the burden of demonstrating that personal

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jurisdiction is proper.

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Resolving the instant Motion does not require deciding whether Plaintiff has failed

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to state a claim upon which relief can be granted. The court therefore does not address

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that question.

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IT IS THEREFORE ORDERED that Defendant’s Motion to Dismiss Complaint

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(Doc. 9) is granted to the extent that the purported service of process is quashed for

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insufficient service of process.

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IT IS FURTHER ORDERED that Plaintiff may serve process on Defendant no

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later than May 1, 2015. If by May 4, 2015, Plaintiff has not filed proof of service of

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process, the Clerk shall terminate this case.

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Dated: April 1st, 2015.

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Neil V. Wake
United States District Judge

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