Westworld Consulting LLC v. Vanity Group PTY Limited et al

Filing 28

ORDER denying 19 Motion to Dismiss for Lack of Jurisdiction. Signed by Judge David G Campbell on 11/292017.(DGC, nvo)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Westworld Consulting, L.L.C.,
Plaintiff,

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No. CV16-03361-PHX-DGC
ORDER

v.
Vanity Group Pty Ltd.; Vanity Group; John
Does I-XX; Jane Does I-XX; XYZ Entities
1-100.
Defendants.

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Plaintiff Westworld Consulting, LLC, filed a complaint against Defendants Vanity

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Group Pty. Ltd. and Vanity Group (collectively “Vanity”) seeking monetary and

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injunctive relief for an alleged breach of contract, promissory estoppel, conversion,

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negligence, and fraud.

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jurisdiction. Doc. 19. The motion is fully briefed and oral argument will not aid the

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Court’s decision. See Fed. R. Civ. P. 78(b); LRCiv 7.2(f). For the reasons set forth

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below, the Court will deny Vanity’s motion.

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I.

Doc. 1.

Vanity has moved to dismiss for lack of personal

Background.

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Plaintiff is an Arizona company that offers consulting and networking services for

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business clients throughout the United States and abroad. Doc. 1 ¶ 1. Its principal place

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of business is Scottsdale, Arizona, and Arizona resident Mike Dunlap is its managing

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member. Id.; Doc. 23-1 at 1. Vanity is an Australian company that supplies luxury hotel

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amenities. Doc. 19-1 at 1-2. It is incorporated and headquartered in Sydney, Australia.

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Id.

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In November 2015, Vanity used LinkedIn to recruit Dunlap for the role of Vice

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President of Business Development for North America.

Doc. 23-1 at 2-3.

Vanity

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initiated the communication with an invitation to connect. Id.; Doc. 19-1 at 11; Doc. 27

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¶ 17. At the time, Vanity had no physical presence or customers in Arizona. Doc. 19-1

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at 2. After preliminary discussions, Vanity invited Dunlap to interview in its Sydney

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office for the position. Doc. 23-1 at 3-4.

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Dunlap visited Sydney in January 2016, and the parties agreed to a long-term

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relationship in which Dunlap would serve as Vanity’s Vice President of Business

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Development for North America. Id. Although Vanity attempted to draft a one-year

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contract compliant with U.S. law, no written contract was ever executed. Id. at 6;

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Doc. 19-1 at 6, 32-35. Dunlap’s responsibilities included the facilitation of business

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relationships with potential clients throughout the United States. Doc. 23-1 at 4. The

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parties agreed that Dunlap would act as Vanity’s agent and operate from an office in

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Scottsdale, Arizona. Id. Vanity provided Dunlap with Vanity business cards and a

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Vanity email-signature block, both of which contained a Scottsdale address. Id. at 5-6.

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Upon his return to Arizona, Dunlap began promoting Vanity’s business in

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Arizona, California, Texas, and Nevada.

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agreements with several national hotel chains. Id. at 6-7. Vanity paid Dunlap for this

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work and associated travel expenses. Id. at 8-9. Meanwhile, Vanity introduced Dunlap

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to customer contacts in the United States as its Vice President of Business Development

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for North America. Id. at 7.

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Id. at 4.

He started negotiating sales

Vanity terminated its relationship with Dunlap in February 2016.

Id. at 9.

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Plaintiff filed this action in October 2016. Doc. 1. Vanity now moves to dismiss the

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complaint for lack of personal jurisdiction. Doc. 19.

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II.

Legal Standard.

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To withstand a 12(b)(2) motion, the plaintiff must show that the defendant is

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properly subject to the court’s jurisdiction. Mavrix Photo, Inc. v. Brand Techs., Inc., 647

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F.3d 1218, 1223 (9th Cir. 2011). “Where, as here, the defendant’s motion is based on

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written materials rather than an evidentiary hearing, the plaintiff need only make a prima

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facie showing of jurisdictional facts to withstand the motion to dismiss.” Id. “The

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plaintiff cannot ‘simply rest on the bare allegations of its complaint,’ but uncontroverted

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allegations in the complaint must be taken as true.” Id. (quoting Schwarzenegger v. Fred

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Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004)). In ruling on such a motion, the

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Court considers the pleadings and any materials submitted by the parties, accepting as

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true any uncontroverted allegations in the complaint and resolving any factual conflicts in

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the plaintiff’s favor.

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affidavits must be resolved in the plaintiff’s favor.” Schwarzenegger, 374 F.3d at 800.

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III.

Id.

“Conflicts between parties over statements contained in

Discussion.

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Arizona’s long-arm statute, Ariz. R. Civ. P. 4.2(a), applies in this diversity action.

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See Terracom v. Valley Nat’l Bank, 49 F.3d 555, 559 (9th Cir. 1995). That rule “provides

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for personal jurisdiction co-extensive with the limits of federal due process.” Doe v. Am.

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Nat’l Red Cross, 112 F.3d 1048, 1050 (9th Cir. 1997). “[A] corporation may be subject

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to personal jurisdiction only when its contacts with the forum support either specific or

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general jurisdiction.” Martinez v. Aero Caribbean, 764 F.3d 1062, 1068 (9th Cir. 2014)

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(citing Int’l Shoe Co. v. Washington, 326 U.S. 310 (1945)).

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Plaintiff argues that Vanity is subject to specific jurisdiction.

Doc. 23 at 5.

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Specific jurisdiction exists if a foreign corporation’s contacts with the forum give rise to

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the cause of action before the Court. Daimler AG v. Bauman, 134 S. Ct. 746, 754 (2014).

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The Ninth Circuit employs a three-prong test to determine whether a non-resident has

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sufficient minimum contacts for specific jurisdiction:

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(1) [T]he defendant must either purposefully direct his activities toward the
forum or purposefully avail himself of the privileges of conducting
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activities in the forum; (2) the claim must be one which arises out of or
relates to the defendant’s forum-related activities; and (3) the exercise of
jurisdiction must comport with fair play and substantial justice, i.e. it must
be reasonable.

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Axiom Foods, Inc. v. Acerchem Int’l, Inc., 874 F.3d 1064, 1068 (9th Cir. 2017). Plaintiff

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has the burden of satisfying the first two elements. Id. If it does, Vanity must show that

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the exercise of jurisdiction would be unreasonable. Id. at 1068-69.

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A.

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A purposeful availment analysis is appropriate here because the claims sound

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primarily in contract – the tort claims are all related to, and arise from, the contractual

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relationship. Boschetto v. Hansing, 539 F.3d 1011, 1016 (9th Cir. 2008) (applying

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purposeful availment analysis to case involving breach of contract, misrepresentation,

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and fraud because the case sounded “primarily in contract”); Sher v. Johnson, 911 F.2d

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1357, 1362 (9th Cir. 1990) (analyzing purposeful availment for both tort and contract

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claims arising out of a contractual relationship).

Purposeful Availment.

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“To have purposefully availed itself of the privilege of doing business in the

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forum, a defendant must have performed some type of affirmative conduct which allows

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or promotes the transaction of business within the forum state.” Boschetto, 539 F.3d at

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1016 (internal quotation marks omitted). The defendant’s conduct, not the plaintiff’s,

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must create a substantial connection with the forum. Walden v. Fiore, 134 S. Ct. 1115,

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1121-22 (2014). “Due process requires that a defendant be haled into court in a forum

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State based on his own affiliation with the State, not based on the ‘random, fortuitous, or

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attenuated’ contacts he makes by interacting with other persons affiliated with the State.”

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Id. at 1123.

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Plaintiff contends that Vanity purposefully availed itself of the benefits of doing

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business in Arizona by: (1) reaching out to Plaintiff in Arizona to begin preliminary

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discussions about a contractual relationship; (2) establishing a long-term contractual

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relationship with an Arizona resident; (3) contracting with Plaintiff to operate Vanity’s

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business activities in Scottsdale, Arizona; (4) identifying a Scottsdale, Arizona, address

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on Plaintiff’s Vanity business cards and email-signature block; (5) employing Plaintiff to

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perform business development from and in Arizona; (6) designating Plaintiff as an agent

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to undertake business commitments on behalf of Vanity from Arizona; and (7) paying

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Plaintiff for his business development work. Doc. 23-1 at 2-9.

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Vanity argues that it has “never marketed its products, or directed its business to

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the residents of Arizona.” Doc. 19 at 3. Although Vanity did contract with Plaintiff to

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engage in limited business development on a trial basis, “Vanity never requested, or

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asked, or otherwise instructed [Plaintiff] to work from Arizona.” Doc. 26 at 6. Vanity

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further asserts that during negotiations Plaintiff suggested it could work from a “virtual”

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office anywhere in the United States. Id. The fact that Plaintiff chose to work from

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Arizona, Vanity argues, “does not translate into a direct connection between Vanity and

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the State of Arizona.” Id. at 8.

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As noted above, Plaintiff “need make only a prima facie showing of jurisdictional

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facts to withstand the motion,” and the Court must draw all reasonable inferences and

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resolve all factual disputes in Plaintiff’s favor. Mavrix Photo, Inc, 647 F.3d at 1223.

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Plaintiff has made a prima facie case for jurisdiction. Regardless of who chose Arizona

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as the location for Plaintiff’s work, Vanity contracted with an Arizona resident to

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represent Vanity and pursue business opportunities, designated the resident as its vice

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president, created business cards showing the Arizona resident as its agent, and paid the

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agent for business development work. Vanity disputes a number of these facts, but, as

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noted above, “[c]onflicts between parties over statements contained in affidavits must be

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resolved in the plaintiff’s favor.” Schwarzenegger, 374 F.3d at 800.

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Vanity’s reliance on Walden v. Fiore is misplaced. Doc. 19 at 12 (citing 134 S.

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Ct. at 1125). In Walden, the defendant was a Georgia police officer who seized Nevada

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residents’ money in Georgia and wrote a false affidavit to justify the seizure. 134 S. Ct.

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at 1119-20.

Although the Nevada residents felt harm in Nevada, “no part of [the

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defendant’s] course of conduct occurred in Nevada.” Id. at 1124-25. The defendant

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never “conducted activities within, contacted anyone in, or sent anything or anyone to

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Nevada.” Id. at 1124. Vanity, by contrast, reached into Arizona to recruit an Arizona

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resident, employed the Arizona resident, held the resident out as a Vanity employee

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located in Arizona, and compensated the resident for work performed in Arizona.

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B.

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The claims in this case must also arise out of Defendants’ contacts with Arizona.

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The Ninth Circuit uses a “but for” test. A claim arises out of a defendant’s forum

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contacts if, “but for” the contacts, the cause of action would not have arisen. Menken v.

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Arising Out Of.

Emm, 503 F.3d 1050, 1058 (9th Cir. 2007).

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The test is satisfied here. Plaintiff alleges that Vanity contracted with him to

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conduct business from an address in Arizona. But for this agreement, Plaintiff “would

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not have performed services or turned over proprietary information to [Vanity].” Doc. 23

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at 12. It is Plaintiff’s performance and Vanity’s alleged breach of this contract that gave

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rise to the complaint.

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C.

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Once the first two prongs are satisfied, there is a strong presumption of

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reasonableness. Dole Food Co., Inc. v. Watts, 303 F.3d 1104, 1117 (9th Cir. 2002). The

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burden shifts to the defendant to “‘present a compelling case that the presence of some

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other considerations would render jurisdiction unreasonable.’”

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Burger King Corp. v. Rudzewicz, 471 U.S. 462, 477 (1985)).

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evaluated using the following factors:

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Reasonableness.

Id. at 1114 (quoting
Reasonableness is

(1) [T]he extent of the defendants’ purposeful injection into the forum
state’s affairs; (2) the burden on the defendant of defending in the forum;
(3) the extent of the conflict with the sovereignty of the defendant’s state;
(4) the forum state’s interest in adjudicating the dispute; (5) the 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.

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Id.

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The first factor – the extent of Vanity’s purposeful injection into Arizona – weighs

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in favor of Plaintiff. Granted, Vanity’s relationship with Plaintiff lasted less than a

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month, it has no other employees, facilities, or clients in Arizona, and it does not sell or

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distribute products here. Doc. 19 at 2. But Vanity nonetheless reached into Arizona to

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recruit Plaintiff, identified a Vanity office in Scottsdale, and directed Plaintiff to develop

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business in Arizona, among other states.

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The second factor – the burden on Vanity – weighs in favor of Vanity. It would

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undoubtedly be more burdensome for an Australian company to litigate in Arizona. See

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Bristol-Myers Squibb Co. v. Superior Court of Cal., 137 S. Ct. 1773, 1780 (2017)

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(“primary concern is the burden on the defendant” (internal quotation marks omitted)).

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But this factor does not carry heavy weight because “modern advances in

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communications and transportation have significantly reduced the burden of litigating in

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another country.” Dole Food Co., Inc., 303 F.3d at 1115 (quoting Sinatra v. Nat’l

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Enquirer, 854 F.2d 1191, 1199 (9th Cir. 1988)). And Vanity does not face the burden of

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overcoming a language barrier. See id. (fluency in English is a “mitigating factor”).

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The third factor – conflict with Australian sovereignty – also weighs in favor of

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Vanity. The Supreme Court has indicated that “[g]reat care and reserve should be

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exercised when extending our notions of personal jurisdiction into the international

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field.” Asahi Metal Indus. Co., Ltd. v. Superior Court of Cal., 480 U.S. 102, 115 (1987)

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(internal quotation marks omitted). But “this factor is not dispositive because, if given

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controlling weight, it would always prevent suit against a foreign national in a United

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States court.” Haisten v. Grass Valley Med. Reimbursement Fund, Ltd., 784 F.2d 1392,

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1401-02 (9th Cir. 1986) (internal quotation marks omitted).

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The fourth factor – Arizona’s interest in adjudicating the dispute – weighs in favor

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of Plaintiff. Arizona has a strong interest in ensuring that its residents are compensated

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for their injuries. Ochoa v. J.B. Martin and Sons Farms, Inc., 287 F.3d 1182, 1193 (9th

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Cir. 2002).

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The fifth factor – the most efficient judicial resolution – favors neither party. The

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Ninth Circuit looks “primarily at where the witnesses and the evidence are likely to be

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located.” Core-Vent Corp. v. Nobel Indus. AB, 11 F.3d 1482, 1489 (9th Cir. 1993).

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Vanity contends that the most efficient resolution would be in Australia, “where the

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anticipated relationship was negotiated.” Doc. 19 at 16. Yet neither party contends that a

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majority of the witnesses and evidence is located in Australia or Arizona. Id.; Doc. 23 at

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14. Also relevant is the choice of law applicable to the case. See Dole Food Co., Inc.,

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303 F.3d at 1116. The parties dispute whether the law of Arizona or Australia would

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govern the contract, but the Court must resolve this dispute in favor of Plaintiff at this

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stage. Plaintiff avows that Defendant contemplated a contract compliant with U.S. law.

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Doc. 23-1 at 6; see also Doc. 19-1 at 32-35 (although Vanity shared a standard Australian

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contract to give Plaintiff notice of the general terms, Vanity attempted to secure a

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contract compliant with U.S. law).

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The sixth factor – Plaintiff’s convenience – weighs in favor of Plaintiff. Litigating

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in Australia would surely be inconvenient for an Arizona resident. Nonetheless, the

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Court does not weigh Plaintiff’s convenience heavily. See Ziegler v. Indian River Cty.,

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64 F.3d 470, 476 (9th Cir. 1995).

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The final factor – the existence of an alternative forum – weighs in favor of

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Vanity. Plaintiff does not dispute that Australia is an alternative forum. See Doc. 23

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at 15.

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The first, fourth, and sixth factors favor Plaintiff; the second, third, and seventh

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factors favor Vanity; and the fifth factor favors neither party. Because the factors do not

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clearly favor either party, the Court cannot conclude that Vanity has made a compelling

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case of unreasonableness. Caruth v. Int’l Psychoanalytical Ass’n, 59 F.3d 126, 129 (9th

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Cir. 1995) (“given the closeness of the factors, we conclude that [defendant] has not

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presented a ‘compelling case’ that exercising jurisdiction over it would be

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unreasonable”). Ninth Circuit cases “emphasize the heavy burden on both domestic and

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foreign defendants in proving a ‘compelling case’ of unreasonableness to defeat

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jurisdiction.” Dole Food Co., Inc., 303 F.3d at 1117.

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IT IS ORDERED that Vanity’s motion to dismiss for lack of personal jurisdiction
(Doc. 19) is denied.
Dated this 29th day of November, 2017.

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