Williams v. Wiggins et al

Filing 23

ORDER: IT IS ORDERED that the Defendants' Motion to Dismiss for Lack of Personal Jurisdiction Under Federal Rule of Civil Procedure 12(b), or in the Alternative to Transfer Venue (Doc. 12 ) is granted; and IT IS FURTHER ORDERED that the Clerk of Court shall terminate this case and enter judgment accordingly. (See Order for further details.) Signed by Judge Steven P Logan on 10/4/2019. (SST)

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WO 1 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 Michael S. Williams, 9 10 Plaintiff, vs. 11 12 Christopher J. Wiggins, et al., Defendants. 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ) ) ) ) ) ) ) ) ) ) ) ) No. CV-19-03482-PHX-SPL ORDER Before the Court is Christopher J. Wiggins and Seldon Wiggins (together, the “Defendants”) Motion to Dismiss for Lack of Personal Jurisdiction Under Federal Rule of Civil Procedure 12(b), or in the Alternative to Transfer Venue (the “Motion”). (Doc. 12) The Motion was fully briefed on July 5, 2019, and oral argument was requested by Plaintiff Michael S. Williams (the “Plaintiff”). (Docs. 18, 19) Because it would not assist in resolution of the instant issues, the Court finds the pending motion is suitable for decision without oral argument. See LRCiv. 7.2(f); Fed. R. Civ. P. 78(b); Partridge v. Reich, 141 F.3d 920, 926 (9th Cir. 1998). The Court’s ruling is as follows. I. Background Defendant Christopher J. Wiggins (“Wiggins”) is a co-founder, former chief executive officer, and majority shareholder of ORhub, Inc. (“ORhub”). (Doc. 1-2 at 3; Doc. 18 at 5) ORhub is incorporated in Nevada and headquartered in Tempe, Arizona. (Doc. 18 at 26) The Plaintiff is an investor in ORhub and an Arizona resident. (Doc. 18 at 26) 1 Frederic Buonincontri (“Buonincontri”) and Lanny Lang (“Lang”) are also ORhub investors 2 and Arizona residents. (Doc. 18 at 26) 3 In October 2018, Buonincontri filed a lawsuit against ORhub in the Maricopa County 4 Superior Court. (Doc. 18 at 26) On April 4, 2019, Wiggins sent an email (the “April Email”) 5 to approximately 78 ORhub investors and stockholders, including Williams, Buonincontri, 6 and Lang, making statements that the Plaintiff alleges are defamatory. (Doc. 18 at 27; Doc. 7 1-2 at 4) 8 behavior” between Williams, Buonincontri, and Lang; (ii) referred to Williams, 9 Buonincontri, and Lang as “criminal,” accusing them of “intentionally damaging the value 10 of” ORhub; and (iii) stated that Williams, Buonincontri, and Lang “have continued to 11 manipulate the truth and mislead [ORhub’s] shareholders.” (Doc. 1-2 at 4–5) The April Email (i) included statements alleging “collusion and wrongful 12 On April 17, 2019, the Plaintiff initiated this lawsuit (the “Complaint”) in the 13 Maricopa County Superior Court alleging causes of action for defamation and false light 14 invasion of privacy. (Doc. 1-2) The case was removed to this Court on May 24, 2019. (Doc. 15 1) The Defendants filed the Motion seeking dismissal of the Complaint pursuant to Federal 16 Rule of Civil Procedure 12(b)(2). 17 II. Legal Standard 18 “[T]he plaintiff bears the burden of demonstrating that jurisdiction is appropriate.” 19 Picot v. Weston, 780 F.3d 1206, 1211 (9th Cir. 2015). Where, as here, a defendant’s motion 20 to dismiss is based on a written record and no evidentiary hearing is held, “the plaintiff need 21 only make a prima facie showing of jurisdictional facts.” Id. “For a court to exercise 22 personal jurisdiction over a non-resident defendant, that defendant must have at least 23 ‘minimum contacts’ with the relevant forum such that the exercise of jurisdiction ‘does not 24 offend traditional notions of fair play and substantial justice.’” Dole Food Co. v. Watts, 303 25 F.3d 1104, 1110–11 (9th Cir. 2002) (quoting Int’l Shoe Co. v. Washington, 326 U.S. 310, 26 316 (1945)). “In judging minimum contacts, a court properly focuses on ‘the relationship 27 among the defendant, the forum, and the litigation.’” Calder v. Jones, 465 U.S. 781, 788 28 (1984) (quoting Shaffer v. Heitner, 433 U.S. 186, 204 (1977)). When no federal statute 2 1 specifically defines the extent of personal jurisdiction, federal courts look to the law of the 2 state where the district court sits—in this case, Arizona. CE Distribution, LLC v. New Sensor 3 Corp., 380 F.3d 1107, 1110 (9th Cir. 2004). “Arizona’s long-arm rule permits the exercise 4 of personal jurisdiction to the extent allowed by the due process clause of the United States 5 Constitution.” Ochoa v. J.B. Martin & Sons Farms, Inc., 287 F.3d 1182, 1188 (9th Cir. 6 2002). 7 Personal jurisdiction may be either general or specific. See Bancroft & Masters, Inc. 8 v. Augusta Nat’l Inc., 223 F.3d 1082, 1086 (9th Cir. 2000). General jurisdiction exists where 9 a non-resident defendant engages in substantial, continuous or systematic activities within 10 the forum. Marlyn Nutraceuticals, Inc. v. Improvita Health Prod., 663 F. Supp. 2d 841, 848 11 (D. Ariz. 2009) (citing Perkins v. Benguet Consol. Mining, Co., 342 U.S. 437, 445 (1952)). 12 In deciding whether a defendant is subject to specific personal jurisdiction, federal 13 courts consider whether (1) the non-resident defendant purposefully directs his activities or 14 consummates some transaction with the forum or resident thereof; or performs some act by 15 which he purposefully avails himself of the privilege of conducting activities in the forum, 16 thereby invoking the benefits and protections of its laws; (2) the claim arises out of or relates 17 to the defendant’s forum-related activities; and (3) the exercise of jurisdiction comports with 18 fair play and substantial justice, i.e. it must be reasonable. Picot, 780 F.3d at 1211 (citing 19 Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 802 (9th Cir. 2004)). The 20 plaintiff has the burden of proving the first two prongs. CollegeSource, Inc. v. AcademyOne, 21 Inc., 653 F.3d 1066, 1076 (9th Cir. 2011). If he does so, the burden shifts to the defendant 22 to “set forth a ‘compelling case’ that the exercise of jurisdiction would not be reasonable.” 23 Id. (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 477 (1985)). For claims 24 sounding in tort, courts apply a “purposeful direction” test and look to evidence that the 25 defendant has directed his actions at the forum state, even if those actions took place 26 elsewhere. Schwarzenegger, 374 F. 3d at 802. 27 III. 28 Analysis The Defendants seek dismissal of this case because the Court does not have personal 3 1 jurisdiction over either of the Defendants. (Doc. 12 at 6) The Defendants argue that the 2 Plaintiff fails to establish general or specific personal jurisdiction through the allegations in 3 the Complaint because (i) the Defendants are not Arizona residents and (ii) the April Email 4 was not directed at Arizona residents. (Doc. 12 at 6) In response, the Plaintiff argues that 5 the Court has personal jurisdiction over the Defendants because the defamatory actions 6 taken by the Defendants targeted and impacted persons and entities residing in Arizona. 7 (Doc. 18 at 5) 8 A. General Jurisdiction 9 The Defendants argue that they do not have the requisite minimum contacts with 10 Arizona for the Court to have general personal jurisdiction over the parties. The Defendants 11 argue that they are California residents who do not reside or conduct business in Arizona. 12 (Doc. 12 at 6) The Defendants also argue that they do not own any assets in Arizona and 13 do not travel to Arizona. (Doc. 12 at 8) In response, the Plaintiff argues that the Defendants 14 conduct business in Arizona because Wiggins is a current board advisor and stockholder of 15 ORhub, which is headquartered in Arizona. (Doc. 18 at 20) 16 The Court finds that it does not have general personal jurisdiction over the 17 Defendants because the Plaintiff has failed to allege sufficient information demonstrating 18 that the Defendants have substantial, continuous and systematic contacts with Arizona. The 19 Plaintiff fails to dispute that the Defendants are not Arizona residents or that they do not 20 spend any meaningful amount of time in Arizona. Even the Plaintiff’s allegation that the 21 Defendants are stockholders in Arizona companies fails to prove continuous and systematic 22 contacts, as the Plaintiff fails to allege that the Defendants’ stockholder relationship requires 23 the Defendants to travel or conduct business in Arizona on a continuous or systematic basis. 24 Accordingly, the Court finds that it cannot exercise general personal jurisdiction over the 25 Defendants. 26 B. Specific Jurisdiction 27 The Defendants argue that the allegations in the Complaint do not allege facts 28 sufficient to confer specific personal jurisdiction over the Defendants. The Court of Appeals 4 1 for the Ninth Circuit analyzes specific jurisdiction under a three-prong test: (1) the non- 2 resident defendant must purposefully direct his activities or consummate some transaction 3 with the forum or resident thereof; or perform some act by which he purposefully avails 4 himself of the privilege of conducting activities in the forum, thereby invoking the benefits 5 and protections of its laws; (2) the claim must be one which arises out of or relates to the 6 defendant’s forum-related activities; and (3) the exercise of jurisdiction must comport with 7 fair play and substantial justice, i.e. it must be reasonable. Mavrix Photo, Inc. v. Brand 8 Techs., Inc., 647 F.3d 1218, 1227–28 (9th Cir. 2011). 9 1. Purposeful Direction 10 In order to determine whether a party purposefully directs out-of-forum activities at 11 a forum, courts implement an “effects test”. Freestream Aircraft (Bermuda) Ltd. v. Aero 12 Law Grp., 905 F.3d 597, 606 (9th Cir. 2018). The “effects test” focuses on the forum in 13 which a defendant’s actions were felt, whether or not the actions themselves occurred within 14 the forum. MJG Enterprises, Inc. v. Cloyd, 2010 WL 3842222, at *6 (D. Ariz. Sept. 27, 15 2010). The three-part test requires that the defendant have “(1) committed an intentional 16 act, (2) expressly aimed at the forum state, (3) causing harm that the defendant knows is 17 likely to be suffered in the forum state.” Schwarzenegger, 374 F.3d at 805. 18 The Defendants concede that sending the April Email qualifies as an intentional act. 19 (Doc. 12 at 12) However, as to the second prong of the “effects test,” the Defendants argue 20 that the April Email at issue was not expressly aimed at Arizona because (i) the target 21 audience of the April Email was persons primarily outside of Arizona, and (ii) the majority 22 of the April Email recipients reside outside of Arizona. (Doc. 12 at 12) In response, the 23 Plaintiff argues that 18 of the approximately 78 email recipients reside in Arizona, and the 24 purpose of the email was to disrupt an Arizona-based company and an Arizona-based 25 lawsuit. (Doc. 18 at 13–15) 26 The “express aiming” requirement is met when “the defendant is alleged to have 27 engaged in wrongful conduct targeted at a plaintiff whom the defendant knows to be a 28 resident of the forum state.” Marlyn Nutraceuticals, 663 F. Supp. 2d at 851. Acts that have 5 1 merely foreseeable effects in the forum state are insufficient. Id. Instead, the Defendants 2 must have known that the consequences of their allegedly wrongful conduct would be felt 3 in Arizona. Id. The Walden precedent found that individualized targeting is, on its own, 4 insufficient to confer specific personal jurisdiction. Axiom Foods, Inc. v. Acerchem Int’l, 5 Inc., 874 F.3d 1064, 1070 (9th Cir. 2017). 6 In this case, the Defendants clearly expected the email to impact a company 7 headquartered in Arizona; however, even though the April Email was sent to a group 8 including Arizona residents, the Defendants dispute that they specifically targeted Arizona 9 residents through the email. The Court finds that there are sufficient allegations in the 10 Complaint to demonstrate that Arizona residents were the target of the email or that the 11 email was sent to specifically induce action from the Arizona email recipients. The 12 strongest example of this is that the Arizona stockholders were purposely included in the 13 list of email recipients. (Doc. 1-2 at 4) The Complaint also alleges that Wiggins sought to 14 galvanize stockholders to file a class action lawsuit against the Plaintiff, Buonincontri, and 15 Lang. (Doc. 1-2 at 6) 16 In Dole, the Court exercised specific jurisdiction where the defendants 17 communicated “frequently” with a company’s decisionmakers who resided in the forum 18 state, and the company’s principal place of business was in the forum state. Dole, 303 F.3d 19 at 1109–12. This case is distinguishable from Dole because the communication at issue in 20 this case was not frequent. Here, the Defendants sent a single email seeking to communicate 21 with a large group of stockholders, most of which residing outside of Arizona, in order to 22 organize support against an Arizona company led by Arizona residents. 23 This case is also distinguishable from Neuromechanical, LLC because the 24 Defendants sent the April Email directly to approximately 18 Arizona residents, including 25 the Plaintiff. Neuromechanical, LLC v. Kiro Kids Pty. Ltd., 2011 WL 333337, at *3 (D. 26 Ariz. Jan. 31, 2011) (finding that less than one percent of the defendants’ emails targeted 27 Arizona residents).1 In Axiom, the Court focused on the defendant’s contacts with the 28 1 The 18 Arizona email recipients constitute approximately 20 percent of the total 6 1 proposed forum state of California while adjudicating a copyright infringement claim. 2 Axiom Foods, 874 F.3d at 1070–71. In Axiom, a defendant’s knowledge regarding the forum 3 of a copyright was one required element necessary to establish individualized targeting. 4 This case is distinguishable from Axiom because the Defendants’ alleged dissemination of 5 defamatory communication to Arizona residents necessitates the Court’s consideration of 6 the Defendants’ communication and contact with Arizona residents. 7 The Court’s finding is supported by the Walden precedent, as (i) the Defendants 8 established minimum contacts in Arizona through communication via email with Arizona 9 residents, which is sufficient to constitute a “relevant contact”; and (ii) the April Email was 10 widely circulated to Arizona residents within the relevant stockholder group, and the brunt 11 of the Plaintiff’s injury occurred in Arizona. Walden v. Fiore, 571 U.S. 277, 285–87 (2014). 12 This is evidenced by the Plaintiff’s claim that his professional reputation is centered in 13 Arizona. (Doc. 18 at 25) Ultimately, it was the Defendants’ communication with the 14 relevant forum that allows the Court’s exercise of specific jurisdiction in this case. 15 Accordingly, the Court finds that the Defendants expressly aimed their actions at Arizona 16 residents for the purpose of the “effects test”. 17 Finally, the third prong of the “effects test” asks if a defendant’s intentional action 18 aimed at the forum state caused harm that the defendant knew was likely to be suffered in 19 the forum. MJG Enterprises, 2010 WL 3842222, at *9. “When a forum in which a plaintiff 20 corporation has its principal place of business is in the same forum toward which defendants 21 expressly aim their acts, the ‘effects’ test permits that forum to exercise personal 22 jurisdiction”. Id. It is undisputed that ORhub hosts its headquarters and principal place of 23 business in Arizona. The Defendants argue that the Plaintiff’s harm was not foreseeable in 24 Arizona because most of the targeted recipients of the April Email reside outside of Arizona. 25 However, the Court finds this argument unsupported by the fact that the Plaintiff, 26 Buonincontri, and Lang were included in the email, and the Defendants knew each of them 27 to be Arizona residents operating an Arizona company. (Doc. 1-2 at 4) Thus, the Court 28 April Email recipients. 7 1 finds that the Defendants purposefully directed their actions at Arizona. 2 2. Forum Related Activities 3 The Defendants do not directly address whether the April Email constitutes a forum- 4 related activity. To address this issue, the Court analyses whether the Plaintiff would not 5 have been injured “but for” the Defendants’ conduct directed toward the Plaintiff in 6 Arizona. Biliack v. Paul Revere Life Ins. Co., 265 F. Supp. 3d 1003, 1008 (D. Ariz. 2017) 7 (stating “whether the claim arises out of or relates to the defendant’s forum-related 8 activities, is established ‘if the plaintiff would not have been injured but for’ the defendant’s 9 conduct directed at the forum.”). The Plaintiff argues that the Plaintiff’s claims for 10 defamation “arise out of [the Defendants’] Arizona-focused emails sent to 18 Arizona 11 recipients,” but no further argument is provided. (Doc. 18 at 17) 12 Based on the established “but for” precedent, the Court cannot find that the Plaintiff’s 13 claims arise out of the Defendants’ forum-related activities. It is entirely plausible that the 14 Plaintiff could bring identical claims against the Defendants had the April Email only been 15 distributed to parties outside of Arizona. Although the Plaintiff may argue that the majority 16 of his harm was experienced in Arizona, the Court cannot find that his injury did not occur 17 elsewhere. With identical content and intent behind the distribution of the April Email, the 18 Plaintiff can still bring claims against the Defendants in another forum, and the Defendants’ 19 act of sending the allegedly defamatory April Email does not create a cause of action 20 specific to Arizona. Thus, the Court finds that the Plaintiff still may have been injured but 21 for the Defendants’ forum-related conduct. Therefore, the Motion must be granted. 22 3. Reasonableness 23 The Plaintiff has the burden of establishing the first two prongs of the specific 24 jurisdiction analysis before the burden shifts to the Defendants to argue that the exercise of 25 jurisdiction would not be reasonable. CollegeSource, 653 F.3d at 1076. Because the Court 26 finds that the Plaintiff has not met his burden, the Court declines to address the 27 reasonableness of an exercise of specific jurisdiction or the Defendants’ motion to transfer 28 venue. 8 1 Accordingly, 2 IT IS ORDERED that the Defendants’ Motion to Dismiss for Lack of Personal 3 Jurisdiction Under Federal Rule of Civil Procedure 12(b), or in the Alternative to Transfer 4 Venue (Doc. 12) is granted; and 5 6 7 IT IS FURTHER ORDERED that the Clerk of Court shall terminate this case and enter judgment accordingly. Dated this 4th day of October, 2019. 8 9 Honorable Steven P. Logan United States District Judge 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 9

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