j2 Global Inc et al v. Fax87.com et al
Filing
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ORDER by Judge Dean D. Pregerson: granting 21 defendant Farjad Fani's Motion to Dismiss for Lack of Jurisdiction. Fani is dismissed as adefendant in this action, without prejudice. (lc). Modified on 2/5/2014 .(lc).
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UNITED STATES DISTRICT COURT
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CENTRAL DISTRICT OF CALIFORNIA
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j2 GLOBAL, INC. and ADVANCED
MESSAGING TECHNOLOGIES,
INC.,
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Plaintiffs,
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v.
FAX87.COM, FARJAD FANI, MATT
JOHNSON FINANCE INC.,
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Defendants.
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___________________________
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Case No. CV 13-05353 DDP (AJWx)
ORDER GRANTING MOTION TO DISMISS
UNDER RULE 12(b)(5)
[DKT No. 21]
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Before the Court is Defendant Farjad Fani's Motion to Dismiss
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for Insufficient Service of Process under Rule 12(b)(5) and Lack of
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Personal Jurisdiction under Rule 12(b)(2). The matter is fully
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briefed and suitable for adjudication without oral argument. See
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Fed.R.Civ.P. 78. Having considered the parties' submissions, the
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Court now issues the following order.
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II.
Background
Plaintiffs j2 Global, Inc. and Advanced Messaging
Technologies, Inc. (collectively, “j2”) assert claims for breach of
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contract and patent infringement arising from Defendants' alleged
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unlicensed use of two patents owned by Plaintiffs.
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j2 is the owner of U.S. Patents No. 6,208,638 (“'638 patent”)
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and 6,350,066 (“'066 patent”). (Complaint ¶ 11-17 & Exs. A, B.)
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a previous action filed on March 29, 2011, j2 sued Matt Johnson
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Finance, Inc. (“MJF”), Fax87.com (“Fax 87”), and Farjad Fani for
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infringement of the '638 and '066 patents (“First Action”). (Id.
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¶ 18.) On April 12, 2012, the parties settled the First Action and
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it was dismissed by stipulation. (Id. ¶ 19.) As part of the
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settlement, j2 and MJF (doing business as Fax87.com) entered into a
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Patent License Agreement (“Agreement”). (Id. ¶ 20 & Ex. E.)
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Under the Agreement, MJF received a non-exclusive license to
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the '638 and '066 patents in exchange for its payment to j2 of a
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lump sum of $25,000 and running royalties based on customer use.
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(Id. ¶ 21 & Ex. E, ¶ 3.1.) The Agreement also requires that MJF
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mark user materials and manuals associated with the licensed
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product with the numbers of the licensed patents in the manner
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required by 35 U.S.C. § 87. (Id. ¶ 22 & Ex. E. § 7.4.)
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Additionally, the Agreement requires MJF to notify j2 within a
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specified period if it undergoes one of several specified “change
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events,” which j2 interprets to include any change in control of
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the Fax87.com website. (Id. ¶ 23. & Ex. E. § 8.)
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The Agreement also includes a choice of law provision,
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providing that the Agreement is to be governed by California law,
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and a forum selection clause, providing that any claims arising
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from the Agreement must be brought in the Central District of
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California. (Id. Ex. E. § 10.1-10.2.)
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j2 named Fani, along with MFJ and Fax87.com, in its claim for
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breach of contract, alleging that these defendants breached the
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Agreement by failing to provide a royalty report, failing to remit
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royalty payments, selling the business without providing timely
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notice to j2, and failing to provide the required markings on the
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Fax.87.com website. (Id. ¶ 42.) Though not relevant to this motion,
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j2 additionally asserts patent infringement claims against the
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current owners and operators of Fax87.com, who are named as Does 1
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& 2. (Id. ¶ 37-56.)
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Importantly, although Fani was a party to the First Action and
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to an agreement settling that litigation, he is not included in the
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Agreement as a party or signatory in his individual capacity. (Id.
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Ex. E.) Instead, Fani signed the Agreement as a signatory for Matt
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Johnson Finance, Inc. d/b/a Fax87.com, as the company's CEO. (Id.)
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Fani asserts, and j2 does not contest, that Fani was included in
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his individual capacity in the first draft of the Agreement
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provided by j2, but that he was removed as a party at his request
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during the negotiations that led to the final Agreement. (Id.)
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(Declaration of Farjad Fani in Support of Motion ¶ 4.)
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Fani asserts that, apart from being named in and negotiating
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the resolution to the earlier patent infringement litigation, he
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has no other personal contacts with California. He asserts that he
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formerly resided in Washington, but left the United States in or
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about February 2013. (Fani Decl. ¶ 2.) He asserts that he has never
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resided in California; does not maintain an office or place of
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business in California; has no mailing address, telephone number or
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telephone listing in California; does not own or lease property in
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California; does not maintain a bank account in California; and has
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not borrowed money in California or applied for a loan in
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California. (Id.) He further asserts that he has only visited
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California on vacation in the past. (Id. ¶ 3.)
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As discussed further below, Fani also contends that he was not
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served with the Summons and Complaint. Plaintiffs' proof of service
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on Fani indicates that the Summons and Complaint were executed upon
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Tom Walker (“Walker”), purportedly as an Agent for Service of
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Process for Fani, at the Eastham Foster CPAs (“Eastham”) firm in
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Washington State on or about October 15, 2013. (DKT No. 13.)
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Service on MJF was also simultaneously executed upon Walker, who
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was MFJ’s registered agent for service of process. (DKT No. 14.)
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However, Fani has submitted a declaration stating that he has
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not authorized any person or entity to accept service of process on
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his behalf, and particularly, has never authorized Eastham or
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Walker to accept service of process for him. (DKT No. 24 ¶ 7.) Fani
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states that when he learned on November 4, 2013 that Walker had
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mistakenly purported to accept service of process on his behalf, he
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contacted Eastham, which then advised j2’s counsel that Eastham and
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Walker were only authorized to accept service of process for MJF.
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(Id. ¶ 8.)
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Fani moves to dismiss the claim against him for failure to
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provide sufficient service of process under Rule 12(b)(5) and for
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lack of personal jurisdiction under Rule 12(b)(2).
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II.
Motion to Dismiss for Insufficient Service of Process
The Court first considers Fani’s contention that service of
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process was insufficient. “[S]ervice of summons is the procedure by
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which a court having venue and jurisdiction of the subject matter
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of the suit asserts jurisdiction over the person of the party
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served.” Mississippi Publishing Corp. v. Murphree, 326 U.S. 438,
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444–445 (1946). “Before a federal court may exercise personal
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jurisdiction over a defendant, the procedural requirement of
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service of summons must be satisfied.” Omni Capital Int'l, Ltd. v.
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Rudolf Wolff & Co., Ltd., 484 U.S. 97, 104 (1987). Accordingly,
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Federal Rule of Civil Procedure 12(b)(5) provides that insufficient
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service may be a basis for dismissal of a complaint. Fed.R.Civ.P.
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12(b)(5). Requirements for the manner of service are established by
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Rule 4. As relevant here, Rule 4(e)(2)(C) provides that an
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individual may be served, inter alia, by “delivering a copy of [the
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summons and complaint] to an agent authorized by appointment or by
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law to receive service of process.” Fed.R.Civ.P. 4(e)(2)(C). Once
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the adequacy of service is challenged, the plaintiff bears the
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burden of establishing that service was valid. Brockmeyer v. May,
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383 F.3d 798, 801 (9th Cir. 2004).
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Fani contends that service was insufficient here because
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Walker, the purported agent on whom Plaintiffs served process for
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Fani, was never authorized to accept service on Fani’s behalf.
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(Mot. at 6.) Fani contends that, although Walker mistakenly failed
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to recognize that one set of the papers was directed to Fani when
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accepting service for MJF, this error does not render service on
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Fani sufficient. (Id.) Walker has submitted an affidavit stating
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that, although he is the agent for service of process for MJF, he
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is not the agent for service of process for Fani. (DKT No. 25 ¶ 3.)
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He states that he accepted papers for Fani in error under the
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misunderstanding that the papers concerned MJF only, not Fani.
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(Id.)
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In response, j2 argues in its Opposition that “Walker did not
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simply accept the papers without noticing that Fani was a
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Defendant, as Fani Argues. He affirmatively told the process server
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that he was authorized to accept service for Fani.” (Opp. at 12.)
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This argument fails for two reasons. First, j2 does not support
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this assertion with any declaration by the process server or any
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other witness stating that Walker made the assertions j2 alleges in
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its Opposition. The Court cannot credit bald factual assertions by
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counsel made without any citation to supporting evidence. This is
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particularly so given that, in his declaration, Walker specifically
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denied having a conversation with the process server concerning to
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whom the papers were directed or advising the process server that
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he was authorized to accept service of process for Fani, or words
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to that effect. (Id.)
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Second, as Fani notes, “even if a person states that he or she
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is authorized to accept service, that is not proof that the person
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actually has the authority to do so.” U.S. Commodity Futures
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Trading Comm'n v. Paron Capital Mgmt., LLC, 2012 WL 1156396 (N.D.
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Cal. Apr. 6, 2012). Rule 4 requires that the purported agent have
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actual authority for service to be adequate. See Fed.R.Civ.P
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4(e)(2)(C) (allowing for service on an agent who is “authorized by
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appointment or by law to receive service of process”); Pochiro v.
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Prudential Ins. Co. of Am., 827 F.2d 1246, 1248–49 (9th Cir. 1987)
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(service on attorney is insufficient unless attorney had actual
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authority from client to accept service on client's behalf).
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j2 additionally argues that Fani was properly served because
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service was executed properly on MJF, which j2 contends is Fani’s
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alter ego. (Opp. at 13.) Service on a defendant’s alter ego may
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constitute service on defendant himself. See, e.g., Certified Bldg.
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Prods. Ins. V. N.L.R.B.,528 F.2d 968, 969 (9th Cir. 1976). However,
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in the instant Complaint, j2 has not made sufficient factual
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allegations to support an alter ego theory.
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To invoke the doctrine of alter ego, a plaintiff must assert
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(1) that there is such a unity of interest and ownership between
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the corporation and its equitable owner that the separate
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personalities of the corporation and the shareholder do not in
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reality exist; and (2) that there would be an inequitable result if
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the acts in question are treated as those of the corporation alone.
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Neilson v. Union Bank of California, N.A., 290 F. Supp. 2d 1101,
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1115 (C.D. Cal. 2003). “Conclusory allegations of ‘alter ego’
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status are insufficient to state a claim. Rather, a plaintiff must
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allege specifically both of the elements of alter ego liability, as
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well as facts supporting each.” Id., citing In re Currency
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Conversion Fee Antitrust Litigation, 265 F.Supp.2d 385, 426
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(S.D.N.Y. 2003). “Factors that courts have found militated towards
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finding alter ego liability include commingling of assets,
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treatment of the assets of the corporation as the individual's own,
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failure to maintain corporate records, employment of the same
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employees and attorneys, undercapitalization, and use of the
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corporation as a shell for the individual.” Ontiveros v. Zamora,
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2009 WL 425962, at *7 (E.D. Cal. Feb 20, 2009).
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Here, j2 has alleged no relevant facts in support of its alter
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ego theory. Indeed, although the Complaint asserts that Fani and
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MJF are alter egos, the only supporting factual allegations are
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that “Defendant Farjad Fani is the sole officer of Matt Johnson
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Finance, Inc. and purports to be the founder of Fax87.com.”
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(Complaint at ¶ 8.) These allegations are insufficient to plausibly
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support a finding that MJF and Fani are alter egos. Nor do they
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suggest that there is as-yet-undiscovered evidence that would
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support such a finding.1
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j2 has requested jurisdictional discovery. (Opp. at 12-13.)
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However, because there is no reason to believe that discovery may
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reveal evidence showing that Walker was authorized to accept
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service and because the Complaint does not sufficiently plead an
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alter ego theory, the Court finds that jurisdictional discovery–-
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and its concomitant burden on the defendant and use of judicial
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resources--is not justified. See Pebble Beach Co. v. Caddy, 453
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F.3d 1151, 1160 (9th Cir. 2006) (“[W]here a plaintiff's claim of
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personal jurisdiction appears to be both attenuated and based on
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bare allegations in the face of specific denials made by the
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defendants, the Court need not permit even limited discovery.”)
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(internal citation and quotation marks omitted). The Court
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therefore denies j2's request for jurisdictional discovery.
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Because the Court finds j2 has not borne its burden to show
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that service of process upon Fani was sufficient, the Court does
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not reach Fani’s motion to dismiss under Rule 12(b)(2). See Omni
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Capital, 484 U.S. at 104.
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The Court notes that the question of whether Fani and MJF
are alter egos may be important for personal jurisdiction, as well
as the merits, as Fani is not formally a party to the Agreement
that forms the basis for j2's breach of contract claim.
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IV.
Conclusion
For the reasons set forth above, Defendant Fani’s motion
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to dismiss under Rule 12(b)(5) is GRANTED. Fani is dismissed as a
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defendant in this action, without prejudice.
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IT IS SO ORDERED.
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Dated: February 5, 2014
S. JAMES OTERO
United States District Judge
for
DEAN D. PREGERSON
United States District Judge
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