Randhawa v. Skylux, Inc., et al.

Filing 37

MEMORANDUM AND ORDER RE: MOTIONS TO DISMISS signed by Judge William B. Shubb on 12/18/09: 10 Motion to Dismiss is granted in part and denied in part. Plaintiff has thirty days from the date of this Order to file an amended complaint consistent with this Order. (Kaminski, H)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MOHIT RANDHAWA aka HARPAL SINGH, Plaintiff, v. SKYLUX INC., INTERACTIVE INTELLIGENCE, INC., MUJEEB PUZHAKKARAILLATH, and DOES 1 through 20, inclusive, Defendants. / ----oo0oo---Plaintiff Mohit Randhawa aka Harpal Singh filed this action in state court against defendants Skylux Inc. ("Skylux"), Interactive Intelligence, Inc. ("Interactive"), and Mujeeb Puzhakkaraillath alleging various state claims relating to a contract for calling center software. action to federal court. All defendants removed the UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA ----oo0oo----

NO. CIV. 09-2304 WBS DAD MEMORANDUM AND ORDER RE: MOTIONS TO DISMISS

Skylux and Puzhakkaraillath now move to

dismiss plaintiff's First Amended Complaint ("FAC") pursuant to Federal Rules of Civil Procedure 12(b)(2) for lack of personal 1

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jurisdiction, 12(b)(3) for improper venue, and 12(b)(6)1 for failure to state a claim upon which relief can be granted. I. Factual and Procedural Background Skylux is a New York corporation of which Puzhakkaraillath, a New York resident, is President and CEO. (First Amended Complaint ("FAC") ¶¶ 4, 15; Decl. Puzhakkaraillath ¶ 7.) In April 2005, Skylux and Puzhakkaraillath allegedly

contacted plaintiff, a resident of California, advertising software for an integrated calling center. (FAC. ¶¶ 1, 8.) The

software was manufactured by Interactive, an Indiana corporation, and Skylux acted as authorized reseller and service provider. (Id. ¶¶ 3, 8, 17.) On May 27, 2005, representatives for

plaintiff entered into a written Memorandum of Understanding ("MOU") with Skylux Telelink Pvt. Ltd. ("STPL"), an Indian company also owned by Puzhakkaraillath, to set up the Interactive software for an inbound and outbound Indian calling center for plaintiff's future company. Puzhakkaraillath ¶ 4.) (FAC Ex. A; FAC ¶ 9; Decl.

Skylux and Puzhakkaraillath allegedly

represented to plaintiff that Skylux would be responsible for implementing the Interactive software and calling system. 27.) Plaintiff also tendered approximately (Id. ¶

$207,000.00 to

Skylux to purchase the software and licenses to use the software, and hired employees for the calling center. (FAC ¶¶ 10, 11.)

Plaintiff alleges that Skylux has not overseen the finalization

While defendants Skylux and Puzhakkaraillath originally moved to dismiss the entirety of plaintiff's FAC pursuant to 12(b)(6), they have since withdrawn their 12(b)(6) motion with respect to plaintiff's sixth and seventh causes of action. (Skylux Reply 8.) 2

1

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of the call center project as required by the MOU.

(Id. ¶ 20.)

Beginning around September 2005 and ending in May 2009, plaintiff had technical difficulties using the Interactive software. (Id. ¶ 13.) Plaintiff alleges he purchased software

for inbound and outbound calls, but the licenses he received were only for outbound calls. (Id.) Plaintiff alleges that Skylux

refused to provide him with the correct inbound/outbound licenses or respond to his complaints for four years, and represented that they had no record that plaintiff had purchased Interactive licenses though them. (Id. ¶¶ 17, 24, 27.) Skylux allegedly

refused to acknowledge that plaintiff has purchased the licenses. (Id. ¶ 20.) One of plaintiff's employees, Amit Aurora, allegedly worked as an agent for Skylux and intentionally damaged plaintiff's Interactive software and property so that plaintiff would have to pay Skylux repair and consultation fees. 12, 48.) (Id. ¶¶

Skylux allegedly hired Aurora after his employment with (Id.)

plaintiff ended. II. Discussion

On a motion to dismiss, the court must accept the allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff. Scheuer v. Rhodes, 416

U.S. 232, 236 (1974), overruled on other grounds by Davis v. Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S. 319, 322 (1972). To survive a motion to dismiss, a plaintiff needs to

plead "only enough facts to state a claim to relief that is plausible on its face." 1955, 1974 (2007). Bell Atl. Corp. v. Twombly, 127 S. Ct.

This "plausibility standard," however, "asks 3

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for more than a sheer possibility that a defendant has acted unlawfully," and where a complaint pleads facts that are "merely consistent with" a defendant's liability, it "stops short of the line between possibility and plausibility." Ashcroft v. Iqbal,

129 S. Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 556-57). In general, the court may not consider materials other than the facts alleged in the complaint when ruling on a motion to dismiss. 1996). Anderson v. Angelone, 86 F.3d 932, 934 (9th Cir.

The court may, however, consider additional materials if

the plaintiff has alleged their existence in the complaint and if their authenticity is not disputed. See Branch v. Tunnell, 14

F.3d 449, 454 (9th Cir. 1994), overruled on other grounds by Galbraith v. County of Santa Clara, 307 F.3d 1119 (9th Cir. 2002). Here, plaintiff and defendants Skylux and

Puzhakkaraillath have provided the court with a copy of the MOU (Removal Ex. A; FAC Ex. A) and no party has questioned its authenticity. Accordingly, the court will consider this document

in deciding defendants' motion to dismiss. Upon granting a motion to dismiss, Federal Rule of Civil Procedure 15(a) "advises the court that `leave shall be freely given when justice so requires,'" and the court should grant leave under Rule 15(a) "`with extreme liberality.'" Eminence Capital, L.L.C. v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003). "Absent prejudice, or a strong showing of any

[other relevant] factor[], there exists a presumption under Rule 15(a) in favor of granting leave to amend." Id. "Dismissal with

prejudice and without leave to amend is not appropriate unless it 4

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is clear . . . that the complaint could not be saved by amendment." Id. Defendants have failed to show that they will

suffer prejudice if plaintiff is allowed to file a second amended complaint. Accordingly, upon dismissing any claims, the court

must grant plaintiff leave to amend his FAC unless the futility of amendment warrants dismissing a claim with prejudice. A. Motion to Dismiss for Lack of Personal Jurisdiction A plaintiff has the burden of establishing that the court has personal jurisdiction over a defendant. Doe v. Unocal

Corp., 248 F.3d 915, 922 (9th Cir. 2001) (citing Cubbage v. Merchent, 744 F.2d 665, 667 (9th Cir. 1984)). On a motion to

dismiss, a plaintiff "need make only a prima facie showing of jurisdictional facts . . . . That is, the plaintiff need only

demonstrate facts that if true would support jurisdiction over the defendant." Id. (quoting Ballard v. Savage, 65 F.3d 1495, When not directly controverted, a

1498 (9th Cir. 1995)).

plaintiff's version of the facts must be taken as true and conflicts between the facts contained in the parties' affidavits should be resolved in favor of the plaintiff. Id. at 922. Once

a defendant has contradicted the allegations contained in the complaint, however, a plaintiff may not rest on the pleadings, but must present admissible evidence which, if true, would support the exercise of personal jurisdiction. Harris Rutsky &

Co. Ins. Svcs., Inc. v. Bell & Clements Ltd., 328 F.3d 1122, 1129 (9th Cir. 2003). "Personal jurisdiction over a nonresident defendant is tested by a two-part analysis. First, the exercise of

jurisdiction must satisfy the requirements of the applicable 5

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state long-arm statute.

Second, the exercise of jurisdiction Dow Chem. Co. v.

must comport with federal due process."

Calderon, 422 F.3d 827, 830 (9th Cir. 2005) (quoting Chan v. Soc'y Expeditions, Inc., 39 F.3d 1398, 1404-05 (9th Cir. 1994)). "California [law] permits the exercise of personal jurisdiction to the full extent permitted by due process." Bancroft &

Masters, Inc. v. Augusta Nat'l Inc., 223 F.3d 1082, 1086 (9th Cir. 2000); see also Cal. Civ. Pro. Code § 410.10 ("A court of this state may exercise jurisdiction on any basis not inconsistent with the Constitution of this state or of the United States."). Therefore, the governing standard in this case is

whether the court's exercise of personal jurisdiction over defendant comports with federal due process. F.3d at 831. The exercise of personal jurisdiction over a defendant comports with federal due process only if the defendant "has certain minimum contacts with the relevant forum such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice." Yahoo! Inc. v. La Ligue See Calderon, 422

Contre Le Racisme Et L'Antisemitisme, 433 F.3d 1199, 1205 (9th Cir. 2006) (en banc) (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)) (internal quotation marks omitted). In

turn, sufficient "minimum contacts" can give rise to "general jurisdiction" or "specific jurisdiction." at 923. Unocal Corp., 248 F.3d

General jurisdiction applies if the defendant's

activities in the forum "are substantial, continuous and systematic," whereas specific jurisdiction applies if a defendant's "less substantial contacts with the forum give rise 6

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to the cause of action before the court." at 923.

Unocal Corp., 248 F.3d

Because plaintiff has not presented any argument in

support of general jurisdiction over defendants in this action, the court will limit its analysis to determining whether specific jurisdiction exists. The Ninth Circuit analyzes specific jurisdiction according to a three-prong test: (1) The non-resident defendant must purposefully direct his activities or consummate some transaction with the forum or resident thereof; or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws; (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. Yahoo! Inc., 433 F.3d at 1205-06 (quoting Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 802 (9th Cir. 2004)). The

plaintiff bears the burden of satisfying the first two prongs of the test. Menken v. Emm, 503 F.3d 1050, 1057 (9th Cir. 2007).

If the plaintiff succeeds in satisfying both of the first two prongs, "the burden then shifts to the defendant to `present a compelling case' that the exercise of jurisdiction would not be reasonable." 1. Id. (quoting Schwarzenegger, 374 F.3d at 802). Purposefully Avail/Direct

The purposeful availment prong of the specific jurisdiction test has been further subdivided into two distinct questions: whether Skylux and Puzhakkaraillath either (1) "purposefully availed" themselves of the privilege of conducting activities in the forum, or (2) "purposefully directed" their 7

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activities toward the forum.

See Schwarzenegger, 374 F.3d at 802

("We often use the phrase `purposeful availment,' in shorthand fashion, to include both purposeful availment and purposeful direction, but availment and direction are, in fact, two distinct concepts. A purposeful availment analysis is most often used in A purposeful direction analysis, on

suits sounding in contract.

the other hand, is most often used in suits sounding in tort.") (internal citations omitted). Because plaintiff in this case

alleges tort and contract claims, an analysis of both purposeful availment and purposeful direction is appropriate. a. Purposeful Availment

A showing that a defendant purposefully availed itself of the privilege of doing business in a forum state typically consists of evidence of the defendant's contacts or actions in the forum. By making such contacts or taking such actions, a

defendant "purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." U.S. 235, 253 (1958). Hanson v. Denckla, 357

In return for these "benefits and

protections," a defendant must "submit to the burdens of litigation in that forum." Burger King Corp. v. Rudzewicz, 471

U.S. 462, 476,(1985); see also Cote v. Wadel, 796 F.2d 981, 984 (7th Cir. 1986) ("[P]ersonal jurisdiction over nonresidents of a state is a quid for a quo that consists of the state's extending protection or other services to the nonresident."). Contract negotiations are classic examples of the sort of contact that can give rise to in personam jurisdiction. Burger King, 471 U.S. at 473. See

"A nonresident defendant's act of 8

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soliciting business in the forum state will generally be considered purposeful availment if that solicitation results in contract negotiations or the transaction of business." Smith+Noble v. S. Jersey Vinyl Inc., No. 97-7473, 1998 WL 650079, at *2 (C.D. Cal. May 11, 1998) (quoting Sinatra v. Nat'l Enquirer, Inc., 854 F.2d 1191, 1195 (9th Cir. 1988)); see also McGee v. Int'l Life Insur. Co., 355 U.S. 220, 221-23 (1957) (holding that a Texas insurance corporation had minimum contacts with California when the insurance corporation mailed an insurance contract to California and received premium payments from their insured customer who resided in California). However, forming a contract with a forum-state party does not alone create jurisdiction over a nonresident defendant. Burger King, 471 U.S. at 478 ("If the question is whether an individual's contract with an out-of-state party alone can automatically establish sufficient minimum contacts in the other party's home forum, we believe the answer clearly is that it cannot.") (emphasis removed); see also Boschetto v. Hansing, 539 F.3d 1011, 1016-17 (9th Cir. 2008) (same); Unocal Corp., 248 F.3d at 924 (citing McGlinchy v. Shell Chem. Co., 845 F.2d 802, 816 n.9 (9th Cir. 1988)). Rather, contracts often give rise to

personal jurisdiction because they "create continuing relationships and obligations" within the forum state. Travelers

Health Ass'n v. Commonwealth of Va., 339 U.S. 643 (1950); see also Burger King, 471 U.S. at 478 ("[W]e have emphasized the need for a highly realistic approach that recognizes that contract is ordinarily but an intermediate step serving to tie up prior business negotiations with future consequences which themselves 9

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are the real object of the business transaction."). Courts evaluating whether contracts give rise to personal jurisdiction, therefore, look to the qualitative nature of the forum contacts created by the contract. Boschetto, 539 This

F.3d at 1017 n.3 (discussing McGee, 355 U.S. at 223).

evaluation "ensures that a defendant will not be haled into a jurisdiction solely as a result of random, fortuitous, or attenuated contacts or of the unilateral activity of another party o[r] a third person." Unocal Corp., 248 F.3d at 924

(quoting Burger King, 471 U.S. at 475). Plaintiff in this case alleges that personal jurisdiction over Skylux arises from telephone calls made by Skylux to plaintiff advertising calling center software. 8; Opp. Mot. to Dismiss Skylux 3:9-11.) (FAC ¶

According to plaintiff

and unchallenged by defendants, Skylux knew plaintiff was in California and affirmatively sought out his business by making contact with him. Skylux entered into contract negotiations with

plaintiff, and plaintiff allegedly paid Skylux approximately $207,000.00 to purchase the software and licenses to use the Interactive software. (FAC ¶¶ 10, 11.) As a result of these

discussions with Skylux and Puzhakkaraillath, plaintiff entered into the MOU with STPL. Furthermore, Skylux allegedly

represented that it would be responsible for implementing the Interactive software and calling system. (Id. ¶ 27.) These are

precisely the sorts of contacts contemplated in Burger King that give rise to a finding of purposeful availment. 471 U.S. at 473. Furthermore, as alleged, the contacts and negotiations 10 See Burger King,

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between plaintiff and Skylux led not only to memorializing an agreement with STPL, but also to continued relations with Skylux as the party responsible for implementing the software and calling system. *2. See Smith+Noble, No. 97-7473, 1998 WL 650079, at

As in McGee, 355 U.S. at 221-23, defendant Skylux allegedly All of these

accepted payment from plaintiff in California.

facts indicate that Skylux "purposefully avail[ed] itself of the privilege of conducting activities" in California, and that it should therefore be subject to jurisdiction within the state. See Hanson, 357 U.S. at 253. b. Purposeful Direction

Purposeful direction analysis is generally applied to tort cases, in which a court "appl[ies] an `effects' test that focuses on the forum in which the defendant's actions were felt, whether or not the actions themselves occurred within the forum." Yahoo! Inc., 433 F.3d at 1206 (citing Schwarzenegger, 374 F.3d at 803); see also Calder v. Jones, 465 U.S. 783 (1984) (finding personal jurisdiction where defendant writers knew that an article written and edited by them in Florida and published in the National Enquirer would have an effect in California where plaintiff lived and worked). Purposeful direction requires that:

"the defendant allegedly [must] have (1) committed an intentional act, (2) expressly aimed at the forum state, (3) causing harm that the defendant knows is likely to be suffered in the forum state." Schwarzenegger, 374 F.3d at 803 (quoting Dole Food Co. However, courts

v. Watts, 303 F.3d 1101, 1111 (9th Cir. 2002)).

applying the purposeful direction prong "evaluate all of a defendant's contacts with the forum state, whether or not those 11

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contacts involve wrongful activity by the defendant." Inc., 433 F.3d at 1206.

Yahoo!

Plaintiff here alleges that Skylux contacted him and made intentional misrepresentations when advertising Skylux's calling center services. (Opp. Mot. to Dismiss 3-4; FAC ¶ 27.)

As alleged, plaintiff satisfies the first two elements of purposeful direction because the misrepresentations allegedly made before the MOU was signed were clearly targeted at plaintiff personally, as a potential business partner. That plaintiff and

STPL later consummated these negotiations by signing the MOU is irrelevant; at that point defendants were in contact with plaintiff as an individual. As to the third element of harm,

defendant Skylux and Puzhakkaraillath were aware that plaintiff resided in California when they made the misrepresentations to him. Furthermore, plaintiff alleges that he paid Skylux

approximately $207,000.00 of his own money, before his Indian company, Shannon Callnet, was created. Any harms that flowed

from these misrepresentations necessarily flowed to plaintiff in California. Furthermore, because plaintiff was the primary

financial backer of Shannon Callnet and the India call center project, the defendants should have foreseen that any intentional torts to him or his proposed company would be felt personally by plaintiff in California. The other misrepresentations and intentional acts allegedly made by defendants occurred after plaintiff's India company was formed and STPL started to work directly with Shannon Callnet. (See FAC. ¶¶ 13-14, 20, 27.) According to the terms of

the MOU, STPL would provide calling center services and equipment 12

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to plaintiff's proposed company in India, not to plaintiff personally. (FAC Ex. A.) Yet plaintiff, not Shannon Callnet,

was a party to the MOU, and STPL remained accountable to plaintiff in California for the representations contained in the MOU. The totality of Skylux's contacts with plaintiff support a Skylux allegedly repeatedly

finding of purposeful direction.

misrepresented to plaintiff its future obligations and liabilities to plaintiff, and directed these misrepresentations personally to plaintiff in California. At this juncture, no more

is required to support a finding of purposeful direction. 2. Claims Arise from Forum-Related Activities

The second prong to establish whether Skylux and Puzhakkaraillath have sufficient minimum contacts so to establish specific personal jurisdiction is that the plaintiff must show that his claims arise out of or relate to the defendants' forum-related activities. Yahoo! Inc., 433 F.3d at 1205-06 "This step explores

(quoting Schwarzenegger, 374 F.3d at 802.

the relationship between the cause of plaintiff's harm and the defendant's acts identified as creating purposeful contacts with the forum state." 1987). Lake v. Lake, 817 F.2d 1416, 1421 (9th Cir. On

Courts evaluate this relationship along a continuum.

one end, where a defendant has multiple and significant contacts to support general jurisdiction, no relationship is needed between the contacts and the cause of action. On the other end,

where there is only one contact with the forum state, "the cause of action must arise out of that particular purposeful contact of the defendant with the forum state." Id.

Plaintiff here alleges defendants had multiple contacts 13

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with him in California, placing this court's analysis of the relationship between defendant's contacts and plaintiff's claims somewhere in the middle of the continuum described above. Id. See

Plaintiff alleges various tort and contract claims arising

out of his negotiations with Skylux and Puzhakkaraillath and his MOU with STPL. Plaintiff's third, sixth, seventh causes of

action claim against Skylux for alleged misrepresentations to plaintiff in California, and are therefore clearly related to Skylux's contacts with California. Plaintiff's first, second, fourth, and fifth causes of action involve STPL's subsequent breaches of the MOU allegedly felt by plaintiff in California. (See generally FAC.) While

these claims do not arise out of particular purposeful contacts with California, they do relate to and are a part of a common series of events springing from Skylux's California contacts. Skylux made representations to and negotiated a contract with plaintiff, and plaintiff and STPL eventually formalized these communications by entering into the MOU. The court also notes

that MOU itself states that STPL has an office at Skylux in New York, implying there is a connection between the two companies in the provision of software licenses and call center services. (FAC Ex. A.) Plaintiff's claims, therefore, relate to Skylux's

forum contacts with plaintiff in California. 3. Comport with Fair Play and Substantial Justice

Because plaintiff has satisfied the first two prongs of the test for specific jurisdiction, the burden shifts to defendant "to `present a compelling case' that the exercise of jurisdiction would not be reasonable." 14 Menken, 503 F.3d at 1060

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(quoting Schwarzenegger, 374 F.3d at 802).

To determine the

reasonableness of exercising jurisdiction over a defendant, the court considers the following factors: (1) the extent of the defendant's purposeful interjection into the forum state's affairs; (2) the burden on the defendant of defending in the forum; (3) the extent of 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. Id. (quoting CE Distrib., LLC v. New Sensor Corp., 380 F.3d 1107, 1112 (9th Cir. 2004)). Defendants contend that each factor

establishes that the exercise of personal jurisdiction over them would be unreasonable. (Mot. to Dismiss Skylux 13-16.)

As to the first factor, some cases in the Ninth Circuit "have suggested that once the minimum contacts threshold is met the degree of intrusion into the forum becomes irrelevant." Core-Vent Corp. v. Nobel Indus. AB, 11 F.3d 1482, 1488 (9th Cir. 1993) (citing Corporate Inv. Bus. Brokers v. Melcher, 824 F.2d 786, 787 (9th Cir. 1987)); see Menken, 503 F.3d at 1062 (Bybee, J., concurring). Nonetheless, other cases provide that "[e]ven

if there is sufficient `interjection' into the state to satisfy the [purposeful availment prong], the degree of interjection is a factor to be weighed in assessing the overall reasonableness." Core-Vent Corp., 11 F.3d at 1488 (9th Cir. 1993) (quoting Ins. Co. of N. Am. v. Marina Salina Cruz, 649 F.2d 1266, 1271 (9th Cir. 1981)) (alterations in original). In this case, defendants' contacts with the state of California appear limited to isolated communications in 2005 with 15

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plaintiff to advertise Skylux's or STPL's calling center services and negotiate potential contract terms with plaintiff. Defendants also provide that they do not do any business in California. (Mot. to Dismiss Skylux 5.) Overall, defendant's

contacts with the forum appear attenuated, and therefore this factor weighs against the reasonableness of exercising personal jurisdiction over defendant. Nonetheless, this factor does not

"weigh heavily" in defendant's favor since defendant's contacts "were sufficient to meet the purposeful availment prong." Core-Vent Corp., 11 F.3d at 1488. Regarding the second factor, the court acknowledges that defendants, a New York corporation and a New York resident, would be burdened by litigating this case in California. However, "with the advances in transportation and telecommunications and the increasing interstate practice of law, any burden is substantially less than in days past." Menken, 503

F.3d at 1062 (quoting CE Distrib., LLC, 380 F.3d at 1112). Indeed, the Ninth Circuit provides that even where a defendant must travel from a foreign country, "this factor is not dispositive" as to the reasonableness of exercising personal jurisdiction. Dole Food Co., Inc. v. Watts, 303 F.3d 1104, 1115

(9th Cir. 2002) (citing Sinatra v. Nat'l Enquirer, 854 F.2d 1191, 1199 (9th Cir. 1988)); see, e.g., Harris Rutsky & Co. Ins. Servs., Inc. v. Bell & Clements Ltd., 328 F.3d 1122, 1132-33 (9th Cir. 2003); Core-Vent Corp., 11 F.3d at 1488. Therefore,

although this factor weighs in defendant's favor, the court does not find it wholly persuasive. The third factor concerns the extent to which the 16

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district court's exercise of jurisdiction in California would conflict with the sovereignty of New York, Skylux's state of incorporation and Puzhakkaraillath's state of residence. Defendants contend that the forum selection clause in the MOU designating India as the mandatory forum for disputes presents a conflict of sovereignty with India. This factor, however,

involves only conflicts "with the sovereignty of the defendant's state." Menken, 503 F.3d at 1060. Core-Vent, 11 F.3d at 1489.

To the extent that any actions of STPL might be imputed to Skylux, courts evaluating this factor "have focused on the presence or absence of connections to the United States in general, not just to the forum state." 1489. Core Vent., 11 F.3d at

Defendants have not shown the presence of any sovereignty Therefore, the court finds

conflict with the state of New York. this factor to be neutral.

As to the fourth factor, defendants contend that California does not have a strong interest in providing redress for plaintiff's tort claims because the facts surrounding the claims involved plaintiff's Indian company setting up a calling center in India. However, "California maintains a strong

interest in providing an effective means of redress for its residents [who are] tortiously injured." 1200. Sinatra, 854 F.2d at

While defendants contend that California lacks a strong

interest in providing a means of redress because plaintiff's company is located in India, plaintiff has alleged individual as well as corporate harms sufficient to invoke California's interests. Therefore, this factor weighs in favor of exercising

personal jurisdiction over defendants. 17

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The fifth factor concerns the efficiency of the forum. In evaluating this factor, courts look primarily at where the witnesses and the evidence are likely to be located. 854 F.2d at 1200. Sinatra,

"It is no longer weighed heavily given the Caruth, 59

modern advances in communication and transportation." F.3d at 129.

Defendants are both located in New York, and Defendants contend that

plaintiff resides in California.

exhibits and witnesses are primarily located in India, as the bulk of plaintiff's claims against them are based on the MOU between plaintiff and STPL to set-up an Indian call center and later disputes in India between Shannon Callnet and STPL. Therefore, this factor weighs slightly in favor of defendants. In evaluating the convenience and effectiveness of relief for the plaintiff, courts have given little weight to the plaintiff's inconvenience. Ziegler, 64 F.3d at 476. Nothing

indicates that relief is not available to plaintiff in India. Because the burden on plaintiff would be relatively slight, this factor is essentially neutral. Regarding the final reasonableness factor, the court agrees with defendants that alternative fora exist to adjudicate this dispute, as plaintiff could bring this action in New York or India. Because the court will not, at this juncture, enforce the

MOU's forum selection clause choosing India as the preferred forum for resolving disputes, this factor weighs only slightly against exercising personal jurisdiction over defendants. Ultimately, although several of the foregoing factors favor defendant, the court concludes that defendant has not presented a "compelling case" that the exercise of personal 18

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jurisdiction over it would be unreasonable.

See Panavision

Int'l, L.P. v. Toeppen, 141 F.3d 1316, 1324 (9th Cir. 1998) ("[W]e conclude that although some factors weigh in [defendant's] favor, he failed to present a compelling case that the district court's exercise of jurisdiction . . . would be unreasonable."). Indeed, "[t]he only case in which the Supreme Court has held that these factors determined the question of personal jurisdiction was in a suit between two foreign corporations in which the Court divided evenly over whether the minimum contacts were sufficient." Menken, 503 F.3d at 1063 n.1 (9th Cir. 2007)

(Bybee, J., concurring) (citing Asahi Metal Indus. Co., Ltd. v. Superior Court of Cal., 480 U.S. 102, 107 (1987)). 4. Personal Jurisdiction over Puzhakkaraillath

Plaintiff also asserts that this court has personal jurisdiction over Puzhakkaraillath as CEO of Skylux. (FAC ¶ 15.)

However, the fiduciary shield doctrine provides that "a person's mere association with a corporation that causes injury in the forum state is not sufficient in itself to permit that forum to assert jurisdiction over the person." Davis v. Metro Prods., In other words, "[t]he

Inc., 885 F.2d 515, 520 (9th Cir. 1989).

mere fact that a corporation is subject to local jurisdiction does not necessarily mean its nonresident officers, directors, agents, and employees are suable locally as well." Colt Studio, Inc. v. Badpuppy Enter., 75 F. Supp. 2d 1104, 1111 (C.D. Cal. 1999). Though employees are not necessarily subject to liability

in a given jurisdiction due to the contacts of their employers, "their status as employees does not somehow insulate them from jurisdiction. Each defendant's contacts with the forum State 19

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must be assessed individually." Calder v. Jones,

465 U.S. 783,

790 (1984) (finding jurisdiction proper over non-resident corporate employees where the employees were the primary participants in an alleged wrongdoing intentionally directed at a California resident). The fiduciary shield doctrine may be ignored in two circumstances: (1) where the corporation is the agent or alter ego of the individual defendant; or (2) by virtue of the individual's control of, and direct participation in the alleged activities. Transgo, Inc. v. Ajac Transmission Parts Corp., 768

F.2d 1001 (9th Cir. 1985); Wolf Designs, Inc. v. DHR Co., 322 F. Supp. 2d 1065, 1072 (C.D. Cal. 2004). Plaintiff's allegations against Puzhakkaraillath do not adequately describe the kind of conduct needed to allege an alter ego. However, plaintiff also argues that Puzhakkaraillath

participated directly in the actions which give rise to this suit. "`A corporate officer or director is, in general,

personally liable for all torts which he authorizes or directs or in which he participates, notwithstanding that he acted as an agent of the corporation and not on his own behalf.'" Wolf

Designs, 322 F. Supp. 2d at 1072 (quoting Coastal Abstract Serv., Inc. v. First Am. Title Ins. Co., 173 F.3d 725, 734 (9th Cir. 1999) (corporate officers cannot "hide behind the corporation where [the officer was] an actual participant in the tort")). Generally, "[c]ases which have found personal liability on the part of corporate officers have typically involved instances where the defendant was the `guiding spirit' behind the wrongful conduct, . . . or the `central figure' in the challenged 20

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corporate activity."

Davis v. Metro Prods., Inc., 885 F.2d 515,

524 (9th Cir. 1989) (citations omitted). Puzhakkaraillath is the President and CEO of both Skylux and STPL, and owns a majority of the shares in both companies. (Mot. to Dismiss Puzhakkaraillath Decl. ¶¶ 7, 12, 17.) In his declaration, Puzhakkaraillath admits to speaking with plaintiff on the telephone about plaintiff's plan to set up a call center in India and STPL's interest in acting as a consultant. (Id. ¶ 19.) Plaintiff's FAC alleges that "SKYLUX

and PUZHAKKARAILLATH made material misrepresentations to Plaintiff, specifically that [listing three Skylux misrepresentations]" (FAC ¶ 27), and that "Puzhakkaraillath had knowledge of the conduct of Skylux and its agents and encouraged, aided, and or agreed to the conduct of defrauding Plaintiff of substantial sums of money." (FAC ¶ 50.)2 Defendants do not

dispute the allegation that Puzhakkaraillath personally contacted plaintiff to advertise his company's calling center services. Rather, they allege that "most of the discussions were between Plaintiff's employees" in India and STPL's employees (Mot. to Dismiss 12:6-8) (emphasis added) and assert that there were no in-person meetings between Puzhakkaraillath and anyone at plaintiff's company. (Id. 12:4-5.) Regardless of whether the

statements were in-person, or by phone, plaintiff's allegations against Puzhakkaraillath are sufficient at this stage to find

Plaintiff also alleges that Puzhakkaraillath, on behalf of Skylux, entered into the MOU with Plaintiff. (FAC ¶ 9.) However, this is clearly controverted by the MOU itself (FAC Ex. A), and plaintiff appears to correct this allegation in his Opposition. (Opp. Mot. to Dismiss 3-4.) 21

2

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that Puzhakkaraillath personally and purposefully directed tortious conduct toward plaintiff in California and that this court has personal jurisdiction over him. B. Motion to Dismiss for Improper Venue Federal law applies to interpret a forum selection clause, because forum selection is primarily a venue matter. See, e.g., Manetti-Farrow, Inc. v. Gucci America, Inc., 858 F.2d 509, 512 (9th Cir. 1988). In resolving motions to dismiss for

improper venue based on a forum selection clause, the pleadings are not accepted as true, as would be required under a Rule 12(b)(6) analysis. See, e.g., Murphy v. Schneider Nat'l Inc., The court must, however,

362 F.3d 1133, 1137 (9th Cir. 2004).

draw all reasonable inferences in favor of the non-moving party and resolve all factual conflicts in favor of the non-moving party. Id. at 1138. "[I]f the facts asserted by the non-moving

party are sufficient to preclude enforcement of the forum selection clause, the non-moving party is entitled to remain in the forum it chose for suit unless and until the district court has resolved any material factual issues that are in genuine dispute." Id. at 1139. 1. Standing

The court must first decide whether Skylux and Puzhakkaraillath have standing to enforce the forum selection clause. It is undisputed that neither Skylux nor (See FAC

Puzhakkaraillath signed the MOU containing the clause. Ex. A.)

Nevertheless, both defendants seek to enforce the forum

selection clause against plaintiff and force plaintiff to bring his claims against them in the courts of India. 22 The Ninth

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Circuit allows non-parties to enforce a forum selection clause where "the alleged conduct of the nonparties is closely related to the contractual relationship." Holland America Line Inc. v.

Wartsila North America, Inc., 485 F.3d 450, 456 (9th Cir. 2007); see also Manetti-Farrow Inc., 858 F.2d at 514 n.5 ("[A] range of transaction participants, parties and non-parties, should benefit from and be subject to forum selection clauses."). In Holland

America, a forum selection clause was found to apply to nonparty defendants because "any transactions between those entities and Holland America took place as part of the larger contractual relationship between Holland America and [another party to the forum selection clause]." 485 F.3d at 456.

Plaintiff here alleges a close relationship among Skylux, STPL, and Puzhakkaraillath, and seeks to impute STPL's alleged torts and contract violations to Skylux. Mot. to Dismiss Skylux 3-4.) (FAC ¶ 17; Opp.

Furthermore, like in Holland

America and Manetti-Farrow, Inc., the alleged misrepresentations of Skylux and Puzhakkaraillath are intimately tied to the eventual contract that plaintiff signed with STPL. Therefore,

defendants Skylux and Puzhakkaraillath may invoke the forum selection clause of the MOU. 2. Enforcement of the Forum Selection Clause

A contractual forum selection clause is "prima facie valid and should be enforced unless enforcement is shown by the resisting party to be `unreasonable' under the circumstances." The Bremen v. Zapata Offshore Co., 407 U.S. 1, 10 (1972). While

The Bremen involved admiralty law, its standard has been widely applied to forum selection clauses in other contexts, and governs 23

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international contracts specifying forum and applicable law. Richards v. Lloyd's of London, 135 F.3d 1289 (9th Cir. 1998); Manetti-Farrow, Inc., 858 F.2d at 512. For a forum selection

See

clause to be deemed "unreasonable" so as to require setting aside the clause, the opposing party must show that its enforcement would contravene strong public policy of the forum in which the suit was brought, or be the result of fraud, undue influence, overweening bargaining power, or be so gravely difficult and inconvenient that the complaining party will for all practical purposes be deprived of its day in court. U.S. at 18. A showing of fraud requires proof that the plaintiff relied on the misrepresentations or fraudulent omissions of a defendant. See In re Estate of Young, 160 Cal. App. 4th 62, 79 See The Bremen, 407

(2008) (finding the essential elements of a claim for fraud are "(a) a misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or `scienter'); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage"); Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC, 162 Cal. App. 4th 858, 868 (2008) (stating that "the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact" in an action for fraud based on concealment). The MOU contains a forum selection clause which states: "All disputes of any nature will be settled under the jurisdiction of Ludhiana (Punjab) court only." (FAC Ex. A ¶ 11.)

Plaintiff contends that the forum selection clause should not be 24

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enforced because is the result of fraud.

According to plaintiff,

he was unable to review the MOU before it was signed by his father-in-law in India, despite his repeated requests for a copy of the MOU. (Opp. Mot. to Dismiss Skylux 5.) In his

supplemental declaration, the plaintiff further asserts that he orally negotiated over the terms of the MOU with defendants, and that the defendants never mentioned their intention to insert a forum selection clause binding plaintiff to litigating any disputes in India. (Supp. Decl. Randhawa Sur-Reply Mot. to Had he known the defendants intended to

Dismiss Skylux ¶ 3.)

insert the forum selection clause, the plaintiff asserts he would not have accepted the agreement. (Id.) Plaintiff alleges that

when he did see a copy of the signed MOU approximately three to four days after it was executed, he immediately contacted defendants to object to the forum selection clause present in paragraph eleven of the MOU. (Id. ¶ 4.) Plaintiff alleges that

Skylux assured him the clause was deleted, and that a new MOU would be executed. (Id.)

The defendants describe a different series of events, and allege that they did provide the plaintiff with a copy of the MOU that included the forum selection clause before the MOU was signed by plaintiff's father-in-law. (Supp. Decl. Defendants further

Puzhakkaraillath Response to Surreply ¶ 5.)

allege that the plaintiff first objected to the forum selection clause in 2009 in response to the defendants' motion to dismiss. (Id. ¶¶ 6, 8.) Finally, defendants allege that neither they nor

any agents of Skylux or STPL told the plaintiff that the forum selection clause would be deleted. 25 (Id. ¶ 7.)

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As alleged, the plaintiff has stated facts sufficient to preclude enforcement of the forum selection clause under the fraud exception to The Bremen. In short, plaintiff alleges that

he had negotiated an agreement with the defendants, that defendants inserted the forum selection clause into the MOU without his knowledge or consent, and that had he been aware that defendants intended to insert the clause he would not have agreed to the MOU. Plaintiff alleges at the very least that the

defendants failed to disclose the inclusion of a material term to the MOU and misled plaintiff into believing the clause was subsequently deleted. Accepting plaintiff's assertions of fact

as true and giving him all reasonable inferences, plaintiff further alleges a broader scheme by defendants to make plaintiff believe he was dealing with Skylux, an American company, and to surreptitiously bind him to litigating any disputes that arose out of the MOU in India. This Rule 12(b)(3) motion comes very early in the litigation when the factual record remains undeveloped. While

the defendants request an evidentiary hearing to resolve the many factual issues that remain in genuine dispute surrounding the inclusion of the forum selection clause, the parties will undoubtedly need discovery before such a hearing could be conducted. Should the factual record regarding the inclusion of

the forum selection clause be further developed during the ordinary discovery process, defendants may renew their motion to dismiss for lack of improper venue. C. Motion To Dismiss for Failure To State a Claim upon Which Relief Can Be Granted 26

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As a preliminary matter, defendants have withdrawn their motion to dismiss with respect to plaintiff's sixth and seventh causes of action. (Skylux Reply 8.)

Plaintiff's Opposition makes no arguments with respect to the defendants' motion to dismiss plaintiff's first, second, fourth and fifth causes of action. Those causes of action­-

breach of contract, breach of duty of good faith and fair dealing, breach of express warranty, and breach of the implied warranty for fitness for a particular purpose­-are all based on the MOU that plaintiff concedes is with STPL and not Skylux or Puzhakkaraillath personally. (Opp. Skylux Mot. to Dismiss 3.)

Plaintiff has not shown if or why these parties should be exposed to liability under the MOU for STPL's alleged breaches of the contract itself and of express and implied warranties present in the MOU. Plaintiff admits that he was aware that Skylux and STPL

were in fact legally distinct, and believed Skylux to be the parent company to STPL. Dismiss Skylux ¶ 2.) (Supp. Decl. Randhawa Sur-Reply Mot. to

Taking plaintiff's assertions as true,

plaintiff presents no reason why the alleged parent company Skylux should be sued instead of STPL, or why Puzhakkaraillath should be liable on the contract claims as if he were a signatory and party to the MOU. Accordingly, the court must dismiss

plaintiff's first, second, fourth, and fifth causes of action. Plaintiff's third cause of action for misrepresentation is subject to the heightened pleading standards of Federal Rule of Civil Procedure 9(b). Under Rule 9(b), "a party must state

with particularity the circumstances constituting the fraud." Fed. R. Civ. P. 9(b). The plaintiffs must include the "who, 27

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what, when, where, and how" of the fraud.

Vess v. Ciba-Geigy

Corp. USA, 317 F.3d 1097, 1006 (9th Cir. 2003) (citation omitted). "The plaintiff must set forth what is false or Decker v. Additionally,

misleading about a statement, and why it is false." Glenfed, Inc., 42 F.3d 1541, 1548 (9th Cir. 1994).

"[w]here multiple defendants are asked to respond to allegations of fraud, the complaint must inform each defendant of his alleged participation in the fraud." Ricon v. Reconstrust Co., No.

09cv937, 2009 WL 2407396, at *3 (S.D. Cal. Aug. 4, 2009) (quoting DiVittorio v. Equidyne Extractive Indus., 822 F.2d 1242, 1247 (2d Cir. 1987)). The plaintiff must plead each element of fraud,

which are: (1) misrepresentation; (2) scienter; (3) intent to induce reliance; (4) justifiable reliance; and (5) resulting damages. In re Estate of Young, 160 Cal. App. 4th 62, 79 (2008). Plaintiff's third cause of action fails to meet the heightened pleading standard articulated in Rule 9(b). alleges that Skylux and Puzhakkaraillath made material misrepresentations to plaintiff that: (1) Skylux would be responsible for implementing the Interactive software and calling system; (2) that Skylux had no record that plaintiff had purchased Interactive licenses from it; and (3) that Skylux could not help plaintiff solve the problems with the Interactive software until a record of plaintiff's purchase could be found. (FAC ¶ 27.) Plaintiff does not distinguish between Skylux and Plaintiff

Puzhakkaraillath as to these representations, or identify any other Skylux agents that made representations to plaintiff. Rather, plaintiff merely alleges that "SKYLUX demanded proof of purchase from Plaintiff . . . and subsequently SKYLUX refused to 28

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provide the correct licenses to Plaintiff."

(FAC ¶ 14.)

Contrary to plaintiff's assertion, paragraphs 8 to 15 of the FAC do not meet the requirements of Rule 9(b). to Dismiss Skylux 6.) (Opp. Mot.

Plaintiff must put each defendant on

notice as to their alleged participation in the fraudulent misrepresentations, and specify with particularity who made the statements at issue and when they were made. Furthermore, Specifically,

plaintiff must show why the statements are false.

plaintiff has not shown what is misleading about alleged misrepresentations (2) and (3) above, or why they those alleged statements are false or misleading. Finally, plaintiff's third cause of action repeatedly recites the elements of fraud rather than alleging specific facts to support the legal conclusions that plaintiff asserts. "[T]he

tenet that a court must accept a complaint's allegations as true is inapplicable to threadbare recitals of a cause of action's elements, supported by mere conclusory statements." S. Ct. at 1940 (citing Twombly, 550 U.S. at 555). IT IS THEREFORE ORDERED that defendants Skylux and Puzhakkaraillath's motion to dismiss plaintiff's first, second, third, fourth, and fifth causes of action under Rule 12(b)(6) of the Federal Rules of Civil Procedure be, and the same hereby is, GRANTED. IT IS FURTHER ORDERED that defendants Skylux and Puzhakkaraillath's motions to dismiss be and the same hereby are, DENIED in all other respects. // // 29 Iqbal, 129

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Plaintiff has thirty days from the date of this Order to file an amended complaint consistent with this Order. DATED: December 18, 2009

30