Epic Advertising v. Asis Internet Services et al

Filing 28

ORDER by Judge Samuel Conti denying 16 Motion to Dismiss for Lack of Jurisdiction; granting 19 Administrative Motion to File Under Seal (sclc2, COURT STAFF) (Filed on 9/29/2011)

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1 2 3 4 IN THE UNITED STATES DISTRICT COURT 5 FOR THE NORTHERN DISTRICT OF CALIFORNIA 6 7 EPIC ADVERTISING d/b/a AZOOGLEADS.COM, INC., a Delaware corporation, 8 9 Plaintiffs, For the Northern District of California United States District Court 10 v. 11 ASIS INTERNET SERVICES, a California corporation; and NELLA WHITE, an individual. 12 13 14 Defendants. 15 16 17 I. ) Case No. 11-1705 SC ) ) ORDER DENYING DEFENDANTS' ) MOTION TO DISMISS ) ) ) ) ) ) ) ) ) ) ) ) INTRODUCTION Before the Court is a Motion to Dismiss for Lack of Diversity 18 19 Jurisdiction filed by Defendants Asis Internet Services ("Asis") 20 and Nella White ("White") (collectively, "Defendants"). 21 ("Mot."). 22 Opposition, and Defendants filed a Reply.1 23 For the following reasons, the Court DENIES Defendants' Motion. 24 /// 25 1 26 27 28 ECF No. 16 Plaintiff Epic Advertising ("Plaintiff") filed an ECF No. 17 ("Opp'n"). Defendants filed an administrative motion requesting leave to file their Reply under seal. ECF No. 19. They argue that filing the Reply under seal is necessary because it discusses a settlement agreement containing strict confidentiality provisions, and because a copy of the settlement agreement is attached to the Reply as an exhibit. Id. The Court GRANTS Defendants' motion to file the Reply under seal pursuant to Civil Local Rule 79-5. 1 II. BACKGROUND 2 Plaintiff is an Internet marketing company that purchases 3 "consumer leads" from third party vendors and sells those leads to 4 its clients. 5 Plaintiff's attempt to collect on a judgment for monetary sanctions 6 against Defendants from a prior lawsuit, ASIS Internet Services v. 7 Optin Global, Inc., No. 05-5124 (N.D. Cal.) (hereinafter, "the 2005 8 action"). 9 other parties for allegedly sending over 10,000 deceptive and Graff Decl. ¶¶ 2, 3.2 This action involves In the 2005 action, Defendants sued Plaintiff and twenty United States District Court For the Northern District of California 10 unsolicited emails to ASIS's server. ASIS Internet Services v. 11 Optin Global, Inc., No. 05-5124, 2010 U.S. Dist. LEXIS 57825, at 12 *3-6 (N.D. Cal. May 19, 2010). 13 in favor of Plaintiff and granted Plaintiff's motion for sanctions, 14 awarding it $806,978.84 in fees. The court granted summary judgment Id. Plaintiff filed this action on April 7, 2011, alleging that 15 16 Defendants have not paid Plaintiff the money owed under the 17 sanctions award from the 2005 action. 18 alleges that Asis is "a defunct internet service provider" whose 19 sole officer and director is White. 20 alleges that Asis sold all of its assets and accounts to employees 21 well below market value, and White transferred all of Asis's 22 remaining funds to herself in an effort to avoid the sanctions 23 judgment. 24 malicious prosecution, tort of another, and fraudulent transfer. 25 Id. ¶¶ 103-133. 26 basis of diversity, claiming that it is a citizen of New York and Id. ¶¶ 13, 14. Compl. ¶ 12. Id. ¶¶ 24, 26. Plaintiff Plaintiff Plaintiff asserts state law claims for Plaintiff alleges federal jurisdiction on the 27 28 2 David Graff ("Graff"), general counsel for Plaintiff, filed a declaration in support of the Opposition. ECF No. 18. 2 1 Delaware and that Defendants are citizens of California. Id. ¶ 20. In the instant Motion, Defendants argue that Plaintiff is a 2 3 citizen of California and, therefore, that this Court lacks subject 4 matter jurisdiction. 5 6 III. LEGAL STANDARD "Federal courts are courts of limited jurisdiction. 7 They 8 possess only that power authorized by Constitution and statute . . 9 . ." Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 United States District Court For the Northern District of California 10 (1994) (citations omitted). 11 12(b)(1) allows a party to seek dismissal of an action where 12 federal subject matter jurisdiction is lacking. 13 has the burden of proving jurisdiction in order to survive a Rule 14 12(b)(1) motion. 15 federal court is presumed to lack jurisdiction in a particular case 16 unless the contrary affirmatively appears." 17 Confederated Tribes, 873 F.2d 1221, 1225 (9th Cir. 1989). 18 Id. Federal Rule of Civil Procedure Id. The plaintiff As a court of limited jurisdiction, "[a] Stock West, Inc. v. A party may seek dismissal for lack of jurisdiction "either on 19 the face of the pleadings or by presenting extrinsic evidence." 20 Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir. 21 2003). 22 demonstrating or refuting the existence of jurisdiction. 23 Reef Atoll Invs., LLC v. United States, 541 F.3d 1189, 1195 (9th 24 Cir. 2008). 25 attaches to plaintiff's allegations, and the existence of disputed 26 material facts will not preclude the trial court from evaluating 27 for itself the merits of jurisdictional claims." In a factual challenge, the court may consider evidence Kingman "In such circumstances, no presumptive truthfulness 28 3 Id. 1 2 IV. DISCUSSION Plaintiff filed this action in federal court on the basis of 3 diversity jurisdiction pursuant to 28 U.S.C. § 1332, which provides 4 that "[t]he district courts shall have original jurisdiction of all 5 civil actions where the matter in controversy exceeds the sum or 6 value of $75,000, . . . and is between -- (1) citizens of different 7 States[.]" 8 9 For the purposes of diversity jurisdiction, a natural person is deemed a "citizen" of the state in which he or she is domiciled. United States District Court For the Northern District of California 10 Lew v. Moss, 797 F.2d 747, 750 (9th Cir. 1986). 11 however, is deemed a citizen "of any State by which it has been 12 incorporated and of the State where it has its principal place of 13 business." 14 typically a citizen of two states for determining the existence of 15 diversity jurisdiction: the state of incorporation and the state in 16 which it has its principal place of business." 17 California, 37 F.3d 562, 564 (9th Cir. 1994). 18 principal place of business is its "nerve center" -- 19 where "a corporation's officers direct, control, and coordinate the 20 corporation's activities." 21 1192, (2010). Typically, this is the location of a corporation's 22 headquarters. Id. 23 28 U.S.C. § 1332(c)(1). A corporation, Thus, "a corporation is Breitman v. May Co. A corporation's the location Hertz Corp. v. Friend, 130 S. Ct. 1181, Defendants argue that Plaintiff is a citizen of California for 24 two reasons. First, they argue that Plaintiff recently filed 25 articles of incorporation in California. 26 attach to their Motion a copy of articles of incorporation filed 27 with the California Secretary of State on January 18, 2011, for a 28 4 Mot. at 2. Defendants Singleton Decl. Ex. A.3 1 corporation named "Epic Advertising, Inc." 2 Defendants offer this document as proof that Plaintiff is now a 3 California corporation. 4 declaration from its general counsel attesting that the articles of 5 incorporation proffered by Defendants do not pertain to Plaintiff 6 or any of its subsidiaries. 7 Plaintiff is a Delaware corporation and attaches proof of 8 Plaintiff's corporate registration with the Delaware Department of 9 State. United States District Court For the Northern District of California 10 Id. Ex. A. However, Plaintiff provides a sworn Graff Decl. ¶ 11. Graff declares that Defendants do not address the matter further in their Reply. Second, Defendants argue that Plaintiff recently merged with 11 12 Connexus Corporation ("Connexus"), a California corporation. Thus, 13 they argue, Plaintiff is now incorporated in both California and 14 Delaware and jointly headquartered in California and New York. 15 Mot. at 2. 16 website states: "Epic Advertising and Connexus Corporation merge to 17 form Epic Media Group. 18 York City and Los Angeles." 19 Plaintiff's website lists Art Shaw ("Shaw") as the Chief Executive 20 Officer of Epic Media Group. 21 that they claim shows that Shaw "is based" in California. Defendants contend that a section of Plaintiff's The Company sets up two headquarters in New Id. Defendants also contend that They then provide a web address Id. Id. In response, Plaintiff argues that its principal place of 22 23 business is in New York. Graff attests that Plaintiff's 24 headquarters are located in New York City; its officers and 25 directors work out of its New York headquarters; its executive and 26 administrative functions are performed in New York; and the 27 28 3 Jason K. Singleton ("Singleton"), attorney for Defendants, filed a declaration in support of the Motion. 5 1 majority of its computers, office equipment, and other assets are 2 located in New York. 3 Plaintiff's Chief Executive Officer is not Shaw, but Don Mathis, 4 who works out of the company's New York headquarters. Graff Decl. ¶¶ 5-9. Graff declares that Id. ¶ 6. Regarding the Connexus acquisition, Graff declares that 5 Id. ¶¶ 12- 6 Connexus is now a wholly owned subsidiary of Plaintiff. 7 13. 8 in New York, while Connexus maintains a separate headquarters in 9 Los Angeles. He avers that Plaintiff continues to maintain its headquarters Id. ¶ 14. Plaintiff notes that, under Danjaq, S.A. United States District Court For the Northern District of California 10 v. Pathe Communications Corp., Inc., 979 F.2d 772, 775 (9th Cir. 11 1992), "the citizenship of a parent [corporation] is distinct from 12 its subsidiary where . . . there is no evidence of an alter ego 13 relationship." 14 Defendants argue in reply that Connexus is not a subsidiary of 15 Plaintiff. They contend that Plaintiff and Connexus merged by way 16 of a stock-for-stock merger and, therefore, that Plaintiff and 17 Connexus are effectively a single parent entity incorporated in 18 both California and Delaware and maintaining "joint headquarters" 19 in California and New York. 20 argument, Defendants submit what they contend is a document that 21 Plaintiff filed with the Securities and Exchange Commission 22 ("SEC"). 23 Azoogle.com, Inc. acquired Connexus Corporation in a stock-for- 24 stock merger, with cash paid in lieu of fractional shares." 25 Ex. A. 26 document, nor have they asked the Court to take judicial notice of 27 the document. 28 acquired Connexus was a stock-for-stock merger has no bearing on Reply at 1-2. In support of this The document states: "[p]ursuant to a merger agreement, Reply Defendants have not filed a declaration authenticating the Furthermore, whether the method by which Plaintiff 6 1 whether the acquisition resulted in Connexus becoming subsidiary of 2 Plaintiff. 3 (D.C. Cir. 2001); Wright v. Or. Metallurgical Corp., 222 F. Supp. 4 2d 1224, 1227-1228 (D. Or. 2002). 5 not refute Graff's sworn statement that Connexus is Plaintiff's 6 wholly owned subsidiary. See Ass'n of Communs. Enters. v. FCC, 235 F.3d 662, 664 The purported SEC filing does Plaintiff has established to the Court's satisfaction that 7 8 Connexus is its subsidiary. Thus, under Danjaq, the citizenship of 9 Connexus is irrelevant to whether Plaintiff is a California citizen United States District Court For the Northern District of California 10 for the purposes of determining diversity jurisdiction. The Court 11 finds, based on Graff's declaration, that Plaintiff's "nerve 12 center" lies in New York, not in California, and that Plaintiff is 13 not incorporated in California. 14 California citizen, and this Court has diversity jurisdiction under 15 28 U.S.C. § 1332. Accordingly, Plaintiff is not a Defendants' Motion is DENIED.4 16 17 V. CONCLUSION 18 For the foregoing reasons, the Court DENIES the Motion to 19 Dismiss filed by Defendants Asis Internet Services and Nella White. 20 IT IS SO ORDERED. 21 22 Dated: September 29, 2011 23 24 UNITED STATES DISTRICT JUDGE 25 26 27 28 4 Defendants also argue in their Reply that this matter should be sent to arbitration pursuant to a 2007 settlement agreement between Connexus and Defendants. Reply at 2-3. Because this argument is raised for the first time in Defendants' Reply, the Court does not address it here. If Defendants wish to file a proper motion on the matter, they may do so. 7

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