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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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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EPIC ADVERTISING d/b/a
AZOOGLEADS.COM, INC., a Delaware
corporation,

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Plaintiffs,

For the Northern District of California

United States District Court

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v.
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ASIS INTERNET SERVICES, a
California corporation; and NELLA
WHITE, an individual.

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Defendants.

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I.

) Case No. 11-1705 SC
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) ORDER DENYING DEFENDANTS'
) MOTION TO DISMISS
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INTRODUCTION
Before the Court is a Motion to Dismiss for Lack of Diversity

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Jurisdiction filed by Defendants Asis Internet Services ("Asis")

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and Nella White ("White") (collectively, "Defendants").

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("Mot.").

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Opposition, and Defendants filed a Reply.1

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For the following reasons, the Court DENIES Defendants' Motion.

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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.

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II.

BACKGROUND

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Plaintiff is an Internet marketing company that purchases

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"consumer leads" from third party vendors and sells those leads to

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its clients.

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Plaintiff's attempt to collect on a judgment for monetary sanctions

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against Defendants from a prior lawsuit, ASIS Internet Services v.

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Optin Global, Inc., No. 05-5124 (N.D. Cal.) (hereinafter, "the 2005

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action").

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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

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unsolicited emails to ASIS's server.

ASIS Internet Services v.

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Optin Global, Inc., No. 05-5124, 2010 U.S. Dist. LEXIS 57825, at

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*3-6 (N.D. Cal. May 19, 2010).

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in favor of Plaintiff and granted Plaintiff's motion for sanctions,

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awarding it $806,978.84 in fees.

The court granted summary judgment

Id.

Plaintiff filed this action on April 7, 2011, alleging that

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Defendants have not paid Plaintiff the money owed under the

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sanctions award from the 2005 action.

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alleges that Asis is "a defunct internet service provider" whose

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sole officer and director is White.

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alleges that Asis sold all of its assets and accounts to employees

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well below market value, and White transferred all of Asis's

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remaining funds to herself in an effort to avoid the sanctions

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judgment.

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malicious prosecution, tort of another, and fraudulent transfer.

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Id. ¶¶ 103-133.

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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

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David Graff ("Graff"), general counsel for Plaintiff, filed a
declaration in support of the Opposition. ECF No. 18.
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Delaware and that Defendants are citizens of California.

Id. ¶ 20.

In the instant Motion, Defendants argue that Plaintiff is a

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citizen of California and, therefore, that this Court lacks subject

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matter jurisdiction.

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III. LEGAL STANDARD
"Federal courts are courts of limited jurisdiction.

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They

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possess only that power authorized by Constitution and statute . .

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. ."

Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377

United States District Court

For the Northern District of California

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(1994) (citations omitted).

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12(b)(1) allows a party to seek dismissal of an action where

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federal subject matter jurisdiction is lacking.

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has the burden of proving jurisdiction in order to survive a Rule

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12(b)(1) motion.

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federal court is presumed to lack jurisdiction in a particular case

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unless the contrary affirmatively appears."

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Confederated Tribes, 873 F.2d 1221, 1225 (9th Cir. 1989).

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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

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the face of the pleadings or by presenting extrinsic evidence."

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Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir.

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2003).

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demonstrating or refuting the existence of jurisdiction.

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Reef Atoll Invs., LLC v. United States, 541 F.3d 1189, 1195 (9th

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Cir. 2008).

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attaches to plaintiff's allegations, and the existence of disputed

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material facts will not preclude the trial court from evaluating

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for itself the merits of jurisdictional claims."

In a factual challenge, the court may consider evidence
Kingman

"In such circumstances, no presumptive truthfulness

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Id.

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IV.

DISCUSSION
Plaintiff filed this action in federal court on the basis of

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diversity jurisdiction pursuant to 28 U.S.C. § 1332, which provides

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that "[t]he district courts shall have original jurisdiction of all

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civil actions where the matter in controversy exceeds the sum or

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value of $75,000, . . . and is between -- (1) citizens of different

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States[.]"

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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

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Lew v. Moss, 797 F.2d 747, 750 (9th Cir. 1986).

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however, is deemed a citizen "of any State by which it has been

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incorporated and of the State where it has its principal place of

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business."

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typically a citizen of two states for determining the existence of

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diversity jurisdiction: the state of incorporation and the state in

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which it has its principal place of business."

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California, 37 F.3d 562, 564 (9th Cir. 1994).

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principal place of business is its "nerve center" --

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where "a corporation's officers direct, control, and coordinate the

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corporation's activities."

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1192, (2010).

Typically, this is the location of a corporation's

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headquarters.

Id.

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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

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two reasons.

First, they argue that Plaintiff recently filed

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articles of incorporation in California.

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attach to their Motion a copy of articles of incorporation filed

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with the California Secretary of State on January 18, 2011, for a

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Mot. at 2.

Defendants

Singleton Decl. Ex. A.3

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corporation named "Epic Advertising, Inc."

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Defendants offer this document as proof that Plaintiff is now a

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California corporation.

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declaration from its general counsel attesting that the articles of

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incorporation proffered by Defendants do not pertain to Plaintiff

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or any of its subsidiaries.

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Plaintiff is a Delaware corporation and attaches proof of

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Plaintiff's corporate registration with the Delaware Department of

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State.

United States District Court

For the Northern District of California

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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

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Connexus Corporation ("Connexus"), a California corporation.

Thus,

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they argue, Plaintiff is now incorporated in both California and

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Delaware and jointly headquartered in California and New York.

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Mot. at 2.

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website states: "Epic Advertising and Connexus Corporation merge to

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form Epic Media Group.

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York City and Los Angeles."

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Plaintiff's website lists Art Shaw ("Shaw") as the Chief Executive

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Officer of Epic Media Group.

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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

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business is in New York.

Graff attests that Plaintiff's

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headquarters are located in New York City; its officers and

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directors work out of its New York headquarters; its executive and

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administrative functions are performed in New York; and the

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Jason K. Singleton ("Singleton"), attorney for Defendants, filed
a declaration in support of the Motion.
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majority of its computers, office equipment, and other assets are

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located in New York.

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Plaintiff's Chief Executive Officer is not Shaw, but Don Mathis,

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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

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Id. ¶¶ 12-

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Connexus is now a wholly owned subsidiary of Plaintiff.

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13.

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in New York, while Connexus maintains a separate headquarters in

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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

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v. Pathe Communications Corp., Inc., 979 F.2d 772, 775 (9th Cir.

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1992), "the citizenship of a parent [corporation] is distinct from

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its subsidiary where . . . there is no evidence of an alter ego

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relationship."

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Defendants argue in reply that Connexus is not a subsidiary of

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Plaintiff.

They contend that Plaintiff and Connexus merged by way

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of a stock-for-stock merger and, therefore, that Plaintiff and

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Connexus are effectively a single parent entity incorporated in

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both California and Delaware and maintaining "joint headquarters"

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in California and New York.

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argument, Defendants submit what they contend is a document that

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Plaintiff filed with the Securities and Exchange Commission

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("SEC").

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Azoogle.com, Inc. acquired Connexus Corporation in a stock-for-

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stock merger, with cash paid in lieu of fractional shares."

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Ex. A.

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document, nor have they asked the Court to take judicial notice of

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the document.

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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

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whether the acquisition resulted in Connexus becoming subsidiary of

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Plaintiff.

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(D.C. Cir. 2001); Wright v. Or. Metallurgical Corp., 222 F. Supp.

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2d 1224, 1227-1228 (D. Or. 2002).

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not refute Graff's sworn statement that Connexus is Plaintiff's

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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

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Connexus is its subsidiary.

Thus, under Danjaq, the citizenship of

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Connexus is irrelevant to whether Plaintiff is a California citizen

United States District Court

For the Northern District of California

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for the purposes of determining diversity jurisdiction.

The Court

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finds, based on Graff's declaration, that Plaintiff's "nerve

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center" lies in New York, not in California, and that Plaintiff is

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not incorporated in California.

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California citizen, and this Court has diversity jurisdiction under

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28 U.S.C. § 1332.

Accordingly, Plaintiff is not a

Defendants' Motion is DENIED.4

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V.

CONCLUSION

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For the foregoing reasons, the Court DENIES the Motion to

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Dismiss filed by Defendants Asis Internet Services and Nella White.

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IT IS SO ORDERED.

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Dated: September 29, 2011

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UNITED STATES DISTRICT JUDGE

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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.
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