Beene v. Beene et al

Filing 39

ORDER GRANTING 37 Motion for Leave to File Second Amended Complaint. Case Management Statement due by 1/4/2013. Case Management Conference set for 1/11/2013 01:30 PM in Courtroom 11, 19th Floor, San Francisco. Signed by Judge Jeffrey S. White on October 15, 2012. (jswlc3, COURT STAFF) (Filed on 10/15/2012)

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NOT FOR PUBLICATION

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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JONES C. BEENE IV,

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ORDER GRANTING MOTION
FOR LEAVE TO FILE VERIFIED
SECOND AMENDED
COMPLAINT AND SCHEDULING
INITIAL CASE MANAGEMENT
CONFERENCE

Plaintiff,

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For the Northern District of California

United States District Court

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No. C 11-6717 JSW

v.
JAMES JEFFERSON BEENE, JR., JONES
BEENE, TODD HARRIS, and DOES 1-30,
inclusive,

(Docket No. 37)
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Defendants.
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INTRODUCTION

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Now before the Court for consideration is the Motion for Leave to File a Verified

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Second Amended Complaint, filed by Plaintiff Jones C. Beene IV (“Plaintiff”). The Court has

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considered the parties’ papers, relevant legal authority, and the record in this case, and it finds

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the motion suitable for disposition without oral argument. See N.D. Civ. L.R. 7-1(b). The

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Court VACATES the hearing scheduled for November 9, 2012, and it HEREBY GRANTS

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Plaintiff’s motion.
BACKGROUND

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The Court set forth the facts underlying this dispute in its Order granting the motion to

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dismiss filed by Defendants James Jefferson Beene, Jr., Jones Beene, Jr., and Todd Harris

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(collectively “Defendants”), and it shall not repeat them here. (See Docket No. 36, Order at

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2:3-3:4.)

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In that Order, the Court determined that Plaintiff had not alleged sufficient facts to show

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that the Court would have personal jurisdiction over the Defendants for a direct, rather than a

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derivative claim, for breach of fiduciary duty. The Court further ordered that if Plaintiff wanted

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to pursue a direct action in this district, he would be required to seek leave to amend and to

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demonstrate sufficient jurisdictional facts to support a direct action against the Defendants.

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(Docket No. 36, Order at8:23-9:21.)

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Plaintiff has submitted a proposed Verified Second Amended Complaint (“Proposed

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SAC”), in which he asserts four claims for relief: (1) breach of fiduciary duties; (2) abuse of

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control; (3) waste of corporate assets; and (4) unjust enrichment. Plaintiff alleges that he
resides in California and that Defendants were aware of that fact. (Proposed SAC ¶¶ 3, 10.)

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For the Northern District of California

United States District Court

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Plaintiff also alleges that he holds non-voting common shares in PI, Inc. (the “Company”), and

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that he has no ability to control the Company. (Id. ¶ 4.) Plaintiff also alleges that, in order to

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take control of the Company, Defendants converted their non-voting shares to voting shares, at

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no premium price and without approval of other shareholders. (Id. ¶ 5.) Finally, Plaintiff

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alleges that Defendants have engaged in a variety of actions that were intended to dilute the

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value of his shares. (Id. ¶¶ 7-8, 34, 36-44.)

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ANALYSIS
Plaintiff seeks leave to amend pursuant to Federal Rule of Civil Procedure 15. Rule

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15(a) provides that leave to amend “shall be freely given.” See Fed. R. Civ. Proc. 15(a). The

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Ninth Circuit has stated that “[r]ule 15’s policy of favoring amendments to pleadings should be

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applied with ‘extreme liberality.’” United States v. Webb, 655 F.2d 977, 979 (9th Cir. 1981).

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Four factors are considered to determine whether a motion for leave to file an amended

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complaint should be granted: bad faith; undue delay; prejudice to the opposing party; and

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futility of amendment. DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 186 (9th Cir. 1987).

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While these “factors are usually used as criteria to determine the propriety of a motion for leave

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to amend ... the crucial factor is the resulting prejudice to the opposing party.” Howey v. United

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States, 481 F.2d 1187, 1190 (9th Cir. 1973).

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This litigation is in its infancy, so there is no issue of undue delay. Defendants do not

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argue that they would be prejudiced if the Court grants Plaintiff leave to amend or that Plaintiff

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is acting in bad faith. Thus, each of these factors weigh in favor of granting Plaintiff’s motion.

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Defendants argue, in a conclusory fashion, that amendment would be futile, because the

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Proposed SAC fails “to demonstrate that this Court has personal jurisdiction over Defendants.”

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(Opp. Br. at 1:20-23.) At the same time, Defendants state that they are “keenly aware” that

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Rule 15 requires that leave to amend be granted liberally, and they “reserve their right to

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challenge the SAC in the event the Court sees fit to grant the instant motion.” (Id. at 1:25, 2:1-

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2.)
Plaintiff bears the burden to establish personal jurisdiction over Defendants. Menken v.

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For the Northern District of California

United States District Court

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Emm, 503 F.3d 1050, 1056 (9th Cir. 2007). “Personal jurisdiction over a defendant is proper if

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it is permitted by a long-arm statute and if the exercise of that jurisdiction does not violate

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federal due process.” Pebble Beach Co. v. Caddy, 453 F.3d 1151, 1154 (9th Cir. 2006) (citing

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Fireman’s Fund Ins. Co. v. Nat’l Bank of Cooperatives, 103 F.3d 888, 893 (9th Cir. 1996)).

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Because California’s long arm statute is co-extensive with federal due process requirements, the

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jurisdictional analyses under California law and federal due process are the same.

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Schwarzenegger v. Fred Martin Co., 374 F.3d 797, 801 (9th Cir. 2004).

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For specific jurisdiction, “the issue of whether jurisdiction will lie turns on an evaluation

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of the nature and quality of the defendant’s contacts in relation to the cause of action.” Data

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Disc, Inc. v. Systems Tech. Assocs., Inc., 557 F.2d 1280, 1287 (9th Cir. 1977); see also Calder

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v. Jones, 465 U.S. 783, 788 (1984) (“In judging minimum contacts, a court properly focuses on

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the relationship among the defendant, the forum, and the litigation.”) (internal quotations and

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citation omitted). Specific jurisdiction over a defendant exists where: (1) the defendant has

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purposefully directed his or her activities at residents of the forum state or the forum state itself;

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(2) the plaintiff’s claim arises out of or relates to those activities; and (3) the assertion of

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personal jurisdiction is reasonable and fair. Schwarzenegger, 374 F.3d at 802; see also Burger

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King Corp. v. Rudzewicz, 471 U.S. 462, 472-77 (1985).

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Plaintiff’s claims sound in tort. In such cases, courts generally focus on “whether a

focuses on the forum in which the defendant’s actions were felt, whether or not the actions

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themselves occurred within the forum.” Yahoo! Inc. v. La Ligue Contre Le Racisme et

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L’Antisemitisme, 433 F.3d 1199, 1206 (9th Cir. 2006) (citing Schwarzenegger, 374 F.3d at 803,

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in turn citing Calder, 476 U.S. at 789-90). Under the effects test, “the defendant allegedly

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[must] have (1) committed an intentional act, (2) expressly aimed at the forum state, (3) causing

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harm that the defendant knows is likely to be suffered in the forum state.” Schwarzenegger,

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374 F.3d at 803 (citation omitted); see also Bancroft & Masters, Inc. v. August Nat’l, Inc., 223

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F.3d 1082, 1087 (9th Cir. 2000) (express aiming “requirement is satisfied when the defendant is

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For the Northern District of California

defendant ‘purposefully direct[s] his activities’ at the forum state, applying an ‘effects’ test that

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United States District Court

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alleged to have engaged in wrongful conduct targeted at a plaintiff whom the defendant knows

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to be a resident of the forum state”).

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The Court has reviewed the allegations set forth in the Proposed SAC, which have not

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been contradicted by Defendants in opposition to the motion to amend. The Court concludes

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that the Plaintiff has alleged sufficient jurisdictional facts such that it would not be futile to

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grant Plaintiff leave to amend. See Jones v. H.F. Ahmanson & Co., 1 Cal. 3d 93, 108 (1969);

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Jara v. Suprema Meats, 121 Cal. App. 4th 1238, 1257-58 (2004) (construing Jones to permit “a

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minority shareholder to bring a personal action alleging ‘a majority stockholders’ breach of a

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fiduciary duty to minority stockholders, which resulted in the majority stockholders retaining a

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disproportionate share of the corporation’s ongoing value’”) (quoting Pareto v. F.D.I.C., 139

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F.3d 696, 699-700 (9th Cir. 1998)).

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Accordingly, the Court GRANTS Plaintiff’s motion for leave to amend.

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CONCLUSION

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Plaintiff shall file and serve the Second Amended Verified Complaint by no later than

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October 19, 2012. Defendants shall answer or otherwise respond within twenty-one (21) days

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after service.

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It is FURTHER ORDERED that the parties shall appear for an initial case management

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conference on Friday, January 11, 2013 at 1:30 p.m., and the parties’ shall submit a joint case

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management statement by no later than January 4, 2013.

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IT IS SO ORDERED.
Dated: October 15, 2012
JEFFREY S. WHITE
UNITED STATES DISTRICT JUDGE

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For the Northern District of California

United States District Court

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