Wright et al v. Bloom et al

Filing 95

ORDER DENYING MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION, GRANTING MOTION TO DISMISS FOR LACK OF PROPER SERVICE, AND VACATING HEARING by Hon. William Alsup granting in part and denying in part 79 Motion to Dismiss.(whalc2, COURT STAFF) (Filed on 11/27/2012)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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Plaintiffs,

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For the Northern District of California

United States District Court

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No. C 12-00746 WHA

VERN WRIGHT, JUNE WRIGHT, and
SUPERANTENNA CORPORATION,

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v.
MICHAEL BLOOM, JAIMEE BLOOM,
KINGSBRIDGE CORPORATION, OFFSHORE
SOLUTIONS, INC., SINOTECH
CORPORATION, DIFONA
COMMUNICATION GMBH, BULLIVANT
HOUSER BAILEY PC, and DOES 1–10,

ORDER DENYING MOTION TO
DISMISS FOR LACK OF
PERSONAL JURISDICTION,
GRANTING MOTION TO DISMISS
FOR LACK OF PROPER SERVICE,
AND VACATING HEARING

Defendants.

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/

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INTRODUCTION

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A German company moved to dismiss for lack for personal jurisdiction and failure to

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effectuate proper service via the Hague Convention. The motion to dismiss for lack for personal

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jurisdiction is DENIED. The motion to dismiss for lack of proper service is GRANTED.

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STATEMENT
The background facts of this action have been set forth in the order regarding the motion

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to dismiss or transfer (Dkt. No. 77). Additional facts relevant to defendant Difona

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Communications GmbH’s motion to dismiss for lack of personal jurisdiction and failure to

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effectuate proper service via the Hague Convention are set forth below.

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Plaintiffs Vern and June Wright started Super Antennas in 1999, a small business in

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Lincoln, California, selling antennas to the amateur ham radio market. The Wrights later

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established SuperAntenna Corporation, a California corporation headquartered in San Mateo.

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SuperAntenna Corporation is entirely owned by the Wrights. This order refers to plaintiffs'

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companies generally as “Super Antenna.”

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Defendant Difona is a ham radio equipment distributor located in Germany. Difona had

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an ongoing business relationship with plaintiffs over several years for the purchase and

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distribution of Super Antenna products in Germany (Second Amd. Compl. ¶¶ 208–209). Difona

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was the exclusive distributor for Super Antenna products in Germany during 2009 and 2010 (id.

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¶ 203). Plaintiffs also allege that they had an agreement with Difona “to become a worldwide

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dealer and distributor for Super Antenna” (id. ¶ 206). In support of these allegations, plaintiffs

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submitted invoices, emails, and shipping statements relating to the purchase and shipment of

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For the Northern District of California

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Super Antenna products from California to Difona (Wright Decl., Exhs. 1-3).
As part of a fraudulent scheme with defendants Michael and Jaimee Bloom, Difona sold

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pirated Super Antenna products in Europe by directly contacting Super Antenna’s customers and

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through retail sales from Difona’s website. Difona owner Alfred Kräemer approached Super

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Antenna dealers in Europe, falsely stating that Super Antenna was out of business and offering to

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sell “genuine Super Antenna products manufactured by the same factory to the same

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specifications” (Second Amd. Compl. ¶ 212).

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Plaintiffs filed a first amended complaint on May 16, 2012. Difona moved to dismiss the

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complaint. On October 4, plaintiffs filed a second amended complaint. The second amended

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complaint includes claims against Difona for (1) intentional or negligent misrepresentation or

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fraud, and unjust enrichment and (2) misappropriation of trade secrets. Because the second

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amended complaint contained additional allegations against Difona, an order issued requiring

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Difona to file a new motion to dismiss (Dkt. No. 78). Difona now moves to dismiss the second

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amended complaint based on lack of personal jurisdiction and defective service of process. For

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the reasons discussed below, Difona’s motion to dismiss for lack of personal jurisdiction is

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DENIED.

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Difona’s motion to dismiss for lack of service is GRANTED.
ANALYSIS

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California’s long-arm jurisdiction statute is coextensive with federal due process

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requirements, such that the jurisdiction analyses under state law and federal due process are the
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same. Panavision Int’l, L.P. v. Toeppen, 141 F.3d 1316, 1320 (9th Cir. 1998) (citing Cal. Code

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Civ. Proc. Section 410.10). Where a defendant moves to dismiss a complaint for lack of

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personal jurisdiction, the plaintiff bears the burden of demonstrating that jurisdiction is

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appropriate. Dole Foods Co., Inc. v. Watts, 303 F.3d 1104, 1108 (9th Cir. 2002). “If the motion

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is based on written materials rather than an evidentiary hearing, the plaintiff need only make a

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prima facie showing of jurisdictional facts.” Ibid. The plaintiff cannot “simply rest on the bare

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allegations of its complaint,” but uncontroverted allegations in the complaint must be taken as

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true. Ibid.

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1.

GENERAL JURISDICTION.

To exercise general jurisdiction over Difona, its contacts with California must be

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“substantial” or “continuous and systematic” such that Difona can be haled into court in

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California in any action. See Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408,

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415 (1984). Difona’s contacts with the forum state must be of the sort that approximate physical

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presence. Gates Learjet Corp. v. Jensen, 743 F.2d 1325, 1331 (9th Cir. 1984).

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According to the declaration of Alfred Kräemer, managing director of Difona, the

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company is headquartered in Germany. Difona is owned and operated by Kräemer and his

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family. Difona has no offices or employees in California, is not authorized to do business here,

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does not pay California taxes, and has no registered agent for service of process in California

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(Kräemer Decl. ¶¶ 3, 5). Kräemer further testified that Difona sells ham-radio equipment

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exclusively in Europe and does not sell or offer for sale any products in California (id. ¶ 5).

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Plaintiffs contend that general jurisdiction exists because Difona purchased products

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from California, sells products in California, and “downloaded specifications from the website of

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a California business.” The Supreme Court has made clear, however, that “mere purchases, even

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if occurring at regular intervals, are not enough to warrant a State’s assertion of in personam

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jurisdiction over a nonresident corporation in a cause of action not related to those purchase

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transactions.” Helicopteros, 466 U.S. at 418. Moreover, plaintiffs’ allegation that Difona sells

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products in California is contradicted by their own affidavits. Plaintiffs point to the declaration

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of William Waters III, an individual who attempted to purchase an allegedly pirated product
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from Difona’s website. Mr. Waters testified that, upon his attempt to purchase a product for

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delivery to California, Difona contacted him to tell him the company was “not allowed to sell to

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USA by law” (Waters Decl. ¶ 11). Difona contacted him a second time, referring to Vern

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Wright’s lawsuit against Difona and stating that “we can not ship to California until this matter is

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cleared” (id. ¶ 13). Difona refunded the payment and did not ship any product to Mr. Waters.

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Plaintiffs set forth no other evidence that Difona sold any products in California. Lastly,

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plaintiffs’ claim that Difona downloaded materials from plaintiffs’ website is insufficient to

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establish general jurisdiction over Difona in California. See Mavrix Photo, Inc. v. Brand

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Technologies, Inc., 647 F.3d 1218, 1226–27 (9th Cir. 2011).
2.

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Even where general jurisdiction does not exist, personal jurisdiction may be established

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SPECIFIC JURISDICTION.

based on “specific jurisdiction” when the following requirements are met:
(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 privileges
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

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(3) the exercise of jurisdiction must comport with fair play and substantial
justice, i.e. it must be reasonable.
Dole Food, 303 F.3d at 1111 (internal quotation marks and citation omitted).

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Plaintiffs’ claims against Difona are based on Difona’s sale of pirated Super Antenna

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products in Europe, which competed with or displaced potential sales of plaintiffs’ products.

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Plaintiffs also claim that, in order to steal plaintiffs’ customers, Kräemer made false or

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misleading statements to European dealers of Super Antenna products that resulted in

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competitive injury. “[A] major antenna dealer who previously sold Super Antenna products”

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spoke with Kräemer via telephone in March 2012. Kräemer told the dealer, Martin Lynch, that

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Super Antenna was “dead” and out of business, and that plaintiff Wright would no longer be able

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to supply antennas again.* Difona “could now supply all of the Super Antenna products which

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were made in exactly the same factory that supplied [plaintiff’s] products and that the antenna

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products Difona were [sic] offering were identical” to those offered by plaintiffs (Second Amd.

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Compl. ¶ 221). Plaintiffs further allege that they “have identified numerous other former

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SuperAntenna dealers who were approached by Difiona and sold pirated versions of

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SuperAntenna products” (id. ¶ 222). Difona’s fraudulent actions allegedly resulted in injury to

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plaintiffs’ business relationships and damaged the world-wide market for Super Antenna

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products.

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Purposeful Availment and Direction.

This prong “may be satisfied by purposeful availment of the privilege of doing business

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A.

in the forum; by purposeful direction of activities at the forum; or by some combination thereof.”

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Yahoo! Inc. v. La Ligue Contre Le Racisme Et L'Antisemitisme, 433 F.3d 1199, 1206 (9th Cir.

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2006) (en banc). In tort cases, a court should determine whether a defendant “purposefully

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directs his activities” at the forum state, by applying an “effects” test, set forth by the Supreme

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Court in Calder v. Jones, 465 U.S. 783 (1984). Our court of appeals has construed the Calder

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effects test to require that “the defendant allegedly must have (1) committed an intentional act,

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(2) expressly aimed at the forum state, (3) causing harm that the defendant knows is likely to be

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suffered in the forum state.” Yahoo! Inc., 433 F.3d at 1206.

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The parties do not dispute that defendant’s actions were intentional within the meaning of

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the Calder effects test. Difona contends, however, that because it never marketed or attempted

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to sell antennas in California, it is not subject to personal jurisdiction here. Difona argues that

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this case is similar to Schwarzenegger v. Fred Martin Motor Co., 734 F.3d 797 (9th Cir. 2004).

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There, the defendant was an Ohio resident who used Arnold Schwarzenegger’s image on an

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advertisement for his Ohio car delearship. Our court of appeals found that there was no “express

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aiming” at California, where Schwarzenegger resided, because the advertisement was directed to

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Ohioans, was never circulated in California, and because the defendant “had no reason to believe

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* Plaintiffs submitted the declaration of Martin Lynch, managing director and owner of Martin Lynch
& Sons, Ltd. Martin Lynch & Sons was previously a defendant in this action but settled with plaintiffs in
September 2012 (Lynch Decl. ¶ 2).

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that any Californians would see it and pay a visit to the dealership.” Id. at 807. The court of

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appeals found that defendant’s “express aim was local,” even if the defendant may have known

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that Schwarzenegger lived in California, where the alleged harm was eventually felt. In this

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case, Difona argues that its actions were similarly focused locally (on Europe) and that it never

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exploited the California market. Difona contends that it is thus not subject to personal

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jurisdiction in this forum. This order disagrees.

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Our court of appeals has held that “wrongful conduct individually targeting a known

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forum resident” constitutes “express aiming” under the Calder effects test. See Bancroft &

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Masters, Inc. v. Augusta Nat., Inc., 223 F.3d 1082, 1087 (9th Cir. 2000). The “express aiming”
inquiry focuses on whether “an intended impact that is either local or undifferentiated” or is

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“targeted at a known individual who has a substantial, ongoing connection to the forum.” Fiore

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v. Walden, 688 F.3d 558, 578 (9th Cir. 2012). In Bancroft, the defendant sent a letter to a third

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party in Virginia, which forced the plaintiff, a California resident, to bring suit in California to

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protect its intellectual property. The court of appeals determined that defendant’s intentional

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action in sending the letter, even though to Virginia, individually targeted the plaintiff, a

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California corporation. Therefore, the defendant’s act was “expressly aimed” at California.

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Moreover, the effects of the letter were primarily felt in California, as the defendant knew they

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would be. Bancroft, 223 F.3d at 1088.

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Here, plaintiffs allege that Difona made knowingly false statements to Super Antenna

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customers to induce them to stop buying products from plaintiffs and to instead buy them from

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Difona. Plaintiffs further allege that Difona’s fraud was directed at harming plaintiffs’

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California business by stealing plaintiffs’ European customers. Difona purposefully targeted

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plaintiffs and their business by soliciting plaintiffs’ customers, representing that Difona’s

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products were the same, and informing customers that plaintiffs were out of business. Difona

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knew that the effects of its intentional conduct would be felt in California, plaintiffs’ state of

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residence. Unlike the defendant in Schwarzenegger, whose intentional acts were focused only

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on Ohio, here plaintiffs have adequately alleged that Difona’s fraudulent activities were

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expressly aimed at competing with plaintiffs through direct interference with plaintiffs’ customer

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relationships. This is based on the record at present and is subject to proof at trial.

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Turning to the third prong of the Calder effects test, this order finds that plaintiffs have

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suffered “jurisdictionally sufficient” harm as a result of Difona’s intentional acts. “In

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determining the situs of a corporation’s injury, our precedents recognize that in appropriate

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circumstances a corporation can suffer economic harm both where the bad acts occurred and

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where the corporation has its principal place of business.” Mavrix Photo, 647 F.3d at 1231-32

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(citing Dole Food, 303 F.3d at 1113). Plaintiffs Vern and Judy Wright are residents of

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California, and the principal place of business of plaintiff Super Antenna is California. Where,
as here, “a forum in which a plaintiff corporation has its principal place of business is in the

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same forum toward which defendant[] expressly aim[ed] [its] acts, the ‘effects’ test permits that

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forum to exercise personal jurisdiction.” Dole Food, 303 F.3d at 1114.

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B.

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Whether the claim arises out of or relates to the defendant’s forumrelated activities.

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“The second requirement for specific jurisdiction is that the contacts constituting

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purposeful availment must be the ones that give rise to the current suit.” Bancroft, 223 F.3d at

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1088. Our court of appeals applies a “but for” causation standard. Ibid. This requirement is met

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here. Plaintiffs allege that they would not have suffered an injury “but for” Difona’s false

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statements to Super Antenna customers and sale of pirated Super Antenna products. These

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allegations form the basis for plaintiffs’ claims against Difona in the current action.

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C.

Whether the exercise of jurisdiction is reasonable.

“Once purposeful availment has been established, the forum’s exercise of jurisdiction is

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presumptively reasonable. To rebut that presumption, a defendant ‘must present a compelling

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case’ that the exercise of jurisdiction would, in fact, be unreasonable.” Roth v. Garcia Marquez,

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942 F.2d 617, 625 (9th Cir. 1991). Our court of appeals has established a seven-factor test to

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determine whether the exercise of jurisdiction would be reasonable:

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(1) the extent of the defendants’ 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 defendants’
state; (4) the forum state's interest in adjudicating the dispute; (5) the
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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.

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Menken v. Emm, 503 F.3d 1050, 1058 (9th Cir. 2007).

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First, Difona argues there was no purposeful interjection into California because

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defendant did not and does not market or sell products in California and does not have

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employees or offices here. Plaintiffs, however, allege that Difona had a long-term business

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relationship with plaintiffs and their company for the purchase and distribution of Super Antenna

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products. Through this relationship, Difona gained access to and became aware of plaintiffs’

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alleged trade secrets, marketing information, and specifications of products that Difona later
misappropriated. Plaintiffs claim that they had frequent telephone conversations and meetings

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with Difona to discuss joint marketing strategy, and that Difona regularly purchased products

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from Super Antenna in California over the course of several years. Difona purposefully

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interjected itself into California through its ongoing business relationship with plaintiffs in

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California, from which it received economic benefit. This factor weighs in favor of plaintiffs.

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Second, Difona argues that it would be extremely burdensome to require it to defend

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itself in a California lawsuit. Difona is a German company, headquartered in Germany, with

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employees who are all German citizens and speak German as their primary language (Kräemer

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Decl. ¶¶ 3–4). Plaintiffs counter that Difona managing director Alfred Kräemer speaks English

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and travels frequently to the United States. Although this factor weighs against the exercise of

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jurisdiction, “[u]nless such inconvenience is so great as to constitute a deprivation of due

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process, it will not overcome clear justifications for the exercise of jurisdiction.” Roth, 942 F.2d

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at 623.

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Third, Difona contends that the factor regarding “conflict with the sovereignty of the

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defendants’ state” weighs against the reasonableness of exercising jurisdiction. Difona argues

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that Germany has a significant interest in regulating the conduct of businesses that are

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headquartered in and do business within its borders. Difona does not have an agent or offices in

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the United States, is headquartered in Germany, and its employees are all German citizens. This

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factor also tends to undermine the reasonableness of asserting jurisdiction over Difona. In this
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regard, we must always remember that foreign courts will be entitled to hale in our citizens and

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corporations to the same extent as we do theirs, so that this justification works both ways.

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Nonetheless, “[t]he factor of conflict with the sovereignty of the defendant’s state is not

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dispositive because, if given controlling weight, it would always prevent suit against a foreign

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national in a United States court.” Id. at 623-24.

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Fourth, California has a strong interest in adjudicating the dispute. Plaintiffs’ claims

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against Difona are based on California law. Additionally, California has a strong interest in

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providing redress for its citizens who suffered injury due to fraudulent conduct or

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misappropriation.
Fifth, a court must evaluate whether the United States is the most efficient forum to

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resolve this dispute. Difona argues that a more efficient forum is China, where the products

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were manufactured; England, where some of the products were sold by Difona; or Germany,

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where Difona is located. Difona is the only foreign defendant in this action. Defendants

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Michael and Jaimee Bloom, Kingsbridge Corporation, Offshore Solutions, Inc., Sinotech

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Corporation, and Bullivant Houser Bailey PC are located in the United States. This factor is a

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toss up, for it would also be reasonable to require plaintiffs to proceed against defendant in

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Germany.

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Sixth, plaintiffs contend that Germany is not an alternative forum for the adjudication of

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the entire action. Plaintiffs allege that defendants were involved in a fraudulent scheme,

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involving Difona as well as domestic defendants Michael and Jaimee Bloom, Sinotech, and

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Offshore Solutions. It is unlikely that a German court would have jurisdiction over the domestic

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defendants, against whom plaintiffs have alleged similar facts. Additionally, plaintiffs have

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federal and state securities law claims against certain defendants that they could not bring in a

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German court. Plaintiffs have sufficiently established that an alternative forum is not reasonably

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available to adjudicate the entire controversy.

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Seventh, plaintiffs’ choice of forum weighs in favor of the reasonableness of personal

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jurisdiction here, although “the plaintiff’s convenience is not of paramount importance.” Dole

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Food, 303 F.3d at 1116.
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Weighing these factors together, this order finds that the exercise of personal jurisdiction

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over Difona in this action is reasonable, although barely so. Again, this conclusion is based on

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allegations that may fall short at trial and/or on summary judgment.

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SERVICE UNDER THE HAGUE CONVENTION.

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The Hague Convention governs service of summons on defendants in foreign countries

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that are signatories to the treaty. Germany is a signatory to the Hague Convention. Difona

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argues, and plaintiffs do not dispute, that plaintiffs must serve Difona under the Hague

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Convention (Dkt. No. 40 at 19)

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Plaintiffs state that a translation of the first amended complaint was delivered to the
German government on September 27, 2012, for service through the Hague Convention (Opp. at

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13). Difona maintains, and plaintiffs do not contest, that Difona has not yet been served.

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Because plaintiffs have not completed proper service on Difona — likely due to delays

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associated with the Hague Convention procedures — Difona’s motion to dismiss is GRANTED.

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If, however, Difona is properly served with the first amended complaint, it must appear in this

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action or risk default judgment being entered against it.

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Plaintiffs originally filed this action on February 15, 2012. Normally, a plaintiff has 120

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days to complete service on all defendants. Because of the additional time necessary for service

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via the Hague Convention, the Court would normally extend this period once. Due to

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inexcusable delay on the part of plaintiffs, no effort was made to use the Hague Convention

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procedures until plaintiffs conceded in their filing on July 25, 2012, that they would begin the

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process of service under the Hague Convention (Dkt. No. 52). In light of this delay, the Court

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will impose a DEADLINE OF FEBRUARY 17, 2013, to complete service. This is the absolute

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deadline for completing service on Difona under the Hague Convention. As plaintiffs state they

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provided a translated copy of the first amended complaint to the German government two

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months ago, this should provide ample time.

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Difona contends that, because plaintiffs subsequently filed a second amended complaint,

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plaintiffs must now translate the second amended complaint and begin the process of Hague

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Convention service anew. Difona provides no authority to support this contention. Once the
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summons and first amended complaint have been translated and served via the Hague

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Convention, and counsel for Difona appear in this action, plaintiffs may serve the second

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amended complaint on counsel, as it may do with other subsequent filings.

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CONCLUSION

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For the forgoing reasons, defendant’s motion to dismiss for lack of personal jurisdiction

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is DENIED. Defendant’s motion to dismiss for insufficient service is GRANTED. Plaintiffs must

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complete proper service on defendant by FEBRUARY 17, 2013. Defendant should be aware that

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it must appear if it is timely served via the Hague Convention procedures or risk default

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judgment. The hearing scheduled for November 29 is hereby VACATED.

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IT IS SO ORDERED.

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Dated: November 27, 2012.

WILLIAM ALSUP
UNITED STATES DISTRICT JUDGE

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