Pag-Daly City, LLC v. Quality Auto Locators, Inc et al

Filing 280

ORDER DENYING MOTIONS TO DISMISS denying 196 Motion to Dismiss; terminating 199 Motion to Amend/Correct ; ; finding as moot 276 Motion (whalc1, COURT STAFF) (Filed on 8/22/2013)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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PAG-DALY CITY, LLC,

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For the Northern District of California

United States District Court

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Plaintiff,

No. C 12-03907 WHA

v.
QUALITY AUTO LOCATORS, INC.,
et al.,

ORDER DENYING
MOTIONS TO DISMISS

Defendants.
/

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INTRODUCTION

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In this dealership vehicle-allocation dispute, eight dealership defendants move to dismiss

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pursuant to Rule 12(b)(2) for lack of personal jurisdiction. One also moves to dismiss for lack of

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subject-matter jurisdiction and failure to state a claim for fraud. For the reasons explained

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below, these motions are DENIED WITHOUT PREJUDICE.

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STATEMENT

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Plaintiff in this action is Pag-Daly City, LLC, dba City Toyota, located in California.

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Defendants are of two types: (1) car dealerships located outside of California; and (2) car broker

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companies and their employees. Car dealerships sell and service vehicles manufactured by

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Toyota. Car broker companies Quality Auto Locators and Classic Locators locate vehicles that

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have been allocated to dealers that have too much inventory and are willing to transfer those

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allocations to dealers who are short on inventory. Brokers facilitate that transfer and are paid a
fee for the service.

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An “A-status” vehicle is a vehicle that has been “allocated” by the manufacturer to a

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dealer and that the dealer has accepted to be part of its future stock (Moeller Dep. 37). At the

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time of allocation, the vehicle does not physically exist in the dealer’s lot, but is electronically

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credited to its inventory. Dealers looking to “unload” this inventory will match up with dealers

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who need more inventory and transfer the A-status vehicles in yet another electronic transaction

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(Elder Dep. 44–45). Sometimes, brokers such as Quality Auto and Classic Locators facilitate

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these transactions.

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Plaintiff City Toyota alleges that defendant dealers utilized defendant brokers to induce a
City Toyota employee to make unauthorized transfers of A-status vehicles out of City Toyota’s
inventory and into the inventory of dealer defendants. The employee’s name was Allan

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For the Northern District of California

United States District Court

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Mercado. According to plaintiff’s allegations, Mercado presented to the brokers, Quality Auto

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Locators and Classic Locators, that he had an “in” with California dealers from which he could

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provide “A-status” vehicles (Petro Dep. 45). Quality and Classic would locate buyers, and the

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transfers would be made. Eventually, plaintiff realized Mercado had made over 350

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unauthorized transfers of A-status vehicles out of its inventory and into the inventories of dealers

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across the country (Amd. Compl., Exh. A). Plaintiff did not receive the vehicles that it was

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allocated, nor did it receive any payment for the transfer of the A-status vehicles from its

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dealership (Compl. ¶ 21).

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During the time of these unauthorized transfers, plaintiff alleges that the industry had

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“critical supply and inventory shortfalls” (Compl. ¶ 28). These shortfalls were primarily caused

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by the economic downturn in 2008, the “Cash-for-Clunkers” program in 2009, and, more

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specifically with respect to Toyota cars, the earthquake and tsunami that struck Japan in March

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2011 (id. at ¶¶ 23–26).

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In January 2013, the car dealership defendants, each located outside of California, moved

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to dismiss for lack of personal jurisdiction. A January 2013 order found that the record was

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inadequate to rule on the motion, and allowed further discovery. The order held that “[i]f the

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dealership defendants indeed knew that they were participating in the improper transfer of

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vehicles bound for California, or at least acted recklessly, then the exercise of specific personal
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jurisdiction over these defendants may be proper” (Dkt. No. 152 at 3). After discovery, both

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sides submitted supplemental briefing.

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Because it will be applicable with respect to each defendant, this order will briefly set

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forth the process under which the brokered A-status vehicle transfers were typically conducted.

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Four defendants used the broker services of Quality Auto Locators, Inc. and its owner Chad

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Petro, co-defendants in this action. Five defendants used the broker services of Christopher

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“Steve” Glass at Classic Locators, not named in this action. One defendant used both brokers’

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services.

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Chad Petro of Quality Auto Locators testified to the standard procedure that his company
followed in executing the “dealer transfer form,” which was the contract used to transfer an A-

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For the Northern District of California

United States District Court

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status car. Quality Auto’s practice was to keep the parties “held separate” until both sides agreed

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to the transaction. Quality Auto would send one form to the buyer to fill out, with the seller

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information filled in as “to be provided.” It would then send one form to the seller to fill out,

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with the buyer information listed as “to be provided.” When both were signed and returned,

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Quality Auto would do a “cut and paste,” and create a form with both the seller and buyer

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information and signatures. Quality Auto then provided a copy of the signed form to both sides

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(Petro Dep. 122, 126). Once the buying dealer confirmed that it had received the car(s) in its

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inventory, the buyer would write a check and deliver the entire amount to broker Quality Auto,

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not to the dealer (Petro Dep. 127). Plaintiff alleges that it received no payments from these re-

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allocations (Compl. ¶ 21).

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Mr. Steve Glass of Classic Locators provided testimony that revealed a process that was

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less systematic but of similar character. According to his testimony, the process would begin by

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sending out Classic’s version of a dealer transfer form to be signed by the buyer. The seller

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would then transfer the vehicles into the buyer’s inventory. Next, the buying dealer would check

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its inventory. If the transfers had arrived, the buyer would then write a single check, made out to

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Classic Locators (Glass Dep. 132, 181). This was despite the fact that the form Classic used

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explicitly indicated that the buying dealer should “contact selling dealership to make payment

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arrangements” (Glass Dep. 77). Plaintiff alleges that it received no payments from these

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transfers (Compl. ¶ 21).

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A common practice among buying dealers was to confirm that the A-status vehicles had

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been transferred to their inventory before making a payment for the vehicles. It is also not

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disputed that, as soon as vehicles were transferred into a dealer’s inventory, a dealer had access

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to all information regarding the transferring dealer through a system called Dealer Daily,

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including the location of the transferring dealer (Moeller Decl. ¶ 5). At this point, a dealer

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would have had a way to learn that City Toyota, a California dealership, was the source of its A-

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status transfers. City Toyota had access to this information as well.
ANALYSIS

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For the Northern District of California

United States District Court

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Plaintiff argues only for specific personal jurisdiction. Our court of appeals has

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established a three-prong test under which we must analyze a claim of specific personal

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jurisdiction:

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(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 protection of its laws;
(2) The claim must be one which arises out of or relates to the
defendant’s forum-related activities;

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(3) The exercise of jurisdiction must comport with fair play and
substantial justice, i.e. it must be reasonable.

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Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 802 (9th Cir. 2004).

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The purposeful-availment or direction requirement of the first prong protects a defendant

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from being haled into a jurisdiction “merely because of random, fortuitous, or attenuated

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contacts . . . or because of the unilateral activity of a third party.” Burger King Corp. v.

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Rudzewicz, 471 U.S. 462, 475 (1985). Jurisdiction is proper when the “contacts proximately

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result from actions by the defendant himself that create a substantial connection with the forum

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state.” Ibid. (quotation omitted).

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“[P]laintiff bears the burden of demonstrating that jurisdiction is appropriate.”

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Schwarzenegger, 374 F.3d at 800 (citation omitted). When “the trial court rule[s] on the issue
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relying on affidavits and discovery materials without holding an evidentiary hearing, dismissal is

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appropriate only if the plaintiff has not made a prima facie showing of personal jurisdiction.”

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AT&T v. Compagnie Bruxelles Lambert, 94 F.3d 586, 588 (9th Cir. 1996). To determine

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whether plaintiff has met the prima facie burden, “any evidentiary materials submitted on the

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motion are construed in the light most favorable to the plaintiff and all doubts are resolved in

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[plaintiff]’s favor.” Schwarzenegger, 374 F.3d at 802.

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When the issue of personal jurisdiction is argued in an evidentiary hearing, in a summary

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judgment motion, or at trial, the burden on the plaintiff shifts to a preponderance of evidence.

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Rano v. Sipa Press, Inc., 987 F.2d 580, 598 n.3 (9th Cir. 1993). At the Rule 12-stage, the
plaintiff must only make a prima facie showing, and this order will make reasonable assumptions

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For the Northern District of California

United States District Court

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and resolve factual disputes in plaintiff’s favor.

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Under this standard, defendants’ motions to dismiss are DENIED WITHOUT PREJUDICE.

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Regarding the second and third prongs of the test for specific personal jurisdiction, plaintiff’s

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claims against all of the dealer defendants for conversion, unfair competition, and penal code

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violations involving stolen property arise out of the alleged diversion of vehicles bound for

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California. This order accordingly finds that the claims arise out of the defendants’ forum-

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related activities. This order also finds that it is reasonable for the defendants to be haled into a

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California court for allegedly diverting vehicles that would otherwise have been sold by a

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California dealer to consumers in California. Regarding the first prong, this order will now

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assess each defendant in turn to decide whether plaintiff has established a prima facie case that

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each dealer defendant “purposefully direct[ed] his activities or consummate[d] some transaction

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with the forum or resident thereof.”

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1.

BERT WOLFE, INC., DBA BERT WOLFE TOYOTA.

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This order finds that there is prima facie evidence that Bert Wolfe Toyota (BWTI)

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repeatedly and knowingly consummated transactions that prevented cars from reaching the

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inventory of our dealer plaintiff in California, and is therefore properly under this Court’s

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jurisdiction at this stage.

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First, plaintiff has made a sufficient prima facie showing that at the time BWTI paid its

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broker, Quality Auto Locators, for the A-status vehicles, BWTI knew or should have known that

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the A-status vehicles were coming from California. All Toyota dealers had access to a program

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called Dealer Daily, where they checked their inventory. In this program, they could also check

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the identity and location of the transferring dealer. Joshua Zain, the sales manager at BWTI,

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testified that he checked it “daily” (Zain Dep. 89). In a typical A-status transfer at BWTI, the

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selling dealer would transfer the vehicles into BWTI’s inventory, and BWTI would always check

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the inventory on Dealer Daily to verify (Zain Dep. 91–92). BWTI used Quality Auto six times

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in less than a year to acquire over 52 A-status vehicles (Amd. Compl., Exh. A). Construed
favorably to plaintiff, this evidence shows that defendant repeatedly contracted to obtain cars

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For the Northern District of California

United States District Court

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that he knew or should have known were from California.

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Second, defendant BWTI does not produce evidence that refutes this prima facie

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showing. Zain claims he does not recall if the transfers were “blind” or not at the time he signed

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the dealer transfer forms (Zain Dep. 83). In fact, “[d]ealer trades are the last minute thing on

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[his] mind” (Zain Dep. 139). BWTI only produced two incomplete dealer transfer forms for all

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six transactions when, according to both Zain and Petro’s testimony, there was usually some

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documentation, at least by fax, for each transfer (Zain Dep. 83). Zain’s total lack of recollection

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and BWTI’s missing paperwork do not defeat the prima facie showing.

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Construed favorably to plaintiff, the evidence shows that BWTI purposefully

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consummated transactions to the detriment of a company that it knew to be located in California.

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This order holds that in light of this repeat activity, personal jurisdiction in California is

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reasonable.
FAULKNER TREVOSE, INC., FKA FAULKNER TOYOTA, INC.

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2.

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This order finds that the record contains prima facie evidence that defendant Faulkner

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Trevose knowingly consummated a transaction diverting vehicles that were allocated to a

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California dealership and did so in reckless disregard of the potential impropriety of its activity.

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Jurisdiction is therefore properly asserted at this stage.

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First, defendant Faulkner knew that the cars it was receiving were originally allocated to

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a California dealership. From March 15–16, 2011, defendant acquired 57 A-status vehicles from

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City Toyota through its broker, Classic Locators (Amd. Compl,. Exh. A). Upon the transfer, Mr.

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Harris, the sales manager for Faulkner, prepared a spreadsheet listing each car and its location-

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specific “dealer code.” On Dealer Daily, a dealer could see the location of any dealership if it

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had that dealer’s code (Dep. Exh. 49). On March 21, after checking to verify that the cars had

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been transferred to his inventory, Mr. Harris prepared a check request for Classic Locators. In

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that check request, Harris specified the reason for the disbursement: “Had 41 vehicles flipped

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into our inventory from California” (Dep. Exh. 42 at 4). While the parties dispute whether the
transaction was properly considered “completed” when the inventory transfer took place or when

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For the Northern District of California

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the payment was made, it is clear that defendant deliberately made a payment for cars that it

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knew it would be removing from a California dealership.

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In addition to knowingly consummating a transaction that it knew would remove product

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from a California dealer, plaintiff has submitted prima facie evidence that Faulkner Toyota acted

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in reckless disregard of the potential impropriety of the transaction. Faulkner obtained these A-

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status transfers days after the March 2011 tsunami in Japan, after getting word that it should

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expect “the inventory to drastically reduce” (Harris Dep. at 78). Harris testified that he gave no

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thought to the fact that this would reduce inventory in California as well but, when pressed,

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affirmed that it may have been “too good to be true” (Harris Dep. at 82). Defendant confirms

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that he knew nothing about this broker, Classic Locators, who just happened to cold-call one day

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(Harris Dep. 66). Given that this was a large, one-time, “too good to be true” deal, defendant

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may not hide from jurisdiction because he recklessly did not give “any thought” to the source

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(Harris Dep. 68).

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3.

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There is also prima facie evidence that Page Toyota acted with both knowledge that it

PAGE IMPORTS, INC., DBA PAGE TOYOTA.

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was diverting cars that were intended for California, and with reckless disregard to the potential

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impropriety of its activity.

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Like other dealers, defendant Page Toyota was informed of the California origin of the

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vehicles at the time it completed the transaction. Michael Gardner, the general manager at Page,

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checked Dealer Daily when transfers were made, from which he could have known the origin of

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the cars. Moreover, Gardner testified that as he would receive the inventory, he would

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customarily generate vehicle information reports for the accounting department, from which he

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testified that he could see that the cars were coming from City Toyota (Gardner Dep. 67–68).

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Therefore, there is prima facie evidence that defendant Page knowingly consummated

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transactions in which it re-allocated vehicles it knew or should have known were originally

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destined for California.
Furthermore, in early 2011, Gardner was contacted by the general manager at Fremont

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Toyota, another California dealership, who informed him that unauthorized transfers had been

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made to Page Toyota from his dealership. The Fremont general manager indicated that “the

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vehicles were transferred to [Page’s] inventory without his knowledge, that an employee had did

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it without his permission, [and] that [Fremont Toyota] wanted the vehicles back” (Gardner Dep.

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at. 76). Despite this warning, it does not appear that Gardner made any changes to his

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procedures with respect to A-status transfers. This order finds there is prima facie evidence to

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demonstrate that defendant acted in reckless disregard of the potential impropriety of these

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transfers from this point forward, as he continued to complete A-status transfers from City

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Toyota with little official paperwork (or at least little that has been produced in discovery).
MULLER AUTOMOTIVE, INC., DBA LAWRENCE TOYOTA.

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4.

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This order finds that there is also prima facie evidence that Lawrence Toyota acted with

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knowledge that it was diverting cars that were intended for California, and with reckless

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disregard to the potential impropriety of its activity.

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There is prima facie evidence that Defendant Lawrence Toyota knew the dealer from

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which it was getting the A-status vehicles was from California. As Mike Page, inventory control

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manager of Lawrence Toyota, testified, he was constantly aware of the time difference with this

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“West Coast” dealer in negotiations. Upon further questioning, it was made clear that Page was

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not aware of any cars Lawrence had received from any West Coast state but California (Page
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Dep. 70–73). Plaintiffs allege that Lawrence then engaged in three sets of unauthorized transfers

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from June 2010 to August 2010 for a total of 54 A-status cars (Amd. Compl., Exh. A). After

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multiple transactions with the same party, defendant Lawrence Toyota knew or should have

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known, whether it checked the inventory or not, that the cars were originally allocated to

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California.

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Prior to its unauthorized transfers, Lawrence Toyota executed an authorized A-status

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transfer with City Toyota in January 2010. In the authorized transfer, defendant’s practices were

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substantially different. Defendant paid City Toyota directly for the vehicles. Mr. David

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Moeller, the chief financial officer and dealer principal of City Toyota, executed a signed seller’s
agreement, and Lawrence Toyota executed a signed buyer’s agreement with the dealer, City

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Toyota, indicated at the bottom. This paperwork was typical, and it was retained and produced

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by the defendant (Dep. Exh. 32). In the following unauthorized transactions, there were no

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seller’s agreements (or none have been produced), and the check went only to Classic Locators

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(Exh. 34, 35). This stark deviation from past practices demonstrates reckless disregard of the

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potential impropriety of this transaction.

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5.

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Walker Toyota has a long history of repeated transfers of A-status cars from City Toyota,

WALKER AUTO GROUP, INC., DBA WALKER TOYOTA.

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from which it would be reasonable to infer that defendant Walker Toyota knew it was receiving

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cars from California when it used Classic Locators.

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Plaintiff alleges that defendant Walker Toyota engaged in ten different sets of

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unauthorized transfers between January and November of 2010 for 78 A-status cars (Amd.

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Compl., Exh A). While defendant argues that the Court should not rely on Exhibit A, as its

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source has not been authenticated, it is alleged in the complaint, and at this stage, we must accept

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all allegations made in the complaint as true, particularly provided that defendant has submitted

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no evidence to refute it. Like other defendants, Walker had access to the dealership information

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on each and every one of the cars that was in its inventory. After repeated transfers, plaintiff has

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made a prima facie case that defendant knew or should have known that each time it used

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Classic Locators to find cars, the cars were originally allocated to California.
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Defendant Walker Toyota also completed two authorized transactions with City Toyota.

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A comparison with the unauthorized transfers produces prima facie evidence that defendant

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acted in reckless disregard of the potential impropriety of the transaction. In the authorized

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transactions, City Toyota was identified as the “selling dealership,” and its location was clearly

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displayed on the dealer transfer form. Despite testifying that “every single one of our deals”

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would have a completed transfer form, the final version of which would have “everything on it,”

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Walker did not produce any such completed contracts for the allegedly unauthorized transactions

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(Walker Dep. 117, 239). For some transactions, defendant produced no accompanying

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paperwork. The forms defendant did produce did not have the seller information available.
Walker produced incomplete forms, or no forms at all (See Dep. Exh. 3, 5). This deviation from

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standard procedure is enough for an inference of recklessness at this stage.

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6.

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Plaintiff alleges that Charles Barker Toyota engaged in the unauthorized transfer of 35 A-

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status vehicles from April 2010 through March 2011, using Steve Glass at Quality Auto Locators

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(Amd. Compl., Exh. A). Plaintiff makes a sufficient prima facie showing that defendant Charles

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Barker Toyota was aware that it was transacting to obtain cars that were originally allocated for

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California.

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CHARLES BARKER ENTERPRISES, INC., DBA CHARLES BARKER TOYOTA.

First, there is some evidence that defendant Charles Barker Toyota had contact with

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Allan Mercado, plaintiff’s “miscreant” employee, while negotiating the first unauthorized

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transfers in April 2010. In the end of April 2010, plaintiff alleges that 26 unauthorized transfers

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were made to Charles Barker Toyota (Amd. Compl., Exh. A). Mercado’s phone records indicate

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there was communication between Mercado and Charles Barker Toyota during this time (Logan

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Decl. ¶ 20, Exh. A). Charles Barker Toyota also previously had dealings in authorized transfers

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with City Toyota, in which it communicated with Mercado (Dep. Exh. 21–22). Construing this

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evidence most favorably to the plaintiff, defendant knew or had reason to know that the cars they

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were obtaining were coming not just from California, but from Mercado and City Toyota more

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specifically.

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Second, defendant produced a fax that shows defendant was given the identifiable dealer

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code of City Toyota prior to the November 2010 A-status transfers. On this fax, Steve gave Mr.

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Carter a list of the available inventory, or suggested that he could “just look @ his Dealer Code

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which is 04143” to pick out the cars he wanted to transfer (Exh. 28 at 1). Defendant’s process

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was not “blind.” It was aware of the locations of the cars prior to when the transaction was

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consummated.

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Third, Mr. Carter confirmed that he would, like other dealers, always check that the cars

would have had full access to information on the location of the selling dealer. Through the

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course of five separate transfers, defendant knew or should have known that these cars were

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For the Northern District of California

were in his inventory before writing a check for the cars (Carter Dep. 51). At this point, he

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United States District Court

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likely being diverted from a California dealership.

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With this showing, plaintiff has made a prima facie case that defendant purposefully and

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repeatedly transaction to obtain vehicles that it knew had been allocated to a California

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dealership.

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7.

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This order finds that defendant Rolling Hills Toyota knowingly entered into transactions

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PLE ENTERPRISES, INC., DBA ROLLING HILLS TOYOTA.

in which it received cars that it knew were originally allocated to a California dealership.
Plaintiff alleges that defendant Rolling Hills Toyota made 22 unauthorized transfers of

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A-status vehicles on four separate days from City Toyota through Quality Auto Locators (Amd.

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Compl., Exh A). These transactions occurred from December 2010 through April 2011. Mr.

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Petro confirmed that it was his practice, when dealing with Mr. Elder at Rolling Hills Toyota, to

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tell him that the cars were from California (Petro Dep. 106). Additionally, Mr. Petro testified

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that it was his practice to give defendant the temporary serial (VIN) numbers for the vehicles that

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were to be transferred (Exhs. 12, 18). Both of these items of information, independently, would

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have informed defendant that it was receiving cars from California. Together, this establishes

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prima facie evidence that defendant negotiated a deal in which it knew it would receive cars

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originally allocated to a California dealership.

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Defendant argues that, even though defendant may have known that these cars were

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allocated to a California dealership, jurisdiction is not proper because “there is no evidence that

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the vehicles at issue in this litigation were ever located in California” (Rolling Hills Mot. at 3).

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These cars were property owned by a California dealership in the form of an A-status vehicle.

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That allocated vehicle, the property of this California dealer, was purposefully diverted from

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California. Jurisdiction is therefore proper, at least at this stage.

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8.

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Herb Chambers argues three grounds for dismissal: (1) lack of personal jurisdiction; (2)

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HERB CHAMBERS 1168, INC., DBA HERB CHAMBERS TOYOTA.

lack of subject-matter jurisdiction; and (3) failure to plead with particularly claims sounding in
fraud.
A.

Personal Jurisdiction.

Like its co-defendants, there is prima facie evidence that defendant Herb Chambers

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Toyota consummated transactions in which it knew or should have known it was diverting cars

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originally allocated to California. It was in a July 2011 A-status transfer with Chambers that

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plaintiff discovered unauthorized transfers were being made from its inventory. Mr. Moeller of

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plaintiff City Toyota placed a call to Mr. Taylor, the general manager at Chambers, demanding

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that he transfer the vehicles back. Mr. Taylor refused. The claim of conversion against

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Chambers is grounded on this act, which was done with full knowledge that he was refusing to

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return vehicles that were originally allocated to California (Amd. Compl ¶ 33).

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Moreover, there is sufficient evidence to establish a prima facie case that defendant

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generally knew it was diverting cars that were intended for California. Mr. Taylor testified that

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the reason he figured this unnamed dealership was giving up its A-status vehicles in the post-

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tsunami inventory crunch was because “the economy was tough in California” (Taylor Dep.

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137). Mr. Taylor also testified that he would not send a check for the vehicles until he confirmed

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that they were in his inventory, at which point he could view their selling dealership (Taylor

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Dep. 68). He also testified that he did not consider the transaction complete until payment was

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made, as the dealer agreement was “not a contract” (Taylor Dep. 67). Therefore, during the

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course of negotiations for the transfer of A-status cars, plaintiff has made a prima facie showing
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that defendant Chambers knew it was making an agreement to divert cars that were originally

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allocated to California.

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Drawing inferences for the plaintiff, this order finds that there is prima facie evidence

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that when defendant approved the transfer of the cars from plaintiff, defendant knew that it was

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consummating a transfer that would remove cars that were allocated to California.

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B.

Subject-Matter Jurisdiction.

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Defendant Herb Chambers Toyota moves to dismiss for lack of subject-matter

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jurisdiction, arguing that it is impossible for the amount in controversy to exceed $75,000. To

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dismiss for failing to meet the amount in controversy requirement, “[i]t must appear to a legal
certainty that the claim is really for less than the jurisdictional amount.” St. Paul Mercury

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Indem. Co. v. Red Cab Co., 303 U.S. 283, 288–89 (1938).

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Counsel argues that as a matter of law, plaintiff may not seek damages for lost profits

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where fair market value will make the plaintiff whole. According to defendant, an A-status

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vehicle is in effect a futures contract, and its fair market value will therefore equal the present

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value of any future proceeds that could be gained from it. Its fair market value at the time of

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sale, therefore, will make plaintiff whole. According to Chambers, the fair market value of all of

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these transfers could not possibly exceed $20,150.

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First, this argument fails on a mathematical basis. “Aggregation is permitted when a

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single plaintiff seeks to aggregate two or more of his own claims against a single defendant.”

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Bank of Cal. Nat’l Ass’n v. Twin Harbors Lumber Co., 465 F.2d 489, 491 (9th Cir. 1972).

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Plaintiff states a claim for conversion against defendant Herb Chambers Toyota, which allows

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damages in “the value of the property at the time of conversion, with the interest from that time,

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or, an amount sufficient to indemnify the injured for the loss which is the natural, reasonable,

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and proximate result of the wrongful act complained of . . . .” Cal. Civ. Code. § 3336. Plaintiff

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also states a claim for receiving stolen property under California Penal Code Section 496(a),

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which allows that “[a]ny person who has been injured by a violation of subdivision (a) or (b)

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may bring an action for three times the amount of actual damages . . . and reasonable attorney’s

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fees.” These two claims, using defendant’s maximum estimate, would equal $80,600 in damages
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($20,150 plus $60,450 in treble damages). It is therefore possible for the plaintiff to meet the

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minimum amount in controversy requirement with respect to Herb Chambers Toyota.

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Second, this argument fails on the merits. Defendant refers to California Shoppers, Inc.

decision, after a full trial, the court found plaintiff could not recover lost profits because he had

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sold his business at present fair market value, which by definition included all future streams of

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income. At our early stage, however, this order cannot determine either whether fair market

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value is sufficient to make plaintiff whole, or what would constitute fair market value. At this

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stage, the complaint plausibly alleges damages for “the loss of each vehicle misappropriated, its

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lost revenues and profits on the sale of those vehicles, its lost income generated from servicing

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For the Northern District of California

v. Royal Globe Ins. Co., 175 Cal. App. 3d 1, 61 (Cal. Ct. App. 1985), as its authority. In that

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United States District Court

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those vehicles, and its loss of current sales for purposes of future allocations” in the amount of

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$94,512.00 (Amd. Compl. ¶ 38).

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C.

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Fraud.

Defendant Herb Chambers Toyota moves to dismiss for failure to plead with particularity

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claims “sounding in fraud.” This argument fails. Rather than pointing to statements in the

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complaint that are not pleaded with particularity, defendant proceeds to make legal arguments

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about whether or not Mercado was properly considered to be an authorized or unauthorized

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transferor of A-swaps. This order will not address this legal argument at this early stage.

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CONCLUSION

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Based on the current record after limited discovery, plaintiffs have made a prima facie

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showing of specific personal jurisdiction in a California court with respect to each defendant.

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There is prima facie evidence that each defendant either knowingly consummated a transaction

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in which it received goods originally allocated to California, or acted in reckless disregard of the

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improper behavior which diverted the A-status cars from California. It is therefore reasonable

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for the defendants to be expected to be haled into a California court. For the above stated

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reasons, defendants’ motions to dismiss are DENIED WITHOUT PREJUDICE. Because this order

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does not rely on it, plaintiff’s administrative motion to augment evidence submitted in

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opposition to defendants’ motions to dismiss is DENIED AS MOOT.

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IT IS SO ORDERED.

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Dated: August 22, 2013.

WILLIAM ALSUP
UNITED STATES DISTRICT JUDGE

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For the Northern District of California

United States District Court

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