RocketPower, Inc. v. Strio Consulting, Inc.

Filing 18

ORDER by Judge Charles R. Breyer denying 10 Motion to Dismiss for Lack of Jurisdiction. (crblc2, COURT STAFF) (Filed on 11/18/2020)

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Case 3:20-cv-06446-CRB Document 18 Filed 11/18/20 Page 1 of 8 1 2 3 4 5 IN THE UNITED STATES DISTRICT COURT 6 FOR THE NORTHERN DISTRICT OF CALIFORNIA 7 8 ROCKETPOWER, INC., Plaintiff, 9 United States District Court Northern District of California ORDER DENYING MOTION TO DISMISS OR TRANSFER VENUE v. 10 11 Case No. 20-cv-06446-CRB STRIO CONSULTING, INC., Defendant. 12 RocketPower, Inc. is suing Strio Consulting, Inc. for breach of contract. 13 14 RocketPower alleges that Strio agreed to perform and review background checks for one 15 of RocketPower’s clients and did not do so. Strio has moved the Court to either dismiss 16 the case for lack of personal jurisdiction or transfer the case to the District of Minnesota. 17 The Court denies Strio’s motion. 18 I. BACKGROUND 19 RocketPower—a company incorporated in Delaware with its principle place of 20 business in California—provides outsourced or contract recruiters and staffers to other 21 companies. See Complaint (dkt. 1-A) ¶ 5; Notice of Removal (dkt. 1) ¶ 7. Strio—a 22 company incorporated and with its principle place of business in Minnesota—provides 23 administrative services like payroll, employment benefits, and background checks to 24 companies including RocketPower and, pursuant to a verbal agreement with RocketPower, 25 some of RocketPower’s clients. Complaint ¶ 6; Notice of Removal ¶ 8. RocketPower 26 alleges that when RocketPower identified a qualified candidate for a client, Strio was 27 contractually “responsible for conducting a background check and other relevant 28 screening” according to the client’s needs. Complaint ¶ 12. Case 3:20-cv-06446-CRB Document 18 Filed 11/18/20 Page 2 of 8 Nuro, Inc., is a California robotics company that develops self-driving vehicles. Id. 1 2 ¶¶ 18–19. Nuro hired RocketPower to recruit “Safety Drivers,” “Autonomous Vehicle 3 Operators,” (AVOs), and “Command Center Operators” (CCOs). Id. ¶ 20. Nuro required 4 that job applicants successfully complete a background check; ones with driving-related 5 offenses would not qualify. Id. ¶¶ 23–24. RocketPower placed over 100 workers with 6 Nuro in California, though RocketPower also placed workers with Nuro in Arizona and 7 Texas. Caldwell Decl. (dkt. 11-1) ¶¶ 20, 22. 8 RocketPower alleges that Strio knew of Nuro’s screening requirements and their 9 importance to RocketPower’s relationship with Nuro. Id. ¶¶ 26–27. Nonetheless, Strio “either (1) failed to conduct the background checks for the workers or (2) failed to 11 United States District Court Northern District of California 10 adequately review the background checks conducted for disqualifying criteria.” Id. ¶ 36. 12 This came to light because in February 2020, Nuro conducted its own background check, 13 which “flagged workers for whom Strio was responsible for conducting the background 14 check” including at least one who had been convicted of driving under the influence. Id. 15 ¶¶ 34–35, 37. Once that happened, “RocketPower saw a sharp decline in its placement of 16 workers with Nuro.” Id. ¶ 46. 17 On July 24, 2020, RocketPower sued Strio for breach of contract in the Superior 18 Court of California in Alameda County. See id. at 1–2. On September 14, 2020, Strio 19 removed the case to this Court under 28 U.S.C. § 1441(b) based on diversity jurisdiction. 20 See Notice of Removal ¶ 6.1 Strio now moves the Court to either dismiss the case for lack of personal 21 22 jurisdiction or transfer the case to the District of Minnesota. See Mot. to Dismiss (dkt. 10) 23 24 25 26 27 28 1 Because RocketPower is incorporated in Delaware and has its principal place of business in California, and Strio is incorporated and has its principal place of business in Minnesota, the parties are diverse. See Notice of Removal ¶¶ 7–9. And although the Complaint states that Strio’s liability “exceeds $25,000,” Strio has submitted a declaration suggesting that the amount at stake is $28,915.41 per month for at least five months. See id. ¶ 15; Fulhart Decl. (dkt. 10-2) ¶ 4. The Court thus finds “by a preponderance of the evidence” that the amount in controversy exceeds $75,000. See Chavez v. JPMorgan Chase & Co., 888 F.3d 413, 416 (9th Cir. 2018) (citation omitted). Therefore, the Court has subject matter jurisdiction under 28 U.S.C. § 1441 and 28 U.S.C. § 1332(c)(1). 2 Case 3:20-cv-06446-CRB Document 18 Filed 11/18/20 Page 3 of 8 1 at 5, 12. 2 II. LEGAL STANDARD 3 A. Personal Jurisdiction 4 When a motion to dismiss for lack of personal jurisdiction is based on written materials rather than an evidentiary hearing, the plaintiff need only make a prime facie 6 showing of jurisdiction. See Mavrix Photo, Inc. v. Brand Techs., Inc., 647 F.3d 1218, 7 1223 (9th Cir. 2011). “[U]ncontroverted allegations in the complaint must be taken as 8 true” and “[c]onflicts between parties over statements contained in affidavits must be 9 resolved” in the plaintiff’s favor, Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 10 800 (9th Cir. 2004), but disputed allegations in the complaint that are not supported by any 11 United States District Court Northern District of California 5 evidence cannot establish jurisdiction, see In re Boon Glob. Ltd., 923 F.3d 643, 650 (9th 12 Cir. 2019). A court may exercise personal jurisdiction over an out-of-state defendant when 13 14 doing so is permitted by the forum state’s long-arm statute and where the exercise of 15 jurisdiction does not violate federal due process. Pebble Beach Co. v. Caddy, 453 F.3d 16 1151, 1154 (9th Cir. 2006). Because California’s long-arm statute allows courts to 17 exercise personal jurisdiction to the extent permitted by the Due Process Clause, see Cal. 18 Code Civ. Pro. § 410.10, that leaves only the due process inquiry. 19 Due process requires that a defendant not present in the forum state have “certain 20 minimum contacts” with the state “such that the maintenance of the suit does not offend 21 traditional notions of fair play and substantial justice.” Int’l Shoe Co. v. Washington, 326 22 U.S. 310, 316 (1954).2 There are “three requirements”— 23 (1) The defendant must either purposefully direct his activities or purposefully avail himself to the privileges of conducting activities in the forum; (2) The claim must be one which arises out of or relates to the defendant’s forum related activities; and 24 25 26 27 28 A court may also exercise “general” personal jurisdiction where a defendant’s “affiliations with the State are so continuous and systematic as to render them essentially at home” there. Daimler AG v. Bauman, 571 U.S. 117, 127 (2014). That is not the case here. 3 2 Case 3:20-cv-06446-CRB Document 18 Filed 11/18/20 Page 4 of 8 1 (3) The exercise of jurisdiction must comport with fair play and substantial justice, i.e. it must be reasonable. 2 3 Axiom Foods, Inc. v. Acerchem Int’l, Inc., 874 F.3d 1064, 1068 (9th Cir. 2017). 4 B. Transfer 5 “For the convenience of parties and witnesses, and in the interest of justice, a district court may transfer any civil action to any other district or division where it might 7 have been brought or to any district of division to which all parties have consented.” 28 8 U.S.C. § 1404(a). A court must “weigh multiple factors in its determination whether 9 transfer is appropriate in a particular case.” Jones v. GNC Franchising, Inc., 211 F.3d 495, 10 498 (9th Cir. 2000). A court may consider “(1) the location where the relevant agreements 11 United States District Court Northern District of California 6 were negotiated and executed, (2) the state that is most familiar with the governing law, (3) 12 the plaintiff’s choice of forum, (4) the respective parties’ contacts with the forum, (5) the 13 contacts relating to the plaintiff’s cause of action in the chosen forum, (6) the differences 14 in the costs of litigation in the two forums, (7) the availability of compulsory process to 15 compel attendance of unwilling non-party witnesses, and (8) the ease of access to sources 16 of proof.” Id. at 498–99. 17 III. 18 DISCUSSION Strio argues that the Court lacks personal jurisdiction over Strio because Strio does 19 not have the required “minimum contacts” with California. Mot. to Dismiss at 1. In the 20 alternative, Strio argues that the Court should transfer this lawsuit to Minnesota for 21 efficiency reasons because there is pending litigation between the parties in the District of 22 Minnesota. Id. 1–2, 12–13. Because the Court has personal jurisdiction over Strio and the 23 relevant factors do not support transferring this case to Minnesota, the Court denies Strio’s 24 motion. 25 A. Personal Jurisdiction 26 The Court concludes that it has jurisdiction over Strio because Strio purposefully 27 contracted to provide services to RocketPower, a California company, and those services 28 included providing employment screening for California workers that Strio knew would 4 Case 3:20-cv-06446-CRB Document 18 Filed 11/18/20 Page 5 of 8 1 2 work at Nuro, another California company. First, Strio has “purposefully directed” its activities at California. Burger King 3 Corp. v. Rudzewicz, 471 U.S. 462, 473 (1985). When it comes to “interstate contractual 4 obligations,” parties that “reach out beyond one state and create continuing relationships 5 and obligations with citizens of another state are subject to regulation and sanctions in the 6 other State for the consequences of their activities.” Id. (citation omitted). Although a 7 “contract with an out-of-state party alone . . . clearly cannot” establish the required 8 minimum contacts, the “prior negotiations and contemplated future consequences, along 9 with the terms of the contract and the parties’ actual course of dealing” determine “whether the defendant purposefully established minimum contacts within the forum.” Id. at 478– 11 United States District Court Northern District of California 10 79. Here, Strio reached beyond Minnesota in creating a contractual relationship with 12 RocketPower, a citizen of California. Complaint ¶¶ 10–17. And although negotiations 13 took place partly in Minnesota and partly remotely between Minnesota and California, see 14 Fullhart Decl. (dkt. 10-2) ¶ 16; Caldwell Decl. ¶ 6–8, the parties’ course of dealing shows 15 that Strio purposefully established contacts with California. Pursuant to its agreement with 16 RocketPower, Strio indirectly but purposefully provided certain services to Nuro, a 17 California company. Complaint ¶¶ 28–29. Those services were tailored to Nuro’s specific 18 needs, id. ¶ 26, and the California workers entered into joint employment agreements with 19 RocketPower and Strio, Caldwell Decl. ¶ 11. Strio’s contacts with California are thus far 20 from “random,” “fortuitous,” or “attenuated.” See Burger King, 471 U.S. at 480 (citation 21 omitted). 22 Second, RocketPower’s claim “arises out of” Strio’s California-related activities. 23 Axiom Foods, 874 F.3d at 1068. RocketPower alleges that Strio breached the contract it 24 made with RocketPower, a California company, by failing to screen workers that it jointly 25 employed with RocketPower on behalf of Nuro, a California company. 26 Third, exercising jurisdiction in this case would be reasonable. See id. “[W]here a 27 defendant who purposefully has directed his activities at forum residents seeks to defeat 28 jurisdiction, he must present a compelling case that the presence of some other 5 Case 3:20-cv-06446-CRB Document 18 Filed 11/18/20 Page 6 of 8 1 considerations would render jurisdiction unreasonable.” Burger King, 471 U.S. at 477. 2 The Ninth Circuit “has identified seven relevant factors in determining the reasonableness 3 of asserting jurisdiction over a nonresident defendant.” FDIC v. British-Am. Ins. Co., 4 Ltd., 828 F.2d 1439, 1442 (9th Cir. 1987). 5 (1) (2) (3) (4) (5) (6) 6 7 8 9 (7) 10 United States District Court Northern District of California 11 12 . The extent of purposeful interjection into the forum state; The burden on the defendant of defending in the forum; The extent of conflict with the sovereignty of defendant’s state; The forum state’s interest in adjudicating the dispute; The most efficient judicial resolution of the controversy; The importance of the forum to [the] plaintiff’s interest in convenient and effective relief; The existence of an alternative forum. Id. Because these factors are neutral, or point both ways, Strio has not presented a 13 compelling case that exercising jurisdiction would be unreasonable. As discussed above, 14 Strio purposefully interjected into the forum state by agreeing with RocketPower to 15 provide certain services to RocketPower and its clients, including California clients. 16 Although defending in California may burden Strio to some extent, RocketPower chose to 17 sue in California, and any relevant third parties (e.g., Nuro representatives and job 18 applicants) are likely located in California, not Minnesota. For the same reason, and 19 despite litigation between the parties in the District of Minnesota, this specific controversy 20 would be more efficiently adjudicated in California. 21 Therefore, the Court has personal jurisdiction over Strio. 22 B. 23 The Court denies Strio’s motion to transfer venue because the Jones factors do not 24 25 Transfer support transferring this case to Minnesota. See 211 F.3d at 498. Some of the factors relevant to a motion to transfer venue under 28 U.S.C. 26 § 1404(a) do not favor either party. For example, “the location where the relevant 27 agreements were negotiated and executed,” id., was both California and Minnesota, see 28 Fullhart Decl. ¶ 16; Caldwell Decl. ¶ 6–8. Similarly, the parties’ contacts with California 6 Case 3:20-cv-06446-CRB Document 18 Filed 11/18/20 Page 7 of 8 1 and Minnesota are a wash because RocketPower and Strio have both established contacts 2 with California and Minnesota, and the contacts in both places are relevant to this suit. See 3 Jones, 311 F.3d at 498–99. The “state that is most familiar with the governing law,” id. at 4 498, remains unclear at this stage because the parties dispute whether California or 5 Minnesota law governs RocketPower’s breach of contract claim and have not adequately 6 briefed this issue.3 But other factors favor not transferring this case. The “plaintiff’s choice of forum” 7 obviously points in that direction. Id. So do the “availability of compulsory process to 9 compel attendance of unwilling non-party witnesses” and the “ease of access to sources of 10 proof.” Id. Under Rule 45(c)(1) of the Federal Rules of Civil Procedure, a subpoena may 11 United States District Court Northern District of California 8 command a person to attend a trial, hearing, or deposition only “within 100 miles of where 12 the person resides, is employed, or regularly transacts business in person” or “within the 13 state where the person resides, is employed, or regularly transacts business in person” if 14 certain additional requirements are met. Fed. R. Civ. P. 45(c)(1). Here, the only non-party 15 persons with apparent relevance are Nuro representatives, job applicants, and workers. 16 These persons are likely located in California, not Minnesota. And it is unclear what 17 would prevent the parties from obtaining any pertinent evidence currently located in 18 Minnesota. Strio argues that existing litigation in the District of Minnesota means that 19 20 transferring this case would be more efficient. See Mot. to Dismiss at 13–15. But a closer 21 look at the Minnesota suits indicates that they involve different issues. See Strio Request 22 for Jud. Notice (dkt. 10-1). For example, the Northern District of California previously 23 transferred a breach of contract suit brought by RocketPower against Strio to Minnesota 24 based on an express forum-selection clause in one of the relevant agreements. See No. 19- 25 cv-2900-WHA (N.D. Cal) Order Granting Transfer (dkt. 10-1 Ex. 1) at 4. No such clause 26 27 28 3 Either way, California choice-of-law principles will determine which state law controls. See Van Dusen v. Barrack, 376 U.S. 612, 642 (1964) (“[T]he transferee district court must under § 1404(a) apply the laws of the State of the transferor district court.”). But if that were determinative, no case would ever be transferred. 7 Case 3:20-cv-06446-CRB Document 18 Filed 11/18/20 Page 8 of 8

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