Xiaoning et al v. Yahoo! Inc, et al

Filing 73

MOTION to Dismiss for Lack of Personal Jurisdiction ; Memorandum of Points and Authorities in Support filed by Yahaoo! Holdings (Hong Kong), Ltd.. Motion Hearing set for 11/1/2007 02:00 PM in Courtroom 2, 4th Floor, Oakland. (Petrocelli, Daniel) (Filed on 8/27/2007) Modified on 8/28/2007 (cp, COURT STAFF).

Xiaoning et al v. Yahoo! Inc, et al

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DANIEL M. PETROCELLI (S.B. #97802) [e-mail] MATTHEW T. KLINE (S.B. #211640) [e-mail] O'MELVENY & MYERS LLP 1999 Avenue Of The Stars Los Angeles, California 90067-6035 Main Number: [phone] Facsimile: [phone] Attorneys for Specially Appearing Defendant YAHOO! HONG KONG LIMITED.

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA OAKLAND DIVISION WANG XIAONING, YU LING, SHI TAO, and ADDITIONAL PRESENTLY UNNAMED AND TO BE IDENTIFIED INDIVIDUALS, Plaintiff, v. YAHOO! INC., a Delaware Corporation, YAHOO! HONG KONG LIMITED, a Foreign Subsidiary of Yahoo! Inc., AND OTHER PRESENTLY UNNAMED AND TO BE IDENTIFIED INDIVIDUAL EMPLOYEES OF SAID CORPORATIONS, Defendant. Case No. C07-02151 CW SPECIALLY APPEARING DEFENDANT YAHOO! HONG KONG LIMITED'S NOTICE OF MOTION AND MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT [Declaration of Alfred Po Tak Tsoi filed concurrently herewith] Date: November 1, 2007 Time: 2 p.m. Location: Courtroom 2 Judge: Hon. Claudia Wilken

TO PLAINTIFFS; DEFENDANT YAHOO! INC.; AND THEIR COUNSEL OF RECORD: PLEASE TAKE NOTICE THAT ON NOVEMBER 1, 2007, at 2 p.m. in Courtroom 2, 4th Floor, United States Courthouse, 1301 Clay Street, Oakland, California, specially appearing defendant Yahoo! Hong Kong Limited ("YHKL") will and hereby does move for an order dismissing YHKL for lack of personal jurisdiction, pursuant to Federal Rule of Civil Procedure 12(b)(2) (hereinafter "Rule"). YHKL's motion to dismiss for lack of personal jurisdiction is based on this notice of motion and motion, the pleadings on file in this matter, the following memorandum of points and authorities, the declaration of Alfred Po Tak Tsoi, any
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reply brief YHKL files ín support of this rr^otion, and any further argument and evidence the Court allows. Pursuant to Rules 12(b}(^} and 12(e}, anal without waiving its right to contest personal jurisdiction, YHKL also maves to dismiss plaintiffs' Second Amended Complaint ("Complaint with prejudice, for the reasons set forth ín (1}Defendant Yahoo? Inc's Motion t^ Dís^r^íss Plaintiffs' Second Amended Complaint, (2}Defendant Yahoo! lnc.'s Special Motion to Strike Plaintiffs' State Law Causes of Action Pursuant to the California Anti-SLAPP Statute; and (3} Defendant Yahoo? Inc's Alternative M©tíon for a More Definite Statement (filed August 27, 2007), ín which YHKL j oíns, Dated: August 27, 2007 DÁNIEL M. FETROCELLI MATTHEW T. KL1NE O'MELVENY & MYERS LLP

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By:
Daniel M. Petroeelli Attorneys for Specially Appearing Defendant Yahoo! Hong Kong, Li^níted

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CQ7-íi2151 CW MOT. ^"© DISMISS F'O^ LACK OF PIJRSONAL 3URI5DICi'ION 2

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^I, I. II.

TABU O^ CONTENTS Page INTRODUCTION .............................................................................................................. 1 FACTUAL BACKGROUND ............................................................................................. 2 A. B. Plaintiffs ' Allegations ............................................................................................. 2 Defendant ^ ahoo'. Hong Kong Limited ("YRKE"} ............................................... 2

YHKL SHOULD BE DISMISSED FOR LACK OF PERSONAL JURISDICTION .................................................................................................................. 3 A. B. This Court Lacks General Jurisdiction Over YHKL ............................................... á This Court Lacks Specific Jurisdiction Over YHKL .............................................. S 1. 2. C. D. Plaintiffs Cannot Satisfy the Purpaseful Avaílment "Éffects Test."........... ^ The Alleged Harm Did Not Arise Out Of Forum Contacts ........................ ^

The Zippo " Slidmg Scale " Test Does Not Save Plaintiffs ...................................... 7 Yahoo! I^c.'s California Contacts Cannot Be Attributed to YHKL ....................... 8 1. 2. Plai ^tiffs ' Boilerplate Legal Conclusions Faíl as a Matter of Law............. 8 Y^IKL Is, ín Faet, Neither an Alter Ego Nor an Agere of Yahoo! Inc ............................................................^........................................... a. b. .... 4

YHKL is nat an Alter Ega of Yahoo! Ir^c ..................................... 10 YHKL is Not Yahoo ! Int.'s Aget ............................................... 12

E. IV. V.

Exercising Jurisdiction Over ^ HKL Would Be Unreasonable ............................ 14 .. 15

YHKL JONS ^N YAHOOI ING'S MOTIONS .............................................................. 1 S CONCLUSION .......................................................................................................

Co^-o^ I s I cw ^ o ^ . ^ o Dls^sS I~oR LAC ^ oI~
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TABLE OF AUTH4R^TIES Page
CASES Amíni I^novatio^ Carp. v. JSlmports, Ine., 2 007 WL 1597942 {C.D. Cal. May 2 2, 2 007} .......................................................................... 7 As^hi MetØl Indes. Co. v. Superior Court,
480 U.S. 102 {1987} .................................................................................................................. 3 Associated Vendors, I^c. v. Oakland Meßt Co.,

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210 Cal. App. 2d 825 (19^2} ............................................................................................. 10, i l Aut^motriz del Golfo de C^lifornias v. Res^íck,
47 Cal. 2 d 792 {1957} ..............................................................................................Appendix A Bancroft c^ Masters, Inc. v. Aug^^st^ Nat'l, Inc.,

223 F.3d 1082 (9th Cir. 2000) ..............................................................................·--.......... 3, S, ^ B^riffi v. Longridge Dev. Co., 1 56 Gal. App. 2d 583 (1958} ....................................................................................Appendix A ße11 Atlantic Corp. v. Twombly, 127 S. ct.l9ss {^oo7j ................................................................................ ..............................9
Best I^a^ Li^^es Inc. v. WØlker,

490 Fad 239 {2d Cir. 2007} ...................................................................................................... 7 C'^ll^way Golf Corp. v. Royal Ca^^dí^n Golf Assoc.,
125 F. Supp. 2d 1194 {C.D. Cal. 2000}..........^ .......................................................................... 7 Calvert v. Huckins,

875 F. Supp. 674 {E.D. Cal. 1995) ............................................................................................ 9 C^prì Trading Corp. v. Bank Bumiputra Malaysia Berhad, 812 F. Supp. 1041 {N.D. Cal. 1993} ....................................................................................... 1 S CFA N. Cal., I^c. v. CRT Partners LLP,
378 F. Supp. 2d 1177 {N.D. Cal. 2005} .................................................................................... 4 China Qcean Shipping C^. v. Mitr^ns Shipping Co. Ltd.,

[1995] 3 H.K.C. 228 ................................................................................................................ 10 Cl^ren^ont Press Pub'g. Co. v. Barksdale, 187 Cal. App. 2d 813 {1960} ....................................................................................Appendix A Coren^etrics, I^c. v. Atomic Park. com, LLC, 370 F. Supp. 2d 1013 {N.D. Cal. 2005} ................................................................................ 5, 7 Core-Dent Corp. v. Nobel Indus. AB, 11 F.3d 1482 {9th Cir. 1993} ............................^.........^.............................................................. 6 Doe v. Unocal, 248 F.3d 915 (9th C ^ r. 2001} ............................................................................................passim Dole Food Co. v. PØtrickso^,
538 U.S. 468 (2003} .............................................................................. .................. ................ 10 Dragon Capital Partners L. P. v..Merrill Lynch C^pit^l Servs. Inc.,

949 F. Supp. 1123 {S.DN.Y. 1997} ........................................................................................ 15

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C[37-02151 CW MOT. TO DiSMISS ^O.R LACK OF P^RSONAL JURISDICTIC^N

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TABLE OF AUTHORITIES {cont^nned}
Page

Engineering Service Carp. v. Lvngrídge Inv. Cv., 153 Cal. App. 2d 404 (1957) ....................................................................................Appendix A Gardemal v. Westin Hvtel Co., 186 F.3d 58$ (5th Cir. 1999) ................................................................................................... 10 Gates Learjet Corp. v. Jensen, 743 .2d 1325 (9th. Cir. 1984) .................................................................................................. 4 Glencore Grain Rotterdar^z B. V. v. Shívnath Rai Harn^raín Co., 284 ^.^d 1114 (9th Cir. 2402) ..................................................................................... 3, 4, 5, 14 Haskell v. Time, Inc., 857 . Supp. 1392 (E.D. Cal. 1994) ........................................................................................ 10 HealthOne, Inc. v. Columbïa Wesley Med. Ctr., 93 F. Supp. 2d 1152 (D. Kan. 2440) ................................................................................. 1 ^, 11 Helícoptervs N^cíanales de Cvlvmbia, S.A., v. ^^ll, 4b6 U.S. 408 (1984) .................................................................................................................. 4 Hiehle v. Torrange Millwvrl^s, I^c., 126 Cal. App. 2d 624 (1954) ....................................................................................Appendix A Home Gambling Net ^^ork, I^ c. v. Betinternet. cvtn, 2006 WL 1795554 (D. Nev. June 26, 2006) ............................................................................. 7 Hvnor Plastic Indus. Co. v. Lallicup SSA, Inc., 2006 WL 2792812 (E.D. Cal. Sept. 28, 2406) .................................................................... 8, 14 Ka1^, Voorhis & Co. v. Am. Fín. Corp., 8 F.^d 130 (2d Cir. 1993) ........................................................................................................ 10 Keeton v. Hustler Magazine, Inc., 4^5 U.S. 770 (1984) .................................................................................................................. 9 Las Palmas Assocs. v. Las Palmas Center Assocs., 235 Cal. App. ^d 1220 (1991 ) ..................................................................................Appendix A Lincv Services, Inc. v. DuPont, 239 Cal. App. 2d 841 (196^) ....................................................................................Appe^zdi^ A Loral Ìerr^com v. Valley Nat'l Bask, 49 F.3d 555 (9th Cir. 1995) .......................................................^---............................................ ^ Lockett v. Bethlehe^ra Steel Corp., 518 F.2d 1373 (10th Cir. 1984) ............................................................................................... 11 IVI.^.D. vfthe Islamic Republic vf'Ira^ v. Gould, I ^ c.,
Marr v. Pvstal Unívn Life Ins. Co., 9^9 .2d 7^4 (9th Cir. 1992) ............................................................................................... 9, 10

8

40 Cal. App. 2d ^7^ (1940)....^ .................................................................................................. 2 M^Kee v. Peterson, 214 Cal. App. 2d 515 (19^3) ....................................................................................Appendix A Minton v. C^vaney, 5^ Cal. 2d 576 (19^1) ..............................................................................................Appendix A

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^A^^^^, of AV^^o^^Es
(e©^^tínued)
Page Molnlycke Health Care AB v. Dumex Med. Surgical Prods. Ltd ,

641?. Supp. 2d 448 {E.D. Pa. 1999) .......................................................................................... 5 Norms Realty Ca. v. Consol. Abstract c& Title Guar. Co., 80 Cal. App. 2d 879 (1947) ..................................................................................................... 10 Pan Pac. Sash ^^ Door Co. v. Greendale Park, Inc.,
166 Cal. App. 2d 652 (195$) ....................................................................................Appendix A Paul v. Palm Springs Homes, Inc.,

192 Cal. App. 2d 858 {1961} ....................................................................................Appendix A Pebble Beach Co. v. Caddy, 453 F.3d 1151 {9th Cir. 2006) ................................................................................................... ^ Platt v. Billingsley, 234 Cal. App. 2d 577 (1965) ....................................................................................Appendix A Robins v. Blechet, 52 Cal. App. 4th 8ßb (1997) .....................................................................................Appe^^dix A Rosen v. E. C. Losch, .Inc. , 234 Cal. App. 2d 324 (1965) ....................................................................................Appendix A Schlum^erger Logelco, Inc. v. Morgan Equip. Co., N©. C-94-1776 MHP, 199 WL 251951 (N.D. Cal. May 3, 1996} ........................................ 10 Schwarzenegger v. Fred Martin Motor Co .,
374 F.3d 797 (9th Cit. 2004) ................................................................................................. 3, 6 Seymore v. Lake Tahoe Cruises, Inc.,

^^ß F. Supp- 1029 {E.D. Cal. 1995) .........................................^............................................. 12, Sh^fford v. Otto Sies Co., 49 Cal. App. 2d 42 $ (1957} ......................................................................................Appendix A Shah v. Stdlman, 2004 WL 352179 (Cal. App. 2d Dist. Feb. 2^, 2 004} {unpublished) ......................Appendix A Sonya Dimond Corp. v. Superior Caurt, 83 Cal. App. 4th 523 {2000) .............................................................................................. 10, 12 Southeast Texas Inns, Inc. v. Prime Haspìt^lity Carp., 462 F.3d X66 (6tb Cit. 2006} ............................................................................................... 9, 12 Stewart & Stevenson Servs., Inc. v, Serv-Tech, 879 S.W.2d 89 (Tex. App. 1994} ..............................^........................................,.................... 10 Talbot u. Fresno-P^cif^c Corp., 181 Cal. App. 2d 425 (1960) ....................................................................................Appendix A Temple v. Bodeg^ BØy Fisheries, Inc., 180 Cal. App. 2d 279 (1960) ....................................................................................Appendix A Virtuc^lMagic Asia, Inc. v. Fíi-Cartoons, Inc.;
99 Cal. App. 4th 228 (2002).........^....--^ ................................................................................... 13 Wady v. Pravide^t Life c^ Accident Ins. Co. ofAm.,

21^ F. Supp. 2d 1060 {C.D. Cal. 2002) ................................................................................... 10

Cal-02151 CW MOT. TO I31SMiSS FOR LACK UP PARS©NAL J^RISI^ICTIUN

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TABLE OF AUTHORITIES (eo^^#i^^^ed) Page Wells Fargo .Bank v. ClarenØo^ Services, Inc.,
2043 WL 21232420 (Cal. App. 3d Dist . May 28 , 2003 ) (unpublished) ..................Appendu A Wheeler v. Superior l^l^rtgage Co.,

19^ Cal. App. 2d 822 {1961 ) .................................................................................... Appendix A Yahool, Inc. v. La Ligue Contre Le Racisme et L'Ar^tisemitisme, 433F.3d 1199 {9tï^^ Cir . 2006 ) .............................^..................................................................... 6 Zippy Mfg. Ca. v. Zápp^ Dvt Corn, Inc., 952 ^. Supin. 1119 {W.D. Pa. 1997 ) ...................................................................................... ^, 8 OTHER AUTHORITIES
LAWRENCE LAU ^ P^©NY WONG, TRESPASS TO Till PERS©N IN TORT LAW ANI]

PRACTICI Ilv{ IIoNG Ko^G 253, 254-66 {Kemal Bokhary et al. eds. , 2005) ............................ 15 RESTATEMENT {SECQND} CoNFL^c^ of LAWS § 347 (1971 } ......................................................... 10 RULES F n. R. CIV. P. 9{b} ......................................................................................................................... 9 PEn. R. C ^ v. P. 12{b}{2} ................................................................................................................... 1 PEn. R. Ctv. P. 12{b}{6} .................................................................... .. 2 FEn. R. Civ. P. 12{e} ........................................................................................................................ 2

Col-^^ i s ^ Cw
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I.

INTRODUCTION In this action brought by Chinese citizens for harms allegedly suffered ív China at the

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hands of Chinese government officials, there ís no basis for a court in Calífarnía ta exercise personal jurisdiction aver YHKL, an ívdirect Havg Kong subsidiary of Yahoo! Inc. that does business a half a world away fram this State. YHKL does vat have the substantial, systematic, and contínuaus contacts with California approximating physical presence that are necessary to f^vd general jurisdiction here. YHKL ís a Hang Kong company organized under Hong Kong law with headquarters in Hong Kong, where its approximately 150 employees work. YHKL's business ís conducted in Hang Kong, and its revenue ís de^íved almast exclusively from the Hong Kong market. YHKL ís awell-established company worth aver X100 million that possesses all the indicía of a fully functíaval subsidiary whose separate identity and foreign status must be honored. YHKL has no offices, no business center, va property and no employees ín Calíforvía. It has no business plan almed at the State, and unsurprisingly derives no material revenue or profit from this jurísdiction. Likewise, plaintiffs do not and. cannot allege facts that YHKL purposely availed itself af the privilege of doing business ín California and that plaintiffs' claims arise out of such contacts sufficient to create specific jurísdiction. YHKL's attenuated contacts to California have nothing to do with plaintiffs' claims. Moreover, plaívtíffs dïd not use l^k.yahao.com e^r^aíl accounts a^ groups lists to publish the materials they allege subjected them to mistreatment by the PRC. The complaint explicitly alleges that plaintiffs used the mainland Chinese website, cn.vahoa.caz^^, avd e^naíl services to post and send the materials ív question. That YHKL's website (hk.yahoa.çam) is, like any other website, available to be viewed worldwide does not convey jurísdiction. The YHKL site serves aChinese-reading audience ín Hong Kong, ís directed at Hong Kong residents and is not purposefully directed at Calífarnía. I^^ar does the California presence of YHKL's corporate grandparent, Yahoo! Inc., confer jurísdiction. Belated and bald assertions of ``alter ego" avd "agency'' cannot not save plaintiffs. In snart, YI-IKL should be dismissed from this action based upon a lack of personal jurisdiction.

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C07-02151 CW

^ o ^ . ^0 Dls ^ lss FoR LAC ^ o1v
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FACTUAL BACKGROUND A. Plaintiffs' Ale^ati©ns

Plaintiffs are Chinese citizens who reside in the People's Republic of China ("PRC"). See Compl. ^¡ 10-12. Plaintiffs Shi Tao and Wang Xíaoníng allege the PRC imprisoned and abused them because they published political literature using Yahoos China group lists and email accounts. See id. Plaintiffs admit they used computers based ín China to post this material See id. ,j^ 32-37, 42, S2-S5. Plaintiffs allege defendants provided the PRC with infarm^atian regarding plaintiffs' online activities and that, using this information, the PRC identified, charged, and convicted plaintiffs for violating Chinese criminal law. See icy! ^^¶ 36-42, 56-62. Wang and Shi allege the PRC ís arbitrarily detaining them in mainland Chinese jails, has tortured them in these facilities, and has co^r^itted ather human rights abuses. See ^d. ¶¶ 39, 44-45, 65-6^. Wang's wife, Yu Ling, claims her husband's arrest and mistreatment harmed her as well. See íßa'. 11.

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Plaintiffs seek to held defendants liable for aiding aid abetting the PRC's alleged misconduct. Plaintiffs assert various causes of action under ínternatíanal, United States, and California law and seek, among things, compensatory and punitive damages and injunctive relief. See íd. ¶¶ 2, 6, 14-67, 60, ^ß, 75, S3, ^0, 96, 97-117, 127 & Prayer at (a)-(g). B. Defendant Yah^^ ! H^n^^ K©n^ Lí^nited ("YHKL")

YHKL is a limited liability corx^pa^^y organized under the laws of ^^Iong Kong. See Tsoi Dec1. ^ 2. Yahoo! International Subsidiary Holdings, Inc. ("YISH"), a California corporation, owns 99% of YHKL's outstanding shares. See rd. ^ 2. The remaining 1 % ís owned by Yahoo! Tnc. Yahaa! Inc. owns 100°/^ of the outstanding shares of YISH stock. See id. ^ 2.

YI-IKL operates aChinese-language website serving Hong Kong residents. See íd. ^¡ 3. Through its website, ^k.yalln^.com, YI-IKL offers a variety of internet-based services, including search engines, email accounts, and a variety of content services, including news and entertaínrr^ent. See id. ¶ á. All these services are aimed at Hong Kong residents. See id. ¶ 3. The overwhelming majority of YHKL's income comes frorxr third-party advertisers who purchase ads on YHKL's website to promote their goods and serví^es to residents of Hong Kang. See ^d. ^ 7. YHKL's business operations are located in Hong Kong. A11 of YHKL's approximately
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150 err^ployees live and work there. See id. ^^ 4. All of YHKL's management posrtions-

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íncluding the most senior position, the General Manager-are filled by Hong Kong resíder^ts. See id. YHKL is licensed to da busïness in Hong Kang and pays taxes There. See id. The content on YHKL's websíte ìs seleged by YHKL employees ín Hong Kong, and YHKL has never advertised to California residents. See id. ¶¶ 4, b. III. YHKL SHOULD BE DISMISSED FOR LACK OF PERSONAL JURISDICTION. YHKL may nai be forced to defènd this action in Califor^ìa because it has never "purposefully established minimum contacts" in the State. Asahi Mehl Indus. Co. v. Superior Court, 480 U.S. 102, 108-09 (1987}. Plaintiffs cannot allege facts sufficient to meet tl e "fairly high" standard far establishing generas jurisdiction which requires that contacts be of the sort that appraxïmate physical presence. Bancroft & Masters, Inc. v. Augusti Nat'l, Inc., 223 F.^d i 082, 108b (9th Cír. 2000). Likewise, plaintiffs' co^r^plaint fails to show that YHKL purposefully availed itself of California or that their claims "arose out of' Y1=1KL's agívítíes í ^ Ca1^farr ia. Schwarzenegger v. Fred .Martin Motor Co., 374 F.3d 797, 802 {9th Cír. 2004). Indeed, not only is the connection to California rzot there. as the complaint concedes, it was plaintiffs' use of Yahoo! China services in China that allegedly subjected them to mistreatment. Lastly, neither the fact that YHKL is an internet company, nor the fact that plaintiffs' have now added alter-ego anal agency allegations ta their complaint is enough to establish jurisdiction over YHKL. A. This Court Lacks General Jurisdiction Over YHKL.

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For general jurisdictí^n to be found, a defendant must not only step through the door inta a forum, ít must "sit] dawn and [makes itself at home." Glencore Grain Rotterdam B. V. i3. Shivnath Rai H^rnarain Co., 284 .3d 1114, 1125 (9th Cír. 2002}. ^ HKL's inconsequential eonta^ts with California do not come close io meetïng this standard. YHKL has never been licensed to do business ïn California, has never paid taxes in the state, and has .never filed or been named as a defendant in a lawsuit filed í^ California-until this case. See Tsoi llecl.l¡ 5. YHKL has never: (1}owned or leased any real property in Calíforr^sa; (2) maintained an offzce here; (3) maintained an address, P.Q. Box or telephone listing in the state; ar (4} maintained any other physical presence in California. See id. Nar do YHKL's employees spend sign^f^cant amounts of Ca^^-o^^s^ Cw
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time here. A handful af Y^iKL employees periodically take short trips to California for brief meetings. See id. Infrequent visits to California cannot justify a flndíng of general personal jurisdiction, since none of YHKL's employees works or resides in California on a permanent or even partial basis. See Gates Learjet C©rp. v. Jensen, 743 F.2d 1325, 1330-31 (9th. Cir. 1984),
YHKL has never advertised ta California residents. See Tsai Decl. ^ ^. Virtually all of the content on YHKL's website is ín Chinese. See id. Unsurprisingly, the traffic Yi-1KL receives fram California is incidental and not a significant pari of its business. To take one recent example, YI1KL estimates that less than 1 % af the visitors to YHKL's website in March to May 2007 connected to the site from computers in California. See id. ^ 10. Éven assuming X11 of those users are Calífornía residents-----an unreasonable assumption g ^ ^e ^ the hundreds of thousands of Hong Kong and Chinese cití^ens who travel to Calífornía each year-this unínter^ded audience d©es not create general jurisdiction. Y1-1KL's best estimate is tl at, at most, 1 % of its revenue comes fram the state. See id. ¶ 9. ^

Courts have refused to find general jurísdíctíon even where companies have had greater contacts ta a forum state. Far example: · Tr Helícnpteros Nacionales de Colombia, S.A., v. Ilan, 4^6 U.S. 408, 411 (1984}, the

Supreme Court held that a Colombian company was not subject to general jurísdíctíon ín Texas even though ít purchased 80% of its helicopter fleet and equipment in the state {at a cost exceeding $4 million} and sent its pilots and maintenance team to Texas far training. · In Glenc^re, 284 F.3d at 1124-25, the ^^ínth Circuit rejected a claim of general

jurisdiction in California where defendant sent 15 shipments of rice through San Francisco during a one year period and employed an independent shipping agent ín the state. · And in CFA N CSI., Inc. v. CRT P^rt^ers LLP, 378 F. Supp. 2d 1177, 1185 (N.D.

Cal. 2005), this Court refi^sed to exercise general jurísdíctíon over an Arizona franchisee even though it signed 18 franchise agreements with a California franchisor, purchased goads from California suppliers, and regularly visited the California franchisor's af#^ces.

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' YHKL can provide further specifics regarding these raw numbers underlying these percentages and how they were abtaiz^ed, but such data and information are trade secrets. Defendants have moved far a protective order allowing them to keep such information confidential. See Defs.' Mat. For Protective Order Governing Confidential lnfarmati^n (filed Aug. 15, 2007). If the Court grants the motion, defendants wí11 be able to provide these additional details.
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Coremetrics, Inc. v. Atomic Parl^.cam, LLC, 370 F. Sopp. 2d 1013 (N.D. Cal. 2005), an the other hand, illustrates the kind of systemic, regular contacts that an internet business must have in ^ forum state ta warrant a finding of general jurisdiction. There, defendant maintained a "highly interactive websíte" used ta sell its own products and services, had sales to California consumers ín excess of $3.3 million ina 10-month period, which constituted 14.71 % of its total sales; and purchased over $1 millian worth of products frarr^ California vendors during a similar time frame. See id. at 1019-21. Even then, the court said this was "a close call" and not one of the factors, by itself, was enough to justify general jurisdiction. Id. at 1021.

In sharp contrast, YHKL's site has never catered ta California residents (it is in Chinese}; YHKL's California revenues are minute; and only a tiny fraction ofvisitars ta the site have even a potential co^r^ectio^ to the state. YHKL has got "sat down and made itself at home" in California. Glescore, 284 F.^d at 1125. It has barely tread on California's front yard. Assuming plaintiffs even argue far general jurisdictio ^ in this case, the only possible claim they can make is that, by ha^i^g a global internet presence and a few incidental users in California, YIIKL ís subject to general jurisd ^ ctí©n here. That expansive view of generad jurisdiction graves too much, would create universal jurisdictio ^ over almast every i^ternet ^ampa^y, and has consistently been rejected by the courts. :S'ee, e. g., Bancroft & M^.sters, 223 F.^d at 1086 ("Masters" tournament's websíte, occasional sales tó Californía^s, aid license agreements with California television networks insufficient for general jurisdiction), M^lnlycke Health Gare AB v. Dumex Med. Surgical 'rads. Ltd , 54 F. Supp. 2d 448, 451-54 (E.D. Pa. 1999} ("To hold that the possibility of ordering products from a websíte establishes general jurisdiction would effectively hold that any corporatia^ with such a websíte is subject to general jurisdiction in every state."). Imposing general jurisdiction over YHKL í^ California under these circumstances would be u^precede^ted, unwarranted, and improper. B. This Court La^^s Snecífic Jurisdiction 4ve^- YHKL.

To establish specific jurisdiction, plaintiffs must show both that YHKL "purposefully availed" itself of the privileges of California, and that plaintiffs' claims "arose out of ' Y ^ KL's activities in California. Schwarzenegger, 374 F.3d at 802, Plaintiffs fail on both counts. coy-o^^5^ cw
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l.

Plaintiffs Cannot Satisfy the Pureoseful Avaíl^nent "Effects Test."

Iz^ tort eases, courts use the "effects lest" to determine whether a party has "purposefully availed" itself of the forum jurisdiction. The effects test "focuses on the forum ín whích the defendant's actions were felt." Yahoo!, Inc. v. La Lígue Cantre Le Racísme et L Ántisemítisme, 433 F.^d 1199, 1206 (9th Cír. 2006). Plaintiffs must Shaw (1}YHKL took intentional actions aimed at California; and (2} those actions caused plaintiffs' harm, "the brunt of which [were] suffered---and whích [YHKL] kn[ew] [were] likely to be suffered-ín [California]." Care-Vent Carp. v. Nabel Indus. AB, 11 F.3d 1482, 1486 (9th Cír. 1993}. Simply showing a foreseeable effect in California is not enough. Intent matters, and plaínt^ffs must sha^v that YHKL's conduct was directed at the state. See Pebble Beach Co. v. Caddy, 453 F.^d 1151, 1156-58 (9th Cìr. 2006) {"the fact that [defendant's] website ís not directed at Ca^^f©z-^zía is controlling."). Put anaiher way, YHKL must "have engaged in wrongful conduct targeted at a plaintiff whom the defendant knows to be a resident of the forum state." Bancro^t & Masters, 223 F.3d at 1087.

7

Proof of such facts is impossible -here. T© begin: with, plaintiffs allegedly used cn.váhoo.cam accounts -- nvt hk.vahaa .ca^n accounts -- to transmit the materials in question. Even when focusing on YHKL's alleged conduct ìn the case, plaintiffs contend that YHKL engaged in conduct ín Hong Dong and mainland Ching that affected plaintiffs in mainland China. See, e.g., Compl. ¶^[ 1-2, 36, 42, 44-45, 54, 56, 62, 6S. Plain^tíffs do not allege YHKL aimed conduct at California that YHKL knew would cause an injury, the "brunt of which" would be felt in California. Care-Vent, 11 F.^d at 1486. T© the contrary, plaintiffs allege YHKL's conduct caused Chinese plaintiffs to be apprehended, tortured, and detained by Chinese officials, all in China. Plaíntífís' inability to show or even allege purposeful avaílment is fatal to exercise of jurisdiction over YHKL. See Pe^^1e Beach, 45^ Fad at 1155 (dismissal appropriate first prong oat satisfied}. 2. The Alleged Harm Did Not Arise Out Of Forum Contacts.

Plaintiffs likewise have na ability to show they would oat have been injured "but for" YHKL's contacts with California. Schwarzenegger, 374 F.^d at 802; koral Terracom v. Valley N^t'1 Bank, 49 F.3d SSS, Sbl (9th Cir. 1995}. Plaintiffs' awn allegations negate this "but for"
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requirement. Plai^^tiffs allege ít was YHKL's doing business in China (not Ca1íf©rnia), its provision of information to the PRC {not California), and its alleged desire to appease the PRC {not California) that caused plaintiffs' harm. See Cornpl. ¶^ 2, 14-20, 27-31. C. Tl^e Zippa " Slídí^^ Scale" Test Dies Nat Save Plaintiffs.

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O

YHKL is not subject to jurisdiction in California because its website can be accessed almost anywhere in the world. Únder what ís commonly referred to as the Zippo "sliding scale" test, a court may riot find jurisdiction over an internet company where the defendant's website is "passive ," i. e., one "through which the defendant simply posts information ." Callaway Golf Corp. v. Ray^l Can^di^n Golf Assoc., 12S F. Supp . 2d 1194 , 1203 (C.D. Cal . 2000). Only íf the defendant " conducts business transactions ormer the Internet with residents of the forum ," can an argument then be made for jurisdiction. Id. at 1202. While some courts in this circuit treat the Zippo test as a separate ground for establishing jurísdiction,^ the better reasoned opinions treat it merely as "a fadar that informs the jurisdictional analysis."4 As the Second Circuit recently and rightly concluded:
While analyzing a defendant's conduct under the Zippo sliding scale of interactivity may help frame the jurisdictional in^u^ry in some cases, as the district court here pointed out, "ít does not amount to a separate framework for analyzing internet-based jurisdiction ." Instead, "traditional stat^^tory and constitutional principles reman the touchstone of the inquiry."

Best Vag Lines Inc. v. Waller, 490 F.3d 239, 252 (2d Cír. 2007). No matter how this Cours considers or applies the Zippo test, plaintiffs fall it. YHKL is not an o^nlir^e stare that derives its revenue from sales to or in California. The bulk af YHKL's on-line services are provided free of charge, and the vast majority of YHKI,' s revenue comes from advertising written i n Chinese and created for and directed to a Hong Kong audience. See

^ See Zippo Mfg. Ca. v. Zippo Dat Cam, Inc., 952 F. Supp. 1119 (W.D. Pa. 1997). ^ See, e.g., Amins I^^avatian Carp, v. JS Imports, Inc., 2007 WL 1597942 (C.D. Cal. May 22, 2ß07j (addressing Zippo "sliding scale" and "effects" tests separately).
4 Caremetri^s, 370 F. Supp. 2d at 1019 ("[Tjhe fact that [defendant] maintains a highly interactive website by usel fwould not be enough to establish general jurisdiction, as a number of courts have found."); Home Gam^lingNettivark, Inc. v. Betinternet .com, 2006 WL 1795554, at *2-4 {D. Nev..lune 2b, 2006) { rejecting general jurisdiction in Nevada over foreign internet gambling company with "interactive" online gambling website}.

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Tsoí Decl. ^ 7-8. Although YHKL offers some premium services that require users to pay a fee--for example, users can buy online personal ads or pay for an astrology reading---- 11 such

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b

services are in Chinese and marketed exclusively to Hong Kong resídents. See id. ^ 8. The economic reality here is that YHKL does not do business in California, over the Internet or otherwise: YHKL does not ^r^arket its websíte or its services to California resídents, the users of the websíte are overwhelmingly not California resídents, and YI-IKL generates no significant revenue from California residents. See Honar Plastic Ind^^s. C^. v. L^llicúp USA, Inc., 200 WL 2792$12, at *7 (E.D. Cal. Sept. 2$, 2006) ("[Tjhe most reliable indicator of the nature and extent of defendant's Internet contacts with the forum state will be the amount of sales generated ín the state by or through the interactive website.")). Under these circumstances, YHKL's Internet operations do not establish personal jurisdíct^on in Calif©rnia, regardless of the test applied-general jurisdiction, specific jurisdiction, or the Zìpp© sliding scale. D. Yah© n! In . ' s California Contacts Cannot Be Attributed to YHKL.

7

After being apprised of Y^IKL's objectíans to jurisdiction, plaintiffs recently amended their complaint to allege that YHKL is a mere agent or alter ego of its grandparent company, Yaho©! Inc. See Compl. ^¶ 9, 15-20. These new allegations do nothing to create, justify, or support jurisdiction. They are boílerpiate and conclusory in the extreme and they are inadequate to overcome the strong presumption that the parent-subsidiary relationship is insufficient to establish personal jurisdiction. 1. Plaintiffs' Boilerplate Legal Cvn^Iusíons Fail as a Matter of Law.

Plaintiffs' first two complaints lacked any jurisdictional allegations concerning ^ HKL. When filing their second amended complaint, plaintiffs argued it provided "the basis for the exercise of jurisdiction over [YHKL] by this Court." Pls.' Mot. for Leave to File a Sec. Ain. Compl. at 2:19-24 {filed July I3, 2007). They are mistaken. In their new complaint, plaintiffs say that Yahao^ Inc. "controlled" and had a "unïty of interest" with YHKL, because Yahoo! Inc. "directly owns" YHKL. s (In reality, YISH owns 99%

See, e.g., Compl. 2 {"Defendant Yahoo! Inc, and its agents, alter egos, and/or affiliated entities, including but not limited to wholly-owned subsidiaries Yahoo! HK and Yahoo! China."), C07-02I5I CW
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of YHKL, and Yahoo? Inc. only owns 1°/© of the company. See Ts^í Decl. ¶ 2.) These are not facts, but mere legal conclusions that come straígbt from the tests to prove agency and alter egn. ^n the words of the Supreme Court, "a plaintiff s o ^ lígatíon to provide the `grounds' ©f his `entitle[ment] to relief requires more than labels and conclusions.... fA],furmulaic recitation ^f the elements of a cause of ^^tìo^ will got d^." Bell Atl^ntìc C"^^rp. v. 7'wombly, 127 S. Ct. 1955, 1964-65 (2007) (emphasis added}. Enforcing this pleading standard ís especially important here. As the Supreme Court has further explained, "[j]urísdíctíon over a parent corporation" does not "automatically establish }urísdíctíon over a wholly owned subsidiary. Each defendant's contacts with the forum State must be assessed individually." I{eeton v. Hustler t^laga^ine, Inc., 465 U.S. 770, 781 n.13 0984). The only jurisdictional contact plaintiffs have pled is that Yahoo! inc. directly owns YIiKL. This fact alone ís plainly not enough. If plaintiffs are serious that defendants used the corporate form to commit a fraud, they make such claims "with particularity." Southeast 7'ex^s I^^^s, Inc. v. Prime hospitality Corp., 462 F.^d 666, 672 (6th Cír. 2000 {citing FEQ. R. Ctn. P. 9(b)). 2. YHKL Is, in Fact, Neither a^ Alter Ego Nar any Agent of Yahoo! Inc.

3 4 S b 7

Courts only refuse ^o respect the corporate form of a party in "exceptional circumstances," and where plaintiffs point to clear evidence mandating this extreme remedy. Calvert v. Huckì^s, 875 F. Supp. 674, 677-78 (E.D. Cal. 1995). Plaintiffs have no such evidence, as they concede. See Compl. at ^¡ 143. Nor would discovery yield such evidence, as demonstrated below.? id. x( 1 5 ("there was a unity of ownership and positive indicators of a unity of interest between the personality of Yahoo} 1-long Kong Límíted (formerly Yahon! Holdings Hong Kong Limited) and the personality of Yahoo! Inc."); ìd. 16 {Yahoo! Inc. "directly own[ed] and cor^trol[ed] the operations of Yahna! Hong Kong"). ^ See, e.g., Doe v. ^Inoc^I, 248 F.3d 915, 926 {9th Cír. 2001) (listing "contr©^" arid "unity of interest" as factors); id. at 926 ("agency relationship is typified by parental control of the subsidiary's internal affairs or daily operations") (emphasis adrierij. 7 For purposes of this motion, we assume that California or Ninth Circuit law would apply------bath of which are "substantially similar." M.O.D. ^f the Islamic Republic of Iran v, Go^^ld, Inc., 969 F.2d 764 , 769 n.3 (9th Cír. 1992). YHKL reserves the right to argue that Hong Kong law-the law of the state of Y^^KL's incorporation-applies. See Schlumberger ^©gelco, Inc. v. Marge Equip. Co., No. C-94-1776 MI-IP, 1 996 WL 251951 at *3 (N.D. Cal. May 3, 1 996} ("the law of Austria, as the state of incorporation, governs plaintiffs' alter ego claim"); K^l^, Voorhis ^^ C:^^, v. Am. Fira. Corp., 8 F.3d 130 (2d Cír. 1990 (law of the state of íncorporat^on governs);

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a.

YHKL ís not an Alter Ego af Yahoo! Inc.

To find that a company is a mere alter ego, the Caurt must reject the company's separate personage, presumed by law, and deprive its shareholders of the statutorily created right of l^míted liability. Cf: Dvle Food Co. v. Patrickson, 538 U.S. 468, 474 (2003) {"A basic tenet of American corporate law is that the corporation anal its s>areholders are distinct entities."). For this reason, the alter-ego test ìs demanding, and hence plai^^tiffs must show (1}that the parent and subsidiary are one; and (2} that an injustice would result íf their separateness were recognized. See Unocal 248 F.3d at 926; Sonora Diamond Carp. v. Superior Court, 83 Cal. App. 4th 52^, 538 {2000}; Associated Vendors, hoc. v. Oakland Meat Co., 210 Cal. App. 2d 825 (1962). Before the Caurt even reaches these two factors, however, an initial threshold showing must be made------i. e., that YHKL waul d be unable to satisfy a judgment.8 Counsel have scaur ^ d the ease law in California and cannot find a single instance of piercing the corporate veil where

RESTATF.MFNT {S^co^v^^) Co^^FL^crO^ LAWS § 307 (1971 ) {same}. Hnng Kong law imposes even greater hurdles to ignoring the corpaxate form. See, e.g., China Ocean Shipping Co. v. Mitrans Shipping Co. Ltd., [1995] ^ H.K.C. 228 {corporate veil may only be pierced where co^parate form used to evade existing legal obligation to plaintiff). ^ See Norins Realty Co. v. Consol. Abstract åc Title Gear. C^., 80 Cal. App. 2d 879, 883 {1947} {no piercing where corporatia^ "not alleged to be insolvent and nn facts are alleged from which it can be inferred that it wí11 be unable to respond to any judgment which may be írr pased upon it" because there is no evidence "that justice cannot otherwise be accomplished"); Iran, 969 F.2d at 774 (plaintiff failed to slaw an "inequity" where it was unable to "produce[] evidence chat [the alleged shell company] would be unable to satisfy the award"); Wady v. Pravide^t Life & Accident Ins. Co. of Am., 216 F. Supp. 2d 1060, 1070 (C.D. Cal. 2002) {plaintiff failed to submit any evidence supporting the claim that "inequitable results will follow íf the corporate wall between Provident and Ur^umProvident ís maintained"; "Provident ís fully able to respond to any damages award [plaintiffj nay recover in this action"); Haskell v. Time, Inc., 857 F. Supp. 1392, 1 403 {E.D. Cal. 1994} (no piercing because, "w]íth annual sales of $2 billion, Tíme should be able to respond to any restítutíonary award"); Gardem^l v. Westin Hotel Co., 1$6 F.3d 588, 594 {5th Cir. 1999} ("[T]here ìs scant evidence that [subsídíaryj Westin Mexico ís ín fact undercapitalized and unable to pay a judgment, if necessary."}; Stewart & Stevenson Servs., Inc. v. Serv-Tech, 879 S.W.2d 89, 110 {Tex. App. 1994) {"Ifthe corporation responsible for the ^laín^zff s injury ís capable of paying a judgmen t upan proof of liability, then r o reason would exist to attempt to pierce the corporate veil and have shareholders pay far the injury."); He^lthOne, Inc. v. Columbia Wesley Mea'. Ctr., 9^ F. Supp. 2d 1152, 1164 (D. Kan. 2000} ("HealthOne cites ^nthíng to show that permitting the defendants to ma^ntaín their separate corporate structures will result ín injustice.... [Mjost significantly, HealthOne cites no evidence that Wesley----wít1^ a net earth ín excess of $200 m llion-----will be incapable of paying any judgment rendered against ít in this action.").

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the company was able to pay a judgment. See Appendix A. That threshold showing cannot passíbly be made ín this case. YHKL's net worth ís in excess of $100 million; it owns assets, such as stock in other companies, that could be sold f ©r hundreds of milïions of d©11ar^; and ^ ^ is subject to enforcement of a judgment in Hong Kong. Even íf ít were ínconveníent for pla^ntíffs to proceed against YHKL in Hong Kong------which demonstrably ís not the case in light of Shi Tao's pending action against YHKL there, see Co^mpl. ¶ 64 and Tsoí Decl. ^( 13-rihat would not justify piercing YHKL's veil. See Lu^kett v. Bethlehem Steel Corp., 5 1$ F.2d 1373, 1379 (10th Cír. 1980) ("V^e do not feel that the possible difficulty of enf©rci ^g ^ judgment against Bethlehem Singapore alone or the possible inconvenience to plaintiff {and resulting convenience to Bethlehe^x^ Singapore} ín suing Bethlehem Singapore ín another forum ís the type of injustice which warrants piercing the corporate veil."). Nor cán plaintiffs satisfy the two-prong test for piercing the corporate veil. The first prong requires the Court to look at some 15 Associated Venders factors. See Appendix B {listing factors). In interpreting these factors, typical parent-subsidiary interactions do not count. As the Ninth Circuit made clear:
A parent corporation may be directly involved in the activities of its subsidiaries without incurring liability so long as that involvement ìs "consistent with the parent's investor status." Appropriate parental involvement includes: "monitoring of the subsidiary's performance, supervision of the subsidiary's finance and capital budget decisions, and artículatio^ of general policies and procedures."

Unocal, 248 h.3d at 925. Plaintiffs neither allege nor could ever prove the contrary. Consistent with the Associated Vendors factors: · · YHKL and Yahoo! Inc. do not commingle assets, see Tsoí Decl. ¶ 11; YHKL issued stock, see id. { 2;

· YHKL pays taxes, makes regulatory filings, maintains its own corporate records, see íd. ¶ 4, 11; · YHKL has its own managers and board of directors, see id. ^ 11; · YHKL it is well capitalized and has significant corporate assets of its own, see id. !^ 12; · YHKL has its own offices in Hong Kong, around 150 employees, and both Hong Kong-qualified in-house attorneys and local outside counsel and advisors ín Hong Kong, see id. ¶ 4, 11;

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* YHKL has ïts owe finance organization., negotiates contracts in its awn name, and has its own relationships with local contractors, clients, vendors and suppliers, see íd. ^ 11; · + · · YHKL maintains its own bank accounts separate from Yahoo! lnc., see ïd. ¶ 11; YHKL generates its ow°r^ income from its own operations i^ Hogg Kong, see id. ^ 11; YHKL makes its own business and hiring decisions, see id. ^ 11; and YHKL runs its own website, see íd. ^¶ 4, 11.

No company with these hallmarks of independence has ewer been found to be an alter ego. Finally , plaintiffs fail the second prang of the alter-ego test. They have Hat alleged, nor
could they ever show that Yahoo[, Inc., YIS -I, or YHKL engaged ^ n "bad fait " in employing the corporate form or that plaintiffs ' harm was somehow caused by or '`flow[ed] from" the fact that YHKL is a separate corporation . Cf. Sv^vra Di^mvnd, 83 Cal. App. 4th at 539 ("[t]he alter ego doctrine does not guard every u^sat^sfied creditor of a corporatun but instead affords protection where some conduct amounting t^^ bid faith makes ít requitable for the corporate owner to hide behind the corporate form"); Seymore v. ^^ke Tahoe C'ruíses, Inc., 888 F. Sapp . 1O2ß, 1036 n.21 (E.D. Cal. 1995 ) {"[Tjhe showing of inequity necessary to satisfy the second prong must flv^^ from the misuse of the corporate form.") {emphases added). In short, there is no conceivable ^onnectí © ^ between plaintiffs' alleged harm. anal YHKL's corporate status:

^

[Plaintiffs' u^derlyi^g cause of action [ì. e., their claim that YHKL aided aid abetted human rights abuses] does not supply the necessary fraud of injustice [necessary to pierce the corporate veil]. To hold otherwise would render the fraud or injustice element meaningless, and would sanction bootstrapping. The law requires that fraud or injustice be found in the defendants use of the corporate form. Southeast Texas Inns, 462 F.3d at 6^4. Plaintiffs have neither alleged nor could ever prove this. b. YHKL is Nit Yoh© ^! Int. 's Agent.

The Ninth Circuit has recognized agency as a separate theory for jurìsdictunal purposes. See Unocal, 248 F.^d at 928. The legal test, as stated by both the Nuth Circuit and California courts, is often called the "representative services" test and mirroxs aspects of the apex-aga test. Key factors of the agency test include unusual domination and control of the subsidiary's day-today affairs as well as the subsidiary's mere existence to do the bidding of the parent company.g g See U^vcal, 248 F.^d at 92b ("An alter ego or agency relationship is typified by parental control of the subsidiary's internal affairs or daily operatuns.")); id. at 928 (agency requires "a showing that the sut^sidíary functions as the parent coxpoxation's representative in that ít performs services C07-02151 C W
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l'laíntíffs have not alleged nor coed they ever prove that Yahoo! lnc. runs YHKL's dayto-day affairs or that YHKL exists solely to do Yahoos Ine.'s bidding. YHKL's General Manager, who works and lives in Hong Kong, his team of executives, who work and live ire Hong Kong, and YHKL's own employees run YHKL's affairs. They sign contracts. They maintain the YHKL, website. They seek advertisers for the site. And they try to bring Hong Kong residents to the YHKL site. See Tsoi Decl. ¶¶ 4, 6-S, 11. Yahoo! Inc. may set broad corporate policies, but such decisions and actions by a corporate parent are proper and do not create an agency relationship. See Unocal, 248 F.^d at 926-28. In Ünocal, one of the first ATS cases against corporate defendants, plaintiffs alleged that Total, the French energy company, could be hailed into court ín California under the ``representative services" test because it had subsidiaries in California. The Ninth Circuit refused to find an agency relationship for jurisdictional purposes even though Total's subsidiaries were mere "holding" companies and "Total [was] an active parent corporation involved directly in decision-making about its subsidiaries' holdings." Id. at 928-29. The Ninth Circuit found plaintiffs had failed to allege or prove unusual domínaiíon and control. See id. This ís a more eompell^ng ease for rejecting plaintiffs' agency theory. Unlike Total's subsidiaries, YHKL ^s much more than a holding company; it ís an active, independent, operating business. Moreover, no argument can be made here that Yahool Inc. relies on YHKL to do business in the State of California. Yahoo! Inc. runs its own California business. YHKL focuses on the Hong Kong market. If the existence of Total's subsidiaries in California solely to hold its

28

that are `sufficiently important that if it did not have a representative to perform them, the cozporations ow^^^ officials would undertake to perform substantially similar services."')^ VirtualNlagic Asia, Inc, v. F^l-Cartoons, Inc., 99 Cal. App. 4th 228, 245 (2002) ("It is the nature of the control exercised by the parent over the subsidiary that ís crucial, because some degree of control ís an ordinary and necessary incident of the. parent's ownership of the subsidiary. Only when the degree of control exceeds this level and reflects the parent's purposeful disregard of the subsidiary's independent corporate existence that the principal/agent theory wí11 be invoked. As a practical matter, the parent must be shown to have moved beyond the establishment of general policy and direction for the subsidiary and in effect taken over performance of the subsidiary's day-to-day operations in carrying out that policy.").
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interests here was nit enough to establish jurisdiction over Total, jurisdiction cannot be exercised agaínst YHKL just because its grandparent is located here. E. Exercísin Jurisdiction Over YHKL Would Be Unreasonable.

There ís a remaining hurdle plaintiffs must jump. Even assuming they satisfied ane of these tests above, they would have to sh©w is "reasonable" for the Court to exercise jurisdiction in this case. See Glencore, 284 F.ád at 1124-25; Honor Plastic, 2006 WL 2?92812 at *4. There are seven factors to determine reasonableness. See Gleecore, 284 F.^d at 1 1 25. Plaintiffs fall each. 1. The extent to which YHKL "purposeful interject[ed]" itself into Calif^^rnia is minimal. 2. It would be a burden for YHKL to defend itself in ^ case 7,000 miles from home. 3. This lawsuit challenges the sovereignty of the PRC, for the reasons stated in Yahoof, Int.'s motion to dismiss, and YHKL ís located in Hong Kong -- a Special Autonomous Region ©f the PRC. 4. California has ^o particular interest in adjudicating a dispute between a Hong Kong company and citizens ofmainland China arising ©ut of acts occurring in China, íncludivg acts of the Chívese government. 5. Dismissing YHKL for lack af personal jurisdiction will not result in dismissing plaintiffs' case; personal jurisdiction over Yahoo! Inc. is not disputed. 5. Plaintiffs could not enforce a judgment against YHKL iv California, so there ís n© added "c^n^enience" in their suing here. Glen ore, 284 F.^d at 1125 ("[A]bsent any evidence of assets in the California forum agaínst which [plaintiff) could enforce its award, we fivd [plaintíff'sj interest ín `convenient and effectí^e' reliefis frustrated, not promoted by bringing suit here."). 7. Plaintiffs have an alternative forum in Hong Kong; indeed, Shi Taa has already brought a corr^plaint agaínst YHKL there. See Compl. ^^ 54, l41ì. The fact that Shi lost his case and is new appealing does not matter. U.S. courts have repeatedly found litigation in I-long Kong

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to be an adequate alternative to i^tigatíon in the United States,'0 aid Hong Kong recognizes the torts of battery, assault, and false imprisonment." IV. YHKL JOINS IN YAHOO! INC.'S NOTIONS. Without waí^íng its objections to jurisdiction, ^HKL's joins Yahoo? Inc.'s motions to dismiss plaintiffs' complaint with pxejudice, to strike plaintiffs' California claims pursuant to the anti-SLAPP statute, and far a rr^ore definíie statement. V. CONCLUSION YHKL should be dismissed from this case for lack of personal jurisdiction.

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6

7

Dated : A,^gus z7, 2aa7

DANIEL M. PETROCELLI MATTHEW T. KLINF, O'MELVENY & MYERS LLP

^ y:

Daniel M. Petroeelli Attorneys for Specially Appearing Defendant Yahoo! Hong Kong, Limited

14 See e.g., Capri Trading Corp. v. 13ank I^umiputra Malaysia 13erhad, 812 F. Supp. 1041, 1x4344 (N.D. Cal. 1993) (Hong Kong is an adequate farurr^ to adjudicate alleged RICO violations, common law fraud and breach of fiduciary duty claim), Dragon Capital Partners L.P. v. Merrill Lynch Capitl Servs. Inc., 949 . Sopp. 1123, 1130-31 (S.D.N.Y. 1997) (rejecting claim that irriper^ding Chinese takeover of Hong Kong will render it an inadequate forum and finding that Hong Kong is an adequate forum to try securities fraud claims).
" See LAWRENCE LAí1 & PEONY WO^^G, TRESPASS TQ THE PERSON IN TORT LAW AND PRACï'ICE IN HONG Ko?vo 253, 254-5^ (Kemal Bokharv et al. eds., 2aß5}. In addition, Section ^^ of Hong Kong's Personal Data (Privacy) Ordinance provides for a right to compensation f or damages suffered as a result of violations of the Ordinance. See http:/Iwww.pcpd.org.hklenglishl ordinancelsectian 7o.htrr^l.
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Case

APPENDIX A Capitalized Corporations Are N©t Pierced Alter ego reIected because: ^1

Wady v. Provident Life Carporat^an `fully ^^le to respond to any damages award fpl^int ffj ^, & Accident Ins. C^. ^^f n^áy recover ^n this action. The court thus concludes that na genuine Am., 21^ F. Supp. 2d ^ issue of rr^ateríal fact exists to support [plaintiff s^ alter-ego argument, 1060 C.D. Cal. 2p02 and that defendant ís entitled to 'ud ment as a matter of law." 1070 Seymore v. Lake Tahoe Carporation was not "u^dercapátalized or otherwise incapable of Cruises, Inc., 88$ F. satisfying ^ judgment." (1036) Supp. 1029 (E.D. Cal. 1995 Haskell v, Time, Int., Corpora^ on "should be able to respond to any restituti^n^ry ^w^rd." 857 F. Supp. 1392 (1403) ^ E.D. Cal. 1994 Norins Realty Co. v. Carporation "not alleged to be insolvent and na facts are alleged from Co^s^h Abstract ^^c which ít can be inferred that it will be unable to respond to any Title Guar. Co., 80 Cal. ,judgment which may be imposed upon ít." (883) A . 2d $79 1947 M. ^.D. of the Islamic Plaintiff failed to "produce[] evidence that [delèndant] would be Repuñlic áf Iran v. unable to satisfy the award." (770) Gould, Int.; 969 F.2d 764 9th Cír. 1992 Robins v. Blether, 52 Plaintiff was not a creditor, much less an unsatísf^ed one. "As ^n Cal. App. 4th 886 entity which was no longer a judgment creditor ^f jdefendantf (1997) fplaintiffJ had simply lost standing t^ pursue fde fend^nt'sj alter egos." In other wards, the court ret^gnized that the door to alter ego ^ closes as soon as ^ laintì ceases to be ^n^unsatisf^ed creditor. 894 Only Corporatio^^s with Insuílicient Assets Are Píer^ed Case Assets Other Indicia Of Ut^derca ítalízation N^ted_By Ç©urt Corporation unable to pay $10,000 judgment Co oratían failed to issue stack Corporation bankrupt Corporation unable to fulfill contractual abl.ígations Co oratían failed to issue stock Ca^paratíon unable to pay $25,000 pro^x^íssory Hate Shareholder "left [corporation] with substantial debts but no assets save aff^ce furniture" Corporation unable to pay $12,529 constructíar^ bill Corporation unable to fulfill $15,000 contractual

', I

Minton v. Cavaney, 56 $0 Cal. 2 d 576 1961 Automotri^ del Golfo de $0 Cahfornias v. Resnick, 47 Cal. 2d 792 1957 Linco Services, Ine. v. ©ffice DuPont, 239 Cal. App. furniture 2d 841 1966 Platt v. Billingsley, 234 ^ $0 Cal. A . 2d 577 1965 Rosen v. E. C. Losch, $856 .Inc., 234 Cal. App. 2d 324 1965 1llcKee v. Peterson, 214 $12,500 Cal. App. 2d 515 (1963) Wheeler v. Superior $0 Mort a e Có., 196 Cal. ^

obligation
Corporation liabilities, including $4,975 judg^x^ent, exceeded assets Co oration failed to issue stock Corporation unable to pay $12,194 judgment Ca oratían failed to issue stack

^'

28

coy-oz ^ s ^ cw
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Case A . 2d 822 1961 Pain v. Palrn Springs Homes, Ini., 192 Cal. A . 2d 858 1961 Claremont Press Pub'g.
Co. v. $arksd^le, 187

Assets

Other ^^díeía Of U^derca ^ta^ízatí^n
N©ted By_C^urt

2 carps: $0; $500 $S00

Cal. A . 2d 813 1960 Talbot v. Fresno-Pacífi^ $0 Corp.; 181 Cal. App. 2 d 42S 1960 Temple v. Bodega Bay $10,000 Fisheries, Ini., 180 Cal.

Corporations unable to repay prorr^íssory nutes totaling $47,608, because shareholders had effectuated transfers "ín order to dissi ate the cor oration's assets" Corporation unable to fulfill $7,207 contractual obligation Co oratíon failed to issue stock Corporation unable ta fulfill$7,280 contractual obligaten Corporation unable ta pay its creditors

A . 2d 279 1960
Pan Pay. Sash & Door Co. v. Greendale Park, Inc., 166 Cal. App. 2d 652 1958 Co., 1ST Cal. App- 2d 583 1958 Engineering Service
Corp. v. Longridge Inv.

2 corps: $200; Corporations unable to pay its outstandeg obligations

$500

of $28.700
Corporation unable to fulfzll $5,900 contractual obligaten Corporation unable to fulfill $16,839 obligation Corporation faíled to issue stock Corporation insolvent, and unable to meet contractual obligaten ta pay commissions Co oratíon faíled to íssue suck orporation bankrupt orporatíon unable to repay promissory notes orporatíon faíled to issue stock o^poration unable to repay promissory note a^paration failed to íssue stock efore sint filed, "Sellers drained Devcorp of its assets nd manpower for the purpose of leaving the company mere shell corporaten." Id. at 1236. After being rained, Devcorp was left with $4.1 million e assets, alf af which was its eterest under Buyers' xamissary note. Id. at 1236. Devcorp held liable at rial far $11.5 million in darrgages. Id. at 1237. Award educed ta $2.2 million un appeal, but court rejects gement that Devcorp can satisfy judgment because aj there was evidence that sellers were continuing to rain Devcorp of its assets pending the appeal; (b) evcorp's alleged assets were of dubious value; and c) there was no need to rely on a piercing theory ta each sellers because sellers themselves were liable fox ^ rood. Id. at 1251-52 . efore suit filed, Stillman sold all the assets of the 0 oratíon to newt created co oration ín effort to
_2

Bariffi v. Longridge Dev. $200

$200

C©., 153 Gal . App. 2d
404 1957 Sh^fford v. Otto Sales Co.,149 Cal. App. 2d 428 1957 Hiehle v. Torrance
Millworks, Inc., 126

$50 2,000

I

Cal. App. 2d X24 1954 Morr v. Postal Union Life Ins. C^., 40 Cal. A . 2d 673 1940 Lis Palmas Assocs. v. L s Palmas Center Assocs., 235 Cal. App. ^d 1220 (1991)

nclear one for urposes of
he court's

alysís excuse assets ere stripped rom company y alter ego efore filing f lawsuit and uring trial nd appeal

Shah v. Stillman, 2004 WL áS2179 Cal. A

unclear,
arentl $0

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Case 2d Dist. Feb. 26, 2004} (unpublished)

Assets

Other I^dícía Of Undercanítalízatin^ Nated By Cnurt vade liability fram judgment. Payment was supposed o be made for assets but there is no e^idenee it was dually .made. Stillman then allowed corporation to e suspended anal default judgment entered against it pow assetless). Deeded largely op fraudulent
rapsfer theory - Stillman gutted coreoration to try to

7

Wells Fargo Bank v. ClarenØvn Services, Inc., 2003 WL 21232420 (Cal. App. 3d Dist. May 28, 2003) (ux^pul^lished)

ínímal, escribed as `shell"

sea e a in "ud rpept. orporafiiop was adequately capitalized and separate at egipníng, but over years parent had assumed greater ontrol, eventually stripping ït of its assets and ssumipg total control of its affairs. Lease in cor^tept as entered at direction of parent company, and it was arept who regularly paid rent and who stopped aying (thus causing lawsuit for breach). Subsidiary ad been "stripped" of separate identity by parent and ad no ability to generate income or otherwise honor 'ts oblï ations.

ca ^-Q2 s I cw

PERSONAL 1URI5DICTION

^ o ^ . ^ o >^IS ^ lss Fo Iaac ^ oE

3

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APPENDIIX B
The Fifteen Assoc^^ted Vendans Factora*

(t) Commingling of finds and other assets, failure to segregate funds af the separate entíties, and the unauthorized diversion of corporate funds ar assots ta other than corporate uses (?) (3) {4) The treatment by an ^ndivídual of the assets of the corporation as his own The failure to obtain authority to issue stock or to subscribe to or issue