Allegro Consultants, Inc. v. Wellington Technologies, Inc. et al

Filing 57

ORDER (1) GRANTING MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION AS TO AUDAX, KIMMES, AND BIZJAK AND DENYING MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION AS TO JASKO; (2) GRANTING MOTION TO DISMISS FOR FAILURE TO JOIN AN INDISPENSABLE PARTY AS TO CLAIMS 9-11 WITH LEAVE TO AMEND; (3) DENYING MOTION TO DISMISS FOR IMPROPER VENUE; AND (4) DENYING ALTERNATIVE MOTION TO TRANSFER (addressing 39 ). Signed by Judge Beth Labson Freeman on 9/2/2014. (blflc1, COURT STAFF) (Filed on 9/2/2014)

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1 2 3 4 5 UNITED STATES DISTRICT COURT 6 NORTHERN DISTRICT OF CALIFORNIA 7 SAN JOSE DIVISION 8 9 ALLEGRO CONSULTANTS, INC., Case No. 13-cv-02204-BLF Plaintiff, 10 v. 17 ORDER (1) GRANTING MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION AS TO AUDAX, KIMMES, AND BIZJAK AND DENYING MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION AS TO JASKO; (2) GRANTING MOTION TO DISMISS FOR FAILURE TO JOIN AN INDISPENSABLE PARTY AS TO CLAIMS 9-11 WITH LEAVE TO AMEND; (3) DENYING MOTION TO DISMISS FOR IMPROPER VENUE; AND (4) DENYING ALTERNATIVE MOTION TO TRANSFER 18 [Re: ECF 39] United States District Court Northern District of California 11 12 13 WELLINGTON TECHNOLOGIES, INC., et al., Defendants. 14 15 16 19 20 21 Plaintiff Allegro Consultants, Inc. (“Allegro”) brings this action to recover monies for 22 software support services rendered to Defendant Wellington Technologies, Inc. (“Wellington”). 23 Allegro sues Wellington and several other defendants that are alleged to be alter egos of 24 Wellington and of each other: Audax Solutions LLC (“Audax”), Todd Kimmes (“Kimmes”), Ed 25 Griglak (“Griglak”), Joseph Jasko (“Jasko”), and James Bizjak (“Bizjak”). Audax, Kimmes, 26 Jasko, and Bizjak move to dismiss the action for lack of personal jurisdiction, failure to join an 27 indispensable party, and improper venue. Alternatively, they request that the Court transfer the 28 action to the Northern District of Ohio. The Court has considered the briefing and the oral argument presented at the hearing on 1 2 August 21, 2014. For the reasons discussed below, the motion to dismiss for lack of personal 3 jurisdiction is GRANTED as to Audax, Kimmes, and Bizjak without leave to amend and DENIED 4 as to Jasko; the motion to dismiss for failure to join an indispensable party is GRANTED as to 5 Claims 9-11 with leave to amend; the motion to dismiss for improper venue is DENIED; and the 6 alternative motion to transfer is DENIED. I. 7 BACKGROUND1 Allegro is a California corporation that provides software support services. (First Am’d 8 Compl. (“FAC”) ¶ 1, ECF 15; Cooper Decl. ¶¶ 4-5) Wellington is an Ohio corporation that buys, 10 sells, repairs, re-manufactures, services, distributes, and generally deals in computer hardware and 11 United States District Court Northern District of California 9 software. (Jasko Decl. ¶ 2, ECF 40) Effective August 1, 2007, Wellington retained Allegro under 12 a Software Support Services Agreement to provide software support services as ordered by 13 Wellington “from time to time.” (Cooper Decl. Ex. B, ECF 51-5) Bizjak, one of Wellington’s co- 14 founders, traveled to California to negotiate the agreement. (Cooper Decl. ¶ 4; Bizjak Decl. ¶ 2, 15 ECF 41) Wellington did not order software support services from Allegro for approximately 16 fifteen months after the agreement was finalized. (Cooper Decl. ¶ 5) In 2008, Wellington was awarded a large contract to maintain servers at AT&T data 17 18 centers throughout the country. (Cooper Decl. ¶ 5; Jasko Decl. ¶ 4) Wellington requested that 19 Allegro provide software services to support Wellington in fulfilling the AT&T contract, and 20 Allegro did provide such services. (Id.) Most of Allegro’s work on the contract was done in 21 California. (Cooper Decl. ¶ 5) Jasko, Wellington’s President, spent about one week a month in 22 California during the next two years as the AT&T business grew. (Id.; Jasko Decl. ¶ 4) 23 Wellington also hired a local California employee and leased office space and a corporate 24 apartment in California. (Cooper Decl. ¶¶ 7-8) 25 In 2009 and 2010, Wellington lost ten significant contracts, including the AT&T contract. 26 (Jasko Decl. ¶ 6) Wellington was unable to make payments on a $3.5 million line of credit that it 27 1 28 The background facts are drawn from the operative first amended complaint as well as declarations submitted by the parties in connection with the motions. 2 1 had obtained from non-party Liberty Bank. (Jasko Decl. ¶¶ 5-7) Wellington also failed to pay 2 Allegro more than $700,000 in invoices. (FAC ¶ 27) On December 8, 2010, Wellington and 3 Allegro entered into a Vendor Customer Terms Modification Agreement under which Wellington 4 was to pay Allegro the past-due invoices over a five-year period at 5% interest. (FAC ¶ 31; 5 Cooper Decl. Ex. C, ECF 51-6) Wellington was to make monthly payments of approximately 6 $12,000 beginning in February 2011. (FAC ¶ 31) Jasko specifically represented to Allegro that 7 Wellington intended to make the required payments. (FAC ¶ 42) Wellington failed to make the 8 payments. (FAC ¶ 31) In March 2011, Allegro filed suit against Wellington in the Northern District of California, 10 alleging claims for breach of contract and fraud. (Pl.’s Corrected RJN Ex. H, ECF 52-2)2 Allegro 11 United States District Court Northern District of California 9 alleges that it dismissed that action without prejudice after reaching an oral agreement with 12 Wellington under which Wellington committed to pay the past-due invoices on an agreed-upon 13 schedule. (FAC ¶ 36) Wellington made payments under the new schedule through June 2012 but 14 then it made only partial payments for some months and no payments at all for other months. (Id.) 15 In late 2012, Liberty Bank informed Wellington that it was electing to foreclose on 16 Wellington’s assets, which were collateral for the line of credit that Liberty Bank had extended to 17 Wellington. (Bizjak Decl. ¶ 7) Flagship Technologies, Inc. (“Flagship”), a Minnesota corporation 18 in the business of reselling computer hardware and peripheral equipment, expressed interest in 19 buying the collateral. (Kimmes Decl. ¶¶ 2-5, ECF 42). Flagship had been one of Wellington’s 20 suppliers of computer parts and, like Allegro, was one of Wellington’s unsecured creditors. 21 (Kimmes Decl. ¶ 3, ECF 42; Kimmes Suppl. Decl. ¶ 3, ECF 54) Flagship’s owner, Kimmes, 22 hoped to recoup some of the losses that Flagship sustained as a result of Wellington’s delinquent 23 account. (Id.) Flagship’s wholly owned subsidiary, Westlake Investments, LLC (“Westlake”), 24 formed Audax on April 24, 2013. (Kimmes Decl. ¶ 7, ECF 42; Pl.’s Corrected RJN Ex. G, ECF 25 52-1).3 A deal was worked out under which Wellington agreed to voluntarily turn over certain of 26 2 27 The Court “may take judicial notice of court filings and other matters of public record.” Reyn’s Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 n.6 (9th Cir. 2006). 28 3 The Court may take judicial notice of records showing the date of Audax’s formation. See id. 3 1 its assets to Liberty Bank for immediate sale to Audax. (Id. ¶ 6) On April 12, 2013, Wellington 2 and Liberty Bank entered into an Agreement for Turnover of Collateral and Private Sale. (Jasko 3 Decl. Ex. 4) On April 30, 2013, Liberty Bank and Audax signed a Secured Creditor Asset 4 Purchase Agreement, which provided that it was “effective as of 12:00 midnight (EDT) April 12, 5 2013.” (Kimmes Decl. ¶ 6 and Ex. 2, ECF 42) Under the Secured Creditor Asset Purchase 6 Agreement, Audax paid Liberty Bank $250,000 cash for certain of Wellington’s assets. (Id.) On May 14, 2013, Allegro filed the present lawsuit against Wellington, asserting claims 7 8 for breach of contract and fraud. On February 21, 2014, Allegro filed the operative FAC, adding a 9 number of defendants: Audax; Kimmes, the founder and owner of Flagship; Griglak, a co-founder of Wellington; Bizjak, a co-founder of Wellington; and Jasko, President of Wellington. (FAC, 11 United States District Court Northern District of California 10 ECF 15) Allegro claims that Audax is merely an alter ego of Wellington; that all of the individual 12 defendants likewise are alter egos of Wellington and of each other; and that the Secured Creditor 13 Asset Purchase Agreement under which Audax purchased certain of Wellington’s assets from 14 Liberty Bank is void as a fraudulent transfer of assets for the purpose of avoiding paying Allegro 15 for its services. (FAC ¶ 9) Alternatively, Allegro claims that Audax is a successor or “mere 16 continuation” of Wellington. (FAC ¶ 12) The FAC asserts claims for: (1) breach of contract against Wellington; (2) fraud against 17 18 Jasko and Wellington; (3) common counts for money had and received against all defendants; (4) 19 fraud and intentional misrepresentation against all defendants; (5) fraud and negligent 20 misrepresentation against all defendants; (6) fraudulent concealment against all defendants; (7) 21 false promise against all defendants; (8) declaratory relief against all defendants; (9) fraudulent 22 transfer with actual intent to defraud pursuant to California Civil Code § 3439.04(A)(1) against all 23 defendants; (10) constructive fraudulent transfer pursuant to California Civil Code § 24 3439.04(A)(2) against all defendants; and (11) constructive fraudulent transfer pursuant to 25 California Civil Code § 3439.05 against all defendants. 26 27 28 II. DISCUSSION Defendants Audax, Kimmes, Jasko, and Bizjak move to dismiss the FAC for lack of personal jurisdiction over them, for failure to join Liberty Bank as an indispensable party, and for 4 1 improper venue. Alternatively, Defendants request that the Court transfer the action to the 2 Northern District of Ohio. 3 4 5 A. Personal Jurisdiction 1. Legal Standard When a defendant challenges a court’s personal jurisdiction over it under Federal Rule of Civil Procedure 12(b)(2), the plaintiff bears the burden of establishing that jurisdiction is 7 appropriate. Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004). If the 8 motion is evaluated based upon written materials rather than an evidentiary hearing, “the plaintiff 9 need only make a prima facie showing of jurisdictional facts.” Id. (internal quotation marks and 10 citation omitted). Uncontroverted allegations in the complaint are accepted as true, and factual 11 United States District Court Northern District of California 6 disputes created by conflicting affidavits are resolved in the plaintiff’s favor. Id. 12 “Federal courts ordinarily follow state law in determining the bounds of their jurisdiction 13 over persons.” Walden v. Fiore, --- U.S. ----, ----, 134 S. Ct. 1115, 1121 (2014) (quoting Daimler 14 AG v. Bauman, 571 U.S. ----, ----, 134 S. Ct. 746, 753 (2014)); see also Schwarzenegger, 374 F.3d 15 at 800 (“[T]he district court applies the law of the state in which the district court sits.”). 16 California’s long-arm statute is coextensive with federal due process requirements. 17 Schwarzenegger, 374 F.3d at 800-01. “The Due Process Clause of the Fourteenth Amendment 18 constrains a State’s authority to bind a nonresident defendant to a judgment of its courts.” 19 Walden, 134 S. Ct. at 1121. “Although a nonresident’s physical presence within the territorial 20 jurisdiction of the court is not required, the nonresident generally must have ‘certain minimum 21 contacts . . . such that the maintenance of the suit does not offend ‘traditional notions of fair play 22 and substantial justice.’” Id. (quoting Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). 23 A federal district court may exercise either general or specific personal jurisdiction over a 24 nonresident defendant. Daimler, 134 S. Ct. at 754. General jurisdiction exists when the 25 defendant’s contacts “are so continuous and systematic as to render [it] essentially at home in the 26 forum State.” Id. (internal quotation marks and citation omitted). A nonresident that is subject to 27 the court’s general jurisdiction may be sued for claims “arising from dealings entirely distinct” 28 from the forum-related activities. Id. (internal quotation marks and citation omitted). In contrast, 5 1 specific jurisdiction exists when the defendant’s contacts with the forum state are more limited but 2 the plaintiff’s claims arise out of or relate to those contacts. Id. A defendant’s contacts with a 3 resident of the forum state alone are insufficient to establish personal jurisdiction – to satisfy due 4 process, “the defendant’s suit-related conduct must create a substantial connection with the forum 5 State.” Walden, 134 S. Ct. at 1121 (emphasis added). 6 7 2. Defendants’ Contacts with California With respect to each of the moving parties, the Court must determine whether Allegro has 8 made out a prima facie case of personal jurisdiction based upon the party’s own contacts with 9 California or based upon Allegro’s alter ego and successor theories. (See FAC ¶¶ 9, 12) It is undisputed for purposes of this motion that Wellington has sufficient contacts with California to 11 United States District Court Northern District of California 10 give rise to personal jurisdiction. (See, e.g. Cooper Decl. ¶¶ 4-10, ECF 51-4; Griglak Decl. ¶¶ 2-3) 12 Thus if Wellington’s contacts may be imputed to any of the moving parties, the Court would have 13 personal jurisdiction over those parties as well. 14 California law applies to Allegro’s alter ego and successor claims. See In re Schwarzkopf, 15 626 F.3d 1032, 1037 (9th Cir. 2010) (“In determining whether alter ego liability applies, we apply 16 the law of the forum state”); SEC v. Hickey, 322 F.3d 1123, 1128 (9th Cir. 2003) (“We apply the 17 law of the forum state in determining whether a corporation is an alter ego of an individual.”) 18 (internal quotation marks and citation omitted); Wilson v. Metals USA, Inc., No. CIV. S-12-0568 19 LKK/GGH, 2013 WL 4586919, at *7 (E.D. Cal. Aug. 28, 2013) (district court sitting in diversity 20 applies law of the forum state to questions of successor liability). 21 “California recognizes alter ego liability where two conditions are met: First, where there 22 is such a unity of interest and ownership that the individuality, or separateness, of the said person 23 and corporation has ceased; and, second, where adherence to the fiction of the separate existence 24 of the corporation would . . . sanction a fraud or promote injustice.” Schwarzkopf, 626 F.3d at 25 1038 (internal quotation marks and citation omitted). “Under California law, and under traditional 26 rules of successor liability, asset purchasers are not liable as successors unless one of the 27 following four exceptions applies: (1) The purchasing corporation expressly or impliedly agrees 28 to assume the liability; (2) The transaction amounts to a ‘de-facto’ consolidation or merger; (3) 6 1 The purchasing corporation is merely a continuation of the selling corporation; or (4) The 2 transaction was fraudulently entered into in order to escape liability.” Cygnus Telecommc’ns 3 Tech., LLC v Worldport Commc’ns, Inc., 543 F. Supp. 2d 1113, 1121 n.5 (N.D. Cal. 2008). a. 4 Audax and Kimmes Audax’s and Kimmes’ own contacts with California are insufficient to give rise to personal 6 jurisdiction. Kimmes is a Minnesota resident. (Kimmes Decl. ¶ 9, ECF 42) He has never lived in 7 California or maintained an office or bank account there. (Id.) It appears that his sole contact with 8 California was a trip for pleasure in 2013. (Id.) Kimmes owns 90% of the outstanding shares of 9 Flagship, a Minnesota corporation; Flagship wholly owns Westlake, a Minnesota limited liability 10 company; and Westlake owns 90% of Audax, a Minnesota limited liability company. (Id. ¶¶ 2, 6- 11 United States District Court Northern District of California 5 7) Audax is not registered, licensed, or qualified to do business in California. (Id. ¶8) It does not 12 have offices, employees, bank accounts, or property in California and it does not pay taxes there. 13 (Id.) Audax remotely services the equipment of its single California customer. 14 With respect to Allegro’s alter ego and successor theories, Kimmes never held an 15 ownership interest in Wellington. (Kimmes Suppl. Decl. ¶ 3, ECF 54) None of the other 16 individual defendants ever held an ownership interest in Audax. (Id. ¶ 2). Allegro argues that 17 alter ego is shown by the fact that the Secured Creditor Asset Purchase Agreement (under which 18 Audax bought certain of Wellington’s assets from Liberty Bank) bears the date April 12, 2013 19 (see Kimmes Decl. Ex. 2, ECF 42), but Audax did not come into existence until April 24, 2013 20 (see Pl.’s Corrected RJN Ex. G, ECF 52-1). Allegro asserts that this evidence suggests that 21 Kimmes, rather than Audax, was the true purchaser. Even if this inference could be drawn, at 22 most the inference would suggest that Kimmes is the alter ego of Audax; it does not suggest that 23 either Kimmes or Audax is the alter ego of Wellington. Moreover, the Secured Creditor Asset 24 Purchase Agreement does not indicate that it was signed on April 12, 2013, but rather that the 25 parties to the agreement had elected to make it “effective as of 12:00 midnight (EDT) April 12, 26 2013.” (Kimmes Decl. Exh. B, ECF 42 (emphasis added)) Kimmes explains in his declaration 27 that the Secured Creditor Asset Purchase Agreement actually was signed on April 30, 2013. 28 (Kimmes Decl. ¶ 6) 7 Allegro also points to evidence that a number of key Wellington officers and employees 1 2 now work for Audax and that Wellington’s Linked In page directs viewers to “Explore the 3 services of Audax Solutions.” (Cooper Decl. ¶ 10 and Ex. F, ECF 51-5, 51-9; Griglak Decl. ¶ 3, 4 ECF 51-10) While this evidence shows some relationship between Audax and Wellington, the 5 Court concludes that it is insufficient to make out a prima facie case that there is unity of interest 6 and ownership between the two companies, or that Audax is a successor of Wellington.4 Indeed, 7 the Court does not find it particularly surprising that Audax sought out Wellington’s employees 8 given that Audax had purchased certain of Wellington’s assets, including existing contracts. Nor 9 is it surprising that Wellington’s employees were looking for new jobs given Wellington’s 10 financial picture. Accordingly, the motion to dismiss for lack of personal jurisdiction is GRANTED as to United States District Court Northern District of California 11 12 Audax and Kimmes. Allegro’s counsel indicated at the hearing that all known facts regarding 13 personal jurisdiction are in the record. Leave to amend therefore is denied. b. 14 Jasko However, Allegro has made out a prima facie case of specific personal jurisdiction based 15 16 upon Jasko’s contacts with California. The Ninth Circuit has articulated a three-prong test for 17 determining whether a nonresident defendant is subject to specific personal jurisdiction. See 18 Schwarzenegger, 374 F.3d at 802. That test must be applied in light of and as informed by the 19 Supreme Court’s recent decision in Walden, which is discussed in detail below. In order for a 20 Court to exercise specific personal jurisdiction over a non-resident defendant, 21 (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 protections of its laws; 22 23 (2) the claim must be one which arises out of or relates to the defendant’s forumrelated activities; and 24 25 (3) the exercise of jurisdiction must comport with fair play and substantial justice, i.e. it must be reasonable. 26 27 28 4 Defendants contend that Ohio law governs the alter ego and successor issues. The Court would reach the same conclusion even if it were to apply Ohio law. See, e.g., Rondy & Co. v. Plastic Lumber Co., C.A. No. 25548, 2011 WL 5377741, at *6 (Ohio Ct. App. Nov. 9, 2011). 8 1 Schwarzenegger, 374 F.3d at 802 (citation omitted). The plaintiff bears the burden of proof with 2 regard to the first two elements. Sher v. Johnson, 911 F.2d 1357, 1361 (1990). If the plaintiff 3 satisfies that burden, the burden shifts to the defendants to “present a compelling case” that 4 exercising jurisdiction would be unreasonable. Id. at 1364 (citing Burger King Corp. v. 5 Rudzewicz, 471 U.S. 462, 476 (1985)). Jasko (Wellington’s President) called Cooper (Allegro’s President) in 2008 to request 6 7 Allegro’s support on Wellington’s AT&T contract. (Cooper Decl. ¶ 5) Jasko spent approximately 8 one week a month in California in 2008 and 2009, working with Allegro on the AT&T contract. 9 (Cooper Decl. ¶¶ 4-5) Jasko also allegedly represented that Wellington would make the payments required under the Vendor Customer Terms Modification Agreement. (FAC ¶ 42) Allegro’s 11 United States District Court Northern District of California 10 claims against Jasko – almost all of which are grounded in fraud – arise from those contacts. The 12 Court concludes that Allegro has met its burden of demonstrating that Jasko directed his activities 13 toward California (and in fact performed many of those activities in California), and that Allegro’s 14 claims arise out of the forum-related activities. Jasko has not presented a compelling reason why exercise of jurisdiction would be 15 16 unreasonable. He argues without citation to authority that his actions on behalf of Wellington 17 cannot give rise to jurisdiction over him personally. (See Opp. at 4-5, ECF 53) That argument is 18 unavailing in light of Calder v. Jones, 465 U.S. 783, 790 (1984). In Calder, the Supreme Court 19 affirmed the California state courts’ exercise of jurisdiction over two nonresident defendants who 20 had allegedly libeled the plaintiff in an article they wrote and edited in Florida for publication in 21 the National Enquirer. Rejecting the defendants’ argument that their contacts with the forum state 22 – writing and editing the article – occurred only in their capacities as employees of the National 23 Enquirer, the Supreme Court held that the defendants’ “status as employees does not somehow 24 insulate them from jurisdiction.” Calder, 465 U.S. at 790. The Supreme Court recently revisited Calder in Walden, in which the plaintiffs brought a 25 26 Bivens5 action against Walden, a Georgia police officer working as a deputized Drug Enforcement 27 28 5 Bivens v. Six Unknown Fed. Narcotics Agents, 403 U.S. 388 (1971). 9 1 Administration agent at Atlanta’s Hartsfield-Jackson International Airport. Walden, 134 S. Ct. at 2 1119. Walden seized almost $97,000 in cash from the plaintiffs, professional gamblers en route 3 from Puerto Rico to Las Vegas, Nevada, despite their claims that the cash consisted of their 4 gambling bank and winnings. Id. Walden seized the cash after using a drug-sniffing dog to 5 perform a sniff test that the plaintiffs characterized as “at best, inconclusive,” and later he helped 6 draft an allegedly false affidavit to show probable cause for forfeiture of the money. Id. at 1119 & 7 n.1. The plaintiffs sued Walden in the District of Nevada, which dismissed the suit for lack of 8 personal jurisdiction. Id. at 1120. The Ninth Circuit reversed, holding that Walden had “expressly 9 aimed” his submission of the allegedly false affidavit at Nevada by submitting the affidavit to the United States Attorney’s Office in Georgia with knowledge that it would affect persons with a 11 United States District Court Northern District of California 10 “significant connection” to Nevada. Id. The Supreme Court held that the Ninth Circuit had erred 12 in focusing on Walden’s contacts with the plaintiffs rather than his contacts with the forum. Id. at 13 1124. It concluded that: “[Walden’s] actions in Georgia did not create sufficient contacts with 14 Nevada simply because he allegedly directed his conduct at plaintiffs whom he knew had Nevada 15 connections. Such reasoning improperly attributes a plaintiff’s forum connections to the 16 defendant and makes those connections ‘decisive’ in the jurisdictional analysis.” Id. at 1125. 17 Characterizing Walden as entirely consistent with Calder, the Supreme Court noted that in Calder 18 the alleged tort of libel actually occurred in California as a result of the widespread circulation of 19 the offending article there, and that as a result the defendants had significant contacts with 20 California. Id. at 1124. 21 In the present case jurisdiction is not based upon conduct occurring outside of California 22 but “aimed” at a California resident. Instead, jurisdiction is based upon misrepresentations that 23 Jasko allegedly made directly to Allegro in connection with services performed by Allegro in 24 California and supervised by Jasko on-site in California. Under both Calder and Walden, those 25 contacts are sufficient to give rise to specific personal jurisdiction. Accordingly, the motion to 26 dismiss for lack of personal jurisdiction is DENIED as to Jasko. 27 28 c. Bizjak The record discloses far more limited California contacts on the part of Bizjak. While 10 1 Bizjak negotiated the Software Support Services Agreement in California in 2007 (Cooper Decl. 2 ¶¶ 4, ECF 51-4), no allegation or evidence establishes that he had contacts with California after 3 that initial negotiation. Allegro does not assert any claims arising out of the 2007 negotiations. 4 Thus Allegro has failed to establish a prima facie case of personal jurisdiction based upon Bizjak’s 5 own contacts with California. 6 With respect to Allegro’s theory that Bizjak is an alter ego of Wellington, there is no 7 evidence of the factors that typically suggest an alter ego relationship in California: commingling 8 of funds, the individual’s treatment of corporate assets as his own, disregard of legal formalities 9 and the failure to maintain arm’s length relationships among related entities, or diversion or manipulation of assets. See Schwarzkopf, 626 F.3d at 1038. Absent such evidence, the Court 11 United States District Court Northern District of California 10 concludes that Allegro has failed to make out a prima facie case of personal jurisdiction based 12 upon alter ego. 13 Accordingly, the motion to dismiss for lack of personal jurisdiction is GRANTED as to 14 Bizjak. Allegro’s counsel indicated at the hearing that all known facts regarding personal 15 jurisdiction are in the record. Leave to amend therefore is denied. 16 17 B. Indispensable Party 1. Legal Standard 18 When a defendant moves to dismiss under Federal Rule of Civil Procedure 12(b)(7) for 19 failure to join a party required under Federal Rule of Civil Procedure 19, the court engages in a 20 three-step inquiry. Salt River Project Agr. Imp. and Power Dist. v. Lee, 672 F.3d 1176, 1178-79 21 (9th Cir. 2012). First, the court must determine whether the absent party is necessary – that is, 22 required to be joined if feasible – under Rule 19(a). Id. at 1179. A party may be necessary under 23 Rule 19(a) under three circumstances: (1) if the court cannot accord complete relief among 24 existing parties; (2) if the absent party has an interest in the action and resolving the action in his 25 absence may as a practical matter impair or impede his ability to protect that interest; or (3) if the 26 absent party has an interest in the action and resolving the action in his absence may leave an 27 existing party subject to inconsistent obligations because of that interest. Id. 28 Second, if an absent party is necessary, the court must determine whether it is feasible to 11 1 order joinder of the absent party. Id. Third, if joinder is not feasible, the court must determine 2 whether the case can proceed without the absent party or whether the absent party is indispensable 3 such that dismissal is required. Id. 4 A party may be necessary to some claims and not others, see Lyon v. Gila River Indian 5 Comty., 626 F.3d 1059, 1068 (9th Cir. 2010), and the court may dismiss some claims under Rule 6 19 while allowing others to proceed, see EEOC v. Peabody Western Coal Co., 610 F.3d 1070, 7 1083 (9th Cir. 2010). 2. 8 9 Liberty Mutual Claims 9, 10, and 11 seek to void the Secured Creditor Asset Purchase Agreement under which Audax purchased certain of Wellington’s assets from Liberty Bank. As a party to the 11 United States District Court Northern District of California 10 contract that Allegro seeks to void, Liberty Bank clearly has an interest that could be impaired if 12 those claims are resolved in its absence. Based upon the current record, it does not appear feasible 13 to join Liberty Bank because it does not appear that Liberty Bank is subject to this Court’s 14 personal jurisdiction. The Ninth Circuit has “repeatedly held that ‘[n]o procedural principle is 15 more deeply imbedded in the common law than that, in an action to set aside a lease or a contract, 16 all parties who may be affected by the determination of the action are indispensable.’” EEOC v. 17 Peobody Western Coal, 610 F.3d at 1082 (quoting Lomayaktewa v. Hathaway, 520 F.2d 1324, 18 1325 (9th Cir. 1975)). Thus Liberty Bank is an indispensable party to claims seeking to void the 19 Secured Creditor Asset Purchase Agreement. 20 At the hearing, the Court noted that the scope of Defendants’ motion was unclear. 21 Defendants’ counsel clarified that Defendants do not seek dismissal of the entire action for failure 22 to join an indispensable party and he agreed that dismissal is appropriate only with respect to those 23 claims seeking to void the Secured Creditor Asset Purchase Agreement. Accordingly, the motion 24 to dismiss is GRANTED as to Claims 9-11 for failure to join an indispensable party. The Court 25 will grant leave to amend so that Allegro may join Liberty Bank as a defendant if in fact Liberty 26 Bank is subject to personal jurisdiction and such joinder is feasible. 27 C. Venue 28 Defendants seek dismissal of the action under Federal Rule of Civil Procedure 12(b)(3) for 12 1 improper venue or, alternatively, transfer of the action to the Northern District of Ohio. 1. 2 Dismissal “A civil action may be brought in – (1) a judicial district in which any defendant resides, if 3 4 all defendants are residents of the State in which the district is located; (2) a judicial district in 5 which a substantial part of the events or omissions giving rise to the claim occurred, or a 6 substantial part of property that is the subject of the action is situated; or (3) if there is no district 7 in which an action may otherwise be brought as provided in this section, any judicial district in 8 which any defendant is subject to the court’s personal jurisdiction with respect to such action.” 28 9 U.S.C. § 1391(b). Defendants argue that the action should be dismissed because venue is proper only in the Northern District of Ohio. Because “a substantial part of the events or omissions 11 United States District Court Northern District of California 10 giving rise to the claim[s] occurred” in the Northern District of California – e.g., the negotiation 12 and execution of the Software Support Services Agreement – venue is proper here. 13 Defendants rely on a forum selection clause contained in the Secured Creditor Asset 14 Purchase Agreement, which provides that any “action under or to enforce” the agreement must be 15 brought in a state or federal court within the Northern District of Ohio, Eastern Division at 16 Cleveland.6 (Kimmes Decl. Exh. 2 ¶ 17g) The forum selection clause is not applicable here, as 17 none of Allegro’s claims are brought “under or to enforce” the Secured Creditor Asset Purchase 18 Agreement; to the contrary, Allegro seeks to void that agreement. Accordingly, the motion to dismiss for improper venue is DENIED. 19 2. 20 Transfer 21 Defendants alternatively seek to transfer the action to the Northern District of Ohio. “For 22 the convenience of parties and witnesses, in the interest of justice, a district court may transfer any 23 civil action to any other district or division where it might have been brought or to any district or 24 division to which all parties have consented.” 28 U.S.C. § 1404(a). Defendants assert that the 25 action could have been brought in the Northern District of Ohio because the Secured Creditor 26 27 28 6 The Agreement for Turnover of Collateral and Private Sale contains a nearly identical forum selection clause. (Jasko Decl. Exh. 4 ¶ 10) However, none of Allegro’s claims are brought “under or to enforce” the turnover agreement. 13 1 Asset Purchase Agreement was made and performed there. (See Mot. at 19) Defendants do not 2 point to record evidence showing that the Secured Creditor Asset Purchase Agreement was made 3 and performed in Ohio. However, even assuming that the action might have been brought in the 4 Northern District of Ohio, Defendants have not demonstrated that transfer to that district is 5 warranted. In a case not involving a forum-selection clause,7 a district court considering a § 1404(a) 6 7 motion “must evaluate both the convenience of the parties and various public-interest 8 considerations.” Atl. Marine Constr. Co., Inc. v. United States Dist. Court for the Western Dist. of 9 Texas, --- U.S. ----, ----, 134 S. Ct. 568, 581 (2013). “Factors relating to the parties’ private interests include ‘relative ease of access to sources of proof; availability of compulsory process for 11 United States District Court Northern District of California 10 attendance of unwilling, and the cost of obtaining attendance of willing, witnesses; possibility of 12 view of premises, if view would be appropriate to the action; and all other practical problems that 13 make trial of a case easy, expeditious and inexpensive.’” Id. at 581 n.6 (quoting Piper Aircraft 14 Co. v. Reyno, 454 U.S. 235, 241 n.6 (1981)). “Public-interest factors may include ‘the 15 administrative difficulties flowing from court congestion; the local interest in having localized 16 controversies decided at home; [and] the interest in having the trial of a diversity case in a forum 17 that is at home with the law.’” Id. (quoting Piper Aircraft, 454 U.S. at 241 n.6) (alteration in 18 original). The Supreme Court has indicated that “[t]he Court must also give some weight to the 19 plaintiffs’ choice of forum.” Id. The Ninth Circuit has gone further, holding that “[t]he defendant 20 must make a strong showing of inconvenience to warrant upsetting the plaintiff’s choice of 21 forum.” Decker Coal Co. v. Commonwealth Edison Co., 805 F.2d 834, 843 (9th Cir. 1986). 22 Defendants’ motion addresses these factors only generally and in conclusory fashion 23 without citation to record evidence. (See Mot. at 19) Consequently, Defendants have not made 24 the requisite “strong showing” to warrant disregard of Allegro’s choice of forum. The motion for 25 26 27 28 7 As noted, both the Secured Creditor Asset Purchase Agreement and the Agreement for Turnover of Collateral and Private Sale contain forum selection clauses applying to “actions under or to enforce” those agreements. The forum selection clauses are not relevant to the § 1404(a) analysis, as none of Allegro’s claims are brought “under or to enforce” the Secured Creditor Asset Purchase Agreement or the Agreement for Turnover of Collateral and Private Sale. 14 1 2 transfer is DENIED. III. ORDER 3 For the foregoing reasons, IT IS HEREBY ORDERED that: 4 (1) to amend as to Audax, Kimmes, and Bizjak and DENIED as to Jasko; 5 6 The motion to dismiss for lack of personal jurisdiction is GRANTED without leave (2) The motion to dismiss for failure to join an indispensable party is GRANTED only as to Claims 9-11 with leave to amend; 7 8 (3) The motion to dismiss for improper venue is DENIED; 9 (4) The motion to transfer is DENIED; 10 (5) Leave to amend is limited to curing the defects noted herein with respect to the United States District Court Northern District of California 11 failure to join Liberty Bank as a party – Plaintiff may not add additional claims or 12 parties without leave of the Court; and 13 (6) Any amended complaint shall be filed on or before September 23, 2014. 14 15 16 17 Dated: September 2, 2014 ______________________________________ BETH LABSON FREEMAN United States District Judge 18 19 20 21 22 23 24 25 26 27 28 15

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