Pepper, N.A. v. Expandi, Inc. et al

Filing 26

ORDER DENYING DEFENDANTS' MOTION TO DISMISS. Re: Dkt. No. 15 . Defendants must answer the complaint within 14 days. Case management conference set for 12/9/2015 10:00 AM. The parties must submit a case management statement by 12/2/2015, which should include a proposed case schedule. Signed by Judge Nathanael Cousins. (lmh, COURT STAFF) (Filed on 11/30/2015)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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PEPPER, N.A.,
Plaintiff,

United States District Court
Northern District of California

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ORDER DENYING DEFENDANTS’
MOTION TO DISMISS

v.

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Case No. 15-cv-04066 NC

EXPANDI INC., et al.,

Re: Dkt. No. 15

Defendants.

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This case is about an alleged joint venture agreement between Pepper, N.A. and

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defendants NetPartnering, Expandi UK, and Expandi Inc. to secure a $12 million

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worldwide marketing project with Hewlett Packard in Palo Alto, California. Once

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defendants obtained the contract with HP, Pepper alleges that defendants unlawfully

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terminated Pepper from the project. Defendants now move to dismiss for lack of personal

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jurisdiction over the United Kingdom corporations, NetPartnering and Expandi UK, and

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for improper venue under the doctrine of forum non conveniens. The Court finds that

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defendants purposefully availed themselves of California’s protections by engaging in a

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pitch and negotiations in Palo Alto, California. Additionally, the defendants have not met

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their burden to demonstrate that litigating in California is unreasonably burdensome,

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expensive, or inefficient. Thus, the Court DENIES defendants’ motion to dismiss.

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//

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Case No. 15-cv-04066 NC

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I. BACKGROUND
A.

Parties

Plaintiff Pepper, N.A. (“Pepper”) is a Delaware corporation, with its principal place

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of business in Chicago, Illinois. Dkt. No. 1, Compl. ¶ 1. Pepper does business as Iris

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Chicago and provides marketing services to a wide variety of corporate clients, including

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Hewlett Packard (“HP”). Compl. ¶ 17. HP is a Delaware corporation with its

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headquarters in Palo Alto, California. Compl. ¶ 11. Defendant NetPartnering Limited

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(“NetPartnering”) is a foreign corporation organized under the laws of the United

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Kingdom with its principal place of business in London. Compl. ¶ 3. Defendant Expandi

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Limited (“Expandi UK”) is a corporation organized under the laws of the United Kingdom.

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United States District Court
Northern District of California

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Compl. ¶ 4. Expandi UK is the parent corporation of NetPartnering. Compl. ¶ 4.

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Defendant Expandi Inc. is a California corporation with its principal place of business in

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Mountain View, California. Compl. ¶ 5. NetPartnering, Expandi UK, and Expandi Inc.

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are all marketing agencies with common officers, directors, and ownership that provide

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business-to-business marketing to technology companies worldwide. Compl. ¶ 16.
The complaint lists the following relevant additional individuals and entities: Janet

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Pretti, Frederic Leenhardt, Brennen Roberts, Erin Creaney Loftus, Zach Sharpe, Brittany

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Feldman. Janet Pretti is the Director of Expandi Inc. and North American Director of

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NetPartnering, and she resides in California. Compl. ¶ 5. Frederic Leenhardt is the

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NetPartnering Managing Director. Compl. ¶ 6. According to defendants, Leenhardt

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resided and worked in France. Dkt. No. 15, Leenhardt Decl. at ¶ 2. Brennen Roberts, Erin

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Creaney Loftus, Zach Sharpe, and Brittany Feldman are all Pepper employees and worked

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in Chicago. Compl. ¶¶ 7-10.

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B.

Facts

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In April 2014, defendants NetPartnering and Expandi UK contacted Pepper to

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engage in a pitch to HP for a worldwide marketing project. Compl. ¶¶ 19, 21. Defendants

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and Pepper Munich had a history of successful joint ventures. Compl. ¶ 37. The

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forecasted budget for the project was $12 million. Compl. ¶ 20. To prepare for the pitch,
Case No.15-cv-04066 NC

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Pepper contributed over 200 hours of time, engaging four employees working in Chicago.

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Compl. ¶¶ 25, 37. To prepare, Creaney and Roberts participated in over twelve conference

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calls with Pretti. Compl. ¶ 37. From July 8 to July 10, 2014, Creaney traveled to Palo

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Alto to meet with HP. Compl. ¶ 37. Prior to the in-person pitch, defendants asked

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Creaney to participate in a presentation review meeting and practice session in California.

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Compl. ¶ 37.

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On October 3, 2014, HP notified Pepper and defendants that they were awarded the

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project. Compl. ¶ 38. HP signed the contract with defendants in November 2014. Compl.

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¶ 39. Shortly after, defendants terminated the alleged agreement with Pepper to work on
the project together. Compl. ¶ 40. On February 25, 2015, Creaney notified HP that

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United States District Court
Northern District of California

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defendants had terminated Pepper. Compl. ¶ 43.

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C.

Procedural History
On May 26, 2015, Pepper sued defendants in the Northern District of Illinois, 15-

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cv-4604. Compl. ¶ 14. The defendants moved to dismiss, arguing that the Court could not

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exercise personal jurisdiction and that venue was improper under the doctrine of forum

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non conveniens. Defendants argued that either the Northern District of California or the

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United Kingdom was a more appropriate forum than Illinois. The Illinois district court

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found that personal jurisdiction was proper, but dismissed the case on forum non

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conveniens grounds.
On September 5, 2015, Pepper filed this case in the Northern District of California.

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Dkt. No. 1. Pepper alleges the arrangement between the parties constituted a joint venture.

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Pepper now sues for (1) breach of joint venture agreement; (2) breach of fiduciary duty;

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(3) unjust enrichment; (4) promissory estoppel; (5) quantum meruit; and

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(6) violation of the California Unfair Competition Law.
Defendants move to dismiss based on lack of personal jurisdiction and forum non

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conveniens. Dkt. No. 15. All parties have consented to the jurisdiction of a magistrate

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judge. Dkt. Nos. 17, 18.

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II. DISCUSSION
A. Res Judicata

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Pepper argues that defendants are barred by the doctrine of res judicata or collateral

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estoppel from arguing that the Court lacks personal jurisdiction and that venue is improper

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because defendants made the same arguments and lost in the Illinois district court. “Under

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res judicata, a final judgment on the merits of an action precludes the parties or their

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privies from relitigating issues that were or could have been raised in that action.” Allen v.

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McCurry, 449 U.S. 90, 94 (1980). Here, res judicata is not the appropriate doctrine, as

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there was no final judgment on the merits of the Illinois action.

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“Under collateral estoppel, once a court has decided an issue of fact or law

United States District Court
Northern District of California

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necessary to its judgment, that decision may preclude relitigation of the issue in a suit on a

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different cause of action involving a party to the first case.” Id. Here, the Illinois district

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court found that defendants were subject to jurisdiction in Illinois, but that Illinois was not

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the proper forum under the doctrine of forum non conveniens. The Court finds that the

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Illinois holding was limited to personal jurisdiction and forum non conveniens in Illinois.

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Because defendants currently argue about the appropriateness of California as a forum, the

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Illinois decision does not preclude their arguments. Therefore, the Court finds the

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collateral estoppel argument unpersuasive and proceeds to consider defendants’ motion to

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dismiss.

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B.

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Personal Jurisdiction

Defendants NetPartnering and Expandi UK argue that the Court lacks personal

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jurisdiction over them because they are UK limited foreign companies. These defendants

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assert that they are not domiciled in the United States and do no business in California.

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Personal jurisdiction over a defendant is proper if it is permitted by a state’s long-

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arm statute and if the exercise of that jurisdiction does not violate federal due process.

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Fireman’s Fund Ins. Co. v. Nat. Bank of Cooperatives, 103 F.3d 888, 893 (9th Cir. 1996).

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The California long-arm requires compliance with due process requirements. Pebble

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Beach Co. v. Caddy, 453 F.3d 1151, 1154-55 (9th Cir. 2006). “The cornerstone of the due
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process inquiry is an analysis of the defendant’s contacts with the selected forum.” Tuazon

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v. R.J. Reynolds Tobacco Co., 433 F.3d 1163, 1168-69 (9th Cir. 2006).

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A Court may exercise either general or specific jurisdiction over a defendant.

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General jurisdiction exists over a controversy unrelated to a defendant’s contacts with the

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forum where a defendant’s “continuous corporate operations within a state [are] thought so

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substantial and of such a nature as to justify suit against [the defendant] on causes of action

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arising from dealings entirely distinct from those activities.” Int’l Shoe Co. v. State of

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Wash., Office of Unemployment Comp. & Placement, 326 U.S. 310, 318 (1945). A court

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may exercise specific jurisdiction where the suit “arises out of” or is related to the
defendant’s contacts with the forum and the defendant “purposefully avails itself of the

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United States District Court
Northern District of California

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privilege of conducting activities within the forum State, thus invoking the benefits and

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protections of its laws.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985);

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Tuazon, 433 F.3d at 1169. Here, no party disputes that NetPartnering and Expandi UK do

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not have continuous contacts in California, so they cannot be subject to general jurisdiction

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in California. However, Pepper argues that defendants are subject to specific jurisdiction

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because the facts in this case arise out of defendants’ actions in California in contracting

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with HP.

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A court may exercise specific personal jurisdiction over a nonresident defendant if

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(1) the nonresident defendant purposefully directs his activities at the forum or performs

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some act by which he purposefully avails himself of the privilege of conducting activities

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in the forum, thereby invoking the benefits and protections of its laws; (2) the plaintiff’s

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claim arises out of the forum-related activities of the nonresident defendant; and (3) the

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exercise of jurisdiction over the nonresident defendant is reasonable. Schwarzenegger v.

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

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Generally, the plaintiff has the burden of establishing jurisdiction. Boschetto v.

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Hansing, 539 F.3d 1011, 1015 (9th Cir. 2008). Under the specific jurisdiction test, if the

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plaintiff satisfies the first two elements, the burden shifts to the defendant to “present a

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compelling case” that the exercise of jurisdiction would not be reasonable.
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Schwarzenegger, 374 F.3d at 802. “[T]he court may consider evidence presented in

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affidavits to assist in its determination and may order discovery on the jurisdictional

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issues.” Doe v. Unocal Corp., 248 F.3d 915, 922 (9th Cir. 2001). The plaintiff “need only

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make a prima facie showing of personal jurisdiction.” Brayton Purcell LLP v. Recordon &

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Recordon, 606 F.3d 1124, 1127 (9th Cir. 2009). “Conflicts between the parties over

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statements contained in the affidavits must be resolved in the plaintiff’s favor.”

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Schwarzenegger, 374 F.3d at 800.

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The first element of the specific jurisdiction test is satisfied by either “purposeful
availment” or “purposeful direction” by the defendant. Brayton Purcell LLP, 606 F.3d at

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1128. Under a purposeful availment analysis, “[a] showing that a defendant purposefully

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United States District Court
Northern District of California

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availed himself of the privilege of doing business in a forum state typically consists of

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evidence of the defendant’s actions in the forum, such as executing or performing a

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contract there.” Id. “This purposeful availment requirement ensures that a defendant will

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not be haled into a jurisdiction solely as a result of random, fortuitous, or attenuated

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contacts.” Burger King, 471 U.S. at 475. When the subject of the lawsuit is based in

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contract law, the Court can look to “prior negotiations and contemplated future

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consequences, along with the terms of the contract and the parties’ actual course of

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dealing.” Id. at 479.

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Here, the complaint alleges several claims related to a breach of contract, and one

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claim for fraudulent business practices. Dkt. No. 1. Defendants argue that Pepper’s claims

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require this Court to consider all of the prior dealings between Pepper Munich and

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defendants, so all of the necessary information is in Europe. However, the complaint

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states that Pepper’s claims are based on the interactions between the parties in preparation

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for a pitch to HP in Palo Alto, California. Specifically, Pepper seeks damages for

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reimbursement of time spent on the HP pitch, money spent traveling to and preparing in

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Palo Alto, and damages related to the contract between HP and defendants. Only Pepper’s

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first cause of action, for breach of a joint venture agreement, relies on past dealings

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between the parties in Europe. From the allegations in the complaint, the claims are
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related to those activities that led to the contract between defendants and HP in California.

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The Court finds that defendants purposefully availed themselves of California laws

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in conducting business in California with HP. When defendants traveled to California to

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pitch business to HP, they intended to enter into business negotiations, and ultimately a

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contract in the United States. Additionally, defendants increased the staff of Expandi Inc.

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after concluding the contract, hiring additional employees for their California-based

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business. In this initial business interaction, Pepper NA, defendants, and HP all engaged in

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business activities that were subject to the protection of California laws concerning the

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negotiation and signing of a business contract. Put differently, on the same set of facts,
defendants could reasonably anticipate that they could be hailed into court in California for

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United States District Court
Northern District of California

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a breach of the contract with HP. Thus, the Court finds that Pepper has satisfied the first

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and second elements of the specific jurisdiction analysis. Because the subject of the

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lawsuit is a business interaction based in California, the Court finds that defendants have

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not demonstrated that the exercise of jurisdiction is unreasonable. Thus, the Court

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DENIES defendants’ motion to dismiss for lack of personal jurisdiction.

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C.

Forum Non Conveniens

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All defendants argue that California is not the appropriate forum because litigation

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in California is too burdensome. A party seeking dismissal of an action on forum non

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conveniens grounds “must show two things: (1) the existence of an adequate alternative

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forum, and (2) that the balance of private and public interest factors favors dismissal.”

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Loya v. Starwood Hotels & Resorts Worldwide, Inc., 583 F.3d 656, 664 (9th Cir. 2009).

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Here, defendants argue that the United Kingdom is an adequate alternative forum, and that

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the statute of limitations has not run in the United Kingdom. Dkt. No. 15 at 13.

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The private interest factors to be weighed in a forum non conveniens inquiry are:

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(1) the residence of the parties and the witnesses; (2) the forum’s convenience to the

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litigants; (3) access to physical evidence and other sources of proof; (4) whether unwilling

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witnesses can be compelled to testify; (5) the cost of bringing witnesses to trial; (6) the

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enforceability of the judgment; and (7) all other practical problems that make trial of a case
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easy, expeditious and inexpensive. Boston Telecommunications Group, Inc. v. Woods, 588

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F.3d 1201, 1206-07 (9th Cir. 2009). “[W]e have cautioned that the focus for this private

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interest analysis should not rest on the number of witnesses in each locale but rather the

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court should evaluate the materiality and importance of the anticipated witnesses’

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testimony and then determine their accessibility and convenience to the forum.” Id. at

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1209.

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Here, defendants argue that only one relevant witness, Pretti, is in California. Dkt.

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No. 15 at 14. According to defendants, all other relevant witnesses are in Europe. Id. This

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is not only inconvenient, but also makes issuing a subpoena difficult. Id. Additionally,
defendants argue, “any judgment rendered by the Court would be essentially ineffective as

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United States District Court
Northern District of California

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none of the defendants have any property or bank accounts in California.” Id.

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Defendants’ version of the relevant events emphasizes past dealings between Pepper

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Munich and the foreign defendants. However, the complaint does not rely extensively on

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such past dealings, and these interactions are only mentioned in relationship to the first

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claim for breach of a joint venture agreement. In the complaint, only one individual is

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mentioned who resides in Europe, Frederic Leenhardt.

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The public interest factors are: (1) the local interest in the lawsuit, (2) the court’s

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familiarity with the governing law, (3) the burden on local courts and juries, (4) congestion

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in the court, and (5) the costs of resolving a dispute unrelated to a particular forum.

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Tuazon, 433 F.3d at 1181. Defendants do not address the public interest factors, except in

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arguing that California is not the most convenient forum. Here, the complaint is brought

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under California law regarding a pitch, negotiations, and contract that occurred in

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California. One of the defendants is a California corporation. California courts have noted

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that the state has a “significant interest in providing a forum for those harmed by the

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actions of its corporate citizens.” Stangvik v. Shiley Inc., 54 Cal.3d 744, 756 n.10 (1991);

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see also Morris v. AGFA Corp., 144 Cal. App. 4th 1452, 1465 (2006) (noting that in

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California, a “corporate defendant’s state of incorporation and principal place of business

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is presumptively a convenient forum”).
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The doctrine of forum non conveniens is “an exceptional tool to be employed

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sparingly,” and not a “doctrine that compels plaintiffs to choose the optimal forum for their

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claim.” Dole Foods Co. v. Watts, 303 F.3d 1104, 1118 (9th Cir. 2002). “The mere fact

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that a case involves conduct or plaintiffs from overseas is not enough for dismissal.”

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Carijano v. Occidental Petroleum Corp., 683 F.3d 1216, 1224 (9th Cir. 2011). Any court

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will “necessarily face some difficulty in securing evidence from abroad, but these

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complications do not necessarily justify dismissal.” Tuazon, 433 F.3d at 1181.
The Court has reviewed the defendants’ arguments and finds that California is an

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appropriate forum for many of the same reasons that personal jurisdiction is satisfied.
First, the Court is not persuaded that the litigation actually centers on events that occurred

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United States District Court
Northern District of California

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in Europe. Second, defendants purposefully availed themselves of the protections of

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California law, and thus the public interest factors weigh in favor of adjudicating this case

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in California. Additionally, defendants argued in the district court in Illinois that

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California was a more appropriate forum. Finally, dismissal of a case based on the

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doctrine of forum non conveniens is an exceptional tool, and defendants have not

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demonstrated that litigation in California is burdensome, expensive, or impractical.

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Defendants have not stated with specificity who they would seek to depose, the relevance

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of those witnesses to the litigation, the inefficiency of litigating the case in the United

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States, or the actual cost to the defendants. The Court will not dismiss the case based on

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speculation that the litigation could be burdensome, or because defendants prefer to litigate

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the case in the United Kingdom. Thus, the Court DENIES defendants’ motion to dismiss

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based on improper venue, or forum non conveniens.

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III.

CONCLUSION
The Court finds that NetPartnering and Expandi UK purposefully availed

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themselves of California’s jurisdiction by traveling to California to engage in a pitch with

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HP, in coordination with Pepper. Additionally, the Court is not persuaded that the balance

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of private and public factors weigh favors dismissal for improper venue.

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/
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Thus, defendants’ motion to dismiss is DENIED. Defendants must answer the

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complaint within 14 days. Fed. R. Civ. P. 12(a)(4)(A). A case management conference is

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scheduled for December 9 at 10:00 a.m. The parties must submit a case management

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statement by December 2, 2015, which should include a proposed case schedule.

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IT IS SO ORDERED.

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Dated: November 30, 2015

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_____________________________________
NATHANAEL M. COUSINS
United States Magistrate Judge

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United States District Court
Northern District of California

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