OOO Brunswick Rail Management et al v. Sultanov et al

Filing 52

ORDER DENYING 3 PLAINTIFFS' APPLICATION FOR PRELIMINARY INJUNCTION AND 23 MOTION FOR EXPEDITED DISCOVERY. Signed by Judge Edward J. Davila on 1/20/2017. (ejdlc2S, COURT STAFF) (Filed on 1/20/2017)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN JOSE DIVISION

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United States District Court
Northern District of California

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OOO BRUNSWICK RAIL
MANAGEMENT, et al.,
Plaintiffs,

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v.
RICHARD SULTANOV, et al.,

Case No. 5:17-cv-00017-EJD
ORDER DENYING PLAINTIFFS’
APPLICATION FOR PRELIMINARY
INJUNCTION AND MOTION FOR
EXPEDITED DISCOVERY
Re: Dkt. Nos. 3, 23

Defendants.

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Plaintiffs OOO Brunswick Rail Management and Brunswick Rail Group Limited (together,

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“Brunswick”) allege that defendants Paul Ostling and Richard Sultanov misappropriated

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Brunswick’s confidential information. Complaint ¶¶ 31–48, Dkt. No. 1. This Court previously

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granted Brunswick’s ex parte application to preserve evidence and for a temporary restraining

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order (“TRO”) to prevent Sultanov and Ostling from disseminating the confidential information at

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issue. Dkt. No. 15 (“TRO Order”). The order directed Sultanov and Ostling to show cause why a

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preliminary injunction should not issue. Id. Brunswick has also moved for expedited discovery.

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The Court held a hearing on January 20, 2017, on Brunswick’s application for a

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preliminary injunction and its motion for expedited discovery. The Court will DENY both

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requests for lack of personal jurisdiction over Ostling and Sultanov.

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Case No.: 5:17-cv-00017-EJD
ORDER DENYING PLAINTIFFS’ APPLICATION FOR PRELIMINARY INJUNCTION AND
MOTION FOR EXPEDITED DISCOVERY

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I. BACKGROUND

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Defendants Sultanov and Ostling are former employees of Brunswick. Br. in Supp. of Pls.’

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Ex Parte Appl. at 2–3, Dkt. No. 4. Brunswick alleges that Sultanov improperly sent confidential

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information to his personal email account; that Ostling improperly received confidential

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information at his personal email account from his former assistant; and that both Defendants

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improperly forwarded that information to Brunswick’s creditors. Id. at 5–8. Brunswick also

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alleges that Sultanov has not returned a company-issued laptop and mobile phone containing

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sensitive information. Id. at 1.
To preserve evidence of the alleged misappropriation and to prevent further dissemination

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of confidential materials, Brunswick filed an ex parte application for an order to seize and preserve

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United States District Court
Northern District of California

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evidence, for expedited discovery, for a TRO, and to show cause why a preliminary injunction

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should not issue. Dkt. No 3; TRO Order at 1–2. The Court ordered third parties Google and

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Rackspace (the companies that provided personal email accounts to Sultanov and Ostling) to

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preserve data associated with Defendants’ email accounts. TRO Order at 6. The Court further

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ordered Sultanov not to access or modify his company-issued laptop and phone, and to deliver

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those devices to the Court at the hearing. Id. at 6–7. Finally, the Court temporarily enjoined

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Sultanov and Ostling from destroying evidence and from further disseminating Brunswick’s

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confidential information. Id. at 7–8. The Court rejected the request for expedited discovery

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because Brunswick did not show good cause, but the Court allowed Brunswick to explain its

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request in a separate motion. The Court set a hearing for January 20, 2017, to show cause why a

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preliminary injunction should not issue. Id. at 6.
After the Court issued its order on Brunswick’s ex parte application, Brunswick filed a

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supplemental brief in support of injunctive relief (Dkt. No. 17) and a motion for expedited

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discovery (Dkt. No. 23). Ostling and Sultanov have filed a response to the Court’s order to show

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cause (Dkt. No. 32) and an opposition to Brunswick’s motion for expedited discovery (Dkt. No.

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23).

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Case No.: 5:17-cv-00017-EJD
ORDER DENYING PLAINTIFFS’ APPLICATION FOR PRELIMINARY INJUNCTION AND
MOTION FOR EXPEDITED DISCOVERY

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II. DISCUSSION

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Ostling and Sultanov argue that this Court lacks general and specific personal jurisdiction

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over them. Defs.’ Resp. to the Ct.’s Order to Show Cause (“Resp.”) at 15, Dkt. No. 50-3.
General personal jurisdiction exists in the forum where a defendant is domiciled. Goodyear

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Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 924 (2011); Gaudin v. Remis, 379 F.3d

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631, 636 (9th Cir. 2004) (“A person’s domicile is her permanent home, where she resides with the

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intention to remain or to which she intends to return.”). Defendants argue that this Court lacks

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general personal jurisdiction because neither Defendant lives in California. Resp. at 15–16.

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Ostling lives in Connecticut and last visited California in 2014; Sultanov used to live in California,
but since 2007 he has lived in Russia and has visited California only twice for brief periods. Id.

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United States District Court
Northern District of California

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Brunswick’s complaint alleges that Sultanov “maintains a residence” in Monterey, California, but

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Defendants explain that the Monterey address is “a family friend’s property that Mr. Sultanov

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sometimes uses as a mailing address.” Compl. ¶ 4; Resp. at 16. The Court finds that no general

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personal jurisdiction exists because Defendants are not domiciled in California.

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Specific personal jurisdiction exists if three conditions are met: (1) the defendant

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purposefully directed activities toward the forum or purposefully availed itself of the benefits and

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protections of the forum’s laws; (2) the claim arises out of the defendant’s forum-related activities;

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and (3) exercise of jurisdiction would be reasonable. Schwarzenegger v. Fred Martin Motor Co.,

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374 F.3d 797, 802 (9th Cir. 2004). Ostling and Sultanov argue that this Court lacks specific

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personal jurisdiction for several reasons. First, they live elsewhere and have no current ties to the

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state. Resp. at 16–17. Second, their employment agreements are governed by the laws of Russia,

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Bermuda, the United Kingdom, and Wales. Id. at 17. Third, Brunswick’s claims do not arise from

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any activity that happened in California. Id. Sultanov was not in California when he sent

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information to his personal email account; Ostling was not in California when he received

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materials at his personal email account from his former assistant; neither of them was in California

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when they forwarded the information; the recipients of those emails were also not in California;

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Case No.: 5:17-cv-00017-EJD
ORDER DENYING PLAINTIFFS’ APPLICATION FOR PRELIMINARY INJUNCTION AND
MOTION FOR EXPEDITED DISCOVERY

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and the dissemination of the information at issue had no effect in California. Id. If Brunswick

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suffered harm because of Ostling’s and Sultanov’s actions, it was only in Russia (as to OOO

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Brunswick Rail Management) or Bermuda (as to Brunswick Rail Group Limited). Id. Since

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Ostling and Sultanov have no ties to California and no reason to anticipate being sued in

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California, it would be unreasonable for this Court to exercise personal jurisdiction over them. Id.

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In response, Brunswick argues that specific personal jurisdiction exists because Ostling

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and Sultanov both emailed confidential information to Gmail addresses. Pls.’ Suppl. Br. in Supp.

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of Ex Parte Appl. (“Suppl. Br.”) at 2–3, Dkt. No. 17. Sultanov sent information to his personal

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Gmail account, and Ostling sent information to the personal Gmail account of Brunswick’s Chief
Financial Officer. Id. According to Brunswick, Ostling and Sultanov’s use of Gmail creates

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United States District Court
Northern District of California

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personal jurisdiction in California because Gmail is a service of Google, Inc., which is

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headquartered in California, and the Gmail servers may be located in California. Id.

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Brunswick offers two justifications for this theory. First, Google’s terms of use contain a

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forum selection clause indicating that claims will be litigated exclusively in the federal and state

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courts of Santa Clara County. Id. at 3. This argument fails, however, because Google’s terms of

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use apply only to disputes with Google. Resp. at 20 (“These terms control the relationship between

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Google and you. They do not create any third party beneficiary rights.”).

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Second, Brunswick argues that Ostling and Sultanov “have purposefully availed

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themselves of California and meet the ‘effects’ test establishing specific jurisdiction.” Suppl. Br.

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at 3. Under Brunswick’s theory, every one of Gmail’s one billion users (Resp. at 18) would be

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subject to personal jurisdiction in California based solely on their email activity. Jurisdiction

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would also extend to non-Gmail users who send messages to Gmail recipients. The cases

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Brunswick cites do not support such an expansive theory. See U.S. Chess Fed’n, Inc. v. Polgar,

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No. C 08-05126 MHP, 2009 WL 3334882 (N.D. Cal. Oct. 14, 2009) (holding that personal

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jurisdiction existed when a Washington defendant gained unauthorized access to the email account

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of a California plaintiff); Bancroft & Masters, Inc. v. Augusta Nat’l. Inc., 223 F.3d 1082, 1088

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Case No.: 5:17-cv-00017-EJD
ORDER DENYING PLAINTIFFS’ APPLICATION FOR PRELIMINARY INJUNCTION AND
MOTION FOR EXPEDITED DISCOVERY

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(9th Cir. 2000) (holding that personal jurisdiction existed when an Illinois defendant registered a

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domain name in an attempt to “extort compensation” from a California plaintiff); Yahoo! Inc. v.

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La Ligue Contre Le Racisme Et L’Antisemitisme, 433 F.3d 1199 (9th Cir. 2006) (holding that

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personal jurisdiction existed when a French defendant sent a cease-and-desist letter, effected two

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services of process, and obtained two orders in French courts directing a California plaintiff to

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take action in California); Leibman v. Prupes, No. 2:14-cv-09003-CAS(VBKx), 2015 WL 898454,

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at *10 (C.D. Cal. Mar. 2, 2015) (holding that personal jurisdiction existed where a New Jersey

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defendant sent extortionate emails to a California plaintiff, and noting that “isolated emails may

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rarely, if ever, give rise to personal jurisdiction, because they are by their nature not tied to
specific physical locations. . . . Here, it is defendant’s alleged actions of sending extortionate

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United States District Court
Northern District of California

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emails to a targeted California resident that create minimum contacts with California”); Facebook,

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Inc. v. ConnectU LLC, No. C 07-01389 RS, 2007 WL 2326090, at *2 (N.D. Cal. Aug. 13, 2007)

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(holding that personal jurisdiction existed where Washington defendants gained unauthorized

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access to Facebook accounts “by logging into Facebook using borrowed or falsified login

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information” and, once logged in, scraped data from users’ profiles); Dole Food Co., Inc. v. Watts,

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303 F.3d 1104 (9th Cir. 2002) (holding that personal jurisdiction existed where European

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defendants fraudulently induced a California company to lease warehouse space in the

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Netherlands); Dinar Corp. Inc. v. Sterling Currency Group, LLC, No. 2:13-cv-02106-APG-PAL,

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2014 WL 4072023 (D. Nev. Aug. 15, 2014) (finding a lack of personal jurisdiction in Nevada

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where a Nevada company sued a Georgia competitor for spreading disparaging information

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online); NetApp, Inc. v. Nimble Storage, Inc., 41 F. Supp. 3d 816 (N.D. Cal. 2014) (finding that

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personal jurisdiction existed where an Australian resident gained unauthorized access to computer

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systems in California); Keeton v. Hustler Magazine, Inc., 465 U.S. 770 (1984) (holding that

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personal jurisdiction existed in New Hampshire where a New York plaintiff sued an Ohio

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defendant that circulated magazines in New Hampshire).

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Case No.: 5:17-cv-00017-EJD
ORDER DENYING PLAINTIFFS’ APPLICATION FOR PRELIMINARY INJUNCTION AND
MOTION FOR EXPEDITED DISCOVERY

The cases Brunswick cites are distinguishable from the present dispute.1 All of them

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involved harm that occurred in the forum state. See, e.g., U.S. Chess Fed’n, 2009 WL 3334882

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(involving harm to a California plaintiff when a Washington defendant intruded into the plaintiff’s

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email account); Leibman, 2015 WL 898454 (involving harm to a California plaintiff who received

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extortionate emails from a New Jersey defendant); Keeton, 465 U.S. 770 (involving libel that

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occurred in the forum state, New Hampshire, that injured a New York plaintiff). In this case, by

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contrast, Ostling and Sultanov’s use of Gmail was incidental to the harms Brunswick alleges in its

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complaint. Brunswick alleges that it was harmed when Ostling and Sultanov improperly

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disseminated confidential information, but Brunswick has not established that it suffered harm in

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California.

United States District Court
Northern District of California

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The Court concludes that Brunswick has not met its burden of showing that the Court has

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personal jurisdiction over Ostling and Sultanov. Boschetto v. Hansing, 539 F.3d 1011, 1016 (9th

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Cir. 2008) (holding that the plaintiff bears the burden of showing the defendant’s connection to the

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forum). Brunswick contends that, at the preliminary injunction stage, a plaintiff “need only make a

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prima facie showing of jurisdictional facts to withstand the motion to dismiss. . . . That is, the

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plaintiff need only demonstrate facts that if true would support jurisdiction over the defendant.”

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Pls.’s Reply Br. in Supp. of Mot. for TRO at 2, Dkt. No. 47 (quoting Ballard v. Savage, 65 F.3d

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1495, 1498 (9th Cir. 1995)). However, even if true, Brunswick’s allegations—that Ostling and

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Sultanov sent confidential materials to Gmail accounts, and that Google and its servers are located

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in California—do not establish specific personal jurisdiction. Id. at 2–8. Brunswick has also failed

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to show that Sultanov’s use of a Monterey address is sufficient to establish that he is domiciled in

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Brunswick also cites SolarBridge Techs., Inc. v. Ozkaynak, No. C 10-cv-03769-EJD, 2012 WL
2150308 (N.D. Cal. June 12, 2012), in which a defendant in Turkey used a Yahoo! Inc. email
address to misappropriate trade secrets belonging to a Delaware company based in Texas. This
Court held that personal jurisdiction existed because Yahoo! is based in San Jose, California. Id. at
*3–4. In that case, the defendant did not file an answer or otherwise respond to the complaint. Id.
at *1. The plaintiffs moved for default judgment and a preliminary injunction, which the defendant
did not oppose. Id. Here, by contrast, Ostling and Sultanov have raised appropriate challenges to
personal jurisdiction.
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Case No.: 5:17-cv-00017-EJD
ORDER DENYING PLAINTIFFS’ APPLICATION FOR PRELIMINARY INJUNCTION AND
MOTION FOR EXPEDITED DISCOVERY

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California. Compl. ¶ 4; Resp. at 16.
The parties offer several other arguments for and against injunctive relief and expedited

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discovery. Because this Court lacks personal jurisdiction over the Defendants, it may not

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adjudicate these remaining issues. Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 575 (1999)

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(“Personal jurisdiction . . . is an essential element of district court jurisdiction, without which the

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court is powerless to proceed to an adjudication.”).

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III. CONCLUSION

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Brunswick has not shown that this Court has personal jurisdiction over Ostling and

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United States District Court
Northern District of California

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Sultanov. The Court orders as follows:
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The Court DENIES Brunswick’s application for a preliminary injunction and its

motion for expedited discovery.
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The Court’s order granting a temporary restraining order (Dkt. No. 15) is

DISSOLVED.
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At the hearing on January 20, 2017, counsel for Defendants indicated that counsel

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would prevent anyone from accessing or modifying the company-issued laptop and mobile phone

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that Brunswick issued to Sultanov. The laptop and mobile phone shall remain in the custody of

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Defendants’ counsel and shall not be accessed or modified without a court order.

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IT IS SO ORDERED.
Dated: January 20, 2017
______________________________________
EDWARD J. DAVILA
United States District Judge

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Case No.: 5:17-cv-00017-EJD
ORDER DENYING PLAINTIFFS’ APPLICATION FOR PRELIMINARY INJUNCTION AND
MOTION FOR EXPEDITED DISCOVERY