Nutrition Distribution LLC v. Fulfillment Pros LLC et al

Filing 15

ORDER granting Defendants Blake Madgett and Kimberly Borkhataria's 10 Motion to Dismiss for Lack of Jurisdiction. The Defendants are dismissed from the Action. Court directs the Clerk to terminate 9 Motion to Dismiss, which is duplicative of Defendants' 10 Motion to Dismiss (See 11 Notice of Withdrawal of Document). Signed by Judge Cynthia Bashant on 8/21/2017. (jah)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 NUTRITITION DISTRIBUTION LLC, 12 Plaintiff, 13 Case No. 16-cv-03115-BAS-JLB ORDER GRANTING DEFENDANTS BLAKE MADGETT AND KIMBERLY BORKHATARIA’S MOTION TO DISMISS v. 14 15 FULFILLMENT PROS LLC, et al., Defendants. 16 [ECF No. 10] 17 18 Defendants Blake Madgett and Kimberly Borkhataria move for dismissal pursuant 19 to Federal Rule of Civil Procedure 12(b)(2) and (3) for lack of personal jurisdiction and 20 improper venue. (ECF No. 10.) Because the Court ultimately concludes exercising 21 personal jurisdiction over these two Defendants would not be reasonable and would not 22 comport with “fair play and substantial justice,” the Court GRANTS the Motion to Dismiss 23 these two Defendants pursuant to Rule 12(b)(2). 24 25 I. STATEMENT OF FACTS 26 Plaintiff—an Arizona limited liability company whose principal place of business is 27 in Arizona—alleges that Defendant PTG Group, a Florida corporation, is the former owner 28 of the Extreme Peptides website that sells nutritional supplements via the internet. (Compl. –1– 16cv3115 1 ¶¶ 9, 12, ECF No. 1.) Both Defendants Madgett and Borkhataria deny that PTG Group 2 had any ownership interest in or controlled the Extreme Peptides website. (Declaration of 3 Kimberley Borkhataria (“Borkhataria Decl.”) ¶ 7, ECF No. 10-1 at 1; Declaration of Blake 4 Madgett (“Madgett Decl.”) ¶ 10, ECF No. 10-1 at 6.) Madgett further avers that he did not 5 ever individually have any control or ownership of the Extreme Peptides website. (Madgett 6 Decl. ¶ 10.) 7 Madgett is (or was, because it appears PTG Group was dissolved after this 8 Complaint was filed) the registered agent and president of PTG Group, and Borkhataria is 9 (or was) the CFO. (Compl. ¶¶ 14–15; Req. for Judicial Notice, ECF No. 12-2.)1 Both 10 Madgett and Borkhataria are Florida residents, and they file uncontradicted declarations 11 that they have never resided in California, have not visited California in the last ten years, 12 and have never conducted business in California. (Borkhataria Decl. ¶¶ 1, 3–4; Madgett 13 Decl. ¶¶ 3–5.) 14 The Extreme Peptides website offers the products at issue for sale with statements 15 Plaintiff contends are false and misleading. (Compl. ¶¶ 1, 25.) Without specifying to 16 which of the six named Defendants it is referring, Plaintiff alleges that “Defendant 17 purposefully and voluntarily placed the products into the stream of commerce with the 18 expectation that they will be purchased [in the Southern District of California].” (Id. ¶ 7.) 19 Plaintiff offers screenshots of the Extreme Peptides website that indicate the products can 20 21 22 23 24 25 26 27 28 1 Both parties request that the Court take judicial notice of various documents. Madgett and Borkhataria request that the Court take judicial notice of: (A) a federal information charging Anabolic Resources with introduction of unapproved drugs with intent to defraud; (B) a guilty plea by Anabolic Resources to this same charge; (C–H) prior lawsuits filed by Nutrition Distribution, LLC; and (I) an opinion issued out of the Central District of California. (ECF No. 14.) Although these documents may be proper subjects of judicial notice, they have no bearing on the Court’s decision in this case. Therefore, the Court denies the request. In addition, Nutrition Distribution requests that the Court take judicial notice of a copy of the records of the Florida Department of State, Division of Corporations, showing that PTG Group was dissolved one month after the Complaint was filed in this case. (ECF No. 12-2.) Defendants do not object. Therefore, the Court will take judicial notice of this document. See Fed. R. Evid. 201(b)(2) (“The Court may judicially notice a fact that is not subject to reasonable dispute because it . . . can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned.”). –2– 16cv3115 1 be shipped throughout the United States, free shipping is available in the United States for 2 all orders over $99, and fulfillment centers are located throughout the United States. 3 (Declaration of Robert Tauler ¶ 2, Ex. A, ECF No. 12-1.)2 The screenshots also suggest 4 that a membership plan is available; viewers are encouraged to create an account online, 5 which will lead to member-only sales. (Id.) 6 Plaintiff claims Defendant (again without specifying among the six named 7 Defendants) has been unjustly enriched at the expense of Plaintiff, a competing nutritional 8 supplement company, and has caused Plaintiff extensive and irreparable harm including 9 loss of revenue, disparagement, and loss of good will. (Compl. ¶¶ 4, 24.) Although 10 Plaintiff alleges generally that a “substantial part of the events which gave rise to this claim 11 occurred in this district,” (id. ¶ 8), Plaintiff does not allege that it sells products in California 12 or that any of its revenue comes from California, nor does Plaintiff allege that any 13 California residents purchased the products from the Extreme Peptides website. All six 14 named Defendants are Florida residents. 15 California. No parties are alleged to be residents of 16 17 II. ANALYSIS 18 When a party moves to dismiss for lack of personal jurisdiction, “the plaintiff bears 19 the burden of establishing that jurisdiction exists.” Rios Props. Inc. v. Rio Int’l Interlink, 20 284 F.3d 1007, 1019 (9th Cir. 2002). In ruling on the motion, the “court may consider 21 evidence presented in affidavits to assist it in its determination and may order discovery on 22 the jurisdictional issues.” Doe v. Unocal Corp., 248 F.3d 915, 922 (9th Cir. 2001), 23 abrogated on other grounds as recognized in Williams v. Yamaha Motor Co., Ltd., 851 24 25 26 27 28 2 Plaintiff offers the Declaration of its counsel, Robert Tauler, in support of its Opposition to the Motion to Dismiss. (ECF No. 12-1.) Defendants object only to Tauler’s offer of text messages ostensibly from Madgett, arguing that these messages lack authentication and are inadmissible hearsay. (Reply n. 11, 5:25–26, ECF No. 13 (in what appears to be a typographic error, Defendants label this footnote number 11, although it is the first footnote in their Reply). The court overrules these objections, although ultimately the Court finds the text messages have little relevance to its ultimate decision in this order. –3– 16cv3115 1 F.3d 1015, 1024 (9th Cir. 2017). Where the motion is based on written materials rather 2 than an evidentiary hearing, the plaintiff need only make “a prima facie showing of 3 jurisdictional facts to withstand the motion to dismiss.” Brayton Purcell LLP v. Recordon 4 & Recordon, 606 F.3d 1124, 1127 (9th Cir. 2010) (Pebble Beach Co. v. Caddy, 453 F.3d 5 1151, 1154 (9th Cir. 2006)). A prima facie showing means that “the plaintiff need only 6 demonstrate facts that if true would support jurisdiction over the defendant.” Unocal, 248 7 F.3d at 922. 8 Although the court “may not assume the truth of allegations in a pleading which are 9 contradicted by [an] affidavit,” Mavrix Photo, Inc. v. Brand Techs., Inc., 647 F.3d 1218, 10 1223 (9th Cir. 2011), the court must “resolve disputed jurisdictional facts in the plaintiff’s 11 favor,” Nissan Motor Co., Ltd. V. Nissan Computer Corp., 89 F. Supp. 2d 1154, 1158 (C.D. 12 Cal. 2000). 13 “The general rule is that personal jurisdiction over a defendant is proper if it is 14 permitted by a long-arm statute and if the exercise of that jurisdiction does not violate 15 federal due process.” Pebble Beach, 453 F.3d at 1154. Both the California and federal 16 long-arm statutes require compliance with due-process requirements. Daimler AG v. 17 Bauman, __ U.S. __, 134 S. Ct. 746, 753 (2014); see also Fed. R. Civ. P. 4(k)(2); Holland 18 Am Line Inc. v. Wärtsilä N. Am., Inc., 485 F.3d 450, 461 (9th Cir. 2007). 19 There are two types of personal jurisdiction: general and specific. See Daimler AG, 20 134 S. Ct. at 754–55. “Since International Shoe . . . ‘general jurisdiction [has played] a 21 reduced role.’” Id. at 755 (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 22 U.S. 915, 925 (2011)). General jurisdiction “enables a court to hear cases unrelated to the 23 defendant’s forum activities[.]” Fields v. Sedgewick Assoc. Risks, Ltd., 796 F.2d 299, 310 24 (9th Cir. 1986). Specific jurisdiction allows the court to exercise jurisdiction over a 25 defendant whose forum-related activities gave rise to the action before the court. Bancroft 26 & Masters, Inc. v. August Nat’l Inc., 223 F.3d 1082, 1086 (9th Cir. 2000). 27 There is little question that this Court lacks general jurisdiction over Madgett and 28 Borkhataria—who are Florida residents that have never lived in California, have not visited –4– 16cv3115 1 California in the past ten years, and have never conducted business in California. Instead, 2 Plaintiff asserts that specific jurisdiction over these Defendants is proper. 3 The Ninth Circuit employs a three-part test to determine whether the defendant’s 4 contacts with the forum state are sufficient to subject it to specific jurisdiction. Ballard v. 5 Savage, 65 F.3d 1495, 1498 (9th Cir. 1995). Under the three-part inquiry, specific 6 jurisdiction exists only if: (1) the out-of-state defendant purposefully availed him or herself 7 of the privilege of conducting activities in the forum, thereby invoking the benefits and 8 protections of the forum’s laws; (2) the cause of action arose out of the defendant’s forum- 9 related activities; and (3) the exercise of jurisdiction is reasonable. Myers v. Bennett Law 10 Offices, 238 F.3d 1068, 1072 (9th Cir. 2001). 11 The plaintiff bears the burden of satisfying the first two prongs of this specific 12 jurisdiction test. Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 802 (9th Cir. 13 2004). “If the plaintiff succeeds in satisfying both of the first two prongs, the burden then 14 shifts to the defendant to ‘present a compelling case’ that the exercise of jurisdiction would 15 not be reasonable.” Id. (quoting Burger King Corp v. Rudzewicz, 471 U.S. 462, 476–78 16 (1985)). “If any of the three requirements is not satisfied, jurisdiction in the forum would 17 deprive the defendant of due process of law.” Pebble Beach, 453 F.3d at 1155. The Court 18 thus analyzes each of these prongs below. 19 20 1. 21 In the context of internet website advertising, the Ninth Circuit has held that a 22 Defendant’s purposeful availment runs on a continuum: when the website is merely a 23 passive advertisement or available for informational purposes, the Defendant has not 24 purposefully availed itself of the privilege of conducting activities in the forum, but where 25 the entity is actually conducting business or sales over the internet, it may constitute 26 purposeful availment. Cybersell, Inc. v. Cybersell, Inc., 130 F.3d 414 (9th Cir. 1997); see 27 also Stomp, Inc. v. NeatO, LLC, 61 F. Supp. 2d 1074, 1078 (C.D. Cal. 1999) (“By 28 advertising and offering its products for sale via the Internet, [defendant] has placed its Purposeful Availment –5– 16cv3115 1 products into the stream of commerce intending that they would be purchased by 2 consumers with access to the Web, including California citizens.”) 3 Whether a defendant has purposefully directed his activities to a forum state such 4 that this first prong is met is guided by the three-part “Calder-effects” test, taken from the 5 Supreme Court’s decision in Calder v. Jones, 465 U.S. 783 (1984). See Brayton Purcell, 6 606 F.3d at 1128. The defendant must have: (1) committed an intentional act; (2) expressly 7 aimed at the forum state; (3) causing a harm that the defendant knows is likely to be 8 suffered in the forum state. Id. 9 In this case, Plaintiff alleges that Madgett and Borkhataria controlled PTG Group, 10 which was responsible for the Extreme Peptides website. Although both Madgett and 11 Borkhataria submit affidavits denying PTG Group controlled the website, Plaintiff 12 provides copies of screenshots showing that PTG Group was listed as the contact for the 13 website. For purposes of this motion, the Court must resolve these disputed jurisdictional 14 facts in Plaintiff’s favor. Therefore, for purposes of the motion, the Court will assume that 15 Madgett and Borkhataria controlled the website via PTG Group. 16 However, Plaintiff alleges that the sale of the products on the Extreme Peptides 17 website led Plaintiff, an Arizona resident, to suffer irreparable harm, including loss of 18 revenue, disparagement, and loss of good will. Plaintiff does not explain how Defendants 19 knew that this alleged harm to an Arizona company was likely to be suffered in California. 20 Plaintiff fails to allege that it has a customer base in California, that it has ever sold a 21 product in California, that PTG Group has ever sold a product in California, or that Madgett 22 and Borkhataria knew that Plaintiff sold products in California. Plaintiff has simply failed 23 to meet its burden to show that Madgett and Borkhataria, even if they controlled the 24 Extreme Peptides website, purposefully directed their activities to the Southern District of 25 California. None of the cases relied on by Plaintiff involve a non-resident Plaintiff 26 targeting non-resident Defendants. In that case, something more is required, indicating 27 how the harm was targeted at the chosen forum. Thus, the purposeful availment prong is 28 not satisfied. See, e.g., Brayton Purcell, 606 F.3d at 1124 (providing the defendants must –6– 16cv3115 1 have caused an alleged harm that they knew would be likely to be suffered in the forum 2 state). 3 Cause of Action Arising out of the Defendant’s Forum-Related Activities 4 2. 5 This second prong requires that the claim “arise out of” the defendant’s forum- 6 related activities. Shute v. Carnival Cruise Lines, 897 F.2d 377, 383 (9th Cir. 1990), 7 reversed on other grounds, 499 U.S. 585 (1991). The court must determine whether the 8 plaintiff would not have been injured “but for” the defendant’s conduct directed toward the 9 plaintiff in the chosen forum. Panavision Intern., L.P. v. Toeppen, 141 F.3d 1316, 1322 10 (9th Cir. 1998). 11 In this case, even if Madgett and Borkhataria, through the Extreme Peptides website, 12 were selling products in California, Plaintiff fails to explain how its claim that it was 13 harmed by false advertising “arose out of” this forum. In other words, just because Madgett 14 and Borkhataria may have advertised or even sold products in California, Plaintiff fails to 15 show how this Arizona company would not have been injured “but for” the Defendants’ 16 advertising in California. Given the paucity of allegations concerning California, Plaintiff 17 fails to make this showing. Hence, the second prong of the specific jurisdiction test is also 18 not satisfied. 19 20 3. 21 The exercise of jurisdiction lacks reasonableness if it does not comport with “fair 22 play and substantial justice.” Core-Vent Corp. v. Nobel Indus. AB, 11 F.3d 1482, 1487 23 (9th Cir. 1993). In assessing reasonableness, the court considers seven factors: “(1) the 24 extent of the defendants’ purposeful interjection into the forum state’s affairs; (2) the 25 burden on the defendant of defending in the forum; (3) the extent of conflict with the 26 sovereignty of the defendants’ state; (4) the forum state’s interest in adjudicating the 27 dispute; (5) the most efficient judicial resolution of the controversy; (6) the importance of Reasonableness 28 –7– 16cv3115 1 the forum to the plaintiff’s interest in convenient and effective relief; and (7) the existence 2 of an alternative forum.” Id. at 1487–88. 3 Even assuming the Plaintiff in this case has met its burden of showing that Madgett 4 and Borkhataria purposefully availed themselves of the privilege of conducting activities 5 in the Southern District of California and their forum-related activities resulted in 6 Plaintiff’s cause of action, these two Defendants have met their burden of showing the 7 exercise of jurisdiction over them would not be reasonable. 8 9 First, as discussed above, there is no evidence that Madgett or Borkhataria purposefully interjected themselves into California’s affairs. Although the website 10 purports to sell products throughout the United States, it is not clear whether it did, in fact, 11 do so. Requiring these individual Defendants to litigate in California, when they live in 12 Florida, never lived in California, and have not visited California in at least ten years, while 13 not an insurmountable obstacle, would be a burden. California has only a minimal interest 14 in adjudicating this dispute. None of the parties is a California resident. This forum has 15 less interest in providing an effective redress to Plaintiff, who is a non-resident of 16 California. Furthermore, there is no indication that witnesses or evidence are located in 17 California. Because the parties reside in Florida and Arizona, presumably the evidence 18 and witnesses are located in those states, and thus California is not a particularly efficient 19 forum in which to resolve the controversy. Plaintiff has less of an interest in litigating the 20 controversy in California because it is a non-resident, and it is unclear why this forum was 21 selected by Plaintiff. Finally, alternative forums, in Arizona and Florida, both of which 22 appear to have a greater connection to the events at issue, are available. Accordingly, the 23 balance of the factors demonstrates it is not reasonable for the Court to exercise jurisdiction 24 over Madgett or Borkhataria. See Core-Vent Corp., 11 F.3d at 1487–88. 25 26 III. CONCLUSION 27 The Court finds Plaintiff has failed to show that Madgett and Borkhataria 28 purposefully availed themselves of the privilege of conducting activities in this forum and –8– 16cv3115 1 that the alleged cause of action arose out of their forum-related activities. Furthermore, an 2 exercise of personal jurisdiction over these two Florida residents would lack 3 reasonableness. Therefore, Defendants Madgett and Borkhataria’s Motion to Dismiss 4 (ECF No. 10) is GRANTED, and these two Defendants are dismissed from the Action.3 5 IT IS SO ORDERED. 6 7 DATED: August 21, 2017 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 3 28 The Court directs the Clerk of the Court to also TERMINATE ECF No. 9, which is duplicative of Defendants’ Motion to Dismiss (ECF No. 10). (See Notice of Withdrawal of Document, ECF No. 11.) –9– 16cv3115

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