Certified Nutraceuticals Inc. v. Oleofarm SP. ZO.O. et al

Filing 14

ORDER granting 6 Motion to Dismiss for Lack of Jurisdiction. Signed by Judge Roger T. Benitez on 3/9/2018. (anh)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 CERTIFIED NUTRACEUTICALS, INC., 12 Plaintiff, 13 ORDER GRANTING MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION v. 14 Case No.: 3:17-cv-1088-BEN-WVG OLEOFARM SP. Z O.O., Defendant. 15 16 17 Before the Court is the Motion to Dismiss filed by Defendant Oleofarm Sp. z o.o 18 (“Oleofarm”). (Docket No. 6.) The motion is fully briefed. Because the Court finds it 19 lacks personal jurisdiction over Oleofarm, the motion is GRANTED. BACKGROUND1 20 21 Plaintiff Certified Nutraceuticals, Inc. (“Certified”) is a California corporation with 22 its principal place of business in Pauma, California. Certified is a world renowned and 23 trusted industry leader in the development and manufacturing of nutritional ingredients, 24 which are sold worldwide to formulators of nutraceuticals and dietary supplements. It 25 specializes in quality collagen nutritional ingredients, having pioneered the original 26 27 The following overview of the facts are drawn from the allegations of Plaintiff’s Complaint. The Court is not making factual findings. 1 28 1 3:17-cv-1088-BEN-WVG 1 invention of three Collagen Type II patents for dietary supplements, and being the first to 2 introduce Collagen Types I, II, and III food supplements to the market. Certified also 3 created the patented KollaGen II-XS, a Collagen Type II food supplement, which is used 4 to reduce joint pain and inflammation. 5 Defendant Oleofarm is a limited liability company organized under the laws of and 6 with its principal place of business in the country of Poland. Its business is purportedly 7 focused on the research, production, and sale of high-quality food supplements, dietary 8 foods for special medical purposes, pharmaceutical raw materials and healthy food, 9 including cold pressed oils. 10 On June 6, 2014, Certified and Oleofarm entered into a Confidentiality Agreement 11 (“Agreement”), whereby Certified agreed to disclose certain “confidential, important, 12 and/or proprietary” information to Oleofarm as part of a potential transactional or 13 relationship between the parties. (Compl. ¶ 18.) Oleofarm agreed to only use the 14 confidential information for “evaluating a possible transaction or relationship” with 15 Certified, and to not “use the Confidential Information to the detriment” of Certified. (Id. 16 ¶ 20.) Relying on the Agreement, Certified disclosed to Oleofarm “highly confidential 17 and proprietary information and material regarding its product, KollaGen II SX [sic], 18 including, but not limited to, United States patent information, composition, and analysis 19 information, flow chart, method of analysis and validation, clinical studies, 20 recommendations for encapsulation, and at least 2,400 kg. of KollaGen II SX [sic] Avian 21 (Chicken) Collagen Type II Powder (collectively, “the Proprietary Information”).” (Id. ¶ 22 21.) 23 Certified alleges Oleofarm subsequently breached the Agreement by using the 24 Proprietary Information to develop and manufacture its own avian chicken Collagen 25 Type II product. It filed this action seeking damages and injunctive relief for breach of 26 the Agreement. Oleofarm now moves to dismiss Certified’s on lack of personal 27 jurisdiction, forum non conveniens, and lack of subject matter jurisdiction grounds. 28 (Docket No. 6.) 2 3:17-cv-1088-BEN-WVG 1 LEGAL STANDARD 2 On a Rule 12(b)(2) motion to dismiss a complaint for lack of personal jurisdiction, 3 the plaintiff bears the burden of establishing personal jurisdiction. Wash. Shoe Co. v. A-Z 4 Sporting Goods, Inc., 704 F.3d 668, 671-72 (2012). Where the motion is based on 5 written materials and affidavits rather than an evidentiary hearing, a plaintiff is only 6 required to make a “prima facie showing of jurisdictional facts to withstand the motion to 7 dismiss.” Martinez v. Aero Caribbean, 764 F.3d 1062, 1066 (9th Cir. 2014) (quoting 8 Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004)). In 9 determining whether a plaintiff has met her burden, “uncontroverted allegations in [the] 10 complaint must be taken as true, and ‘conflicts between the facts contained in the parties’ 11 affidavits must be resolved in [the plaintiff’s] favor for purposes of deciding whether a 12 prima facie case for personal jurisdiction exists.’” Am. Tel. & Tel. Co. v. Compagnie 13 Bruxelles Lambert, 94 F.3d 586, 588-89 (9th Cir. 1996) (quoting WNS, Inc. v. Farrow, 14 884 F.2d 200, 203 (5th Cir. 1989) (internal citations omitted)). 15 “Where, as here, no federal statute authorizes personal jurisdiction, the district 16 court applies the law of the state in which the court sits.” Mavrix Photo, Inc. v. Brand 17 Techs., Inc., 647 F.3d 1218, 1223 (9th Cir. 2011) (internal citations omitted). 18 California’s long-arm statute permits its courts to exercise personal jurisdiction “on any 19 basis not inconsistent with the Constitution of this state or of the United States.” Daimler 20 AG v. Bauman, 134 S. Ct. 746, 753 (2014) (quoting Cal. Civ. Proc. Code § 410.10). 21 Thus, “California's long-arm statute allows the exercise of personal jurisdiction to the full 22 extent permissible under the U.S. Constitution,” and the Court must ensure that its 23 assertion of personal jurisdiction over a party comports with the limits imposed by 24 federal due process. Id. (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 464 25 (1985)). Due process requires that nonresident defendants have “minimum contacts” 26 with the forum state “such that the maintenance of the suit does not offend ‘traditional 27 notions of fair play and substantial justice.’” Goodyear Dunlop Tires Operations, SA. v. 28 3 3:17-cv-1088-BEN-WVG 1 Brown, 564 U.S. 915, 923 (2011) (quoting Int’l Shoe Co. v. Washington, 326 U.S. 310, 2 316 (1945)). Personal jurisdiction can be either “general” or “specific.” See 3 Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 415-16 (1984). 4 5 Oleofarm argues that Certified has not met its burden to show that this Court has specific jurisdiction over it.2 The Court agrees.3 6 DISCUSSION 7 “The inquiry whether a forum State may assert specific jurisdiction over a 8 nonresident defendant ‘focuses on the relationship among the defendant, the forum, and 9 the litigation.’” Walden v. Fiore, 134 S. Ct. 1115, 1121 (2014) (quoting Keeton v. 10 Hustler Magazine, Inc., 465 U.S. 770, 775 (1984) (internal quotation omitted)). For 11 specific jurisdiction to exist, “the defendant’s suit-related conduct must create a 12 substantial connection with the forum State.” Id. at 1121; see also Nissan Motor Co. Ltd. 13 v. Nissan Comput. Corp., 89 F. Supp. 2d 1154, 1158 (C.D. Cal. 2000) (“Specific personal 14 jurisdiction may be exercised when the nature and quality of the defendant’s contacts 15 with the forum state are significant in relation to the specific cause of action.”) (internal 16 quotation and citation omitted). This connection “must arise out of contacts that the 17 ‘defendant himself’ creates with the forum State.” Walden, 134 S. Ct. at 1122 (quoting 18 Burger King, 471 U.S. at 475) (emphasis in original). A defendant’s affiliation with the 19 plaintiff, or with persons who reside in the forum, standing alone, is insufficient to confer 20 specific jurisdiction. Id. at 1122-23. 21 In the Ninth Circuit, a district court “will exercise specific jurisdiction over a non- 22 resident defendant only when three requirements are satisfied: (1) the defendant either 23 ‘purposefully direct[s]’ its activities or ‘purposefully avails’ itself of the benefits afforded 24 25 2 26 27 28 Although Oleofarm also moved to dismiss for lack of general jurisdiction, Certified’s opposition did not address this argument. Therefore, the Court concludes Certified implicitly concedes this issue. 3 Because the Court finds personal jurisdiction over Oleofarm lacking, it declines to decide Oleofarm’s alternative grounds for dismissal. 4 3:17-cv-1088-BEN-WVG 1 by the forum’s laws; (2) the claim ‘arises out of or relates to the defendant’s forum- 2 related activities; and (3) the exercise of jurisdiction [ ] comport[s] with fair play and 3 substantial justice, i.e., it [is] reasonable.’” Williams v. Yamaha Motor Co., 851 F.3d 4 1015, 1023 (9th Cir. 2017) (quoting Dole Food Co. v. Watts, 303 F.3d 1104, 1111 (9th 5 Cir. 2002)). 6 The plaintiff bears the burden of satisfying the first two prongs of this specific- 7 jurisdiction test. Schwarzenegger, 374 F.3d at 802. “If the plaintiff succeeds in 8 satisfying both of the first two prongs, the burden then shifts to the defendant to ‘present 9 a compelling case’ that the exercise of jurisdiction would not be reasonable.” Id. “If any 10 of the three requirements is not satisfied, jurisdiction in the forum would deprive the 11 defendant of due process of law.” Pebble Beach Co. v. Caddy, 453 F.3d 1151, 1155 (9th 12 Cir. 2006) (quoting Omeluk v. Langsten Slip & Batbyggeri A/S, 52 F.3d 267, 270 (9th 13 Cir. 1995)). 14 1. 15 For cases sounding in contract, courts generally apply the purposeful-availment Purposeful Availment 16 analysis. Schwarzenegger, 374 F.3d at 802. “An out-of-state party does not purposefully 17 avail itself of a forum merely by entering into a contract with a forum resident.” HK 18 China Grp., Inc. v. Beijing United Auto. & Motorcycle Mfg. Corp., 417 F. App'x 664, 665 19 (9th Cir. 2011) (citing Burger King, 471 U.S. at 478); see also Roth v. Garcia Marquez, 20 942 F.2d 617, 621 (9th Cir. 1991) (“[T]he existence of a contract with a resident of the 21 forum state is insufficient by itself to create personal jurisdiction over the nonresident.”). 22 “Rather, there must be actions by the defendant himself that create a ‘substantial 23 connection’ with the forum State.” Picot v. Weston, 780 F.3d 1206, 1212 (9th Cir. 2015) 24 (internal quotation marks and emphasis omitted). Merely “random, fortuitous, or 25 attenuated” contacts are not sufficient. Burger King, 471 U.S. at 475 (internal quotation 26 marks omitted). 27 28 Where, as here, the exercise of personal jurisdiction over a defendant is based on the execution or performance of a contract, the court must “use a highly realistic 5 3:17-cv-1088-BEN-WVG 1 approach that recognizes that a contract is ordinarily but an intermediate step serving to 2 tie up prior business negotiations with future consequences which themselves are the real 3 object of the business transaction.” Burger King, 471 U.S. at 479 (internal quotation 4 marks and citation omitted); see also Schwarzenegger, 374 F.3d at 802 (“The appropriate 5 analysis for a suit ‘sounding in contract’ focuses on the presence of ‘purposeful 6 availment.’”). Thus, to determine whether a party to a contract has purposefully 7 established the requisite minimum contacts with the forum, a court should look at four 8 factors: (1) prior negotiations; (2) contemplated future consequences; (3) the terms of the 9 contract; and (4) the parties’ actual course of dealings. Burger King, 471 U.S. at 479. 10 More specifically, “[t]o have purposefully availed itself of the privilege of doing business 11 in the forum, a defendant must have performed some type of affirmative conduct which 12 allows or promotes the transaction of business within the forum state.” Boschetto v. 13 Hansing, 539 F.3d 1011, 1016 (9th Cir. 2008) (internal citation and quotation marks 14 omitted). 15 Oleofarm argues the Court lacks specific jurisdiction over it because its activities 16 within California “are non-existent” as it “has not conducted business or other activities 17 in the State of California.” (Mot. at p. 8.) It provided evidence in the form of a 18 declaration from one of its Management Board members that Oleofarm “does not sell its 19 dietary supplements or other products in the United States, either directly or indirectly” 20 and “has no business, agents, property, or advertising located within or directed at the 21 State of California.” (See Declaration of Dr. Katarzyna Suchoszek ¶ 3.) As to the 22 Agreement, it was “made” in Poland because Oleofarm executed the Agreement in 23 Poland and has never visited California.4 (Id. ¶¶ 4, 10.) Additionally, “[t]he only time 24 25 26 27 28 4 Plaintiff did not contest this fact in its opposition. See Jhirmack Enters., Inc. v. Superior Court, 96 Cal. App. 3d 715, 723 (1979) (“The last act necessary to the validity of a contract, usually the act constituting acceptance, is the place of its making.” (citing Braunstein v. Superior Court, 225 Cal. App. 2d 691, 696 (1964)). 6 3:17-cv-1088-BEN-WVG 1 Oleofarm employees have visited the United States on business was in November 2013 2 and October 2015, for trade shows in Las Vegas, Nevada.” (Id. ¶ 4.) 3 In response, Certified contends specific jurisdiction exists because “Oleofarm 4 continuously communicated with [Certified] for approximately two years with the 5 intention that Oleofarm would become [Certified’s] exclusive distributor, signed a non- 6 disclosure agreement (“NDA”) identifying the laws of California as the choice of law 7 governing Oleofarm’s disposition of [Certified’s] products, and purchased product from 8 [Certified] and knowing that [Certified] conducted business in California.” (Opp’n at p. 9 4.) None of these facts, either individually or collectively, is sufficient to establish 10 11 specific jurisdiction over Oleofarm. First, Certified acknowledges, as it must, that the Agreement alone, regardless of 12 where is was “made” cannot establish specific jurisdiction. See Burger King, 471 U.S. at 13 478 (“If the question is whether an individual’s contract with an out-of-state party alone 14 can automatically establish sufficient minimum contacts in the other party’s home forum, 15 we believe the answer clearly is that it cannot.”). Although Oleofarm does not deny that 16 the Agreement contains a choice of law provision designating California law, Oleofarm’s 17 consent to the choice of law provision alone is not equivalent to consent to jurisdiction in 18 California. 19 Second, Certified’s reliance on Burger King is misplaced. In Burger King, the 20 Supreme Court concluded that although the defendant did not have physical ties and may 21 never even have traveled to Florida (the forum state), his contacts with Florida were 22 sufficient to establish specific jurisdiction because: (1) the “franchise dispute grew 23 directly out of ‘a contract which had substantial connection with that State’”; (2) the 24 defendant “deliberately ‘reach[ed] out beyond’ Michigan and negotiated with a Florida 25 corporation for the purchase of a long-term franchise and the manifold benefits that 26 would derive from affiliation with a nationwide organization”; (3) the defendant “entered 27 into a carefully structured 20-year relationship that envisioned continuing and wide- 28 reaching contacts with Burger King in Florida.” Id. at 479-480 (internal citations omitted 7 3:17-cv-1088-BEN-WVG 1 and emphasis added in original). The Burger King court concluded that “[i]n light of 2 Rudzewicz’ voluntary acceptance of the long-term and exacting regulation of his 3 business from Burger King’s Miami headquarters, the ‘quality and nature’ of his 4 relationship to the company in Florida can in no sense be viewed as ‘random,’ 5 ‘fortuitous,’ or ‘attenuated.’” Id. at 480 (quoting Hanson v. Denckla, 357 U.S., at 253; 6 Keeton v. Hustler Magazine, Inc., 465 U.S. at 774; World-Wide Volkswagen Corp. v. 7 Woodson, 444 U.S. at 299). Additionally, the defendant’s refusal to pay in accordance 8 with the contract while continuing to receive its benefits, caused foreseeable injuries to 9 the corporation in Florida. Thus, “[f]or these reasons it was, at the very least, 10 presumptively reasonable for [the defendant] to be called to account there for such 11 injuries.” Id. at 480. 12 Here, Certified provided evidence that Oleofarm’s Purchasing Manager, Marzena 13 Janowska, communicated via email with Certified’s Vice-President, Abdul S. Alkayali, 14 for approximately two years, and stated in an email she would “do ‘everything’ she could 15 ‘to become [Certified’s] exclusive distributor in EU.’” (Declaration of Abdul S. Alkayali 16 ¶ 3.) However, unlike the long-term contract envisioned in Burger King, this contract 17 never came into fruition. It naturally follows that, in the absence of such a contract, 18 Oleofarm did not expect to receive any benefits from California and that there can be no 19 foreseeable injuries to Certified. 20 Third, Certified’s evidence that Oleofarm made three purchases of its Kollagen II- 21 XS product is simply not relevant to the Court’s analysis. The parties agree that 22 Oleofarm purchased Certified’s product to be sent from California to Poland. In any 23 event, Certified’s breach of contract claim does not “arise out of” these purchase 24 contracts,5 and Certified did not submit any other evidence that Oleofarm “performed 25 26 27 28 5 Indeed, these purchases are not even mentioned in the Complaint. 8 3:17-cv-1088-BEN-WVG 1 some type of affirmative conduct which allows or promotes the transaction of business 2 within the forum state.” 6 Boschetto, 539 F.3d at 1016 (emphasis added). 3 In sum, the only relevant evidence proffered by Certified to establish Oleofarm’s 4 purposeful availment of the privileges of conducting activities in California are the two 5 years of email correspondence between its Vice-President and Oleofarm’s Purchasing 6 Manager. Therefore, the Court finds Certified has only established contacts “with 7 persons who reside” in California, rather than “with the forum State itself,” which is 8 insufficient to establish specific jurisdiction over Oleofarm. Williams, 851 F.3d at 1023. 9 As a result, Certified has failed to meet its burden to establish the first prong of the three- 10 part test, and the Court need not determine the remaining prongs. Accordingly, 11 Oleofarm’s motion to dismiss for lack of jurisdiction is GRANTED. 12 CONCLUSION 13 For the foregoing reasons, Oleofarm’s motion to dismiss is GRANTED, and 14 Plaintiff’s Complaint is DISMISSED without prejudice for lack of personal 15 jurisdiction. 16 IT IS SO ORDERED. 17 18 Dated: March 9, 2018 19 20 21 22 23 24 25 26 27 28 In fact, although the Complaint alleges Oleofarm “directly or through its intermediaries (including other distributors and retailers), developed, licensed, manufactured, shipped, distributed, offered for sale, sold, and advertised its products in the United States, the State of California and this district,” Oleofarm’s evidence refutes this allegation and Certified’s opposition is silent on this issue. Thus, the Court concludes Certified concedes this argument. 6 9 3:17-cv-1088-BEN-WVG

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