Scott USA Inc. v. Patregnani

Filing 32

MEMORANDUM DECISION AND ORDER denying 17 Motion to Dismiss. Signed by Judge B. Lynn Winmill. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (st)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO

SCOTT USA INC.,

Case No. 1:14-cv-00482-BLW

Plaintiff,

MEMDORANDUM DECISION AND
ORDER

v.
ARMAND PATREGNANI,
Defendant/Third-Party Plaintiff,
v.
BIKESTREET RETAIL, LLC d/b/a
BIKESTREET USA,
Third-Party Defendant

Before the Court is Third-Party Defendant BikeStreet Retail d/b/a BikeStreet
USA’s Motion to Dismiss for Lack of Personal Jurisdiction (Dkt. 17). BikeStreet, seeks
dismissal of this action for lack of personal jurisdiction in Idaho. For the reasons set forth
below, the Court finds that BikeStreet is not subject to general jurisdiction because it
does not have substantial, continuous, and systematic contacts with the State of Idaho, but
is subject to specific jurisdiction of the Idaho courts for reasons described below.
BACKGROUND
BikeStreet is a Florida limited liability company with its headquarters in Florida.
BikeStreet operates retail bicycle stores throughout Florida, North Carolina, and South
Carolina. Netral Decl. ¶ 4. BikeStreet has never operated a store in Idaho nor sold its
MEMORANDUM DECISION & ORDER - 1

good to an Idaho purchaser. BikeStreet has never provided bicycle repairs services that
required pick-up or delivery of repaired bicycle in Idaho.
In 2012, however, BikeStreet began purchasing bicycles and bicycle products
from Scott USA, Inc., which has business operations in Idaho. As part of its arrangement
with Scott USA to purchase bicycle products, BikeStreet requested and Scott USA
extended a line of credit. Defendant Armand Patregnani personally guaranteed the line of
credit, presumably at the request of BikeStreet.
In the credit application, which BikeStreet executed on August 8, 2012, BikeStreet
consented to the jurisdiction in Idaho:
The undersigned [Patregnani] further acknowledges that all applications are
subject to approval and acceptance by SCOTT at its principal office in Sun
Valley, Idaho. The law of the state of Idaho, excluding its choice of law
rules, governs this application and any resulting agreement between
SCOTT and the Dealer [BikeStreet]. The Dealer [BikeStreet] and the
undersigned individuals [Patregnani] consent and submit to the jurisdiction
of the courts of the state of Idaho including its courts in Blaine County.
Patregnani Decl. ¶¶ 4, 7, Ex. 1; see also Compl. Ex. A.
The Scott USA Personal Guarantee, executed by Patregnani, in order for Scott to
extend credit to Bike Street, includes a similar provision:
[The] law of the state of Idaho, excluding its choice of law rules, governs
this Guarantee and any agreement between SCOTT and the Dealer
[BikeStreet]. The Dealer [BikeStreet] and the undersigned individuals
[Patregnani] consent and submit to the jurisdiction of the courts of the state
of Idaho including its courts in Blaine County.
Patregnani Decl. ¶ 5, Ex. 2; see also Compl. ¶ 7.

MEMORANDUM DECISION & ORDER - 2

Finally, the Terms and Conditions of Sale, also executed by BikeStreet on August
8, 2012, likewise contain a nearly identical provision:
Governing Law. Except as otherwise provided herein, this agreement and
all rights and obligations of the parties hereunder, including matters of
construction, validity and performance, shall be governed by the laws of the
State of Idaho, but without giving effect to the principles of conflicts of law
thereof. The Dealer [BikeStreet] consents and submits to the jurisdiction of
the courts of the state of Idaho including its courts in Blaine County.
Patregnani Decl. ¶ 6, Ex. 3; see also Compl. Ex. B.
According to Scott USA, BikeStreet defaulted on the credit terms. Compl. ¶¶ 4-5.
On October 9, 2014, Scott USA therefore filed a lawsuit against Defendant Armand
Patregnani in Idaho state court, seeking recovery of money damages under the personal
guarantee. Specifically, Scott USA alleges in its Complaint that BikeStreet failed to pay
amounts due and owing to Scott, and that Patregnani is liable for those amounts pursuant
to the personal guarantee. Id. Patregnani removed Scott’s action to this Court and filed
his Answer and Third Party Complaint on November 21, 2014. Third Party Compl., Dkt.
8. Patregnani’s Third Party Complaint asserts a common law indemnity claim against
BikeStreet, and alleges that his damages are attributable to the acts or omissions of
BikeStreet. Third Party Compl., pp. 6-7, Dkt. 8
ANALYSIS
The Due Process Clause of the Fourteenth Amendment allows state court, and
therefore this Court, to exercise personal jurisdiction over an out-of-state defendant if the
defendant has “certain minimum contacts with [the state] such that the maintenance of
the suit does not offend traditional notions of fair play and substantial justice.” Int’l Shoe
MEMORANDUM DECISION & ORDER - 3

Co. v. Washington, 326 U.S. 310, 316 (1945). The minimum contacts analysis allows this
Court to obtain either general jurisdiction or specific jurisdiction over a non-resident
defendant. Doe v. Unocal, Corp., 248 F.3d 915, 923 (9th Cir. 2001).
For general jurisdiction the defendant must have continuous and systematic
contacts with the forum state, but the particular cause of action may be unrelated to those
contacts. Id. General jurisdiction broadly subjects the defendant to suit in the forum
state's courts in respect to all matters, regardless of whether the matter before the court
has anything to do with the defendant's contacts with the state. Id. In this way general
jurisdiction is different from specific jurisdiction because specific jurisdiction depends on
an “affiliatio[n] between the forum and the underlying controversy.” Goodyear Dunlop
Tires Operations, S.A. v. Brown, 131 S.Ct. 2846, 2851 (2011) (internal quotation marks
omitted) (alteration in original). There is no claim of general jurisdiction here; only
specific jurisdiction is at issue.
Courts may assert specific jurisdiction over a defendant when it is permissible
under both the forum state's long-arm statute and the Due Process Clause of the United
States Constitution. Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th
Cir. 2004); see also Fed. R. Civ. Pro. 4(k)(1)(A). Idaho’s long arm statute extends to the
fullest extent permitted by the Due Process Clause of the Constitution, Lake v. Lake, 817
F.2d 1416, 1420 (9th Cir. 1987), and so the Court turns directly to the constitutional
analysis.

MEMORANDUM DECISION & ORDER - 4

The Ninth Circuit analyzes specific personal jurisdiction according to a threeprong test: (1) the defendant must perform an act or consummate a transaction such that it
purposefully avails itself of the privilege of conducting activities in the forum; (2) the
claim must relate to or arise out of the defendant’s activities in the forum; and (3) the
court’s exercise of jurisdiction must be reasonable. See Yahoo! Inc. v. La Ligue Contre Le
Racisme Et L’Antisemitisme, 433 F.3d 1199, 1205-1206 (9th Cir. 2006). The plaintiff
bears the burden of satisfying the first two prongs of the test. See Menken v. Emm, 503
F.3d 1050, 1057 (9th Cir. 2007). If the plaintiff satisfies the first two prongs, the burden
shifts to the defendant to come forward with a compelling case that the exercise of
jurisdiction would not be reasonable. Boschetto v. Hansing, 539 F.3d 1011, 1016 (9th
Cir. 2008) (internal citation omitted).
Specific jurisdiction requires that the defendant's contacts represent a purposeful
availment of the privilege of conducting activities in the forum state, thereby invoking the
benefits and protections of that state's laws and making the defendant's presence before
the state's courts foreseeable. Doe v. Unocal Corp., 248 F.3d 915, 923 (9th Cir. 2001). In
the purposeful availment inquiry the focus is on the defendant's intentions, and the
cornerstones are voluntariness and foreseeability. Id. The defendant's contacts must be
deliberate, and not based on the unilateral actions of another party. Id.
BikeStreet agreed that Idaho law would govern any disputes arising from its credit
agreement with Scott USA and further consented “to the jurisdiction of the courts of the
state of Idaho.” Terms and Conditions, Patregnani Decl. ¶ 6, Ex. 3. Forum selection
MEMORANDUM DECISION & ORDER - 5

clauses in commercial contexts are prima facie valid and should be enforced unless
enforcement is shown by the resisting party to be ‘unreasonable’ under the
circumstances. Manetti–Farrow, Inc. v. Gucci America, Inc., 858 F.2d 509, 513 (9th Cir.
1988) (citing Bremen v. Zapata Off–Shore Co., 407 U.S. 1 (1972)). The party resisting
enforcement must show that litigation in the selected forum “will be so gravely difficult
and inconvenient that [the party] will for all practical purposes be deprived of [its] day in
court.” Bremen 407 U.S. at 18.
However, BikeStreet does not argue that the forum selection clause in this case is
“unreasonable.” Rather, it argues that the documents Patregnani cites as evidence of
BikeStreet’s consent to jurisdiction in Idaho – the Personal Guarantee, the Scott USA
Credit Application and the Terms and Conditions of Sale – only pertain to disputes
between BikeStreet and Scott USA – and not to disputes between BikeStreet and
Patregnani. And, according to BikeStreet, “Patregnani may enforce the terms of those
agreements only if he can show that he is a third-party beneficiary.” BikeStreet’s Reply
Br. at 2, Dkt. 21.
But a formal third-party beneficiary relationship is not required for Patregnani to
enforce the forum selection clause against BikeStreet. The test for non-signatories to an
forum-selection agreement is broader: In order to bind a non-party to a forum selection
clause, the party must be “closely related” to the dispute such that it becomes
“foreseeable” that it will be bound. Manetti–Farrow, Inc. v. Gucci Am., Inc., 858 F.2d
509, 514 n. 5 (9th Cir. 1988). There can be little doubt that BikeStreet is “closely related”
MEMORANDUM DECISION & ORDER - 6

to the dispute between Scott USA and Patregnani. This dispute between Scott USA and
Patregnani arises out of BikeStreet’s alleged breach of its credit agreement with Scott
USA, which Patregnani guaranteed. Thus, it is eminently foreseeable that BikeStreet
would be bound by a forum selection clause that references BikeStreet specifically – even
if BikeStreet was not a signatory to the Personal Guarantee signed by Patregnani.
The Court further finds that binding BikeStreet to the forum selection clause for
the purpose of exercising personal jurisdiction does not offend due process. The fact that
BikeStreet signed two separate documents consenting to jurisdiction in Idaho courts
likewise makes it eminently foreseeable that BikeStreet would be held accountable for
any alleged breach of those agreements in Idaho’s courts. See, e.g., Burger King, 471
U.S. at 482 (finding that a choice of law provision, combined with the defendant's
relationship with the forum, reinforced the defendant's “deliberate affiliation with the
forum State and the reasonable foreseeability of possible litigation there”). In the Court’s
view, it makes little difference that BikeStreet has been haled into court here in Idaho by
Patrengani as a third-party defendant, rather than being directly sued by Scott USA.
Either way, it was foreseeable that BikeStreet would be sued in Idaho courts for any
dispute arising from its credit arrangement with Scott USA.
Accordingly, the Court finds that the exercise of personal jurisdiction in this case
over BikeStreet is reasonable and comports with the notions of fair play and substantial
justice. BikeStreet has not carried their burden to establish that the exercise of personal
jurisdiction would be unreasonable.
MEMORANDUM DECISION & ORDER - 7

ORDER
O
T
ERED that Third-Party Defendant BikeStreet Retail d/b/ BikeStreet
T
y
t
t
/a
IT IS ORDE
USA’s Motion to Dismiss for Lack of Per
M
D
rsonal Juris
sdiction (Dk 17) is DE
kt.
ENIED.

DAT
TED: April 16, 2015
l

__________
__________
_____
___
B. L
Lynn Winm
mill
Chief Judge
ited
District Cou
urt
Uni States D

MEMORA
ANDUM DECIS
SION & ORDE - 8
ER