Cataraha v. Elemental Prism

Filing 23

ORDER; Defendant's motion to dismiss for lack of personal jurisdiction 3 is DENIED. Signed by Judge Brian Morris on 7/17/2018. (TLO)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
GREAT FALLS DIVISION

CV-17-128-GF-BMM

STEPHANIE CATARAHA, as the
personal representative of the Estate of
STEPHEN HAMILTON,
Plaintiff,

ORDER ON DEFENDANT’S
MOTION TO DISMISS

vs.
ELEMENTAL PRISM, LLC, Herb
Stomp,
Defendants.

Defendant Elemental Prism, LLC, d/b/a Herb Stomp, (“Elemental Prism”),
moves this Court to dismiss the Complaint (Doc. 1) of Plaintiff Estate of Stephen
Hamilton (“Estate”) for lack of personal jurisdiction over them. (Doc. 3 at 1-2.)
I.BACKGROUND
The Estate alleges in the Complaint that Elemental Prism, an Oregon limited
liability company that sells herbal botanicals, spices, and other natural products,
violated M.C.A. § 27-1-719 (2) and (3) by selling “a dangerous and defective
product unreasonably dangerous to its users and consumers.” (Doc. 1 at 2.) The
Estate alleges that Elemental Prism sells Kratom, an herb that can be fatal if
ingested. Id. The Estate alleges that Elemental Prism extensively marketed Kratom
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for external use only. Id. The Estate alleges that Elemental Prism knew or should
have known, however, that users and consumers like Stephen Hamilton ingested
Kratom for pain relief. Id.
The Estate alleges that Hamilton purchased quantities of Kratom from
Elemental Prism in March of 2017. Id. Hamilton died on March 25, 2017. Id. The
Estate alleges that an overdose of mitragynine, a substance found in Kratom,
caused Hamilton’s death. Id. The Estate further alleges that Elemental Prism failed
to warn consumers of these dangers. Id. The Estate alleges that Elemental Prism’s
violation of M.C.A. § 27-1-719 constituted the legal cause of the death of
Hamilton. Id.
II.LEGAL STANDARD
Federal courts generally look to state law to determine the bounds of their
jurisdiction over parties. Picot v. Weston, 780 F.3d 1206, 1211 (9th Cir. 2015)
(internal quotation and citation omitted). Montana follows a two-step test for
determining whether a Montana court may exercise personal jurisdiction over a
nonresident defendant. Milky Whey, Inc. v. Dairy Partners, LLC, 342 P.3d 13, 17
(Mont. 2015). The Court first must determine whether personal jurisdiction exists
under M.R. Civ. P. 4(b)(1). Id. A party may be “found within the state of Montana”
and subject to general jurisdiction, or specific jurisdiction may exist if the claim for
relief arises from any of the acts listed in Rule 4(b)(1)(A-G). Id. The second step
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requires the court to determine whether the exercise of personal jurisdiction
conforms with “the traditional notions of fair play and substantial justice embodied
in the due process clause.” Cimmaron Corp. v. Smith, 67 P.3d 258, 260 (Mont.
2003) (citing Threlkeld v. Colorado, 16 P.3d 359, 361 (Mont. 2000)).
When opposing a defendant’s motion to dismiss for lack of personal
jurisdiction, “the plaintiff bears the burden of establishing that jurisdiction is
proper.” Ranza v. Nike, Inc., 793 F.3d 1059, 1068 (9th Cir. 2015) (citation
omitted); Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir.
2004). Plaintiffs cannot “rest” on the bare allegations of the Complaint. Amba
Mktg. Sys., Inc. v. Jobar Int’l, Inc., 551 F.2d 784, 787 (9th Cir. 1977). They must
“come forward with facts, by affidavit or otherwise, supporting personal
jurisdiction.” Id.
III.DISCUSSION
A. General Jurisdiction
To be “found” within Montana for the purpose of general jurisdiction, “it is
necessary that the defendants’ activities are ‘substantial’ or ‘systematic and
continuous.’” Milky Whey, Inc., 342 P.3d at 17 (citation omitted). The Supreme
Court has clarified this to mean that a state court may exercise general jurisdiction
over out-of-state corporations when their “affiliations with the state are so
‘continuous and systematic’ as to render them essentially at home in the forum
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state.” BNSF Ry. Co. v. Tyrrell, ___ U.S. ___, 137 S.Ct. 1549, 1558 (2017)
(citation omitted).
Elemental Prism is registered as an Oregon limited liability company and
maintains its principal place of business in Portland, Oregon. (Doc. 4 at 8.)
Elemental Prism conducts business in Montana through online sales. Elemental
Prism cannot be said to be “at home” in Montana, for purposes of establishing
general personal jurisdiction within the parameters established in Tyrrell. Further,
the Estate does not allege or argue that general jurisdiction exists over Elemental
Prism. (Doc. 10 at 4.) The Estate argues instead that this Court possesses “longarm jurisdiction” because Elemental Prism transacted business and committed torts
in Montana. M.R. Civ. P. 4(b)(1)(A) and (B). (Docs. 16, 21.) The Court will focus
its analysis on the former provision.
B. Specific Jurisdiction
The Estate primarily relies on 4(b)(1)(B) to establish personal jurisdiction,
but the more pertinent section would be 4(b)(1)(A). A defendant may be subject to
specific jurisdiction under Rule 4(b)(1)(A) if the claim arises from its “transaction
of any business within Montana.” M.R. Civ. P. 4(b)(1)(A). The “transacting
business” provision requires “far fewer contacts with the forum state than are
necessary to support general jurisdiction on the theory that the defendant is ‘doing
business’ in the forum state.” Milky Whey, Inc., 342 P.3d at 18 (citing 4A Wright &
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Miller, § 1069.3 at 156-61). Factors to be considered when analyzing this provision
include “the defendant company’s local negotiations for various types of
commercial transactions, the solicitation of business within the state, prior
litigations in the forum, the presence of agents in the state, and the existence of
ongoing contractual relationships with residents of the forum state.” Id.
The Montana Supreme Court determined in Milky Whey, Inc. that the court
lacked specific jurisdiction because the defendant never sold any product or
engaged in the performance of any service in Montana. Id. at 19. The defendant
also did not engage in e-commerce. Id. The defendant operated a website, but the
plaintiff did not allege that it had interacted with the website in any way.
The Montana Supreme Court determined in Nelson, by contrast, that the
defendant had transacted business in Montana. The court cited the defendant’s
lengthy contractual relationship with another Montana business, its negotiation of a
contract with the Montana plaintiff, and its arrangement of a contractual
relationship between two Montana businesses. Id. at 20 (citing Nelson v. San
Joaquin Helicopters, 742 P.2d 447, 450 (Mont. 1987)). These factors established a
relationship that proved more extensive than “a few phone calls back and forth
between the parties.” Id. These factors proved sufficient to find “purposeful
interjection into Montana” by the defendant and the transaction of business in
Montana. Id.
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The Estate cites Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F.Supp. 1119
(W.D. Pa. 1997), to support personal jurisdiction. (Doc. 21 at 2.) There the district
court addressed whether the defendant’s conducting of electronic commerce with
Pennsylvania residents constituted the purposeful availment of doing business in
Pennsylvania. Id. at 1126. The district court concluded that it did. The contact had
not been random or fortuitous. The defendant chose to process Pennsylvania
residents’ applications despite being under no obligation to sell its services to out
of state residents. Id. The defendant freely chose to do so, presumably in order to
profit from such transactions. Id.
Elemental Prism has been involved in no prior litigation in Montana. (Doc.
4-1 at 2.) Elemental Prism’s employees all live and work in Oregon. Id. Elemental
Prism operates a retail store in Portland, Oregon. Id. at 3. Elemental Prism sells
products over the phone and maintains a website, however, that facilitates online
sales. Id.
Elemental Prism shipped 41 orders to Montana in 2017, 47 orders to
Montana in 2016, and 42 orders to Montana in 2015. Id. Elemental Prism’s website
advises that it ships online sales via USPS. Of these sales to Montana, the Estate
contends that Elemental Prism shipped 16 orders to Hamilton between October 17,
2015 and March 20, 2017. (Doc. 22 at 2.)

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The Estate further points to the fact that major credit card companies do not
honor purchases of Kratom. Id. Elemental Prism instead directs customers to
complete online transactions up to the point of purchase. Id. The customers then
call Elemental Prism to give the credit card information over the phone. Id.
The Estate further alleges that Elemental Prism occasionally would send free
samples of new Kratom products to Hamilton to try. Id. Finally, the Estate
contends that when Hamilton expressed concern about the product causing illness,
Elemental Prism sent a test kit and communicated the results directly to Hamilton.
(Doc. 10 at 13.)
Taking all of the Estate’s well-pled allegations as true, it does not appear
beyond doubt that the Estate has failed to establish that Elemental Prism transacted
business within Montana. Elemental Prism sold and shipped its products directly
into Montana, unlike the defendant in Milky Whey, Inc. Elemental Prism processed
online orders. It worked with Montana residents to facilitate credit card
transactions. Elemental Prism also allegedly reached out to Montana customers,
such as Hamilton, by sending free samples and test kits. Similar to the defendant in
Zippo Mfg. Co., Elemental Prism chose to operate a website and a phone number
that it made available to out of state residents and chose to process their orders.
The Court finds that these factors prove sufficient to establish that Elemental Prism
transacted business within Montana. Zippo Mfg. Co., 952 F.Supp. at 1126-27.
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C. Due Process Requirements
The Court next must assess how the exercise of jurisdiction over Elemental
Prism would comport with principals of due process. Buckles v. Continental Res.,
Inc., 402 P.3d 1213, 1218 (Mont. 2017). Specific jurisdiction depends on the
“relationship among the defendant, the forum, and the litigation,” and on whether
the defendant’s “suit-related conduct” created a substantial connection with the
forum state. Id. at 1217 (quoting Tackett v. Duncan, 334 P.3d 920 (Mont. 2014)).
The Montana Supreme Court in Simmons adopted the Ninth Circuit’s threefactor due process test to evaluate the appropriateness of exercising specific
jurisdiction over a foreign defendant:
(1) The nonresident defendant must do some act or consummate some
transaction with the forum or perform some act by which he purposefully
avails himself of the privilege of conducting activities in the forum, thereby
invoking its laws;
(2) The claim must be one which arises out of or results from the
defendant’s forum-related activities; and
(3) Exercise of jurisdiction must be reasonable.
Simmons v. Montana, 670 P.2d 1372, 1378 (Mont. 1983). The Court confirmed the
use of this due process test in Buckles. Buckles, 402 P.3d at 1218.
The Montana Supreme Court has determined that the plaintiff need not
demonstrate each of the three elements to establish jurisdiction. Bunch v. Lancair
Int’l Inc., 202 P.3d 784, 795 (Mont. 2009). Once the plaintiff demonstrates that the
defendant has purposefully availed itself of the privilege of conducting activities in
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Montana, a presumption of reasonableness arises, which a defendant can overcome
only by presenting a compelling case that jurisdiction would be unreasonable. Id.
1. Purposefully directed activities to or availed itself to the benefits of
Montana
The Ninth Circuit uses a “purposeful direction test” in tort suits. Axiom Foods,
Inc. v. Acerchem Int’l, Inc., 874 F.3d 1064, 1069 (9th Cir. 2017) (citation omitted).
Purposeful direction requires the plaintiff prove the defendant “(1) committed an
intentional act, (2) expressly aimed at the forum state, (3) causing harm that the
defendant knows is likely to be suffered in the forum state.” Id. (citation omitted).
A defendant’s contacts with the state cannot be based on the “random, fortuitous,
or attenuated” contacts he makes by interacting with other persons affiliated with
the state. Walden v. Fiore, 571 U.S. 277, 286 (2014) (citing Burger King Corp. v.
Rudzewicz, 471 U.S. 462, 475 (1985)).
An intentional act is one denoting an external manifestation of the actor’s will
and does not include any of its results, even the most direct, immediate, and
intended. Morrill v. Scott Fin. Corp., 873 F.3d 1136, 1142 (9th Cir. 2017). The
Supreme Court determined in Calder that the intentional acts committed by the
reporter and editor were the researching, writing, editing, and publishing of an
allegedly libelous tabloid news article, all of which occurred in Florida. Calder v.
Jones, 465 U.S. 783, 789 (1984); see also Schwarzenegger, 374 F.3d at 806
(applying the test). The Supreme Court ultimately determined jurisdiction would
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be proper in California based on the ‘effects’ that the defendant’s conduct in
Florida caused in California. Calder, 465 U.S. at 789. Elemental Prism committed
an intentional act when it mailed Kratom to residents such as Hamilton in
Montana.
A court must consider two factors in determining whether a party aimed an
action at the forum state. Morrill, 873 F.3d at 1143. The relationship must arise out
of contacts that the “defendant himself” creates with the forum state. Walden, 571
U.S. at 284 (citation omitted). Further, the “minimum contacts” analysis looks to
the defendant’s contacts with the forum state itself, rather than the defendant’s
contacts with persons who reside there. Id. at 285 (citation omitted).
In Walden, a DEA agent seized cash from two Nevada gamblers in an airport in
Georgia before they could board a flight to Nevada. Id. at 279. The gamblers filed
suit in their home state of Nevada on the basis that the agent had crafted a
fraudulent affidavit in support of the seizure. Id. at 281. The Supreme Court
determined that the Nevada court lacked jurisdiction because the agent had not
expressly targeted the state of Nevada. Id. at 289-90. The agent “never traveled to,
conducted activities within, contacted anyone in, or sent anything or anyone to
Nevada.” Id. at 289.
Elemental Prism equates the case at hand with Walden, as noted by the assertion
that “the only connection with Montana mentioned in the Complaint is the fact that
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Stephen Hamilton resided in Montana.” (Doc. 4 at 25.) The Court disagrees.
Physical entry into the state – either by the defendant in person or through an
agent, goods, mail, or some other means – qualifies as a relevant contact. Walden,
571 U.S. at 285 (citation omitted). Elemental Prism’s products did not happen to
enter Montana through the streams of commerce. Elemental Prism processed
orders from Montana residents and mailed product into Montana on at least 130
occasions. These interactions establish that there was contact expressly aimed at
the forum state that cannot be dismissed as random, fortuitous, or attenuated.
With regard to the third element of the purposeful direction test, the notion that
some injury to Hamilton could occur in Montana proved foreseeable in light of the
fact that Elemental Prism mailed Kratom directly into Montana. The FDA has
exercised jurisdiction over Kratom as an unapproved drug and actively interdicts
shipments of Kratom entering the United States. (Doc. 21 at 7.) Further, when
Hamilton expressed concern about Kratom causing illness, Elemental Prism sent a
test kit for Hamilton to use. (Doc. 10 at 13.) Finally, it is undisputed that harm did
indeed occur in the forum state when Hamilton died of mitragynine concentration.
2. Forum-related activities
The Estate’s claims directly arise out of or relate to Elemental Prism’s
business activities in Montana.
3. Reasonableness
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The third prong of the due process analysis requires that the exercise of
jurisdiction must be reasonable. The Montana Supreme Court has set forth seven
nonexclusive factors to be considered when examining the reasonableness of
jurisdiction:
(1) The extent of defendant’s purposeful interjection into Montana;
(2) The burden on defendant of defending in Montana;
(3) The extent of the conflict with the sovereignty of defendant’s state;
(4) Montana’s interest in adjudicating the dispute;
(5) The most efficient resolution of the controversy;
(6) The importance of Montana to plaintiff’s interest in convenient and
effective relief; and
(7) The existence of an alternative forum.
Simmons Oil Corp. v. Holly Corp., 796 P.2d 189, 196-97 (Mont. 1990). As noted
above, the burden falls on the defendant to overcome a presumption of
reasonableness by presenting a compelling case that jurisdiction would be
unreasonable. Bunch, 202 P.3d at 795.
First, Elemental Prism maintains that it did not “purposefully direct” its
activities at Montana, and even if it did, it was only a very limited amount of
contact. (Doc. 4 at 27.) As discussed above, Elemental Prism’s contacts with
Montana cannot be characterized as random, fortuitous, or attenuated. Elemental
Prism’s shipment of approximately 130 orders to Montana in 3 years proves
significant. This factor weighs in favor of exercising jurisdiction.
Second, Elemental Prism contends that the burden to defend itself in
Montana would be substantial and unfair. (Doc. 4 at 27.) Elemental Prism cites to
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the burden of having members and employees travel to Montana to defend at trial.
Id. Elemental Prism employs eight people, five of whom work part time. (Doc. 4-1
at 2.) The United States Supreme Court has observed that the burdens imposed on
defendants to defend lawsuits in a foreign state have diminished markedly through
the years. Simmons 670 P.2d at 1383 (citing World-Wide Volkswagen Corp. v.
Woodson, 444 U.S. 286, 292-93 (1980)). The Court does not find this burden to be
unreasonable. This factor weighs in favor of exercising jurisdiction.
Third, Elemental Prism concedes that “regardless of where this case is
adjudicated, the sovereignty of the other state would be minimally and equally
impacted.” (Doc. 4 at 27.) Further, Elemental Prism concedes that there appears to
be no material difference between Montana’s and Oregon’s laws regarding product
liability actions. Id. This factor proves neutral at best.
Fourth, Elemental Prism asserts that this factors weighs against Montana
exercising jurisdiction. Elemental Prism cites the minimal number of shipments to
Montana, the fact that Stephanie Cataraha resides in California, and Oregon’s
interest in protecting businesses from costly litigation in foreign forums. Id. at 2829. Montana courts possess interest in allowing Montana plaintiffs to seek
restitution for tortious conduct. Simmons, 670 P.2d at 1383 (citation omitted).
Further, approximately 130 shipments into Montana over a period of 3 years
proves sufficiently significant for Montana courts to be interested in adjudicating
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the dispute. Oregon’s interest is not relevant when weighing this factor. This factor
favors Montana exercising jurisdiction.
Fifth, Elemental Prism asserts that the Ninth Circuit has primarily looked to
the location of witnesses and evidence in evaluating the efficiency of the forum.
(Doc. 4 at 29.) Elemental Prism contends that all of Elemental Prism’s employees
and documentary evidence is located in Oregon. Id. The Estate contends that
almost all witnesses and evidence exists in Montana. (Doc. 10 at 16.) Witnesses are
likely located in both states, as well as other evidence including Elemental Prism’s
documentation and the Estate’s autopsy and lab results. Accordingly, this factor
does not weigh heavily in favor of either side.
Sixth, regarding the importance of the forum to the plaintiff’s interest in
relief, Elemental Prism reasserts the fact that the personal representative of the
estate, Stephanie Cataraha, resides in California. (Doc. 4 at 29.) Elemental Prism
also asserts that the claims in this litigation can be effectively remedied in Oregon.
(Doc. 16 at 15.) The Estate concedes that Cataraha lives in California. (Doc. 10 at
16.) The Estate argues, however, that Cataraha serves as the personal
representative of Hamilton’s estate in Montana and further points to the fact that
Hamilton’s parents also live in Montana. Id. In considering Elemental Prism’s
point that Cataraha resides in California, the Court does not see how litigating in
Oregon would provide the plaintiff more convenient or effective relief than
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litigating in Montana. This factor weighs in favor of Montana exercising
jurisdiction.
Finally, it is the plaintiff’s burden to prove the unavailability of an
alternative forum. Core-Vent Corp. v. Nobel Indus. AB, 11 F.3d 1482, 1490 (9th
Cir. 1993). The Estate concedes that Oregon is an alternative forum. (Doc. 10 at
16.) This factor weighs in favor of Montana not exercising jurisdiction.
The court concludes, based on these factors, that Elemental Prism has failed
to present a compelling case that the exercise of jurisdiction would not comport
with fair play and substantial justice and would thus be unreasonable.
I.CONCLUSION
Montana’s long-arm statute reaches Elemental Prism. Exercising specific
personal jurisdiction over Elemental Prism does not offend due process
requirements.
II.ORDER
Accordingly, IT IS ORDERED that Defendant’s motion to dismiss for lack
of personal jurisdiction (Doc. 3) is DENIED.
DATED this 17th day of July, 2018.

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