Case Number: SC121917    Hearing Date: August 01, 2014    Dept: O

SC121917
FONT PLAZA INC v. ADAMSON

Defendant’s Motion to Quash is DENIED. Based on Plaintiff’s and Defendant’s evidence, Defendant Adamson visited California multiple times to conduct Plaintiff’s business and solicit investors. These contacts are substantially related to the controversy and assertion of jurisdiction would not be unreasonable.

Defendant’s Motion to Stay on Forum Non Conveniens Grounds is GRANTED. Defendant establishes that all Defendants are in Utah, a bulk of the evidence is in Utah, the patent is in Utah, the patent was developed in Utah, there is no limitations issue if the action is brought in Utah and there is an action by a Utah investor against him based on the same facts in Utah. Given these facts and the congestion of California’s courts, the action is properly stayed based on forum non conveniens.

ANALYSIS: Defendant Adamson moves to quash service of summons based on lack of minimum contacts. Defendant Adamson does not reside in California, does not maintain a place of business in California, and does not have any contacts in California. Adamson visits his son in California occasionally and has tenuous business contacts with the state. All Defendants are in Utah, all witnesses in Utah and the patent at issue is located in Utah.

In the alternative, Adamson also moves to stay the action for forum non conveniens. Utah is a proper alternative forum because all witnesses, the physical evidence and the defendants are in Utah. Moreover, one of Plaintiff’s shareholders has filed an identical action against Defendants in Utah. Adamson asks that this action be stayed and Plaintiff forced to litigate in Utah.

Plaintiff opposes on grounds that (1) Defendant waived any objection based on personal jurisdiction by previously filing a motion to quash based on CCP 430.10(a), which only authorizes challenges based on personal jurisdiction; (2) Defendant waived any objection based on personal jurisdiction when he engaged in non-jurisdictional discovery; (3) Defendant engaged in several minimum contacts with California that would justify assertion of specific jurisdiction; and (4) Defendant fails to establish that California is an inconvenient forum or that there is a proper alternative forum.

On reply, Defendant argues the reference to CCP 430.10(a) in the prior motion to quash was an error and that the substance of the argument therein was based on personal jurisdiction. Also, Defendant denies a number of the contacts that allegedly occurred and argues those that did occur do not support specific jurisdiction, as Plaintiff fails to explain how this action arose out of those contacts. Defendant also asserts that under CCP 418.10, any act after filing this motion to quash, including any responses to non-jurisdictional discovery, does not waive his objection based on personal jurisdiction. Finally, Defendant claims California is an inconvenient forum and Utah a proper forum.

No waiver of objection based on personal jurisdiction
Defendant’s prior motion to quash based on CCP 430.10(a) did not waive any objections based on personal jurisdiction. CCP 430.10(a) provides authority to demur based on subject matter jurisdiction. The reference to CCP 430.10(a) was clearly inadvertent, as the substantive argument was directed at personal jurisdiction. The motion was not titled a demurrer based on subject jurisdiction but a motion to quash.

Defendant served non-jurisdictional discovery on 6/12/14. See Opposition, Ex. 3. The non-jurisdictional discovery did not waive Defendant’s objection based on personal jurisdiction, because Defendant’s original motion to quash was filed and served on 2/28/14. As long as the motion to quash was filed before or concurrently with the discovery, Defendant will not be deemed to have submitted to the court’s jurisdiction. See Roy v. Sup.Ct. (Lucky Star) (2005) 127 Cal.App.4th 337, 345.

MOTION TO QUASH
Plaintiff bears the burden of establishing grounds for jurisdiction in response to a motion to quash. See Dill v. Berquist Const. Co., Inc. (1994) 24 Cal.App.4th 1426, 1439-1440. Plaintiff does not assert general jurisdiction over Defendant. As such, the only basis for jurisdiction asserted is specific jurisdiction.

“A court may exercise jurisdiction over a nonresident defendant only if the defendant’s minimum contacts with the forum state are sufficient to make the maintenance of the action inoffensive to traditional concepts of fair play and substantial justice.” See Virtual Magic Asia, Inc. v. Fil-Cartoons, Inc. (2002) 99 Cal.App.4th 228, 238. Specific jurisdiction results when the defendant’s contacts with the forum state, though not enough to subject the defendant to the general jurisdiction of the forum, are sufficient to subject the defendant to suit in the forum on a cause of action related to or arising out of those contacts. Specific jurisdiction exists if: (1) the defendant has purposefully availed itself of forum benefits with respect to the matter in controversy; (2) the controversy is related to or arises out of the defendant’s contacts with the forum; and (3) the assertion of jurisdiction would comport with fair play and substantial justice.” Id. (citing Sonora Diamond Corp. v. Sup. Ct. (2000) 83 Cal.App.4th 523, 526).

Plaintiff relies on the declaration of Melvin Gagerman and flight receipts to establish Defendant Adamson’s multiple visits to California from October through December 2013 to solicit investors for Plaintiff. See Opposition, Ex. 10, Decl. of M. Gagerman, ¶¶2-7. Defendant Adamson also opened an account in California for Plaintiff. Id. at ¶7. The mere fact that Defendant Adamson was acting on behalf of the corporation does not automatically shield him from jurisdiction. There is no “fiduciary shield” or jurisdictional immunity for nonresident corporate officers and directors who act on behalf of a corporation if their acts otherwise would subject them to local personal jurisdiction. Keeton v. Hustler Magazine, Inc. (1984) 465 US 770, 781.

Defendant Adamson denies that some of these California visits occurred and admits to three meetings but claims they were merely social. See Reply, R. Adamson Decl., ¶¶17-18. Defendant also does not clearly deny some of the meetings but merely testifies that he “does not recall.” Id. at ¶22-23. However, between those visits he admits to and his testimony on reply that the initial discussions regarding Plaintiff’s formation occurred in California through a California attorney, there is sufficient evidence that Adamson purposefully availed himself of California’s benefits. See Reply, R. Adamson Decl., ¶¶12-15. The mere fact that Adamson considers a number of the meetings at Hillcrest Country Club to be “social” does not negate the finding that he purposefully availed himself of California’s benefits by soliciting investors on Plaintiff’s behalf at social gatherings.

Defendant Adamson argues that that these contacts are not sufficiently related to the controversy at hand. In order to establish that a controversy is related arises from the defendant’s contacts, there must be substantial connection between the two. A substantial connection does not require that the contacts be the legal cause of the plaintiff’s injury, nor do the contacts have to be “substantially relevant” to the claims, e.g. serve to establish an element of the claim. Vons Cos., Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 460-462 and 469-470. “A claim need not arise directly from the defendant’s forum contacts in order to be sufficiently related to the contact to warrant the exercise of specific jurisdiction. Rather, as long as the claim bears a substantial connection to the nonresident’s forum contacts, the exercise of specific jurisdiction is appropriate. The due process clause is concerned with protecting nonresident defendants from being brought unfairly into court in the forum, on the basis of random contacts.” Id. at 452.

Based on the complaint and the controversy framed by the papers, Plaintiff claims Defendant Adamson has defrauded it and its investors by refusing to sign over the patent and comply with Plaintiff’s by-laws restricting loans in the name of the corporation. Defendant Adamson allegedly wooed investors with statements regarding Plaintiff’s ultimate possession and exploitation of the patent, which he has now intentionally refused to turn over. There is a substantial connection between the controversy and Adamson’s contacts with California.

Even if there is a sufficient of purposeful availment and a substantial connection between those contacts and the controversy, the Court may still refrain from asserting jurisdiction over Adamson if doing some would be “unreasonable.” See Burger King Corp., supra, 471 US at 477-478. If plaintiff shows that the nonresident defendant has purposefully availed itself of benefits and protections of forum law, the burden shifts to the defendant to demonstrate that it would be unreasonable for a local court to exercise jurisdiction. Id.

In determining whether assertion of jurisdiction would be unreasonable, the court must consider (1) the burden on the defendant; (2) the forum State’s interest in adjudicating the dispute; (3) the plaintiff’s interest in obtaining convenient and effective relief; (4) the interstate judicial system’s interest in obtaining the most efficient resolution of controversies; and (5) the shared interest of the several States in furthering fundamental substantive social policies. See World-Wide Volkswagen Corp. v. Woodson (1980) 444 US 286, 292.

Defendant Adamson fails to demonstrate that assertion of jurisdiction would be unreasonable. Defendant Adamson resides in Utah, which is relatively close to California, particularly given the ease of air travel. Moreover, much of the litigation will not require Adamson’s personal presence in Los Angeles. Defendant Adamson also did not have any difficulty traveling to Los Angeles on multiple occasions to seek investors, discuss business or for social reasons.

California also has a substantial interest in adjudicating this dispute. A number of Plaintiff’s investors and all its officers and directors are California residents. See Opposition, M. Gagerman Decl., ¶9. Plaintiff is qualified to do business here and California is its principal place of business, although it was incorporated in Delaware. Id. For the same reasons, Plaintiff has a valid interest in obtaining convenient and effective relief in the forum of its choice.

Utah is the only other forum presented by any of the parties with a competing interest in the controversy. However, there is no showing that it has a greater interest, although Defendant does establish that a large number of witnesses reside in Utah, including himself. However, this factor cuts in favor of both Utah and California and as such, alone does not justify the motion to quash.

MOTION TO STAY ON FORUM NON CONVENIENS GROUNDS
Forum non conveniens is “an equitable doctrine invoking the discretionary power of a court to decline the exercise of jurisdiction (to stay or dismiss) it has over a transitory cause of action when it believes that the action may be more appropriately and justly tried elsewhere.” See Stangvik v. Shiley, Inc. (1991) 54 Cal.3d 744, 751 (court should not decide that there are circumstances in which the doctrine will always apply or never apply); Piper Aircraft Co. v. Reyno (1981) 454 U.S. 235, 249-250 (emphasizing flexibility of forum non conveniens doctrine and refusing to place central emphasis on any one factor).

Where a party seeks dismissal, the inquiry is not whether some other state or country provides a better forum than does California, but whether California is a seriously inconvenient forum. See Ford Motor Co. v. Insurance Co. of No. America (1995) 35 Cal.App.4th 604, 611. The moving party bears the burden of establishing that California is a seriously inconvenient forum. Id.

However, where the defendant is only seeking a stay, the “seriously inconvenient forum” standard does not apply. National Football League v. Fireman’s Fund Insurance Company (2013) 216 Cal.App.4th 902, 933. In considering whether to stay an action, in contrast to dismissing it, the plaintiff’s residence is but one of many factors which the court may consider. Id. As such, defendants are only required to demonstrate that there is a suitable alternative forum and the factors articulated in Stangvik weigh in favor of stay and litigation in the alternative forum.

“In determining whether to grant a motion based on forum non conveniens, a court must first determine whether the alternate forum is a ‘suitable’ place for trial. If it is, the next step is to consider the private interests of the litigants and the interests of the public in retaining the action for trial in California. The private interest factors are those that make trial and the enforceability of the ensuing judgment expeditious and relatively inexpensive, such as the ease of access to sources of proof, the cost of obtaining attendance of witnesses, and the availability of compulsory process for attendance of unwilling witnesses. The public interest factors include avoidance of overburdening local courts with congested calendars, protecting the interests of potential jurors so that they are not called upon to decide cases in which the local community has little concern, and weighing the competing interests of California and the alternate jurisdiction in the litigation.” Stangvik, supra, 54 Cal.3d at 751.

Where the plaintiff is a California resident, the court may not dismiss an action on grounds of forum non conveniens. The court may, however, stay the action when substantial justice requires trial elsewhere. “In short, the trial court retains a flexible power to consider and weigh all factors relevant to determining which forum is the more convenient, and to stay actions by true California residents when it finds that the foreign forum is preferable.” Archibald v. Cinerama Hotels (1976) 15 Cal.3d 853, 860.

Defendant makes a strong case for forum non conveniens based on the number of witnesses residing in Utah (26 out of 27), the fact that the patent is located in Utah, a number of investors are located in Utah, all Defendants are Utah residents, and there was a subsequently filed Utah action by a Utah investor against Defendant Adamson that asserts substantially the same facts and claims as this action. Defendant also establishes Utah is a suitable alternative forum on these facts and the absence of any statute of limitations issue.

Utah and California both have interests in this litigation. However, Utah’s calendars are not as congested and the expense of litigating in California when most of the evidence, including witnesses will likely be in Utah, weighs in favor of staying the action on forum non conveniens grounds.

Defendant sufficiently establishes grounds to stay this action for forum non conveniens. Defendant’s Motion to Stay for Forum Non Conveniens is GRANTED, matter is stayed.