Case Number: KC069647 Hearing Date: March 04, 2019 Dept: O

Specially Appearing Defendant John Mikulski, Inc.’s motion to quash service of summons or, in the alternative, motion to dismiss for inconvenient forum is DENIED.

Specially Appearing Defendant John Mikulski, Inc. (“JMI”) moves to quash service for lack of personal jurisdiction:

A defendant, on or before the last day of his or her time to plead or within any further time that the court may for good cause allow, may serve and file a notice of motion to quash service of summons on the ground of lack of jurisdiction of the court over him or her.

(CCP 418.10(a)(1).)

When a nonresident defendant challenges personal jurisdiction the burden shifts to the plaintiff to demonstrate by a preponderance of the evidence that all necessary jurisdictional criteria are met. (Jewish Defense Org. v. Superior Court (1999) 72 Cal. App. 4th 1045, 1054-55.) This burden must be met by competent evidence in affidavits and authenticated documentary evidence. (Id. at 1055.)

GENERAL JURISDICTION: General jurisdiction may lie in situations where a foreign corporation’s “continuous corporate operations within a state [are] so substantial and of such a nature as to justify suit against it on causes of action arising from dealings entirely distinct from those activities. (International Shoe v. State of Washington (1945) 326 U.S. 310, 318.) “A court may assert general jurisdiction over foreign (sister-state or foreign-country) corporations to hear any and all claims against them when their affiliations with the State are so “continuous and systematic” as to render them essentially at home in the forum State.” (Goodyear Dunlop Tires Operations, S.A. v. Brown (2011) 131 S. Ct. 2846, 2851.) The cause of action need not be related to the defendant’s contacts. (Thomson v. Anderson (2003) 113 Cal.App.4th 258, 265-266.)

The operative complaint alleges that Sentron International, Inc. (“Sentron”) and Smith Barnett LLP (“Barnett”) are indebted to plaintiff Cathay Bank (“plaintiff”) in excess of $11 million. Defendant Ace Hardware (“Ace”) converted plaintiff’s collateral and paid Smith Barnett in excess of $2 million, which should have been paid to the Receiver. JMI is alleged to be Sentron’s sales distributor.

JMI is a corporation formed under the laws of the state of Illinois. (See Declaration of Chris Tuuk ¶2.) JMI’s sole office and corporate headquarters is located in Illinois. (Id. ¶ 3.)

The Court finds there is no general jurisdiction.

SPECIFIC JURISDICTION: 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. (Aquila, Inc. v. Superior Court (2007) 148 Cal.App.4th 556, 569-570.) 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. at 570.) Courts must additionally evaluate: (1) the burden on the defendant of appearing in the forum, (2) the forum state’s interest in adjudicating the claim, (3) the plaintiff’s interest in convenient and effective relief within the forum, (4) judicial economy, and (5) the shared interest of the several states in furthering fundamental substantive social policies. (Id.)

On August 31, 2015, Sentron was indebted to plaintiff for over $11 million, secured by Sentron’s personal property, including a contract to sell to Ace approximately $2 million in racking products. It is alleged that Bruce Meredith, an officer of Sentron, planned to transfer Sentron’s assets to Barnett without plaintiff’s knowledge and in violation of its loan agreement. (See Opposition to Plaintiffs Cathay Bank and Robb Evans & Associates LLC to Specially Appearing Defendant John Mikiuski, Inc.’s Motion to Quash at 5.)

Three days after the plaintiff filed suit in this court, JMI emailed Ace with an urgent request to transfer Sentron’s vendor number to Barnett and complete the racking contract in Barnett’s name. (See Declaration of Bruce Meredith ¶ 11, Appendix 4.) After this Court issued its order appointing the Receiver and granting an injunction on November 4, 2015 (which was served on Ace on November 18, 2015), JMI urged Ace to ignore the injunction, conceal from the Receiver Sentron’s transfer of assets to Smith Barnett, and release funds over which Ace’s legal department had placed a hold. (See Declaration of Bruce Poltrock ¶ 3.f, Appendix Exhibit 8, ¶ 3.g, Appendix Ex. 6, 8, 9.) Simultaneously, JMI urged Meredith in California to expedite the shipments to avoid the injunction. The result was that by the end of 2015, Ace had paid Smith Barnett, and JMI had pocketed its commission on the transactions. (Poltrock Decl., ¶3.h, Appendix Ex. 10.)

“One of the recognized bases for jurisdiction in California arises when the defendant has caused an “effect” in the state by an act or omission which occurs elsewhere.” (Sibley v. Superior Court of Los Angeles County (1976), 16 Cal. 3d 442, 446.) Thus, jurisdiction can be proper where the Defendant engages in “intentional conduct expressly aimed at or targeting the forum state… the Defendant’s knowledge that his intentional conduct would cause harm in the forum.” (Pavlovich v. Superior Court (2002) 29 Cal.4th 262, 269.)

In Moncrief v. Clark (2015), 238 Cal.App.4th 1000, 1009, the court held that the nonresident Defendant’s “conduct and his intentional misrepresentations were required to close the sale. Clark personally availed himself of the benefits of California when he reached into California to induce Moncrief’s client to complete the equipment purchase.”

Similarly, JMI aided and abetted Sentron by inducing Ace to ignore this court’s Injunction and Receivership Order, and transferring payments to Smith Barnett, which constitute collateral that belonged to the Bank. JMI was aware of this court’s receivership order, and encouraged Ace to conceal the transactions. Specifically, on 11/18/15, JMI wrote to Ace, “we ask that any payables beyond the above 4 are not to be disclosed to the receivership” (Poltrock Decl., ¶3.f, Appendix Ex. 8); on 11/23/15, JMI emailed Ace and requested that Ace’s legal department release a hold that Ace had put on the funds: “we also ask that no Smith Barnett invoices be shared with the receivership.” (Id. at ¶3.g, Appendix Ex. 9.) JMI persuaded Ace to release the funds to Smith Barnett. JMI’s direct intervention caused the Bank to suffer damages. Thus, the court finds that JMI’s conduct induced Ace to transfer and conceal the fact that funds belonging to the Bank were being transferred to a different entity, Smith Barnett. JMI’s actions caused an effect in this state, and therefore, JMI, purposefully availed itself of this forum’s benefits.

The court further finds that the exercise of jurisdiction in this forum comports with traditional notions of fair play and substantial justice. This action has been litigated for over 3.5 years. Judicial efficiency favors litigation of all claims in a single forum. Further, it is reasonable to exercise jurisdiction under these circumstances because JMI was a major player, who dealt directly with Sentron, Smith Barnett, and Ace Hardware. Further, JMI’s contract with Sentron provided that it agreed to litigate any disputes “in any court of law in the United States of America,” which belies any notion that litigating in California would be an undue burden. (See Milski Decl., ¶16, p. 5.) Finally, this court has a substantial interest in adjudicating matters arising from the violations of its own Receivership Order, and providing a forum in which its court-ordered Receiver can vindicate its rights.

Motion is DENIED.