Case Name: Gary K. Chow v. Dan Yuan Chiao, et al.
Case No.: 18CV322807

IV. Background

This case brought by Gary K. Chow (“Plaintiff”) against Dan Yuan Chiao (“Dan”), Irene Yuan Chiao (“Irene”) , Christopher Patrick Leveriza, and Pacific Bay aka The Yuan Group aka Industria Pacificum (collectively “Defendants”) arises from financial losses sustained by Plaintiff due to the alleged improper investment of his money.

According to the allegations of the First Amended Complaint (“FAC”), Defendants formed a partnership, namely Pacific Bay, to manage investments for others. In December 2012, they approached Plaintiff, with whom they were friends from college, about investing money through the partnership. Dan sent an email to Plaintiff stating that he and Chris Leveriza put together a document to help potential investors understand their approach; that document, entitled Investment Principles, was attached. Dan also thanked Irene in the email for some unspecified help with the document.

Plaintiff was an inexperienced investor, and afraid of the possibility of losing his principal. It was very important to him to avoid losing any of his savings, which he planned to use to purchase a home. Nevertheless, Plaintiff agreed to allow Defendants to invest his money. Defendants were aware he had a very low tolerance for risk, and understood his priority was not to lose any of his savings. Dan told Plaintiff they would only invest in low risk stocks.

The investing occurred through an online system called Interactive Brokers. Irene was identified as Plaintiff’s financial advisor in an email from Interactive Brokers as well as an accompanying application to open a client account.

Plaintiff eventually gave Defendants $110,000 to invest on his behalf. Contrary to their written principles and oral assurances, Defendants made high risk investments. Plaintiff’s account gained value at first, and at one point was worth over $187,000. Eventually, however, the value of his account dropped below the principal invested. Plaintiff was not financially sophisticated, and took no action when he noticed the account value dropping other than to contact Defendants. Dan provided assurances and Plaintiff left his money in Defendants’ care. Losses eventually reduced the value of Plaintiff’s account to $300. In addition to those losses, Plaintiff had to pay significant taxes due to short term gains caused by Defendants’ investments.

The FAC alleges causes of action against Defendants for: (1) Breach of Fiduciary Duty; (2) Breach of Contract; (3) Constructive Fraud; (4) Violation of Corporations Code Section 25401 et seq.; (5) Violation of Corporations Code Section 25403; (6) Violation of Corporations Code Section 25504.1; (7) Violation of Corporations Code Section 25236 and California Code of Regulations Section 260.236 and Damages Under California Civil Code Section 3372; and (8) Fraud.

Currently before the Court is Irene’s motion to quash service of summons and dismiss the case due to lack of personal jurisdiction.

V. Legal Standard

A defendant may move to quash service of summons on the ground the court lacks personal jurisdiction over him or her. (Code Civ. Proc., § 418.10, subd. (a)(1).) Although the moving party is the defendant, “the plaintiff has the burden of proving, by a preponderance of the evidence, the factual bases justifying the exercise of jurisdiction.” (ViaView, Inc. v. Retzlaff (2016) 1 Cal.App.5th 198, 209-210 (ViaView).) To carry that burden, “[t]he plaintiff must do more than merely allege jurisdictional facts. It must present evidence sufficient to justify a finding that California may properly exercise jurisdiction over the defendant.” (In re Automobile Antitrust Cases I and II (2005) 135 Cal.App.4th 100, 110.) If the plaintiff makes such a showing, “the burden shifts to the defendant to present a compelling case demonstrating that the exercise of jurisdiction by our courts would be unreasonable.” (Id. at pp. 110-111.)

VI. Evidentiary Objections

Irene filed written objections to evidence presented by Plaintiff in support of his opposition, particularly Plaintiff’s initial and supplemental declarations as well as the declaration of Plaintiff’s counsel Jeffrey Feldman.

The Court will treat the challenged evidence as admissible for purposes herein because the outcome of the motion would be the same irrespective of the admissibility of such evidence.

VII. Merits of the Motion to Quash

Irene’s motion is predicated on her status as a nonresident defendant. She points out that Plaintiff specifically alleges she is a resident of Washington, D.C., and contends that Plaintiff will not be able to satisfy his burden of establishing she has sufficient minimum contacts with California to justify the exercise of jurisdiction over her.

The Court observes as a preliminary matter that Plaintiff filed the operative FAC concurrently with his opposition to the motion to quash. Because the motion was filed before the FAC, Irene references allegations from the original complaint throughout her supporting memorandum.

Plaintiff asserts the filing of the FAC “should make IRENE’s instant motion moot, given IRENE has specifically attacked the original Complaint in the motion.” (Opp., p. 1:13-15.) Plaintiff emphasizes that “[t]he FAC has much more detail on IRENE’s contacts with California, and provides a clear basis for both general and specific personal jurisdiction…” (Opp., p. 1:15-16.)

There are certain types of motions that may be rendered moot by the subsequent filing of an amended complaint, such as a motion for summary judgment or demurrer. With respect to a motion for summary judgment, the pleading delimits the issues to be considered (Laabs v. City of Victorville (2008) 163 Cal.App.4th 1242, 1253); thus, an amended pleading could change the scope of the proceeding in a way that materially affects the efficacy of such motion (see State Comp. Ins. Fund v. Superior Court (2010) 184 Cal.App.4th 1124, 1131). As for a demurrer, which tests the legal sufficiency of a specifically targeted pleading (McKenney v. Purepac Pharmaceutical Co. (2008) 167 Cal.App.4th 72, 78; see also Code Civ. Proc., §430.50), the filing of an amended pleading necessarily renders the matter moot. (See People ex rel. Strathmann v. Acacia Research Corp. (2012) 210 Cal.App.4th 487, 506.)
There is no apparent legal authority, however, supporting the proposition that a motion to quash for lack of personal jurisdiction is moot upon the filing of an amended complaint. Further, in contrast to a motion for summary judgment or demurrer, a motion to quash simply is not concerned with the legal sufficiency or merits of the pleading. As such, there is no legitimate rationale for concluding an amended complaint renders a motion to quash moot.

Next, insomuch as Plaintiff relies on new jurisdictional allegations in the FAC to defeat Irene’s motion, his reliance is misplaced. “An unverified complaint may not be considered as supplying the necessary jurisdictional facts.” (Nobel Floral, Inc. v. Pasero (2003) 106 Cal.App.4th 654, 658.) The FAC is unverified; thus, the allegations therein do not constitute evidence that can establish personal jurisdiction.

The Court will now turn to the merits of the motion. For context, “[u]nder California’s long-arm statute, California courts may exercise personal jurisdiction over nonresidents on any basis not inconsistent with the Constitution of this state or of the United States. A state court’s assertion of personal jurisdiction over a nonresident defendant who has not been served with process within the state comports with the requirements of the due process clause of the federal Constitution if the defendant has such minimum contacts with the state that the assertion of jurisdiction does not violate traditional notions of fair play and substantial justice. The due process clause is concerned with protecting nonresident defendants from being brought unfairly into [a forum state], on the basis of random contacts.” (ViaView, supra,1 Cal.App.5th at p. 209, internal quotation marks and citations omitted.)

There are two ways to establish personal jurisdiction under a minimum contacts analysis; “‘[p]ersonal jurisdiction may be either general or specific.’” (Pavlovich v. Superior Court (2002) 29 Cal.4th 262, 268–269 (Pavlovich); see also ViaView. supra,1 Cal.App.5th at p. 209.) Here, Plaintiff argues that Irene is subject to both general and specific jurisdiction.

A. General Jurisdiction

General jurisdiction exists when a defendant is domiciled in the forum state or his or her activities there are “substantial, continuous, and systematic.” (F. Hoffman-La Roche, Inc. v. Superior Court (2005) 130 Cal.App.4th 782, 796.) In the latter situation, the defendant’s “contacts with the forum are so wide-ranging that they take the place of physical presence in the forum as a basis for jurisdiction.” (Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 446 (Vons).)

There does not appear to be any dispute that Irene is not domiciled in California. Plaintiff argues general jurisdiction is proper because Irene has substantial, continuous, and systematic contacts with the state in that she grew up in California, currently owns an interest in real property in California, and may have lived in the state in 2004 and from 2012 to 2014.

Plaintiff presents minimal evidence in support. She primarily relies on a LexisNexis Comprehensive Person Report (“the Report”) listing contacts Irene had with California based upon public records. The Report connects Irene to an address in California in 2004, and again from 2012 to 2014. Additionally, the Report indicates Santa Clara County assessor records connect her to an address in Sunnyvale, CA. The Report does not specify what her particular connection is to each property (e.g., whether she lived at a particular address, owned the property, etc.) Plaintiff also presents his own declaration, wherein he states Irene grew up in California and has family here. Finally, Plaintiff submits a grant deed showing the transfer to Irene of a one-sixth interest in certain real property located in California in 2004.

Plaintiff’s evidence does not demonstrate that Irene has substantial, continuous and systematic contacts with California. The facts presented lack meaningful detail and, in any event, reflect only negligible contacts within the state. “[C]ontacts that are random, fortuitous, or attenuated do not rise to the minimum level” necessary to establish personal jurisdiction. (F. Hoffman–La Roche, Ltd. v. Superior Court, supra, 130 Cal.App.4th at p. 795.) Furthermore, Irene attests she has not lived in California since she was a child. (Irene Decl., ¶¶3-4.)

Accordingly, Plaintiff fails to show that the existence of general jurisdiction over Irene.

B. Specific Jurisdiction

In the absence of extensive contacts with the state to justify general jurisdiction, “a defendant may be subject to specific jurisdiction, meaning jurisdiction in an action arising out of or related to the defendant’s contacts with the forum state. [Citations.] Specific jurisdiction depends on the quality and nature of the defendant’s forum contacts in relation to the particular cause of action alleged. [Citation.] [¶] A nonresident defendant is subject to specific personal jurisdiction only if (1) the defendant purposefully availed itself of the benefits of conducting activities in the forum state; (2) the controversy arises out of or is related to the defendant’s forum contacts; and (3) the exercise of jurisdiction would be fair and reasonable. [Citation.] ‘These guidelines are not susceptible of mechanical application, and the jurisdictional rules are not clear-cut. Rather, a court must weigh the facts in each case to determine whether the defendant’s contacts with the forum state are sufficient.’ [Citations.]” (HealthMarkets, Inc. v. Superior Court (2009) 171 Cal.App.4th 1160, 1167.)

“The purposeful availment inquiry … focuses on the defendant’s intentionality. This prong is only satisfied when the defendant purposefully and voluntarily directs his activities toward the forum so that he should expect, by virtue of the benefit he receives, to be subject to the court’s jurisdiction based on his contacts with the forum.” (Pavlovich, supra, 29 Cal.4th at 269, internal citations and quotation marks omitted.) In addition, the defendant must have knowledge that its intentional conduct may cause harm in that state. (Id. at p. 272-273.)

Plaintiff also argues Irene is equitably estopped from denying she is a California based financial advisor. Plaintiff argues the fact Irene was described as a financial advisor in an email from Interactive Brokers should be viewed as a false representation by her that she was a California based financial advisor. Plaintiff then reasons Irene should be estopped from denying she is a California based financial advisor pursuant to Evidence Code section 623.

Plaintiff’s argument does not precisely parse the elements of specific jurisdiction and the facts he is asserting meet each of them. Faced with this lack of clarity, the Court interprets Plaintiff’s argument that Irene acted as a California based financial advisor as addressing the purposefully availment element.

The elements of estoppel are “(1) the party to be estopped must be apprised of the facts; (2) he must intend that his conduct shall be acted upon, or must so act that the party asserting the estoppel has a right to believe it was so intended; (3) the other party must be ignorant of the true state of facts; and (4) he must rely upon the conduct to his injury.’ [Citations]” (Ibid.) (Minish v. Hanuman Fellowship (2013) 214 Cal.App.4th 437, 459; see Evid. Code, § 623.)

The Court is unaware of, and Plaintiff does not present, any cases where the facts establishing personal jurisdiction were proven through estoppel. In any event, the elements of estoppel are not established here. The evidence presented does not show Irene knew about the email inviting Plaintiff to make an account, knowingly identified herself as a financial advisor, or acted as one. Plaintiff asserts in his opposition “Irene directed these activities, or allowed others to make these representations about her…” (Opp., p. 6:1.) This argument implicitly concedes Plaintiff is only presuming her involvement or sufferance of the use of her account, and does not present evidence she actually made any representation about being a financial advisor. Absent some evidence of Irene’s knowledge or actions, Plaintiff cannot establish estoppel.

This raises factual issues regarding Irene’s knowledge that her account was used to create a client account for Plaintiff, whether she sent an email inviting Plaintiff to create an account, and whether she knew that she was listed as a financial advisor. No evidence is presented that Irene ever used the account with her name, that she was the only person who used that account, or that she alone had access to it. Irene denies that she sent the email or identified herself as a financial advisor. Insomuch as Plaintiff argues that Irene purposefully directed herself towards California by actually acting as a financial advisor, she denies this as well. Based on the limited evidence now before the Court, it finds it more likely that Irene did not send the email, did not hold herself out as a financial advisor, and did not act as a financial advisor. The evidence is an email message from Interactive Brokers stated Irene was Plaintiff’s financial advisor. This is insufficient to establish that Irene took any action. Thus, the first and second elements of equitable estoppel are absent. Because Plaintiff’s purposeful availment theory is predicated on equitable estoppel, it too fails.

Thereafter, Plaintiff argues that because financial advice is a regulated activity in California, and Irene engaged in it, she is subject to personal jurisdiction. In support of this theory, Plaintiff cites Bressler v. Stavros (1983) 141 Cal.App.3d 365 (Bressler). In Bressler, the court found personal jurisdiction properly asserted over an out of state investor who, along with co-investors, purchased the entire stock of a California medical corporation. (Id. at p. 369.) Plaintiff cites Bressler not simply for its own merits, but because it mentions a more analogous case regarding financial regulation. Bressler discusses Quattrone v. Superior Court (1975) 44 Cal.App.3d 296 (Quattrone), wherein a person who fraudulently induced the issuance of shares of stock by a California corporation was found to be subject to specific jurisdiction. (Quattrone, supra, 44 Cal.App.3d at p. 307.)

The cited cases are distinguishable in that they involved no dispute as to whether the defendants engaged in certain transactions and thereby invoked the protections of California law. Here, as stated above, Plaintiff has not provided evidence that Irene actually gave any financial advice or invested Plaintiff’s money, only that an account associated with her name was used to do so.

Finally, Plaintiff asserts that specific jurisdiction is appropriate based upon an intentional tort. In support, Plaintiff relies upon Dole Food Co., Inc. v. Watts (9th Cir. 2002) 303 F.3d 1104 (Dole) and Calder v. Jones, 465 U.S. 783 (1984) (Calder). Plaintiff argues where “the intentional act was expressly aimed at the forum state, causing harm in that the defendants knew was likely to be suffered in the forum state and (b) the claim arose out of or was related to the defendant’s forum related activities.” (Opp., p. 8:13-16.) As discussed above, the evidence presented does not establish Irene actually took any action, let alone expressly aimed an action at California.

Calder and its progeny, as interpreted by controlling California state courts, state the proper personal jurisdiction analysis focuses on “(1) the defendant’s contacts with the forum, not with the plaintiff, and (2) whether those contacts create ‘ “ ‘the relationship among the defendant, the forum, and the litigation’ ” ’ necessary to satisfy due process. [Citation.]” (Burdick v. Superior Court (2015) 233 Cal.App.4th 8, 24.) Thus, “‘the proper question is not where the plaintiff experienced a particular injury or effect but whether the defendant’s conduct connects him to the forum in a meaningful way.’ [Citation.]” (Id. at p. 24.)

Finally, Plaintiff argues specific jurisdiction is proper because Irene helped in some way with the Investment Principles document, knew it would be sent to California residents, and that it would cause harm. Plaintiff’s only evidence for these points is that Dan sent an email which included a statement of thanks to Irene. Dan’s email did not mention Irene had knowledge of where the document would be sent, or that she would have some significant role in investing Plaintiff’s money going forward. This is not sufficient evidence to show Irene intentionally directed herself towards California or California residents.

As discussed above, Plaintiff has not met this standard. Irene did not connect herself to California in a meaningful way. In short, the evidence before the Court does not show Irene purposefully took any action to direct herself towards the state of California. As such, Plaintiff fails to demonstrate that specific jurisdiction exists.

C. Continuance for Discovery

In consideration of the above discussion, the motion to quash is meritorious. Plaintiff requests that, if the Court is inclined to grant the instant motion, the hearing be continued to give him the opportunity to conduct jurisdictional discovery.

“A trial court has the discretion to continue the hearing on a motion to quash service of summons for lack of personal jurisdiction to allow the plaintiff to conduct discovery on jurisdictional issues.” (HealthMarkets, Inc. v. Superior Court (2009) 171 Cal.App.4th 1160, 1173; see also School Dist. of Okaloosa County v. Superior Court (1997) 58 Cal.App.4th 1126, 1131.) To obtain such a continuance, “the plaintiff should demonstrate that discovery is likely to lead to the production of evidence of facts establishing jurisdiction.” (In re Automobile Antitrust Cases I and II (2005) 135 Cal.App.4th 100, 127, internal citations and quotation marks omitted.)

Plaintiff requests time to conduct discovery to explore Irene’s potential contacts with California, including how often she was at the addresses listed in the Report and how those addresses connect her to the state. The record does not reflect that any of the addresses listed in the Report are directly related to the instant dispute. Thus, it would appear Plaintiff asks to conduct discovery on the issue of general rather than specific jurisdiction.

In determining general jurisdiction, courts consider defendant’s contacts when the alleged wrongful conduct occurred and at the time of service of summons. (DVI, Inc. v. Superior Court (2002) 104 Cal.App.4th 1080, 1100.) Therefore, in determining if further discovery is likely to establish general jurisdiction, the Court assesses whether any of the evidence presented suggests discovery about the properties listed in the Report will establish relevant facts about either of these two periods.

Beginning with when the alleged contacts occurred, Plaintiff argues that the Report shows Irene was residing in California or had an active address “for much of the time that the Complaint asserts the DEFENDANTS lost all of GARY’s money.” (Opp., p. 4:1-4.) This is a mischaracterization of the Report. According to the FAC, the alleged conduct began in November 2012 when Plaintiff received an email inviting him to open an Interactive Brokerage account. (FAC, ¶ 29.) Plaintiff transferred his money to Defendants over several transactions, and did not complete this process until July 2014. More importantly, the FAC indicates Defendants did not lose any of Plaintiffs money prior to 2015. (See FAC, ¶ 32 [“By the end of 2014, MR. CHOW’s investments had appreciated to $187,783…”].) Thus, the losses that form the primary damage of this suit did not occur until at least 2015.

The Report lists an address in California from 2012 to 2014. Even if the Report is accurate, only part of the conduct underling the case occurred between 2012 and 2014 while Irene was in California or had an active address there. In sum, Plaintiff makes no evidentiary showing that discovery about the properties listed in the report is likely to produce evidence establishing general jurisdiction during the time the events occurred.

Turning to the date the summons was served, the proof of service filed by Plaintiff states Irene was served in February 2018. That is several years after the contacts with California mentioned in the Report, and even longer after the other evidence presented.

Therefore, Defendant has not shown that permitting discovery would likely result in facts establishing personal jurisdiction over Irene.

VIII. Conclusion

In consideration of the foregoing, Irene’s motion to quash service of summons and dismiss the case as against her is GRANTED.