Case Name: Tongtai Machine and Tool Co., Ltd. v. Nano System, Inc., et al.
Case No.: 17-CV-319530

Currently before the Court is the motion by cross-defendant Todd Lizotte (“Lizotte”) to quash service of the summons and cross-complaint.

Factual and Procedural Background

This action arises out of a business dispute between plaintiff Tongtai Machine and Tool Co., Ltd. (“Tongtai”) and defendant and cross-complainant Nano Systems, Inc., (“Nano”). Tongtai filed its underlying complaint against Nano, Nano’s CEO defendant XiangZhen Qi (“Qi”), and Nano’s CFO defendant Qi Jiang, alleging causes of action for: (1) breach of contract; (2) breach of implied covenant of good faith and fair dealing; (3) fraud and deceit; (4) negligent misrepresentation; (5) negligence; (6) conversion; (7) breach of contract; (8) breach of implied covenant of good faith and fair dealing; and (9) conversion.

Thereafter, Nano filed a cross-complaint against Tongtai, cross-defendant Osaume Sekine (“Sekine”), cross-defendant Thinh Nguyen, and Lizotte, alleging causes of action for: (1) breach of fiduciary duty; (2) breach of contract; (3) breach of contract; and (4) misappropriation of trade secrets. The only claim alleged against Lizotte is the second cause of action for breach of contract.

According to the allegations of the cross-complaint, Nano is a registered California corporation with a principal place of business in Santa Clara County. (Cross-Complaint, ¶ 1.) Tongtai is a Taiwanese company that does business in Santa Clara County. (Id. at ¶ 2.) In 2014, Lizotte—a resident of New Hampshire—entered into an employment contract with Nano and began working as its Director of Emerging Technology. (Id. at ¶¶ 5, 12, & 27.) Lizotte left Nano in October 2016. (Id. at ¶ 12.) “[P]rior to [his] departure from Nano, [Lizotte] attempted to destroy key information including [Qi’s] e-mail inbox.” (Id. at ¶ 16.) Lizotte also “conspired with … Sekine to harm Nano and to support Sekine’s new company by meeting with Tongtai after [he] was told not to.” (Ibid.) Nano alleges that Lizotte breached his employment contract with it “by meeting with competitors without authorization, destroying company property, misuse of funds, and withholding … [Nano’s] intellectual property.” (Id. at ¶ 29.)

On January 15, 2019, Lizotte filed the instant motion to quash service of the summons and cross-complaint. Nano filed papers in opposition to the motion on April 24, 2019. On April 30, 2019, Lizotte filed a reply.

Discussion

Pursuant to Code of Civil Procedure section 418.10, Lizotte moves to quash service of the summons and cross-complaint on the ground that this Court does not have personal jurisdiction over him, a resident of New Hampshire.

I. Request for Judicial Notice

In connection with his reply papers, Lizotte asks the Court to take judicial notice of several federal cases. Lizotte cites these cases as persuasive authority in his reply papers. (See Haligowski v. Super. Ct. (2011) 200 Cal.App.4th 983, 989-990 [citation to unpublished federal cases is permitted as persuasive authority].)

A court must take judicial notice of federal decisional, constitutional, and statutory law under Evidence Code section 451, subdivision (a). Consequently, the federal cases attached to Lizotte’s request for judicial notice are proper subjects of judicial notice.

Accordingly, Lizotte’s request for judicial notice is GRANTED.

II. Motion to Quash

California courts “may exercise jurisdiction on any basis not inconsistent with the Constitution of this state or of the United States.” (Code Civ. Proc., § 410.10.) “The federal Constitution permits a state to exercise jurisdiction over a nonresident defendant if the defendant has sufficient ‘minimum contacts’ with the forum such that ‘maintenance of the suit does not offend “traditional notions of fair play and substantial justice.” [Citations.]’ ” (DVI, Inc. v. Super. Ct. (2002) 104 Cal.App.4th 1080, 1089-1090, quoting International Shoe Co. v. Washington (1945) 326 U.S. 310, 316.)

The “minimum contacts” doctrine embraces two types of personal jurisdiction: general jurisdiction and specific jurisdiction. (Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 445.) General jurisdiction exists where the defendant’s contacts in the forum are so “substantial, continuous and systematic” that there need not be any relationship between the alleged causes of action and the defendant’s relationship to the forum. (Ibid.) 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.” (Sonora Diamond Corp. v. Super. Ct. (2000) 83 Cal.App.4th 523, 536.)

A defendant may move to quash service of the summons on the ground the court lacks personal jurisdiction. (Code Civ. Proc., § 418.10, subd. (a)(1).) When a defendant challenges personal jurisdiction by filing a motion to quash, the plaintiff opposing the motion has the initial 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; BBA Aviation PLC v. Super. Ct. (2010) 190 Cal.App.4th 421, 428-429 (BBA).) “The plaintiff must do more than merely allege jurisdictional facts; plaintiff must provide affidavits and other authenticated documents demonstrating competent evidence of jurisdictional facts. [Citation.]” (BBA, supra, 190 Cal.App.4th at pp. 428-429; Strasner v. Touchstone Wireless Repair & Logistics, LP (2016) 5 Cal.App.5th 215, 221–222 (Strasner) [“The plaintiff must provide specific evidentiary facts, through affidavits and other authenticated documents, sufficient to allow the court to independently conclude whether jurisdiction is appropriate. [Citation.] The plaintiff cannot rely on allegations in an unverified complaint or vague and conclusory assertions of ultimate facts. [Citation.]”].) “If the plaintiff does so, the burden shifts to the defendant to present a compelling case that the exercise of jurisdiction would be unreasonable. [Citation.]” (BBA, supra, 190 Cal.App.4th at p. 429; Snowney v. Harrah’s Entertainment, Inc. (2005) 35 Cal. 4th 1054, 1062.)

Here, Nano argues that specific jurisdiction over Lizotte exists. Nano does not argue that Lizotte has sufficient minimum contacts under a general jurisdiction theory.

“[S]pecific jurisdiction is determined under a three-part test: ‘(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 the benefits and protections of 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.’ [Citation.]” (Jewish Def. Org. v. Super. Ct. (1999) 72 Cal.App.4th 1045, 1054; Gilmore Bank v. AsiaTrust New Zealand Ltd. (2014) 223 Cal.App.4th 1558, 1568.)

Nano contends that Lizotte purposefully availed himself of the benefits of California and its breach of contract claim arises out of Lizotte’s contacts with the forum because: (1) Lizotte signed an employment contract with Nano, a California resident; (2) Lizotte worked for Nano for two years and performed work in California “including meeting with numerous parties to perform services and other work-related activities”; and (3) Lizotte conspired with other California residents to harm Nano. (Oppn., pp. 3:15-25, 3:28-4:19, & 5:2-16.)

The only evidence offered by Nano in support of its contentions is the declaration of Qi. Qi declares that she is the CEO and Chairman of the Board of Directors for Nano, she reviewed Nano’s files and is familiar with how Nano’s records are retained, and the employment agreement between Lizotte and Nano is attached to her declaration as Exhibit A. (Qi Dec., ¶¶ 1-3.)

Exhibit A is a letter from Sekine, as President of Nano, to Lizotte entitled “Confirmation of an Offer of Employment.” (Qi Dec., Ex. A.) The letter is dated September 16, 2014. (Ibid.) The letter lists a Fremont address for Sekine and Nano, and a New Hampshire address for Lizotte. (Ibid.) The letter states that Nano is offering Lizotte the position of Director of Emerging Technology, and Lizotte would perform certain services for Nano “as described in [an] attached position description.” (Ibid.) The letter then sets forth information regarding Lizotte’s compensation, hours of work, benefits, at-will employment, and termination, as well as a non-disclosure and assignment of inventions agreement. (Ibid.) Lizotte signed the letter on September 29, 2014, indicating that he agreed to and accepted the offer of employment. (Ibid.)

The only other evidence before the Court is the declaration of Lizotte, which is offered in support of Lizotte’s motion. In his declaration, Lizotte declares that he is a resident and citizen of New Hampshire. (Lizotte Dec., ¶ 2.) He has lived and worked in New Hampshire since 1987. (Ibid.) Lizotte declares that he has never consented to jurisdiction in California, lived in California, owned or leased property in California, maintained or operated a business in California, worked in California, held any licenses or certifications in California, been a party to a contract in California, worked in California, or had a bank account, safe deposit box, or mailing address in California. (Id. at ¶¶ 3-10.) He also declares that he was served with the cross-complaint while in New Hampshire. (Id. at ¶ 11.)

With respect to his employment with Nano, Lizotte declares that he “was solicited by [Nano] to work in its planned New Hampshire facility as the Director of Emerging Technology” in 2014.” (Lizotte Dec., ¶ 12.) Nano “sent [him] the offer letter of employment in New Hampshire, and [he] accepted the offer in New Hampshire.” (Id. at ¶ 13.) Lizotte further declares that “[he] conditioned [his] acceptance of [Nano’s] offer of employment upon working only in [Nano’s] New Hampshire facility,” and he worked in Nano’s New Hampshire office during his employment with Nano. (Id. at ¶¶ 14-15.)

During his employment with Nano, “[Lizotte’s] only contacts with California consisted of work-related communications with [Nano’s] agents, employees and clients, including four sales and service engineering calls upon [Nano] clients located in California.” (Lizotte Dec., ¶ 16.) He states that Nano sells products worldwide; “[t]he fact that the four [Nano] clients [he] visited were in California is merely random or fortuitous”; and he “also visited [Nano] clients elsewhere, including in Massachusetts, China and Germany.” (Id. at ¶ 17.) Lizotte “also attended one annual professional society conference in California that [he] had attended before his employment with [Nano].” (Id. at ¶ 16.) Lizotte declares that he “visited the [Nano] home office in California on each of these trips.” (Ibid.) Lastly, Lizotte declares that he has read the cross-complaint and “[i]t is [his] understanding that it alleges a single cause of action against [him] for breach of contract which does not arise out of either these four sales and service engineering calls or [his] visits to [Nano’s] home office.” (Id. at ¶ 18.)

Upon review of the foregoing evidence, the Court finds that Nano has not presented sufficient evidence to permit the Court to find that it has specific jurisdiction over Lizotte.

First, there is no evidence in the record that Nano is a resident of California.
A corporation is not a resident of California merely because it does business here; rather, a domestic corporation is only one formed under California law. (Corp. Code §§ 167 & 171; Investors Equity Life Holding Co. v. Schmidt (2015) 233 Cal.App.4th 1363, 1380.) Nano does not present any evidence that it was incorporated in California or that its principal place of business is in California. At most, the evidence shows that Nano had a “home office” in California. (Lizotte Dec., ¶¶ 16 & 18.) Although Nano alleges in its cross-complaint that it “is a registered California [c]orporation with a principal place of business in Santa Clara County,” Nano cannot rely on the allegations of its unverified cross-complaint. (See Strasner, supra, 5 Cal.App.5th at pp. 221-222.) Thus, to the extent Nano contends that the Court may exercise specific jurisdiction over Lizotte because he entered into a contract with a California resident, Nano’s contention lacks merit.

Second, even assuming for the sake of argument that Nano is a California corporation, its employment contract with Lizotte, alone, does not automatically establish that Lizotte had sufficient minimum contacts with California. (Burger King Corp. v. Rudzewicz (1985) 471 U.S. 462, 475–476; Stone v. Texas (1999) 76 Cal.App.4th 1043, 1048 (Stone).) “Rather, a court must evaluate the contract terms and the surrounding circumstances to determine whether the defendant purposefully established minimum contacts within the forum. Relevant factors include prior negotiations, contemplated future consequences, the parties’ course of dealings, and the contract’s choice-of-law provision. [Citation.]” (Stone, supra, 76 Cal.App.4th at p. 1048.)

Here, Nano submits no evidence concerning the prior negotiations, contemplated future consequences, or the parties’ course of dealings, which might establish a substantial connection between the contract at issue and California. For example, there is no evidence establishing that the contract was made or performed in California. Nano does not present evidence that Lizotte reported to or was supervised by persons in California. There is no evidence that Lizotte received monetary payments or benefits from Nano that were sent from California. Additionally, the contract does not contain a choice-of-law provision or forum selection clause. Furthermore, the evidence before the Court demonstrates that the contract was sent to and signed by Lizotte in New Hampshire; Lizotte conditioned his acceptance on working in Nano’s New Hampshire facility; and Lizotte worked in the New Hampshire facility during his employment with Nano. Thus, Lizotte’s employment contract with Nano does not establish purposeful availment.

Third, Nano fails to demonstrate “substantial nexus or connection” between Lizotte’s remaining contacts with California and its second cause of action for breach of contract. During Lizotte’s employment with Nano he “attended one annual professional society conference in California that [he] had attended before his employment with [Nano].” (Lizotte Dec., ¶ 16.) Additionally, Lizotte made four sales and service engineering calls to Nano clients in California. (Id. at ¶¶ 16-17.) On these trips, Lizotte also visited Nano’s home office in California. (Id. at ¶ 18.) There is no evidence in the record suggesting that Nano’s claim against Lizotte for breach of employment contract arises out of or is, in any way, related to Lizotte’s attendance at the conference, his four trips to Nano clients, or his visits to Nano’s home office. As alleged, the second cause of action is based on allegations that Lizotte “attempted to destroy key information including [Qi’s] e-mail inbox” and met with “Tongtai after [he] was told not to.” (Id. at ¶¶ 16 & 29.) Nothing has been presented to the Court showing that these alleged acts are related to Lizotte’s attendance at the conference, his four trips to Nano clients in California, or his visits to Nano’s home office.

For these reasons, Nano has not met its initial burden to demonstrate by a preponderance of the evidence that Lizotte has sufficient minimum contacts with California to subject him to personal jurisdiction.

Accordingly, Lizotte’s motion to quash is GRANTED.