Case Name: Patrick Rivelli, et al. v. Rodo Medical, Inc., et al.

Case No.: 18CV326785

Motion of Institut Straumann AG to Quash Service of Summons

On April 18, 2018, plaintiffs Patrick Rivelli and Pinecroft Ventures, LLC (“Plaintiffs”) filed a complaint against defendant Institut Straumann AG (“Straumann”), among others, asserting causes of action for fraud, breach of fiduciary duty, breach of contract, violation of Corporations Code §§213, 1600-1605, and injunctive relief. Defendant Straumann is alleged to be a foreign corporation with its primary place of business in Basel, Switzerland. (Complaint, ¶4.)

On June 25, 2018, defendant Straumann filed the motion now before the court, a motion to quash service of summons.

I. Defendant Straumann’s motion to quash service of summons is GRANTED.

“A defendant is under no duty to respond in any way to a defectively served summons. It makes no difference that defendant had actual knowledge of the action. Such knowledge does not dispense with statutory requirements for service of summons.” (Weil & Brown et al., CAL. PRAC. GUIDE: CIV. PROC. BEFORE TRIAL (The Rutter Group 2018) ¶4:414, p. 4-69 citing Kappel v. Bartlett (1988) 200 Cal.App.3d 1457, 1466 (Kappel) and Ruttenberg v. Ruttenberg (1997) 53 Cal.App.4th 801, 808 (Ruttenberg).) “[N]otice does not substitute for proper service. Until statutory requirements are satisfied, the court lacks jurisdiction over a defendant.” (Ruttenberg, supra, 53 Cal.App.4th at p. 808.) “[I]n California, ‘…the original service of process, which confers jurisdiction, must conform to statutory requirements or all that follows is void.’” (Id. at p. 809.)

Appellant was under no duty to act upon a defectively served summons. The requirement of notice ‘is not satisfied by actual knowledge without notification conforming to the statutory requirements’ [citation]; it is long-settled that methods of service are to be strictly construed and that a court does not acquire jurisdiction where personal service is relied upon but has not in fact taken place.

(Kappel, supra, 200 Cal.App.3d at pp. 1466 – 1467.)

A “defendant’s first line of attack normally is a motion to quash service for lack of personal jurisdiction under Code of Civil Procedure section 418.10, subdivision (a)(1). The same motion is used to attack defects in the manner in which summons was issued or served.” (Weil & Brown et al., CAL. PRAC. GUIDE: CIV. PROC. BEFORE TRIAL (The Rutter Group 2018) ¶3:376, p. 3-108.) “Without valid service of summons, the court never acquires jurisdiction over defendant. Hence, the statutory ground for the motion to quash is that the court lacks jurisdiction over the defendant.” (Id. at ¶4:413, p. 4-69 citing Code Civ. Proc. §418.10, subd. (a)(1).) Code of Civil Procedure section 418.10, subdivision (a)(1) states, in pertinent part,

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 for one or more of the following purposes: (1) To quash service of summons on the ground of lack of jurisdiction of the court over him or her.

“[W]here a defendant properly moves to quash service of summons the burden is on the plaintiff to prove facts requisite to the effective service.” (Sheard v. Superior Court (1974) 40 Cal.App.3d 207, 211.) “Although the defendant is the moving party, the burden of proof is on the plaintiff.” (Weil & Brown et al., CAL. PRAC. GUIDE: CIV. PRO. BEFORE TRIAL (The Rutter Group 2018) ¶3:384, p. 3-111 citing Floveyor International, Ltd. v. Superior Court (1997) 59 Cal.App.4th 789, 793 (Floveyor), et al.) “[T]he burden of proof is upon the plaintiff to establish the facts of jurisdiction by a preponderance of the evidence.” (Evangelize China Fellowship, Inc. v. Evangelize China Fellowship, Hong Kong (1983) 146 Cal.App.3d 440, 444 (Evangelize).) “Where a motion to quash is made, the burden of proof is on the plaintiff to establish the facts of jurisdiction, by declarations, verified complaint or other evidence.” (2 Witkin, California Procedure (4th ed. 1996) Jurisdiction, §211, p. 775 – 776.)

California law permits service of process on a foreign corporation by delivery of the summons and complaint to the foreign corporation’s “general manager in this state.” (Corp. Code, §2110; Code Civ. Proc., §416.10, subd. (d).)

[A] consideration in testing the validity of service under section [2110] of the Corporations Code is whether the person served is within the statutory designation here ‘the general manager in this State’ for Smith & Wesson. In this regard, it has been said that ‘every object of the service is obtained when the agent served is of sufficient character and rank to make it reasonably certain that the defendant will be apprised of the service made,’ and by service on such an agent, ‘the requirement of the statute is answered.’ [Citation.] Whether in any given case, the person served may properly be regarded as within the concept of the statute depends on the particular facts involved. [Citation.]

(Cosper v. Smith & Wesson Arms Co. (1959) 53 Cal.2d 77, 83 (Cosper).)

Here, it reasonably appears that Lookabaugh, as a manufacturer’s representative actively engaged in promoting the sales of Smith & Wesson and earning commissions through such sales, would have ample regular contact with Smith & Wesson and would be of ‘sufficient character and rank to make it reasonably certain’ that Smith & Wesson would be apprised of the service of process. Neither the fact that Lookabaugh’s organization was designated as ‘manufacturer’s representatives’ nor the fact that such representatives promoted sales ‘on their own time and expense’ is determinative here. Whether Smith & Wesson was operating ‘through an independent contract, agent, employee or in any other manner’ (Gray v. Montgomery Ward, Inc., supra, 155 Cal.App.2d 55, 58, 317 P.2d 114, 116; Fielding v. Superior Court, 111 Cal.App.2d 490, 494, 244 P.2d 968; see also Eclipse Fuel Engineering Co. v. Superior Court, supra, 148 Cal.App.2d 736, 740, 307 P.2d 739), the essential factor is that Lookabaugh in his selling and advertising activities was performing services for Smith & Wesson and providing it with the opportunity for ‘regular contact with its customers and a channel for a continuous flow of business into the state.’ Sales Affiliates, Inc. v. Superior Court, supra, 96 Cal.App.2d 134, 136, 214 P.2d 541, 542. In short, the arrangement of Smith & Wesson with Lookabaugh appears, in the light of the president’s affidavit, to have given Smith & Wesson substantially the business advantages that it would have enjoyed ‘if it conducted its business through its own offices or paid agents in the state’ (Eclipse Fuel Engineering Co. v. Superior Court, supra, 148 Cal.App.2d 736, 740, 307 P.2d 739, 742); and such arrangement was sufficient to constitute Lookabaugh ‘the general manager in this State’ for purposes of service of process on Smith & Wesson. Corp.Code, s 6500.

(Cosper, supra, 53 Cal.2d at pp. 83–84.)

In opposition, Plaintiffs contend they properly served Straumann by serving its general manager in this state, Straumann USA, LLC (“Straumann USA”). In anticipation of this argument, Straumann submits evidence that Straumann USA is a Delaware limited liability company with its principal place of business in Andover, Massachusetts. Straumann USA is a wholly owned subsidiary of Straumann Manufacturing, Inc., a Delaware corporation that also has its principal place of business in Andover, Massachusetts. Straumann Manufacturing, Inc., like Straumann, is a wholly owned subsidiary of the Swiss holding company, Straumann Holding AG. Straumann does not have an ownership interest in Straumann USA or Straumann Manufacturing, Inc. Straumann does not have any involvement in the day-to-day finances, activities, management, sales, or marketing of Straumann USA.

Plaintiffs submit the declaration of its counsel who states that he conducted a search for Straumann USA records with the California Secretary of State and in an Application for Registration filed June 13, 2005, Straumann USA listed a principal place of business in California as 610 Newport Center Drive, Suite 1350, Newport Beach, CA 92660. Plaintiff’s counsel further declares that he performed a search of FDA records and observed a number of filings made by Straumann USA “on behalf of Institut Straumann AG” regarding applications to permit the marketing of Straumann’s dental products in the United States. Some identify Straumann as “applicant” and Straumann USA as “correspondent.” Plaintiffs’ counsel further declares that he reviewed a Straumann Product Catalog 2017/2018 which lists Straumann USA as its American contact for sales.

An American subsidiary of a foreign corporation is its “general manager in this state” for purposes of service of process. (See Yamaha Motor Co., Ltd. v. Superior Court (2009) 174 Cal.App.4th 264, 268, 274.) In addition, a representative in “ample regular contact” with the corporation is a general manager in California where it is reasonably certain that the representative will inform the corporation that it was served. (See id. at p. 273, citing Cosper v. Smith & Wesson Arms Co. (1959) 53 Cal.2d 77.)

The evidence submitted by Plaintiffs is insufficient in this court’s opinion to establish that Straumann USA is a “general manager in this state” such that service on Straumann USA’s agent for service of process constitutes valid service on Straumann. Although Straumann USA initially registered as a foreign limited liability company in California, more recent filings do not evidence a California business address and instead confirm a principal place of business in Massachusetts. Similarly, while there is some evidence that Straumann USA made applications to the FDA on behalf of Straumann, those activities appear to have occurred from the state of Massachusetts. The court does not find evidence of “ample regular contact” between Straumann USA and Straumann. As in Cosper, the fact that Straumann USA is designated the American contact for Straumann sales is not determinative. Plaintiffs do not proffer any evidence to challenge Straumann’s evidence that Straumann USA is not a subsidiary of Straumann.

In addition to improper service, Straumann moves to quash on the basis that it is not subject to personal jurisdiction in California. In opposition, Plaintiffs contend personal jurisdiction against Straumann is proper based on Straumann’s contractual consent. “California courts may exercise personal jurisdiction over a non-resident who has contractually consented in advance to such jurisdiction (e.g., provision that ‘in event of dispute, parties regardless of their residence will be subject to the jurisdiction of the courts of the State of California’). (Weil & Brown et al., CAL. PRAC. GUIDE: CIV. PRO. BEFORE TRIAL (The Rutter Group 2018) ¶3:170, p. 3-59 citing National Equip. Rental Ltd. v. Szukhent (1964) 375 US 311, 315-316.)

Plaintiffs submit evidence that Straumann was a signatory to a Stock Purchase and Exchange Agreement and Amended and Restated Investor Rights Agreement. In both of those agreements, Straumann agreed to “submit to the jurisdiction and venue of, any state or federal court located in the County of Santa Clara, California.” However, Plaintiffs are not parties to those agreements and have not made any showing that they, as non-parties, are entitled to enforce the forum-selection clause(s) against Straumann. (See Bancomer, S. A. v. Superior Court (1996) 44 Cal.App.4th 1450; Bugna v. Fike (2000) 80 Cal.App.4th 229; Lu v. Dryclean-U.S.A. of Calif., Inc. (1992) 11 Cal.App.4th 1490; and Berclain America Latina v. Baan Co. (1999) 74 Cal.App.4th 401.)

Accordingly, specially appearing defendant Straumann’s motion to quash service of summons is GRANTED.