Artec Group, Inc. v. Klimov

186 F. Supp. 3d 1002, 2016 U.S. Dist. LEXIS 60576, 2016 WL 2593896
CourtDistrict Court, N.D. California
DecidedMay 5, 2016
DocketCase No. 15-CV-03449-RMW
StatusPublished

This text of 186 F. Supp. 3d 1002 (Artec Group, Inc. v. Klimov) is published on Counsel Stack Legal Research, covering District Court, N.D. California primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Artec Group, Inc. v. Klimov, 186 F. Supp. 3d 1002, 2016 U.S. Dist. LEXIS 60576, 2016 WL 2593896 (N.D. Cal. 2016).

Opinion

ORDER DENYING AXON BUSINESS SYSTEMS, LLC’s MOTION TO DISMISS

Ronald M. Whyte, United States District Judge

Plaintiff Artec Group, Inc. alleges trade secret misappropriation, breach of contract, and related causes of action against three former employees and three corporations. Defendant Axon Business Systems, LLC moves to dismiss Artec’s claims against Axon for lack of personal jurisdiction and insufficient service of process. Dkt. No. 85. Artec opposes Axon’s motion. Dkt. No. 89. Axon filed a reply. Dkt. No. 95. The court heard argument on March 25, 2016. Having considered the parties’ arguments, this court denies Axon’s motion.

I. BACKGROUND

Artee Group, Inc. is a California corporation specializing in the design and manu[1005]*1005facture of 3D scanners and facial recognition devices. Dkt. No. 80, First Amended Complaint (“FAC”) ¶ 19. Artec alleges that a group of former Artec officers, directors, and employees breached their employment contracts by conspiring to misappropriate trade secrets and compete directly with Artec through two newly formed companies, A-Star LLC and ID-Wise SIA. Id. ¶¶ 3, 85-94. Artec alleges that Axon Business Systems, LLC, a third corporate defendant, breached an Artec distribution agreement by purchasing and receiving Artec-branded products from defendant A-Star. Id. ¶¶20, 139-143. Artec originally brought this action against sixteen defendants. Dkt. No. 1. On October 26, 2015, the fifteen defendants who had been served (all but Axon) moved to dismiss. Dkt. No. 20. On November 9, 2015, Artec voluntarily dismissed as to ten of the original defendants. Dkt. No. 47. On December 22, 2015, this court dismissed Artec’s claims against corporate defendants ID-Wise and A-Star with leave to amend. Dkt. No. 78. .The court denied the motion to dismiss as to the three remaining individual defendants. Id. On January 15, 2016, plaintiff filed the First Amended Complaint, asserting claims against the three individual defendants, as well as corporate defendants ID-Wise, A-Star, and Axon. Dkt. No. 80. Axon now moves to dismiss for lack of personal jurisdiction and insufficient service of process. Dkt No. 85.

Axon Business Systems, LLC is registered and headquartered in the United Arab Emirates; Axon maintains no presence in California. FAC ¶ 19; Dkt. No. 89-1, Mostafa Decl. ¶¶ 3-9. On May 28, 2012, an Artec account manager in Russia sent an unsolicited email to an Axon manager suggesting a partnership between the parties. Id. ¶¶ 10-11. After a follow up email from the Artec account manager, the parties arranged to meet in Dubai and continued ' to negotiate via email. Id. ¶¶ 12-14. The parties reached agreement and entered' into a Non-Exclusive Distribution Agreement, effective August 8, 2012. FAC ¶¶ 20, 76, Mostafa Decl. ¶15. Under the Non-Exclusive Distribution Agreement, Axon had the right to distribute Artec’s “Broadway 3D” scanners to customers in the United Arab Emirates. FAC ¶76; Mostafa Decl. ¶¶ 15-17. The term of the agreement was one year, but certain provisions of the agreement' survived its termination. FAC ¶ 77. For example, Axon has a continuing obligation to' maintain the secrecy of Artec’s confidential information and refrain from selling “products similar to or competitive with” Artec’s products in the UAE without Artec’s permission. Id. ¶¶ 20, 77-83. Artec also alleges that the parties continued to do business as if the agreement were in effect after the one-year term expired. See Dkt. Nos. 94-1, 90-7, Yukhin Decl. ¶ 14 and Ex. F.

Artec alleges that Axon breached the terms of the Non-Éxclusive Distribution Agreement on January 7, 2015 by contracting for the purchase of Artec Broadway 3D devices from defendant A-Star at lower prices than Artec’s own wholesale list prices. Id. ¶¶ 11, 90. Artec alleges that the Broadway 3D devices sold to Axon were either “purloined” from Artec’s warehouses or “covertly built” by defendants using misappropriated Artec parts and technology. Id. ¶ 142; see also ¶¶ 20, 34, 36 55, 125, 127. Artec informed Axon of the alleged breach through counsel on May 3, 2015, but alleges that Axon refused to cooperate with Artec to remedy the breach. Id. ¶¶ 141-42. Artec asserts seven causes of action related to the alleged breach against Axon: Count Four (“Breach of Written Distributor Agreement”), Count Five (“Unjust Enrichment”), Count Seven (“Breach of Implied Covenant of Good Faith and Fair Dealing”), Count Nine (“Conversion”), Count Thirteen (“Civil Conspiracy”), Count Fourteen (“Constructive Trust”), and Count Sixteen (“Unfair [1006]*1006Competition”). FAC ¶¶ 179-187; 188-192; 198-202; 212-214; 251-257; 258-266;, 282-286.

II. ANALYSIS

Axon moves to dismiss for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2). In response to a motion to dismiss, “the plaintiff bears the burden of demonstrating that jurisdiction is appropriate.” Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir.2004) (citing Sher v. Johnson, 911 F.2d 1357, 1361 (9th Cir.1990)). “Where, as here, the motion is based on written materials rather than an evidentiary hearing, ‘the plaintiff need only make a prima facie showing of jurisdictional facts.’ ” Id. (quoting Sher, 911 F.2d at 1361). “Conflicts between the parties over statements contained in affidavits must be resolved in the plaintiffs favor.” Id.

Axon also moves to dismiss for insufficient service of process pursuant to Federal Rule of Civil Procedure 12(b)(5). When the validity of service is contested, plaintiff bears the burden to prove valid service. Brockmeyer v. May, 383 F.3d 798, 801 (9th Cir.2004). “The court may consider evidence outside the pleadings in resolving a Rule 12(b)(5) motion.” Wright v. City of Santa Cruz, No. 13-CV-01230-BLF, 2014 WL 3058470, at *6 (N.D.Cal. July 3, 2014) (quoting Fairbank v. Underwood, 986 F.Supp.2d 1222, 1228 (D.Or.2013)).

A. Personal Jurisdiction

If no federal statute governs personal jurisdiction, the law of the forum state applies. See Panavision Int’l L.P. v. Toeppen, 141 F.3d 1316, 1320 (9th Cir.1998). California’s long-arm statute is coextensive with federal standards, so a federal court may exercise personal jurisdiction as long as doing so comports with federal constitutional due process. Id. at 1320. “For a court to exercise personal jurisdiction over a nonresident defendant, that defendant must have at least ‘minimum contacts’ with the relevant forum such that the exercise of jurisdiction ‘does not offend traditional notions of fair play and substantial justice.’ ” Schwarzenegger, 374 F.3d at 801 (quoting Int’l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945)).

“There are two forms of personal jurisdiction that a forum state may exercise over a nonresident defendant—general jurisdiction and specific jurisdiction.” Boschetto v.

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Bluebook (online)
186 F. Supp. 3d 1002, 2016 U.S. Dist. LEXIS 60576, 2016 WL 2593896, Counsel Stack Legal Research, https://law.counselstack.com/opinion/artec-group-inc-v-klimov-cand-2016.