Crossfit, Inc. v. Matrix Solutions, LLC

• Court: District Court, S.D. California
• Decided: February 28, 2020
• Docket: 3:19-cv-00887
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 CROSSFIT, INC., Case No.: 19-CV-887-CAB-BLM

12 Plaintiff, ORDER GRANTING DEFENDANT 13 v. DAGOBAH, LLC’S MOTION TO DISMISS 14 MATRIX SOLUTIONS, LLC et al.,

15 Defendants. [Doc. No. 35] 16 17 18 This matter comes before the Court on Defendant Dagobah, LLC’s (“Dagobah”) 19 motion to dismiss for lack of jurisdiction. [Doc. No. 35.] The motion has been fully 20 briefed, and the Court finds it suitable for determination on the papers submitted and 21 without oral argument. See S.D. Cal. CivLR 7.1(d)(1). For the reasons set forth below, 22 Dagobah’s motion is granted. 23 I. BACKGROUND 24 On May 10, 2019, Plaintiff CrossFit, Inc. filed its complaint for breach of contract 25 and trademark infringement against Defendants Matrix Solutions, LLC, Progenex 26 Holdings, LLC, Fitness Trade sp. z o.o, Fitness Trade sp. z o.o sp. k., and ABC Corp. [Doc. 27 No. 1.] On December 2, 2019, Plaintiff filed a First Amended Complaint (“FAC”) joining 28 as Defendants The Conclave, LLC and Dagobah, LLC. [Doc. No. 28.] 1 The FAC alleges that Matrix Solutions, LLC, Progenex Holdings, LLC, The 2 Conclave, LLC, and Dagobah, LLC, all Wyoming limited liability companies with a 3 principal place of business in Utah, are collectively doing business as “Progenex.” [Id. at 4 ¶ 10.1] Plaintiff alleges breach of contract and unauthorized use of Plaintiff’s intellectual 5 property and brand in a manner confusing to the public. [Id. at ¶ 1.] 6 The FAC alleges the Court has personal jurisdiction over Dagobah because it has 7 purposefully directed branding and other activities toward Plaintiff in California and is 8 jointly responsible for Progenex’s activities which are purposefully directed to California. 9 [Id. at ¶ 21.] The FAC also alleges that Dagobah is closely affiliated with or an alter ego 10 of Matrix Solutions and the several Progenex entities are all alter egos of one another. [Id. 11 at ¶¶ 9, 14.] The FAC mentions Ryan Page only once, as CEO of Defendant Matrix 12 Solutions, in relation to his response to Plaintiff’s demand letter from July 2017. [Id. at ¶ 13 118.] 14 On January 17, 2020, Dagobah moved to dismiss under Federal Rule of Civil 15 Procedure 12(b)(2) for lack of personal jurisdiction. [Doc. No. 35.] 16 II. LEGAL STANDARD 17 Federal Rule of Civil Procedure 12(b)(2) allows a district court to dismiss an action 18 for lack of personal jurisdiction. “Where defendants move to dismiss a complaint for lack 19 of personal jurisdiction, plaintiffs bear the burden of demonstrating that jurisdiction is 20 appropriate.” Dole Foods Co. Inc. v. Watts, 303 F. 3d 1104, 1108 (9th Cir. 2002). “The 21 court may consider evidence presented in affidavits to assist in its determination and may 22 order discovery on the jurisdictional issues.” Doe v. Unocal Corp., 248 F.3d 915, 922 (9th 23 Cir. 2011) (citing Data Disc, Inc. v. Sys. Tech. Ass’n, Inc., 557 F.2d 1280 (9th Cir. 1977)). 24 A court’s power to exercise personal jurisdiction over a non-resident defendant is 25 limited by two independent constraints, namely the applicable state personal jurisdiction 26 27 28 1 statute and the constitutional principles of due process. Sher v. Johnson, 911 F.2d 1357, 2 1361 (9th Cir. 1990); see also In re W. States Wholesale Natural Gas Antitrust Litig., 715 3 F.3d 716, 741 (9th Cir. 2013) (“[p]ersonal jurisdiction over a nonresident defendant is 4 proper if permitted by a state’s long-arm statute and if the exercise of that jurisdiction does 5 not violate federal due process.”). “Under California’s long-arm statute, California state 6 courts may exercise personal jurisdiction ‘on any basis not inconsistent with the 7 Constitution of this state or of the United States.’” Daimler AG v. Bauman, 571 U.S. 117, 8 125 (2014) (quoting Cal. Civ. Proc. Code Ann. § 410.10 (West 2004)). Thus, “the 9 jurisdictional analyses under state law and federal due process are the same.” 10 Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800-801 (9th Cir. 2004)). 11 Under the Due Process Clause of the Fourteenth Amendment, to exercise personal 12 jurisdiction over an out-of-state defendant, the defendant must have “certain minimum 13 contacts with [the State] such that the maintenance of the suit does not offend traditional 14 notions of fair play and substantial justice.” Goodyear Dunlop Tires Operations, S.A. v. 15 Brown, 564 U.S. 915, 923 (2011) (quoting Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 16 (1945) (internal quotations omitted)). This minimum contacts jurisdiction may be either 17 “general or all-purpose jurisdiction,” or “specific or case-linked jurisdiction.” Id. at 919 18 (citing Helicopteros Nacionales de Colombia S.A. v. Hall, 466 U.S. 408, 414 (1984)). “The 19 strength of contacts required depends on which of the two categories of personal 20 jurisdiction a litigant invokes: specific jurisdiction or general jurisdiction.” Ranza v. Nike, 21 Inc., 793 F.3d 1059, 1068 (9th Cir. 2015). 22 III. DISCUSSION 23 Dagobah contends it is a Wyoming limited liability company that does not conduct 24 business in California to be subject to general jurisdiction in this Court. Dagobah also 25 denies that it has availed itself of the benefits of the laws of California and states it has no 26 contacts with California to support a finding of specific jurisdiction. Dagobah avers it is 27 only a holding company and has never sold any products or provided any services 28 anywhere. 1 Plaintiff argues Dagobah has sufficient minimum contacts with California to support 2 specific jurisdiction and suggests there may be general jurisdiction because Dagobah is an 3 unincorporated association and California may be its home. Primarily, Plaintiff contends 4 that Dagobah is closely affiliated with or an alter ego of Defendant Matrix Solutions and 5 the “Progenex” enterprise, such that Dagobah should also be responsible for the past and 6 ongoing trademark infringement by Progenex in California. 7 A. General Jurisdiction 8 “A court with general jurisdiction may hear any claim against that defendant, even 9 if all the incidents underlying the claim occurred in a different State.” Bristol-Myers 10 Squibb Co. v. Superior Court of California, 137 S. Ct. 1773, 1780 (2017) (emphasis in 11 original) (citing Goodyear, 564 U.S. at 919). “But ‘only a limited set of affiliations with a 12 forum will render a defendant amenable to’ general jurisdiction in that State.” Id. (quoting 13 Daimler, 571 U.S. at 137). “Because the assertion of judicial authority over a defendant is 14 much broader in the case of general jurisdiction than specific jurisdiction, a plaintiff 15 invoking general jurisdiction must meet an ‘exacting standard’ for the minimum contacts 16 required.” Ranza, 793 F.3d at 1069 (citing CollegeSource, Inc. v. AcademyOne, Inc., 653 17 F.3d 1066, 1074 (9th Cir. 2011)). “‘[G]eneral jurisdiction requires affiliations so 18 continuous and systematic as to render the foreign corporation essentially at home in the 19 forum State, i.e., comparable to a domestic enterprise in that State.’” Id. (quoting Daimler, 20 571 U.S. at 133 n.11). “Such contacts must be ‘constant and pervasive.’” Id. (citing 21 Daimler, 571 U.S. at 122). “The paradigmatic locations where general jurisdiction is 22 appropriate over a corporation are its place of incorporation and its principal place of 23 business.” Id. (citing Daimler, 571 U.S. at 137). “Only in an ‘exceptional case’ will 24 general jurisdiction be available anywhere else.” Id. (some internal quotation marks 25 omitted) (quoting Martinez v. Aero Caribbean, 764 F.3d 1062, 1070 (9th Cir. 2014)). 26 Limited liability companies are considered citizens of each state where its owners or 27 members are residents. See Johnson v. Columbia Properties Anchorage, LP, 437 F.3d 894, 28 899 (9th Cir. 2006). 1 Plaintiff’s argument for general jurisdiction involves Dagobah’s possible citizenship 2 in California because it is a limited liability company. [Doc. No. 41 at 25.] Plaintiff points 3 out that Dagobah only states that its sole member is a private trust established under, and 4 governed by, the laws of Utah, but Dagobah failed to identify the citizenship of any trustee. 5 The citizenship of a traditional trust is the citizenship of its trustee or trustees. See 6 Demarest v. HSBC Bank USA, N.A., 920 F.3d 1223, 1229 (9th Cir. 2019). In response to 7 the Court’s order for a supplemental declaration on this issue, Dagobah declared the private 8 trust has two trustees, Ryan and Lindsay Page, both citizens of Utah. [Doc. No. 45.] 9 Dagobah is a Wyoming limited liability company with its principal place of business in 10 Wyoming. Dagobah’s sole member is a private trust established under the laws of Utah 11 with two trustees who are both citizens of Utah. Plaintiff’s suggestion that the Court has 12 general jurisdiction because Dagobah might be a citizen of California is therefore 13 unsupported. Besides its argument under the alter ego theory, which is discussed further 14 below, Plaintiff does not assert any additional reason to adequately invoke general 15 jurisdiction. Accordingly, the Court does not find that Dagobah has any affiliations with 16 California that are so continuous and systematic to invoke general jurisdiction over 17 Dagobah. 18 B. Specific Jurisdiction 19 The Ninth Circuit applies a three-part test to determine whether a district court can 20 exercise specific personal jurisdiction over a nonresident defendant: 21 (1) The non-resident defendant must purposefully direct his activities or 22 consummate some transaction with the forum or resident thereof; or perform some 23 act by which he purposefully avails himself of the privilege of conducting activities 24 in the forum, thereby invoking the benefits and protections of its laws (the 25 “purposeful availment” requirement); 26 (2) the claim must be one which arises out of or relates to the defendant’s forum- 27 related activities; and 28 1 (3) the exercise of jurisdiction must comport with fair play and substantial justice, 2 i.e. it must be reasonable. 3 Schwarzenegger, 374 F.3d at 802 (quoting Lake v. Lake, 817 F.2d 1416, 1421 (9th Cir. 4 1987)). “The plaintiff bears the burden of satisfying the first two prongs of the test.” Id. 5 “If the plaintiff succeeds in satisfying both of the first two prongs, the burden then shifts to 6 the defendant to ‘present a compelling case’ that the exercise of jurisdiction would not be 7 reasonable.” Id. (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 477 (1985)). 8 a. Purposeful Availment 9 Plaintiff contends that because liability here sounds in tort, the “purposeful 10 direction” analysis derived from Calder v. Jones, 465 U.S. 783 (1984), is appropriate. A 11 defendant purposefully directed his activities at the forum if he: “1) committed an 12 intentional act; 2) expressly aimed at the forum state; 3) causing harm that the defendant 13 knows is likely to be suffered in the forum state.” Picot v. Weston, 780 F.3d 1206, 1214 14 (9th Cir. 2015) (internal citation omitted). The Supreme Court has cautioned that “the 15 plaintiff cannot be the only link between the defendant and the forum.” Walden v. Fiore, 16 571 U.S. 277, 285 (2014). “Rather, it is the defendant’s conduct that must form the 17 necessary connection with the forum State that is the basis for its jurisdiction over him.” 18 Id. As the Court explained, “[r]egardless of where a plaintiff lives or works, an injury is 19 jurisdictionally relevant only in so far as it shows that the defendant has formed a contact 20 with the forum state. The proper question is not where the plaintiff experienced a particular 21 injury or effect but whether the defendant’s conduct connects him to the forum in a 22 meaningful way.” Id. at 290. 23 Here, Plaintiff has failed to demonstrate that Dagobah committed any intentional act 24 expressly aimed at California. Plaintiff argues that Dagobah provides CEO services to 25 Progenex through Ryan Page which supports personal jurisdiction. The Court is not 26 convinced that even if true, this forms the necessary connection with Dagobah and 27 California. Dagobah providing CEO services to Progenex, without any other intentional 28 act on the part of Dagobah, does not result in a meaningful connection between Dagobah 1 and California. Moreover, Plaintiff’s argument is largely based on allegations without 2 factual support. To support a meaningful connection between Dagobah and California 3 through some type of complex scheme as Plaintiff suggests would require sufficient factual 4 support beyond mere allegations. The Court is also not convinced by Plaintiff’s assertion 5 that Dagobah’s ongoing participation in a California JAMS arbitration is a sufficient 6 contact to establish personal jurisdiction. Plaintiff states that Dagobah was named as a 7 defendant in the arbitration action. The Court does not find that Dagobah choosing to 8 defend itself and assert counterclaims in the arbitration action equates to deliberately 9 engaging in significant activities in California. In the absence of reliable evidence to the 10 contrary, Dagobah has not purposefully directed its activities to California. 11 In light of the above, the Court concludes that Dagobah’s actions do not connect it 12 with California in a way sufficient to support the assertion of personal jurisdiction over it. 13 Accordingly, because Plaintiff has failed to establish that Dagobah purposefully availed 14 itself of the privilege of conducting activities in California, the Court need not address 15 whether the claim arises out of or resulted from Dagobah’s forum related activities or 16 whether the exercise of jurisdiction would be reasonable. See Pebble Beach Co. v. Caddy, 17 453 F.3d 1151, 1155 (9th Cir. 2006) (concluding that because plaintiff’s claim failed the 18 first prong of the minimum contacts test “we need not address whether the claim arose out 19 of or resulted from Caddy’s forum-related activities or whether an exercise of jurisdiction 20 is reasonable per the factors outlined by the Supreme Court in Burger King Corp., 471 U.S. 21 462, 476-77 [] (1985).”); Attilio Giustio Leombruni S.p.A v. Lsil & Co., Inc., Case No. CV 22 15-002128 BRO (Ex), 2015 WL 12743878, at * 10 (C.D. Cal. May 29, 2015) (declining to 23 address the reasonableness of exercising jurisdiction where plaintiff failed to demonstrate 24 purposeful availment). 25 C. Alter Ego Theory 26 Plaintiff primarily argues that jurisdiction is proper under an alter ego theory. 27 Plaintiff contends that Dagobah is an alter ego of the Progenex enterprise which consists 28 of the other defendant entities, Matrix Solutions, Progenex Holdings, and The Conclave. 1 Essentially, Plaintiff alleges that Ryan Page has orchestrated some type of tax-evasion 2 scheme where Dagobah is controlling both the CEO and managing member, himself, of 3 the other Progenex entities and Progenex is using Dagobah to concentrate its assets while 4 leaving the liabilities to the remaining defaulted defendant entities. 5 The Court finds Plaintiff’s alter ego theory is unsupported. Plaintiff has not provided 6 any concrete evidence that Ryan Page is concentrating the assets of Progenex using 7 Dagobah or that Dagobah is directly involved with any of the actions of the other entities. 8 As stated previously, Plaintiff’s argument is based largely on unsubstantiated allegations 9 and speculation, which are insufficient as a matter of law to support a finding of alter ego. 10 See Davis v. Metro Prods. Inc., 885 F.2d 515, 520 (9th Cir. 1989) (“Because the corporate 11 form serves as a shield for the individuals involved for purposes of liability as well as 12 jurisdiction, many courts search for reasons to ‘pierce the corporate veil’ in jurisdictional 13 contexts parallel to those in liability contexts.”). See also Katzir’s Floor & Home Design, 14 Inc. v. M-MILS.com., 394 F.3d 1143, 1149 (9th Cir. 2004) (holding “mere fact of sole 15 ownership and control does not eviscerate the separate corporate identity that is the 16 foundation of corporate law,” noting, “[e]ven if the sole shareholder is entitled to all of the 17 corporation’s profits, and dominated and controlled the corporation, that fact is insufficient 18 by itself to make the shareholder personally liable”); Leek v. Cooper, 194 Cal. App. 4th 19 399, 414 (2011) (finding an “allegation that a person who owns all of the corporate stock 20 and makes all of the management decisions is insufficient to cause the court to disregard 21 the corporate entity.”). As a result, the Court cannot assert jurisdiction over Dagobah 22 simply because of its association with Progenex and Ryan Page. See Davis, 885 F.2d at 23 520 (“mere association with a corporation that causes injury in the forum state is not 24 sufficient in itself to permit that forum to assert jurisdiction.”). 25 D. Jurisdictional Discovery 26 Plaintiff requests that should the Court be inclined to grant Dagobah’s motion, it 27 should stay ruling on the motion to allow Plaintiff to conduct jurisdictional diversity 28 otherwise it would cause substantial prejudice. 1 “[T]he question of whether to allow discovery is generally within the discretion of 2 || the trial judge.” Am. W. Airlines, Inc. v. GPA Grp., Ltd., 877 F.2d 793, 801 (9th Cir. 1989). 3 || A decision “to deny discovery will not be disturbed except upon the clearest showing that 4 denial of discovery results in actual and substantial prejudice to the complaining 5 || litigant.” Laub v. U.S. Dep’t of Interior, 342 F.3d 1080, 1093 (9th Cir. 2003) (internal 6 ||citations omitted). While “purely speculative allegations of attenuated jurisdictional 7 contacts” are insufficient to warrant jurisdictional discovery, Getz v. Boeing Co., 654 F.3d 8 860 (9th Cir. 2011), “discovery should ordinarily be granted where pertinent facts 9 ||bearing on the question of jurisdiction are controverted or where a more satisfactory 10 showing of the facts is necessary.” Laub, 342 F.3d at 1093 (citing Butcher’s Union Local 11 498 v. SDC Inv., Inc., 788 F.2d 535, 540 (9th Cir.1986); Boschetto v. Hansing, 539 12 1011, 1020 (9th Cir. 2008)). 13 The Court finds that Plaintiff has not met its burden of demonstrating that there are 14 || “pertinent facts” that are controverted or needing a more satisfactory showing in order to 15 || determine the issue of jurisdiction over Dagobah nor has Plaintiff clearly shown any “actual 16 || or substantial prejudice” would result by denying discovery as Dagobah will be dismissed 17 || without prejudice in this action. Accordingly, Plaintiff's request for jurisdictional 18 || discovery is DENIED. 19 IV. CONCLUSION 20 For the reasons set forth above, Dagobah’s motion to dismiss for lack of personal 21 |/jurisdiction is GRANTED. Accordingly, Plaintiff's claims against Dagobah, LLC are 22 ||DISMISSED without prejudice to refiling in a court that has personal jurisdiction over 23 || Dagobah, LLC. 24 It is SO ORDERED. 25 Dated: February 28, 2020 € 26 Hon. Cathy Ann Bencivengo 27 United States District Judge 28