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Best Western International Incorporated v. Paradise Hospitality Incorporated

United States District Court, D. Arizona

August 26, 2014

Best Western International Incorporated, Plaintiff,
Paradise Hospitality Incorporated, et al., Defendants.


DAVID G. CAMPBELL, District Judge.

Defendants Paradise Hospitality, Inc. ("Paradise"), Dae In Kim ("Kim"), and Jane Nam Kim ("Mrs. Kim") have filed a motion to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1)-(3) and (6). Doc. 17. The motion is fully briefed. The Court will deny the motion.[1]

I. Background.

Plaintiff Best Western International Inc. ("Best Western") alleges that on November 19, 2012, Paradise and the Kims applied for a Best Western membership for the "Grand Plaza Hotel & Convention Center" located in Toledo, Ohio. Doc. 1, ¶ 24. The application was approved and the hotel became a Best Western member property. Id., ¶ 27. Defendants' relationship with Best Western was memorialized in a Membership Agreement. Id., ¶ 9. Under the Agreement, Defendants were required to pay all fees, dues, charges, and assessments and to promptly pay the costs of all goods or services provided through Best Western. Id., ¶¶ 10-12.

On October 11, 2013, Defendants sent Best Western a letter requesting to voluntarily terminate the Membership Agreement. Id., ¶ 30. Three days later, on October 14, 2013, Best Western sent Defendants a letter confirming the termination. Id., ¶ 32. Pursuant to the Membership Agreement, termination triggered obligations to immediately pay off Defendants' account balance with Best Western, to remove all Best Western marks displayed at the hotel, and to remove any advertising for Defendants' hotel using Best Western marks within fifteen days. Id., ¶¶ 21-22.

Best Western alleges that Defendants failed to pay off their account balance of $793, 958.32 and to remove Best Western symbols from the hotel and advertising. Id., ¶¶ 34, 37, 39. The complaint asserts eleven claims, including breach of contract, breach of guaranty, breach of the implied covenant of good faith and fair dealing, unjust enrichment, unfair competition, and trademark infringement. Id., ¶¶ 40-118.

On October 26, 2011, Paradise filed a petition for Chapter 11 bankruptcy in the United States Bankruptcy Court for the Central District of California (the "Bankruptcy Court"). Doc. 25, ¶ 3. On November 23, 2011, Kim filed an individual petition for Chapter 11 bankruptcy. Id., ¶ 4. Defendants assert that both bankruptcy proceedings are ongoing. Id., ¶¶ 12-13.[2]

II. Legal Standard.

A. Rule 12(b)(1): Subject Matter Jurisdiction.

The defense of lack of subject matter jurisdiction may be raised at any time by the parties or the Court. See Fed.R.Civ.P. 12(h)(3); Augustine v. United States, 704 F.2d 1074, 1077 (9th Cir. 1983). "A Rule 12(b)(1) jurisdictional attack may be facial or factual." Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004); see Thornhill Publ'g Co. v. Gen. Tel. & Elecs., 594 F.2d 730, 733 (9th Cir. 1979). "In a facial attack, the challenger asserts that the allegations contained in the complaint are insufficient on their face to invoke federal jurisdiction. By contrast, in a factual attack, the challenger disputes the truth of the allegations that, by themselves, would otherwise invoke federal jurisdiction." Safe Air for Everyone, 373 F.3d at 1039. In resolving a factual attack on jurisdiction, the Court "may review evidence beyond the complaint without converting the motion to dismiss to a motion for summary judgment." Id .; see Augustine, 704 F.2d at 1077.

B. Rule 12(b)(2): Personal Jurisdiction.

The plaintiff bears the burden of establishing personal jurisdiction. See, e.g., Ziegler v. Indian River County, 64 F.3d 470, 473 (9th Cir. 1995). Because no statutory method for resolving the personal jurisdiction issue exists, the district court determines the method of its resolution. See Data Disc, Inc. v. Sys. Tech. Assocs., 557 F.2d 1280, 1285 (9th Cir. 1977) (citing Gibbs v. Buck, 307 U.S. 66, 71-72 (1939)). A district court may allow discovery to help it determine whether it has personal jurisdiction over a defendant. See id. at 1285 n.1. In addition, a district court may hear evidence at a preliminary hearing to determine its jurisdiction. See id. at 1285 n.2. At such a preliminary hearing, the plaintiff must establish the jurisdictional facts by a preponderance of the evidence. See id. at 1285. If the district court does not hear testimony or make findings of fact and permits the parties to submit only written materials, then the plaintiff must make only a prima facie showing of jurisdictional facts to defeat the defendant's motion to dismiss. See Omeluk v. Langsten Slip & Batbyggeri A/S, 52 F.3d 267, 268 (9th Cir. 1995). Under this prima facie burden of proof, the plaintiff need only establish facts, through admissible evidence, that if true would support personal jurisdiction over the defendant. See Ballard v. Savage, 65 F.3d 1495, 1498 (9th Cir. 1995). If the complaint survives the motion to dismiss under a prima facie burden of proof, however, the plaintiff must still prove the jurisdictional facts by a preponderance of the evidence at a preliminary hearing or at trial. Data Disc, 557 F.2d at 1285 n.2.

C. Rule 12(b)(3): Venue.

When deciding a motion to dismiss under Rule 12(b)(3), the Court need not accept the pleadings as true and may consider facts outside the pleadings. See R.A. Argueta v. Banco Mexicano, S.A., 87 F.3d 320, 324 (9th Cir. 1996). Once a defendant raises an objection to venue, the plaintiff bears the burden of establishing that the selected venue is proper. Rio Props., Inc. v. Rio Int'l Interlink, 284 ...

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