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Expotech Engineering Inc. v. Cardone Industries Inc.

United States District Court, D. Arizona

March 4, 2019

Expotech Engineering Incorporated, Plaintiff,
v.
Cardone Industries Incorporated, Defendant.

          ORDER

          Honorable James A. Soto, United States District Judge.

         Pending before the Court is Cardone Industries, Inc.'s Motion to Dismiss for Lack of Personal Jurisdiction, or Alternatively, to Transfer Venue, or Alternatively, to Dismiss for Failure to State a Claim (Doc. 19). This motion is fully briefed and ripe for the Court's consideration.

         FACTS [1]

         Plaintiff had its principal place of business in Phoenix, Arizona. Defendant had its principal place of business in Philadelphia, Pennsylvania. In 2014 and 2015, Defendant solicited vendors to work on its Enterprise Resource Planning system. Defendant selected Plaintiff for the service, and the parties entered into a contract in 2016. The contract contained a “Governing Law” section, which states “The parties hereby consent to the exclusive jurisdiction of the state courts of the Commonwealth of Pennsylvania, County of Philadelphia, and the United States District Court for the Eastern District of Pennsylvania in connection with any dispute based on, or arising out of, or in connection with, this Agreement.” (Doc. 1-1 at 12.) Defendant and its employees, representatives, agents, officers, or directors did not go to Arizona during the contract negotiation or implementation.

         Plaintiff performed much of the contracted work in Arizona through remote access, [2]which allowed it to perform its work in Arizona, while working with Defendant's employees elsewhere.[3] In 2018, Defendant rescinded a payment to Plaintiff. The parties continued to work together and through electronic and telephonic communications, the parties w ere ab l e to rea c h an a g reement to repair their working relationship. This agreement stated “With respect to all matters arising from or relating to this Amendment, and in the event of any litigation, or arbitration or other dispute resolution proceeding under this Amendment, the parties hereto irrevocably (a) consent and submit to the exclusive jurisdiction of the United States District Court for the Eastern District of Virginia (sic) Pennsylvania sitting in Philadelphia, Pennsylvania or, if there is no basis for federal jurisdiction, in the Court of Common Pleas, Philadelphia County, Pennsylvania[.]” (Doc. 1-1 at 22.) Again, Defendant failed to faithfully abide by the agreement. All of Defendant's servers and electronically stored information and programs were and remained in Pennsylvania or North Carolina. There was no travel by Defendant to Arizona in connection with the Agreement or with Plaintiff's work on the Agreement.

         On October 9, 2018, Plaintiff filed a complaint in the United States District Court for the District of Arizona alleging breach of contract, copyright infringement, unjust enrichment, and replevin. (Doc. 1.) On November 8, 2018, Defendant filed the present motion to dismiss for lack of personal jurisdiction or to transfer venue or to dismiss for failure to state a claim (Doc. 19).

         LEGAL STANDARD

         The burden is on plaintiff to demonstrate that a particular district court has personal jurisdiction over defendant. Boschetto v. Hansing, 539 F.3d 1011, 1015 (9th Cir. 2008); Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004). If the court does not conduct an evidentiary hearing, the plaintiff must make a prima facie showing. Mavrix Photo, Inc. v. Brand Tech. Inc., 647 F.3d 1218, 1223 (9th Cir. 2011); Boschetto, 539 F.3d at 1015. Uncontroverted allegations in plaintiff's complaint are taken as true and conflicts over statements in affidavits are resolved in the plaintiff's favor. Boschetto, 539 F.3d at 1015; Schwarzenegger, 374 F.3d at 800.

         Personal jurisdiction in this matter is governed by the general jurisdictional statute, which applies the state's law regarding personal jurisdiction. Fed.R.Civ.P. 4(k)(a)(A); see Axiom Foods, Inc. v. Acerchem Int'l, Inc., 874 F.3d 1064, 1067 (9th Cir. 2017) (evaluating personal jurisdiction in a copyright infringement action). Arizona authorizes the exercise of personal jurisdiction to the full extent permitted by the Due Process Clause of the United States Constitution. See Ariz. R. Civ. P. 4.2(a); Wake Up and Ball LLC. v. Sony Music Entm't Inc., 119 F.Supp.3d 944, 947 (D. Ariz. 2015).

         Under the Federal Due Process Clause, personal jurisdiction may be found under two categories: general or specific. Daimler AG v. Bauman, 571 U.S. 117, 122 (2014); Picot v. Weston, 780 F.3d 1206, 1211 (9th Cir. 2015).

         General jurisdiction provides jurisdiction over defendant in matters unrelated to its litigation-related contacts. Daimler AG, 571 U.S. at 121-22. General jurisdiction requires that defendants have contacts that are so “continuous and systematic” as to render them “at home” in the forum state. Id. at 138; Mavrix Photo, Inc., 647 F.3d at 1223. The United States Court of Appeals for the Ninth Circuit suggests that courts look to the contact's “[l]ongevity, continuity, volume, economic impact, physical presence, and integration into the [forum] state's regulatory or economic markets, ” when considering this exacting standard. Mavrix Photo, Inc., 647 F.3d at 1224 (first alteration in original) (quoting Tuazon v. R.J. Reynolds Tobacco Co., 433 F.3d 1163, 1172 (9th Cir. 2006)). Corporations are generally “at home” where they are incorporated or have their principal place of business. See Daimler AG, 571 U.S. at 139.

         Specific jurisdiction provides jurisdiction over defendants in forums with case-linked contacts. Walden v. Fiore, 571 U.S. 277, 283-84 (2014); Axiom Foods, Inc., 874 F.3d at 1068. Specific jurisdiction requires that courts ensure that the defendant has “minimum contacts” with a forum to ensure that litigating in the jurisdiction “does not offend ‘traditional notions of fair play and substantial justice.'” Axiom Foods, Inc., 874 F.3d at 1068 (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)); see Boschetto, 539 F.3d at 1015-16. The crux of the inquiry is the defendant's contact with the forum and not the defendant's contacts with the plaintiff or plaintiff's contacts with the forum. Walden, 571 U.S. at 284; Axiom Foods, Inc., 874 F.3d at 1068. “[A] plaintiff's contacts with the forum State cannot be ‘decisive in determining whether the defendant's due process rights are violated[.]'” Walden, 571 U.S. at 279 (quoting Rush v. Savchuk, 444 U.S. 320, 332 (1980)).

         The Ninth Circuit has created and implemented a three-prong test to determine if a court has specific personal jurisdiction over a defendant. Axiom Foods, Inc., 874 F.3d at 1068 (applying the Schwarzenegger test); Boschetto, 539 F.3d at 1016. “(1) the defendant must either ‘purposefully direct his activities' toward the forum or ‘purposefully avail[ ] himself of the privileges of conducting activities in the forum'; (2) ‘the claim must be one which arises out of or relates to the defendant's forum-related activities'; and (3) ‘the exercise of jurisdiction must comport with fair play and substantial justice, i.e. it must be reasonable.'” Axiom Foods, Inc., 874 F.3d at 1068 (alteration in original) (quoting Dole Food Co., Inc. v. Watts, 303 F.3d 1104, 1111 (9th Cir. 2002)); see Picot, 780 F.3d at 1211. The first two prongs are the plaintiff's burden to show, while the third prong requires the defendant to “present a compelling case.” Schwarzenegger, 374 F.3d at 802 (citation omitted). Pendant personal jurisdiction may be extended to from claims with jurisdiction if the claims share a “common nucleus of operative facts.” Picot, 780 F.3d at 1211 (quoting Action Embroidery Corp. v. Atl. Embroidery, Inc., 368 F.3d 1174, 1181 (9th Cir. 2004)). If plaintiff's arguments fail under the first prong, then the court is not obligated to consider the remaining prongs. Pebble Beach Co. v. Caddy, 453 F.3d 1151, 1155 (9th Cir. 2006).

         The first prong can be satisfied in two separate ways, depending on the type of case. Axiom Foods, Inc., 874 F.3d at 1069 (applying the purposeful direction test as copyright infringement is a tort); Picot, 780 F.3d at 1212; Pebble Beach Co., 453 F.3d at 1155. When both contract and tort claims are presented, if either test is ...


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