Ocean Garden Products Inc v. Blessings Inc.

          ORDER

          HONORABLE ROSEMARY MARQUEZ UNITED STATES DISTRICT JUDGE.

         Pending before the Court is a Rule 12(b)(2) Motion to Dismiss (“MTD”) filed by Pacific Ocean Harvest, S. De R.L. De C.V. (“Pacific Ocean”) (Doc. 157.)^[1]

         I. Background

         This litigation began in July 2018, when Plaintiff Ocean Garden Products, Inc. (“OG”) initiated a lawsuit against Blessings, Inc. (“Blessings”) and David Mayorquin (“David”) in case number CV-18-322. (Doc. 1.) OG later initiated a separate lawsuit alleging claims under Arizona's Uniform Fraudulent Trade Act (“UFTA”) against numerous defendants, including Pacific Ocean, in case number CV-19-284. (Doc. 1 in CV-19-284) (the “UFTA Action”). After case numbers CV-18-322 and CV-19-284 were consolidated, OG filed a First Amended Complaint in the UFTA Action (“UFTA FAC”), the operative pleading with respect to Pacific Ocean. (Doc. 154.)

         On July 9, 2019, Pacific Ocean filed the pending MTD (Doc. 157), which was directed at OG's original UFTA Complaint but which the parties appear to agree may be treated as seeking dismissal of the claims asserted against Pacific Ocean in the UFTA FAC. (See Doc. 196 at 3 n.1; see also Doc. 186 at 4; see generally Doc. 187.) The MTD was fully briefed on August 26, 2019. (Docs. 187, 196.) The Court held oral argument on September 16, 2019, and took the matter under advisement. (Doc. 215.)

         II. Allegations of UFTA FAC Concerning Pacific Ocean

         OG's UFTA FAC makes the following allegations with respect to Pacific Ocean:

         At a time when Blessings was in serious financial distress and facing an existential threat from a criminal investigation, David and his brother Abraham Mayorquin (“Abraham”) ran up Blessings' debt to OG and transferred millions of dollars-in addition to equipment and intangible assets-from Blessings to a Mexican company called ADAB Ocean Harvest, S. De R.L. De C.V. (“ADAB Mexico”), thereby isolating the debts of their shrimp business in Blessings and the assets in ADAB Mexico. (Doc. 154 at 2, 5-10.) David and Abraham later set up Pacific Ocean in Nogales to take over the business of ADAB Mexico (shrimp processing); they also set up a company called ADAB Ocean Harvest LLC (“ADAB Tucson”) in Arizona to take over the business of Blessings (shrimp sales). (Id. at 2, 13-14.)

         Pacific Mexico now processes shrimp from a building formerly occupied by ADAB Mexico in Nogales, Mexico, using ADAB Mexico's equipment, which ADAB Mexico received through fraudulent transfers from Blessings. (Doc. 154 at 14.) Pacific Ocean uses the equipment based on an insider lease negotiated by David and Abraham. (Id. at 14-15.) ADAB Mexico did not receive reasonably equivalent value in exchange for the equipment lease, and Pacific Mexico did not enter into the lease in good faith. (Id. at 17-18.) Abraham is the 99% owner of Pacific Ocean, but in reality David is still an equitable owner and shares in revenues funneled from ADAB Tucson to ADAB Mexico and Pacific Ocean. (Id. at 14-15.) Due to the Mayorquin brothers' “cross-border corporate shell game, Blessings is insolvent and judgment-proof” while ADAB Mexico and Pacific Ocean are operational “primarily thanks to the millions of dollars” transferred from Blessings. (Id. at 2.) Although Pacific Mexico is a Mexican entity with premises in Nogales, Mexico, jurisdiction over it is proper because it is not a good-faith transferee of assets fraudulently transferred to it from Blessings via ADAB Mexico. (Id. at 3-4.)

         III. Legal Standard

         “Federal courts apply state law to determine the bounds of their jurisdiction over a party.” Williams v. Yamaha Motor Co., 851 F.3d 1015, 1020 (9th Cir. 2017). Arizona's long-arm statute permits the exercise of jurisdiction to the full extent permissible under the United States Constitution. Ariz. R. Civ. P. 4.2(a); Davis v. Metro Prod., Inc., 885 F.2d 515, 520 (9th Cir. 1989). In order for the exercise of personal jurisdiction over an out-of-state defendant to comport with the requirements of due process under the United States Constitution, the defendant must “have certain minimum contacts” with the forum state “such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.” Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (internal quotation omitted).

         The plaintiff bears the burden of establishing that the exercise of personal jurisdiction is proper. Ranza v. Nike, Inc., 793 F.3d 1059, 1068 (9th Cir. 2015). This is true even though the defendant is the moving party on a Rule 12(b)(2) motion to dismiss. Rio Props., Inc. v. Rio Int'l Interlink, 284 F.3d 1007, 1019 (9th Cir. 2002). But in the absence of an evidentiary hearing, the plaintiff need only make “a prima facie showing of personal jurisdiction.” Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004) (internal quotation omitted).^[2]

         Personal jurisdiction can be general or specific. General personal jurisdiction exists when the defendant's affiliations with the forum state are so “continuous and systematic” that the defendant can properly be said to be “at home” in that state. Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011) (internal quotation omitted). A corporate defendant is typically “at home” only in its state of incorporation and the state in which it has its principal place of business. See Id. at 924. Specific personal jurisdiction exists only when “the defendant's suit-related conduct . . . create[s] a substantial connection with the forum State.” Walden v. Fiore, 571 U.S. 277, 284 (2014). Three requirements must be satisfied for a court to exercise specific personal jurisdiction over a non-resident defendant: (1) the defendant must have “purposefully direct[ed] his activities or consummate[d] some transaction with the forum or resident thereof” or “purposefully avail[ed itself] of the privileges of conducting activities in the forum, thereby invoking the benefits and protections of its laws”; (2) the claim must have arisen out of or relate 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.” Dole Food Co. v. Watts, 303 F.3d 1104, 1111 (9th Cir. 2002). If the plaintiff meets its burden of showing sufficient minimum contacts to satisfy the first two requirements for exercising specific personal jurisdiction, the burden then shifts to the defendant to “present a compelling case that the exercise of jurisdiction would not be reasonable.” Schwarzenegger, 374 F.3d at 802 (internal quotation omitted).

         In evaluating a motion to dismiss for lack of personal jurisdiction under Rule 12(b)(2), the Court is not restricted to the four corners of the Complaint and may consider extrinsic evidence, including affidavits and discovery materials. Doe v. Unocal Corp., 248 F.3d 915, 922 (9th Cir. 2001) (per curiam), abrogated on other grounds by Daimler AG v. Bauman, 571 U.S. 117 (2014). Uncontroverted allegations of a complaint must be taken as true. Ranza, 793 F.3d at 1068. Factual ...