JOSEPH C. SPERO, Magistrate Judge.
Plaintiff GT Securities, Inc. ("GTK") brings an action for breach of contract against Defendant Klastech GmbH ("Klastech") and an action for interference with contract against Defendant Triangle Venture Capital Group GmbH & Co. KG Nr. IV ("Triangle"). Klastech and Triangle each bring a Motion to Dismiss ("Klastech Motion" and "Triangle Motion," respectively) for lack of personal jurisdiction under Rule 12(b)(2) of the Federal Rules of Civil Procedure. In addition, Klastech argues that Plaintiff's claims are subject to arbitration based on the theory of equitable estoppel and therefore subject to dismissal under either 12(b)(1), (3), or (6). The Court held a hearing on the Motion on Friday, June 27, 2014, at 9:30 a.m. For the reasons state below, both Motions are DENIED.
Plaintiff filed its Complaint in this action on July 3, 2013. On April 15, 2014, both Klastech and Triangle filed Motions to Dismiss for lack of personal jurisdiction pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure. GTK filed a combined Opposition to Defendants' Motions on April 29, 2014. Triangle replied to GTK's Opposition on May 6, 2014. Klastech did not file a Reply to GTK's Opposition to its Motion. On May 28, 2014, Klastech filed a notice stating that for financial reasons, it would not be filing a Reply brief.
GTK alleges that Triangle principals, Bernd Geiger and Wiebke Langhans,
GTK alleges that, in breach of their contract, Klastech refused to pay GTK. Id. at 19. GTK further alleges that it is informed and believes that Triangle falsely represented to PTI that Klastech had no obligations to any investment bank or other entity in connection with the Transaction, and/or wrongfully failed to disclose the Agreement, with the intent to induce Klastech to breach the Agreement and to deprive GTK of the payments and other benefits due it under the Agreement. Compl. ¶ 27. GTK asserts that Triangle did so fraudulently, maliciously, and in willful and conscious disregard for the rights of GTK under the Agreement. Compl. ¶ 30.
Against Klastech and Triangle, GTK seeks compensatory damages in an amount to be proven at trial, but in no event less than $400,000, plus pre and post judgment interest, attorneys' fees, and reasonable costs and expenses as provided by law and in the Agreement. Compl. ¶ 24. Additionally, against Triangle, for its willful and malicious conduct, GTK seeks punitive damages. Compl. ¶ 30.
Klastech argues that, pursuant to California's long-arm jurisdictional statute and federal due process requirements, it should be dismissed from this breach of contract action because the Complaint fails to allege facts establishing either general or specific jurisdiction over it. Klastech Motion at 2 (citing Pebble Beach Co. v. Caddy, 453 F.3d 1151, 1154 (9th Cir. 2006)).
Klastech contends that, because its activities in California are not "substantial, continuous and systematic" and it is not domiciled in California, it is not subject to this Court's general jurisdiction. Klastech Motion at 3 (citing Panavision Int'l, L.P. v. Toeppen, 141 F.3d 1316, 1320 (9th Cir. 1998)). With regards to specific jurisdiction, Klastech asserts that its single contract with a resident of California, GTK, is not sufficient on its own to establish that it purposefully availed itself of the benefits of doing business in California. Klastech Motion at 4 (citing Thomas P. Gonzalez Corp. v. Consejo Nacional De Produccion De Costa Rica, 614 F.2d 1247, 1253 (9th Cir. 1980); Azzarello v. Navagility, LLC, 2008 WL 4614667, at 3 (N.D. Cal. Oct. 16, 2008)).
In addition, Klastech moves to dismiss GTK's claim against it under Rules 12(b)(1), (3), and (6)
Triangle asks the Court to dismiss the claim against it under Rule 12(b)(2) of the Federal Rules of Civil Procedure because it asserts that it does not have sufficient contacts with California to allow this Court to establish personal jurisdiction over it. Triangle Motion at 1 (citing Rocke v. Can. Auto. Sport Club, 660 F.2d 395, 398 (9th Cir. 1981)). Triangle argues that it has not engaged in the type of "substantial, continuous and systematic" activity necessary for California to assert general jurisdiction over it because it has no offices, employees, directors, managers, or property in California. Triangle Motion at 7; Declaration of Bernd Geiger ("Geiger Decl.") ¶¶ 4-7. Triangle also argues that, as a non-party to the Agreement, it has not purposefully directed any of its activities at California residents or availed itself of the privilege of conducting activities in California and thus is not subject to the Court's specific jurisdiction. Triangle Motion at 7; Geiger Decl. ¶¶ 5, 13.
In its Opposition, GTK asserts that is claims against both Defendants are based on a long and involved relationship in California and that, therefore, the exercise of specific personal jurisdiction is proper as to both Defendants. Plaintiff's Opposition to Defendant's Motion to Dismiss ("Opp.") at 1. GTK also contends that Klastech is subject to general jurisdiction due its continued sales presence in California and the attendance of its personnel at an annual trade show in California. Id. GTK asks the Court to allow it to conduct jurisdictional discovery, if necessary. Id. Finally, GTK argues that Klastech's motion to compel arbitration should be denied because GTK has never agreed to arbitrate any dispute with Klastech. See id. at 13-14; Declaration of Ali Tabibian ("Tabibian Decl.") ¶ 15.
Triangle's primary argument against personal jurisdiction in its Reply brief is that Geiger and Langhans were acting as Beiratsmitglieder (German for "directors" or "members of the board") for Klastech until its acquisition by PTI, and therefore the actions that occurred during the relevant contract formation negotiations were done at the direction and for the benefit of Klastech, not Triangle. Triangle's Reply to Plaintiff's Opposition to Triangle Motion to Dismiss ("Reply") at 2; Geiger Decl. ¶ 3. Triangle asserts that, pursuant to German law, as members of Klastech's board Langhans and Geiger had a "duty of loyalty" to Klastech. Reply at 3. Accordingly, Triangle contends that, as an entity in and of itself, it was not involved in the formation of the contract between GTK and Klastech nor in any of the actions undertaken by Langhans and Geiger "during the time PTI purchased Klastech." Id.; Geiger Decl. ¶¶ 2, 3, 7.
GTK is a California corporation with its principal place of business in Los Angeles County, California. Compl. ¶ 5. Triangle and Klastech are German corporations with their headquarters in Germany. See Geiger Decl. ¶ 4; Burgess Decl. ¶ 4. Klastech asserts that it has no operations, offices, or employees in the United States or California. Klastech Motion at 4. However, GTK argues that Klastech used an independent contractor to sell its products in California prior to its acquisition and that, since its acquisition, its website lists a designated sales representative for the "USA West" with two California phone numbers. Opp. at 14 (citing Klastech Motion at 4); Declaration of Geoffrey C. Rushing ("Rushing Decl.") ¶ 2 & Exs. 1-2. Triangle has no offices, employees, directors, managers, agent for service, sales, marketing, or property in California. Geiger Decl. ¶¶ 3-8, 10. According to GTK, during the actions that gave rise to this Complaint, Klastech was a wholly owned subsidiary of Triangle. Compl. ¶ 4. As of January 21, 2013, Klastech has been acquired by PTI, an Arkansas-based corporation. Comp. ¶ 18; Rushing Decl., Ex. 3.
In September, 2009, Langhans, a principal at Triangle, emailed GTK to inquire about the possibility of engaging its investment management services for Klastech in the exploration of strategic alternatives, including a Transaction. Tabibian Decl., Ex. 1. Langhans sent this email from her @triangle-venture.com email account, with a signature block that identified her as an Investment Manager at Triangle Venture Capital Group Management GmbH, to Tabibian at GTK. It states:
Tabibian Decl., Ex. 1.
Langhans and Geiger, another Triangle principal, negotiated the Agreement between GTK and Klastech with the help of sophisticated counsel from Foley & Lardner. Tabibian Decl. ¶ 6. The negotiations were conducted through telephone discussions and email exchanges, including one dated June 2010. Tabibian Decl. ¶ 6 & Ex. 5. In this email exchange, Sven Riethmueller from Foley & Lardner writes that he is "awaiting feedback on one issue f[r]om Triangle" after "sending the revised proposed draft based on our conversation of Friday this morning California time." Tabibian Decl., Ex. 5. Langhans, from her @triangle-venture.com email address was part of the email conversation and participated in planning a phone call. Id.
GTK's contractual relationship with Klastech began on July 31, 2010, pursuant to the Agreement negotiated by Triangle. Tabibian Decl. ¶ 1; Compl., Ex. A. In the Agreement, GTK agreed to share at least bi-weekly written reports of its progress via Tabibian, the individual with "principal senior responsibility for the day to day management." Compl., Ex. A, Section 1. In return for GTK's services under the Agreement, Klastech promised to make three retainer payments of $10,000 each due in July, August, and September of 2010 and to cover GTK's out-of-pocket expenses. Id., Sections 2(a) and 3. In the event of the consummation of a Transaction during GTK's engagement and prior to termination of the Agreement, the Agreement specifies that Klastech pays a minimum "Success Fee" of $400,000, plus an additional amount to be determined based on the ultimate value of the Transaction. Id., Section 2(b)(1). Klastech must mention GTK's role as advisor in any press release or public announcement it makes about the Transaction. Id., Section 6. Klastech is allowed to terminate at any time by giving seven days prior written notice to GTK. Id., Section 4. In addition, Klastech has no obligation to agree to any other employee of GTK to serve as a suitable replacement of Mr. Tabibian. Id. Under certain circumstances, GTK is still eligible for the "Success Fee" for Transactions consummated after Klastech's termination. Id. The Agreement is governed by New York law. Id., Section 8.
As contemplated by the Agreement, in August and September 2010, Klastech, Triangle, and GTK exchanged information, developed an Executive Summary presentation for potential acquirors, and communicated several times a week, sometimes daily. Tabibian Decl. ¶ 7. In July, August, and September 2010, Klastech made three monthly retainer payments by wire to GTK's California bank account. Id. Between September and December 2010, Tabibian contacted approximately twenty potential acquirors on behalf of GTK, several of which were located in California. Id. ¶ 8.
When Tabibian left GTK to work at Citigroup in December 2010, GTK offered Klastech the option to transfer the Agreement to Citigroup or to terminate it. Tabibian Decl. ¶ 10 & Compl., Ex. B. Tabibian informed Triangle of his departure as well and explained to Geiger over the phone that the option to terminate allowed Klastech to keep the engagement open and re-start at GTK without the need for payment of a new retainer. Tabibian Decl. ¶ 10. When Tabibian returned to GTK in January 2012 after two years at Citigroup, Klastech executed a subsequent written agreement for additional services. Tabibian Decl. ¶ 11 & Ex. 4.
From January 2012 through July 2012, GTK continued to provide advice, identify potential acquirors, develop approach strategies, and exchange periodic updates with Klastech and Triangle. Tabibian Decl. ¶ 12. Tabibian met with the CEO of Klastech, Chris Madin, and a Klastech sales representative in San Francisco to discuss the status of their work, while the two were attending a trade show in California. Id. Tabibian also provided advice to Klastech and Triangle on their interactions with PTI. Id. ¶ 13. In an email exchange that took place on July 2, 2012, Langhans, again from her @triangle-venture.com email account, emailed Tabibian regarding "a response from PTI" and expressed a desire to schedule a meeting. Tabibian Decl., Ex. 3. The email exchange also included Madin at his @klastech.de email account. Id.
On January 28, 2013, Tabibian contacted Madin to suggest a meeting in San Francisco, at which point, Madin informed Tabibian that as of January 21, 2013, Klastech had been acquired by PTI pursuant to the Purchase Agreement signed by Klastech, Triangle, and PTI. Comp. ¶ 18; Burgess Decl., Ex. A (Purchase Agreement). GTK alleges that Klastech is now wholly owned by and run in close coordination with Arkansas-based PTI. Opp. at 11 (citing Compl. ¶ 4). GTK refers the Court to a 2014 press release, entitled "Power Technology Inc. Acquires Advanced DPSS Laser Manufacturer KLASTECH GmbH." Rushing Decl., Ex. 3. The press release states, in part:
Id.
In accordance with the Agreement, GTK demanded payment of the "Success Fee" from Klastech based upon the Transaction with PTI, which Klastech allegedly refused to pay. Compl. ¶ 19. GTK alleges that Triangle falsely represented to PTI that Klastech had no obligations to any investment bank or other entity in connection with the Transaction, pointing to the "no broker" provision of the Purchase Agreement, which reads as follows:
Compl. ¶ 27; Burgess Decl., Ex. A. The Purchase Agreement also contains a clause which provides for arbitration in New York and which Klastech references in its Motion to Dismiss for lack of subject matter jurisdiction. See Burgess Decl., Ex. A, Section 8.11.
A party may move for dismissal under Rule 12(b)(2) of the Federal Rules of Civil Procedure for lack of personal jurisdiction. The plaintiff bears the burden of establishing personal jurisdiction over the defendant. See Pebble Beach Co. v. Caddy, 453 F.3d 1151, 1154 (9th Cir. 2006). "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 v. Johnson, 911 F.3d 1357, 1361 (9th Cir. 1990)). "Although the plaintiff cannot simply rest on the bare allegations of its complaint, . . . uncontroverted allegations in the complaint must be taken as true." Schwarzenegger, 374 F.3d at 800 (internal quotations omitted). "Conflicts between parties over statements contained in affidavits must be resolved in the plaintiff's favor." Id. "Where, as here, there is no applicable federal statute governing personal jurisdiction, the district court applies the law of the state in which the district court sits." Dole Food Company, Inc. v. Watts, 303 F.3d 1104, 1110 (9th Cir. 2002). "Because California's long-arm jurisdictional statute is coextensive with federal due process requirements, the jurisdictional analyses under state law and federal due process are the same." Id. (citing Cal. Code Civ. Proc. § 410.10).
"For a court to exercise personal jurisdiction over a non-resident 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.'" Dole Food, 303 F.3d at 1110-11 (citing International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). "In judging minimum contacts, a court properly focuses on `the relationship among the defendant, the forum, and the litigation.'" Calder v. Jones, 465 U.S. 781, 788 (1984) (quoting Shaffer v. Heitner, 433 U.S. 186, 204 (1977)).
Personal jurisdiction may be either general or specific. See Bancroft & Masters, Inc. v. Augusta Nat. Inc., 223 F.3d 1082, 1086 (9th Cir. 2000). General jurisdiction may be established when a defendant's contacts with a state are "substantial" or "continuous and systematic" such that the defendant "can be haled into court in that state in any action, even if the action is unrelated to those contacts." Id. "The standard for establishing general jurisdiction is fairly high, and requires that the defendant's contacts be of the sort that approximate physical presence." Id. "Factors to be taken into consideration are whether the defendant makes sales, solicits or engages in business in the state, serves the state's markets, designates an agent for service of process, holds a license, or is incorporated there." Id. "[E]ngaging in commerce with the residents of the forum state is not in and of itself the kind of activity that approximates physical presence within the state's border." Id.
Nevertheless, "[e]ven if a defendant has not had continuous and systematic contacts with the state sufficient to confer general jurisdiction, a court may exercise specific jurisdiction when the following requirements are met:
Dole Food, 303 F.3d at 1111 (internal quotations and citations omitted). "The plaintiff bears the burden of satisfying the first two prongs of the test." Id. (citing Sher, 911 F.2d at 1361). If the plaintiff fails to satisfy either of these prongs, personal jurisdiction is not established in the forum state." Dole Food, 303 F.3d at 1111. "If the plaintiff succeeds in satisfying both of the first two prongs, the burden then shifts to the defendant to `present a compelling case' that the exercise of jurisdiction would not be reasonable." Id. (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476-78 (1985)).
"Once it has been established that a defendant purposefully established minimum contacts with a forum, `he must present a compelling case that the presence of some other considerations would render jurisdiction unreasonable' in order to defeat personal jurisdiction." Dole Food, 303 F.3d at 1144 (quoting Burger King, 471 U.S. at 477). To determine whether the exercise of jurisdiction is reasonable, and therefore, "comports with fair play and substantial justice," courts consider seven factors:
Dole Food, 303 F.3d at 1114.
In Dole Food, the Ninth Circuit held that California's exercise of specific, personal jurisdiction over two foreign individuals who allegedly defrauded a California corporation was reasonable. Dole Food, 303 F.3d at 1106. Plaintiff Dole U.S., a corporation incorporated with its principal place of business in California, sued two former employees, Watts (a citizen of the U.K.) and Boenneken (a citizen of Germany), for fraudulently inducing Dole to lease warehouse space in the Netherlands on unfavorable terms. Id. at 1107. Both employees worked at Dole's European offices, although Watts's direct supervisor worked in Dole's California office. Id. at 1107. Dole alleged that Watts pitched the plan that led to Dole's unfavorable lease during a visit to the California office and that both employees communicated frequently with Dole's California office by phone, fax, and mail regarding implementation of the plan. Id.
In weighing the seven reasonableness factors, the court emphasized the "heavy burden on both domestic and foreign defendants in proving a `compelling case' of unreasonableness to defeat jurisdiction." Id. at 1117 (citing Roth v. Garcia Marquez, 942 F.2d 617 (9th Cir. 1991) (finding personal jurisdiction in California over two foreign individual defendants, despite the fact that only two of the reasonableness factors favored plaintiff while three factors favored the defendants, who "ma[d]e a strong argument . . . that the exercise of jurisdiction may be unreasonable.") The court noted that the only two factors that favored defendants — burden on defendants and sovereignty conflicts — "are likely to favor foreign defendants every time personal jurisdiction in the United States is considered." Id. Finally, the court found that Watts and Boenneken had several U.S.-based relationships, including employment relationships, and the intended audience for defendants' communications was the plaintiff, headquartered in California. Id. Therefore, the court concluded that the balance of the factors established that jurisdiction in California was reasonable. Id.
The different outcomes on the exercise of specific jurisdiction in Dole Food and Core-Vent provide a useful contrast for assessing the weight of various facts in a determination of reasonableness. In Core-Vent, the Ninth Circuit held that California's exercise of specific, personal jurisdiction over four doctors in Sweden who allegedly defamed a California corporation in articles published in international medical journals would not comport with fair play and substantial justice. Core-Vent Corp., 11 F.3d at 1483. Plaintiff Core-Vent, a California corporation that manufactured dental implants, sued four Swedish doctors based on two articles they had published in two journals, both distributed world-wide, that "contained false and misleading comparisons of Core-Vent and Nobelpharma," allegedly at the direction of Nobelpharma, Core-Vent's competitor. Id. at 1483-84. Core-Vent also sued Nobelpharma, three individual Americans, and another Swedish citizen, but these defendants were not parties to this appeal of personal jurisdiction. Id. at 1484.
Based on the seven factors, the court found that the Swedish doctors had presented a compelling case that the exercise of personal jurisdiction was unreasonable. Id. In reaching this decision, the court put particular emphasis on the defendants' status as individual citizens of a foreign country, noting that "[t]he Supreme Court in Asahi indicated that a plaintiff seeking to hale a foreign citizen before a court in the United States must meet a higher jurisdictional threshold than is required when the defendant is a United States citizen." Id. It explained that "where the plaintiff [was] an international corporation and where the defendants [were] individual citizens of a foreign country who lack[ed] connections to the United States and whose purposeful interjection into the forum state [was] very limited," the interest of a state in providing a forum for those injured in its borders "must give way." Id. The Court found that the defendants' purposeful interjection was limited because California was not the primary audience for the journals, and, in fact, the defendants had no knowledge the journals would be distributed there. Id. at 1486. The court also emphasized that the plaintiff's ability to obtain effective relief was not compromised by dismissal of the Swiss doctors because the court maintained jurisdiction over the remaining defendants. Id. at 1490.
While GTK contends that Klastech is subject to both specific and general jurisdiction in California, because the Court finds that there are sufficient contacts with the forum related to the claim to support its exercise of specific jurisdiction, the Court need not decide the question of general jurisdiction over Klastech.
"The purposeful availment requirement ensures that a nonresident defendant will not be haled into court based upon "random, fortuitous or attenuated contacts with the forum state." Panavision Intern., L.P. v. Toeppen, 141 F.3d 1316, 1320 (9th Cir. 1998) (quoting Burger King, 471 U.S at 475). While a single contract with a resident of the relevant jurisdiction is not necessarily sufficient, the critical issue is whether the contract evidences a substantial relationship with the forum based on prior negotiations, contemplated future consequences, and the terms of the contract. See Burger King, 471 U.S. at 475-76. "[W]ith respect to interstate contractual obligations, . . . parties who `reach out beyond one state and create continuing relationships and obligations with citizens of another state' are subject to regulation and sanction in the other State for the consequences of their activities." Id. at 473.
In Burger King, despite the defendant's never having been to Florida, his contract with Florida-based plaintiff, Burger King, to establish a franchise in Michigan demonstrated a substantial connection with Florida where defendant "`reach[ed] out beyond' Michigan and negotiated with a Florida corporation for the purchase of a long-term franchise and the manifold benefits that would derive from affiliation with a nationwide organization." Burger King, 471 U.S. at 480. The Supreme Court rejected the lower court's determination that, in light of the supervision emanating from Burger King's district office in Michigan, defendant believed that office was the embodiment of Burger King and he had no reason to anticipate a suit outside of Michigan. Id. Instead, the Supreme Court pointed to evidence that defendant knew he was "affiliating himself with an enterprise based primarily in Florida" in the form of 1) the contract documents specifying that Burger King operated in Florida and that the agreement was made and enforced there and 2) the parties' course of dealing in which the defendant corresponded with Florida headquarters by mail and phone. Id. at 481.
GTK has provided sufficient factual allegations and non-conclusory testimony to establish that Klastech's conduct pursuant to the Agreement gives rise to a "substantial connection" with California by creating "`continuing obligations' between [itself] and [a] resident[] of the forum." See Burger King, 471 U.S. at 475-76. First, just like the defendant in Burger King, Klastech "reached out" to a California corporation to enter into a long-term relationship from which Klastech derived manifold benefits in the form of hundreds of hours of work performed by GTK in California. Compl. ¶¶ 8, 9, 15, 16, 17. Pursuant to the Agreement, GTK prepared evaluation materials for a potential Transaction, introduced Klastech to potential acquirors (many of them in California), participated in discussions with potential acquirors, and provided advice to Klastech on its interactions with PTI. Compl. ¶ 15, 17.
Second, although Klastech claims it believes GTK performed work for it in Germany, there is sufficient evidence to demonstrate that Klastech knew it was "affiliating [itself] with an enterprise based primarily in [California]." See Burger King, 471 U.S. at 481. First, the contract documents demonstrate Klastech's affiliation with California, albeit less strongly than in Burger King by listing GTK's San Francisco address on every page.
Thus, Plaintiff has demonstrated that Klastech knew it was affiliating itself with a California corporation in a manner that would lead to substantial contacts with California. The Court finds that GTK has made a prima facie showing that Klastech purposefully availed itself of the "privileges of conducting activities in the forum, thereby invoking the benefits and protections of its laws." See Dole Food, 303 F.3d at 1111 (internal quotations and citations omitted).
"The second requirement for specific, personal jurisdiction is that the claim asserted in the litigation arises out of the defendant's forum related activities." Panavision, 141 F.3d at 1322. The Court must determine if Plaintiff would not have been injured "but for" Defendant's contacts with California. See id. In Panavision, the defendant's registration of plaintiff's trademarks as his own domain names had the effect of injuring a plaintiff in California. Id. Therefore, the court concluded that "but for" the defendant's conduct, the plaintiff's injury would not have occurred. Id. Similarly, in Burger King, the defendant's refusal to make contractually required payments in the forum state, and his continued use of Burger King's trademarks, "caused foreseeable injuries to the corporation in Florida," such that plaintiff's claim arose out of the defendant's forum-related activities. Burger King, 471 U.S. at 480.
Here, Klastech's refusal to make contractually required payments in California, and to give GTK the contractually required recognition due in California, has caused foreseeable injuries to GTK in California. See Compl. ¶¶ 23-24. "But for" Klastech's engagement of GTK to perform services in California and its failure to make contractually required payments in California, GTK would not have suffered financial harm in California. Compl. ¶¶ 8, 11. The Court finds that GTK has demonstrated that its claim against Klastech arises out of Klastech's California-related activities.
Next, the Court examines the seven reasonableness factors in turn. First, the Court considers the extent of Klastech's purposeful injection into the forum state. The Court finds that the activities which demonstrate that Klastech purposefully availed itself of the privilege of doing business in California are also sufficient in this case to meet the purposeful injection test. Just as in Dole Food, where the defendants' purposeful injection favored jurisdiction, Klastech engaged in repeated communications with GTK manager, Tabibian, in California in furtherance of their contractual relationship, including travelling to California to discuss business with GTK on at least one occasion. See id. at 1115. Klastech knew GTK had its principal place of business in California and it knew it was affiliating itself with GTK in a manner that would result in substantial contacts with California.
With respect to factor two, burden on the defendant, the fact that Klastech is a German corporation, headquartered in Germany, weighs against jurisdiction. See Dole Food, 303 F.3d at 1115. However, Klastech has a designated representative for the USA West with two California telephone numbers, which mitigates Klastech's burden. See Burgess Decl. ¶ 2. Klastech's burden is further diminished by the fact that Klastech representatives have traveled to California on several occasions in the past for business, including business directly related to the events that gave rise to this suit. See Dole Food, 303 F.3d at 1115. Furthermore, as the Supreme Court explained in Burger King, "because `modern transportation and communications have made it much less burdensome for a party sued to defend himself in a State where he engages in economic activity,' it usually will not be unfair to subject him to the burdens of litigating in another forum for disputes relating to such activity." Burger King, 471 U.S. at 474. Therefore, the Court finds that the burden on Klastech of litigating in California only weakly favors Klastech.
The third factor, conflict with the sovereignty of a defendant's state, requires "an examination of the competing sovereign interests in regulating [the defendant's] behavior. Dole Food, 303 F.3d at 1115. Because Klastech has submitted as uncontroverted evidence the declaration of Burgess that Klastech is headquartered in Germany, the Court must examine the interests of the United States and Germany in adjudicating this dispute. See Core-Vent, 11 F.3d at 1489 (stating that the Ninth Circuit focuses on connections to the United States in general, not just to the forum state, in giving weight to the third factor). Klastech currently has an ongoing relationship with the United States because it is a wholly owned and controlled subsidiary of PTI.
For factor four, the Court considers the forum state's interest in adjudicating the suit. California has a "`manifest interest' in providing its residents with a convenient forum for redressing injuries inflicted by out-of-state actors." See Burger King, 471 U.S. at 473. GTK is a California corporation with its principal place of business in California so this factor favors GTK. See Dole Food, 303 F.3d 1116.
Factor five, concerning efficiency of the forum, examines the location of the witnesses and the evidence, as well as which substantive law governs the dispute. See id.; Core-Vent, 11 F.3d at 1489. New York law governs the Agreement, but there are no other connections with New York that indicate it would be a more efficient forum than California besides Burgess's sworn declaration that Klastech could more effectively handle this dispute in "an arbitration in New York."
Factor six, convenience to plaintiff, favors GTK, which is based in California. "However, in this circuit, the plaintiff's convenience is not of paramount importance." See Dole Food, 303 F.3d at 1116.
Finally, the Court considers whether an alternative forum is unavailable. There is a split in the Ninth Circuit regarding which party bears the burden on this issue, although the great weight of Ninth Circuit authority favors putting the burden on the plaintiff. Id. Klastech has suggested that Germany or New York would be a valid alternative forum, and GTK has not presented any evidence that it would be precluded from suing Klastech in either jurisdiction. See Burgess Decl. ¶ 6. GTK counters that jurisdiction in Germany would be inconvenient and unfair, but this is not the relevant standard. See Core-Vent, 11 F.3d at 1490 (citing Roth, 942 F.2d at 625) ("Doubtless [plaintiff] would prefer not to [litigate in Germany], but that is not the test."). Without any evidence that GTK could not obtain effective relief in Germany, this factor favors Klastech.
In balancing the reasonableness factors, "a number of our cases emphasize the heavy burden on both domestic and foreign defendants in proving a `compelling case' of unreasonableness to defeat jurisdiction." Dole Food, 303 F.3d at 1117 (citing Roth, 942 F.2d 617; Panavision, 141 F.3d at 1324; Ballard, 65 F.3d at 1502; Sinatra, 854 F.2d at 1201.) In finding jurisdiction reasonable, the court in Dole Food relied on the nature of the defendants' U.S.-based relationships and the fact that the intended audience of their communications with California was the plaintiff. Id. Similarly, Klastech had, and continues to have, ongoing relationships with the U.S., and GTK was the intended audience of all Klastech's communications with California. Of the two factors that favor Klastech, factor two (the burden on the defendant) favors Klastech only weakly, and, with regards to factor seven, the Ninth Circuit has held that "[w]hether another reasonable forum exists becomes an issue only when the forum state is shown to be unreasonable." Thus, the Court finds that in light of the "heavy burden" on Klastech to make a "compelling case," Klastech's ongoing relationship with the U.S. and California, and Klastech's purposeful injection into California, it is not unreasonable for California to exercise personal jurisdiction over Klastech.
Having found that Plaintiff established the first two requirements of personal jurisdiction, and that Klastech failed to present compelling evidence that the exercise of jurisdiction would be unreasonable, the Klastech Motion to Dismiss for lack of personal jurisdiction is DENIED.
The Court finds that Triangle does not have sufficient contacts "of the sort that approximate physical presence" for the Court to exercise general jurisdiction, nor does GTK oppose Triangle's assertion that this Court lacks general jurisdiction. See Bancroft & Masters, 223 F.3d at 1086. The Court finds that Triangle has sufficient contacts in California related to GTK's claim against it to establish specific jurisdiction. See Dole Food, 303 F.3d at 1111.
"Even though there is no general jurisdiction over [Triangle] in California, California courts may still exercise personal jurisdiction if the case arises out of certain forum-related acts." See Bancroft & Masters, 223 F.3d at 1086. For the reasons discussed below, the Court fins that GTK has made a prima facie showing that (i) Triangle intentionally committed a "foreign act that is both aimed at and has effect in the forum state," and (ii) GTK's claim arises out of Triangle's forum-related activities. See id. at 1086-87. The Court further finds that Triangle has not presented "compelling" evidence that the exercise of jurisdiction is unreasonable. See id. Therefore, the Court will exercise specific, personal jurisdiction over Triangle.
The Ninth Circuit often refers to the first element of specific jurisdiction "in shorthand fashion, as the `purposeful availment' prong." Yahoo! Inc. v. La Ligue Contre Le Racisme Et L'Antisemitisme, 433 F.3d 1199, 1206 (9th Cir. 2006) (en banc) (per curiam). Nevertheless, "[d]espite its label, this prong includes both purposeful availment and purposeful direction." Id. In tort cases, the relevant inquiry is "whether a defendant purposefully directs his activities at the forum state[.]" Id. (emphasis added) (internal quotations omitted). "[T]he [Supreme] Court has allowed the exercise of jurisdiction over a defendant whose only `contact' with the forum state is the `purposeful direction' of a foreign act having effect in the forum state." Haisten v. Grass Valley Medical Reimbursement Fund, 784 F.2d 1392, 1397 (9th Cir. 1986) (citing Calder v. Jones, 465 U.S. 783, 789 (1984)). Under Ninth Circuit precedent, the purposeful direction requirement for tort cases is analyzed under the "effects" test derived from Calder. See Dole Food, 303 F.3d at 1111; see also Yahoo!, 433 F.3d at 1206 ("In tort cases, we typically inquire whether a defendant purposefully directs his activities at the forum state, applying an `effects' test that focuses on the forum in which the defendant's actions were felt, whether or not the actions themselves occurred within the forum.").
GTK asserts a claim for tortious interference with contract against Triangle based on its alleged fraudulent representations in the Purchase Agreement and concealment of the existence of the Agreement. Thus, the Calder "effects" test applies to determine whether Triangle purposefully directed its conduct at California. See Panavision, 141 F.3d at 1321 (stating that because a trademark infringement and unfair competition case was "akin" to a tort case, the court should apply the Calder "effects" test). Under Calder, "the `effects' test requires that the defendant allegedly have (1) committed an intentional act, (2) expressly aimed at the forum state, (3) causing harm that the defendant knows is likely to be suffered in the forum state." Dole Food, 303 F.3d at 1111. However, courts need not only consider those contacts that involve wrongful acts by the defendant. See Yahoo!, 433 F.3d at 1207. The Ninth Circuit has held that Calder does not "require in purposeful direction cases that all (or even any) jurisdictionally relevant effects have been caused by wrongful acts." Id. at 1208. Thus, the Court considers the alleged tortious act of Triangle as well as its other alleged contacts with California in considering whether specific jurisdiction is proper.
The first prong of purposeful direction is easily satisfied and generally glossed over by the courts. See Dole Food, 303 F.3d at 1111 ("Because it is clear that [Plaintiff] has sufficiently alleged that [defendants] acted intentionally, we skip to the `express aiming requirement.'"). GTK need only allege that Triangle acted intentionally when it represented to PTI that Klastech had no obligations to any investment bank in connection with the Transaction. GTK alleges that despite Triangle's awareness of the Agreement, Triangle knowingly made false representations to PTI, and wrongfully failed to disclose the Agreement, with the intent to induce Klastech to breach the Agreement and to deprive GTK of the payments and other benefits due it under the Agreement. Compl. ¶¶ 26-27. GTK refers to email communications between Tabibian and Langhans, in which Langhans represents herself as reaching out to GTK on behalf of Triangle for its assistance in "identifying potential M&A possibilities" for Klastech and "mak[ing] [Klastech] attractive for an exit." Exs. 1, 5. GTK also provides email communications in which Langhans, appearing to represent Triangle, discusses PTI with GTK. Ex. 3. GTK has sufficiently alleged that Triangle acted intentionally when it represented in the Purchase Agreement that Klastech had no obligations to any investment bank or other entity in connection with the Transaction. Compl. ¶ 27.
The "express aiming" requirement "is satisfied when the defendant is alleged to have engaged in wrongful conduct targeted at a plaintiff whom the defendant knows to be a resident of the forum state." Bancroft & Masters, 223 F.3d at 1087; see also Dole Food, 303 F.3d at 1112 ("Because [defendants] knew that Dole's principal place of business was in California, and communicated directly with those California decision makers, we conclude that their actions were `expressly aimed' at the forum state."); Data Disc, Inc. v. Sys. Tech. Assoc., 557 F.3d 1280, 1288 (9th Cir. 1977) ("The inducement of reliance in California is a sufficient act within California to satisfy the requirement of minimum contacts where the cause of action arises out of that inducement."). However, the Supreme Court recently clarified that the plaintiff cannot be the only link between the defendant and the forum, but rather "the defendant's suit-related conduct must create a substantial connection with the forum State." Walden v. Fiore, 134 S.Ct. 1115, 1121-22 (2014) (citing Helicopteras Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 417 (1984) ("[The] unilateral activity of another party or a third person is not an appropriate consideration when determining whether a defendant has sufficient contacts with a forum State to justify an assertion of jurisdiction")). The Court explained that "these same principles apply when intentional torts are involved." Id. at 1123.
In Walden, the plaintiffs, who were Nevada residents, sought to establish Nevada's personal jurisdiction over defendant Walden, a Georgia police officer, who seized a large amount of cash from the plaintiffs in Georgia and then allegedly submitted a false probable cause affidavit justifying the seizure. Id. at 1117. The Ninth Circuit held that Walden's submission of the false affidavit with the knowledge that it would affect persons with significant Nevada contacts demonstrated sufficient minimum contacts with Nevada related to the claim for Nevada to exercise specific, personal jurisdiction. Id. at 1120. The Supreme Court reversed, explaining that the Ninth Circuit improperly shifted the focus of its minimum contacts analysis from defendant's contact with the forum to defendant's contact with the plaintiffs. Id. at 1124. Despite the plaintiffs' allegations that they suffered the harm in Nevada, the Court found that no part of the defendant's course of conduct occurred in the forum state, and he formed no jurisdictionally relevant contacts with that forum. Id. In sum, the plaintiffs' injury occurred in Nevada simply because that is where plaintiffs chose to be when they desired to use the seized funds, but "none of [the defendant's] challenged conduct had anything to do with Nevada itself." Id. at 1125.
The Court explained that relevant conduct on the part of a defendant for establishing jurisdiction was conduct in which a defendant "purposefully `reach[ed] out beyond' [his] State and into another." Id. at 1112 (citing Burger King, at 471 U.S. at 479-80). The Court emphasized that "although physical presence is not a prerequisite to jurisdiction, physical entry into the State — either by the defendant in person or through an agent, goods, mail, or some other means — is certainly a relevant contact." Id. (citations omitted). The Court cited "entering a contractual relationship that `envisioned continuing and wide-reaching contacts' in the forum State" as an example of a defendant establishing sufficient contact with the forum without physical presence in the state. Id. at 1112 (citing Burger King, at 471 U.S. at 479-80). The Court also cited a case in which jurisdiction was proper over defendants who "circulat[ed] magazines to `deliberately exploi[t]' a market in the forum State, despite never physically entering the borders. Id. (citing Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 781 (1984)).
The Court went on to cite with approval Calder's application of the principle that "[a] forum State's exercise of jurisdiction over an out-of-state intentional tortfeasor must be based on intentional conduct by the defendant that creates the necessary contacts with the forum." Id. at 1123. In Calder, the Court held that a libelous article written about an entertainer who lived and worked in California in a newspaper published in Florida, but with a large circulation in California, was "expressly aimed" at California "based on the `effects' of their Florida conduct in California." Calder, 465 U.S. at 789. Jurisdiction was proper because "California [wa]s the focal point both of the story and of the harm suffered." Id. at 789. Specifically, (i) the activities that were the subject of the story took place in California, (ii) the story was drawn from California sources, (iii) the defendants knew the plaintiff lived and worked in California, and (iv) the defendants knew the plaintiff would feel the reputational harm in California. Id. at 788-90. According to the Supreme Court in Walden, the key to the exercise of personal jurisdiction in Calder was that "the `effects' caused by defendants' article — i.e., the injury to the plaintiff's reputation in the estimation of the California public — connected the defendants' conduct to California, not just to a plaintiff who lived there" because the defendants intentionally circulated the article in California. Walden, 134 S. Ct. at 1124.
In determining whether Triangle "expressly aimed" its conduct at California, the Court examines whether Triangle's "suit-related conduct" "connects [it] to the forum in a meaningful way." See id. at 1121-22, 25. Relevant contacts include physical presence in the state, as well as conduct demonstrating that Triangle "reached out beyond" its borders to create substantial contact with California. See id. at 1112.
The Court finds that Triangle's conduct establishes these necessary contacts with California. First, GTK has presented evidence that Triangle "reached out beyond" Germany to GTK in California, after identifying it through a web search, to negotiate the Agreement for services. Tabibian Decl. ¶ 4. Triangle principal, Langhans, then entered California's borders to meet with Tabibian, a decision-maker for GTK, in San Francisco on March 9, 2010 to discuss the business and sale prospects for Klastech. Id. This conduct led to a continuing relationship with GTK in California during which GTK provided advice to Klastech and Triangle on approach strategies for potential acquirors, including several California-based corporations and PTI, the company with which Triangle entered the Purchase Agreement. Tabibian Decl. ¶ 12-13; Compl. ¶ 30. Also relevant, although not sufficient on its own, is that Triangle's allegedly fraudulent representations in the Purchase Agreement caused GTK economic injury in California, where Triangle knew that GTK was based. See Calder, 465 U.S. at 788-89 (finding as relevant to personal jurisdiction that defendants knew that plaintiff lived and worked in California and would feel the reputational harm in California).
Therefore, the Court finds that GTK's economic injury in California is connected to contacts that "`[D]efendant [it]self' created with the forum state," by way of reaching out to a California corporation to negotiate a beneficial relationship (including traveling to California to do so) which lead to continuing contacts with Plaintiff in California and ultimately injury, in California, "targeted at a plaintiff whom the defendant knows to be a resident of the forum state." See Bancroft & Masters, 223 F.3d at 1087. Therefore, the Court finds that Triangle's "intentional, and allegedly tortious, actions were expressly aimed at California." See Bancroft & Masters, 223 F.3d at 1087.
The final element of the Calder "effects" test is satisfied if Plaintiff can show that "a jurisdictionally sufficient amount of harm is suffered in the forum state." Yahoo!, 433 F.3d at 1207 (en banc) (overruling prior decisions which required "the `brunt' of the harm" to be suffered in the forum state and clarifying that "[i]f a jurisdictionally sufficient amount of harm is suffered in the forum state, it does not matter that even more harm might have been suffered in another state.") The Ninth Circuit has relied on a corporation's principal place of business in determining the location of its economic injury. See Dole Food, 303 F.3d at 1114. "[W]hen a forum in which a plaintiff corporation has its principal place of business is in the same forum toward which defendants expressly aim their acts, the `effect' test permits that forum to exercise personal jurisdiction." Id. Accordingly, in Dole Food, the Ninth Circuit held that, where the defendants had expressly aimed their conduct at the same forum where plaintiff had its principal place of business, the plaintiff suffered a jurisdictionally sufficient amount of harm in the forum state. Id.
Following Dole Food, GTK has suffered a jurisdictionally sufficient amount of harm in California because (i) Triangle's tortious conduct satisfies the "express aiming" requirement and (ii) GTK's principal place of business is in California, which is therefore the location of its economic injury. See Compl. ¶ 5. Specifically, GTK alleges that, as a result of Triangle's harmful conduct, Klastech has refused to pay sums due under the Agreement of not less than $400,000 and to acknowledge publicly GTK's role in the Transaction per the Agreement. Compl. ¶¶ 19, 24, 29. As a result, GTK asserts that it has been damaged in California in an amount not less than $400,000 plus the additional costs, including attorneys' fees, it has been forced to incur to enforce its rights. Compl. ¶ 29.
The Court finds that the foregoing constitutes a "jurisdictionally sufficient" amount of harm that GTK suffered in California and that GTK has established the final element of the Calder "effects" test. Accordingly, the Court finds that GTK's allegations demonstrate that Triangle purposefully directed its conduct at California.
"The second requirement for specific, personal jurisdiction is that the claim asserted in the litigation arises out of the defendant's forum related activities." Panavision, 141 F.3d at 1322. The Court must determine if GTK would not have been injured "but for" Triangle's conduct directed towards GTK in California. See id. Triangle argues GTK cannot establish this element because any alleged conduct would have occurred in Germany and because its claim is "so loosely attenuated" and any contact "so extremely limited" as to make the prospect that Triangle could be haled into court in California unforeseeable. Triangle Motion at 8. This argument fails to take into account the full extent of conduct that GTK alleges caused it harm in California.
GTK alleges that Triangle, through Langhans and Geiger, negotiated a contract between GTK and Klastech in California and then, through false representations in the Purchase Agreement, induced Klastech to deny GTK the payment and recognition due in California under the Agreement. Compl. ¶¶ 19, 24, 29. GTK further presents evidence that, throughout the course of the Agreement, it communicated regularly (several times a week, sometimes daily) with Triangle personnel via telephone and email in the performance of its work. Tabibian Decl. ¶¶ 7, 11, 12. In sum, GTK has sufficiently demonstrated that "but for" Triangle's reaching out to GTK in California, negotiating the Agreement with GTK on behalf of Klastech, continuing to communicate with GTK during the course of its performance of the Agreement, and representing to PTI that Klastech had no obligations to any investment company, GTK would not have suffered harm in California. See Panavision, 141 F.3d at 1322. Accordingly, GTK's allegations and affidavits show that its claim against Triangle arises out of Triangle's forum related contacts.
Next, the Court considers the seven reasonableness factors in turn. For factor one, the Court finds that Triangle's activities, which satisfy the "purposeful direction" prong, demonstrate a sufficient level of purposeful injection into the forum state to support a finding of reasonableness. See Dole Food, 303 F.3d at 1114-15. Triangle principals, Langhans and Geiger, knew GTK had its principal place of business in California, reached out and negotiated the Agreement with GTK on behalf of Klastech, repeatedly communicated with GTK pursuant to the Agreement, and allegedly acted with the intent to deprive GTK of the benefits due it under the Agreement. See Tabibian Decl. ¶¶ 3, 4, 6, 7, 13, 17; Compl. ¶ 27.
Factor two, burden on defendant, weighs more strongly in favor of Triangle than it does for Klastech because Triangle has no ongoing presence in the United States or California.
For factor three, in its "an examination of the competing sovereign interests in regulating [the defendant's] behavior," the Court finds that Triangle's relationship with the United States is stronger than that of the defendants in Core-Vent but weaker than the U.S.-based relationships in Dole Food. See Dole Food, 303 F.3d at 1115. Unlike the Swedish doctors in Core-Vent, who had no U.S.-based relationships and no knowledge that their actions would impact California, Triangle principals, Langhans and Geiger, intentionally initiated a relationship on behalf of Klastech with GTK in California, knowing GTK was based there, and participated in ongoing communications with GTK in the course of that relationship. See Tabibian Decl. ¶¶ 3, 4, 6, 7, 13, 17. According to the Complaint, Triangle also intentionally directed its tortious conduct at California when it entered into a contractual relationship with PTI, another U.S.-based company. Compl. ¶ 27. However, unlike the defendants in Dole Food, Triangle has had no employment relationship with the United States. See Dole Food, 303 F.3d at 1115. Triangle's connections to Germany are the same as Klastech's, and therefore, the extent of conflict with Germany's interest in adjudicating this suit is similarly unclear. See Tabibian Decl. ¶ 17. In sum, the sovereignty factor favors Triangle but does not weigh heavily as it did in Core-Vent.
Fourth, California has a "`manifest interest' in providing its residents with a convenient forum for redressing injuries inflicted by out-of-state actors." See Burger King, 471 U.S. at 473. Because GTK is a California corporation with its principal place of business in California, this factor favors GTK. See Dole Food, 303 F.3d 1116.
For the fifth factor, it is difficult to determine on the current record whether California would be the most efficient forum for resolution of the dispute. The parties do not offer evidence regarding the location of the witnesses and evidence, but presumably there are some witnesses in Germany (where Triangle is based) and some in California (where GTK is based) so neither forum has a clear efficiency advantage with respect to witnesses. See id. Likewise, the parties do not discuss which substantive law should govern GTK's tort claim.
Factor six, convenience to plaintiff, favors GTK, which is based in California, but is "is not of paramount importance" in this circuit. See Dole Food, 303 F.3d at 1116.
Factor seven, unavailability of an alternative forum, follows a similar analysis for Triangle as it did for Klastech. Triangle has not suggested an alternative forum, but presumably it would prefer to adjudicate this dispute in Germany. As mentioned above, GTK has not presented any evidence that it could not obtain effective relief in Germany. Therefore, without deciding which party bears the burden of proving unavailability of an alternative forum, this factor favors Triangle.
The reasonableness factors weigh slightly in Triangle's favor due to Triangle's lack of ongoing contacts with California or the United States. Nevertheless, Ninth Circuit jurisprudence emphasizes the "heavy burden" of proving a "compelling case" of unreasonableness and has tended to find jurisdiction is reasonable when the factors do not clearly favor either party. See Dole Food, 303 F.3d at 1117; Caruth v. International Psychoanalytical Ass'n, 59 F.3d 126 (9th Cir. 1995) ("[G]iven the closeness of the factors, we conclude that [defendant] has not presented a `compelling case' that exercising jurisdiction over it would be unreasonable.") Considering all the factors in light of the defendant's burden of presenting a "compelling case," its purposeful injection into California, and its ability to manage travel to and communications with California in the course of the Agreement, the Court concludes that the exercise of jurisdiction over Triangle in California is reasonable.
Having found that GTK established the first two requirements of personal jurisdiction, and that Triangle failed to present compelling evidence that the exercise of jurisdiction would be unreasonable, the Court will assert personal jurisdiction over Triangle. The Triangle Motion to Dismiss for lack of personal jurisdiction is therefore DENIED.
Although section 4 of the Federal Arbitration Act provides for the filing of a motion to compel arbitration, courts have held that a Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction "is a procedurally sufficient mechanism to enforce [an] [a]rbitration [p]rovision." Filimex, L.L.C. v. Novoa Investments, L.L.C., No. CV 05-3792-PHX-SMM, 2006 WL 2091661, at *2 (D. Ariz. July 17, 2006) (citing Choice Hotels Int'l, Inc. v. BSR Tropicana Resort, Inc., 252 F.3d 707, 709-10 (4th Cir. 2001) (holding that as long as the party made clear that it was seeking enforcement of the arbitration clause in its motion to dismiss, it had sufficiently "invoke[d] the full spectrum of remedies under the FAA")); see also Interactive Flight Technologies, Inc. v. Swissair Swiss Air Transport Co., Ltd., 249 F.3d 1177, 1179 (9th Cir. 2001) (citing the Supreme Court's holding in Green Tree Financial Corp.-Alabama v. Randolph, 531 U.S. 79, 86 (2000), that an order dismissing an action remains a "final decision" within the traditional understanding of that term, notwithstanding that dismissal was in favor of arbitration); Lewis v. UBS Financial Services Inc., 818 F.Supp.2d 1161, 1165 (N.D. Cal. 2011) ("Where the claims alleged in a pleading are subject to arbitration, the Court may stay the action pending arbitration or dismiss the action."). Rule 12(b)(1) is appropriate for dismissing claims subject to arbitration because it "is a flexible rule" that often serves as a vehicle for raising residual defenses and the Federal Arbitration Act requires only that a party "petition" the court for an order directing arbitration to proceed. Id. Pursuant to the Federal Arbitration Act, arbitration may be compelled if the following three elements are shown: a written agreement to arbitrate, a dispute within the scope of the arbitration agreement, and a refusal to arbitrate. 9 U.S.C. § 4.
When a defendant moves to dismiss under Rule 12(b)(1) of the Federal Rules of Civil Procedure, the plaintiff, as the party seeking to invoke the court's jurisdiction by filing the complaint, bears the burden of establishing subject matter jurisdiction. See Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 377 (1994). A defendant may attack the court's jurisdiction as it appears on the face of the complaint or by presenting affidavits and other evidence. See White v. Lee, 227 F.3d 1214, 1242 (9th Cir. 2000). For a facial attack, the court must "accept all allegations in the complaint as true and construe them in the light most favorable to the plaintiff[]." See id. The plaintiff must plead sufficient facts in the complaint to establish the court's jurisdiction. Fed. R. Civ. P. 8(a)(1). In contrast, with a factual challenge, courts do not accept as true all facts in a plaintiff's complaint and may evaluate extrinsic evidence and resolve factual disputes where necessary. See Roberts v. Corrothers, 812 F.2d 1173 (9th Cir. 1987). In response to a factual challenge, the plaintiff must present sufficient evidence to support the court's subject matter jurisdiction. See Savage v. Glendale Union High School, Dist. No. 205, Maricopa County, 343 F.3d 1036, 1040 n.2 (9th Cir. 2003). Here, Klastech has presented the Court with evidence of the Purchase Agreement, whose arbitration clause it claims governs the dispute and renders the Court's exercise of subject matter jurisdiction improper. Therefore, the Court will consider extrinsic evidence and resolve factual disputes where necessary.
Klastech challenges the Court's subject matter jurisdiction by asserting that GTK's claim against it is subject to arbitration in New York pursuant to the Purchase Agreement. Klastech argues that a nonsignatory may be compelled to arbitrate its claims if they are based on that defendant's breach of an agreement which provides for arbitration, in this case the Purchase Agreement. However, GTK's breach of contract action against Klastech is not based on Klastech's breach of the Purchase Agreement with PTI but rather its breach of the Agreement with GTK, which does not provide for arbitration. Therefore, the arbitration clause of the Purchase Agreement does not bind GTK in the resolution of its claim against Klastech.
While arbitration is contractual in nature, nonsignatories may be obligated to arbitrate a dispute. Letizia v. Prudential-Bache Sec., Inc., 802 F.2d 1185, 1187 (9th Cir. 1986). In Letizia v. Prudential-Bache Sec., Inc., the Ninth Circuit explained that "nonsignatories of arbitration agreements may be bound by the agreement under ordinary contract and agency principles," including incorporation by reference, assumption, agency, veil-piercing/alter ego, estoppel, and third-party beneficiaries. Id. at 1187-88. Klastech seeks to hold GTK, as a nonsignatory, within the scope of an arbitration clause based upon equitable estoppel, which "precludes a party from claiming the benefits of a contract while simultaneously attempting to avoid the burdens that contract imposes." See Comer v. Micor, Inc., 436 F.3d 1098, 1101 (9th Cir. 2006) (quoting Wash. Mut. Fin. Group, LLC v. Bailey, 364 F.3d 260, 267 (5th Cir. 2004)). "In order to compel a non-signatory to arbitrate under this theory, the non-signatory party must receive a `direct benefit' from the contract containing the provisions." Int'l Ins. Agency Servs., LLC v. Revios Reinsurance U.S., Inc., 2007 WL 951943 (N.D. Ill. Mar. 27, 2007). Klastech relies on Comer and Int'l Ins. Agency in support of its position. The Court finds that its reliance on these cases is misplaced.
In Comer, the Ninth Circuit addressed whether an arbitration clause in investment management agreements between trustees of an ERISA plan and defendant Smith Barney, Inc. bound plaintiff Comer, a participant in the ERISA plan, who was sued Smith Barney under ERISA. Comer, 436 F.3d at 1100-01. Although the court recognized that nonsignatories to an arbitration agreement may be bound by it when they "knowingly exploit" the agreement, it went on to hold that Comer did not "knowingly exploit the agreement containing the arbitration clause despite having never signed the agreement" where he was merely a participant in trusts managed by others for his benefit. Id. at 1102 (quoting E.I. DuPont de Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates, 269 F.3d 187, 195 (3d Cir. 2001)). The court pointed to a lack of evidence that Comer sought to enforce the terms of the management agreements "[]or otherwise take advantage of them." Id. The court also determined that merely "by bringing [his] lawsuit, which he base[d] entirely on ERISA, and not on the investment management agreements," Comer did not attempt to enforce the agreements. Id. The court also rejected Smith Barney's alternate theory that Comer was a third-party beneficiary to the agreement. Id. Rather "[t]o sue as a third-party beneficiary of a contract, the third party must show that the contract reflects the express or implied intention of the parties to the contract to benefit the third party." Id. (citing Klamath Water Users Protective Ass'n v. Patterson, 204 F.3d 1206, 1211 (9th Cir. 2000)). The court explained that where the signatories to the investment management agreements did not intend to give Comer, as a beneficiary of the plan, the right to enforce the agreements, he could not be bound to the terms of a contract that he did not sign or otherwise assent to. Id.
In Int'l Ins. Agency, the District Court of the Northern District of Illinois estopped the non-signatory plaintiff from refusing to arbitrate its claims with the defendant. Int'l Ins. Agency Servs., 2007 WL 951943, at 3. The plaintiff alleged that the defendant deliberately attempted to interfere with plaintiff's business relationships by wrongfully seeking to terminate two agreements (one of which plaintiff negotiated on another party's behalf), which earned plaintiff commissions, profits, and agency fees. Id. at 2. The plaintiff relied on the agreements, which included arbitration clauses, to prove that defendant wrongfully breached those agreements. Id. at 5. Where "[t]he essential issue in [plaintiff]'s claim [was] [defendant]'s compliance with the agreement containing the arbitration clause," the court did not see how the plaintiff could "litigate its claims without proving that [defendant] breached or attempted to breach the agreements containing the arbitration agreements." Id.
Here, as in Comer, Klastech's invocation of equitable estoppel fails because there is no evidence that GTK "knowingly exploit[ed] the agreement containing the arbitration clause despite having never signed the agreement." See id. at 1102 (quoting E.I. DuPont de Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates, 269 F.3d 187, 195 (3d Cir. 2001)). GTK does not seek to enforce the terms of the Purchase Agreement between PTI and Klastech. Rather, like the plaintiff's claim in Comer which did not arise from the agreement with the arbitration clause, GTK's claim, based on an entirely separate contract, does not arise from the Purchase Agreement. See id. Unlike Int'l Ins. Agency, in which the plaintiff's claims were based on the harm it would suffer if the defendant repudiated the agreement, GTK receives no "direct benefit" from the Purchase Agreement, as evidenced by the "no broker" provision. See Int'l Ins. Agency, 2007 WL 951943, at 5. Although GTK relies on the existence of the Purchase Agreement to prove its claim, GTK does not seek to enforce the Purchase Agreement by proving Klastech's lack of compliance with its terms caused GTK harm. See id. at 2.
Klastech has failed to show that GTK, as a nonsignatory to the Purchase Agreement, benefits from the agreement in a way that would subject it to the arbitration clause under the theory of equitable estoppel.
For the foregoing reasons, Defendants' Motions to Dismiss for Lack of Personal Jurisdiction and Defendant Klastech's Motion to Dismiss for Lack of Subject Matter Jurisdiction are DENIED.
