ELIZABETH D. LAPORTE, District Judge.
Pending before the Court are: (1) Defendant Metro National Financial LLC's ("Metro Financial") Renewed Motion to Dismiss for Lack of Personal Jurisdiction (Dkt. 75); and (2) Defendant Rodney Newman's Renewed Motion to Dismiss for Lack of Personal Jurisdiction (Dkt. 74). For the reasons set forth below, the Court grants these motions and dismisses Defendants Metro Financial and Newman without prejudice.
Plaintiff Bradford Technologies, Inc.'s first amended complaint ("FAC") alleges: (1) breach of contract and (2) trade libel against Defendant John David Biggers, as well as (3) misappropriation of trade secrets, (4) copyright infringement, (5) unjust enrichment, (6) intentional interference with prospective economic advantage, (7) unfair competition, and (8) injunctive relief against Defendants NCV Software ("NCV"), Metro Financial, Karma Technologies, LLC ("Karma"), Rodney Newman, and John David Biggers. The FAC alleges that Plaintiff and Biggers executed an employment agreement in November 2007 to secure Biggers' services as a computer programmer to develop software for Plaintiff. (FAC ¶¶ 17-18.) The agreement contained, among other things, confidentiality and non-compete clauses and terms relating to ownership and assignment of work. (
According to the FAC, Biggers also used misappropriated trade secrets and source code to develop appraisal software for Defendant Karma known as "Canvas." (
In support of their motions to dismiss, Defendants Metro Financial and Newman submitted the declaration of Kathy McGeary, the manager of Metro Financial, three declarations of Newman, the president of Metro Financial, and the declaration of Richard Frank, the director of operations of Defendant Karma. Plaintiff, in opposition, submitted the declaration of Jeff Bradford, the owner and president of Plaintiff, and a Request for Judicial Notice of certain documents. According to Defendants' declarations, Metro Financial is a Delaware holding company registered to do business in the state of Utah that maintains its principal place of business in Salt Lake City. (McGeary Decl. ¶ ¶ 3-4, 9; 11/21/11 Newman Decl. ¶ 4; 12/9/11 Newman Decl. ¶ 5.) Metro Financial is not registered to do business in California, does not have an agent for process in California, has no mailing address, office, or employees in California, owns no real property in California, and pays no California taxes. (McGeary Decl. ¶ ¶ 4-7, 9; 11/21/11 Newman Decl. ¶ 5; 12/9/11 Newman Decl. ¶ 7.) Metro Financial is a holding company for Metro National Valuation, LLC ("Metro Valuation"), Metro National Settlement Services, LLC, and Metro National Field Services, LLC, which are Delaware companies. (11/21/11 Newman Decl. ¶ 7.) These three companies offer their clients the ability to use MetroClose, an online vendor management software program, and use metroclose as a domain name. (11/21/11 Newman Decl. ¶¶ 8-9.) Newman uses the email address at MetroClose.com in connection with his duties at these companies. (11/21/11 Newman Decl. ¶ 9.) Defendant Metro Financial does not use the MetroClose software or the metroclose domain name. (11/21/11 Newman Decl. ¶ 10.)
Metro Financial does not oversee, maintain, or administer the Canvas website; its subsidiary Metro Valuation does. (11/21/11 Newman Decl. ¶ 12.) Metro Valuation is a licensee of the Canvas software "powered" by Karma. (11/21/11 Newman Decl. ¶ 17; 11/15/2012 Newman Decl. ¶ 7; Bradford Decl. ¶ 12.) Karma's sales of Canvas to customers located in California totaled $30.00 as of November 15, 2012. (Frank Decl. ¶ 4.) Metro Financial is a separate company from Karma. (11/21/11 Newman Decl. ¶ 14.) Karma is not a subsidiary of Metro Financial, and Metro Financial has no ownership interest in Karma. (11/21/11 Newman Decl. ¶ 14; 12/9/11 Newman Decl. ¶ 12.)
Defendant Newman is a Utah resident and is the president of Metro Financial. He is also the president of Metro National Title, Inc. (11/15/12 Newman Decl. ¶ 16.) He is not an officer, member, or employee of Karma. (12/9/11 Newman Decl. ¶ 11.) Newman does not have any personal ownership interest in Karma. (11/15/12 Newman Decl. ¶ 8.) Newman has, however, donated assets to the Rodney A. Newman 101 Trust, which has an ownership interest in Karma Technologies II, LLC, which owns Karma. (11/15/12 Newman Decl. ¶ 9.) Newman is not a trustee of this trust. 11/15/12 Newman Decl. ¶ 10. Metro Financial and Newman both list Karma II in their Certificates of Interested Entities. (Dkt. 9, 13.)
Plaintiff filed the initial complaint on September 19, 2011. Defendants Metro Financial and Newman moved to dismiss for lack of personal jurisdiction, and the Court granted these motions with leave to amend. On September 20, 2012, Plaintiff's filed the First Amended Complaint, which, among other things, added five additional allegations regarding Metro Financial and Newman. These allegations are that: (1) Metro Financial has the same Utah business address as Karma; (2) an article on mortgageorb.com states that Metro Financial released an updated version of Canvas on July 22, 2010; (3) the Canvas website lists Metro Financial and Newman under its contact details; (4) Newman's email addresses has the same domain name as the email address for Karma's Canvas technical support; and (5) Metro Financial and Newman list Karma II in their certificates of interested entities in this case. (FAC ¶ ¶ 34-42.)
Metro Financial and Newman filed motions to dismiss the FAC for lack of personal jurisdiction in October 2012. After these motions were fully briefed, the Court stayed this case due to Plaintiff's violation of the Stipulated Protective Order. In August 2013, Defendants requested that the Court hear these motions at the August 27, 2012 further case management conference. The Court agreed and held a hearing on August 27, 2013.
A defendant may move to dismiss for lack of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2). The plaintiff bears the burden of establishing personal jurisdiction.
"Personal jurisdiction over a defendant is proper if it is permitted by a long-arm statute and if the exercise of that jurisdiction does not violate federal due process."
For general jurisdiction over a non-resident defendant, the defendant must engage in "continuous and systematic general business contacts" that "approximate physical presence in the forum state.
For specific jurisdiction: "(1) The non-resident defendant must purposefully direct his activities or consummate some transaction with the forum or resident thereof; or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby involving the benefits and protections of its laws; (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."
Metro Financial moves to dismiss on the basis that it does not have sufficient minimum contacts with California for the Court to exercise jurisdiction over it. Plaintiff counters that Metro Financial has numerous contacts with California. Plaintiff notes that Metro Financial and its president, Newman, were listed in the contact information section of the Canvas website. (Request for Judicial Notice ("RJN") Ex. A, Ex. B.) Plaintiff also points out that in November 2011, Metro Financial's website stated that its scope was nationwide "through direct operations and strategic partnerships." (RJN Ex. F;
Plaintiff has not established that Metro Financial has "continuous and systematic" contacts with California, approximating physical presence in the state, that would make the exercise of general jurisdiction appropriate. Metro Financial is a Delaware LLC registered to do business in Utah with a principal place of business in Salt Lake City. Metro Financial is not registered to do business in California, has no agent for service of process in California, has no address, employees, or property in California and pays no taxes in California. Plaintiff does not dispute these facts and does not describe any contacts between Metro and California, let alone continuous and systematic contacts. At most, Plaintiff presents evidence of contacts between Metro Financial and the Canvas software, and Metro Financial and Metro Valuation. As to the former, Plaintiff has not linked this connection to California. Further, Bradford's statements in his declaration about Metro Financial operations are not based on personal knowledge and thus need not be accepted. L.R. 7-5(b);
Plaintiff has also not established that the Court has jurisdiction under the "representative services" doctrine, a variation of the agency theory of general jurisdiction. Under the agency doctrine, a subsidiary's contacts with the forum state may be imputed to the parent for general jurisdiction purposes where "the subsidiary functions as the parent corporation's representative in that it performs services that are sufficiently important to the foreign corporation that if it did not have a representative to perform them, the corporation's own officials would undertake to perform substantially similar services."
Plaintiff's "representative services" argument fails because even if the Court were to impute Metro Valuation's contacts with California to Metro Financial, there is no evidence that these contacts are continuous and systematic.
There is also no basis for exercising general jurisdiction over Metro Financial based on the actions of Karma. There is no evidence that Metro Financial has any control over Karma; Karma is separate from Metro Financial and has different ownership. (11/15/12 Newman Decl. ¶ 8.) Additionally, there is insufficient evidence that Karma has enough contacts with California to permit general jurisdiction over it. As of November 15, 2012, Karma's sales of Canvas in California totaled $30.00. Given that generating substantial revenue from the sale of products to forum state residents is not sufficient by itself to support the exercise of general jurisdiction, Karma's minimal California Canvas revenue further undercuts any general jurisdiction theory based on Karma.
Finally, Plaintiff has not established that the Court has specific jurisdiction over Metro Financial. To prove that Metro Financial purposefully availed itself of the privilege of conducting activities in California, Plaintiff must demonstrate that Metro Financial actually conducted activities there. Plaintiff has not done so. Plaintiff's evidence and allegations about California-related activities involve other defendants. That Metro Financial has the same Utah business address as Karma or was listed as a contact on the Canvas website is not evidence of an act in California. Similarly, there is insufficient evidence that Metro Financial engaged in out-of-state activities directed at California. That Karma sent emails to California residents soliciting the purchase of Canvas is not evidence that Metro Financial directed its activities at California residents.
Accordingly, the Court grants Metro Financial's motion to dismiss for lack of personal jurisdiction.
Like Metro Financial, Defendant Rodney Newman moves to dismiss on the basis that he lacks the minimum contacts with California necessary for this Court to have personal jurisdiction. Plaintiff asserts the requisite contacts exist because Newman, as president of Metro Financial, held himself out as a contact for Canvas on the Canvas website. Plaintiff also points out that Newman is linked to Karma because Karma and Metro Financial share an address and Newman has assets in a trust that Karma listed in its Certificate of Interested Entities. According to Plaintiff, this evidence "shows that [Newman] is and was intimately and directly involved with Karma and as such, was party to Karma's solicitation business in California."
Plaintiff has not met its burden of establishing that the Court has general jurisdiction over Newman. Plaintiff has not identified any contacts between Newman and California. Newman is a Utah resident, does not conduct business in California, does not maintain a residence in California, and pays no California taxes. (12/9/11 Newman Decl. ¶ 3.) Newman has not contacted anyone in California as a result of his contact information being listed on the Canvas website, has not sent emails to California appraisers regarding Canvas, has not made any Canvas sales in California, has not solicited customers in California, and has not sent any advertising materials to California residents regarding Canvas. (11/15/12 Newman Decl. ¶¶ 11-13.)
Plaintiff relies on contacts between Karma and California in the form of alleged emails sent by Karma. (RJN Ex. I, Ex. J, Ex. K.) Even if these documents were admissible and the Court took judicial notice of them,
The lack of contacts between Newman and California also undermines Plaintiff's argument that the Court can exercise specific jurisdiction over him. Plaintiff's specific jurisdiction argument is premised on emails that Karma sent to California appraisers soliciting them to purchase the Canvas software. Although the "solicitation emails" were not directly from Newman, Plaintiff conclusorily asserts that Newman was directly involved with the solicitation based on speculation, not evidence. The Court therefore grants Newman's motion to dismiss for lack of personal jurisdiction.
The Court dismisses Defendants Metro Financial and Newman without prejudice.