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Excel Plas, Inc. v. Sigmax Co.

September 26, 2007

EXCEL PLAS, INC., PLAINTIFF,
v.
SIGMAX CO., LTD., DEFENDANT.



The opinion of the court was delivered by: Hon. Irma E. Gonzalez, Chief Judge Southern District of California United States District Court

ORDER: 1) DENYING DEFENDANT'S MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION; and 2) DENYING DEFENDANT'S FORUM NON-CONVENIENS MOTION TO DISMISS FOR [Doc. No. 8]

Presently before the court are motions to dismiss for lack of personal jurisdiction and for forum non-conveniens filed by Sigmax Co., Ltd. ("defendant"). (Doc. No. 8.) For the following reasons the court denies defendant's motions.

BACKGROUND

Factual Background

This case arises out of an alleged distribution agreement and co-development agreement between Excel Plas, Inc. ("plaintiff") and defendant. Defendant is a Japanese-incorporated company that manufactures Robot-Eye, which is a visual monitoring system that ensures large plastic injection molding machines are operating safely. (Complaint ("Compl.") ¶2; Fumio Taki Declaration In Support of Opposition ("Taki Decla. ISO Opp.") ¶ 3.) Robot-Eye consists of a controller, camera, cable, and a display. (Compl. ¶4.) Plaintiff is a California corporation that acts as the exclusive distributor for Robot-Eye in North America. (Id. ¶7.)

According to the complaint, in January 1998, the parties entered into a written sales agreement where plaintiff would buy Robot-Eye Model SX-310 units from defendant and resell them in North America. (Id. ¶9.) In 2001, defendant developed an upgrade, Robot-Eye Model SX-510. According to plaintiff, the parties continued their arrangement under the 1998 sales agreement, although by its terms, the agreement was only valid for one year and covered the SX-310. (Id. ¶¶11-13.) Plaintiff claims that since 1998, plaintiff has bought more than 80 units for resale in North America. (Id. ¶14.)

Plaintiff alleges some of the Robot-Eye SX-510 units that defendant supplied were defective and end-users began complaining of malfunctions.*fn1 (Id. ¶18.) After informing defendant of the issues, plaintiff began investigating the underlying causes and troubleshooting at the customers' sites. (Id. ¶¶19, 21, 28.) Plaintiff further alleges the sales agreement and user's manual contained defendant's express quality warranty for a period of one year from the unit's shipment. (Id. ¶16.) Because plaintiff was defendant's sole North American distributor, all end-user communications had to go through plaintiff. (Id. ¶21.) Customers returned malfunctioning units to plaintiff, plaintiff then shipped them back to defendant for repairs, and then defendant returned the repaired unit or shipped a new unit to plaintiff for delivery to the end user. (Id. ¶22.) According to plaintiff, defendant always bore the costs of shipping and completing these repairs.

In June 2003, the parties began negotiations to co-develop an improved Robot-Eye model ("New System"). Plaintiff claims defendant requested active participation by plaintiff in the form of technical advice and U.S. marketing information. (Id. ¶ 24.) In August 2005, defendant purportedly confirmed, in writing, an agreement with plaintiff to: 1) develop the New System by June 2006; 2) exhibit the New System at a 2006 trade show in Chicago; and 3) have plaintiff participate in the development. Plaintiff claims it paid a non-refundable fee to reserve a booth at the trade show, as instructed by defendant, and it incurred significant costs in the New System's development.

In November 2005, defendant informed plaintiff it was no longer interested in co-developing the New System or exhibiting the New System at the Chicago trade show. (Id. ¶31.) During this time, plaintiff continued to receive complaints about defects in the SX-510. As two examples, in February 2006, Nissei Mexico and Tyco Electronics Corp. both returned broken units. According to plaintiff, defendant violated the sales agreement by directly contacting both Nissei and Tyco. (Id. ¶32.) Specifically, in March 30, 2006, defendant issued an invoice to Tyco that noted the existence of a general design defect in the integrated circuit ("IC") of the SX-510 controller. (Id. ¶33.) Plaintiff claims defendant knew of this systematic IC defect, which affected all SX-510's, but concealed this information from plaintiff. Moreover, when plaintiff asked defendant late in 2006 about the defect, defendant denied its existence. (Id. ¶ 34.) On July 8, 2006, plaintiff received an invoice from defendant to repair costs, which included costs for repairing Nissei's and Tyco's units. Plaintiff was surprised because since the inception of their arrangement, defendant always bore these types of costs. (Id. ¶35.) Plaintiff requested, in writing, an explanation for this cost-shifting, but defendant refused. Also on July 8, 2006, defendant sent plaintiff an email stating the sales agreement would be terminated, effective July 10, 2007. (Id. ¶36.)

Procedural Background

On December 22, 2006, plaintiff filed a nine-count complaint against defendant in California Superior Court. Plaintiff alleged causes of action for: 1) breach of written contract; 2) breach of implied contract; 3) breach of implied covenant of good faith and fair dealing; 4) unjust enrichment; 5) breach of express warranties; 6) breach of implied warranties; 7) fraudulent concealment; 8) intentional interference with contractual relations; and 9) declaratory relief, seeking a judicial declaration that defendant must indemnify any expenses incurred by plaintiff in repairing Robot-Eye units. (Doc. No. 1.) On March 29, 2007, defendant removed the case to federal court on the basis of diversity jurisdiction, (Doc. No. 1), and filed an answer on April 2, 2007. (Doc. No. 3.)

On July 11, 2007, defendant filed the instant motions. Plaintiff filed an opposition on August 31, 2007. (Doc. No. 12.) Defendant filed its reply and evidentiary objections on September 10, 2007. (Doc. No. 13.)

DISCUSSION

I. Motion to Dismiss For Lack of Personal Jurisdiction

Legal Standard

Rule 12(b)(2) provides for dismissal of an action where the court lacks personal jurisdiction over a defendant. See Fed. R. Civ. P. Rule 12(b)(2). The plaintiff bears the burden of demonstrating that jurisdiction is appropriate. Rio Properties, Inc. v. Rio Int'l Interlink, 284 F.3d 1007, 1019 (9th Cir. 2002). If the motion, as in the present case, is based on affidavits and documentary evidence, the plaintiff need only make a prima facie showing of facts establishing personal jurisdiction.*fn2 Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004). In other words, jurisdiction is proper where the plaintiff demonstrates "facts that, if true, would support, the court's exercise of jurisdiction over the defendant." Amini Innovation Corp. v. JS Imports, Inc., -- F. Supp. 2d --, 2007 WL 1597942, at *2-3 (C.D. Cal. 2007). Uncontroverted allegations in the complaint are accepted as true and conflicts between parties over statements contained in affidavits must be resolved in the plaintiff's favor. Schwarzenegger, 374 F.3d at 800; see Bancroft & Masters, Inc. v. August Nat'l, Inc., 223 F.3d 1082, 1087 (9th Cir. 2000) ("Because the prima facie jurisdictional analysis requires us to accept the plaintiffs allegations as true, we must adopt [the plaintiff's] version of events for purposes of this appeal."). A prima facie showing must be based on affirmative proof beyond the pleadings, such as affidavits, testimony or other competent evidence of specific facts.*fn3 See 4 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1067.6 (3rd ed. 2002).

The Ninth Circuit has established a two-step test for determining the propriety of asserting personal jurisdiction. See Pacific Atlantic Trading Co. v. M/V Main Express, 758 F.2d 1325, 1327 (9th Cir. 1985). First, the relevant state's long-arm statute must permit jurisdiction. Second, the exercise of jurisdiction must be consistent with federal constitutional principles of due process. Greenspun v. Del E. Webb Corporation, 634 F.2d 1204, 1207 (9th Cir. 1980) (citations omitted). As to the first inquiry, California's long arm statute extends jurisdiction to the maximum extent permitted by due process. Cal. Civ. P. Code § 410.10 (West 2006) ("[A] court of this state may exercise jurisdiction on any basis not inconsistent with the Constitution of this state or of the United States.").

Accordingly, California authorizes jurisdiction whenever the second inquiry of the Ninth Circuit's test -- the demands of due process -- is satisfied. FDIC v. British American Ins. Co. Ltd., 828 F.2d 1439, 1441 (9th Cir. 1987).

The Fourteenth Amendment's Due Process Clause permits personal jurisdiction over any defendant that has sufficient "minimum contacts" with the forum such that the exercise of jurisdiction "does not offend traditional notions of fair play and substantial justice." International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). There are two recognized bases for exercising personal jurisdiction over a non-resident defendant: (1) "general jurisdiction," which arises when the defendant's activities in the forum are sufficiently "substantial" or "continuous and systematic" to justify the exercise of jurisdiction over it in all matters; and (2) "specific jurisdiction," which arises when a plaintiff can establish that the present claims arose directly from defendant's California-related activities. See Helicopteros Nacionales de Colombia S.A. v. Hall, 466 U.S. 408, 414-16 (1984).

A. General Jurisdiction

General jurisdiction exists where a non-resident defendant has "substantial" or "continuous and systematic" contacts in the state that "approximate physical presence." Bancroft & Masters, Inc., 223 F.3d at 1086. Thus, there must be a high level of contact with the forum state. Schwarzenegger, 374 F.3d at 801 ("This is an exacting standard, as it should be, because a finding of general jurisdiction permits a defendant to be haled into court in the forum state to answer for any of its activities anywhere in the world."); Fields v. Sedgwick Associated Risks, Ltd., 796 F.2d 299, 301 (9th Cir. 1986) ("[General personal jurisdiction] is a fairly high standard in practice."). A company cannot merely be ...


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