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J. G. Boswell Tomato Company -Kern, LLC v. Private Label Foods

July 31, 2008

J. G. BOSWELL TOMATO COMPANY -KERN, LLC (FORMERLY KNOWN AS RIO BRAVO TOMATO COMPANY, LLC, COMPANY, A CALIFORNIA LIMITED LIABILITY PLAINTIFF,
v.
PRIVATE LABEL FOODS, INC., A NEW YORK CORPORATION; PRIVATE LABEL FOODS OF ROCHESTER, INC., A NEW YORK CORPORATION, AND DOES 1 TO 50, INCLUSIVE, DEFENDANTS.



The opinion of the court was delivered by: Oliver W. Wanger United States District Judge

MEMORANDUM DECISION AND ORDER DENYING DEFENDANT'S MOTION TO DISMISS, AND, IN THE ALTERNATIVE, GRANTING TRANSFER VENUE (Doc. 7)

1. INTRODUCTION

Plaintiff J.G. Boswell Tomato Company-Kern, LLC, ("Boswell") alleges three breach of contract claims against specially appearing Defendant Private Label Foods of Rochester Inc. (Erroneously sued as Private Label Foods, Inc., a dissolved corporation)("Private Label"). Private Label moves to dismiss for lack of personal jurisdiction under Fed. R. Civ. P. 12(b)(2). Alternatively, Private Label moves for an order to transfer this action to the Western District of New York pursuant to 28 U.S.C. § 1404(a) for convenience of the parties and witnesses.

2. JURISDICTION

Removal jurisdiction to the federal court is invoked under 28 U.S.C. 1442; or diversity of citizenship 28 U.S.C. 1332 based on the citizenship of the parties in different states, and the amount in controversy in excess of $75,000.00. Plaintiff is a California LLC, and Defendant is a New York corporation. The amount in controversy exclusive of interest and costs exceeds $75,000.00.

3. BACKGROUND

A. Procedural History

Boswell originally filed its Complaint on March 21, 2008 in the Superior Court for the State of California in and for the County of Kern. (Doc. 2, Compl.) Private Label made a special appearance and removed this case to Federal Court on May 2, 2008. (Doc. 2, Notice of Removal.) Private Label then filed a Motion to Dismiss, or, in the alternative, to Transfer Venue on May 9, 2008. (Doc. 7, Def.'s Mot. Dismiss) Boswell filed an Opposition on July 3, 2008. (Doc. 11, Pl.'s Opp'n.) Private Label filed a Reply to Boswell's Opposition on July 14, 2008. (Doc. 13, Def.'s Reply.)

B. Factual History

Plaintiff Boswell is a limited liability company organized under the laws of the State of California, which alleges three breach of contract actions against Defendant Private Label, a New York corporation with its principle place of business in Rochester, New York. (Compl. ¶ 1; Pl.'s Opp'n 2.)

Boswell, a supplier of processed tomato products, is located in Buttonwillow, Kern County, California. (Pl.'s Opp'n 1.)

Defendant Private Label Foods is a New York corporation, conducting business in Rochester, New York. (Compl. ¶ 2; Def.'s Mot. Dismiss 1.) Private Label manufactures and sells "private label" food products such as salad dressings, cocktail sauces, marinades, barbeque sauces, pasta sauces, salsa, wing sauces, and hot sauces. (Def.'s Mot. Dismiss 1.) Private Label purchases processed tomato products for the production of its products. (Pl.'s Opp'n 1-2.) From 2003 through 2006, Defendant Private Label entered into several contracts with Plaintiff Boswell to purchase over $2.5 million worth of processed (sliced and diced tomatoes and tomato paste) tomato product. (Pl.'s Opp'n 2.)

This dispute arises out of the last three contracts entered into between the parties in the 2006-2007 packing season. (Pl.'s Opp'n 2.) Boswell alleges Private Label breached the contracts by refusing to pay the amounts owed for tomato products sold and delivered, resulting in total alleged damages suffered by Boswell in the amount of $633,127.97. (Compl. ¶¶ 6-7.)

Boswell alleges the parties entered into a written agreement on March 31, 2006, in Kern County, California for the sale/purchase of 1,500,000 pounds of tomato paste product for $.308 per pound, for delivery by June 30, 2007, F.O.B. Buttonwillow, California. (Compl. ¶¶ 8-13, Ex. A.) This contract included a $90 deposit for the shipping bins provided by Boswell which was refundable upon return of the bins in "useable" condition. (Compl. Ex. A) Boswell alleges it has performed all conditions, covenants, and promises required on its part; and that Private Label has failed to pay $1,560.10 as per the terms of the agreement. (Compl. ¶¶ 11-13.)

Boswell alleges the parties entered into an additional written agreement on March 31, 2006, in Kern County, California for the sale/purchase of 1,500,000 pounds of tomato paste product at $.333 per pound, for delivery by June 30, 2007, F.O.B. Buttonwillow, California. (Compl. ¶¶ 14-16, Ex. B.) This contract included a $90 deposit for the shipping bins provided by Boswell which was refundable upon return of the bins in "useable" condition. (Compl. Ex. B.) Boswell alleges it has performed all conditions, covenants, and promises required on its part and Private Label has failed to pay $172,048.72 as per the terms of the agreement. (Compl. ¶¶ 17-19.)

On August 21, 2006, Boswell alleges the parties entered into a third written agreement in Kern, County, California for the sale/purchase of tomato paste product for delivery by June 30, 2007, F.O.B. Buttonwillow, California. (Compl. ¶¶ 14-16, Ex. B.) This contract included a $90 deposit for the shipping bins provided by Boswell which was refundable upon return of the bins in "useable" condition. (Compl. Ex. B)

Boswell alleges it has shipped 77,639 pounds of tomato paste product plus bins for which Private Label still owes $4,245.00. (Compl. ¶ 23.) Boswell alleges it performed all conditions, covenants, and promises required on its part and Private Label failed to take delivery of a remaining 2,922,361 pounds of product before the June 30, 2007 deadline, for which Boswell had to mitigate damages by allocating the product to other purchasers for a price/market differential of $.15 per pound. (Compl. ¶¶ 24-25.) Boswell alleges it lost $438,354.15 as a result, and additionally, Private Label failed to pay for or return 188 bins pursuant to the contract resulting in a loss of $16,920.00. (Compl. ¶¶ 25-26.) Boswell seeks compensatory damages for breach of these three contracts in the sum of $633,127.97 plus interest on this amount from and after November 10, 2007. (Compl. ¶ 26.)

Defendant Private Label alleges that in 2003, Plaintiff Boswell hired a New York Sales Broker to obtain Private Label's business. (Def.'s Mot. Dismiss 2.) Private Label negotiated with this broker in New York and after a sale Private Label paid the broker a commission. (Def.'s Mot. Dismiss 2.) At about this time Boswell sent its president and vice-president to New York to tour Private Label's facility and solicit the sale of Boswell's products. (Def.'s Mot. Dismiss 2.) Additionally, Boswell's vice-president visited on another occasion on behalf of Boswell. (Def.'s Mot. Dismiss 2.) Private Label executed additional agreements with Boswell, continuing to use the New York broker in the negotiations. (Def.'s Mot. Dismiss 2.) Boswell sent its East Coast Sales Manager, John Nestvogel, to New York to solicit business from Private Label on at least six occasions. (Def.'s Mot. Dismiss 2.) Mr. Nestvogel's name is on the August 14, 2006 contract attached to the Complaint as Exhibit C. (Compl. Ex. C.)

Private Label contends the contracts were executed in New York, after which it faxed or mailed the contracts to California. (Def.'s Mot. Dismiss 2.) Private Label states it has never had a location for the transaction of business outside of New York. (Def.'s Mot. Dismiss 1.) Private Label has never had in California, any agents, employees, officers, directors, physical offices, plants, bank accounts, tangible property, or contact with persons located in California to act on its behalf with respect to marketing, distributing, or servicing any of Private Label's goods or services. (Def.'s Mot. Dismiss 1-2.) Private Label representatives have never visited California in connection with the contracts at issue. (Def.'s Mot. Dismiss 2.) Private Label has not attended any trade shows, expositions, or conferences in California and conducts no advertising or marketing targeted or purposefully directed at potential customers in California, and its principals have never traveled to California to conduct business on behalf of Private Label. (Def.'s Mot. Dismiss 2-3.) Private Label is not and has never been registered with the California Secretary of State to conduct business in California. (Def.'s Mot. Dismiss 3.)

Private Label disputes the amount of damages sought in the complaint, but contends that the dispute should not be litigated in California because the court lacks in personam jurisdiction over Private Label and/or because the Eastern District of California is an inconvenient forum. (Def.'s Mot. Dismiss 3.)

4. STANDARD OF REVIEW

A. Personal Jurisdiction

Plaintiff bears the burden of establishing that the Court has personal jurisdiction. See Fed. Deposit Ins. Corp. v. British-Am. Ins. Co., 828 F.2d 1439, 1441 (9th Cir. 1987). When a defendant moves to dismiss for lack of personal jurisdiction, the plaintiff is "obligated to come forward with facts, by affidavit or otherwise, supporting personal jurisdiction." Amba Mktg. Sys. v. Jobar Int'l, 551 F.2d 784, 787 (9th Cir. 1977). The court reviews the pleadings and affidavits, upon which the plaintiff need only make a prima facie showing that personal jurisdiction exists. See Graphic Controls Corp. v. Utah Med. Prod., 149 F.3d 1382, 1383 n.1 (Fed. Cir. 1998). The court construes the pleadings and affidavits in the light most favorable to the plaintiff. See id. Personal jurisdiction exists if permitted by California's long-arm statute and federal due process. See id. at 1385. Pursuant to Cal. Code of Civ. P. § 410.10, California's long-arm statute reaches as far as the Due Process Clause permits i.e. to the extent that maintenance of a suit in California would "not offend traditional notions of fair play and substantial justice." Cal. Civ. Proc. Code § 410.10 (2008); Int'l Shoe Co. v. State of Wash., Office of Unemployment, 326 U.S. 310, 316 (1945). Two categories of jurisdiction exist: general or specific jurisdiction. See Lake v. Lake, 817 F.2d 1416, 1420-21 (9th Cir. 1987).

B. Venue

Pursuant to U.S.C. § 1404(a), the decision whether to transfer venue is at the discretion of the district court. See Jones v. GNC Franchising, Inc., 211 F.3d 495, 498 (9th Cir. 2000). Under § 1404(a), the district court considers each of the factors: "For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought." 28 U.S.C. § 1404(a) (2008); Ventress v. Japan Airlines, 486 F.3d 1111, 1118 (9th Cir. 2007).

5. PERSONAL JURISDICTION ANALYSIS

A. General Jurisdiction

"General jurisdiction exists when a defendant is domiciled in the forum state or his activities there are 'substantial' or 'continuous and systematic.'" Panavision Int'l., L.P. v. Toeppen, 141 F.3d 1316, 1320 (9th Cir. 1998) (citing Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414-16 (1984)). Defendant Private Label argues it is not subject to general jurisdiction in California for multiple reasons. These reasons include Private Label's incorporation in New York; its principle place of business in New York; it has no agents, officers, directors, employees, or property in California; it has not registered with the California Secretary of State; it has no continuous or systematic contacts with California; and it has never conducted any advertising or marketing purposefully directed to, or targeted at, California residents. Because Private Label's contacts have been sporadic and minimal, Plaintiff Boswell does not claim Private Label is subject to general jurisdiction. The issue is whether Private Label is subject to personal jurisdiction on the basis that specific jurisdiction is present.

B. Specific Jurisdiction

Specific jurisdiction is analyzed under a three part test:

(1) Purposeful Availment: the nonresident defendant must do some act or consummate some transaction with the forum state or perform some act by which it purposefully avails itself of the privilege of conducting activities in the forum state, thereby invoking the benefits and protections of its laws;

(2) Arising Out Of Forum-Related Activities: the claim must be one which arises out of or relates to the defendant's forum-related activities; and

(3) Reasonableness: the exercise of jurisdiction must must be reasonable.

comport with fair play and substantial justice, i.e. it Schwarzenegger v. Fred Martin Co., 374 F.3d 797, 802 (9th Cir. 2004).

Physical presence is not required to establish specific jurisdiction. Haisten v. Grass Valley Med. Reimbursement Fund, Ltd., 784 F.2d 1392, 1398 (9th Cir. 1986) (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475-77 (1985)); see also Calder v. Jones, 465 U.S. 783, 790 (1984). "[O]rdinarily 'use of the mails, telephone, or other international communications simply do not qualify as purposeful activity invoking the benefits and protection of the [forum] state.'" Peterson v. Kennedy, 771 F.2d 1244, 1262 (9th Cir. 1985) (quoting Thomas. P. Gonzalez Corp. v. Consejo Nacional de Produccion de Costa Rica, 614 F.2d 1247, 1254 (9th Cir. 1980)).

"In judging minimum contacts, a court properly focuses on 'the relationship among the defendant, the forum, and the litigation.'" Calder, 465 U.S. at 789 (quoting Shaffer v. Heitner, 433 U.S. 186, 204 (1977)); see also Rush v. Savchuk, 444 U.S. 320, 332 (1980). "'An out-of-state act having an effect within the state may be sufficient to support jurisdiction' in a non-tort situation." Haisten, 784 F.2d at 1397-398 (quoting Forsythe v. Overmyer, 576 F.2d 779, 783 (9th Cir. 1978)(finding jurisdiction where defendant assumed personal liability in the event of default on a contract expressly subject to jurisdiction in the forum state - the contract was expressly subject to interpretation under California law by California courts)). "Questions of personal jurisdiction admit of no simple solutions and that ultimately due process issues of reasonableness and fairness must be decided on a case-by-case basis." Forsythe, 576 F.2d at 783 (citing Perkins v. Benguet Consol. Mining Co., 342 U.S. 437, 446 (1952).

1. Purposeful Availment

In this first prong, the term "purposeful availment," is often used in shorthand fashion, to include both purposeful availment and purposeful direction. Schwarzenegger, 374 F.3d at 802 (9th Cir. 2004). Because this is a contract dispute, and not a tort claim, the "purposeful availment" analysis is applied. Menken v. Emm, 503 F.3d 1050, 1057 (9th Cir. 2007). "The purposeful availment standard requires more than foreseeability of causing injury in another state." Terracom v. Valley Nat. Bank, 49 F.3d 555, 560 (9th Cir. 1995) (citing Burger King, 471 U.S. at 474). "The foreseeability that is critical to due process analysis . . . is that the defendant's conduct and connection with the forum state are such that he should reasonably anticipate being haled into court there." Id. (quoting World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980)). This prong "prevents defendants from being haled into a jurisdiction through 'random,' 'fortuitous,'or 'attenuated' contacts." Id. (quoting Burger King, 471 U.S. at 475).

This involves an inquiry into "whether a defendant 'purposefully avails itself of the privilege of conducting activities' or 'consummates a transaction' in the forum, focusing on activities such as delivering goods or executing a contract in the forum state." Menken, 503 F.3d at 1057 (quoting Schwarzenegger, 374 F.3d at 802). These actions reflect a non-resident defendant "purposefully avail[ing] itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." Hanson v. Denckla, 357 U.S. 235, 253 (1958). "In return for these 'benefits and protections,' a defendant must-as a quid pro quo-'submit to the burdens of litigation in that forum.'" Schwarzenegger, 374 F.3d at 802 (citing Burger King, 471 U.S. at 476).

Factors the Supreme Court has established that must be considered in their totality to determine whether a defendant purposefully established minimum contacts (purposefully availed itself) with a forum are as follows:

(1) prior negotiations;

(2) contemplated future consequences;

(3) the terms of the contract; and

(4) the parties' actual course of dealing.

Burger King, 471 U.S. at 479. Private Label purposefully availed itself to California jurisdiction.

A. Prior Negotiations "[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 sanctions in the other State for the consequences of their activities." Burger King, 471 U.S. at 473, (quoting Travelers Health Ass'n v. Virginia, 339 U.S. 643, 647 (1950)).

When considering contract negotiations courts typically consider the ...


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