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Pacific Rollforming, LLC v. Trakloc International

September 8, 2008


The opinion of the court was delivered by: M. James Lorenz United States District Court Judge


In this action arising out of a business dispute, Plaintiff Pacific Rollforming, LLC ("Pacific") filed a complaint for breach of contract, fraud, breach of the implied covenant of good faith and fair dealing, defamation, interference with prospective business advantage and violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq. The dispute arises primarily out of a Master Area License Agreement ("License Agreement") whereby Defendant Trakloc International, LLC ("TLI") granted Pacific a license to manufacture and market a certain proprietary drywall and stud framing system ("Trakloc"). TLNA, allegedly TLI's successor-in-interest, issued a notice of termination of Pacific's License Agreement and, together with Defendants Bert Tabor, Thomas Horst, Southeastern Metals, Inc., and its President Gary Nelson, Jr. allegedly interfered with Pacific's business in Nevada.

Defendants*fn1 filed a motion to dismiss. They argue that Pacific failed to alleged sufficient facts to state a claim under Federal Rule of Civil Procedure 12(b)(6) as to the fraud, defamation, interference with contract/prospective business advantage and RICO causes of action. In addition, they argue under Rule 12(b)(2) that the court lacks personal jurisdiction over Defendants Gary Nelson and Thomas Horst. Pacific opposed the motion. For the reasons which follow, Defendants' motion to dismiss is GRANTED IN THE PART AND DENIED IN PART.

Defendants attack personal jurisdiction over Messrs. Horst and Nelson under Rule 12(b)(2). The plaintiff has the burden of establishing personal jurisdiction. See Farmers Ins. Exchange v. Portage La Prairie Mut. Ins. Co., 907 F.2d 911, 912 (9th Cir. 1990). In ruling on the motion, the "court may consider evidence presented in affidavits to assist in its determination and may order discovery on the jurisdictional issues." Doe v. Unocal Corp., 248 F.3d 915, 922 (9th Cir. 2001). Where a motion is based on written materials rather than an evidentiary hearing the plaintiff need only make a prima facie showing of jurisdictional facts. In such cases, we only inquire into whether [the plaintiff]'s pleadings and affidavits make a prima facie showing of personal jurisdiction. Although the plaintiff cannot simply rest on the bare allegations of its complaint, uncontroverted allegations in the complaint must be taken as true. Conflicts between parties over statements contained in affidavits must be resolved in the plaintiff's favor.

Dole Food Co., Inc. v. Watts, 303 F.3d 1104, 1108 (9th Cir. 2002)(citations and quotation marks omitted). A prima facie showing means that "the plaintiff need only demonstrate facts that if true would support jurisdiction over the defendant." Unocal, 248 F.3d at 922.

There are two types of personal jurisdiction: general and specific. General jurisdiction "enables a court to hear cases unrelated to the defendant's forum activities . . .." Fields v. Sedgewick Assoc. Risks, Ltd., 796 F.2d 299, 301 (9th Cir. 1986). Specific jurisdiction allows the court to exercise jurisdiction over a defendant whose forum-related activities gave rise to the action before the court. See Bancroft & Masters, Inc. v. Augusta Nat. Inc., 223 F.3d 1082, 1086 (9th Cir. 2000). Pacific claims that the court has specific jurisdiction.*fn2

Specific jurisdiction is established by showing three elements: (1) the out-of-state defendant purposefully directed its activities toward a resident of the forum state; (2) the cause of action arose out of or resulted from the defendant's forum-related action; and (3) the forum's exercise of personal jurisdiction is reasonable. Myers v. The Bennett Law Offices, 238 F.3d 1068, 1072 (9th Cir. 2001).

The purposeful availment element "can be met if a defendant's intentional act in the foreign state was calculated to cause injury to the plaintiff in the forum state." Myers, 238 F.3d at 1072, quoting Calder v. Jones, 465 U.S. 783, 791 (1984)(internal alterations and quotation marks omitted). This occurs 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, 223 F.3d at 1087. Pacific argues that "Defendants conspired with and acted in concert with JABLOW and TLNA to make false and defamatory claims against Plaintiff and to otherwise take acts to put it out of business. Those acts were clearly designed to have an effect on an entity [Pacific] whose principal place of business is in California . . .." (Opp'n at 9-10.) Pacific does not allege or argue that Messrs. Horst and Nelson knew Pacific had its principal place of business in California or that the harm they are allegedly causing would be felt in California. The allegedly wrongful conduct took place in Las Vegas, Nevada (id. at 10) and was aimed at Pacific's business in Nevada (see Order Granting Pl.'s Ex Parte Application for a TRO, filed Nov. 7, 2007.) Accordingly, Pacific has not made a prima facie case for personal jurisdiction over Messrs. Horst and Nelson.

Next, Defendants attack the complaint under Rule 12(b)(6). A Rule 12(b)(6) motion to dismiss tests the sufficiency of the complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). Dismissal is warranted under Rule 12(b)(6) where the complaint lacks a cognizable legal theory. Robertson v. Dean Witter Reynolds, Inc.,749 F.2d 530, 534 (9th Cir. 1984); see Neitzke v. Williams, 490 U.S. 319, 326 (1989) ("Rule 12(b)(6) authorizes a court to dismiss a claim on the basis of a dispositive issue of law"). Alternatively, a complaint may be dismissed where it presents a cognizable legal theory yet fails to plead essential facts under that theory. Robertson, 749 F.2d at 534. "[A] plaintiff's obligation to provide the grounds for his entitlement to relief requires more than labels and conclusions, and formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level . . .." Bell Atl. Corp. v. Twombly, 127 S.Ct. 1955, 1964-65 (2007) (internal quotation marks and citations omitted).

In reviewing a motion to dismiss under Rule 12(b)(6), the court must assume the truth of all factual allegations and must construe them in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). However, legal conclusions need not be taken as true merely because they are cast in the form of factual allegations. Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir. 1987); W. Mining Council v. , 643 F.2d 618, 624 (9th Cir. 1981). Similarly, "conclusory allegations of law and unwarranted inferences are not sufficient to defeat a motion to dismiss." Pareto v. Fed. Deposit Ins. Corp., 139 F.3d 696, 699 (9th Cir. 1998.)

Defendants contend Pacific does not allege fraud with sufficient specificity. They argue that Pacific fails to link Defendants David Jablow, Southeastern Metals, Inc., Gary Nelson, Bert Tabor and Thomas Horst to the alleged misrepresentations and non-disclosures. But defendants' argument concerning specificity is rejected because fraud is not asserted against any of these Defendants. (See First Am. Compl. at 5-6.)

Defendants next argue that the complaint does not sufficiently allege conspiracy in connection with the fraud claim. However, Plaintiff does not allege a conspiracy in connection with this claim. (See id.) Accordingly, defendants' argument about the sufficiency of conspiracy allegation vis-a-vis fraud is rejected as well.

The complaint alleges that TLI failed to disclose certain material facts to Pacific in relation to the License Agreement. (Id. at 5-6.) Defendants argue Pacific should be compelled to allege where the alleged misrepresentation occurred, who perpetrated the allegedly deceptive conduct, and how this conduct caused damage to Pacific.

"Rule 9(b)'s particularity requirement applies to state-law causes of action." Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1103 (9th Cir. 2003). To comply with rule 9(b), "the circumstances constituting fraud . . . shall be stated with particularity." "A pleading is sufficient under rule 9(b) if it identifies the circumstances constituting fraud so that a defendant can prepare an adequate answer from the allegations." Moore v. Kayport Package Express, Inc., 885 F.2d 531, 540 (9th Cir. ...

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