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Hammond v. Monarch Investors

July 2, 2010

ALAN HAMMOND, ET AL., PLAINTIFFS,
v.
MONARCH INVESTORS, LLC, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Hon. Thomas J. Whelan United States District Judge

ORDER DENYING IN-PART AND GRANTING IN-PART MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION [DOC.13]

On September 21, 2009, Plaintiffs Alan Hammond, Carl Yates and Chris Bright commenced this action for breach of contract, fraud and unjust enrichment against Defendants Monarch Investors, LLC ("Monarch"), Dominant DNA, LLC ("DNA"), Michael J. Hines and R. Stephen Fox. On February 8, 2010, Defendants filed a motion to dismiss for lack of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2). (Doc. 13.)

The Court decides the matter on the papers submitted and without oral argument. See Civil Local Rule 7.1(d.1). For the reasons outlined below, the Court DENIES IN-PART and GRANTS IN-PART the motion. (Doc. 13.)

I. BACKGROUND

The facts as alleged in Plaintiffs' complaint and opposition are as follows: In April of 2007, Mothwing Camo Technologies ("Mothwing") began soliciting Plaintiffs to invest in the company. (Hammond Decl. [Doc. 16], ¶ 4, Ex. D.) In June and July of 2007, Plaintiffs entered into three separate loan agreements with Mothwing, one of which was negotiated, signed and to be repaid in California. (Compl. [Doc. 1*fn1 ], 4:9; see also Hammond Decl., ¶ 3, Ex. C.)

After obtaining the loans, Mothwing began negotiating an asset purchase agreement with Defendant Monarch. (Opp. [Doc. 15], 3:1.) Defendant Hine, as President of both Monarch and Defendant DNA, and Defendant Fox, as a managing member of Monarch, were among the individuals representing Monarch during its negotiations with Mothwing. (Id. at 2:8.) During these negotiations, Hine and Fox made explicit statements and representations to the effect that Monarch would assume all of Mothwing's liabilities, including the loan agreements with Plaintiffs. (Compl. at 5:6.)

In 2008, the parties reached an agreement whereby Monarch-through a wholly owned subsidiary-would financially support Mothwing until Monarch could complete the purchase of Mothwing's assets. (Opp. at 3:1; see also Compl. at 5:16.) As part of the asset purchase agreement, Monarch agreed to assume Mothwing's debts and repay its creditors. (Compl. at 5:1)

On September 21, 2009, Plaintiffs filed a lawsuit claiming that Monarch and DNA failed to cover the liabilities they assumed pursuant to the Mothwing purchase agreement and, therefore, are in breach of both the asset purchase agreement and the loan contracts. Furthermore, Plaintiffs allege that Hine and Fox intentionally and fraudulently misrepresented and concealed material facts in order to induce Mothwing to enter into the purchase agreement. On February 8, 2010, Defendants moved to dismiss the lawsuit for lack of personal jurisdiction.

II. LEGAL STANDARD

Where a defendant moves to dismiss for lack of personal jurisdiction, it "is the plaintiff's burden to establish the court's personal jurisdiction over a defendant." Doe v. Unocal, 248 F.3d 915, 922 (9th Cir. 2001) (citing Cubbage v. Merchent, 744 F.2d 665, 667 (9th Cir. 1984), cert. denied 470 U.S. 1005 (1985)). The plaintiff needs to make a prima facie showing of jurisdictional facts to withstand a motion to dismiss. Id. That is, the plaintiff need only demonstrate facts that if true, would support jurisdiction over the defendant. Id. Although the plaintiff cannot "simply rest on the bare allegations of the complaint," uncontroverted allegations contained in the complaint must be taken as true. Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004). Furthermore, conflicts between the parties contained in affidavits must be resolved in the plaintiff's favor. Id.

A district court has personal jurisdiction over a defendant only if a statute authorizes jurisdiction and the assertion of jurisdiction does not offend due process. Unocal, 248 F.3d at 922. "Where . . . there is no applicable federal statute governing personal jurisdiction, the district court applies the law of the state in which the district court sits." Yahoo! Inc., v. La Ligue Contre Le Racisme Et L'Antisemitisme, 433 F.3d 1199, 1205 (9th Cir. 2006); see also Fed.R.Civ.P. 4(k)(1)(a). Because California's long-arm jurisdictional statute is coextensive with federal due-process requirements, the jurisdictional analyses under state and federal law are the same. Yahoo!, Inc., 433 F.3d at 1205; see Cal. Civ. Proc. Code § 410.10.

Absent traditional bases for personal jurisdiction (i.e. physical presence, domicile, and consent), the Due Process Clause requires that a nonresident defendant have certain minimum contacts with the forum state such that the exercise of personal jurisdiction does not offend traditional notions of fair play and substantial justice. Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). Unless a defendant's contacts with a forum are so substantial, continuous, and systematic that the defendant can be deemed to be "present" in that forum for all purposes, a forum may exercise only "specific" jurisdiction--that is, jurisdiction based on the relationship between the defendant's forum contacts and the plaintiff's claim. See Helicopteros Nacionales de Colombia S.A. v. Hall, 466 U.S. 408 (1984).

Specific jurisdiction exists where: (1) the defendant purposefully availed himself of the privilege of conducting activities in the forum; (2) the claim arises out of the defendant's forum related activities; and (3) the exercise of jurisdiction comport with fair play and substantial justice, i.e., it is reasonable. See Bancroft & Masters, Inc. v. Augusta Nat'l Inc., 223 F.3d 1082, 1086 (9th Cir. 2000) (citing Cybershell, Inc. v. Cybershell, Inc., 130 F.3d 414, 417 (9th Cir. 1997)). Plaintiff bears the burden of satisfying the first two prongs of the test. Schwarzenegger, 374 F.3d at 802. If plaintiff succeeds ...


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