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Marian Tankersley, et al v. John R. Lynch

May 9, 2011

MARIAN TANKERSLEY, ET AL.,
PLAINTIFFS,
v.
JOHN R. LYNCH, ET AL.,
DEFENDANTS.



The opinion of the court was delivered by: Howard R. Lloyd United States Magistrate Judge

** E-filed May 9, 2011 **

NOT FOR CITATION

United States District Court For the Northern District of California

ORDER GRANTING DEFENDANTS' MOTION TO DISMISS PLAINTIFFS' 13 COMPLAINT

[Re: Docket No. 14]

BACKGROUND

In April 2007, California residents Marian Tankersley ("Tankersley") and Richard Diehl ("Diehl") (collectively, "Plaintiffs") purchased a franchise and three exclusive territories from 19 Collision on Wheels International, LLC ("CoW"), a Michigan-based seller of mobile auto body 20 repair system franchises. Docket No. 1, Ex. A ("Compl.") ¶¶ 1, 2, 8. Their decision to do so was 21 based in part on information found in CoW's Uniform Franchise Offering Circular ("UFOC"), 22 which contains certain disclosures to potential franchisees and which CoW provided to Plaintiffs the 23 month before. Id. ¶¶ 7, 19, 25. 24

Plaintiffs allege that the UFOC upon which they relied contained misstatements and 25 omissions of material fact and that they have been harmed as a result. Id. ¶¶ 18, 21, 24, 26. They 26 filed suit against Michigan residents John Lynch ("Lynch"), Gregory Longe ("Longe"), Gregory Mancina ("Mancina"), Louis Maio ("Maio"), and Richard Bass ("Bass") (collectively, 28 "Defendants"), all of whom are officers or employees of CoW, for violations of Michigan franchise 2 law. Id. ¶¶ 2-6.

4 complaint on the ground that this Court does have not have personal jurisdiction over Defendants.

Docket No. 1 ("Notice of Removal"); Docket No. 14 ("MTD"). Plaintiffs opposed Defendants' 6 motion. Docket No. 20 ("Opp'n"). Pursuant to Civil Local Rule 7-1(b), the Court finds the matter 7 suitable for determination without oral argument, and the May 10, 2011 hearing is vacated.*fn1

10 the burden of showing that jurisdiction is proper." Toyz, Inc. v. Wireless Toyz, Inc., No. C09-05091 JF (HRL), 2010 WL 334475, at *6 (Jan. 25, 2010) (citing Decker Coal Co. v. Commonwealth Edison Co., 805 F.2d 834, 839 (9th Cir. 1986)). "In the context of a motion to dismiss based upon 13 pleadings and affidavits, the plaintiff may meet this burden by making a prima facie showing of 14 personal jurisdiction." Id. (citing Metropolitan Life Ins. v. Neaves, 912 F.2d 1062, 1064 n. 1 (9th 15 1977)). "In determining whether the plaintiff has made a prima facie showing, documents submitted 17 by the plaintiff are construed in the light most favorable to the plaintiff and all doubts are resolved 18 in the plaintiff's favor." Id. (citing Metropolitan Life Ins., 912 F.2d at 1064 n.1). 19

20 resident defendant if the defendant has "minimum contacts" with California such that maintenance 21 of the suit "does not offend traditional notions of fair play and substantial justice." Data Disc, 557 22 F.2d at 1287 (citing International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). "If the 23 nonresident defendant's contacts within [California] are 'substantial' or 'continuous and 24 systematic,'" the defendant is subject to general jurisdiction in California even if the cause of action 25 is not related to the defendant's activities within the state. Data Disc, 557 F.2d at 1287. "If the 26 defendant's activities within the state are not so pervasive as to subject it to general jurisdiction, it 27

Defendants removed this action from California state court and moved to dismiss Plaintiffs'

LEGAL STANDARD

"When a nonresident defendant raises a challenge to personal jurisdiction, the plaintiff bears

Cir. 1990); Data Disc, Inc. v. Systems Technology Associates, Inc., 557 F.2d 1280, 1285 (9th Cir. 16

A federal district court sitting in California may exercise personal jurisdiction over a non-

may be subject to specific jurisdiction." Toyz, 2010 WL 334475, at *6. "The Court may subject a 2 defendant to specific jurisdiction if the defendant's contacts with the forum satisfy the following 3 three-prong test: 4

(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 invoking 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.

Id. (quoting Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 802 (9th Cir. 2004)).

DISCUSSION

A. General Jurisdiction 13

The Court will first determine if general jurisdiction may be exercised over Defendants.

Plaintiffs argue that it may for the following reasons: 15

* CoW registered its UFOC with the California Department of Corporations

* CoW sold franchises to California residents (including Plaintiffs)

* The franchise agreements CoW entered into with California residents included a California-specific addendum

* CoW provided ongoing support services to its California franchisees

Docket No. 21 ("Tankersley Decl.") ¶ 14; Docket No. 22 ("Napell Decl.") ¶ 15. 21

While these facts might subject CoW to this Court's general jurisdiction, they certainly do not subject the individual Defendants to it. Each of Defendants are Michigan residents who appear 23 to lack "substantial" or "continuous and systematic" ties to California. See Docket Nos. 15-19. As 24 discussed below, Plaintiffs' allegations that Defendants participated in the sale of Plaintiffs' 25 franchise are important with respect to ...


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