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Aqua Connect, Inc., A Nevada Corporation v. Code Rebel

September 26, 2011

AQUA CONNECT, INC., A NEVADA CORPORATION, PLAINTIFF,
v.
CODE REBEL, LLC, A HAWAII LIMITED LIABILITY COMPANY; ARBEN KRYEZIU, AN INDIVIDUAL; VLADIMIR BICKOV, AN INDIVIDUAL; AND DOES 1 THROUGH 300, INCLUSIVE, DEFENDANTS.



The opinion of the court was delivered by: Honorable Ronald S.W. Lew Senior, U.S. District Court Judge

ORDER re: Defendants' Arben Kryeziu and Code Rebel, LLC's Motion to Dismiss Complaint for Lack of Personal Jurisdiction [FRCP 12(b)(2)], for Failure to State a Claim [FRCP 12(b)(6)], or in the alternative, for a More Definite Statement [FRCP 12(e)] [5]

On August 24, 2011, Defendants Arben Kryeziu ("Kryeziu") and Code Rebel, LLC's ("Code Rebel") Motion to Dismiss Complaint for Lack of Personal Jurisdiction [FRCP 12(b)(2)], for Failure to State a Claim [FRCP 12(b)(6)], or in the alternative, for a More Definite Statement [FRCP 12(e)] [5] came on for regular calendar before the Court.

The Court having reviewed all papers submitted pertaining to this Motion and having considered all arguments presented to the Court NOW FINDS AND RULES AS FOLLOWS:

The Court hereby DENIES IN PART AND GRANTS IN PART Defendants Kreyziu and Code Rebel's (hereinafter collectively referred to as "Movants") Motion.

I. Background

Defendant Code Rebel is a Hawaii limited liability company maintained and located in the State of Hawaii. Defendant Code Rebel lists various customers on its website that have California businesses and headquarters. Defendant Kryeziu is a resident of Hawaii and a managing member of Defendant Code Rebel. Defendant Vladimir Bickov ("Bickov"), who is not a party to this Motion, is a resident of Australia and a Citizen of Ukraine. Defendant Bickov has not been served with a Complaint, but he consented to the removal of this present action to Federal court.

Plaintiff/Non-Movant Aqua Connect, Inc. ("Plaintiff") is a software company. Plaintiff sells and markets software known as Aqua Connect Terminal Server ("ACTS"). Plaintiff is a Nevada corporation with its principal place of business in Los Angeles County, California.

Plaintiff's claims arise out of the alleged reverse engineering of ACTS and the subsequent sale of infringing software by the three Defendants. On July 20, 2011, Movants, Defendants Code Rebel and Kryeziu, filed the present Motion [5].

II. Legal Standard

A. Motion to Dismiss for Lack of Personal Jurisdiction Pursuant to Federal Rule of Civil Procedure 12(b)(2)

Although the plaintiff has the burden of proving personal jurisdiction, to defeat a motion to dismiss, the plaintiff need only make a prima facie showing of jurisdictional facts. In re Pintlar Corp., 133 F.3d 1141, 1144 (9th Cir. 1998)(citing Farmers Ins. Exch. v. Portage La Prairie Mut. Ins. Co., 907 F.2d 911, 912 (9th Cir. 1990)). The plaintiff need only allege facts which, if true, would support a finding of jurisdiction. Ballard v. Savage, 65 F.3d 1495, 1498 (9th Cir. 1995)(citing Data Disc v. Sys. Tech. Assoc., 557 F.2d 1280, 1285 (9th Cir. 1977).

The exercise of personal jurisdiction over a nonresident defendant requires the presence of two factors. The forum state's laws must provide a basis for exercising personal jurisdiction, and the assertion of personal jurisdiction must comport with due process. Hirsch v. Blue Cross, Blue Shield, 800 F.2d 1474, 1477 (9th Cir. 1986). The California long-arm statute permits the exercise of jurisdiction "on any basis not inconsistent with the Constitution . . . of the United States." Cal. Civ. Proc. Code § 410.10. This statute renders the state and federal limits of jurisdiction coextensive. Roth v. Garcia Marquez, 942 F.2d 617, 620 (9th Cir. 1991). Thus, only a due process analysis is required.

Due process requires that a defendant have "certain minimum contacts with [the forum] such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice." Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). The defendant's contacts must be "such that the [defendant] should reasonably anticipate being haled into court there." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980). Depending upon the nature and scope of the defendant's contacts with the forum, jurisdiction may be general or specific to the cause of action. Roth, 942 F.2d at 620 (citing Data Disc, 557 F.2d at 1287).

In the area of personal jurisdiction and the Internet, the Ninth Circuit has adopted the test set forth in Zippo Manufacturing Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119 (W.D. Pa. 1997). See Gator.Com Corp. v. L.L. Bean, Inc., 341 F.3d 1072, 1079-80 (9th Cir. 2003)(citing the "sliding scale" test set forth in Zippo as a test "that both our own and other circuits have applied to Internet-based companies."). In Zippo, the court categorized Internet use and the exercise of personal jurisdiction along the following spectrum:

At one end of the spectrum are situations where a defendant clearly does business over the Internet. If the defendant enters into contracts with residents of a foreign jurisdiction that involve the knowing and repeated transmission of computer files over the Internet, personal jurisdiction is proper. At the opposite end are situations where a defendant has simply posted information on an Internet [website] which is accessible to users in foreign jurisdictions. A passive [website] that does little more than make information available to those who are interested in it is not grounds for the exercise personal jurisdiction. The middle ground is occupied by interactive [website] where a user can exchange information with the host computer. In these cases, the exercise of jurisdiction is determined by examining the level of interactivity and commercial nature of the exchange of information that occurs on the [website].

Zippo, 952 F. Supp. at 1124 (citations omitted).

B. Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(6)

In a motion to dismiss brought under Federal Rule of Civil Procedure 12(b)(6), the Court must presume all non-conclusory, factual allegations of the complaint to be true and draw all reasonable inferences in favor of the non-moving party. Klarfeld v. United States, 944 F.2d 583, 585 (9th Cir. 1991). After accepting as true all non-conclusory statements and drawing all reasonable inferences in favor of the non-moving party, the Court must determine whether the complaint alleges a plausible claim for relief. See Ashcroft v. Iqbal, 129 S. Ct. 1937, 1940-41 (2009).

A dismissal can be based on the lack of cognizable legal theory or the lack of sufficient facts alleged under a cognizable legal theory. See Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). However, a party is not required to state the legal basis for his claim, only the facts underlying it. See McCalden v. Cal. Library Ass'n, 955 F.2d 1214, 1223 (9th Cir. 1990).

Additionally, claims of fraud must satisfy not only Rule 12(b)(6), but also the heightened pleading standard of Rule 9(b). In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Fed. R. Civ. P. 9(b).

The heightened pleading standard of Rule 9(b) is designed "to give defendants notice of the particular misconduct which is alleged to constitute the fraud charged so that they can defend against the charge and not just deny that they have done anything wrong." Neubronner v. Milken, 6 F.3d 666, 671 (9th Cir. 1993). In order to meet this standard, the plaintiff must allege the "who, what, where, when, and how" of the fraudulent conduct. Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003). The complaint must "state the time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentation." Edwards v. Marin Park, Inc., 356 F.3d 1058, 1066 (9th Cir. 2004). "The plaintiff must set forth what is false or misleading about a statement, and why it is false." Vess, 317 F.3d at 1106 (quoting Decker v. Glenfed, Inc., 42 F.3d 1541, 1548 (9th Cir. 1994)).

However, "[m]alice, intent, knowledge and other conditions of a person's mind may be alleged generally." Fed. R. Civ. P. 9(b); Walling v. Beverly Enters., 476 F.2d 393, 397 (9th Cir. 1973). Nevertheless, states of mind must still be alleged. Bender v. Southland Corp., 749 F.2d 1205, 1216 (6th Cir. 1984).

C. Motion for a More Definite Statement Pursuant to Federal Rule of Civil Procedure 12(e)

If a pleading to which a responsive pleading is permitted is so vague or ambiguous that a party cannot reasonably be required to frame a responsive pleading, the party may move for a more definite statement before interposing a responsive pleading. Fed. R. Civ. P. 12(e). A Rule 12(e) motion is proper only where the complaint is so indefinite that the defendant cannot ascertain the nature of the claim being asserted. See Famolare, Inc. v. Edison Bros. Stores, Inc., 525 F. Supp. 940, 949 (E.D. Cal. 1981).

Rule 12(e) motions are disfavored and rarely granted. Cellars v. Pac. Coast Packaging, Inc., 189 F.R.D. 575, 578 (N.D. Cal. 1998). A motion for a more definite statement fails where the complaint is specific enough to apprise the moving party of the substance of the claim being ...


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