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Dahon North America, Inc v. Joshua Hon

April 24, 2012

DAHON NORTH AMERICA, INC., PLAINTIFF,
v.
JOSHUA HON, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Hon. Otis D. Wright, II

O

ORDER RE MOTIONS TO DISMISS [54], [55]

Pending before the Court are two concurrently filed motions: (1) Defendant Mobility Holdings, Ltd.'s motion to dismiss Plaintiff Dahon North America's second amended complaint ("SAC") for lack of personal jurisdiction (Dkt. No. 55); and (2) Defendants' motion to dismiss Plaintiff's SAC under Fed. R. Civ. P. 12(b)(6), or alternatively, for a more definite statement under Fed. R. Civ. P. 12(e). (Dkt. No. 54). After careful consideration of the oral arguments and papers filed in support of and in opposition to the instant motions, the Court finds as follows.

I.BACKGROUND

Dr. David T. Hon founded the folding bicycle brand, Dahon. (SAC ¶ 17.) Dahon North America ("DNA") was formed in 1982. (Id. ¶ 18.) That same year, DNA began operating its first Asian subsidiary in Taiwan. (Id. ¶ 24.) Since DNA's inception, Florence Hon, Dr. Hon's wife, served as its director and corporate secretary. (Id. ¶¶ 17 n.2, 26.) Since 1992, Joshua Hon, son of Dr. Hon and Florence, has worked as Vice President of Sales and Marketing for DNA. (Id. ¶ 27.) In that role, he helped oversee and develop sales and marketing strategy for the entire brand and developed DNA's website, www.dahon.com. (Id.)

Around 1996, the assets of the Taiwan subsidiary were transferred to Dahon and Hon Industrial Labs, Ltd., Taiwan ("Dahon Taiwan"). (Id. ¶ 24.) Dr. Hon placed Dahon Taiwan's ownership in Florence's name and appointed her as CEO. (Id. ¶ 26.) In 2010, Joshua and Florence created Mobility Holdings, Ltd. (Id. ¶ 41.) At this time, Joshua and Florence approached Dr. Hon about purchasing Dahon Taiwan and the Dahon brand, but he refused. (Id. ¶ 32.) As a result, Joshua and Florence began exerting increased control over Dahon Taiwan by withholding and diverting product orders. (Id. ¶ 33.)

Around June 2011, Joshua and Florence officially announced Tern, their new company and brand. (Id. ¶¶ 35, 44.) But, neither Joshua nor Florence relinquished their titles or responsibilities from DNA. (Id. ¶ 45.) Mobility owns Stile Products, Inc. which sells Tern bicycles. (Id. ¶¶ 8, 43.) The president of Stile is a former officer of DNA, Steve Boyd. (Id. ¶ 9.)

DNA's allegedly stolen assets include its intellectual property: bicycle-related patents, trademarks, and copyrights. (Id. ¶ 19.) DNA registered the DAHON mark ("Original DAHON mark") for use on bicycles, two BIOLOGIC marks for use on certain bicycle parts, and the ECOLOGIC mark for use on bicycles ("collectively, "Original BIOLOGIC and ECOLOGIC marks"). (Id. ¶¶ 48, 51--52.) On July 8, 2009, Joshua and Florence filed an assignment in the United States Patent and Trademark Office ("USPTO") transferring the Original BIOLOGIC and ECOLOGIC marks from DNA to Dahon Taiwan. (Id. ¶¶ 31, 53.) On February 1, 2011, Florence and Joshua assigned the BIOLOGIC mark from Dahon Taiwan to Mobility. (Id. ¶ 53.) At some point, Joshua registered the domain name and website www.dahon.com in his own name. (Id. ¶ 27.)

Further, DNA claims Boyd used his DNA position to transfer DNA's intellectual property to Defendants and to set up Stile as a direct competitor. (Id. ¶ 43.) DNA also alleges that the employees, assets, funds, bank accounts, and property of Tern all came from DNA. (Id. ¶ 44.)

II.PERSONAL JURISDICTION

The Court first addresses Mobility's motion for lack of personal jurisdiction. When a defendant moves to dismiss for lack of personal jurisdiction under Rule 12(b)(2), the plaintiff bears the burden of demonstrating jurisdiction exists. Love v. Assoc. Newspapers Ltd., 611 F.3d 601, 608 (9th Cir. 2010). Where, as here, the motion is based on written materials rather than an evidentiary hearing, a court's only question is whether the plaintiff's pleadings and affidavits make a prima facie showing of personal jurisdiction. Boschetto v. Hansing, 539 F.3d 1011, 1015 (9th Cir. 2008). A plaintiff cannot "simply rest on the bare allegations of its complaint," but undisputed allegations in the complaint must be taken as true. Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004). Furthermore, "[c]onflicts over statements contained in affidavits must be resolved in [the plaintiff's] favor." Love, 611 F.3d at 608.

District courts have the power to exercise personal jurisdiction to the extent of the law of the state in which they sit. Fed. R. Civ. P. 4(k)(1)(A); Panavision Int'l, L.P. v. Toeppen, 141 F.3d 1316, 1320 (9th Cir. 1988). California's long-arm jurisdictional statute is coextensive with federal due process requirements, so the jurisdictional analysis for a non-resident defendant under state law and federal due process is the same. Cal. Civ. Proc. Code § 410.10; Roth v. Garcia Marquez, 942 F.2d 617, 620 (9th Cir. 1991). For a court to exercise personal jurisdiction over a nonresident defendant, that defendant must have sufficient "minimum contacts" with the forum state so that the exercise of jurisdiction "does not offend traditional notions of fair play and substantial justice." Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). Under the "minimum contacts" analysis, a court may obtain either general jurisdiction or specific jurisdiction over a non-resident defendant. Doe v. Unocal Corp., 248 F.3d 915, 923(9th Cir. 2001). If the defendant's activities are insufficient to subject him to general jurisdiction, then the court looks to the nature and quality of the defendant's contacts in relation to the cause of action to determine jurisdiction. Data Disc, Inc. v. Systems Tech. Assoc. Inc., 557 F.2d 1280, 1287 (9th Cir. 1977).

Mobility argues that DNA cannot establish general jurisdiction because it is a Hong Kong holding company. (Mot. at 7.) DNA concedes that the Court does not have general jurisdiction over Mobility and instead asserts that the Court may exercise specific personal jurisdiction using the Calder effects test. (Opp'n at 5.) Thus, the Court will only analyze specific jurisdiction.

A court may assert specific jurisdiction over a claim for relief that arises out of a defendant's forum-related activities. Rano v. Sipa Press Inc., 987 F.2d 580, 588 (9th Cir. 1993). The analysis for specific jurisdiction is as follows:

(1) the nonresident defendant must purposefully direct his activities or consummate some transaction with the forum or residents 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.

Lake v. Lake, 817 F.2d 1416, 1421 (9th Cir. 1987). The plaintiff bears the burden of satisfying the first two prongs, and if either of these is not satisfied, personal jurisdiction is not established. Schwarzenegger, 374 F.3d at 802.

Mobility contends that DNA cannot demonstrate there is specific jurisdiction over Mobility for several reasons. First, Mobility is simply a Hong Kong holding company with no United States contacts. (Mot. at 9.) Second, the other Defendants' forum-related activities cannot be imputed to Mobility. (Id. at 10--15.)Third, Mobility's ownership of Stile, a California corporation, is insufficient to extend jurisdiction to Mobility. (Id. at 7.)

The Court agrees with these arguments and recognizes the relatively inactive role that Mobility plays as a related entity of the Defendants. But, DNA alleges that Mobility currently holds the converted BIOLOGIC mark, among other assets.*fn1 (SAC ¶ 53.) The Court will analyze whether Mobility's possession of the BIOLOGIC mark subjects it to specific jurisdiction.

A.Purposeful availment or direction

A purposeful availment analysis is used in contract suits whereas a purposeful direction analysis is used in tort suits. Schwarzenegger, 374 F.3d at 802. Here, the appropriate framework is purposeful direction because the cause of action is conversion, a tort. Purposeful direction is evaluated by the effect a foreign act has on the forum state. Id. at 803. Under Calder, theeffects test requires that the defendant have: (1) committed an intentional act; (2) expressly aimed the act at the forum state; and (3) caused harm that the defendant knew was likely to be suffered in the forum state. Id. (citing Calder v. Jones, 465 U.S. 783 (1984)).

1.Intentional act

The first element of the Calder effects test is the commission of an intentional act. An intentional act requires an "intent to perform an actual, physical act in the real world, rather than an intent to accomplish a result of consequence of that action." Brayton Purcell LLP v. Recordon & Recordon, 606 F.3d 1124, 1128 (9th Cir. 2012).

DNA avers that Joshua and Florence fraudulently assigned DNA's intellectual property to Dahon Taiwan. (SAC ¶ 53.) Then they assigned the BIOLOGIC mark from Dahon Taiwan to Mobility. (Id.) DNA argues that Mobility's possession of the BIOLOGIC mark is akin to possession of another's chattel; therefore Mobility committed the intentional act of conversion. (Opp'n at 7.)

Mobility argues the alleged conversion of DNA's intellectual property and other assets (including the BIOLOGIC mark) was committed by others, prior to Mobility's existence. (Mot. at 9.) When Mobility was subsequently formed, instead of being an active participant in the alleged scheme, Mobility contends that it "exhibited only the sort of neutral, non-directed conduct . . . insufficient as a basis for personal jurisdiction" because it merely received the BIOLOGIC mark. (Reply at 3.) And therefore, Mobility did not and could not have performed an intentional act. (Id.)

In Kayne, the court faced a similar question-whether the court had specific jurisdiction over several offshore entities that received, via other defendants' transactions, tangible assets from a corporation facing a potential judgment. Kayne v. Ho, CV 09-6816 CAS (CWx), 2010 U.S. Dist. LEXIS 126325, at *7--8, 16 (C.D. Cal. Nov. 15, 2010). There, following a judgment against Grande Holdings Limited (one of the defendants' various holding companies), the defendants: (1) sold Grande's tangible assets, including commercial real estate; (2) distributed Grande's holdings, moving them to the individual defendants and their other holding companies; and (3) engaged in other transactions designed to transfer Grande's assets for little or no value. (Id. at *8.) The court concluded that these asset transfers, including the act of receiving the assets, constituted intentional acts. (Id. at *16.)

Similarly, Defendants Joshua and Florence executed a series of transactions transferring the BIOLOGIC mark to Mobility. (SAC ¶ 53.) There is no indication that DNA received anything in return for these assets. Though the value of the transferred assets in Kayne eclipses that in this case, the Court nevertheless concludes that Defendants' transfer of the BIOLOGIC mark from DNA to Mobility was an intentional act. Further, the Court finds that Mobility's receipt of the BIOLOGIC mark from Dahon Taiwan was an intentional act. However passively Mobility characterizes its role, this subjects Mobility to the tort of conversion. Schroeder v. Auto Driveaway Co.,11 Cal. 3d 908, 918 (1974) (one in possession of a chattel as bailee or otherwise who, on demand, refuses without proper qualification to surrender it to another entitled to its immediate possession is subject to liability for its conversion).

2.Expressly aimed

The second element of the Calder effects test requires that Mobility's conduct be expressly aimed at the forum. Brayton Purcell, 606 F.3d at 1129. This element is satisfied when a defendant is alleged to have engaged in wrongful conduct targeting a plaintiff who the defendant knows to reside in the forum state. Bancroft & Masters, Inc. v. Augusta Nat'l Inc., 223 F.3d 1082, 1087 (9th. Cir. 2000).

DNA argues Mobility expressly aimed its conduct at California because it now holds a California corporation's fraudulently conveyed intellectual property. (SAC ¶¶ 53, 68.) Mobility argues that California was not the focal point of the harm because this action concerns a Taiwanese company, owned and run by residents of Taiwan, and a Chinese company, run by a resident of China. (Mot. at 18.) Mobility also contends that its conduct, even if the conversion allegation was true, was not expressly aimed at California because Defendants' California sales of any products relating to the stolen intellectual property were insignificant.*fn2 (Id. at 19.)

In Calder, a California entertainer alleged in California state court that two Florida residents wrote a libelous magazine article about her. Calder, 465 U.S. at 784--86 (1984). The Supreme Court found that the California court had jurisdiction because in writing a piece circulated in California, the petitioners expressly aimed their conduct at California and "impugned the professionalism of an entertainer whose television career was centered in California." Id. at 812. Mobility asserts that unlike Calder, Mobility's alleged conversion was not expressly aimed at California because any effect in California was insignificant. The Court disagrees.

Mobility errs by arguing only the secondary effect of Mobility's conversion- that Defendants' sales involving Mobility's converted BIOLOGIC mark were insignificant in California. Mobility neglects the primary effect of its intentional act-that is, Mobility's conversion of the BIOLOGIC mark deprived DNA, a California corporation, of its intellectual property. Although Mobility argues it is a passive holding company and did nothing actively, the Court finds that Mobility's alleged possession of DNA's converted property establishes that Mobility's conduct was expressly aimed towards a California company, and therefore, towards California.

3.Foreseeable harm In order to satisfy the third element of the Calder effects test, DNA must demonstrate that Mobility "caused harm that it knew was likely to be suffered in the forum." Brayton Purcell, 606 F.3d at 1131. The element may be satisfied even if "the bulk of the harm" occurred outside the state. Yahoo! Inc. v. La Ligue Contre Le Racisme, 433 F.3d 1199, 1207 (9th Cir. 2006).

This element is easily met. By receiving and continuing to hold DNA's intellectual property, Mobility deprived DNA of its property and any associated use. This is harm that Mobility knew was likely to be suffered by DNA-and therefore in California.*fn3

Accordingly, the Court finds that the purposeful direction prong for specific jurisdiction has been satisfied.

B.Arises out of or relates to forum related activities

The second prong of the test for specific jurisdiction requires that "the claim asserted in the litigation arises out of the defendant's forum related activities." Panavision, 141 F.3d at 1322. This requires a showing of "but for" causation. Id.

DNA alleges that Mobility is part of a scheme to steal DNA's intellectual property and stash it away in offshore entities. DNA's claim of conversion arises out of Mobility's continued possession of DNA's BIOLOGIC mark. As discussed above, Mobility does not need to have committed the initial act of conversion to be liable. Mobility may be liable for conversion by merely holding on to wrongfully possessed ...


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