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Wine Bottle Recycling, LLC v. Niagara Systems LLC

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA


March 18, 2013

WINE BOTTLE RECYCLING, LLC,
PLAINTIFF,
v.
NIAGARA SYSTEMS LLC; SOUTH SHORE SYSTEMS, LLC; S.A. LANGMACK COMPANY; J. CHRIS LANGMACK; CLARK LANGMACK; GEORGE STREKAL; AND RICHARD J. STARK,
DEFENDANTS.

ORDER GRANTING DEFENDANTS' MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM AND GRANTING IN PART AND DISMISSING IN PART DEFENDANTS' MOTION TO DISMISS FOR LACK OF JURISDICTION

I.INTRODUCTION

Now before the Court are the above-captioned Defendants' 21 motions to dismiss Plaintiff Wine Bottle Recycling LLC's 22 ("Plaintiff") First Amended Complaint for failure to state a claim 23 and lack of personal jurisdiction. ECF Nos. 10 ("FAC"), 12 24 ("12(b)(2) MTD"), 18 ("12(b)(6) MTD"). The motions are fully 25 briefed.*fn1 They are also suitable for resolution without oral 26 argument. Civ. L.R. 7-1(b). For the reasons explained below, the 2 Court GRANTS Defendant Niagara System LLC's ("NSL") motion to 3 dismiss for failure to state a claim and GRANTS in part and DENIES 4 in part the remaining Defendants' motion to dismiss for lack of 5 personal jurisdiction.*fn2 The Court also GRANTS Plaintiff's request 6 for jurisdictional discovery. Plaintiff has leave to amend the FAC 7 to the extent provided below. 8 9

II.BACKGROUND

Plaintiff is a Sonoma, California-based company that provides United States District Court For the Northern District of California "renewed wine bottle and delabeling services for the California 12 winery industry." FAC ¶ 1. Defendants manufacture, sell, 13 distribute, and promote bottle-washing machines. Id. 14

Defendant NSL, an Ohio company, contracted with Plaintiff to 15 supply a bottle-washing machine, as described below. Defendants 16 South Shore Systems LLC ("South Shore") and S.A. Langmack Company 17 (so named in the FAC but now called Niagara Custom Built 18 Manufacturing Company ("NCB")) (collectively the "Corporate 19 Defendants") are Ohio companies that worked with NSL in some 20 capacity that is unclear from the facts currently before the Court. 21

The "Individual Defendants" in this matter are J. Chris Langmack, 2 Clark Langmack, George Strekal, and Richard J. Stark, all alleged 3 to be officers or directors of the Corporate Defendants. All of 4 the Individual Defendants reside in Ohio and have no connections to 5 California except through the corporate activity discussed below. 6 J. Chris Langmack Decl ¶¶ 1-7; Stark Decl. ¶¶ 1-8; ECF No. 15 7 (Clark Langmack Decl.) ¶¶ 1-8; ECF No. 17 (Strekal Decl.) ¶¶ 1-8. 8

After Plaintiff contacted NSL to order a bottle-washing 9 machine, NSL provided Plaintiff with specifications and a price 10 quotation on February 3, 2010. ECF No. 10 Ex. A (Proposal for Wine Bottle Renew ("Proposal")). The Proposal stated that the Niagara 12 Bottle Washer Model 200 ("Niagara Model 200" or the "machine") had 13 a "capacity of 200 bottles per minute" and that it would "wash and 14 rinse these bottles and remove the paper or foil label residue" in 15 a five-stage process, which included no drying step. Proposal at 16

1. The Proposal mentions a "drying oven" but otherwise makes no 17 references to any sort of drying apparatus or operation. See id. 18 at 2. 19

On March 3, 2010, Plaintiff contracted with NSL to purchase 20 the Niagara Model 200. Id. ¶ 18. Defendants stated that the 21 machine would be delivered "no later than July 30, 2010," 22 apparently in accordance with the Proposal's stated delivery window 23 of 120 to 150 days. Id. ¶¶ 1, 22; Proposal at 4. Shortly 24 thereafter, on May 3, 2010, Defendant J. Chris Langmack told 25

Plaintiff that the Niagara Model 200 could not remove labels 26 without the purchase of additional equipment not included in the 27 Proposal, even though Defendants apparently told Plaintiff at some 28 earlier date that it could. Id. ¶ 21.

On or about July 17, 2010, Plaintiff learned that Defendants 2 "were not abiding by the agreed schedule of design, manufacture, 3 and installation" of the bottle-washing system and that Defendants 4 "had not even begun the design of the system," even though 5 Plaintiff had already made preparations to commence bottle-washing 6 operations in anticipation of the arrival of the bottle-washing 7 system. Id. ¶ 22. Defendants Chris and Clark Langmack told 8 Plaintiff on or about October 22, 2010 that Defendants were 9 "working overtime to complete the machine" and offered a variety of 10 excuses, though production had apparently stopped by that date.

Id. ¶ 33. 12

The Niagara Model 200 was installed in Plaintiff's Sonoma 13 facility "[b]eginning in or around January 2011," shortly after 14 which it "broke down, failed, or was inoperable on a daily basis." 15

Id. ¶ 47. It did not, as the Proposal stated, clean 200 bottles 16 per minute, and on or about March 17, 2011, Defendant Stark told 17 Plaintiff that Defendants could "get the speed of the system up, 18 but not where they had said it would be." Id. ¶ 19. Other 19 mechanical problems abounded, creating frustration and expense for 20 Plaintiff. See id. In response to these problems, Defendants told 21 Plaintiff that they would repair the system, but despite 22 Defendants' efforts, the defects continued and worsened. Id. ¶¶ 23 47-48, 52-54. Further, Plaintiff complains that the Niagara Model 24 200 did not include a blow dryer, claiming that Defendants promised 25 it would and insisting that the Proposal included "clear reference" 26 to one. Id. ¶ 20. Even so, Defendant J. Chris Langmack apparently 27 told Plaintiff on or about March 18, 2011 that Defendants "had 28 never made a machine for the beverage industry with a dryer." Id.

From these facts, Plaintiff begins with what seem to be 2 obvious claims based on its allegations: breach of warranties and 3 negligent design. Plaintiff goes further, however, alleging tort 4 claims in fraud and misrepresentation on the theory that Defendants 5 essentially lied about their plans and capabilities, as well as the 6 Niagara Model 200's ability to remove labels and dry bottles, 7 throughout their relationship with Plaintiff.

Accordingly, 8 Plaintiff asserts seven causes of action against Defendants: (1) 9 intentional misrepresentation; (2) fraud in concealment; (3) 10 negligent misrepresentation; (4) negligence in design manufacture and installation of a product; (5) breach of implied warranties of 12 merchantability and fitness for intended use; (6) negligent 13 interference with a contractual relationship; and (7) intentional 14 interference with prospective advantage. Plaintiff has since 15 conceded its "negligent interference" claim. Defendants now move 16 to dismiss Plaintiff's FAC, arguing that Plaintiff fails to state 17 claims for negligent misrepresentation and intentional interference 18 with prospective economic advantage against Defendant NSL, and that 19 the Court lacks personal jurisdiction over the other Defendants. 20 21

III. DISCUSSION

A. Defendants' 12(b)(2) Motion

NSL, the only named defendant with whom Plaintiff formed a 24 contract, does not dispute that the Court has jurisdiction over it. 25 However, Defendants move to dismiss Plaintiff's FAC as to South 26 Shore, NCB, and the Individual Defendants, arguing that the Court 27 lacks personal jurisdiction over those parties. 12(b)(2) MTD at 2. 28 Plaintiff makes numerous arguments, discussed below, as to why the Court has jurisdiction over Defendants other than NSL. See 2 12(b)(2) Opp'n at 8-14. None are convincing. 3

1. Legal Standard for Jurisdiction

Under Rule 12(b)(2) of the Federal Rules of Civil Procedure, 5 defendants may move to dismiss for lack of personal jurisdiction. 6 The Court may consider evidence presented in affidavits and 7 declarations determining personal jurisdiction. Doe v. Unocal 8 Corp., 248 F.3d 915, 922 (9th Cir. 2001). Plaintiff bears the 9 burden of showing that the Court has personal jurisdiction over 10 Defendants. See Pebble Beach Co. v. Caddy, 453 F.3d 1151, 1154 (9th Cir. 2006). "[T]his demonstration requires that the plaintiff 12 make only a prima facie showing of jurisdictional facts to 13 withstand the motion to dismiss." Id. (quotations omitted). 14

"[T]he court resolves all disputed facts in favor of the plaintiff 15 . . . ." Id. (quotations omitted). "The plaintiff cannot simply 16 rest on the bare allegations of its complaint, but uncontroverted 17 allegations in the complaint must be taken as true." Mavrix Photo, 18 Inc. v. Brand Techs., Inc., 647 F.3d 1218, 1223 (9th Cir. 2011) 19 (quotations omitted). Since California's long-arm statute is 20 coextensive with federal due process requirements, Cal. Civ. Proc. 21 Code § 410.10, the personal jurisdiction analysis under state and 22 federal law are the same. 23

2. General Jurisdiction

General jurisdiction applies where a defendant's activities in 25 the state are "substantial" or "continuous and systematic," even if 26 the cause of action is unrelated to those activities. Data Disc, 27 Inc. v. Sys. Techs. Assocs., Inc., 557 F.2d 1280, 1287 (9th Cir. 28 1977) (internal quotations omitted).

For general jurisdiction to exist over a nonresident defendant . . . , the defendant must engage in "continuous and systematic general business contacts," . . . that "approximate physical presence" in the forum state . . . . This is an exacting standard, as it should be, because a finding of general jurisdiction permits a defendant to be haled into court in the forum state to answer for any of its activities anywhere in the world.

Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 801 (9th 8 Cir. 2004) (citations omitted). This is a high standard: the Ninth 9 Circuit has regularly declined to find general jurisdiction even 10 where the contacts were quite extensive. See, e.g., Amoco Egypt Oil Co. v. Leonis Navigation Co., 1 F.3d 848, 851 n.3 (9th Cir. 12 1993) (citing cases). "Factors to be taken into consideration are 13 whether the defendant makes sales, solicits or engages in business 14 in the state, serves the state's markets, designates an agent for 15 service of process, holds a license, or is incorporated there." 16

Bancroft & Masters, Inc. v. Augusta Nat'l, Inc., 223 F.3d 1082, 17 1086 (9th Cir. 2000). 18

Plaintiff argues that there are seven bases for exercising 19 general jurisdiction over NCB: (1) NCB's use of a website link that 20 captures site visitors' names for marketing purposes; (2) its use 21 of a California-based web-hosting provider; (3) the fact that 22 California is a major wine production and bottle-recycling state; 23 (4) Defendant J. Chris Langmack's possession of two YouTube (a 24 California-based company) accounts that he uses to demonstrate 25 bottle-washing machines; (5) a corporate registration for a 26 different company listing Defendant J. Chris Langmack's Ohio 27 address as the address for process; (6) a failed negotiation with 28 Plaintiff to set up a California distributorship; and (7) alleged sale of a product to a California winery. 2

Plaintiff claims that, in the aggregate, these allegations 3 support a finding of substantial contacts in California such that 4 the Court could lawfully exercise jurisdiction over Niagara Custom 5

Built. The Court finds otherwise. 6

Plaintiff's arguments about NCB's website, web-hosting 7 provider, and YouTube accounts, points (1), (2), and (4), are 8 contrary to established law because Plaintiff did not show that any 9 of these activities were targeted specifically at California 10 residents. See, e.g., DFSB Kollective Co. Ltd. v. Bourne, No. C 11--1046 PJH, 2012 WL 4051128, at *8 (N.D. Cal. Sept. 13, 2012) 12 (citing Mavrix, 647 F.3d at 1229); American Auto. Ass'n, Inc. v. 13 Darba Enter., Inc., No. C 09--00510 SI, 2009 WL 1066506, at *4 (N.D. 14 Cal. Apr. 21, 2009). Passive web properties not specifically 15 directed into California are insufficient to establish personal 16 jurisdiction over a defendant. See id. 17

Under point (3), the fact that Defendants market products that 18 are most useful in California is irrelevant. Plaintiff has to show 19 that NCB or South Shore actually directed activities into 20 California to such a degree that the Court is justified in 21 exercising general jurisdiction over those Defendants. Plaintiff 22 fails to do so. 23

Per point (5), Plaintiff states that the Court may properly 24 exercise jurisdiction because NCB registered a corporation, 25 "Corrillion of California," with the California Secretary of State, 26 with Defendant J. Chris Langmack serving as the registered agent 27 for service at an address in Ohio. 12(b)(2) Opp'n at 9. Plaintiff 28 does not explain which state's jurisdiction the corporation was organized under, what it did, or whether it is still active. Nor 2 does it offer any other factors that would justify the exercise of 3 jurisdiction based on an old corporate registration for a non-4 Defendant. Plaintiff's allegations are insufficient. 5

Regarding point (6), Plaintiff alleges that a failed 6 negotiation between NCB and Plaintiff demonstrates NCB had an 7 intent to be a presence in the California market. This is not 8 enough to show that the Court has general jurisdiction over NCB, 9 especially since Plaintiff itself apparently initiated these 10 discussions.

As to point (7), NCB's alleged "history of sales of its 12 products in the forum (Ferrara Winery)," Plaintiff does not explain 13 how, when, or by whom those sales were made. This bare allegation 14 is not a basis for jurisdiction. 15

Accordingly, the Court finds that Plaintiff has failed to show 16 sufficient bases for exercising general jurisdiction over NCB. 17

3. Specific Jurisdiction

Where general jurisdiction is inappropriate, a court may still 19 exercise specific personal jurisdiction depending on "the nature 20 and quality of the defendant's contacts in relation to the cause of 21 action." Data Disc, 557 F.2d at 1287. The Ninth Circuit applies a 22 three-prong test when analyzing a claim of specific jurisdiction: 23

(1) The non-resident defendant must purposefully 24 direct his activities or consummate some transaction with the forum or resident thereof; or perform some 25 act by which he purposefully avails himself of the privilege of conducting activities in the forum, 26 thereby invoking the benefits and protections of its laws; 27

(2) the claim must be one which arises out of or 28 relates to the defendant's forum-related activities; and 1

(3) the exercise of jurisdiction must comport with 2 fair play and substantial justice, i.e. it must be reasonable. 3 4

Schwarzenegger, 374 F.3d at 802. The plaintiff bears the burden of 5 satisfying the first two prongs, and if he or she fails to satisfy 6 either, specific jurisdiction is not established. Id. If the 7 plaintiff satisfies these prongs, the burden shifts to the 8 defendant "to present a compelling case" that the exercise of 9 jurisdiction would not be reasonable. Burger King Corp. v. 10 Rudzewicz, 471 U.S. 462, 476--78 (1985).

Plaintiff first argues that NCB and South Shore have met the 12 first prong of Schwarzenegger's specific jurisdiction test, which 13 itself includes two separate tests: the "purposeful direction" test 14 used in tort matters, and the "purposeful availment" test for 15 contract issues. See Yahoo! Inc. v. La Ligue Contre Racisme et 16 L'Antisemitisme, 433 F.3d 1199, 1206 (9th Cir. 2006) (discussing 17 the use of the two different standards) (citing Schwarzenegger, 374 18 F.3d at 802-05). 19

a. Purposeful Direction

The Ninth Circuit applies the following three-part test to 21 evaluate specific jurisdiction in tort cases: "the defendant 22 allegedly must have (1) committed an intentional act, (2) expressly 23 aimed at the forum state, (3) causing harm that the defendant knows 24 is likely to be suffered in the forum state." Id. The Ninth 25

Circuit calls this a "purposeful direction" analysis, 26 distinguishing it from the "purposeful availment" analysis in 27 contract cases. See id. When considering the first prong, 28

"something more than mere foreseeability" of an effect in the forum state is necessary. Schwarzenegger, 374 F.3d at 805 (internal 2 citation and quotation omitted). 3

Plaintiff alleges that NCB "long availed itself of personal 4 jurisdiction in California by intentional acts done to promote 5 products that had utility to a market almost exclusively in 6 California." 12(b)(2) Opp'n at 12. This is insufficient to show 7 purposeful direction. The market for NCB's products does not 8 matter under this prong, and in any event, Plaintiff contacted NCB 9 to ask NCB to do business in California -- not the other way 10 around.

Plaintiff further argues that "[i]f the design and manufacture 12 and installation of the [Niagara Model 200] was deficient, [and] if 13 the representations made by [Defendants] were false (as later 14 admitted by at least one [Individual Defendant]), then [Defendants] 15 would have known that [Plaintiff] would likely suffer the injury in 16 California." 12(b)(2) Opp'n at 12. This argument is far too 17 attenuated to meet the Ninth Circuit's standard for purposeful 18 direction: Plaintiff has failed to explain how their chain of 19 reasoning actually shows intention or express aiming on Defendants' 20 part. 21

The Court accordingly finds that Plaintiff has failed to show 22 purposeful direction as to its tort claims against Defendants, such 23 that it has failed to meet the standard for exercising specific 24 jurisdiction. 25

b. Purposeful Availment

As for purposeful availment, the contract standard for the 27 first prong of the specific jurisdiction test, the Ninth Circuit 28 asks the Court to consider whether a defendant "'purposefully avails itself of the privilege of conducting activities' or 2 'consummate[s][a] transaction' in the forum, focusing on activities 3 such as delivering goods or executing a contract." Yahoo, 433 F.3d 4 at 1206 (quoting Schwarzenegger, 374 F.3d at 802). 5

Plaintiff first claims that NCB and South Shore functioned as 6 a single entity with NSL, and since NSL actually formed a contract 7 in California, NCB and South Shore should be held to have 8 "purposefully availed" themselves of jurisdiction as well. See 9 12(b)(2) Opp'n at 13. In support of this contention, Plaintiff 10 states, " "[t]he inclusion of South Shore and [NCB's] entity titles in e-mails, reports, .pdf drawings sent to [Plaintiff] is 12 indicative that the two entities were interchangeable." Id. 13

Plaintiff's arguments are merely conclusory, and they do not prove 14 that NCB, South Shore, or NSL were interchangeable. To do so 15 Plaintiff must provide factual support for its arguments, not 16 vague, unsupported assertions. 17

Plaintiff also argues that "South Shore played a major role in 18 performing and administering the contract," explaining that South 19 Shore "provided the engineering and design services" for the 20 bottle-washing system in California, sending numerous employees to 21 the site. Id. (citing Suppl. Stephens Decl. ¶ 8).

The evidence 22

Plaintiff cites to support these claims, however, states in a 23 vaguer and more limited fashion that South Shore communicated with 24 Plaintiff about the project "on many occasions," that South Shore 25 employees visited Plaintiff's California production facility "at 26 least three times," and that on a separate occasion, Defendant 27 Stark (allegedly an employee of both South Shore and NCB) told 28 Plaintiff that "defendants" were responsible for delayed delivery of the Niagara Model 200 because they "put priority on other 2 customers' projects." Suppl. Stephens Decl. ¶ 8.*fn3

Plaintiff also 3 includes emails alleged to be from Defendant Stark, discussing 4 shipments of parts for the Niagara Model 200 from South Shore and 5 information about when the machine would be ready, though the 6 latter email includes an NSL signature line. Id. Ex. B. 7

The Court finds that these facts indicate that South Shore was 8 directly involved in designing and delivering the Niagara Model 200 9 to Plaintiff, thereby "avail[ing] itself of the privilege of 10 conducting activities" in California. Yahoo!, 433 F.3d at 1206 (quoting Schwarzenegger, 374 F.3d at 802). 12

c. Remaining Factors as to South Shore

The Court therefore proceeds to the remaining two steps of the 14 Ninth Circuit's specific jurisdiction analysis as to South Shore: 15

(2) whether Plaintiff's claim arose out of or relates to the 16 defendant's forum-related activities, and (3) whether the exercise 17 of jurisdiction comports with fair play and substantial justice. 18

Schwarzenegger, 374 F.3d at 802. "To determine whether a claim 19 arises out of forum-related activities, courts apply a 'but for' 20 test," under which the Court is to consider whether Plaintiff's 21 claim would have arisen but for South Shore's contacts with 2 California. Unocal, 248 F.3d at 924. 3

At this point, Plaintiff's arguments fail. In discussing this 4 prong, Plaintiff's opposition brief shifts from discussing South 5 Shore specifically and simply claims that all Defendants 6 misrepresented facts regarding caustic chemicals to be used in the 7 Niagara Model 200; defects in the machine's design, manufacturing, 8 and installation; and facts about the machine's specifications, 9 speed, and the time it would take to be built. 12(b)(2) Opp'n at 10 14.

Plaintiff never specifies how any of these conclusory statements relate to South Shore's activity, or how "but for" South 12 Shore's involvement Plaintiff's claims would not have arisen. Even 13 resolving all disputes in Plaintiff's favor, the Court simply 14 cannot evaluate Plaintiff's argue on this point because there are 15 no facts to consider, only bare legal conclusions. Plaintiff did 16 provide evidence about South Shore's shipments of parts to 17

California, but this does not suffice to show that South Shore was 18 responsible for any of the negligent design or other torts alleged 19 in the FAC. 20

Without facts regarding the true extent of South Shore's 21 involvement in NSL's undisputed relationship with Plaintiff, it is 22 not clear whether Plaintiff's causes of action would have arisen 23 absent South Shore's involvement. None of the facts Plaintiff 24 cites in the FAC or its Declarations suggest that South Shore was a 25 necessary part of the arrangement, e.g., that NSL would not have 26 supplied the allegedly defective machine or made the statements it 27 did without South Shore's involvement. 28

The Court therefore finds that Plaintiff has failed to show 2 that "but for" South Shore's involvement, its claims would never 3 have arisen. Since Plaintiff fails to make a satisfactory showing 4 as to this prong, the Court need not discuss whether exercising 5 jurisdiction over South Shore would be reasonable. 6

Because Plaintiff fails to meet the first prong of the 7 specific jurisdiction test as to NCB and the second prong as to 8 South Shore, the Court finds that it does not have specific 9 jurisdiction over those Defendants. 10

4. Jurisdiction Over the Individual Defendants

Plaintiff further claims that the Individual Defendants are 12 not protected by the fiduciary shield doctrine, which protects 13 corporate agents and employees from liability for the corporation's 14 torts, because they "personally directed or participated in the 15 tortious conduct at issue here." 12(b)(2) Opp'n at 16-17 (citing 16 U.S. Liab. Ins. Co. v. Haldinger Hayes, Inc., 1 Cal. 3d 586, 595 17 (Cal. 1970)). "A corporate officer or director is, in general, 18 personally liable for all torts which he authorizes or directs or 19 in which he participates, notwithstanding that he acted as an agent 20 of the corporation and not on his own behalf." Coastal Abstract 21 Serv., Inc. v. First Am. Title Ins. Co., 173 F.3d 725, 734 (9th 22 Cir. 1999). 23

Nothing Plaintiff asserts here has merit as to any Individual 24 Defendant. Plaintiff notes that the Individual Defendants were 25 present at certain discussions or operated machinery during a 26 demonstration, but Plaintiff never moves beyond conclusory 27 allegations that the Individual Defendants' behavior was tortious. 28

No Individual Defendant has sufficient contacts with California, no emails or statements at issue were made in California, and 2 Plaintiff never alleges with any specificity that any Individual 3 Defendant, except J. Chris Langmack, made a fraudulent or otherwise 4 actionable statement. With regard to J. Chris Langmack, Plaintiff 5 never addresses the issue of whether he purposefully availed 6 himself of or purposefully directed his actions toward California. 7

The same is true of the other Defendants. Without such facts the 8 Court cannot find that it has jurisdiction over the Individual 9 Defendants. 10

The conduct Plaintiff describes does not suggest that the Individual Defendants were "guiding spirit[s]" or "active directing 12 hand[s]" in the alleged torts such that the Court could justify 13 exercising jurisdiction over them. See Matsunoki Grp. v. 14 Timberwork Oregon LLC, No. C 08--04078 CW, 2009 WL 1033818, at *4 15 (N.D. Cal. Apr. 16, 2009) (citing Int'l Mfg. Co. v. Landon, Inc., 16 336 F.3d 723, 728 (9th Cir. 1964)). The Court accordingly finds 17 that Plaintiff has failed to show that the Court has jurisdiction 18 over any Individual Defendant. 19

5. Agency/Alter Ego

Plaintiff asserts that the Court may also take jurisdiction 21 over South Shore and NCB because they are agents or alter egos of 22 NSL. Generally, the existence of a parent-subsidiary relationship 23 "is not sufficient to establish personal jurisdiction over the 24 parent on the basis of the subsidiaries' minimum contacts with the 25 forum." Unocal, 248 F.3d at 925. However, "if the parent and 26 subsidiary are not really separate entities [i.e., alter egos], or 27 one acts as an agent of the other, the local subsidiary's contacts 28 with the forum may be imputed to the foreign parent corporation." 2

Id. at 926 (quotations omitted). 3

To satisfy the alter ego exception to the general rule, "the 4 plaintiff must make out a prima facie case (1) that there is such 5 unity of interest and ownership that the separate personalities [of 6 the two entities] no longer exist and (2) that failure to disregard 7 [their separate identities] would result in fraud or injustice." 8

Id. (quotations omitted). 9

The agency exception applies where "the subsidiary functions as the parent corporation's representative in that it performs 10 services that are sufficiently important to the foreign corporation 12 that if it did not have a representative to perform them, the 13 corporation's own officials would undertake to perform 14 substantially similar services." Id. at 928 (quotations omitted).

Plaintiff does not clarify whether it is asserting that the Court has jurisdiction over South Shore and NCB under the agency or 17 alter ego exception, but its arguments fail under either theory.

See 12(b)(2) Opp'n at 15-16. Plaintiff cites factors courts have 19 considered in alter ego cases, but never cites facts to which those 20 factors might apply. See id. Instead, Plaintiff makes a 21 conclusory assertion that NCB and South Shore used NSL as a shell. 22

See 12(b)(2) Opp'n at 15-16. This is plainly insufficient to 23 satisfy the alter ego exception. See Doe, 248 F.3d at 925. 24

Similarly, Plaintiff points to no facts suggesting that the agency 25 exception applies. Plaintiff's arguments about agency and alter 26 ego therefore fail.

6. Jurisdictional Discovery

The district court has discretion to allow a plaintiff to 3 conduct jurisdictional discovery. Wells Fargo & Co. v. Wells Fargo 4 Exp. Co., 556 F.2d 406, 430 n.24 (9th Cir. 1977). Requests for 5 such discovery should ordinarily be granted "where pertinent facts 6 bearing on the question of jurisdiction are controverted . . . or 7 where a more satisfactory showing of the facts is necessary." Id. 8

(quotations omitted). However, a district court need not permit 9 discovery "[w]here a plaintiff's claim of personal jurisdiction 10 appears to be both attenuated and based on bare allegations in the face of specific denials made by the defendants . . . ." Terracom 12 v. Valley Nat. Bank, 49 F.3d 555, 562 (9th Cir. 1995). 13

Defendants argue that Plaintiff's request for jurisdictional 14 discovery should be denied because Plaintiff relies on an 15 inapposite case to support its request; Plaintiff has failed to 16 establish facts likely to be obtained through discovery that might 17 assist its claims; and despite having had its previous, improper 18 motion for jurisdictional discovery denied and having been 19 instructed on how to proceed in this matter, Plaintiff fails to 20 provide a discrete itemization of discovery requests. Reply ISO 21 Rule 12(b)(2) MTD at 12-13. 22

Plaintiff do not respond to these arguments, but they note in 23 their opposition brief that the Court cannot fairly determine 24 whether or not NCB or South Shore are alter egos or agents of NSL 25

-- over which the Court indisputably has jurisdiction -- without 26 additional discovery into matters like undercapitalization or 27 commingling of funds. See 12(b)(2) Opp'n at 16. Defendants 28 rightly point out that Plaintiff fails to substantiate its agency or alter ego theories, but Defendants do not explicitly deny 2 Plaintiff's allegations, and the core facts as to the Defendants' 3 interrelationships are controverted. See Terracom, 49 F.3d at 562 4 (requests for jurisdictional discovery should be granted if 5 pertinent jurisdictional facts are controverted). Plaintiff 6 deserves the opportunity to show facts pertinent to the agency and 7 alter ego exceptions. 8

However, it is entirely unclear whether Plaintiff is also 9 asking for jurisdictional discovery as to the Individual Defendants 10 when it states, "Plaintiff here seeks to establish that the fiduciary shield doctrine does not apply to the individual 12 defendants by establishing the agency / alter ego exception." 13

12(b)(2) Opp'n at 24. The fiduciary shield doctrine is relevant 14 only to the Individual Defendants, and the agency and alter ego 15 exceptions only to the Corporate Defendants. Since none of the 16 evidence Plaintiff appears to request -- facts about whether NCB, 17

NSL, and South Shore were in a joint venture, or whether those 18 corporations were undercapitalized or commingling funds, for 19 example -- are relevant to the Individual Defendants, the Court 20 will not grant jurisdictional discovery as to them. 21

Therefore the Court finds jurisdictional discovery appropriate 22 as to Plaintiff's alter ego claims against South Shore and NCB. 23

7. Conclusion as to Defendants' 12(b)(2) Motion

Defendants' 12(b)(2) Motion is DENIED as to NCB and South 25

Shore and GRANTED as to the Individual Defendants. Plaintiff has 26 leave to conduct limited jurisdictional discovery as to whether NCB 27 or South Shore are agents or alter egos of NSL. Plaintiff may not 28 reargue its bases for jurisdiction or seek discovery as to any other Defendant. 2

B. Defendants' 12(b)(6) Motion

Because Plaintiff concedes its claim for negligent 4 interference with contractual relationship, 12(b)(2) Opp'n at 5, 5 the two claims now in dispute as to Defendants' 12(b)(6) motion are 6 for negligent misrepresentation and intentional interference with a 7 prospective economic relationship. Since the Court found that it 8 lacks jurisdiction over all Defendants except NSL, the following 9 discussion pertains only to that Defendant. 10

1. Rule 12(b)(6)

A motion to dismiss under Federal Rule of Civil Procedure 12 12(b)(6) "tests the legal sufficiency of a claim." Navarro v. 13

Block, 250 F.3d 729, 732 (9th Cir. 2001). "Dismissal can be based 14 on the lack of a cognizable legal theory or the absence of 15 sufficient facts alleged under a cognizable legal theory." 16

Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 17 1988). "When there are well-pleaded factual allegations, a court 18 should assume their veracity and then determine whether they 19 plausibly give rise to an entitlement to relief." Ashcroft v. 20

Iqbal, 556 U.S. 662, 679 (2009). However, "the tenet that a court 21 must accept as true all of the allegations contained in a complaint 22 is inapplicable to legal conclusions. Threadbare recitals of the 23 elements of a cause of action, supported by mere conclusory 24 statements, do not suffice." Id. (citing Bell Atl. Corp. v. 25

Twombly, 550 U.S. 544, 555 (2007)). The court's review is 26 generally "limited to the complaint, materials incorporated into 27 the complaint by reference, and matters of which the court may take 28 judicial notice." Metzler Inv. GMBH v. Corinthian Colls., Inc., 540 F.3d 1049, 1061 (9th Cir. 2008) (citing Tellabs, Inc. v. Makor 2 Issues & Rights, Ltd., 551 U.S. 308, 322 (2007)). 3

2. Rule 9(b)

Claims sounding in fraud are subject to the heightened 5 pleading requirements of Federal Rule of Civil Procedure 9(b), 6 which requires that a plaintiff alleging fraud "must state with 7 particularity the circumstances constituting fraud." See Kearns v. 8 Ford Motor Co., 567 F. 3d 1120, 1124 (9th Cir. 2009). "To satisfy 9

Rule 9(b), a pleading must identify the who, what, when, where, and 10 how of the misconduct charged, as well as what is false or misleading about [the purportedly fraudulent] statement, and why it 12 is false." United States ex rel Cafasso v. Gen. Dynamics C4 Sys., 13 Inc., 637 F.3d 1047, 1055 (9th Cir. 2011) (internal quotation marks 14 and citations omitted). 15

3. Negligent Misrepresentation

The elements of negligent misrepresentation are: (1) 17 misrepresentation of a past or existing material fact, (2) without 18 reasonable grounds for believing it to be true, (3) with intent to 19 induce another's reliance on the misrepresentation, (4) ignorance 20 of the truth and justifiable reliance on the misrepresentation by 21 the party to whom it was directed, and (5) resulting damage. Glenn 22

K. Jackson Inc. v. Roe, 273 F.3d 1192, 1200 n.2 (9th Cir. 2001). 23

Negligent misrepresentation claims are subject to Rule 9(b). See, 24 e.g., Dietz v. Comcast Corp., No. C 06-06352 WHA, 2006 WL 3782902, 25 at *6 (N.D. Cal. Dec. 21, 2006) (citing cases). 26

Plaintiff alleges that Defendants misrepresented that they had 27 the experience to construct and furnish a wine-bottle-washing 28 machine, that they were competent and had the experience and expertise to produce such a machine that could remove labels from 2 bottles, and that the machine would process 200 bottles per minute. 3

FAC ¶¶ 38-40. In its opposition to Defendants' 12(b)(2) motion, 4

Plaintiff appears to add that Defendants made various 5 misrepresentations about the amount of caustic chemical necessary 6 to operate the Niagara Model 200 -- an assertion not made in the 7 FAC. See 12(b)(2) Opp'n at 17-18. Plaintiff then asserts that 8 Defendants made these representations without knowing if they were 9 true or false, and that Plaintiff relied on those representations 10 and was harmed by them. Id. ¶¶ 41-43.

Plaintiff's pleadings, without more, are formulaic recitations 12 of a negligent misrepresentation claim's elements. Twombly, 550 13 U.S. at 554-55. Further, they are not specific enough to satisfy 14 Rule 9(b): Plaintiff did not specify "the who, what, when, where, 15 and how" of the fraud. Cafasso, 637 F.3d at 1055. To do so 16 Plaintiff must actually cite statements, provide their speakers and 17 dates, and explain why they were false. See id. None of 18

Plaintiff's facts in the FAC or declarations included in the 19 opposition briefs demonstrate the requisite particularity. In 20 addition to all of these pleading deficiencies, Plaintiff's newly 21 added assertions about Defendants' statements regarding the 22 necessary amount of caustic chemical were improperly raised, and 23 the Court cannot now consider them without converting this Rule 24

12(b)(6) motion to dismiss to a Rule 56 motion for summary 25 judgment. 26

The Court finds that Plaintiff has failed to plead a claim for 27 negligent misrepresentation under Rule 9(b). Accordingly, 28

Plaintiff's negligent misrepresentation claim is DISMISSED. The

Court gives Plaintiff leave to amend this claim to correct the 2 noted deficiencies. 3

4. Intentional Interference with Prospective Economic

Advantage

Defendants argue that Plaintiff fails to plead the tort of 6 intentional interference with prospective economic advantage, 7 because Plaintiff's pleading as to this claim "is so bereft of 8 factual content that the Court could not draw any inferences 9 whatsoever about [NSL's] conduct in relation to [Plaintiff's] prospective advantages with third parties." 12(b)(6) MTD at 7. 10

To prevail on this claim, a plaintiff must show the following 12 elements: (1) an economic relationship between the plaintiff and 13 some third party, with the probability of future economic benefit 14 to the plaintiff; (2) the defendant's knowledge of the 15 relationship; (3) intentional acts on the part of the defendant 16 designed to disrupt the relationship; (4) actual disruption of the 17 relationship; and (5) economic harm to the plaintiff proximately 18 caused by the acts of the defendant. Korea Supply Co. v. Lockheed 19 Martin Corp., 29 Cal. 4th 1134, 1153 (Cal. Ct. App. 2003) (internal 20 citation and quotation marks omitted). 21

Plaintiff fails to plead even the first element here. Nowhere 22 in the FAC or the opposition brief does Plaintiff clarify what 23 actual, non-speculative economic relationship between Plaintiff and 24 a third party was harmed. Vague gestures toward "members of the 25

California wine industry" are insufficient. See FAC ¶ 61. Nor 26 does Plaintiff ever indicate whether or how Defendants knew of such 27 a relationship, how Defendants' acts could possibly be taken to be 28 intentionally geared toward interfering with Plaintiff's economic advantage, that the relationship was disrupted, or that Plaintiff 2 was even harmed. In their opposition, Plaintiff's only support for 3 their claim is that Defendants "cite no authority for their 4 argument that the third party must be specifically named" in this 5 cause of action because they claim that no such authority exists. 6

12(b)(6) Opp'n at 4-5. This is false. "[I]t is well settled in 7

California that a plaintiff must establish an existing economic 8 relationship or a protected expectancy with a third person, not 9 merely a hope of future transactions. Such an existing 10 relationship must be pleaded to state a claim for intentional interference with prospective economic advantage." Halton Co. v. 12 Streivor, Inc., No. C 10--00655 WHA, 2010 WL 2077203 (N.D. Cal., May 13 21, 2010). 14

Even if Plaintiff were able to plead an existing relationship 15 or expectancy, the Court does not find it plausible that Plaintiff 16 could show intent. Amendment would be futile and prejudicial. 17

Plaintiff's claim for intentional interference with prospective 18 economic advantage is DISMISSED WITH PREJUDICE. 19 20

IV. CONCLUSION

For the reasons explained above, Defendants South Shore 22 Systems LLC, S.A. Langmack Company (a.k.a. "Niagara Custom Built 23 Manufacturing Company"), J. Chris Langmack, Clark Langmack, George 24 Strekal, and Richard J. Stark's motion to dismiss Plaintiff Wine 25 Bottle Recycling LLC's First Amended Complaint for lack of personal 26 jurisdiction is GRANTED as to all Defendants except South Shore 27 Systems LLC and Niagara Custom Built Manufacturing Company, as to 28 whom Defendants' motion is DENIED without prejudice.

Plaintiff's request for jurisdictional discovery is GRANTED as 2 to facts relevant to whether the agency or alter ego exceptions 3 apply to Defendants South Shore Systems LLC or Niagara Custom Built 4 Manufacturing Company. Plaintiff must complete discovery within 5 ninety (90) days of this Order's Signature Date. Once that 6 discovery is complete, Defendants may again move to dismiss 7 pursuant to Rule 12(b)(2). Plaintiff may not reargue jurisdiction 8 over any defendants except South Shore Systems LLC and Niagara 9 Custom Built Manufacturing Company. 10

Plaintiff's negligent misrepresentation claim is DISMISSED with leave to amend. Plaintiff's intentional interference with 12 prospective economic advantage claim is DISMISSED WITH PREJUDICE. 13

Plaintiff has thirty (30) days from this Order's signature 14 date to file its amended complaint, or the Court may dismiss the 15 deficient portions of the FAC with prejudice. Plaintiff's 16 amendments are to be strictly tailored to address the deficiencies 17 described in this Order. All additional amendments require leave 18 of the Court. Plaintiff is on notice that everything filed before 19 the Court is subject to Rule 11 of the Federal Rules of Civil 20 Procedure. Plaintiff is instructed to review the Court's Local 21 Rules with regard to filing documents and formatting briefs. 22 23

IT IS SO ORDERED. 24

UNITED STATES DISTRICT JUDGE


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