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Wine Bottle Recycling, LLC v. Niagara Systems LLC

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. ...


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