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Nimbus Data Systems, Inc. v. Modus LLC

United States District Court, N.D. California, San Francisco Division

December 29, 2014

NIMBUS DATA SYSTEMS, INC., a California Corporation Plaintiff,
v.
MODUS LLC and DOES 1-10, Defendants.

ORDER GRANTING IN PART DEFENDANT'S MOTION TO DISMISS Re: Dkt. No. 6

NATHANAEL M. COUSINS, Magistrate Judge.

The merits of this case concern an alleged breach of contract. Defendant Modus LLC moves to dismiss the case under Federal Rule of Civil Procedure 12(b)(2) and (3) for lack of personal jurisdiction and improper venue. Nimbus opposes the motion, arguing that this Court has specific jurisdiction over Modus. In the alternative, Nimbus requests that the Court permit discovery for the purpose of demonstrating general jurisdiction over Modus.

The Court finds that Nimbus has failed to meet its burden to make a prima facie showing of specific personal jurisdiction over Modus. Additionally, because Nimbus has not provided a sufficient basis to justify its request to conduct jurisdictional discovery, the Court DENIES that request. Because the Court finds that it does not have personal jurisdiction over Modus, and that it is in the interest of justice to transfer this case to a district where personal jurisdiction can be exercised, the Court TRANSFERS this case to the United States District Court for the District of Columbia.

I. BACKGROUND

Nimbus brings this suit against Modus on the theories of breach of contract and common counts to recover amounts due for computer equipment delivered to Modus pursuant to a May 2012 purchase order. Dkt. No. 1-1 at 5-8. Nimbus alleges that while it delivered products worth $120, 570 to Modus, Modus did not pay $94, 375 of that amount. Id. at 6.

In support of its motion to dismiss, Modus submitted a declaration stating that it is a limited liability corporation organized under the laws of the State of Maryland and having a principal place of business in Washington, D.C. Dkt. No. 6-1 ¶ 2. Modus is a wholly owned subsidiary of Modus eDiscovery Inc., a corporation organized under the laws of South Carolina and having a principal place of business in Washington, D.C. Id. In addition to its Washington, D.C. office, Modus has offices in West Virginia, Arkansas, Missouri, Wisconsin, Arizona, and Georgia. Id. ¶ 4.

Modus does not have offices or a mailing address in California. Id. ¶ 4. Modus is not registered or licensed to do business in California and does not have a registered agent for service of process in California. Id. ¶ 5. Modus does not own real property in California, and does not maintain any bank accounts in California. Id. ¶ 6. Modus does not lease or own servers, network equipment, or other internet hardware in California. Id. ¶ 7. Modus currently has approximately 118 employees, one of whom is in California but was not involved in the Nimbus agreement. Id. ¶¶ 3, 9. Historically, 1.8% of Modus's clients are located in California. Id. ¶ 8.

Modus has not engaged in marketing or advertising campaigns directed to California. Id. ¶ 10. Modus has engaged in only one advertising campaign, which could not be traced to any new leads or sales. Id. Modus maintains an informational website which describes Modus's services, provides background and educational information on its services, and provides contact information for Modus's offices. Id. ¶ 11. Modus does not provide its services through the website, and the website does not have any interactive components. Id. The website is not targeted to California residents. Id.

With respect to the contract at issue here, the declaration submitted by Modus states that the documentation of the agreement is limited to two pages: a quotation sent from Nimbus to Modus on May 23, 2012, and a purchase order sent from Modus to Nimbus, dated May 24, 2012. Dkt. No. 6-2 at 3. Both documents were signed by an employee of Modus, working in Phoenix, Arizona. Dkt. No. 6-1 ¶ 12; Dkt. No. 6-2 at 2-3.

The computer equipment was delivered to Modus's data center in Reston, Virginia. Dkt. No. 6-1 ¶ 13. The computer equipment featured two controllers. Id. ¶ 12. According to Modus, Nimbus assured Modus that the controllers "could be used in a redundant fail-over' configuration." Id. Despite this assurance, Modus's technical staff could not get the two controllers to operate in the "fail-over" configuration. Id. ¶ 13.

Throughout 2012 and into 2013, neither Nimbus nor Modus was able to successfully resolve the problems with the controllers. Id. ¶ 14. In September 2013, Nimbus refused to continue attempts to repair the controller until Modus paid the remaining balance for the computer equipment, and Modus refused to pay the remaining balance until the computer equipment was fully functional. Id.

According to a declaration submitted by Nimbus, Modus made the first contact to inquire about purchasing from Nimbus. Dkt. No. 11-1 ¶ 5. The contact consisted of an email inquiry dated April 11, 2012, stating in full "please contact us ASAP." Dkt. No. 11-2. The sales quotation for Modus was created by a Nimbus employee in California. Dkt. No. 11-1 ¶ 6. The purchase order from Modus was also processed in California. Id. Modus's purchase included hardware systems that were manufactured in California and shipped from California to Modus. Id. ¶ 7.

In addition, Modus's purchase included software. Id. ¶ 8. A Software License Agreement was "provided" to Modus when it received the products from Nimbus. Id. The Software License Agreement gives the purchaser of the hardware product the license to use the software resident on that product on certain terms and conditions. Dkt. No. 11-3 at 1. The Software License Agreement provides that it "is entered into as of the date Nimbus ships the Licensed System to Customer" and that "BY POWERING ON THE LICENSED SYSTEM, YOU ARE ENTERING INTO THIS AGREEMENT." Id. The Software License Agreement states that it "is governed by the laws of the State of California, without regard to the conflict of laws provisions thereof." Id. ¶ 11. The Software License Agreement further states that "[a]ny dispute, claim or controversy arising out of or relating to this Agreement... shall be determined by final and binding arbitration in San Francisco, California." Id. ¶ 13.

Modus's purchase also included a contract for technical support for three years, titled the Product Support Agreement which was "also delivered" to Modus. Dkt. No. 11-1 ¶ 9. This Product Support Agreement provides that it "is entered into as of the date Nimbus ships the Supported System to Customer" and that "BY POWERING ON THE SUPPORTED SYSTEM, YOU ARE ENTERING INTO THIS AGREEMENT." Dkt. No. 11-4 at 1. The Product Support Agreement contains the same choice-of-law and arbitration provisions as those of the Software License ...


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