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Vix Swimwear, Inc. v. Sbc Clothing, Inc.

United States District Court, S.D. California

June 25, 2015

ViX SWIMWEAR, INC., Plaintiff,
v.
SBC CLOTHING, INC., Defendant.

ORDER FOLLOWING ORDER TO SHOW CAUSE; GRANTING PLAINTIFF'S RENEWED MOTION FOR DEFAULT JUDGMENT

GONZALO P. CURIEL, District Judge.

Before the Court is Plaintiff's response to order to show cause filed by the Court on June 8, 2015 regarding why the matter should not be dismissed for lack subject matter jurisdiction and personal jurisdiction. In its response, Plaintiff also renews its motion for default judgment. Based on the reasoning below, the Court concludes it has subject matter jurisdiction over the case and personal jurisdiction over Defendant and GRANTS Plaintiff's renewed motion for default judgment.

Background

On May 1, 2014, Plaintiff ViX Swimwear, Inc. ("Plaintiff" or "ViX") filed a complaint against Defendant SBC Clothing, Inc. ("Defendant" or "SBC") based on SBC's failure to pay on a contract. (Dkt. No. 1.) An amended complaint was filed on October 3, 2014 alleging causes of action for breach of contract, account stated, reasonable value of services, open book account, and sought declaratory relief. (Dkt. No. 3.) On January 30, 2015, Plaintiff filed a motion for default judgment against Defendant seeking judgment in the amount of $39, 243.42 plus interest of $2, 762.75, and a declaration of rights and obligations under the contract. (Dkt. No. 10.) On February 19, 2015, the Court denied Plaintiff's motion for default judgment for Plaintiff's failure to properly serve the defendants and directed the Clerk of Court to strike the Clerk's entry of default. (Dkt. No. 11.) On March 27, 2015, Plaintiff filed a certificate of service regarding service of the complaint and summons on Defendant pursuant to the Federal Rules of Civil Procedure and the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents ("Hague Convention"). (Dkt. No. 12.) On April 3, 2015, Plaintiff filed a request for entry of default. (Dkt. No. 14.) Default was entered on April 6, 2015. (Dkt. No. 15.) On May 6, 2015, Plaintiff filed another motion for default judgment. (Dkt. No. 16.) On June 8, 2015, the Court denied Plaintiff's motion for default judgment and set an order to show cause hearing why the case should not be dismissed for lack of subject matter jurisdiction and lack of personal jurisdiction. (Dkt. No. 18.) On June 17, 2015, Plaintiff filed a response and asks the Court to grant default judgment which the Court construes as a renewed motion for default judgment. (Dkt. Nos. 19, 20.) Defendant has not yet appeared in the case.

Factual Background

According to the amended complaint, Plaintiff manufactures and sells women's swimwear. (Dkt. No. 3, FAC ¶ 3.) Defendant is a distributor of clothing in Canada. (Id. ¶ 4.) Around October 2012, Plaintiff and Defendant entered into a written contract where Plaintiff appointed Defendant to be an authorized distributor of Plaintiff's products within Canada. (Id. ¶ 6; Ex. 1.) The agreement was effective from October 10, 2012 and was to expire on its own terms and without notice on April 1, 2013 unless terminated earlier by mutual agreement or by Plaintiff with 10 days written notice. (Id. ¶ 7.) "At the expiration of the term the Parties may only extend the term by execution of a new written agreement." (Id. ¶ 13.) On April 18, 2014, Plaintiff terminated the contract and agreed to honor all pending orders. (Id. ¶ 8.) Defendant demanded Plaintiff to continue performing the contract for future orders. (Id. ¶ 9.) Plaintiff asserts that Defendant breached the contract by failing to pay for services and materials rendered to it under the contract. (Id. ¶ 16.)

Discussion

A. Subject Matter Jurisdiction

Plaintiff asserts that the Court has jurisdiction over this case based on diversity jurisdiction. (Dkt. No. 3, FAC ¶ 1.) A district court has jurisdiction over a case if the suit is between citizens of a state and citizens of a foreign state, and the amount in controversy exceeds $75, 000, exclusive of interest and costs. 28 U.S.C. § 1332(a)(2).

In the Court's prior order, it concluded that based on the allegations in the amended complaint, the parties are diverse since Plaintiff is a corporation incorporated in California, and SBC is a foreign alien corporation organized under the laws of Canada. (Dkt. No. 18 at 4.) However, the Court concluded it did not have subject matter jurisdiction because on the face of the amended complaint[1], the allegations were not sufficient to establish that the amount in controversy exceeded $75, 000, and it appeared legally certain that the amount in dispute was less than $75, 000. (Dkt. No. 18 at 5-6.) The amended complaint only sought an amount of $39, 000 as to the amount owed under the contract based on SBC's failure to pay for merchandise and no amounts were alleged as to the declaratory relief Plaintiff sought.

In a complaint seeking injunctive or declaratory relief, the amount in controversy is measured by the value of the "object of the litigation." Hunt v. Wash. State Apple Adver. Com'n, 432 U.S. 333, 347 (1977) (plaintiff seeking declaratory relief that statue was unconstitutional and value of the right is measured by the losses that will follow from the statute's enforcement). "The amount in controversy is not what might have been recovered in money, but rather the value of the right to be protected or the extent of the injury to be prevented." Jackson v. Am. Bar Ass'n, 538 F.2d 829, 831 (9th Cir. 1976). In determining the amount in controversy in such cases, the Ninth Circuit employs the "either viewpoint rule, " which permits the "object of the litigation" to be valued either from the plaintiff's viewpoint or the defendant's viewpoint. In re Ford Motor Co./Citibank, 264 F.3d 952, 959 (9th Cir. 2001) ("Under the either viewpoint' rule, the test for determining the amount in controversy is the pecuniary result to either party which the judgment would directly produce"). "In other words, where the value of a plaintiff's potential recovery... is below the jurisdictional amount, but the potential cost to the defendant of complying with the injunction exceeds that amount, it is the latter that represents the amount in controversy for jurisdictional purposes." Id . In applying the "either viewpoint" rule, courts look at the jurisdictional amount to the Plaintiff if the contract is enforceable or look at the jurisdictional amount if the contract is not enforceable. Int'l Gateway Comm'n, Inc. v. Comm'n Telesystems Int'l, Inc., 922 F.Supp. 122, 125 (N.D. Ill. 1996).

In its response, Plaintiff asserts that its action for declaratory relief seeks to prevent injury it would suffer if it were subject to claims by SBC or was required to continue performing while SBC continued to default on payment under the Agreement. The amended complaint alleged that "SBC has demanded ViX continue performing the Contract for future orders." (Dkt. No. 3, FAC 9.) According to emails submitted by ViX, SBC sought 12 months compensation as a result of ViX's termination, without cause, of the Agreement after almost 15 years. (Dkt. No. 20-1 at 2.) In looking at ViX's invoices to SBC from March 14, 2013 to April 18, 2014 (the date ViX terminated the Agreement), the invoices total $44, 087.46. (Dkt. No. 16-3, Ex. 4.) This amount equates to the injury to Plaintiff to be prevented in seeking declaratory relief.

In addition, the amended complaint seeks damages in the amount of $39, 000 which is the amount owed by Defendant under the contract for unpaid merchandise. (Dkt. No. 3, FAC ¶¶ 17, 21, 25, 30.) Based on these two numbers, the amount in controversy meets the $75, 000 amount in controversy. Therefore, the Court concludes it has subject matter jurisdiction over the case.

B. Personal Jurisdiction

While personal jurisdiction is a defense that may be asserted or waived by a party, when a court is addressing a motion for default judgment, "it may dismiss an action sua sponte for lack of personal jurisdiction." In re Tuli, 172 F.3d 707, 712 (9th Cir. 1999). Where there is no federal statute governing personal jurisdiction, courts look at the law of the state in which the court sits. Mavrix Photo, Inc. v. Brand Techs., Inc., 647 F.3d 1218, 1223 (9th Cir. 2011). Therefore, California state law applies in this case. Panavision Int'l v. Toeppen, 141 F.3d 1316, 1320 (9th Cir. 1998).

California courts "may exercise jurisdiction on any basis not inconsistent with the Constitution of this state or of the United States." Cal. Civ. Proc. Code § 410.10. Accordingly, as long as the requirements of the Due Process Clause of the United States Constitution are satisfied, this Court's exercise of personal jurisdiction over Defendant is proper. See Panavision, 141 F.3d at 1320. California's long-arm jurisdictional statute is "coextensive with federal due process requirements." Mavrix Photo, Inc., 647 F.3d at 1223.

The Due Process Clause requires that nonresident defendants have "minimum contact" with the forum state "such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice." Int'l Shoe Co. v. State of Wash., Office of Unemployment Comp. & Placement, 326 U.S. 310, 316 (1945). Personal jurisdiction can be either "general" or "specific." See Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 415-16 (1984).

When determining general jurisdiction of a foreign corporation, courts look at whether the defendant's affiliations with the State are "so continuous and systematic' as to render [it] essentially at home in the forum State." Daimler AG v. Bauman, 134 S.Ct. 746, 761 (2014) (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S.Ct. 2846, 2851 (2011)). "The standard is met only by continuous corporate operations within a state [that are] thought so substantial and of such a nature as to justify suit against [the defendant] on causes of action arising from dealings entirely distinct from those activities.'" King v. Am. Family Mut. Ins. Co., 632 F.3d 570, 579 (9th Cir. 2011) General jurisdiction "requires that the defendant's contacts be of the sort that approximate physical presence." Bancroft & Masters, Inc. v. Augusta Nat'l, Inc., 223 F.3d 1082, 1086 (9th Cir. 2000).

Plaintiff alleges that the Court has general jurisdiction over SBC because it has had continuous and systematic business for over fifteen years. For fifteen years, SBC has entered into contracts and transaction in San Diego where it was responsible for shipping and paying all appropriate taxes for ViX's merchandise. (Dkt. No. 3, FAC, Ex. 1, General Terms ¶ 1) ("Distributor is responsible for shipping, duties, and taxes of the sample line.")

ViX also cites generally to the Agreement and alleges that SBC made payments to ViX for its merchandise in U.S. dollars to ViX's California accounts, SBC was required to provide notice of its pricing of ViX merchandise and return any confidential information to ViX in San Diego, and SBC agreed to indemnify ViX for claims that arise from SBC's conduct including claims made against ViX in San Diego, CA. However, these provisions do not support Plaintiff's allegations as they are all based on implication. The provisions in the Agreement make no reference to San Diego or California. Moreover, there is no forum selection clause and no mention of where or how these provisions were to be carried out. Therefore, Plaintiff's citation to the Agreement does not support its argument.

ViX also provides a page from SBC's website which states that it also owns and operates warehousing facilities in the United States. (Dkt. No. 19-2, Hubbard Decl., Ex. 2.) However, Defendant's contact must be with the forum state, not contacts with the United States. See Walden v. Fiore, 134 S.Ct. 1115, 1122 (2014); see XL Specialty Ins. Co. v. Melexis GMBH, No. 07-1018(DRD), 2007 WL 3026683, at *3 (N.J. Oct. 16, 2007) (rejecting plaintiff's arguments that defendant parent corporation's operation of various subsidiaries in the United States and the defendant's application for United States patents established general personal jurisdiction over the defendant because "[t]he plaintiff must show that the defendant maintains contacts with the forum state, not simply with the United States.")

The only facts alleged and supported by the Agreement and an email from SBC, is that for fifteen years, SBC entered into contracts and transactions with ViX in San Diego where it was responsible for shipping and paying all appropriate taxes for ViX's merchandise. (Dkt. No. 3, FAC, Ex. 1, General Terms ¶ 1.) There is no showing of any physical presence by Defendant in California. Paying for shipping and paying taxes do not establish that SBC is "essentially at home" in California as these contacts are not akin to physical presence in California. See Bankcroft & Masters, Inc., 223 F.3d at 1086.

A defendant who is not subject to general jurisdiction may still be subject to specific jurisdiction, based on claims related to its activities or contacts with the forum state. Walden v. Riore, 134 S.Ct. 1115, 1121 (2014). The inquiry whether a forum State may assert specific jurisdiction over a nonresident defendant "focuses on the relationship among the defendant, the forum, and the litigation.'" Id. at 1121. The fact that a nonresident enters the forum state to execute or perform a contract with a resident does not per se establish "minimum contacts." Gray & Co. v. Firstenberg Machinery Co., Inc., 913 F.2d 758, 760 (9th Cir. 1990) (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 478 (1985)). Courts must also evaluate "prior negotiations and contemplated future consequences, along with the terms of the contract and the parties' actual course of dealing" to determine whether the "defendant purposefully established minimum contacts within the forum." Burger King Corp., 471 U.S. at 479. The focus is on the nonresident defendant's conduct with the forum state, "that is, whether ...


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