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Stemgenex, Inc. v. Balshi

United States District Court, S.D. California

July 27, 2015

STEMGENEX, INC., Plaintiff,
TOM BALSHI, M.D., a Medical Corporation dba TOM BALSHI, M.D., P.A., TOM BALSHI, M.D., an individual and Does 1 through 20, Defendants.


BARRY TED MOSKOWITZ, Chief District Judge.

Defendants filed a motion to dismiss for lack of subject matter and personal jurisdiction. In response to the motion, Plaintiff StemGenex ("Plaintiff" or "StemGenex") filed a request for leave to conduct jurisdictional discovery. For the reasons discussed below, Plaintiff's request is GRANTED.


On March 24, 2015, Plaintiff commenced this action in the Southern District of California. Plaintiff, a California corporation, "conducts stem cell therapy research, actively provides information and education through various media outlets about stem cell therapy and facilitates individual patient-candidates' access to physicians who are trained and qualified to perform the therapy." (Compl. ¶ 14.) Defendant Tom Balshi, M.D. P.A. ("Balshi P.A."), is a professional services corporation incorporated in Florida. (Ex. 1 to Def. RJN.) Defendant Tom Balshi ("Dr. Balshi"), is a doctor living in Florida and the "president, director, and sole shareholder of Balshi P.A." (Balshi Decl. ¶ 4.) Dr. Balshi maintains a website to promote his practice, specializing in stem cell treatment, cosmetic surgery, and dermatology, as well as a website for private-label skin care products. (Def. RJN ¶¶ 3-4.)

In June 2012, Dr. Balshi met Rita Alexander, President of StemGenex, at a medical conference in Marina Del Rey, California, where they discussed the possibility of entering into a contract together. (Balshi Decl. ¶ 16.) On August 30, 2012, on behalf of Balshi P.A., Dr. Balshi executed a two-year contract with Plaintiff. ( Id. at ¶ 20.) The contract provided that Plaintiff would refer patients seeking stem cell therapies to Dr. Balshi, who would then perform stem cell procedures at a predetermined price. (Compl. ¶¶ 24-25.) Plaintiff claims that during their contractual relationship, StemGenex referred numerous patients and disclosed its proprietary information regarding business practices to Dr. Balshi. (Compl. ¶ 28.) It is unclear whether any of these patients originated in California, but under the terms of the contract, all duties and responsibilities assigned to Dr. Balshi were to be performed in Florida. (Balshi Decl. ¶ 21.)

Plaintiff alleges that Dr. Balshi breached the terms of the contract by using proprietary information regarding business practices to divert patients, referred to him by Plaintiff, to a newly created company, Stemedix, Inc. ("Stemedix"). (Compl. ¶¶ 66, 69.) Plaintiff contends that Dr. Balshi essentially is Stemedix, and that Dr. Balshi admitted as much in a phone call with Ms. Alexander.[1] (Alexander Decl. ¶¶ 2-7.) Plaintiff also alleges that Dr. Balshi engaged in trademark infringement by using a name, website address, and website design that are all confusingly similar to StemGenex. (Compl. ¶¶ 56-57.) Plaintiff asserts claims against Defendants for: (1) trademark infringement under the Lanham Act, 15 U.S.C. § 1125(a), and (2) breach of contract.


In Defendants' motion to dismiss for lack of subject matter jurisdiction and personal jurisdiction, Defendants argue that Dr. Balshi "did not form Stemedix, has no interest in Stemedix, and otherwise has no authority or control over Stemedix and its marketing efforts." (Doc. 7-1 at 8.) Therefore, Defendants claim, Plaintiff does not have Article III standing to bring its claims because Plaintiff has not shown that Defendants caused Plaintiff's injuries or how those injuries would be redressed. Defendants further argue that neither Dr. Balshi nor Balshi P.A. has sufficient contacts with California that would subject them to this Court's personal jurisdiction.

In its opposition, Plaintiff does not extensively argue substantive matters but instead moves for leave to conduct limited jurisdictional discovery to resolve pertinent questions of fact and supplement its opposition to Defendants' motion to dismiss. As discussed below, the Court finds that jurisdictional discovery is warranted.

A. Legal Standard for Jurisdictional Discovery

District courts have broad discretion to grant discovery to establish jurisdiction. Laub v. U.S. Dep't of Interior, 342 F.3d 1080, 1093 (9th Cir. 2003); see also Wells Fargo & Co. v. Wells Fargo Express Co., 556 F.2d 406, 430 n. 24 (9th Cir. 1977). Such discovery "should ordinarily be granted where pertinent facts bearing on the question of jurisdiction are controverted or where a more satisfactory showing of the facts is necessary." Butcher's Union Local No. 498 v. SDC Inv., Inc., 788 F.2d 535, 540 (9th Cir. 1986); see also Data Disc, Inc. v. Systems Tech. Assocs., Inc., 557 F.2d 1280, 1285 n. 1 (9th Cir. 1977). "The Court must weigh the prejudice to the complaining party if discovery is denied." Andrews v. Pride Indus., 2015 WL 1014133, at *5 (E.D. Cal. Mar. 6, 2015) (citing Laub, 342 F.3d at 1093). "Prejudice is established if there is a reasonable probability that the outcome would have been different had discovery been allowed." Id . The Ninth Circuit may find an abuse of discretion where a court denies discovery where such discovery " might well demonstrate facts sufficient to constitute a basis for jurisdiction." Rutsky & Co. Ins. v. Bell & Clements Ltd., 328 F.3d 1122, 1135 (9th Cir. 2003).

B. Analysis

Defendants contend that they do not have contacts with California that would support the exercise of general or specific jurisdiction. Significantly, Defendants deny any ownership or control of Stemedix. Although Plaintiff does not currently have sufficient evidence to establish that Dr. Balshi or Balshi P.A. may be held liable for the acts of Stemedix, Plaintiff has shown that discovery may uncover facts supporting jurisdiction over Defendants.

According to Defendants, their websites are not directed towards consumers in California. (Def. RJN ¶¶ 2-3.) Although Dr. Balshi traveled to California for business on one occasion (Balshi Decl. ¶¶ 15, 16, 26), Defendants argue that a single trip to a business conference in California is too "random, " "fortuitous, " or "attenuated" to support finding minimum contacts. (Doc. 7-1 at 21.) Dr. Balshi declares that he does "not own any interest in" Stemedix, is not "a shareholder, officer, director or ...

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