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LLC v. Barun Electronics Co., Ltd.

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

September 16, 2019

SD-3C, LLC, Plaintiff,
BARUN ELECTRONICS CO., LTD., et al., Defendants.



         Plaintiff SD-3C LLC (“SD-3C”) brings this lawsuit against Defendants Barun Electronics, Co., Ltd. (“BEC”) and Does 1-20, for claims arising from BEC's alleged breach of contract. BEC also brings a variety of counterclaims against SD-3C. Before the Court is SD-3C's motion to remand. Having considered the parties' submissions, the relevant law, and the record in this case, the Court GRANTS SD-3C's motion to remand.

         I. BACKGROUND

         A. Factual Background

         SD-3C is a Delaware limited liability company that licenses S.D. Memory Card technology. ECF No. 1-1 (“Compl.”) ¶ 1. SD-3C is owned by three entities: 1. Panasonic Intellectual Property Corporation of America; 2. Toshiba America Electronic Components, Inc; and 3. SanDisk LLC. See ECF No. 12 at 1. The sole member of SanDisk LLC is S.D. International Holdings, Ltd. See ECF No. 33-2 (“Quackenbush Decl.”) ¶ 2. BEC is a foreign corporation organized under the laws of the Republic of Korea. Compl. ¶ 1. On November 6, 2006, SD-3C entered into an Amended and Restated S.D. Memory Card License Agreement (“CLA”) with BEC, pursuant to which BEC received a non-exclusive intellectual property license relating to the manufacture and sale of certain memory cards. See Id. ¶ 3. The CLA was initially set to expire on November 8, 2016, but its expiration was extended until November 8, 2017. See Id. The CLA's expiration date was then further extended until November 8, 2018. See id.

         The CLA required that BEC satisfy various obligations owed to SD-3C. See Id. In particular, BEC was required to: report quarterly sales of products covered by the CLA; pay royalties associated with the relevant sales; maintain accurate books and records concerning the relevant sales; and permit SD-3C to periodically inspect BEC's books and records concerning the relevant sales. See Id. ¶ 5.

         SD-3C alleges that after the CLA expired, BEC continued to manufacture and sell products utilizing SD-3C's protected intellectual property, without a license to do so. See Id. ¶ 6. Further, upon inspecting BEC's books and records on an unspecified date, SD-3C alleges that it discovered that BEC owed it over $4.4 million in unreported royalties corresponding to the period between January 1, 2013 and June 30, 2017, plus interest and audit fees contemplated by the CLA. Id.

         On July 30, 2018, SD-3C and BEC entered into a Confidential Settlement and Mutual Release Agreement (“CSMRA”), pursuant to which BEC agreed to pay SD-3C a compromise sum. See Id. ¶ 7. After an unspecified number of payments were made under the CSMRA, BEC and SD-3C amended the CSMRA on or around October 23, 2018. See Id. This amendment allegedly required BEC to pay SD-3C a total of $3 million, with an initial payment of $1.2 million due in October 2018 and a second payment of $1.8 million, plus $15, 750 in interest, due in January 2019. See Id. SD-3C alleges that BEC made the first payment but failed to make the second one. See Id. ¶ 8. SD-3C sent BEC notice of BEC's apparent breach on January 17, 2019, id. ¶ 10.

         B. Procedural History

         On February 4, 2019, SD-3C filed its complaint against BEC and the Doe defendants in California Superior Court for the County of Santa Clara. Compl. at 1. SD-3C's complaint exclusively alleges state law breach of contract claims. Id. at 2, 3. SD-3C first served BEC with the summons and complaint by registered mail to its headquarters in South Korea. See ECF No. 33-1 (“Kadotani Decl.”) ¶ 2. SD-3C received a receipt and tracking number, but SD-3C initially believed that it would be unable to confirm delivery because the United States Postal Service (“USPS”) does not track deliveries in South Korea. See Id. SD-3C subsequently learned that the USPS tracking number could be used to track the shipment through the Korea Post. Id. ¶ 8. The Korea Post confirmed that the shipment was delivered on February 21, 2019. Id. Ex. 7. In the meantime, SD-3C also initiated service of the summons and complaint on BEC pursuant to the Hague Convention. Id. ¶ 2.

         On February 13, 2019, SD-3C sent BEC notice that SD-3C planned to apply for an ex parte Right to Attach Order (“RTAO”) in California court, in order to secure the amount that SD-3C alleged that SD-3C was owed under the CSMRA. Kadotani Decl. ¶ 3. The RTAO hearing occurred on February 14, 2019. See Id. At the hearing, the California Superior Court for the County of Santa Clara granted SD-3C's application and issued the RTAO. See Id. The RTAO reflected the California court's determination that SD-3C “established the probable validity of [its] claim, ” and granted SD-3C the right to attach property of BEC to satisfy the damages from the alleged breach of the CSMRA. See Id. Ex. 3.

         On March 12, 2019, BEC's counsel informed SD-3C's counsel that BEC intended to file a responsive pleading, and BEC's counsel inquired into the status of service. See Id. ¶ 6. SD-3C's counsel informed BEC's counsel that service was pending under the Hague Convention, but that SD-3C had not yet confirmed service. See Id. BEC's counsel signed a Notice & Acknowledgement of Receipt to confirm service under state law electronically on that same day, March 12, 2019.

         On April 9, 2019, BEC removed SD-3C's complaint to federal court. See ECF No. 1. BEC's notice of removal claims that the Court has diversity jurisdiction over SD-3C's complaint. See Id. at 2. The notice of removal asserts that complete diversity exists because SD-3C is “a Delaware corporation, ” while BEC is a Korean corporation. See id.

         On April 12, 2019, BEC filed an answer to SD-3C's complaint, and BEC asserted ten counterclaims against SD-3C and a group of corporate entities. See ECF No. 4. Later in the month, on April 30, 2019, BEC amended its answer and added two additional counterclaims. See ECF No. 17. BEC now asserts twelve counterclaims in total. See Id. ¶¶ 91-246. These counterclaims include eight state law causes of action and four federal causes of action. See Id. Three federal claims under the Sherman Act, ...

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