Case Number: 22STCV33639    Hearing Date: March 10, 2023    Dept: 40

Superior Court of California

County of Los Angeles

Department 40

Background Allegations

Plaintiff Jacquelin Gallego sues Defendant Bidhaus—a New York limited liability company—and Does 1 to 10 alleging the following facts.

Plaintiff Gallego was employed by Defendant Bidhaus between May 2019 and approximately May 16, 2022.

Gallego’s employment was governed by a written contract with Bidhaus. The terms of the employment contract included paying Gallego a bonus, though, during her employment, Gallego earned, but was not paid, any bonuses.

During her employment, Bidhaus designated Gallego as an independent contractor. (Plaintiff Gallego’s pleadings argue that she was instead an employee of Bidhaus because the company controlled and had the right to control Gallego both as to the work done and the manner and means in which it was performed.)

When hired, Gallego was employed as an Operations Manager and was paid $500 per week.

In August 2020, Gallego moved to Los Angeles, California, and continued to work for Bidhaus under the title of Inventory Specialist, Logistics at a salary of $800 per week.

Throughout her employment, Gallego typically worked from 10:00 a.m. to either 10:00

p.m. or 12:00 a.m., 7 days per week, which she claimed entitled her to overtime hours, which were not paid to her by Bidhaus. Bidhaus also never provided Plaintiffs with rest and meal periods.

Plaintiff Gallego complained to Bidhaus regarding her lack of paid overtime wages, failure to provide rest periods or meal periods, and unpaid bonuses. Gallego also complained that she was improperly designated as an independent contractor, making her responsible for paying her own taxes. These complaints were directed at Bidhaus Chief Operating Officer, Jon Helmut, and Chief Executive Officer, Frank Giannuzzi.

Following Plaintiff Gallego’s complaints, Bidhaus retaliated against Gallego, including by criticizing Plaintiff’s work performance and later terminating her employment, effective on or about May 16, 2022. (Plaintiff’s pleadings argue she was terminated based on her complaints of wage and hour violations.)

Based on these allegations, on October 17, 2022, Plaintiff Gallego brought suit against Bidhaus and Does 1 through 10 pursuant to claims of (1) Violation of Rest Period Law, (2) Violation of Meal Period Law, (3) Violation of Wage and Hour Laws – Unpaid Overtime, (4) Violation of Wage and Hour Laws – Waiting Time Penalties, (5) Failure to Provide Accurate Wage Statements / Failure to Keep Records, (6) Violation of Labor Code § 2810.5, (7) Failure to Pay Wages, (8) Unfair Competition, (9) Wrongful Retaliation / Termination in Violation of Public Policy, (10) Breach of Employment Contract, and (11) Breach of Covenant of Good Faith and Fair Dealing.

On October 24, 2022, service of the Summons and Complaint was made on Bidhaus by certified return receipt mail pursuant to Code of Civil Procedure section 415.40.

On December 13, 2022, Defendant Bidhaus made the instant Motion to Quash Summons and Complaint, arguing that the Court lacks general and specific jurisdiction over it, and that a forum selection clause in Plaintiff Gallego’s employment contract designates New York as the state in which lawsuits between the parties must be filed. The motion was originally scheduled for hearing on January 23, 2023.

On January 9, 2023, Plaintiff Gallego filed an opposition to Bidhaus’s motion.

On January 11, 2023, the Court reset the hearing for the motion to March 10, 2023.

On January 17, 2023, Bidhaus filed its reply to Gallego’s opposition, as well as objections to Plaintiff’s declaration attached thereto.

Evidentiary Objections

Objections No. 1-6, 8-9: OVERRULED.

Objection No. 7: SUSTAINED.

Motion to Quash Summons and Complaint: GRANTED.

Legal Standard

A defendant, on or before the last day of her time to plead or within any further time that the court for good cause may allow, may move to quash service of summons on the ground of lack of jurisdiction over her. (Code Civ. Proc., § 418.10, subd. (a); see Greener v. Workers’ Comp. Appeals Bd. (1993) 6 Cal.4th 1028, 1036.) For a court to have personal jurisdiction over a defendant, two elements are required: (1) there must be some basis for exercising personal jurisdiction over the defendant, i.e., defendant’s consent, physical presence, domicile, or minimum contacts; and (2) service of summons must be proper. (Ziller Elecs. Lab. GmbH v. Superior Court (1988) 206 Cal.App.3d 1222, 1229.)

A motion to quash service of summons can be used to challenge one or both elements of personal jurisdiction. (See ibid.) When the defendant makes a motion to quash, the burden is on the plaintiff to prove, by a preponderance of the evidence facts justifying the exercise of jurisdiction over the defendant. (See id. at pp. 1232-33 [If a defendant files a motion to quash service of summons, the plaintiff has the burden to establish both elements of personal jurisdiction]; see also ViaView, Inc. v. Ratzlaff (2016) 1 Cal.App.5th 198, 209-10.) Thus, a plaintiff must file an opposition to defeat a motion to quash. (See Floveyor Internat., Ltd. v. Superior Court (1997) 59 Cal.App.4th 789, 794 [defendant does not have to act on motion to quash until plaintiff makes prima facie showing of jurisdiction].) Further, such a motion must establish personal jurisdiction on any grounds challenged by the defendants; if the defendant alleges that there is no basis for personal jurisdiction and that service was improper, the plaintiff must establish both a basis for personal jurisdiction and proper service. (See Ziller, supra, 206 Cal.App.3d at p. 1229; Summers v. McClanahan (2006) 140 Cal.App.4th 403, 413 [plaintiff required to prove jurisdictional facts supporting personal jurisdiction over each defendant when defendant challenged jurisdiction on improper service].) The mere allegations of facts or allegations in an unverified complaint are insufficient to establish jurisdiction for these purposes. (In re Automobile Antitrust Cases I & II (2005) 145 Cal.App.4th 100, 100.)

If a motion to quash is granted because there was no basis for personal jurisdiction, the Court can dismiss the complaint without prejudice, either in whole or as to the moving defendant if there are any remaining defendants in the action. (Code Civ. Proc., § 581, subd. (h).) Although the dismissal without prejudice is not res judicata on the merits of the action, it is res judicata on the court’s jurisdictional ruling. (See MIB, Inc. v. Superior Court (1980) 106 Cal.App.3d 228, 234-35.)

Analysis

Bidhaus moves to quash service of summons and the complaint in this action on the grounds that: (1) the Court lacks general jurisdiction over Bidhaus (Mot., 5:27-6:8); (2) the Court lacks specific jurisdiction over Bidhaus because it did not avail itself of contact with and/or benefits from California or because specific jurisdiction would not comport with notions of fair play and substantial justice (Mot., 6:9-8:22, 8:23-10:12); and (3) an agreement between the parties contains a mandatory forum selection clause in favor of New York (Mot., 10:13-20).

A California court can exercise personal jurisdiction over a nonresident defendant who has “minimum contacts” with the state. (Pavlovich v. Superior Court (2002) 29 Cal.4th 262, 268; Virtualmagic Asia, Inc. v. Fil-Cartoons, Inc. (2002) 99 Cal.App.4th 228, 238.) A defendant has minimum contacts if the quality and nature of its activity in the forum state (referred to as “contacts”) is such that it is reasonable and fair to require the defendant to conduct a defense in that state. (Pavlovich, supra, at p. 268; Strasner v. Touchstone Wireless Repair & Logistics, LP (2016) 5 Cal.App.5th 215, 221.) The focus of the minimum contacts analysis is the defendant’s contacts with the forum. (Bristol-Myers Squibb Co. v. Superior Court (2017) 137 S. Ct. 1773, 1779.) Depending on the extent of a defendant’s contacts with California, it may be subject to either general or specific jurisdiction. (Elkman v. National States Ins. (2009) 14 Cal.4th 434, 445-46; see Pavlovich, supra, at p. 268-69; see also Bristol-Myers, supra, at pp. 1779-80 [noting that general and specific jurisdiction are the two types of personal jurisdiction the United States Supreme Court has recognized since its decision in International Shoe Co. v. State of Wash., Office of Unemployment Compensation & Placement (1945) 326 U.S. 310, 316].)

I. General Jurisdiction: NOT ESTABLISHED.

A court can exercise general jurisdiction over a nonresident defendant when the defendant’s in-state contacts are so continuous and systematic that the defendant is essentially “at-home” in the forum. (BNSF Ry. V. Tyrell (2017) 137 S. Ct. 1549, 1558; Daimler AG v. Bauman (2014) 571 U.S. 117, 138-39; Williams v. Yamaha Motor Co. (9th Cir. 2017) 851 F.3d 1015, 1020.) The contacts considered for the purposes of general jurisdiction are those that existed from the time the alleged conduct occurred to the time of the summons. (Strasner, supra, 5 Cal.App.5th 215, 222.) When the nonresidents contacts render it essentially at home in the forum state, the court can exercise jurisdiction over the defendant even if the cause of action is unrelated to the defendant’s in-state activities. (See Bristol-Myers, supra, 137 S. Ct. at p. 1780; Vons Cos. V. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 445.)

Generally, a natural person is “at home” where she is domiciled, while a corporation is “at home” where it is incorporated and where it has its principal place of business. (Bauman, supra, 571 U.S. at p. 137; see BNSF Ry., supra, 137 S. Ct. at p. 1558.) In exceptional cases, a corporate defendant’s contacts with a forum may be so substantial as to render it “at home” even when the forum is not where it is incorporated or where it has its principal place of business. (BNSF Ry., supra, at p. 1558; Bauman, supra, at p. 139, fn. 19.) To determine whether a foreign corporation is essentially “at home” in California despite being incorporated and having its principal place of business outside of the State, California courts look to a variety of factors, including the “maintenance of offices, the presence of employees, use of bank accounts and marketing or selling products in the forum state, to analyze whether a corporation's contacts render it effectively at home in that state.” (Brue v. Shabaab (2020) 54 Cal.App.5th 578, 590-91.) However, the U.S. Supreme Court has clarified that the focus of this inquiry is the comparison between the defendant’s contacts with the forum state and the defendant’s activities worldwide and whether such contacts render it essentially “at home” in the forum state. (See Bauman, supra, at pp. 138-139, 139 n. 20; Williams, supra, 851 F.3d at pp. 1021-1022; see e.g., Bristol-Myers, supra, at pp. 796-797 [California Supreme Court finding that although the defendant had employees, sizable sales, and a registered agent in California, the defendant was not “at home” in California given the imbalance between its in-state business activities and its nationwide operations in their entirety].)

Defendant Bidhaus argues that it is not subject to general jurisdiction in California because: (1) Bidhaus is neither incorporated nor headquartered in California; (2) Bidhaus is incorporated and headquartered in New York; (3) Bidhaus does not maintain business operations in California at all, let alone operations that are so continuous and systematic as to render Bidhaus essentially at home in California; and (4) Bidhaus does not transact intrastate business in California, it maintains no offices here, and it is not registered with the California Secretary of State to transact intrastate business. (Mot., 5:27-6:8.)

Plaintiff Gallego “concedes that she does not allege general jurisdiction over Defendant” Bidhaus (Opp’n, 2:4), which Bidhaus notes in its reply (Reply, 1:2).

Under these circumstances, the Court finds that Bidhaus is not subject to general jurisdiction in California. (Ziller Elecs. Lab. GmbH v. Superior Court, supra, 206 Cal.App.3d at pp. 1232-33 [When the defendant makes a motion to quash, the burden is on the plaintiff to prove, by a preponderance of the evidence facts justifying the exercise of jurisdiction over the defendant].)

II. Specific Jurisdiction: NOT ESTABLISHED.

A court can exercise specific jurisdiction over a nonresident defendant if (1) the defendant has purposefully availed itself of the forum’s benefits and protections; (2) the cause of action relates to or arises out of the defendant’s contacts with the forum; and (3) the exercise of personal jurisdiction would comport with fair play and substantial justice. (Williams, supra, 851 F.3d at p. 1023; Pavlovich, supra, 29 Cal.4th at p. 269.)

The contacts for specific jurisdiction are those that existed when the plaintiff’s cause of action arose. (Strasner, supra, 5 Cal.App.5th at p. 226.)

Purposeful Availment: To establish minimum contacts for specific jurisdiction, the plaintiff must show that the defendant has purposefully availed itself of the privilege of conducting activities in California to involve its benefits and protections. (See Axiom Foods, Inc. v. Acerchem Int’l (9th Cir. 2017) 874 F.3d 1064, 1068; Bristol-Myers Squibb Co. v. Superior Court (2016) 1 Cal.5th 783, 799-800, rev’d on other grounds, Bristol-Myers, supra, 137 S. Ct. 1773 [reversing and remanding the specific—not general—jurisdiction analysis by the California Supreme Court].) In this analysis, (1) only the defendant’s contacts with California are considered, not the defendant’s contacts with persons who reside there, (2) the defendant’s contacts must have been purposeful rather than random, fortuitous, or attenuated, and (3) the defendant must have sought some benefit by availing itself of the jurisdiction. (See Walden v. Fiore (2014) 571 U.S. 277, 285-286; Burger King Corp. v. Rudzewicz (1985) 471 U.S. 462, 474-475; Vons Cos., supra, 14 Cal.4th at pp. 446, 458.)

Defendant Bidhaus argues that it has not purposefully availed itself of California’s benefits and protections because: (1) the only contact with California was forced by Gallego, exclusively and unilaterally, because Gallego was originally hired to work in New York and was never directed by Bidhaus to travel or relocate to California, and because Bidhaus never traveled to California to meet with Gallego concerning work, thus targeting no benefit from California through her work here (Mot., 6:18-7:2, 8:11-15); and (2) Gallego lived in various other locations during the COVID-19 pandemic, advising Bidhaus that she was traveling to various states in a van while she was telecommuting to work, and moving to Sweden for a period of approximately six months while she was telecommuting to work, ventures which were also unilaterally elected by Gallego, without consulting Bidhaus (Mot., 7:2-9, 8:16-17). Bidhaus also points to case law indicating that “random, fortuitous, or attenuated” contacts made by interacting with other persons affiliated with the state in which the defendant is being haled into court are not sufficient for specific jurisdiction; rather, Bidhaus must have had its own affiliation with the State. (Mot., 8:18-20.)

In opposition, Plaintiff argues that Bidhaus purposefully availed itself of the benefits and protections of the State of California because: (1) Plaintiff’s work in California created $100,000 in sales for Defendant (Opp’n, 6:11, 7:19-21); (2) Bidhaus actively recruited Plaintiff Gallego (Opp’n, 6:12); (3) Bidhaus knew that Gallego was intending to work remotely (Opp’n, 6:13, 8:5-6); (4) Gallego worked for Bidhaus from California for over a year (Opp’n, 6:14); (5) Bidhaus allowed Gallego to work for Bidhaus in California and retaliated against her while she worked in California (Opp’n, 7:18-19); and (6) Gallego’s termination was an intentional act of retaliation and deprivation of wages aimed at harming Gallego within California (Opp’n, 7:22-8:5, 8:6-8). To support these positions for purposeful availment, Plaintiff relies on comparisons to two unpublished district court cases and one published district court case. (See Opp’n, 5:23-6:2, 6:7-7:5 [unpublished district court case], 7:6:27 [second unpublished district court], 7:27-8:9 [published district court case].)

In reply, Bidhaus argues that (1) its contact with California is entirely through Gallego’s contacts, not its own, for which reason there is no evidence that Bidhaus has conducted business within California, or that it purposefully availed itself of laws and protections of California, or that it directed Gallego or anyone else to reach California for the purpose of deriving such privileges and benefits (Reply, 5:18-5:22, 6:5-9); (2) permitting Plaintiff Gallego to work remotely, such as in California, was a response to the remote work derived from the COVID-19 pandemic and the various shutdown and stay at home orders, which made it commonplace for employers to allow their employees during the time frame to work where they chose and or were able to, something that was encouraged by federal and state law, and which was the humanitarian thing to do in chaotic and uncertain times (Reply, 5:25-6:5); (3) Plaintiff’s cited case law—the two unpublished district court decisions—are distinguishable because in those cases, the defendant’s contact with the forum state was clearly purposeful and not merely random due to the employee’s election to work from the forum state (Reply, 6:10-7:22).

The Court agrees with Bidhaus and finds that it has not purposefully availed itself of the benefits and protections of California. To the extent that any contacts were made with California during Plaintiff’s employment with the company, these contacts were with Gallego directly, not with the State—contacts that are insufficient for purposes of specific jurisdiction because only the defendant’s contacts with California are considered, not the defendant’s contacts with persons who reside here. (See Walden, supra, 571 U.S. at pp. 285-286; Burger King Corp., supra, 471 U.S. at pp. 474-475; Vons Cos., supra, 14 Cal.4th at pp. 446, 458.) Further, while Bidhaus benefitted from “over $100,000 in sales” based on Gallego’s work in California (Opp’n, Gallego Decl., ¶ 32), such benefits were random, fortuitous, or attenuated insofar as Bidhaus was permitting Gallego to work wherever she wanted in light of the unusual and extraordinary circumstances of the COVID-19 pandemic.

Relatedness: To establish minimum contacts for specific jurisdiction, the plaintiff must also show that its claim relates to or arises from the defendant’s contacts with the forum. (Bristol-Myers, supra, 137 S. Ct. at p. 1780.) This is referred to as the “relatedness” requirement. (Snowney v. Harrah’s Entm’t, Inc. (2005) 35 Cal.4th 1054, 1062, 1067.) This requirement is satisfied if there is a substantial nexus or connection between the defendant’s California contacts and the plaintiff’s claim. (Id. at p. 1068.)

Defendant Bidhaus’s motion and reply fail to specifically argue relatedness outside of the context of purposeful availment. (See Mot., 6:9-8:22 [purposeful availment arguments], 8:23-10:12 [fair play and substantial justice arguments]; Reply 5:15-7:22 [purposeful availment arguments], 7:23-9:13 [fair play and substantial justice arguments].)

Gallego’s opposition briefly notes that “[t]he forum-related activities second prong is satisfied when the defendant’s contacts with California resulted from the employment relationship and the plaintiff’s claims arise from the employment relationship” without elaborating on this point other than to generally argue purposeful availment. (Opp’n, 8:10-12 [relatedness quote]; see Opp’n, 5:13-8:9 [purposeful availment arguments].)

Because the Court has determined that Bidhaus did not purposefully avail itself of forum benefits, the relatedness question need not be reached.

Fair Play and Substantial Justice: If the plaintiff establishes that the defendant’s contacts are sufficient to invoke specific jurisdiction and related to plaintiff’s claims, the burden shifts to the defendant to establish that exercising jurisdiction would be unreasonable, i.e., that it would offend traditional notions of fair play and substantial justice. (See Vons Cos., supra, 14 Cal.4th at p. 449.)

As noted above, the court has already found that Bidhaus did not purposefully avail itself of forum benefits, so need not reach this issue.  However, in an abundance of caution, and because both parties addressed the issue, the Court will continue its analysis of this issue.

Generally, exercising personal jurisdiction over a nonresident defendant is presumptively reasonable if the defendant has purposefully availed itself of the forum state. (Fighter’s Mkt., Inc. v. Champion Courage, LLC (S.D. Cal. 2016) 207 F.Supp.3d 1145, 1156.) The presumption of reasonableness can be overcome, however, by a compelling argument that the presence of some other consideration would render jurisdiction unreasonable. (Burger King, supra, 471 U.S. at p. 477.) To determine whether the exercise of jurisdiction would be unreasonable, the court must balance seven factors, none of which is dispositive by itself. (Core-Vent Corp. v. Nobel Indus. AB (9th Cir. 1993) 11 F.3d 1482, 1487-1488.) The factors the court must balance are:

(1) The burden to the defendant in defending the action in the forum, (Vons Cos., supra, 14 Cal.4th at p. 448; Bristol-Myers, supra, 137 S. Ct. at p. 1780 [discussing this factor as the primary concern of the fair play and substantial justice analysis]);

(2) The extent of the defendant’s interjection into the forum state’s affairs, (Core-Vent, supra, 11 F.3d at p. 1487; see Cornelison v. Chaney (1976) 16 Cal.3d 143, 151 [focus on defendant’s local activities]);

(3) The forum state’s interest in adjudicating the dispute, (Bristol-Myers, supra, 137 S. Ct. at p. 1780; Vons Cos., supra, 14 Cal.4th at p. 448);

(4) The most efficient judicial resolution of the controversy, (Core-Vent, supra, 11 F.3d at p. 1487; Bristol-Myers, supra, 1 Cal.5th at pp. 812-13; see Vons Cos., supra, 14 Cal.4th at p. 448 [judicial economy]);

(5) The extent of conflict with the sovereignty of the defendant’s state or nation, (Core-Vent, supra, 11 F.3d at p. 1487; Bristol-Myers, supra, 1 Cal.5th at pp. 812-13 [states’ shared interest in furthering substantive social policies]; Vons Cos., supra, 14 Cal.4th at p. 448 [same]);

(6) The importance of the forum to the plaintiff’s interest in convenient and effective relief, (Vons Cos., supra, 14 Cal.4th at p. 448; Core-Vent, supra, 11 F.3d at p. 1487-1488 [noting factor is of little weight due to plaintiff’s preference for bringing action where they live]); and

(7) The existence of an alternative forum, (Core-Vent, supra, 11 F.3d at p. 1488; see Cornelison, supra, 16 Cal.3d at p. 151 [ease of access of alternative forum]).

Bidhaus argues that the first factor disfavors specific jurisdiction because it would be unduly burdensome for Bidhaus to be forced to defend the action in California, requiring travel of 3,000 miles each way, thus placing a burden witnesses other than Plaintiff Gallego and difficulties to Bidhaus in preparing for hearings, among other things. (Mot., 9:22-10:2)

Bidhaus also argues that the second factor disfavors specific jurisdiction because Bidhaus did not purposely inject itself into the forum state, but rather, was dragged into the State by Gallego’s preference as to where to live and work. (Mot., 9:17-21.)

Bidhaus next argues that the third factor disfavors specific jurisdiction because the employment agreement at issue was entered in New York and is controlled by New York law, with Bidhaus being a New York limited liability company, with brief contacts, if any, to California. (Mot., 10:3-7.)

Bidhaus further argues that the fourth factor disfavors specific jurisdiction because relevant evidence and witnesses, with the exception of perhaps Gallegos, are located in New York. (Mot., 10:7-9.)

Bidhaus last argues that the seventh factor disfavors specific jurisdiction because New York is the proper alternative forum for this suit based on the parties’ forum selection clause. (Mot., 10:9-12.)

In opposition, Plaintiff Gallegos argues that while the first and seventh factors favor Bidhaus, the second, third, fourth and sixth factors favor Plaintiff, with the fifth factor being neutral. (Opp’n, 9:2-12.)

In reply, Bidhaus reiterates its positions on motion. (Compare Mot., 9:22-10:2, with Reply, 8:18-9;13.)

The Court finds that (1) the first, second, third, and seventh factors disfavor specific jurisdiction over Bidhaus based on its attenuated contacts with California, the difficulties to parties and witnesses in litigating in California from New York, and the existence of New York as an alternative forum, (2) the fourth and five factors are neutral, and (3) only factor six supports Plaintiff, who is a California resident.

Under these circumstances, the Court finds that Bidhaus is not subject to specific jurisdiction in California.

III. Forum Selection Clause: MOOT.

The Court need not reach the forum selection arguments raised by the parties because it has determined that Plaintiff Gallego has failed to carry her burden to demonstrate that California can exercise general or specific jurisdiction over Bidhaus.

Conclusion

Specially Appearing Defendant Bidhaus’s Motion to Quash Service of Summons and Complaint is GRANTED because Plaintiff Jacquelin Gallego has failed to meet her burden to show that Bidhaus has made sufficient contacts with California for this Court to exercise general or specific jurisdiction over the New York company.

Plaintiff Jacquelin Gallego’s October 17, 2022 Complaint is DISMISSED Without Prejudice.