Judge Bruce G. Iwasaki, Case 20STCV48986 2023-01-05 Tentative Ruling

Responding Party: Plaintiff Marianna Cortez

Tentative Ruling: The motion to quash service of summons is granted based on improper service and lack of personal jurisdiction as to Defendant Best American Hospitality Corporation.

This is an employment action. Mariana Cortez (Plaintiff or Cortez) sued Best American Hospitality California, Inc. d/b/a Church’s Chicken #957 (Best American Inc.) for disability discrimination, failure to accommodate, retaliation, and wrongful termination.

Cortez alleged that she worked in Best American Inc.’s restaurant since 2011 in various capacities including cashier, food prep, and janitor. In August 2015, Cortez allegedly suffered a wrist injury, which required modification of her work duties. In early 2018, she filed a workers’ compensation claim. Thereafter, Cortez alleged that her supervisors became hostile towards her and reduced her work hours. Eventually, in January 2019, her employment was terminated.

In May 2021, Plaintiff added Best American Hospitality Corporation (Defendant or BAHC) as a Doe Defendant. Two months later, default was entered against BAHC. In December 2021, Best American Inc. filed for bankruptcy and a stay was issued on this case. The stay was lifted one year later.

On September 21, 2022, BAHC specially appeared and moved to quash service of summons, but this Court declined to rule on the motion because it was in default. At the hearing on the motion to quash, Plaintiff orally agreed to vacate the default and to re-serve BAHC.

Defendant BAHC now files its second motion to quash service of summons based on improper service and lack of personal jurisdiction.

At all relevant times, Plaintiff Cortez resided in California. Defendant BAHC is incorporated in Georgia, but its principal place of business is Nashville, Tennessee. BAHC’s general counsel averred that the corporation does not have a physical presence here and does not conduct any business in this state. Plaintiff alleges that the Doe Defendants were co-employers and alter egos of Defendant Best American Inc.; however, BAHC maintains that it never employed Cortez. BAHC admits that it purchased a Workers Compensation and Employers Liability Policy, which covered BAHC and its subsidiary, Best American Inc.

Plaintiff filed an opposition to the motion to quash, contending that service was proper and there is personal jurisdiction over BAHC because it purchased insurance in multiple cities throughout California, owns 10% of its subsidiary, and is an alter ego of Best American Inc.

Defendant BAHC filed evidentiary objections to Plaintiff’s counsel’s declaration. The Court sustains objections 2-3, 5-8, 10-13, and 15. The Court overrules objections 1, 4, 9, and 14.

“When a defendant challenges that jurisdiction by bringing a motion to quash, the burden is on the plaintiff to prove the existence of jurisdiction by proving, inter alia, the facts requisite to an effective service.” (Dill v. Berquist Construction Co. (1994) 24 Cal.App.4th 1426, 1439–1440; accord Lebel v. Mai (2012) 210 Cal.App.4th 1154, 1160 [“It was incumbent upon plaintiff, after the filing of defendant’s motion to quash, to present evidence discharging her burden to establish the requisites of valid service on defendant”].) “[T]he filing of a proof of service creates a rebuttable presumption that the service was proper,” but only if it “complies with the statutory requirements regarding such proofs.” (Id. at pp. 1441-1442.)

Defendant BAHC first challenges service of process by arguing that it only received a copy of the First Amended Complaint and an Amendment to Complaint naming it as the Doe Defendant, but not the summons. (Dierolf-Harris Decl., ¶ 2.) Dierolf-Harris attaches a copy of the papers that she received, which do not include any summons. (Id., Ex. A.) This is sufficient to rebut the presumption that service was proper.

Plaintiff’s opposition fails to provide admissible evidence to dispute these assertions. She contends that her counsel’s “service order demonstrates that the summons was attached and included when service of process was requested” and cites to Exhibit B of the Eshaghian Declaration. (Opposition, p. 5:11-13.) But she does not properly authenticate the alleged service order. (Evid. Code, § 1401; Eshaghian Decl., ¶ 6.) Plaintiff points out that the process server, First Legal, “is a third party that is not affiliated with Plaintiff’s counsel” and that the “proof of service also indicates that the summons was served.” (Opposition, p. 5:13-15.) However, she does not advance any admissible evidence to rebut Defendant’s declaration that it never received the summons. There is no declaration from the process server, or anyone with personal knowledge, attesting to the documents served or attaching a copy of the packet that was purportedly served or mailed.

Accordingly, Plaintiff fails to meet her burden to establish proper service and the motion to quash is granted on this ground.

“The Due Process clause of the Fourteenth Amendment constrains a State’s authority to bind a nonresident defendant to a judgment of its courts. [Citation.] [A] nonresident generally must have ‘certain minimum contacts . . . such that the maintenance of the suit does not offend “traditional notions of fair play and substantial justice.” ’ ” (Walden v. Fiore (2014) 571 U.S. 277, 283 (Walden).) Personal jurisdiction may be either general or specific. For general jurisdiction, a defendant’s forum contacts must be “so ‘continuous and systematic’ as to render [the defendant] essentially at home in the forum State.” (Daimler AG v. Bauman (2014) 571 U.S. 117, 139.) The paradigm bases of general jurisdiction for a corporation are its state of incorporation and principal place of business. (Id. at p. 137.)

Specific or case-linked jurisdiction “ ‘focuses on “the relationship among the defendant, the forum, and the litigation.” ’ ” (Walden, supra, 571 U.S. at pp. 283-284.) In particular, “the defendant’s suit-related conduct must create a substantial connection with the forum State.” (Id. at p. 284.) There are three requirements for a court to exercise specific jurisdiction over a nonresident defendant: “First, the defendant must have purposefully availed himself or herself of forum benefits or purposefully directed activities at forum residents. Second, the controversy must relate to or arise out of the defendant’s forum-related activities. Third, the exercise of jurisdiction must comport with traditional notions of fair play and substantial justice.” (David L. v. Superior Court (2018) 29 Cal.App.5th 359, 366.) The plaintiff has the initial burden to establish the first two requirements. Only after doing so does the burden shift to the defendant to show that exercising jurisdiction would be unreasonable. (Id. at p. 367.) The plaintiff must do more than merely allege jurisdictional facts. “ ‘It must present evidence sufficient to justify a finding that California may properly exercise jurisdiction over the defendant.’ ” (Zehia v. Superior Court (2020) 45 Cal.App.5th 543, 552.)

“ ‘[P]urposeful availment occurs where a nonresident defendant “ ‘purposefully direct[s]’ [its] activities at residents of the forum” [citation], “ ‘purposefully derive[s] benefit’ from” its activities in the forum [citation], “create[s] a ‘substantial connection’ with the forum” [citation], “ ‘deliberately’ has engaged in significant activities within” the forum [citation], or “has created ‘continuing obligations’ between [itself] and residents of the forum” [citation]. By limiting the scope of a forum’s jurisdiction in this manner, the “ ‘purposeful availment’ requirement ensures that a defendant will not be haled into a jurisdiction solely as a result of ‘random,’ ‘fortuitous,’ or ‘attenuated’ contacts … .” [Citation.] Instead, the defendant will be subject to personal jurisdiction only if “ ‘it has clear notice that it is subject to suit there, and can act to alleviate the risk of burdensome litigation by procuring insurance, passing the expected costs on to customers, or, if the risks are too great, severing its connection with the state.’ ” [Citations.]’ ” (HealthMarkets, Inc. v. Superior Court (2009) 171 Cal.App.4th 1160, 1168 (HealthMarkets).)

In Walden, the U.S. Supreme Court emphasized two important principles underlying the jurisdictional inquiry: “First, the relationship must arise out of contacts that the ‘defendant himself’ creates with the forum State. [Citation.] Due process limits on the State’s adjudicative authority principally protect the liberty of the nonresident defendant – not the convenience of plaintiffs or third parties.” (Walden, supra, 571 U.S. at p. 284.) “Second, our ‘minimum contacts’ analysis looks to the defendant’s contacts with the forum State itself, not the defendant’s contacts with persons who reside there.” (Id. at p. 285.) “[T]he plaintiff cannot be the only link between the defendant and the forum. Rather, it is the defendant’s conduct that must form the necessary connection with the forum State that is the basis for its jurisdiction over him.” (Ibid.) Therefore, “mere injury to a forum resident is not a sufficient connection to the forum.” (Id. at p. 290.) “The proper question is not where the plaintiff experienced a particular injury or effect but whether the defendant’s conduct connects him to the forum in a meaningful way.” (Ibid.)

Plaintiff’s opposition concedes that BAHC is “incorporated in the state of Georgia, but its principal place of business is in Nashville, Tennessee.” (Eshaghian Decl., ¶ 5.)

BAHC contends there is no personal jurisdiction because: it was not physically present in California when served, not domiciled here, did not make a general appearance in this action, did not consent to jurisdiction via a forum-selection clause, and does not have “minimum contacts” with this state. (Hite Decl., ¶¶ 2-9.)

In her opposition, Cortez asserts that there are “minimum contacts” because (1) BAHC obtained workers’ compensation insurance coverage for its subsidiary, Defendant Best American Inc., and separately obtained insurance in over 37 cities in California, and (2) BAHC is the alter ego of Best American Inc. as it owns 10% of the subsidiary and shares corporate officers.

In support of her argument that BAHC has obtained insurance throughout California, Cortez cites to Exhibit D of the Eshaghian Declaration, which purports to be a printout from the website of the Workers’ Compensation Insurance Rating Bureau of California. The website is a writing, which generally must be authenticated before being received in evidence. (Evid. Code, § 1401, subd. (a); People v. Beckley (2010) 185 Cal.App.4th 509, 517-518.)

Authentication aside, the insurance coverage is not evidence of a transaction or contact with California. The fact that a parent/franchisor and its subsidiary/franchisee are listed on one insurance policy is irrelevant to the degree of control exercised by the parent. This merely supports the close financial connection that is expected in a parent-subsidiary relationship. (Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, 541 (Sonora Diamond Corp.) [“The relationship of owner to owned contemplates a close financial connection between parent and subsidiary and a certain degree of direction and management exercised by the former over the latter”]; see also Aquila, Inc. v. Superior Court (2007) 148 Cal.App.4th 556, 578-579 [parent’s guarantee of a subsidiary’s warehouse lease and “purchase of an insurance policy for the parent and subsidiary companies does not establish the pervasive control required” for jurisdiction]; Dorel Industries, Inc. v. Superior Court (2005) 134 Cal.App.4th 1267, 1276 [procuring insurance for a warehouse used by the subsidiary is not “outside the normal parent-subsidiary relationship”].) That is, being co-insured does not indicate that BAHC was managing and operating the Best American Inc. beyond what is typical in a parent-subsidiary relationship. Plaintiff provides no supporting authority that a defendant who obtains insurance coverage purposefully avails itself of California’s jurisdiction.

Plaintiff’s contention that jurisdiction is established because BAHC “owns at least 10% of more of BAH California, Inc.” is unpersuasive. “The mere ownership of a subsidiary does not subject a nonresident parent company to specific personal jurisdiction based on the subsidiary’s forum contacts. Ownership of a subsidiary alone does not constitute purposeful availment.” (HealthMarkets, supra, 171 Cal.App.4th at p. 1169; Sonora Diamond Corp., supra, 83 Cal.App.4th at pp. 540-541 [“We start with the firm proposition that neither ownership nor control of a subsidiary corporation by a foreign parent corporation, without more, subjects the parent to the jurisdiction of the state where the subsidiary does business”].)

Plaintiff has not shown a requisite degree of control by BAHC for general jurisdiction under alter ego.

“When the nonresident defendant is a parent corporation of a subsidiary which does business in California, the minimum contacts may be direct between the parent and the state, or imputed to the parent via its subsidiary. General jurisdiction over a local subsidiary extends to the foreign parent under an alter ego theory, general principles of agency, or under the representative services doctrine, a narrow species of agency.” (BBA Aviation PLC v. Superior Court (2010) 190 Cal.App.4th 421, 429); Sonora Diamond Corp., supra, 83 Cal.App.4th at p. 540.)

“Ordinarily, a corporation is regarded as a legal entity, separate and distinct from its stockholders, officers and directors, with separate and distinct liabilities and obligations. [Citations.] A corporate identity may be disregarded—the ‘corporate veil’ pierced—where an abuse of the corporate privilege justifies holding the equitable ownership of a corporation liable for the actions of the corporation. [Citation.] Under the alter ego doctrine, then, when the corporate form is used to perpetrate a fraud, circumvent a statute, or accomplish some other wrongful or inequitable purpose, the courts will ignore the corporate entity and deem the corporation’s acts to be those of the persons or organizations actually controlling the corporation, in most instances the equitable owners. [Citations.] The alter ego doctrine prevents individuals or other corporations from misusing the corporate laws by the device of a sham corporate entity formed for the purpose of committing fraud or other misdeeds.” (Sonora Diamond Corp., supra, 83 Cal.App.4th at p. 538.)

“In California, two conditions must be met before the alter ego doctrine will be invoked. First, there must be such a unity of interest and ownership between the corporation and its equitable owner that the separate personalities of the corporation and the shareholder do not in reality exist. Second, there must be an inequitable result if the acts in question are treated as those of the corporation alone. [Citations.] ‘Among the factors to be considered in applying the doctrine are commingling of funds and other assets of the two entities, the holding out by one entity that it is liable for the debts of the other, identical equitable ownership in the two entities, use of the same offices and employees, and use of one as a mere shell or conduit for the affairs of the other.’ [Citations.] Other factors which have been described in the case law include inadequate capitalization, disregard of corporate formalities, lack of segregation of corporate records, and identical directors and officers. [Citations.] No one characteristic governs, but the courts must look at all the circumstances to determine whether the doctrine should be applied. [Citation.] Alter ego is an extreme remedy, sparingly used." (Id. at pp. 538-539.)

Here, Plaintiff relies only on her allegations in the Complaint. (Opposition, p. 7:20-21.) While it is true that a court does not consider the merits of the Complaint on a motion to quash, the plaintiff “must present evidence to justify a finding that the requisite jurisdictional minimum contacts exist.” (Sonora Diamond Corp., supra, 83 Cal.App.4th at p. 540.) Mere allegations of alter ego liability are not enough. (Ibid.; DVI, Inc. v. Superior Court (2002) 104 Cal.App.4th 1080, 1094 [“allegations of alter ego alone are insufficient to create jurisdiction”].)

Secondly, to the extent that Plaintiff may argue that she provides evidence that BAHC and Best American Inc. share the same address and nearly identical corporate officers, this is insufficient. She relies in part on Exhibit H of the Eshaghian Declaration, the webpage of “Shoney’s,” which she states is the operating name for BAHC. Once again, this website is not authenticated and is not admissible.

Even if BAHC and Best American Inc. share the same corporate officers and address, this is not enough to show “purposeful availment” for jurisdictional purposes. In HealthMarkets, supra, the Court of Appeal stated that “ ‘[R]eliance on state substantive law of agency and alter ego to determine the constitutional limits of specific personal jurisdiction is unnecessary and is an imprecise substitute for the appropriate jurisdictional question. The proper jurisdictional question is not whether the defendant can be liable for the acts of another person or entity under state substantive law, but whether the defendant has purposefully directed its activities at the forum state by causing a separate person or entity to engage in forum contacts.’ [Citation.] We reaffirm that conclusion here and conclude that purposeful availment by a parent company through the acts of its subsidiary must be evaluated under the rule that we have stated.” (171 Cal.App.4th at p. 1170.) Plaintiff has not shown how having the same address and corporate officers shows that BAHC “purposefully directed” its activities in California such that it derived benefit, created a substantial connection, engaged in significant activities, or created continuing obligations within this state. (Id. at p. 1168; see Sonora Diamond Corp., supra, 83 Cal.App.4th at p. 541 [“Control is the key characteristic of the agent/principal relationship . . . if a parent corporation exercises such a degree of control over its subsidiary corporation that the subsidiary can legitimately be described as only a means through a which the parent acts . . . the subsidiary will be deemed to be the agent of the parent in the forum state and jurisdiction will extend to the parent”].) In other words, there is no showing that merely sharing addresses and corporate officers means that BAHC sufficiently controlled Best American Inc. such that Best American Inc’s contacts with this state may be imputed to BAHC.

The Court is also unconvinced that injustice would result if BAHC is considered a separate entity. There is no evidence that the corporate form was used to accomplish a wrongful purpose or that any inequity would result from recognition of BAHC as a separate identity. It is true that Best American Inc. has filed for bankruptcy, but “[t]he alter ego doctrine does not guard every unsatisfied creditor of a corporation but instead affords protection where some conduct amounting to bad faith makes it inequitable for the corporate owner to hide behind the corporate form. Difficulty in enforcing a judgment or collecting a debt does not justify this standard.” (Sonora Diamond Corp., supra, 83 Cal.App.4th at p. 539.) Plaintiff identifies no other evidence of wrongdoing such as perpetration of a fraud, circumvention of a statute, or undercapitalization of the company.

Finally, Plaintiff contends that BAHC has waived jurisdiction by making a general appearance in an unrelated case in San Diego County. She cites to “Exhibit I” of the Eshaghian Declaration, which is BAHC’s Answer in a San Diego case filed in October 2019. However, she cites no legal authority for her proposition that an appearance in an unrelated lawsuit in a different county constitutes a blanket general waiver of personal jurisdiction across all cases. Such a broad reading is unsupported in the statute, which states that a defendant makes a general appearance in “an action” when it answers, demurs, or otherwise seeks relief “which recognizes the authority of the court to proceed.” (Code Civ. Proc., § 1013, italics added; Mt. Holyoke Homes, LP v. Cal. Coastal Com. (2008) 167 Cal.App.4th 830, 844; see also Calder v. Jones (1984) 465 U.S. 783, 790 [“Each defendant’s contacts with the forum State must be assessed individually”]; In re Automobile Antitrust Cases I & II (2005) 135 Cal.App.4th 100, 113 [“personal jurisdiction must be based on forum-related acts that were personally committed by each nonresident defendant”].)

As Plaintiff fails to meet her burden of establishing the first two requirements for specific jurisdiction, the Court need not address whether exercise of jurisdiction would be fair and reasonable. Accordingly, the Court grants BAHC’s motion to quash for lack of personal jurisdiction and dismisses it from this case.

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