Judge: Daniel S. Murphy, Case: 23STCV03743, Date: 2023-05-03 Tentative Ruling

Case Number: 23STCV03743    Hearing Date: May 3, 2023    Dept: 32

BACKGROUND

            On February 21, 2023, Plaintiff JD Factors, LLC filed this action against Defendant Moldstar, LLC, alleging (1) breach of contract, (2) promissory estoppel, (3) services rendered, (4) account stated, and (5) declaratory relief.

            Plaintiff is a factoring company that purchases accounts from businesses and obtains the right to payment on associated invoices. (Compl. ¶¶ 7-8.) To assist in collecting on the accounts, Plaintiff provides notice to the account debtors that there has been an assignment and instructing the debtors to pay Plaintiff directly. (Id., ¶ 8.) One of Plaintiff’s clients is third-party VNG Transport, Inc., a North Carolina company. (Id., ¶ 9.) Plaintiff entered into a factoring agreement with VNG, whereby Plaintiff obtained an interest in VNG’s accounts. (Id., ¶¶ 9-10, Ex. A.) VNG provided transport services to its customers, including Defendant. (Id., ¶¶ 11-12.) Therefore, Defendant was an account debtor of VNG, and by operation of the factoring agreement and assignment, owed money to Plaintiff. (Id., ¶ 13.) Plaintiff sent Defendant a notice of assignment and confirmation of payment. (Id., ¶¶ 13-14.) Defendant signed the notice and confirmation. (Id., ¶ 14.) This action arises from Defendant’s failure to pay for $90,000 worth of transport services provided by VNG. (Id., ¶¶ 17-18.)      

            On April 10, 2023, Defendant filed the instant motion to quash for lack of personal jurisdiction. While Plaintiff is a California company, Defendant resides in Washington, and VNG is located in North Carolina.  

LEGAL STANDARD

A defendant may serve and file a notice of motion to quash service of summons on the ground that the court lacks jurisdiction. (Code Civ. Proc., § 418.10, subd. (a).) “When a court . . . finds that in the interest of substantial justice an action should be heard in a forum outside this state, the court shall stay or dismiss the action in whole or in part on any conditions that may be just.” (Id., § 410.30, subd. (a).) “The court may dismiss without prejudice the complaint in whole, or as to that defendant, when dismissal is made pursuant to Section 418.10.” (Id., § 581, subd. (h).)

A court may exercise personal jurisdiction over a defendant if the defendant has established sufficient “minimum contacts” with the forum state, and the exercise of jurisdiction would not offend “traditional notions of fair play and substantial justice.” (In re Marriage of Fitzgerald & King (1995) 39 Cal.App.4th 1419, 1425-26.)

A defendant may establish sufficient minimum contacts with the forum state in one of two ways. For a court to exercise general jurisdiction, the defendant must have contact with the forum state that is substantial, continuous, and systematic. (Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 445.) In such a case, the cause of action need not be related to the defendant’s contact with the forum state. (Id. at p. 446.) For a court to exercise specific jurisdiction, the following elements must be met: (1) the defendant has purposefully availed themselves of forum benefits; (2) the controversy is related to or arises out of the defendant’s contacts with the forum; and (3) the assertion of personal jurisdiction would comport with fair play and substantial justice. (Snowney v. Harrah’s Entertainment, Inc. (2005) 35 Cal.4th 1054, 1062.)

When personal jurisdiction is challenged by a nonresident defendant, the burden of proof is upon the plaintiff to demonstrate by a preponderance of the evidence that minimum contacts exist between the defendant and the forum state to justify imposition of personal jurisdiction. (Mihlon v. Sup. Ct. (1985) 169 Cal.App.3d 703, 710.) Once facts showing minimum contacts with the forum state are established, it becomes the defendant’s burden to demonstrate that the exercise of jurisdiction would be unreasonable. (Vons, supra, 14 Cal.4th at p. 447.)

DISCUSSION

I. Minimum Contacts

There is no dispute that Defendant lacks continuous and systematic contacts with California to justify general jurisdiction. Instead, Plaintiff contends that the Court has specific jurisdiction because Defendant reached out and availed itself of California laws by acknowledging the assignment and signing the payment confirmation with the knowledge that payment would be remitted to Plaintiff in California.

            “Purposeful availment of forum benefits is only satisfied when the defendant purposefully and voluntarily directs his or her activities toward the forum so that he or she should expect, by virtue of the benefit he or she receives, to be subject to the court's jurisdiction based on his or her contacts with the forum.” (Moncrief v. Clark (2015) 238 Cal.App.4th 1000, 1006, internal citations omitted.)

            Moncrief suggests that a single transaction is sufficient for purposeful availment if the defendant targets a California resident for a specific purpose related to the subject of the action. (Moncrief, supra, 238 Cal.App.4th at p. 1007.) In Moncrief, the defendant “purposefully availed himself of the benefits of California when he communicated via telephone and e-mail with [the plaintiff] for the purpose of facilitating the farm equipment sale” at the heart of the lawsuit. (Ibid.) Plaintiff also relies on Epic Communications, Inc. v. Richwave Technology, Inc. (2009) 179 Cal.App.4th 314, 329, where it was purposeful availment for a defendant to sign a non-disclosure agreement in California, an agreement precedent to the subsequent at-issue contract, and to attend two meetings in California to negotiate the at-issue contract. Lastly, Plaintiff cites to Luberski, Inc. v. Oleificio F.LLI Amato S.R.L. (2009) 171 Cal.App.4th 409, 415, where an Italian olive oil seller purposefully availed itself of California by negotiating contractual terms through faxes sent to California, agreeing to ship $406,000 worth of olive oil to California, and injuring the plaintiff in California.

            The instant case is distinguishable because “there is no evidence that defendant ever expressly reached out to California in search of this or any other business opportunity.” (See Shisler v. Sanfer Sports Cars, Inc. (2006) 146 Cal.App.4th 1254, 1262.) The factoring agreement was entered into between Plaintiff and VNG, without any input from VNG’s customers. (See Johnson Decl. ¶ 3.) VNG’s customers/debtors, including Defendant, were merely notified of the assignment and instructed to pay Plaintiff directly. (Id., ¶ 5, Ex. B; Compl. ¶ 8.) Defendant passively received information and instructions, and while it signed the papers to acknowledge the assignment, that is not sufficient “evidence of express aiming or intentional targeting.” (See Shisler, supra, 146 Cal.App.4th at p. 1260.)

It is undisputed that Defendant made no payments and therefore did not remit anything to California. Even if Defendant had made any payments, the payments could have been made electronically to a bank account with no specified address. (See Johnson Decl., Ex. B.) Plaintiff is the one who reached out to Defendant. Defendant did not purposefully avail itself of California benefits. Defendant’s contract with VNG provides for services exclusively outside of California and requires disputes to be arbitrated in Washington. (Neghina Decl., Ex. 1.) This is unlike the cases cited by Plaintiff, where the defendants specifically reached out to California to negotiate the subject transactions. Therefore, the evidence is insufficient to establish Defendant’s minimum contacts with California. For this reason alone, the Court cannot exercise personal jurisdiction over Defendant.

II. Reasonableness of Exercising Jurisdiction

Furthermore, litigating the case in California would not comport with notions of fair play and substantial justice. (See Snowney, supra, 35 Cal.4th at p. 1062.) “In making this determination, the court must consider the burden on the defendant, the interests of the forum State, and the plaintiff's interest in obtaining relief. It must also weigh in its determination the interstate judicial system's interest in obtaining the most efficient resolution of controversies; and the shared interest of the several States in furthering fundamental substantive social policies.” (Id. at p. 1070, internal citations omitted.)

This case arises from a factoring agreement between Plaintiff and a non-California company for assignment of payment rights under a contract between two non-California companies. Defendant’s contract with VNG provides for services exclusively outside of California and requires disputes to be arbitrated in Washington. (Neghina Decl., Ex. 1.) Payment under the assignment could have been made electronically to a bank account. (Johnson Decl., Ex. B.) Therefore, contrary to Plaintiff’s assertion, Defendant does not owe “an ongoing obligation to Plaintiff to be performed in California.” (See Opp. 8:2-3.)

Based on these facts, California has little interest in the litigation beyond the bare fact that Plaintiff happens to be a California company. This one factor does not outweigh the others which support litigation in Washington.

The burden on Defendant would be substantial, and it would be inefficient to hold trial in California, given Defendant resides in Washington and contracted for services outside of California. Therefore, there should be little to no evidence pertinent to the dispute in California. Making Defendant litigate in California would be unreasonable under these circumstances. Plaintiff argues that “there would be little burden on Defendant as most if not all litigation related activities are now conducted virtually. Therefore, Defendant can appear and participate in any hearing while any place in the world.” (Opp. 8:4-6.) But this is equally true for Plaintiff. Given the facts, Defendant would bear a greater burden by litigating the case in California than Plaintiff would by litigating the case in Washington.

Plaintiff also argues that “granting the underlying motion and requiring Plaintiff to refile this action in another Court will be less efficient as it will simply burden another Court with this matter.” (Opp. 8:8-9.) However, the complaint was filed in February 2023, and the litigation has barely begun. The only reason any litigation has occurred in California at all is because Plaintiff filed the action in the wrong forum. Any plaintiff can make the circular argument that because the case was already filed in California, it may as well stay in California. This would render all motions to quash meaningless. The law recognizes that a forum may be changed despite the plaintiff’s initial choice. The cost for Plaintiff to refile the action would be low. Plaintiff does not dispute that Washington is a suitable forum that can provide an adequate remedy.

Defendant had nothing to do with the factoring agreement between Plaintiff and VNG and did not volunteer to make payments to California. Defendant’s refusal to pay is based on its assertion that VNG failed to provide services; it is unrelated to the assignment or factoring agreement. Disputes between Defendant and VNG arising from the services are supposed to be arbitrated in Washington. Therefore, Washington has a greater interest in this case than California.

            Because there is no evidence to support either general or specific jurisdiction, the Court cannot exercise personal jurisdiction over Defendant. Even if the evidence supported personal jurisdiction, exercising it in this case would be unreasonable.  

CONCLUSION

            Defendant’s motion to quash is GRANTED.