Judge Jon R. Takasugi, Case 22STCV37405 2023-02-15 Tentative Ruling

Judge: Jon R. Takasugi, Case: 22STCV37405, Date: 2023-02-15 Tentative Ruling

Case Number: 22STCV37405 Hearing Date: February 15, 2023 Dept: 17

Superior Court of California

County of Los Angeles

DEPARTMENT 17

TENTATIVE RULING

HK YUNTAO, INC. LIMITED

vs.

AMERICAN FASHION NETWORK, et al.

Case No.: 22STCV37405

Hearing Date: February 15, 2023

Defendant’s motion to quash is DENIED.

On 11/29/2022, Plaintiff HK Yuntao, Inc. Limited (Plaintiff) filed suit against American Fashion Network, LLC, OTR Corporate Apparel, LTD, Jacqueline Ferrari aka Jacqueline Wilson, alleging: (1) breach of contract; (2) goods sold and delivered; (3) account stated; (4) open book account; (5) fraud; and (6) unfair business practices.

Now, specially appearing Defendant Jacqueline Ferrari moves to quash service of summons.

Factual Background

Plaintiff is the assignee of the claims of Shanghai Nex-T Co., Ltd. Plaintiff alleges that within the last four years, “Defendant AFN, on the one hand, and Nex-T, on the other hand, entered into a series of agreements pursuant to which Defendant AFN requested, and Nex-T agreed, that Nex-T manufacture and ship garments to Defendant AFN (or Defendant AFN’s customers) at agreed-upon prices, styles and quantities.” The Complaint refers to these orders collectively as the Nex-T Orders. (Complaint ¶ 14.)

Plaintiff also alleges that “Defendants AFN and OTR, on the one hand, and Plaintiff, on the other hand, entered into a series of agreements pursuant to which Defendants AFN and OTR requested, and Plaintiff agreed that Plaintiff manufacture and ship garments to Defendants AFN and OTR (or their customers) at agreed-upon prices, styles and quantities.” (Complaint ¶ 15.) The Complaint refers to these orders collectively as the Yuntao Orders.

Plaintiff alleges that pursuant to these orders, Plaintiff and Next-T shipped and Defendants AFN and OTR accepted the garments that Defendants AFN and OTR had ordered at the prices, and in the styles and quantities and specifications Defendants AFN and OTR had requested. (Complaint ¶ 17.)

Discussion

Defendant here argues that she lacks the requisite contacts with California for this court to exercise jurisdiction over here.

The Court disagrees.

Personal jurisdiction can be either “general” or “specific”.

To establish general jurisdiction, Plaintiff must show that the specially appearing Defendant is “domiciled in the forum state” or that her activities in California are sufficiently “substantial, continuous, and systematic” to “render [her] essentially at home in the forum State.” (F. Hoffman-La Roche v. Superior Court (2005) 130 Cal. App. 4th 782, 796, 30 Cal. Rptr .3d 407.) Here, Defendant resides in New York. Defendant owns no real property here, she maintains no bank accounts here, she owns no interest in any California business entity, she does not maintain a residence here, and she was not here when served. (Ferrari Decl., ¶ 2.) As such, there are no facts to show that she has the substantial, continuous and systemic contacts in California required to justify general jurisdiction. Plaintiff concedes this in opposition.

To establish specific jurisdiction, Plaintiffs must show: “(1) the defendant has purposefully availed himself or herself 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.” (Elkman v. Nat'l States Ins. (2009) 173 Cal. App. 4th 1305 1314.). Jurisdiction is lacking unless all three elements are satisfied. (Calder v. Jones (1984) 465 U.S. 783, 790.)

As to the first element, over $3,400,000 of the goods at issue in this lawsuit were shipped directly to the ports of Long Beach and Los Angeles in California. (Jung Decl., ¶ 9; Ex. 1.) Thus, while none of the alleged agreements were actually negotiated, entered into and/or consummated in California, the shipment of millions of dollars of goods directly to California’s ports, and the sale of those goods within California, as part of a sales agreement constitutes a purposeful availment of California as a forum.

Generally, a director or officer of a corporation does not incur personal liability for torts of the corporation merely by reason of his or her official position, unless he or she participates in the wrongdoing or authorizes or directs that it be done. (See PMC v. Kadisha, (2000) 78 Cal.App.4th 1368, 1378, 1381.) Further, the liability of corporate officers or directors does not derive from their corporate positions, per se, but, rather, from their own tortuous conduct.

However, here, Plaintiff alleges that Defendant Ferrari is “the sole owner, decisionmaker for, and the person in control of, each of Defendants AFN and OTR.” (Complaint ¶ 4.) As such, Plaintiff alleges that Defendant Ferrari personally participated and directed the underlying breaches of contract and fraud, and therefore has set forth a basis for her personal liability. Plaintiff also alleges the Defendant Ferrari’s entities are alter-egos.

Plaintiff also submitted evidence that Ferrari markets herself, in her LinkedIn profile, as CEO, Founder and Owner of the Entity Defendants, and represents that she and Entity Defendants conduct business in “Syracuse, Milwaukee, Los Angeles, Guatemala City.” (Khalili Decl., ¶ 6; Ex. 8.) Plaintiff also is informed and believes that the Entity Defendants solely owned and operated by Defendant Ferrari store goods in warehouses in California, including some of the goods that Plaintiff shipped to California on behalf of the Entity Defendants for sale to Amazon—one of the Entity Defendants’ customers. (Jung Decl., ¶ 12; Ex. 2.)

Based on this evidence, the Court finds that the first element is satisfied.

As to the second element, the plaintiff must demonstrate “a connection between the forum and the specific claims at issue” - not merely a relationship between the forum and the subject matter of the action. (Bristol-Myers Squib. v. Superior Court (2017) 137 S. Ct. 1773, 1780-81.) Here, Plaintiffs claims arise out of the provision of approximately $4,000,000 in goods. Of the $4,000,000 in goods, $3,400,000 of those goods were directly shipped to California, and sold to retailers and consumers in California.

In Greenwell v. Auto-Owners Ins. (2015) 233 Cal. App. 4th 783, 163, the plaintiff was attempting to sue in California for a real property located in Arkansas, despite the fact that the defendant:

does not conduct and has not conducted any business in California. The company is not licensed or authorized to do business in California, does not write policies for California, does not have any agents licensed to sell its policies in California, does not solicit business in California, does not have any employees in California, does not pay taxes in California, and has never commenced any legal action in California.

(Id. at p. 798.)

Here, by contrast, Plaintiff has submitted substantial evidence to show a connection between Entity Defendants, Defendant Ferrari, and the state of California.

Moreover, this case concerns $3,400,000 worth of goods with a direct connection to California.

Finally, as to the third element, the exercise of jurisdiction must comport with traditional notions of fair play and substantial justice. Here, Defendant has not submitted any evidence to show that any relevant documents cannot be produced electronically, or that witnesses could not appear remotely.

Based on the foregoing, Defendant’s motion to quash is denied.

It is so ordered.

Dated: February , 2023

Hon. Jon R. Takasugi
Judge of the Superior Court

Parties who intend to submit on this tentative must send an email to the court at smcdept17@lacourt.org by 4 p.m. the day prior as directed by the instructions provided on the court website at www.lacourt.org. If a party submits on the tentative, the party’s email must include the case number and must identify the party submitting on the tentative. If all parties to a motion submit, the court will adopt this tentative as the final order. If the department does not receive an email indicating the parties are submitting on the tentative and there are no appearances at the hearing, the motion may be placed off calendar.

Due to Covid-19, the court is strongly discouraging in-person appearances. Parties, counsel, and court reporters present are subject to temperature checks and health inquiries, and will be denied entry if admission could create a public health risk. The court encourages the parties wishing to argue to appear via L.A. Court Connect. For more information, please contact the court clerk at (213) 633-0517. Your understanding during these difficult times is appreciated.

Superior Court of California

County of Los Angeles

DEPARTMENT 17

TENTATIVE RULING

HK YUNTAO, INC. LIMITED

vs.

AMERICAN FASHION NETWORK, et al.

Case No.: 22STCV37405

Hearing Date: February 14, 2023

Entity Defendants’ motion to dismiss is DENIED.

Now, Defendants American Fashion Network LLC and OTR Corporate Apparel Ltd. (collectively, Entity Defendants) move to dismiss on grounds of forum non conviens.

Factual Background

Discussion

Entity Defendant argue that this action is not proper in California because this action has no connection with California. More specifically, Entity Defendants contend:

- Plaintiff is a Hong-Kong entity, and the assignor of a Chinese entity known as Shanghai Nex-T Co., Ltd.

- None of those agreements were negotiated, executed and/or performed anywhere in California. (Sullivan Decl. ¶ 4.)

- The writings referred to were sent to and from New York State and China and contained no venue or law provisions identifying California either as the State supplying the applicable law or before which venue could properly be laid. (Ibid.)

- All witnesses and documents pertaining to this dispute are in New York and China. (Sullivan Decl. ¶ 4) All of the transactions, occurrences and documentation relevant thereto occurred in one or both of those two locations. (Id. at p. ¶ 5]

- Though it is true that the Entity Defendants are qualified to do business in California, that is only because they employ one Californian each as part of their design division, and those individuals had nothing whatsoever to do with the transactions and occurrences underlying this Complaint. (Id. at ¶ 6.)

- Although some goods were “dropped shipped” to brick and mortar stores in California, that was only a small percentage of the transactions and occurred only because the customers were nation-wide retailers.

However, as a preliminary matter, Entity Defendants seek relief based on CCP section 418.10(a)(2), yet CCP section 410.30 expressly states that “[t]he provisions of Section 418.10 do not apply to a motion to stay or dismiss the action by a defendant who has made a general appearance.” (CCP § 410.30(b).)

Moreover, in opposition, Plaintiff submitted evidence that:

- Over $3,400,000 of the goods at issue in this lawsuit were shipped directly to the ports of Long Beach and Los Angeles, in California. (Jung Decl., ¶ 9; Ex. 1.)

- The Entity Defendants admit that they are qualified to conduct business in and have at least two employees in the State of California. (Motion, 2:12-13; Declaration of Patrick Sullivan, ¶ 6.)

- AFN lists its address in California as 2301 East 7th Street, Los Angeles, California 90023.

- (Khalili Decl., ¶ 4; Ex. 5.)

- On their website, www.americanfashionnetwork.com, the Entity Defendants expressly represent that they conduct business in California, Wisconsin and New York, referring, among other things, to establishing offices in Los Angeles, California “the epicenter of a leading global fashion mecca …” (Khalili Decl., ¶ 5; Ex. 6, pp. 2-3.)

- On their website, the Entity Defendants also represent that they partner with manufacturing facilities in California, including, without limitation, a cutting and sewing facility in Garden Grove, California. (Khalili Decl., ¶ 5; Ex. 7.)

- The Entity Defendants also advertise having a sample room located in Los Angeles, its only U.S. location for such a facility. (Khalili Decl., ¶ 5; Ex. 6; p. 4.)

Moreover, as noted by Plaintiff, the Entity Defendants “fail to point to a single document which cannot be produced in California, or a single third-party witness whose documents and testimony are required but cannot be produced with this action in California. Indeed, all documents may be produced electronically and all witnesses may appear remotely.” (Opp., 3: 14-18.)

Based on the foregoing, Entity Defendants’ motion to dismiss is denied.

It is so ordered.

Dated: February , 2023

Hon. Jon R. Takasugi
Judge of the Superior Court

Parties who intend to submit on this tentative must send an email to the court at smcdept17@lacourt.org by 4 p.m. the day prior as directed by the instructions provided on the court website at www.lacourt.org. If a party submits on the tentative, the party’s email must include the case number and must identify the party submitting on the tentative. If all parties to a motion submit, the court will adopt this tentative as the final order. If the department does not receive an email indicating the parties are submitting on the tentative and there are no appearances at the hearing, the motion may be placed off calendar.