Judge: Michael P. Linfield, Case: 23STCV24903, Date: 2024-02-01 Tentative Ruling
Case Number: 23STCV24903 Hearing Date: February 1, 2024 Dept: 34
SUBJECT: Motion to Quash Service of Summons and
Complaint for Lack of Jurisdiction
Moving Party: Specially-Appearing
Defendant Cogstate, Inc.
Resp. Party: Plaintiff Dana Hughes
SUBJECT: Application for Sherwin M. Yoder to
Appear as Counsel Pro Hac Vice
Moving Party: Specially-Appearing
Defendant Cogstate, Inc.
Resp. Party: None
The Motion to Quash is CONTINUED until June 18, 2024. The Parties are
granted leave to conduct limited discovery on the sole issue of personal
jurisdiction until May 1, 2024. Any motions concerning this limited discovery
shall be heard by May 16, 2024. Any additional brief by either Party on the motion
to quash is due by May 31, 2024. Such briefs shall be limited to 10 pages. A hearing is set for June 18, 2024 at 8:30 am
on the question of personal jurisdiction.
Conditioned on Counsel
Applicant providing proof of payment to the State Bar of California, the Court
GRANTS the Verified Application.
BACKGROUND:
On October 12, 2023, Plaintiff Dana Hughes filed her
Complaint against Defendant Cogstate, Inc. on a cause of action for violation
of California Penal Code section 502, subdivision (e).
On December 21, 2023, Specially-Appearing Defendant
Cogstate, Inc. filed: (1) Motion to Quash Service of Summons and Complaint for
Lack of Jurisdiction (“Motion to Quash”); and (2) Application for Sherwin M.
Yoder to Appear as Counsel Pro Hac Vice (“Application to Appear Pro Hac Vice”).
In support of its Motion to Quash, Specially-Appearing Defendant concurrently
filed: (1) Declaration of Krisi Geddes; (2) Declaration of Paul Thomas; and (3)
Proposed Order.
On December 27, 2023, in support of the Application to
Appear Pro Hac Vice, Specially-Appearing Defendant filed its Proof of Service.
On January 8, 2024, Plaintiff filed her Opposition to the
Motion to Quash.
On January 12, 2024, Specially-Appearing Defendant filed
its Reply in support of the Motion to Quash.
ANALYSIS:
I.
Motion to Quash
A. Legal
Standard
“A defendant, on or before the last day
of his or her time to plead or within any further time that the court may for
good cause allow, may serve and file a notice of motion for one or more of the
following purposes: (1) To quash service of summons on the ground of lack of
jurisdiction of the court over him or her. . . .” (Code Civ.
Proc., § 418.10, subd. (a)(1).)
“A court of this state
may exercise jurisdiction on any basis not inconsistent with the constitution
of this state or of the United States.” (Code Civ. Proc., § 410.10.)
“California's long-arm statute authorizes
California courts to exercise jurisdiction on any basis not inconsistent with
the Constitution of the United States or the Constitution of California. A
state court's assertion of personal jurisdiction over a nonresident defendant
who has not been served with process within the state comports with the
requirements of the due process clause of the federal Constitution if the
defendant has such minimum contacts with the state that the assertion of
jurisdiction does not violate ‘traditional notions of fair play and substantial
justice.’” (Vons Cos., Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th
434, 444–45, quoting Int’l Shoe Co. v. Washington (1945) 326 U.S. 310,
316, internal quotation and other citations omitted.)
“Personal
jurisdiction may be either general or specific. A nonresident defendant may be
subject to the general jurisdiction of the forum if his or her
contacts in the forum state are substantial, continuous and systematic. In such
a case, it is not necessary that the specific cause of action alleged be
connected with the defendant's business relationship to the forum. Such a defendant's contacts with the forum are
so wide-ranging that they take the place of physical presence in the forum as a
basis for jurisdiction. (Vons Cos., Inc., supra, at pp.
445–46, cleaned up.)
“If the nonresident defendant does not have substantial and
systematic contacts in the forum sufficient to establish general jurisdiction,
he or she still may be subject to the specific jurisdiction of the forum, if the defendant has purposefully
availed himself or herself of forum benefits, and the controversy is related to
or arises out of a defendant's contacts with the forum.” (Vons Cos., Inc.,
supra, at p. 446, cleaned up.)
“When a defendant moves to quash service of
process on jurisdictional grounds, the plaintiff has the initial burden of
demonstrating facts justifying the exercise of jurisdiction. Once facts showing minimum
contacts with the forum state are established, however, it becomes the
defendant's burden to demonstrate that the exercise of jurisdiction would be
unreasonable.” (Vons Cos., Inc., supra, at p. 449, citations
omitted.)
B. Discussion
1. The
Parties’ Arguments
Specially-Appearing Defendant moves the Court to quash the summons and
complaint as to Specially-Appearing Defendant for lack of personal
jurisdiction. (Motion to Quash, p. 13:18–21.)
Specially-Appearing Defendant argues: (1) that Plaintiff sued the wrong
entity, which should have been Cogstate, Ltd.; (2) that Specially-Appearing
Defendant is not subject to general jurisdiction in California; (3) that
Specially-Appearing Defendant is not subject to specific jurisdiction in
California; and (4) that pursuant to the mandatory forum selection clause in
the terms of service on the proper defendant’s website, New York is the proper
forum for this action. (Motion to Quash, pp. 5:25–27, 6:1–3, 6:10, 7:17–18,
13:2–16.)
Plaintiff disagrees, arguing: (1) that the Court may exercise personal
jurisdiction over Specially-Appearing Defendant; (2) that Specially-Appearing
Defendant’s about personal jurisdiction are not correct; and (3) that if the
Court has questions about the sufficiency of Specially-Appearing Defendant’s
contacts with California, Plaintiff requests leave to conduct limited discovery
on the issue of personal jurisdiction. (Opposition, pp. 3:8, 6:20, 10:1–3.)
In its Reply, Specially-Appearing
Defendant reiterates its arguments.
2. The
Entity Sued
Specially-Appearing Defendant argues that Plaintiff sued the wrong
entity. (Motion to Quash, p. 5:25.) Specifically, the argument is that
Plaintiff should have sued Cogstate, Ltd. (which is the parent company), not
Cogstate, Inc. (which is the wholly-owned subsidiary of Cogstate, Ltd.),
because Cogstate, Ltd. is the owner and operator of the website at issue. (Id.
at pp. 5:26–27, 6:1–3.)
It is not yet clear whether this distinction should matter at this
time. Generally speaking, Plaintiff is allowed to file a complaint against whomever
she wants; if it turns out that another entity was actually the proper
defendant, Plaintiff may amend her Complaint accordingly.
However, this is a motion to quash for lack of personal jurisdiction,
not a demurrer or a motion for summary judgment. The only relevant question at
this time is whether the Court has personal jurisdiction over the defendant
that was sued (i.e., Cogstate, Inc.).
3. General
Jurisdiction
a. Legal
Standard
“General jurisdiction exists when the defendant's contacts
with the forum state are so substantial or continuous and systematic as to make
it consistent with traditional notions of fair play and substantial justice to
subject the defendant to the jurisdiction of the forum even when the cause of
action is unrelated to the defendant's contacts with the forum.” (Brue v. Al Shabaab (2020)
54 Cal.App.5th 578, 589, quotations and internal quotation marks omitted.)
“General
jurisdiction over a corporation exists when that corporation might be fairly
regarded as at home in that state. . . . Traditionally, a corporation is at home in its
place of incorporation and its principal place of business. But in an exceptional case a corporation's
operations in a forum other than its formal place of incorporation or principal
place of business may be so substantial and of such a nature as to render the
corporation at home in that state. To test that possibility, courts look to a
variety of factors, including 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, supra, 54 Cal.App.5th at pp. 590–591,
quotations and internal quotation marks omitted.)
“The standard for general jurisdiction
is considerably more stringent than that for specific jurisdiction. A defendant is subject to
general jurisdiction when it has substantial, continuous, and systematic
contacts in the forum state, i.e., its contacts with the forum are so wide-ranging
that they take the place of a physical presence in the state. In assessing a
defendant's contacts with the forum for purposes of general jurisdiction, we
look at the contacts as they existed from the time the alleged conduct occurred
to the time of service of summons. For a corporation, its domicile, place of
incorporation, and principal place of business within a state constitute the
paradigm bases for establishing general jurisdiction. A defendant corporation's
substantial sales in a state are insufficient to establish general
jurisdiction, as the general jurisdiction analysis turns on the nature of the
defendant's continuous corporate operations within a state.” (Strasner v. Touchstone Wireless Repair
& Logistics, LP (2016) 5 Cal.App.5th 215, 222–223, citations and
italics omitted.)
“However, even if a defendant
lacks sufficient direct contacts with a forum to establish general
jurisdiction, a plaintiff may impute the minimum contacts of a California
subsidiary to a nonresident parent through theories of alter ego or agency. To invoke the alter ego doctrine, a plaintiff
must show there is such a unity of interest and ownership between the two
entities that they do not have separate personalities and it would be
inequitable to treat the conduct as attributable to only one of the entities. To impute contacts under a
theory of agency, a plaintiff must demonstrate that the parent exercised
pervasive and continuous control over the subsidiary's day-to-day operations
that went beyond the normal parent-subsidiary relationship.” (Strasner, supra,
at p. 223, citations and internal quotation marks omitted.)
b. Discussion
In her Opposition, Plaintiff has only cited the standard for general
jurisdiction but not actually contended that there is general jurisdiction over
Specially-Appearing Defendant. (Opposition, pp. 3–6.) Thus, the Court “need
only consider whether specific jurisdiction exists.” (Pavlovich v. Super.
Ct. (2002) 29 Cal.4th 262, 269.)
4. Specific
Jurisdiction
a. Legal
Standard
“Specific
jurisdiction is determined under a three-part test: (1) The nonresident
defendant must do some act or consummate some transaction with the forum or
perform some act by which he purposefully avails himself of the privilege of
conducting activities in the forum, thereby invoking the benefits and
protections of its laws; (2) the claim must be one which arises out of or
results from the defendant's forum-related activities; and (3) exercise of
jurisdiction must be reasonable.” (Jewish Def. Org. v. Super. Ct. (1999)
72 Cal.App.4th 1045, 1054 [cleaned up].)
“The purposeful
availment inquiry focuses on the defendant's intentionality. This prong is only satisfied when the
defendant purposefully and voluntarily directs his activities toward the forum
so that he should expect, by virtue of the benefit he receives, to be subject
to the court's jurisdiction based on his contacts with the forum. Thus, 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,
or of the unilateral activity of another party or a third person. When a defendant purposefully avails
itself of the privilege of conducting activities within the forum State, 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.” (Pavlovich, supra, 29 Cal.4th at p. 269 [cleaned
up].)
“It is the
plaintiff's burden to allege the facts in a verified submission on which to premise personal jurisdiction.” (Hogue
v. Hogue (2017) 16 Cal.App.5th 833, 837 [citations omitted, italics in
original].)
“The relevant
time period for measuring the nature and quality of a nonresident defendant's
contacts with the forum for purposes of specific jurisdiction is at the time the
plaintiff's cause of action arose.” (Strasner, supra, 5
Cal.App.5th at p. 226.)
“Once a court has
concluded that the first two prongs of the test have been satisfied, the burden
shifts to the defendant to show the exercise of jurisdiction would be
unreasonable under the third prong.” (Strasner, at p. 226, citations
omitted.)
“Even if minimum contacts are
present, an assertion of jurisdiction by California over a nonresident company
is improper if it would not comport with fair play and substantial justice. Factors relevant to this determination include
the burden on the defendant, the forum State’s interest in adjudicating the
dispute, and the plaintiff’s interest in obtaining convenient and effective
relief. The defendant bears the burden of presenting a compelling
case showing that subjecting it to suit in California would be unreasonable.” (West
Corp. v. Super. Ct. (2004) 116 Cal.App.4th 1167, 1178, cleaned up.)
b. Discussion
Specially-Appearing Defendant argues that it is not subject to specific
jurisdiction in California for Plaintiff’s claims. (Motion to Quash, p.
7:17–18.) Specifically, Specially-Appearing Defendant argues: (1) that
Plaintiff does not allege purposeful direction; (2) that Plaintiff’s claims do
not arise from Specially-Appearing Defendant’s forum-directed activities; and
(3) that the exercise of jurisdiction would be unreasonable. (Id. at pp.
8:20, 10:18–19, 11:19.)
Plaintiff disagrees, arguing: (1) that Specially-Appearing Defendant
has purposefully availed itself of California benefits by creating a website
where Californians can apply for and purchase Defendant’s services; (2) that
Specially-Appearing Defendant conduct relates to California because website
visitors from California can interact with the website, inquire about products
and services through the website, and use it to conduct sales; and (3) that the
allegations here, of secret spyware obtaining Plaintiff’s hidden and
confidential information without Plaintiff’s consent when Plaintiff visited
Specially-Appearing Defendant’s website, create a sufficient connection here
between the conduct and the forum. (Opposition, pp. 5:8–16, 5:25–27, 6:1,
6:14–19.)
In its Reply, Specially-Appearing Defendant makes a number of
responses, including: (1) that Specially-Appearing Defendant does not own or
operate the website, thus it cannot be subject to personal jurisdiction due to
anything involving the website; (2) that Specially-Appearing Defendant does not
directly sell any products or services through the website; (3) that Plaintiff
did not claim that she specifically interacted with any of the features on the
website; (4) that the mere browsing of a website without more is not sufficient
to show that the claim arises out of forum-related activities; and (5) that the
exercise of jurisdiction would be unreasonable because Specially-Appearing
Defendant does not have a physical presence in California, less than 5% of its
employees are located in California, all of those employees work remotely from
their private residences, none of them were involved with the software at
issue, the website is not controlled by Specially-Appearing Defendant, all of
the evidence and witnesses that would be relied upon are located outside of
California, and California’s interests in adjudicating cases that involve its
residents are not sufficient to make it a fair forum. (Reply, pp. 4:1–13,
6:4–23, 7:6–18.)
There are clearly many issues to consider before deciding that the
Court has specific personal jurisdiction here.
For example, there is an open question about whether services can be
purchased through the website at issue. Notably, Specially-Appearing
Defendant’s General Counsel declares: (1) that the website is “informational in
nature and does not allow visitors to make a purchase on the site”; (2) that
the parent company “does not offer products or services directly to individual
consumers, in California or elsewhere”; and (3) that the parent company “does
not directly sell any products or services on the Website. (Decl. Geddes, ¶¶
5–7.) But if the website provides access to salespeople who then upsell
products to Californians, that would be sufficient for a finding of purposeful
availment. (See, e.g., West Corp., supra, 116 Cal.App.4th
at pp. 1176, 1179 [concluding that telemarketers who upsell a product to
residents of a forum state have purposefully availed themselves of the
privileges of that forum state].)
Moreover, while a substantial number of sales is not sufficient for
general jurisdiction, it is established that “under California case law, making a
substantial number of sales of goods or services to California residents via
one's own website constitutes purposeful availment. The vast majority of
federal cases are in accord.” (Thurston v. Fairfield Collectibles of
Georgia, LLC (2020) 53 Cal.App.5th 1231, 1240 [citations omitted].) In Thurston,
8% of a company’s sales — which in that case were sales of more than
$300,000.00 — was enough for the company at issue to have the virtual
equivalent of a brick-and-mortar store in California and be on notice that it
could be sued in California.
Here, Specially-Appearing Defendant’s General Counsel declares that
“[a]pproximately 7% of [the parent company’s] total revenue is generated from
California.” (Decl. Geddes, ¶ 10.) While it is not immediately clear exactly
how much money that entails, it appears to be a substantial amount of the
parent company’s sales, sufficient for a finding of personal availment.
“When a defendant challenges
jurisdiction through a motion to quash, the plaintiff bears the burden to
demonstrate facts, as to each nonresident defendant, justifying the exercise of
jurisdiction by a preponderance of evidence. The plaintiff must provide
specific evidentiary facts, through affidavits and other authenticated
documents, sufficient to allow the court to independently conclude whether
jurisdiction is appropriate. The plaintiff cannot
rely on allegations in an unverified complaint or vague and conclusory
assertions of ultimate facts.” (Strasner, supra, 5 Cal.App.5th at
pp. 221–222, citations omitted.)
The primary issue appears to
be that Specially-Appearing Defendant has repeatedly claimed that it does not
own or operate the website at issue, a fact to which Specially-Appearing
Defendant’s General Counsel has testified under penalty of perjury. In
contrast, Plaintiff has not provided any evidence to the Court on this issue. In fact, Plaintiff has not yet
filed a verified complaint or any declarations in support of its claim that the
Court has personal jurisdiction over Specially-Appearing Defendant.
Thus, while it might be the
case that the Court has specific personal jurisdiction over Specially-Appearing
Defendant’s parent company, Cogstate, Ltd., the Court has not yet been
presented with any evidence that the Court has specific personal jurisdiction
over Specially-Appearing Defendant. Furthermore, for the Court to impute
contacts under a theory of agency, Plaintiff “must demonstrate that the parent
exercised pervasive and continuous control over the subsidiary's day-to-day
operations that went beyond the normal parent-subsidiary relationship.” (Strasner,
supra, at p. 223.)
Plaintiff has requested leave
to conduct limited discovery on the issue of personal jurisdiction.
(Opposition, p. 10:1–9.)
“A trial court has the
discretion to continue the hearing on a motion to quash service of summons for
lack of personal jurisdiction to allow the plaintiff to conduct discovery on
jurisdictional issues.” (HealthMarkets, Inc. v. Super. Ct. (2009) 171
Cal.App.4th 1160, 1173, citation omitted.)
“A plaintiff attempting to
assert jurisdiction over a nonresident defendant is entitled to an opportunity
to conduct discovery of the jurisdictional facts necessary to sustain its
burden of proof. In order to prevail on a motion for a continuance for
jurisdictional discovery, the plaintiff should demonstrate that discovery is
likely to lead to the production of evidence of facts establishing
jurisdiction.” (In re Auto. Antitrust Cases I & II (2005) 135
Cal.App.4th 100, 127 [citations omitted].)
“A motion to quash under section
418.10 must be supported by evidence on the issue of the defendant’s contacts
with the state. The parties are thus permitted to conduct discovery on the
issue prior to the hearing on the motion. The defendant’s conduct of discovery
on the jurisdictional issue, rather than the merits of the case, is not
considered a general appearance in the action.” (Factor Health Mgmt. v.
Super. Ct. (2005) 132 Cal.App.4th 246, 250 [citations omitted].)
The Court finds that limited discovery
on the sole issue of personal jurisdiction would be appropriate. The Court
grants the Parties until May 1, 2024 — which is ninety (90) days from the date of issuance of this Order
— to conduct limited discovery on the sole issue of personal jurisdiction. Any
motions concerning this limited discovery shall be heard by May 16, 2024 — fifteen
(15) days after the close of this limited discovery. The Parties can each
submit an additional brief by May 31, 2024 — fifteen (15) days after the motion
deadline. The Court sets a hearing for June 18, 2024 on the question of
personal jurisdiction.
5. Forum
Selection Clause
a. Legal
Standard
“Our law favors
forum selection agreements only so long as they are procured freely and
voluntarily, with the place chosen having some logical nexus to one of the
parties or the dispute, and so long as California consumers will not find their
substantial legal rights significantly impaired by their enforcement.
Therefore, to be enforceable, the selected jurisdiction must be suitable,
available, and able to accomplish substantial justice. . . . California courts
will refuse to defer to the selected forum if to do so would substantially
diminish the rights of California residents in a way that violates our state's
public policy.” (Am. Online, Inc. v. Super. Ct. (2001) 90 Cal.App.4th 1,
12, quotation and internal quotation marks omitted.)
“The party
opposing enforcement of a forum selection clause ordinarily bears the
substantial burden of proving why it should not be enforced. That burden, however, is reversed when the
claims at issue are based on unwaivable rights created by California statutes.
In that situation, the party seeking to enforce the forum selection clause
bears the burden to show litigating the claims in the contractually designated
forum will not diminish in any way the
substantive rights afforded under California law.” (Verdugo v. Alliantgroup,
L.P. (2015) 237 Cal.App.4th 141, 147–148, cleaned up.)
b. Discussion
The Court does not reach the question of whether the Court should
enforce a forum selection clause here.
C. Conclusion
The Motion to Quash is CONTINUED. The Parties are granted leave to
conduct limited discovery on the sole issue of personal jurisdiction until May 1,
2024. Any motions concerning this limited discovery shall be heard by May 16,
2024. Any additional brief by either Party on the motion to quash is due by May
31, 2024. Such briefs shall be limited to 10 pages. A hearing is set for June 18, 2024 on the
question of personal jurisdiction.
II.
Application to Appear Pro Hac Vice
APPLICATION:
(Cal. Rules of Court, rule
9.40)
CLIENT: Defendant Cogstate, Inc.
PROOF OF SERVICE: OK
CONDITIONS:
1. Associated with
California attorney:
Yes
Brian J. Bergman
BDG Law Group, APLC
10880 Wilshire Boulevard, Suite
1015
Los Angeles, CA 90024-4101
(Verified Application, ¶ 7.)
2. Verified declaration: Yes.
3. Service on State Bar
at SF Office:
Yes. (Proof of Service)
4. Payment of $50 fee to
State Bar:
Yes. (Application, p. 3:14–17.)
5. Good standing and not
currently suspended/disbarred: Yes.
(Verified Application, ¶ 5.)
6. Number of California
appearances in last 2 years: 0
(Verified Application, ¶ 6.)
7. Residence address:
Unknown, but not California
(Verified Application, ¶ 3.)
8. Office address:
Carmody Torrance
Sandak & Hennessey LLP
195 Church Street
New Haven,
Connecticut 06510
(Verified Application, ¶ 2.)
CONCLUSION:
Counsel Applicant seeks admission to appear
as counsel pro hac vice to represent Defendant in this action, and to be associated as co-counsel with Brian J.
Bergman.
Counsel Applicant is a member in good
standing of the United States Supreme Court, the United States Court of Appeals
for the Second Circuit, the United States District Court for the District of
Connecticut, the United States International Trade Commission, the State of Connecticut,
and the State of New York. (Verified Application, ¶ 4.)
Counsel Applicant has not appeared before in
California state courts within the last two years. (Verified Application, ¶ 6.)
Counsel Applicant provides a proof of service for service on the State
Bar of California at its San Francisco address. (Proof of Service). Counsel
Applicant also states that the $50.00 fee to the be admitted pro hac vice has
been paid to the State Bar of California, but Counsel Applicant did not declare
that or provide proof of that payment.
Conditioned on Counsel
Applicant providing proof of payment to the State Bar of California, the Court
GRANTS the Verified Application.