Judge Ronald F. Frank, Case Number: 22TRCV01644, Date: 2023-05-24 Tentative Ruling

Judge: Ronald F. Frank, Case: 22TRCV01644, Date: 2023-05-24 Tentative Ruling

Case Number: 22TRCV01644 Hearing Date: April 5, 2024 Dept: 8

Tentative Ruling

HEARING DATE: April 5, 2023¿

CASE NUMBER: 22TRCV01644

CASE NAME: GSO International, Inc. v. Spartan College of Aeronautics and Technology, et al.

MOVING PARTY: Specially Appearing Defendants, Spartan Education, LLC, erroneously named Spartan College of Aeronautics and Technology, Spartan Global Aviation Training, LLC, Spartan Iraq, LLC, and Rod Zastrow.

RESPONDING PARTY: Plaintiff, GSO International, Inc.

TRIAL DATE: Not Set.

MOTION:¿ (1) Motion to Quash

Tentative Rulings: (1) Motion to Quash is GRANTED, with some oral argument points raised below

I. BACKGROUND¿¿

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A. Factual¿¿

On December 30, 2022, Plaintiff, GSO International, Inc. (“Plaintiff”) filed Complaint against Defendant, Spartan Education (“Defendant”), LLC, erroneously named Spartan College of Aeronautics and Technology (“SCAT”), Spartan Global Aviation Training, LLC, Spartan Iraq, LLC, and Rod Zastrow and DOES 1 through 25. On July 10, 2023, Plaintiff filed a First Amended Complaint (“FAC”) alleging causes of action for: (1) Breach of Contract; (2) Concealment; (3) Violation of California Business & Professions Code § 17200; and (4) Accounting.

Previously, on May 24, 2023, this Court noted in its tentative ruling, that it tentatively was inclined to grant the motion to quash based on jurisdiction. However, with Plaintiff’s filing of the FAC, the Motion to Quash and Demurrer were mooted as to the original complaint.

Now, Defendants file another motion to quash (“MTQ”), but this time, as to the FAC, on the grounds that they argue, Plaintiff’s FAC lacks jurisdiction over any of the named defendants.

B. Procedural¿¿

On January 30, 2024, Specially Appearing Defendants filed a Motion to Quash the FAC. On February 21, 2024, Plaintiff filed an opposition brief. On February 27, 2024, Specially Appearing Defendants filed a reply brief. On March 25, 2024, Specially Appearing Defendants filed an Amended reply brief.

¿II. REQUEST FOR JUDICIAL NOTICE

Specially Appearing Defendants requested this Court take judicial notice of the following document:

1. A true and correct printout from the California Secretary of State website demonstrating the corporate history of Global Source One International Inc., indicating Global Source One International Inc. is currently suspended—not dissolved—and was rendered inactive on February 1, 2012. (Exhibit 1.)

This Court GRANTS the request and takes judicial notice of the above document.

IV. ANALYSIS¿

A. Motion to Quash

In this Court’s previous tentative ruling on May 24, 2023, it noted that Plaintiff’s argument that Spartan Education’s registration as a foreign LLC in California, coupled with the fact that its alleged affiliate, Bounty Island Corporation conducted business pertaining to that contemplated by the Teaming Agreement, was not even close to being sufficient for the exercise of general jurisdiction over any of the specially appearing defendants. Further, when analyzing specific jurisdiction, this Court noted that the previous Motion to Quash, provided evidence tending in reason to show that none of the named defendants contracted with the named Plaintiff, and that when a specific jurisdiction basis for in personam jurisdiction is predicated on a contract, the contract must be shown at least prima facie to be between at least two of the named parties. Exhibit 4 to the previous Motion to Quash presented a different entity than the one named as the Plaintiff in this case. The opposition to the Motion to Quash the original Complaint argued that the “prior entity” assigned its rights to GSO which engaged in the same business as the ”prior entity,” but that those arguments failed to provide any evidence before the Court or any judicially noticed facts that the Court could consider. More specifically, this Court noted that the Complaint, as previously pled, failed to tie GSO and Global Source One International Inc. together. Lastly, this Court noted that The General Teaming Agreement attached as Exhibit 4 of the original Complaint stated that it would terminate on April 30, 2013, and that, the allegations in the original Complaint appeared to claim that the breaches of contract all occurred after that termination date. Thus, this Court posited the questions of: (1) how it could exercise specific jurisdiction over claimed breaches that did not occur until years after the contract had ended?; (2) Whether there was a new contract with the different entity? And if so, what its terms were; and (3) Whether there were any payments ever made under the Teaming Agreement, either before or after the termination date?

The Court will analyze whether these defects in the original Complaint were remedied, and will also analyze Specially Appearing Defendants’ argument that Plaintiff’s FAC is a sham pleading.

1. General Jurisdiction

As the same issues in this Motion to Quash were present in the previous Motion to Quash, this Court spares the parties a revisiting of the requirements and legal precedent for General Jurisdiction. Despite this Courts analysis of the lack of general jurisdiction in the original Complaint, plaintiff’s opposition makes the same argument on this MTQ that the Court previously found unpersuasive. The Court’s tentative ruling in 2023 specifically noted: “In opposition, Plaintiff argues that Spartan Education’s registration as a foreign LLC in California, coupled with the fact that its affiliate, Bounty Island Corporation conducts business pertaining to that contemplated by the Teaming Agreement, would be sufficient to establish general jurisdiction over Spartan Education. This Court finds that this is not even close to being sufficient for the exercise of general jurisdiction over any of the specially appearing defendants.” Plaintiff nonetheless argues the exact same sentence in the opposition papers to the Motion to Quash FAC, and Plaintiff states verbatim the exact same argument that failed before, i.e., “However, Spartan Education’s registration as a foreign LLC in California, coupled with the fact that its affiliate, Bounty Island Corporation, which conducts business pertaining to that contemplated by the Teaming Agreement, would be sufficient to establish general jurisdiction over Spartan Education.” (Plaintiff’s Opposition to MTQ Complaint p. 10; Plaintiff’s Opposition to MTQ FAC, p. 12.) It is not just this sentence that is virtually verbatim in the opposition to the MTQ FAC and opposition to the MTQ original Complaint. In reality, Plaintiff’s opposition briefs have the exact same words and sentences for the entirety of Heading 2 for the last opposition and Heading 3 to the current opposition, both entitled: “Defendants’ Presence-Based Argument is Mistaken. The only difference are minor changes to the paragraph, page, and line citations in reference to Specially Appearing Defendants’ moving papers, and citations to portions of the Complaint versus FAC.

Again, this Court does not wish to repeat the requirements of General Jurisdiction, especially when Plaintiff has not offered any new facts or arguments as to why it believes the Specially Appearing Defendants have General Jurisdiction. Thus, the Court once again finds that this is not even close to being sufficient for the exercise of general jurisdiction over any of the specially appearing defendants.

2. Specific Jurisdiction

In this Court’s previous tentative ruling on the Specific Jurisdiction issue, this Court noted that the previous Motion to Quash moving papers provided evidence tending in reason to show that none of the named defendants contracted with the named Plaintiff, and that when a specific jurisdiction basis for in personam jurisdiction is predicated on a contract, the contract must be shown at least prima facie to be between at least two of the named parties. Exhibit 4 to the previous Motion to Quash presented a different entity than the one named as the Plaintiff in this case. In the amended pleading, Specially Appearing Defendants now note that Plaintiff admits that former Global Source One International, Inc., and not Plaintiff, was the actual signatory of the Teaming Agreement. (FAC, ¶ 14.) However, Plaintiff’s Opposition argues that the contracting entity assigned its rights in the contract to the currently plaintiff which somewhat confusing uses a very similar name to the allegedly dissolved company which had entered into the contract. The Opposition asserts that: “Plaintiff was assigned all rights, assets, and liabilities by Global Source One International, Inc. (“Former GSO”), who is not a party to this action and who has since been dissolved.” (FAC, ¶ 2.) Notwithstanding this allegation, Plaintiff fails to provide this Court with any evidence or proof that such was the case. In Specially Appearing Defendants’ moving papers, they also highlight, in footnote 3, that Plaintiff’s allegations also appear to be contradicted by public records which show that Global Source One International, Inc. is currently suspended – not dissolved – and was rendered inactive on February 1, 2012 – more than three months before the Teaming Agreement was even executed. (Specially Appearing Defendants’ RFJN, Exhibit 1.)

Plaintiff’s amended pleading also includes the new allegation that Spartan Education “’stepped into the shoes’” of SCAT, with whom Former GSO allegedly entered into the Agreement, and that multiple Defendants were involved in the execution of and subsequent carrying out of the terms of the Agreement,” (FAC, ¶ 14), that the Specially Appearing Defendants and Spartan Aviation Industries, Inc. (“Spartan Aviation”) are all joint venturers, alter egos and co-conspirators of one another (FAC, ¶¶ 10-12), and that “multiple Defendants were involved in the execution of and subsequent carrying out of the terms of the Agreement” (FAC, ¶ 14.) Specially Appearing Defendants argue that these new, unverified allegations appear to be sham pleadings, which tey argue should be disregarded by the Court, because they directly contradict both the allegations made in the original Complaint (which only alleged that “SCAT” entered into the Teaming Agreement and carried out its term), and evidence submitted by Specially Appearing Defendants, which they argue establishes that Spartan Aviation is an unrelated entity with different owners.

Before analyzing whether or not these new pleadings qualify Plaintiff’s FAC as a sham pleading, this Court refers back to its initial May 24, 2023 questions regarding specific jurisdiction. This Court asked: (1) for evidence that the “prior entity” assigned its rights to Plaintiff; (2) How this Court could exercise specific jurisdiction over claimed breaches that did not occur until years after the contract had ended; (3) Whether there was a new contract with the different entity, and if so, what the terms were; and (4) Whether there were any payments ever made under the Teaming Agreement, either before or after the termination date?

As to the first question, Plaintiff submits the declaration of Edward Angelino, the owner of Plaintiff and custodian of records for Plaintiff. Angelino states that prior to Plaintiff’s incorporation, he was the sole owner of Former GSO. (Declaration of Edward Angelino (“Angelino Decl.”), ¶ 2.) Angelino further contends that around May 2012, his business grew such that he did not want his business activities to be limited only to sourcing, and decided to dissolve Former GSO, such that he could change his company’s name to GSO International, Inc. (Angelino Decl., ¶ 3.) He further stated that he assigned all of Former GSO’s rights, assets, and liabilities to Plaintiff. (Angelino Decl., ¶ 3.) Here, the Court understands that the Contract specifically states, “[a]ny contract(s) with Client(s) (and services thereunder) arising out of this Agreement and related Exhibits shall not be assigned by either of the Participants without the prior written approval of the other Participant, except that the Participants may assign this Agreement in whole or in part to an affiliate or subsidiary. No assignment shall discharge the obligations of the assigning Participant.” (Contract p. 4, ¶ 14.) Other than the Declaration of Angelino, there is no evidence of assignment between the former GSO and Plaintiff nor of compliance with the contract’s assignment provision’s restrictions including written approval of the other participant. Further, even if there was, there is no evidence whatsoever that SCAT assigned the Contract to any of the Specially Appearing Defendants.

Even if Plaintiff were able to provide evidence that SCAT assigned the Agreement to Specially Appearing Defendants in compliance with restrictions of the assignment provision, and that this was a continuing obligation contract, the evidence before the Court on this motion fails to answer the question of how this Court could exercise specific jurisdiction over claimed breaches that did not occur until years after the contract had ended. The Contract specifically states, “[t]his Agreement shall terminate on April 30, 2013, or when any of the following events occur, without further obligation or liability between the Participants: (a) By mutual agreement of the Participants; (b) Upon public disclosure that the requirements for the (all) Project(s) have been awarded to another bidder.” (Contract p.4, ¶ 12.) However, the only evidence Plaintiff attempts to provide is an email communication from Zastrow on April 21, 2013, discussing final quotations, an email from January 2018, a communication from November 2019. Even if these allegations prove a breach of some sort, the Court is confused as to how these allegations indicate that the Agreement was still binding the parties or had been extended or revived. Plaintiff is unable to provide any new Agreements, or any evidence of payments made under the Teaming Agreement, either before or after the termination date.

Without answering these question, this Court is unable to find specific jurisdiction as to any of the Specially Appearing Defendants. Plaintiff will be given the opportunity to provide oral argument as to actually answering the Court’s previous questions, however, this Court’s tentative ruling is to GRANT the motion to quash. The Court will also entertain oral argument as to how the 3 dozen categories of proposed document demands address the deficiencies outlined in plaintiff’s effort to exercise specific jurisdiction over moving defendants.

IV. CONCLUSION¿¿

Based on the foregoing, Specially Appearing Defendants’ Motion to Quash is GRANTED.

Specially Appearing Defendants are ordered to give notice.

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