Judge: Stephen I. Goorvitch, Case: 22STCV24300, Date: 2023-09-20 Tentative Ruling

Case Number: 22STCV24300    Hearing Date: September 20, 2023    Dept: 39

CRT Compliance Testing Services Co., Ltd. v. Consumer Testing Technology Co., Ltd.

Case No. 22STCV24300

Motion to Quash

BACKGROUND

            Plaintiff CRT Compliance Testing Services Company, Ltd. (“Plaintiff”) filed this case against Consumer Testing Technology Company, Ltd. (“CTT”) and Zhejiang Consumer Testing Technology Company, Ltd.  (“ZCTT”) (collectively, “Defendants”).  Both Plaintiff and Defendants are companies located in the People’s Republic of China.  Defendants now move to quash service of the summons and complaint, which Plaintiff opposes.  The motion is continued to afford Plaintiff’s counsel an opportunity to conduct (limited) jurisdictional discovery. 

PLAINTIFF’S ALLEGATIONS

            Plaintiff is a technology company that provides for certified testing, inspection, and auditing of consumer products manufactured in China.  (Complaint, ¶ 1.)  Plaintiff has its principal place of business in China.  (Complaint, ¶ 2.)  One of Plaintiff’s customers was Torrid LLC (“Torrid”), an American retail company based in California.  (Complaint, ¶ 9.)  On or about August 27, 2021, Torrid “disallowed its vendors from conducting tests with CRT and removed CRT from Torrid’s list of approved lab testing companies.”  (Complaint, ¶ 11.)  Plaintiff alleges that CTT, which is another of Torrid’s approved lab testing companies, “made false and defamatory publications of CRT to Torrid, which ultimately led to Torrid’s August 27 email.”  (Complaint, ¶ 13.)  Specifically, Plaintiff alleges Defendants informed Torrid that Plaintiff’s predecessor lost its certification in China due to “laboratory fraud” and was subject to fines by the Chinese government.  (Complaint, ¶¶ 14-19.)  CTT then publicized Torrid’s decision to delist Plaintiff, thereby further injuring Plaintiff’s reputation and goodwill.  (Complaint, ¶ 17.)     

PROCEDURAL HISTORY

            Plaintiff filed Case Number 21STCV40766 against CTT, Peiqing Fang, Nana Li, and Haixia Ling (collectively, “Defendants”) asserting the same causes of action based upon the same allegations.  The defendants in that case specially appeared and moved to quash service for the summons and complaint for lack of personal jurisdiction.  The Court granted that motion on April 25, 2022, because Plaintiff’s counsel served Defendants through someone in California who was not an agent for service of process.  Plaintiff filed the instant action and intends to proceed through the Hague Convention.  ACTT has been served under the Hague convention, but Plaintiff is still awaiting the proof of service.  (See Declaration of Xiuyuan Hu, ¶ 8.)  It is unclear whether CTT has been served.  (See ibid.; see also Declaration of Zinzhu Li, ¶ 24.)    

LEGAL STANDARD

Under the due process clause of the Fourteenth Amendment to the United States Constitution, state courts may exercise personal jurisdiction over nonresidents who have “minimum contacts” with the forum state.  Minimum contacts exist when the relationship between the nonresident and the forum state is such that the exercise of jurisdiction does not offend “traditional notions of fair play and substantial justice.”  (International Shoe Co. v. Washington (1945) 326 U.S. 310, 316, internal quotations 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 Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 445-446, internal quotations and citations omitted.)

Even if a nonresident defendant does not have sufficient contacts with California such that the defendant is subject to suit in California generally, the defendant may nonetheless be subject to jurisdiction in California for claims based on the defendant’s activities in the state.  To assert “limited” or “specific” personal jurisdiction over a nonresident defendant, the plaintiff must demonstrate that: (a) the out-of-state defendant purposefully established contacts with the forum state; (b) the plaintiff's cause of action “arises out of” or is “related to” defendant's contacts with the forum state; and (c) the forum’s exercise of personal jurisdiction in the particular case comports with “fair play and substantial justice.”  (Burger King Corp. v. Rudzewicz (1985) 471 U.S. 462, 477-478.)

“[W]hen jurisdiction is challenged by a nonresident defendant, the burden of proof is upon the plaintiff to demonstrate that ‘minimum contacts’ exist between defendant and the forum state to justify imposition of personal jurisdiction.”  (Elkman v. National States Ins. Co. (2009) 173 Cal.App.4th 1305, 1313.)  If the plaintiff meets the initial burden, “it becomes the defendant’s burden to demonstrate that the exercise of jurisdiction would be unreasonable.” (Buchanan v. Soto (2015) 241 Cal.App.4th 1353, 1362.)

DISCUSSION

            There appears to be no general jurisdiction within the State of California.  CTT is a corporation organized and existing under the laws of the People’s Republic of China.  (Declaration of Xinzhu Li, ¶ 2.)  ZCTT is a wholly-owned subsidiary of CTT.  (Id., ¶ 13.)  Defendants conduct testing for consumer and healthcare products for domestic and international companies whose products are manufactured in China.  (Id., ¶¶ 2, 13.)  Defendants have only one customer located in the State of California.  (Id., ¶¶ 2, 13.)  Defendants have no designated agent for service of process in California, and had none during the relevant time period.  (Id., ¶¶ 3, 14.)  CTT is not licensed or otherwise authorized to do business in California, and was not during the relevant time period.  (Id., ¶¶ 4, 15.)  CTT does not have any employees in the State of California, and had no employees during the relevant time period.  (Id., ¶¶ 5, 16.)  CTT does not own or lease any property within the State of California, and did not during the relevant time period.  (Id., ¶¶ 6, 17.)  CTT does not maintain any bank accounts within the State of California, and did not during the relevant time period.  (Id., ¶¶ 7, 18.)  CTT is not subject to California state or local taxes, and was not during the relevant time period.  (Id., ¶¶ 8, 19.)  CTT has never made any general appearance in any lawsuit as a plaintiff or defendant.  (Id., ¶¶ 9, 20.)  CTT does not advertise within the State of California.  (Id., ¶¶ 10, 21.) 

            Plaintiff relies on a declaration from Pengfei Wang, who worked for CTT between 2011 and 2013.  (Declaration of Pengfei Wang, ¶ 3.)  According to Wang, “[w]hile [he] was at CTT . . .  [Defendants] made concerted efforts to expand their business into the United States, including in the state of California.”  (Id., ¶ 4.)  This does not benefit Plaintiff, because Wang stopped working at CTT in 2013, and the allegations giving rise to this complaint occurred in or after August 2021.  (See Complaint, ¶¶ 9-17.)

            Nor is there specific jurisdiction within the State of California.  Plaintiff’s complaint and opposition do not provide any clarity on how Defendants “publicized” Torrid’s decision to delist Plaintiff.  If this “publication” occurred in China, i.e., not in California, there is no basis for specific jurisdiction.  Even if Defendants posted defamatory statements on their website, that is not sufficient to confer specific jurisdiction (especially given the declaration of Xinzhu Li, which suggests that the website is not hosted within the State of California).  A website that merely posts information—without any effort to direct California residents to the website—is not sufficient to establish minimum contacts.  (See Pavlovich v. Superior Court (2002) 29 Cal.4th 262, 269; see also ViaView, Inc. v. Retzlaff (2016) 1 Cal.App.5th 198, 218-219; Burdick v. Superior Court (2015) 233 Cal.App.4th 8, 20-21.)  Plaintiff does not allege that Defendants publicized Torrid’s decision to delist Plaintiff within California. 

            Plaintiff alleges that Defendants made a defamatory statement to Torrid.  Again, the complaint and opposition do not make clear whether the statement was posted on Defendants’ website, communicated to Torrid’s representatives in China, or communicated to Torrid’s representatives in California.  Even if the latter, a single communication, e.g., an email, from Defendants in China to Torrid in California is not sufficient to confer jurisdiction within the State of California.  (See ViaView, supra, 1 Cal.App.5th at pp. 218-219.)  The “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., p. 216, citing Walden v. Fiore, 134 S.Ct. 1115, 1121-1122 (2014).)  Mere injury to a forum resident is not a sufficient connection to the forum.  (Id., citing Walden, supra, 134 S.Ct. at p. 1125.)    

The only concern is Defendant’s purported office in California.  There is no dispute that Defendants’ website purported to have an office in the United States.  CTT purportedly maintained an independent sales relationship with ACT Lab LLC in Long Beach, California, and the website identified this as being the “CTT US office.”  (Declaration of Xinzhu Li, ¶ 12.)  Defendants claim this was an error that has since correct to identify ACT Lab LLC as a “Strategic Partner” of CTT.  (Ibid.)  Plaintiff’s evidence confirms that this representation was on CTT’s website.  (See Declaration of Pengfei Wang, ¶ 7.)  Therefore, the Court grants jurisdictional discovery on the narrow issue whether CTT maintained an office in Long Beach, California, as purported on the website. 

CONCLUSION AND ORDER

            Based upon the foregoing, the Court orders as follows:

            1.         The Court grants the motion to quash as it relates to ZCTT.

            2.         The Court continues the motion as it relates to CTT.

            3.         Following service upon CTT, the Court shall permit jurisdictional discovery on the sole and narrow issue whether CTT maintained an office in Long Beach, California during the operative time period.

            4.         The motion is continued to ___________.

            5.         Defendants’ counsel shall provide notice and file proof of such with the Court.