Judge: William D. Claster, Case: 22-01257316, Date: 2022-12-02 Tentative Ruling
1. Defendant Hibbett
Retail, Inc.'s Notice of Motion and Motion to Strike Plaintiff's Nationwide
Class Action Allegations ROA 39
2. Specially Appearing Defendant Hibbett, Inc.'s Notice of Motion and Motion
to Quash Service of Summons for Lack of Personal Jurisdiction ROA 43
MOTION TO STRIKE
Defendant Hibbett Retail, Inc.’s motion to strike the nationwide class allegations is DENIED.
This case is a putative nationwide class action involving alleged violations of the Fair and Accurate Credit Transactions Act (FACTA). Plaintiff seeks to represent a class of persons nationwide who purchased merchandise with credit cards at Hibbett Retail’s stores and received a receipt that contained the first six and last four digits of their credit card numbers, in violation of FACTA’s requirement that only the last five digits be printed on a receipt.
Hibbett Retail moves to strike the nationwide class allegations from the complaint, leaving only the California subclass at issue. It contends the Court lacks personal jurisdiction over non-California class members’ FACTA claims.
The Due Process Clause of the Fourteenth Amendment “limits the personal jurisdiction of [the] state courts.” (Bristol-Myers Squibb Co. v. Superior Court (2017) 137 S.Ct. 1773, 1779.) Personal jurisdiction can be either general or specific. (Id., at 1779-80.) It appears undisputed that this Court lacks general jurisdiction over Hibbett Retail, a Delaware corporation with its principal place of business in Alabama. (Compl. ¶ 11.) Thus, the Court can adjudicate claims against Hibbett Retail only to the extent there is specific jurisdiction.
Hibbett Retail argues that under Bristol-Myers Squibb, the Court lacks personal jurisdiction over the claims of nonresident putative class members. In Bristol-Myers Squibb, which was a mass tort action rather than a class action, the United States Supreme Court held that California courts lacked jurisdiction over the product liability claims of non-California plaintiffs: “The mere fact that [some] plaintiffs were prescribed, obtained, and ingested [the drug] in California—and allegedly sustained the same injuries as did the nonresidents—[did] not allow the State to assert specific jurisdiction over the nonresidents’ claims.” (Id., at p. 1781.) Hibbett Retail argues the same result should hold here: the fact that some class members were injured in California doesn’t allow the Court to exercise personal jurisdiction over out-of-state class members’ claims.
In opposition, Plaintiff notes two federal appellate decisions that have held Bristol-Myers Squibb inapplicable in the class action context. (See Lyngaas v. Curaden AG (6th Cir. 2021) 992 F.3d 412; Mussat v. IQVIA, Inc. (7th Cir. 2020) 953 F.3d 441. A third appellate decision cited by Plaintiff, Molock v. Whole Foods Market Group, Inc. (D.C.Cir. 2020) 952 F.3d 293, does not reach the question.) These cases explain that in class actions, as a practical matter, the lawsuit is the defendant against the representative plaintiff. There is one unitary claim and one unitary defense. In mass tort actions, while some issues may be coordinated for pretrial purposes, each plaintiff is a separate named party with individual claims, and the defendant must present individual defenses. As a result, different jurisdictional analyses apply to mass and class actions, and Bristol-Myers Squibb does not apply. (Lyngaas, 992 F.3d at p. 435; Mussat, 953 F.3d at p. 447.)
Another point in Lyngaas bears mention: “Long-standing precedent shows that courts have routinely exercised personal jurisdiction over out-of-state defendants in nationwide class actions, and the personal-jurisdiction analysis has focused on the defendant, the forum, and the named plaintiff, who is the putative class representative.” (Lyngaas, supra, 992 F.3d at p. 433 [emphasis original].) California courts, like federal courts, have a long history of handling nationwide class actions with nonresident class members. Indeed, in its own opinion in Bristol-Myers Squibb, the California Supreme Court string-cited a number of them to support its holding about mass actions. (See Bristol-Myers Squibb Co. v. Superior Court (2016) 1 Cal.5th 783, 806-07.)
This history suggests that to the extent that Bristol-Myers Squibb applies to California courts, its application does not extend from the mass tort action context to the class action context. Furthermore, Bristol-Myers Squibb itself never discusses the class action context. (See Bristol-Myers Squibb, supra, 137 S.Ct. at p. 1789, fn. 4 [Sotomayor, J., dissenting] [“The Court today does not confront the question whether its opinion here would also apply to a class action in which a plaintiff injured in the forum State seeks to represent a nationwide class of plaintiffs, not all of whom were injured there.”].) Hibbett Retail, for its part, identifies no published California case applying Bristol-Myers Squibb to limit a putative nationwide class.
Considering (1) California courts’ long history of handling nationwide class actions, (2) the differences between mass and class actions, (3) the fact that the alleged violations here center on a single federal law, and (4) the lack of binding precedent applying Bristol-Myers Squibb in the class action context, the Court concludes it does not apply here.
In making this ruling, the Court acknowledges that this issue is a close call. In particular, recent federal district court decisions have differed on this issue with well-reasoned decisions coming to opposite conclusions. (Compare Carpenter v. PetSmart, Inc. (S.D.Cal. 2020) 441 F.Supp.3d 1028 [holding no specific personal jurisdiction over out-of-state class members] with Carranza v. Terminix International Company Limited Partnership (S.D.Cal. 2021) 2021 WL 1174732 [holding that exercising specific personal jurisdiction over out-of-state class members does not offend due process]). Nevertheless, for the reasons set forth above, the motion to strike is denied.
MOTION TO QUASH
Defendant Hibbett, Inc.’s motion to quash service of summons is CONTINUED to March 17, 2023 to permit the jurisdictional discovery described below. Plaintiff Anthony Kamel is to file a supplemental brief of no more than 8 pages (in addition to any supporting declarations, evidence, etc.) by March 3, 2023. Hibbett is to file a responsive supplemental brief of no more than 8 pages (in addition to any supporting declarations, evidence, etc.) by March 10, 2023.
Hibbett has filed objections to Plaintiff’s evidence in support of his opposition. Objection No. 6 is SUSTAINED. The remaining objections are OVERRULED.
I. Background
This is a putative nationwide class action involving alleged violations of the Fair and Accurate Credit Transactions Act. Plaintiff alleges that he visited a Hibbett Sports store in Fullerton, paid for merchandise with a credit card, and was provided a receipt bearing the first six and last four digits of his credit card number, in violation of FACTA’s requirement that only the last five digits be printed on a receipt. Plaintiff has named Hibbett and its subsidiary, Hibbett Retail, Inc., as defendants. Hibbett Retail has entered a general appearance in this action. Hibbett, on the other hand, contends it is not subject to personal jurisdiction in this Court. It moves to quash service of summons, arguing it is a mere holding company, while Hibbett Retail actually controls day-to-day operation of the Fullerton store at issue (and other stores nationwide).
II. Standard of Review
California courts may exercise personal jurisdiction “on any basis not inconsistent with the Constitution of this state or of the United States.” (CCP § 410.10.) “Under the minimum contacts test personal jurisdiction may be either general or specific. [Citations.] 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. [Citations.] Specific jurisdiction, on the other hand, requires some nexus between the cause of action and the defendant’s activities in the forum state. Under well-established case law specific jurisdiction exists when (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.’ [Citations.]” (Brue v. Al Shabaab (2020) 54 Cal.App.5th 578, 589-590.) “The plaintiff bears the burden of showing the defendant has sufficient minimum contacts with the state to justify jurisdiction.” (Id., at p. 590.)
“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. [Citation.] 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 Automobile Antitrust Cases I & II (2005) 135 Cal.App.4th 100, 127.)
III. Existence of Jurisdiction
It appears undisputed that the Court lacks general jurisdiction over Hibbett, which is alleged to be a Delaware corporation with its principal place of business in Alabama. (Compl. ¶ 10.) The question is whether specific jurisdiction lies. Plaintiff’s complaint alleges Hibbett is subject to jurisdiction (1) in its own right, (2) because subsidiary Hibbett Retail is an alter ego of Hibbett, or (3) as principal of Hibbett Retail on an agent-principal theory.
Countering these allegations, Hibbett’s general counsel, David Benck, unequivocally declares that Hibbett is simply a holding company for Hibbett Retail, that Hibbett does nothing in California and has no property or employees in California, that it doesn’t direct or supervise the operation of Hibbett Retail, that it doesn’t print customer receipts, and that all proper formalities are observed between Hibbett and Hibbett Retail.
A. Hibbett in Its Own Right
Plaintiff submits a press release downloaded from Hibbett’s website announcing the opening of the Fullerton Hibbett Sports store in September 2021. (Habashy Decl., Ex. 3.) This press release says “Hibbett (NASDAQ:HIBB), the Birmingham-based premium athleisure and footwear retailer operating more than 1,000 stores nationwide, today announced the opening of the first Orange County, California Hibbett store in Fullerton.” It continues: “‘We are excited to bring the first Hibbett Sports location to the Fullerton community and welcome sneakerheads looking for the hottest new drops, along with families and athletes,’ said John Hart, District Sales Manager (DSM), Hibbett.”
Plaintiff also submits a press release about Hibbett’s name change from “Hibbett Sports, Inc.” to “Hibbett, Inc.”, dated June 2021. (Habashy Decl., Ex. 1.) That is, several months before the Fullerton store was opened, Hibbett assumed its current name, and the press release quotes a “Hibbett” district manager as saying “we” opened a store in Fullerton.
In this press release, Hibbett appears to hold itself out as the entity controlling the Fullerton location where Plaintiff allegedly suffered FACTA violations.
B. Alter Ego
“In California, two conditions must be met before the alter ego doctrine will be invoked. First, there must be such a unity of interest and ownership between the corporation and its equitable owner that the separate personalities of the corporation and the shareholder do not in reality exist. Second, there must be an inequitable result if the acts in question are treated as those of the corporation alone.” (Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App.5th 523, 538.) If the second element cannot be established by evidence, the alter ego doctrine cannot be invoked to create jurisdiction over the shareholder. (Id., at p. 539.)
Regarding the second prong of the analysis, Plaintiff says it would be inequitable for Hibbett Retail to be treated separately because Hibbett is “ultimately responsible for the actions of the subsidiaries it controls.” (Opp. at p. 12.) If this were sufficient to impose alter ego liability, it would effectively eliminate any distinction between parent and subsidiary.
Plaintiff also contends he’s put on evidence that Hibbett controls the POS system at Hibbett Retail stores, meaning it would be inequitable to shield Hibbett from liability. But the first alleged piece of evidence is a 2019 interview Plaintiff has neither included in his papers nor sought judicial notice of. The Court will not consider this interview, particularly when Plaintiff filed both original and “corrected” copies of his supporting evidence. The second piece of evidence, Hibbett’s 2017 annual report, does discuss an “upgrade” to retail POS systems. (Habashy Decl., Ex. 4, at p. 5.) But the second prong of the alter ego analysis requires “conduct amounting to bad faith” by the parent. (Sonora Diamond, supra, 83 Cal.App.5th at p. 539.) Plaintiff nowhere explains how Hibbett ordering an upgrade of Hibbett Retail’s POS systems is bad faith conduct. On this record, Plaintiff fails to satisfy the second prong of the alter ego analysis.
C. Agent-Principal
The United States Supreme Court held in Daimler AG v. Bauman (2014) 571 U.S. 117 that exercise of general personal jurisdiction over an agent cannot, by itself, justify the exercise of general personal jurisdiction over a principal. Hibbett strenuously argues that under the logic of Daimler, the same is true for specific jurisdiction: the Court cannot exercise personal jurisdiction over Hibbett simply because Hibbett Retail is subject to specific personal jurisdiction. But Daimler recognizes that “[a]gency relationships . . . may be relevant to the existence of specific jurisdiction.” (Daimler, 517 U.S. at p. 135, fn. 13 [emphasis original].)
The question, then, is the degree of control Hibbett has over Hibbett Retail: “[I]f a parent corporation exercises such a degree of control over its subsidiary corporation that the subsidiary can legitimately be described as only a means through which the parent acts, or nothing more than an incorporated department of the parent, the subsidiary will be deemed to be the agent of the parent in the forum state and jurisdiction will extend to the parent.” (Sonora Diamond, supra, 83 Cal.App.4th at p. 541.) “As a practical matter, the parent must be shown to have moved beyond the establishment of general policy and direction for the subsidiary and in effect taken over performance of the subsidiary’s day-to-day operations in carrying out that policy.” (Id., at p. 542 [emphasis original].)
Hibbett’s Benck unequivocally declares that Hibbett does not supervise the day-to-day activity of Hibbett Retail, the operations of Hibbett Retail, or the business and affairs of Hibbett Retail. (Benck Decl. ¶¶ 9, 10, 20.) In opposition, Plaintiff points to statements from Hibbett’s SEC filings that at most show general strategic control—things like a common human resources manual for all Hibbett subsidiaries, unified business and marketing strategies, etc. This isn’t enough to show the day-to-day control required for agent-principal jurisdiction under Sonora Diamond.
IV. Jurisdictional Discovery and Further Proceedings
Plaintiff requests a continuance for further discovery. In light of the evidence Plaintiff has put on that Hibbett appears to hold itself out as controlling the Fullerton store, the Court believes jurisdictional discovery on this specific topic is proper. If discovery confirms Plaintiff’s reading of the press releases, this may provide a basis for jurisdiction.
The Court will not permit further discovery as to alter ego or agent-principal discovery. In support of this request, Plaintiff points to evidence of Hibbett’s alleged general control of Hibbett Retail’s operations. As discussed above, Plaintiff identifies evidence tending to show that a parent controls the general direction of its subsidiary, which is insufficient as a matter of law under Sonora Diamond.
As a result of the foregoing, the only potential basis for exercising personal jurisdiction over Hibbett is Hibbett’s control of the Fullerton store. The motion will be continued for Plaintiff to take discovery on this issue only, and the parties will be permitted to file supplemental briefs after discovery is complete.