Darley International v. SDRC CA2/3 ( 2013 )


Menu:
  • Filed 4/16/13 Darley International v. SDRC CA2/3
    NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
    California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
    publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for
    publication or ordered published for purposes of rule 8.1115.
    IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
    SECOND APPELLATE DISTRICT
    DIVISION THREE
    DARLEY INTERNATIONAL, LLC,                                                 B240707
    Plaintiff and Appellant,                                          (Los Angeles County
    Super. Ct. No. BS121441)
    v.
    SDRC INC.,
    Defendant and Respondent.
    APPEAL from an order of the Superior Court of Los Angeles County,
    Abraham Khan, Judge. Affirmed.
    Blecher & Collins, Maxwell M. Blecher, Jennifer S. Elkayam and Majed Dakak
    for Plaintiff and Appellant.
    Law Office of Scott M. Schutz, Scott M. Schutz; Siegel, Barnett & Schutz and
    Julie Dvorak for Defendant and Respondent.
    _______________________________________
    Darley International, LLC (Darley) filed a petition to compel SDRC Inc.,
    a nonresident corporation, to arbitrate in California. The trial court granted SDRC
    Inc.‟s motion to quash service of summons based on lack of personal jurisdiction and
    denied the petition to compel arbitration. Darley appeals challenging both rulings.
    Darley contends (1) SDRC Inc. has sufficient contacts with California to justify
    the exercise of personal jurisdiction in this state; (2) SDRC Inc. is subject to personal
    jurisdiction in California as a successor to the South Dakota International Business
    Institute (SDIBI) or based on agency principles or the representative services doctrine;
    and (3) SDRC Inc. is bound by an arbitration clause in a written agreement despite
    being a nonsignatory to the agreement. We conclude that Darley has shown no error
    and will affirm the order.
    FACTUAL AND PROCEDURAL BACKGROUND
    1.      Factual Background
    SDIBI was created by the South Dakota Board of Regents in 1994 as an
    administrative unit of Northern State University in Aberdeen, South Dakota. SDIBI
    promoted export activities and foreign investment in South Dakota. SDRC Inc. was
    incorporated in South Dakota in January 2008 by Joop Bollen, who was then SDIBI‟s
    director.
    Darley provides international business services to clients worldwide. Darley‟s
    principal place of business is in Orinda, California. Hanul Professional Law
    Corporation (Hanul) is a law firm with offices in Los Angeles, California and Seoul,
    South Korea.
    2
    The federal government, in April 2004, designated the SDIBI‟s Dairy Economic
    Benefit Region as a regional center for purposes of a program offering permanent
    residency to foreign nationals who invest in businesses and create jobs in South Dakota.
    SDIBI later requested permission from the federal government to change the name of
    the regional center to South Dakota Regional Center.
    Hanul assisted SDIBI by contracting with Darley to provide services for the
    benefit of SDIBI. Hanul and Darley entered into a written Overseas Recruitment and
    Service Agreement (Agreement) in October 2007 in which Darley agreed to engage in
    marketing efforts to find foreign investors for certain projects in South Dakota in
    connection with the immigration program. The Agreement included an arbitration
    clause.
    Darley made efforts to find investors in China for a fish farming project in South
    Dakota. SDIBI later canceled the project in December 2007. SDRC Inc. was
    established in January 2008, as stated. SDIBI and SDRC Inc. entered into
    a Memorandum of Understanding in January 2008 providing for SDRC Inc. to engage
    in marketing efforts to find foreign investors for projects in South Dakota in connection
    with the immigration program.
    Darley served a demand for arbitration on both Hanul and SDIBI in March 2008
    stating that the dispute concerned a breach of the Agreement. Hanul agreed to arbitrate,
    but SDIBI as a nonsignatory to the Agreement refused.
    3
    2.      Federal Court Proceedings
    Darley filed a petition in the United States District Court for the Central District
    of California in July 2008 to compel SDIBI to arbitrate the dispute. The federal court
    granted the petition in October 2008. SDIBI filed a motion to vacate the order in
    March 2008 on the grounds that SDIBI was immune from suit in federal court under the
    Eleventh Amendment. Darley voluntarily dismissed its petition without prejudice in
    June 2009.
    3.      Trial Court Proceedings
    Darley filed a petition in the Los Angeles Superior Court July 2009 to compel
    SDIBI to participate in the arbitration. South Dakota Board of Regents, as the legal
    entity operating SDIBI, opposed the petition. After a hearing on the petition, the trial
    court granted the petition in June 2010. The court concluded that Hanul had acted as
    SDIBI‟s ostensible agent in entering into the Agreement and that SDIBI or the Board of
    Regents had ratified the Agreement and therefore was bound by the arbitration clause.
    Darley filed another petition in the same proceeding in September 2011 to
    compel SDRC Inc. to participate in the arbitration. Darley alleges that it conducted
    seminars in China in an effort to attract investors in the fish farming project, and that
    SDIBI failed to support those efforts and later canceled the project. It alleges that
    SDRC Inc. was created to exploit the progress made by Darley and to avoid paying
    Darley any fees. It alleges that SDIBI induced Hanul to breach the Agreement and that
    this is the dispute subject to arbitration.
    4
    Darley further alleges that SDRC Inc., rather than SDIBI, now operates the
    regional center and that SDIBI is inactive. Darley alleges that Bollen, SDIBI‟s former
    director, is president of SDRC Inc. and that SDRC Inc. is, in practical effect, the
    successor in interest to SDIBI. Darley filed a memorandum of points and authorities,
    a declaration by its counsel and exhibits in support of the petition.
    SDRC Inc. filed a motion to quash service of summons based on lack of personal
    jurisdiction (Code Civ. Proc., § 418.10, subd. (a)(1)). It also opposed the petition,
    arguing that SDIBI still exists, that SDRC Inc. is not its successor in interest and that
    there is no basis to compel SDRC Inc. as a nonsignatory to the Agreement to arbitrate.
    SDRC Inc. also filed an objection to the entire petition as evidence on the grounds of
    hearsay, lack of personal knowledge and speculation.
    The trial court granted the motion to quash and denied the petition to compel
    arbitration in a minute order filed on April 6, 2012, stating, “The Court finds that
    Respondent lacks minimum contacts with California, and is an entity separate from the
    signatory without an alter-ego, agency or successor relationship.” The court also
    sustained SDRC Inc.‟s evidentiary objection. Darley timely appealed the order.1
    CONTENTIONS
    Darley contends (1) SDRC Inc. has sufficient contacts with California to justify
    the exercise of personal jurisdiction in this state; (2) SDRC Inc. is subject to personal
    1
    An order granting a motion to quash service of summons is appealable, as is an
    order denying a petition to compel arbitration. (Code Civ. Proc., §§ 904.1, subd. (a)(3),
    1294.)
    5
    jurisdiction in California as a successor to SDIBI or based on agency principles or the
    representative services doctrine; and (3) SDRC Inc. is bound by the arbitration clause in
    the Agreement despite being a nonsignatory.2
    DISCUSSION
    1.     Constitutional Limits on the Exercise of Personal Jurisdiction
    “A California court may exercise personal jurisdiction over a nonresident
    defendant to the extent allowed under the state and federal Constitutions. (Code Civ.
    Proc., § 410.10.) The exercise of personal jurisdiction is constitutionally permissible
    only if the defendant has sufficient „minimum contacts‟ with the forum state so that the
    exercise of jurisdiction „does not offend “traditional notions of fair play and substantial
    justice.” [Citations.]‟ (Internat. Shoe Co. v. Washington (1945) 
    326 U.S. 310
    , 316
    [
    90 L.Ed. 95
    , 
    66 S.Ct. 154
    ]; accord, Pavlovich v. Superior Court (2002) 
    29 Cal.4th 262
    ,
    268, [
    127 Cal.Rptr.2d 329
    , 
    58 P.3d 2
    ] (Pavlovich).) In other words, the defendant‟s
    contacts with the forum state must be such that the defendant had „ “fair warning” ‟ that
    its activities might subject it to personal jurisdiction in the state. (Burger King Corp. v.
    Rudzewicz (1985) 
    471 U.S. 462
    , 472 [
    85 L.Ed.2d 528
    , 
    105 S.Ct. 2174
    ] (Burger King);
    accord, World–Wide Volkswagen Corp. v. Woodson (1980) 
    444 U.S. 286
    , 297
    [
    62 L.Ed.2d 490
    , 
    100 S.Ct. 559
    ].) „In judging minimum contacts, a court properly
    focuses on “the relationship among the defendant, the forum, and the litigation.”
    2
    Darley does not challenge on appeal the sustaining of SDRC Inc.‟s evidentiary
    objection. We therefore will not consider as evidence the factual allegations in the
    petition.
    6
    [Citations.]‟ (Calder v. Jones (1984) 
    465 U.S. 783
    , 788 [
    79 L.Ed.2d 804
    , 
    104 S.Ct. 1482
    ].) „Each defendant‟s contacts with the forum State must be assessed individually.‟
    (Id. at p. 790.)
    “A defendant that has substantial, continuous, and systematic contacts with the
    forum state is subject to general jurisdiction in the state, meaning jurisdiction on any
    cause of action. (Perkins v. Benguet Mining Co. (1952) 
    342 U.S. 437
    , 445–446
    [
    96 L.Ed. 485
    , 
    72 S.Ct. 413
    ]; see Vons Companies, Inc. v. Seabest Foods, Inc. (1996)
    
    14 Cal.4th 434
    , 445 [
    58 Cal.Rptr.2d 899
    , 
    926 P.2d 1085
    ] (Vons).) Absent such
    extensive contacts, a defendant may be subject to specific jurisdiction, meaning
    jurisdiction in an action arising out of or related to the defendant‟s contacts with the
    forum state. (Helicopteros Nacionales de Columbia v. Hall (1984) 
    466 U.S. 408
    , 414,
    fn. 8 [
    80 L.Ed.2d 404
    , 
    104 S.Ct. 1868
    ]; Vons, 
    supra,
     14 Cal.4th at p. 446.) Specific
    jurisdiction depends on the quality and nature of the defendant‟s forum contacts in
    relation to the particular cause of action alleged. (Cornelison v. Chaney (1976)
    
    16 Cal.3d 143
    , 147–148 [
    127 Cal.Rptr. 352
    , 
    545 P.2d 264
    ].)
    “A nonresident defendant is subject to specific personal jurisdiction only if
    (1) the defendant purposefully availed itself of the benefits of conducting activities in
    the forum state; (2) the controversy arises out of or is related to the defendant‟s forum
    contacts; and (3) the exercise of jurisdiction would be fair and reasonable. (Burger
    King, supra, 471 U.S. at pp. 472, 475–478; Pavlovich, 
    supra,
     29 Cal.4th at p. 269.)
    „These guidelines are not susceptible of mechanical application, and the jurisdictional
    rules are not clear-cut. Rather, a court must weigh the facts in each case to determine
    7
    whether the defendant‟s contacts with the forum state are sufficient. (Burger King,
    
    [supra,
     471 U.S.] at pp. 478–479, 486, fn. 29 [105 S.Ct. at pp. 2185–2186, 2189–2190];
    Kulko v. California Superior Court (1978) 
    436 U.S. 84
    , 89, 92 [
    56 L.Ed.2d 132
    ,
    
    98 S.Ct. 1690
    , 1695, 1696–1697]; Vons[, supra, 14 Cal.4th] at p. 450.)‟ (Bridgestone
    Corp. v. Superior Court (2002) 
    99 Cal.App.4th 767
    , 774 [
    121 Cal.Rptr.2d 673
    ].)”
    (HealthMarkets, Inc. v. Superior Court (2009) 
    171 Cal.App.4th 1160
    , 1166-1167
    (HealthMarkets).)
    “ „ “The purposeful availment inquiry . . . focuses on the defendant‟s
    intentionality. [Citation.] This prong is only satisfied when the defendant purposefully
    and voluntarily directs [its] activities toward the forum so that [it] should expect, by
    virtue of the benefit [it] receives, to be subject to the court‟s jurisdiction based on” [its]
    contacts with the forum.‟ (Pavlovich, supra, 29 Cal.4th at p. 269, quoting U.S. v. Swiss
    American Bank, Ltd. (1st Cir.2001) 
    274 F.3d 610
    , 623–624.) Thus, purposeful
    availment occurs where a nonresident defendant „ “purposefully direct[s]” [its] activities
    at residents of the forum‟ (Burger King, 
    supra,
     471 U.S. at p. 472), „ “purposefully
    derive[s] benefit” from‟ its activities in the forum (id. at p. 473), „create[s] a “substantial
    connection” with the forum‟ (id. at p. 475), „ “deliberately” has engaged in significant
    activities within‟ the forum (id. at pp. 475–476), or „has created “continuing
    obligations” between [itself] and residents of the forum‟ (id. at p. 476). By limiting the
    scope of a forum‟s jurisdiction in this manner, 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 . . . . ‟ (Id. at p. 475.) Instead, the
    8
    defendant will only be subject to personal jurisdiction if „ “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, at p. 269, quoting
    World-Wide Volkswagen, supra, 444 U.S. at p. 297.)” (Snowney v. Harrah’s
    Entertainment, Inc. (2005) 
    35 Cal.4th 1054
    , 1062-1063 (Snowney).)
    “A controversy is related to or arises out of the defendant‟s forum contacts, so as
    to satisfy the second requirement for the exercise of specific personal jurisdiction, if
    there is „a substantial connection between the forum contacts and the plaintiff‟s claim.‟
    (Vons, 
    supra,
     14 Cal.4th at p. 452.) The forum contacts need not be the proximate
    cause or „but for‟ cause of the alleged injuries. (Id. at pp. 462–467.) The forum
    contacts also need not be „substantively related‟ to the cause of action, meaning those
    contacts need not establish or support an element of the cause of action. (Id. at
    pp. 469-475.) „A claim need not arise directly from the defendant‟s forum contacts in
    order to be sufficiently related to the contact to warrant the exercise of specific
    jurisdiction. Rather, as long as the claim bears a substantial connection to the
    nonresident‟s forum contacts, the exercise of specific jurisdiction is appropriate.‟ (Id. at
    p. 452.) Accordingly, in evaluating the quality and nature of the defendant‟s forum
    contacts, we consider not only the conduct directly affecting the plaintiff, but also the
    broader course of conduct of which it is a part. (Cornelison v. Chaney, supra, 16 Cal.3d
    at p. 149.)
    9
    “In determining whether the exercise of jurisdiction would be fair and
    reasonable, so as to satisfy the third requirement for the exercise of specific personal
    jurisdiction, a court must consider (1) the burden on the defendant of defending an
    action in the forum, (2) the forum state‟s interest in adjudicating the dispute, (3) the
    plaintiff‟s interest in obtaining relief, (4) „ “the interstate [or international] judicial
    system‟s interest in obtaining the most efficient resolution of controversies,” ‟ and
    (5) the states‟ or nations‟ shared interest „ “in furthering fundamental substantive social
    policies.” ‟ (Asahi [Metal Industry Co. v. Superior Court (1987)] 480 U.S. [102,] 113
    [
    94 L.Ed.2d 92
    , 
    107 S.Ct. 1026
    ]; see id. at p. 115.) „These considerations sometimes
    serve to establish the reasonableness of jurisdiction upon a lesser showing of minimum
    contacts than would otherwise be required. [Citations.] On the other hand, where
    a defendant who purposefully has directed his activities at forum residents seeks to
    defeat jurisdiction, he must present a compelling case that the presence of some other
    considerations would render jurisdiction unreasonable.‟ (Burger King, supra, 471 U.S.
    at p. 477.)” (Anglo Irish Bank Corp., PLC v. Superior Court (2008) 
    165 Cal.App.4th 969
    , 979-980, fn. omitted (Anglo Irish).)
    2.      Standard of Review
    “A plaintiff opposing a motion to quash service of process for lack of personal
    jurisdiction has the initial burden to demonstrate facts establishing a basis for personal
    jurisdiction. (Snowney[, supra, 35 Cal.4th at p.] 1062[].) If the plaintiff satisfies that
    burden, the burden shifts to the defendant to show that the exercise of jurisdiction would
    be unreasonable. (Ibid.) If there is no conflict in the evidence, the question whether
    10
    a defendant‟s contacts with California are sufficient to justify the exercise of personal
    jurisdiction in this state is a question of law that we review de novo. (Ibid.) If there is
    a conflict in the evidence underlying that determination, we review the trial court‟s
    express or implied factual findings under the substantial evidence standard. (Vons,
    supra, 14 Cal.4th at p. 449.)” (HealthMarkets, supra, 171 Cal.App.4th at
    pp. 1167-1168.)
    3.     Darley Failed to Establish a Basis for Personal Jurisdiction in California
    a.     Specific Personal Jurisdiction
    Darley contends SDRC Inc. purposefully availed itself of the benefits of
    conducting activities in California by maintaining a business relationship with Hanul,
    a California resident. Hanul purportedly continued to perform legal services in
    connection with the foreign investment program after SDRC Inc. replaced SDIBI as the
    program operator. Darley also cites evidence that Hanul controlled SDRC Inc. and that
    SDRC Inc. designated a partner in Hanul, James Park, a California resident, as its
    registered agent for a time. Park also purportedly was a director of SDRC Inc. and
    signed the Memorandum of Understanding on its behalf.
    We conclude that Darley failed to present evidence sufficient to establish
    purposeful availment. Darley presented little evidence of Hanul‟s actual role in the
    foreign investment program and its relationship with SDRC Inc. Darley presented no
    evidence that SDRC Inc. purposefully directed its activities toward California or
    California residents through its relationship with Hanul. Although Darley argues that
    Hanul plays an essential role in SDRC Inc.‟s operation of the regional center and its
    11
    marketing efforts, it presented no evidence of any contractual relationship or any
    continuing obligation between SDRC Inc. and Hanul or any California resident. The
    evidence of Park‟s involvement in both SRDC Inc. and Hanul fails to show that SDRC
    Inc. purposefully directed its activities toward California in any manner. In short,
    Darley failed to show that SDRC Inc. purposefully directed its activities toward
    California so as to justify the exercise of specific personal jurisdiction in this state.
    Darley also contends SDRC Inc. is subject to personal jurisdiction in California
    as SDIBI‟s successor. Sanders v. CEG Corp. (1979) 
    95 Cal.App.3d 779
    , 786-787, held
    that a nonresident corporation was subject to specific personal jurisdiction in California
    in a products liability action as the corporate successor to the manufacturer through
    a merger where the manufacturer would have been subject to specific personal
    jurisdiction in this state. (See also CenterPoint Energy, Inc. v. Superior Court (2007)
    
    157 Cal.App.4th 1101
    , 1120.) Here, in contrast, Darley has not shown that SDRC Inc.
    is SDIBI‟s successor. The trial court expressly found that SDRC Inc. is not SDIBI‟s
    successor, and substantial evidence supports that finding.3 We therefore conclude that
    SDRC Inc. is not subject to specific personal jurisdiction as SDIBI‟s successor.4
    3
    Whether SDRC Inc. is SDIBI‟s successor is a question of fact. We review the
    trial court‟s finding under the substantial evidence standard. (Mealy v. B-Mobile, Inc.
    (2011) 
    195 Cal.App.4th 1218
    , 1222.) Darley does not acknowledge the standard of
    review, fails to discuss the evidence supporting the order and explain why it is
    insufficient and therefore has shown no error. (Bell v. H.F. Cox, Inc. (2012)
    
    209 Cal.App.4th 62
    , 80; Provost v. Regents of University of California (2011)
    
    201 Cal.App.4th 1289
    , 1304-1305.)
    4
    Darley cites Saunders, supra, 
    95 Cal.App.3d 779
    , in support of its contention
    that SDRC Inc. is subject to general personal jurisdiction as SDIBI‟s successor.
    12
    b.      General Personal Jurisdiction
    Our conclusion that Darley failed to show purposeful availment for purposes of
    specific personal jurisdiction also compels the conclusion that it failed to show such
    extensive and wide-ranging or substantial, continuous and systematic contacts with
    California as to establish a basis for general personal jurisdiction in this state.
    Some California courts have stated that general personal jurisdiction over
    a nonresident defendant is established under an agency theory if the defendant exercises
    “pervasive and continual” control over a subsidiary doing business in California.
    (BBA Aviation PLC v. Superior Court (2010) 
    190 Cal.App.4th 421
    , 429-430;
    F. Hoffman-La Roche, Ltd. v. Superior Court (2005) 
    130 Cal.App.4th 782
    , 797-798;
    Sonora Diamond Corp. v. Superior Court (2000) 
    83 Cal.App.4th 523
    , 541; but see
    Anglo Irish, supra, 165 Cal.App.4th at p. 983 [declined to apply state substantive law of
    agency and alter ego to determine the constitutional limits of specific personal
    jurisdiction]; HealthMarkets, supra, 171 Cal.App.4th at pp. 1169-1170 [same].)
    Similarly, some courts have stated that general personal jurisdiction over a nonresident
    defendant is established under the representative services doctrine, a species of agency,
    if a local subsidiary exists only to further the business of its parent and performs acts in
    California that the parent otherwise would have to perform itself as part of its business
    Because Saunders involved specific rather than general personal jurisdiction, we will
    address the point with respect to specific personal jurisdiction. Our conclusion with
    respect to general personal jurisdiction based on a successor relationship is the same.
    13
    operations. (BBA, supra, 190 Cal.App.4th at p. 430; F. Hoffman-La Roche, supra,
    130 Cal.App.4th at p. 798; Sonora, supra, 83 Cal.App.4th at pp. 542-543.)
    The trial court here expressly found that there is no agency relationship, and
    substantial evidence supports that finding.5 We therefore conclude that Darley failed to
    establish the existence of general personal jurisdiction based on agency or the
    representative services doctrine and need not decide whether those theories could
    establish a basis for general personal jurisdiction in other circumstances.
    4.     Conclusion
    In summary, we conclude that Darley failed to establish a basis for either specific
    or general personal jurisdiction in California. In light of our conclusion, SDRC Inc.
    cannot be compelled to arbitrate in California, so we need not review the merits of the
    denial of Darley‟s petition to compel arbitration.
    5
    The existence of an agency relationship is a question of fact. (Garlock Sealing
    Technologies, LLC v. NAK Sealing Technologies Corp. (2007) 
    148 Cal.App.4th 937
    ,
    965.) We review the trial court‟s finding under the substantial evidence standard.
    (Ibid.) Darley does not acknowledge the standard of review, fails to discuss the
    evidence supporting the order and explain why it is insufficient and therefore has shown
    no error. (Bell v. H.F. Cox, Inc., supra, 209 Cal.App.4th at p. 80; Provost v. Regents of
    University of California, supra, 201 Cal.App.4th at pp. 1304-1305.)
    14
    DISPOSITION
    The order granting the motion to quash service of summons and denying the
    petition to compel arbitration is affirmed. SDRC Inc. is entitled to recover its costs on
    appeal.
    NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
    CROSKEY, J.
    WE CONCUR:
    KLEIN, P. J.
    KITCHING, J.
    15