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rejecting argument that the defendant waived personal jurisdiction by filing an unrelated lawsuit against the plaintiff in the same forum four years earlier
Summary of this case from Auto-Owners Ins. Co. v. G&D Constr. Grp., Inc.Opinion
No. C-00-0107 CRB.
May 31, 2002.
MEMORANDUM AND ORDER
Now before the Court is defendants' motion to dismiss the complaint for lack of subject matter jurisdiction, lack of personal jurisdiction, and failure to state a claim. After carefully considering the papers filed by the parties, and having had the benefit of oral argument, defendants' motion is GRANTED.
BACKGROUND
Defendant Mabetex Project Engineering ("Mabetex") is an international construction, engineering and design company located in Switzerland. Defendant Behgjet Pacolli ("Pacolli") is President of Mabetex. Defendant CRS-Credito Per La Ricostruczione E Lo Sviluppo S.A. ("CRS Credito") is also a Swiss corporation.
In early 1994, the City of Yakutsk, Russia selected Mabetex to design and construct a waste-water treatment facility in Yakutsk. That same year Mabetex entered into a contract with "Tektra," a partnership between plaintiff Sokol Ibrani and Agim Gjinali. Gjinali was a senior Mabetex employee. The alleged purpose of the contract was for Tektra to provide Mabetex with "technical documentation" for the Yakutsk project. In accordance with that contract Mabetex paid Tektra $350,000.00.
Tektra never provided the required technical documentation and in September 1996 Mabetex filed suit against Ibrani individually and doing business as Tektra in the Northern District of California for breach of contract and various other related claims. Mabetex v. Ibrani, Civ. No. 96-3378. Ibrani did not answer and instead moved to compel arbitration based on an arbitration clause in the contract. The court ordered arbitration in Switzerland and stated that it would not re-litigate any of the issues decided by the arbitrator.
After much delay the arbitration took place and the arbitrator issued his decision on June 27, 2001. The arbitrator found that the contract was a sham, although he could not determine for exactly what purpose the parties entered into the agreement. Ibrani had argued that the purpose of the contract was to siphon money to Gjinali (Mabetex's employee) and avoid payment of Swiss taxes. In any event, the arbitrator refused to enforce the agreement and denied all of the parties' claims, including Ibrani's counterclaims, with one exception.
The arbitrator refused to rule on Ibrani's claim that Mabetex had intentionally interfered with a consulting contract between Tektra and Lemna, a Minnesota corporation. Ibrani alleged that in July 1994, Tektra and Lemna entered into an agreement whereby Tektra agreed to introduce Lemna to parties that might hire Lemna to construct a waste water treatment facility in Russia. In exchange, Lemna promised to pay Tektra a percentage of what Lemna was paid for its work on the facility. Mabetex hired Lemna in August 1994. Lemna never paid Tektra; instead, according to Ibrani, Lemna falsely represented that Mabetex had canceled the contract. Tektra sued Lemna in 1995 in Santa Clara Superior Court for breach of the consulting contract. Mabetex and CRS also sued Lemna in 1996 in the Southern District of New York. Mabetex claimed Lemna was engaged in a conspiracy with Tektra and that it never performed on its subcontract.
In the year 2000, while the arbitration was pending, Ibrani, individually and d/b/a as Tektra, filed the lawsuit presently pending before this Court. Plaintiff sues Mabetex, Pacolli and CRS, a Mabetex subsidiary, and makes claims for fraud, extortion, and breach of the implied covenant of good faith and fair dealing arising out of the Mabetex/Tektra agreement. He also makes intentional/negligent interference claims against Mabetex arising out of Tektra's agreement with Lemna and a claim for emotional distress. Upon plaintiffs ex parte motion, the Court related this case to the earlier case Civ. No. 96-3378 (which had been reassigned to the Court). Plaintiff did not serve defendants with the complaint until February 2002.
All defendants now move to dismiss all the claims in this action. Plaintiff concedes that all of his claims against Mabetex were disposed of in the arbitration, with the exception of the interference with contract claims.
DISCUSSION
I. Plaintiffs supplemental declaration
As a preliminary matter the Court must determine what evidence is properly in the record. Plaintiff filed his opposition and declaration one week after it was due. At the same time he filed his tardy opposition, he requested an extension of time. Despite plaintiffs failure to request the extension before his time for filing the opposition had expired, the Court permitted plaintiff to file his opposition and supporting declarations. On the morning of oral argument, two weeks after plaintiff filed his opposition, after defendants filed a reply to the opposition, and after the Court had read all the papers in preparation for oral argument, plaintiff submitted a detailed supplemental declaration. The declaration addresses issues raised by defendants in their moving papers and/or by plaintiff himself in his opposition. As plaintiff has not offered any explanation as to why he could not have submitted the declaration in a timely manner, and as defendants are prejudiced by its tardy filing, the Court hereby STRIKES plaintiffs supplemental declaration.
II. Subject matter jurisdiction
Defendants first argue that the Court lacks subject matter jurisdiction. Even though defendants are moving to dismiss, plaintiff bears the burden of proving that this Court has jurisdiction to decide his case. See Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 377 (1994) ("Federal courts are courts of limited jurisdiction. . . . It is to be presumed that a cause lies outside this limited jurisdiction, and the burden of establishing the contrary rests upon the party asserting jurisdiction.") (citations omitted). Moreover; "[f]or motions to dismiss under Rule 12(b)(1), unlike a motion under Rule 12(b)(6), the moving party may submit affidavits or any other evidence properly before the court. . . . It then becomes necessary for the party opposing the motion to present affidavits or any other evidence necessary to satisfy its burden of establishing that the court, in fact, possesses subject matter jurisdiction." Association of American Medical Colleges v. United States, 217 F.3d 770, 778 (9th Cir. 2000).
Plaintiff contends the Court has diversity jurisdiction of his complaint because he is a citizen of the United States and all the defendants are foreign citizens. Defendants nonetheless argue that because the Lemna contract with which defendants allegedly interfered was with Tektra, Tektra, a partnership, is a necessary party. Further, because one of the two Tektra partners, Gjinali, is a foreign citizen, there are foreign citizens on both sides of the "v" and diversity is destroyed.
A. Tektra is a partnership
Federal law governs whether Tektra is a necessary party. See Harrell Sumner Contracting Co. v. Peabody Peterson Co., 546 F.2d 1227, 1229 (5th Cir. 1977). "The rule generally applied by federal courts is where two or more parties are joint obligees, they are indispensable parties in an action for enforcement of that obligation." Id. (cited with approval inNike, Inc. v. Comercial Iberica de Exclusivas Deportivas, S.A., 20 F.3d 987, 991 (9th Cir. 1994)). Plaintiff does not dispute this rule or that Tektra was the named obligee of the Tektra/Lemna consulting agreement. Indeed, he named Tektra as a plaintiff, albeit as a sole proprietorship. He claims that Gjinala's citizenship is irrelevant because (1) Tektra was not a real partnership and thus should be considered as a sole proprietorship owned by plaintiff (2) the arbitrator (over Ibrani's objection) found that Gjinali was not a necessary party to the arbitration; (3) Tektra ceased to exist in 1995; and (4) in any event, Gjinali has submitted a declaration disclaiming all interest he may have as a Tektra partner in the pending litigation. None of these responses is sufficient to meet plaintiffs burden of proving the Court has subject matter jurisdiction.
First, plaintiff is judicially estopped from contending that at the time Tektra entered into the consulting agreement with Lemna, Tektra was not a partnership. "Judicial estoppel, sometimes also known as the doctrine of preclusion of inconsistent positions, precludes a party from gaining an advantage by taking one position, and then seeking a second advantage by taking an incompatible position." Rissetto v. Plumbers and Steamfitters Local 343, 94 F.3d 597, 600 (9th Cir. 1996). It is an equitable doctrine "intended to protect the integrity of the judicial process" by preventing a litigant from "playing fast and loose with the courts." Russell v. Rolfs, 893 F.2d 1033, 1037 (9th Cir. 1990). "[J]udicial estoppel applies to a party's stated position, regardless of whether it is an expression of intention, a statement of fact, or a legal assertion." Helfand v. Gerson, 105 F.3d 530, 534 (9th Cir. 1997).
In February 1995 Tektra sued Lemna in California state court for breach of the very consulting agreement that forms the basis of plaintiffs claims against Mabetex. In its complaint, Tektra alleged that it "is a partnership doing business in the State of California with its principal place of business in the County of Alameda." Tektra v. Lemna Corporation, CV 747252, Santa Clara Superior Court, Complaint ¶ 1. Moreover, in his complaint in his action he alleged that Tektra "was a nominal partnership/joint venture of Ibrani and . . . Gjinali." Plaintiff now takes a position directly contrary to those assertions, and he does so for the purpose of creating diversity jurisdiction. As plaintiff is "playing fast and loose with the courts," plaintiff is bound by his earlier representation.
Second, that the arbitrator found Gjinali not to be a necessary party is not dispositive; the Swiss arbitrator was not applying the federal rules of joinder and jurisdiction and, in any event, the arbitrator expressly did not decide plaintiffs claim that defendants interfered with Tektra's agreement with Lemna.
Third, plaintiff does not offer any evidence that upon the alleged dissolution of the Tektra partnership plaintiff was assigned the rights asserted in this case. He also does not cite any law that suggests that upon the dissolution of a partnership any partner may bring a suit based on a right held by the partnership. Moreover, while in his opposition plaintiff claims Tektra dissolved in 1995, in his complaint he alleges that it ceased to exist in 1999.
Finally, plaintiff cannot manufacture diversity jurisdiction by having Gjinali renounce his partnership interest. See Nike, Inc., 20 F.3d at 991-92. In Nike, the Ninth Circuit held that a subsidiary could not assign a claim to its parent for the purpose of creating diversity jurisdiction. After defendants moved to dismiss for lack of subject matter jurisdiction, Gjinali executed a declaration disclaiming his interest in the Lemna contract. Plaintiff offers no reason for Gjinala's litigation-induced "disclaimer of interest" and the Court finds that the disclaimer is a collusive attempt to manufacture diversity jurisdiction.
Accordingly, the Court concludes that Tektra is a partnership/joint venture for the purposes of determining the Court's diversity jurisdiction.
B. Tektra is not diverse from defendants
For purposes of subject matter jurisdiction, the citizenship of each member of the partnership is considered. See Carden v. Arkoma Associates, 494 U.S. 185, 195 (1990). The same rule applies to joint ventures. See Indiana Gas Co., Inc. v. Home Ins. Co., 141 F.3d 314, 316 (7th Cir. 1998). It is undisputed that Tektra had two partners: plaintiff and Gjinali. It is equally undisputed that Gjinali is an alien, that is, he is a citizen of a foreign state, as are all of the defendants. As a result, there is no diversity jurisdiction. See Allendale Mut. Ins. Co. v. Bull Data Systems, Inc., 10 F.3d 425, 427-28 (7th Cir. 1993) (explaining that there is no diversity jurisdiction where there is a mixture of citizens and foreign parties on one side and all foreign parties on the other). The complaint must therefore be dismissed for lack of subject matter jurisdiction.
II. Personal Jurisdiction
The complaint must be dismissed for a second, independent reason: plaintiff has failed to prove that the Court has personal jurisdiction of defendants. Personal jurisdiction can be either "general" or "specific."Data Disc v. Systems Technology Associates, Inc., 557 F.2d 1280, 1287 (9th Cir. 1977). The basic rule is that the defendant must have certain minimal contacts with the forum such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice. See id. at 1287 (citing International Shoe Co. v. Washington, 326 U.S. at 316).
In either case, plaintiff bears the burden of showing that personal jurisdiction is proper. See Fields v. Sedgwick Assoc. Risks. Ltd., 796 F.2d 299, 301 (9th Cir. 1986). Where, as here, the motion to dismiss for lack of personal jurisdiction is made on the basis of written materials rather than an evidentiary hearing, "dismissal is appropriate only if the plaintiff has not made a prima facie showing of personal jurisdiction" ATT Co. v. Compagnie Bruxelles Lambert, 94 F.3d 586, 588 (9th Cir. 1996) (citations and internal quotations omitted). "In determining whether [plaintiff] has met this burden, uncontroverted allegations in plaintiffs complaint must be taken as true, and `conflicts between the facts contained in the parties' affidavits must be resolved in plaintiffs' favor for purposes of deciding whether a prima facie case for personal jurisdiction exists.'" Id. (citations omitted).
A. General jurisdiction
If a defendant's activities in the forum (here, California) were "substantial," or "continuous and systematic," the Court may assert personal jurisdiction as to any cause of action filed against the defendant, regardless of whether the cause of action is related to the defendant's activities in the state. See Data Disc, 557 F.2d at 1287. In the Ninth Circuit, "the level of contact with the forum . . . necessary to establish general jurisdiction is quite high." Shute v. Carnival Cruise Lines, 897 F.2d 377, 380 (9th Cir. 1990), rev'd on other grounds, 499 U.S. 585 (1991). The Ninth Circuit has noted that
[t]he Supreme Court has upheld general jurisdiction only once. . . . Perkins v. Benguet Consol. Mining Co., 342 U.S. 437, 72 (1952). We have stated that "the Perkins holding that the cause of action need not arise out of the defendant's activities in the forum is limited to its unusual facts, and regularly have declined to find general jurisdiction even where the contacts were quite extensive.Amoco Egypt Oil Co. v. Leonis Nav. Co., Inc., 1 F.3d 848, 851 n. 3 (9th Cir. 1993). There is no basis for finding that any of the defendants are subject to general jurisdiction in California. None lives here, does business here, or owns property here; indeed, all three are aliens and reside overseas.
B. Specific jurisdiction
The Ninth Circuit employs a three-part test to determine if it has specific personal jurisdiction: "(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 arise out of the defendant's forum-related activities; and (3) the exercise of jurisdiction must be reasonable. Data Disc, 557 F.2d at 1287. The test is not to be applied mechanically, but "instead must focus on the relationship among the defendant, the forum, and the litigation within the particular factual context of each case." Core-Vent v. Nobel Indus. AB, 11 F.3d 1482, 1487 (9th Cir. 1993).
a. Purposeful availment
To purposefully avail oneself of the forum state, a defendant must take some "deliberate action within the forum state" or create "continuing obligations to forum residents." Ballard v. Savage, 65 F.3d 1495, 1498 (9th Cir. 1998). It is not necessary that a defendant be physically present within, or have physical contacts with, the forum. Rather, "within the rubric of `purposeful availment' the [Supreme] Court has allowed the exercise of jurisdiction over a defendant whose only "contact' with the forum state is the "purposeful direction' of a foreign act having effect in the forum state." Core-Vent, 11 F.3d at 1485 (citations omitted). This "effects" analysis predicates personal jurisdiction on: (1) intentional actions (2) expressly aimed at the forum state (3) causing harm, the brunt of which is suffered — and which the defendant knows is likely to be suffered — in the forum state. Core-Vent, 11 F.3d at 1486 (citing Calder v. Jones, 465 U.S. 783, 789). However, a defendant may not be haled into a jurisdiction "as the result of random, fortuitous or attenuated contacts or based on the unilateral acts of third parties."Lake v. Lake, 817 F.2d 1416, 1421 (9th Cir. 1987) (citing Burger King v. Rudzewicz, 471 U.S. 462, 475 (1985)).
Plaintiff has not identified any conduct by defendants which was purposefully directed toward California. Defendants' conduct — their alleged interference with plaintiffs contract with Lemna — was directed at Lemna in Minnesota. The fact that plaintiff lives in California and therefore he did not receive the benefits of the Lemna contract in California is insufficient to establish personal jurisdiction.
Plaintiff declares that Mabetex contacted him in California to ask him to find subcontractors for the Russian project. Such conduct, however, was not tortious. Moreover, a "contract alone does not automatically establish the requisite minimum contacts necessary for the exercise of personal jurisdiction." Gray Co. v. Firstenberg Machinery Co., 913 F.2d 758, 760 (9th Cir. 1990).
b. Arising out of forum-related activities
Even assuming plaintiff had established that defendants had each purposefully availed themselves of California, plaintiff still must meet the second requirement: each of plaintiffs claims must arise out of defendants' forum-related activities. With respect to Mabetex, the only California-related conduct plaintiff has identified is the 1996 lawsuit filed by Mabetex and the contract Mabetex allegedly entered into with plaintiff to find a subcontractor for the Russia project. Plaintiffs claim that Mabetex, a Swiss corporation, interfered with plaintiffs contract with Lemna, a Minnesota corporation, does not arise from either of those "contacts." Under the Lemna contract, Lemna was obligated to pay plaintiff for helping Lemna obtain a contract with Mabetex to perform work in Russia. Mabetex's alleged interference took place in Switzerland, Russia and Minnesota; none of the relevant conduct occurred in California.
The same lack of forum-related activity exists for the claims against CRS and Patolli. Those claims (other than the interference claim) arise from Tektra's contract with Mabetex for Tektra to provide technical documentation for a project in Russia. Plaintiff does not allege that these two defendants did anything in California: no telephone calls, no letters, no contract signing, or negotiations. As the Court does not have personal jurisdiction of Mabetex, plaintiffs attempt to establish jurisdiction of Patolli and CRS through Mabetex necessarily fails.
C. Reasonableness
Finally, the Court must consider whether the exercise of jurisdiction is reasonable in this case. Exercise of jurisdiction is considered reasonable only if it comports with "fair play and substantial justice."See Core-Vent, 11 F.3d at 1482. The factors which the Court considers include: (1) the extent of the defendant's "purposeful interjection" into the forum state's affairs, (2) the burden on the defendant, (3) the extent of conflict with the sovereignty of the defendant's state, (4) the forum state's interest in adjudicating the dispute, (5) the most efficient judicial resolution of the controversy, (6) the importance of the forum to plaintiffs interest in convenient and effective relief, and (7) the existence of an alternate forum. See Core-Vent, 11 F.3d at 1488-89; Ziegler v. Indian River County, 64 F.3d 470 (9th Cir. 1995). No single factor is dispositive; instead all seven must be balanced. See Ziegler, 64 F.3d at 475. The "reasonableness" requirement may defeat California jurisdiction even if defendant has purposefully engaged in California activities. See Asahi Metal Indus. Co., Ltd. v. Superior Ct., 480 U.S. 102 (1987). Moreover, the "unique burdens" placed upon a foreign national defending itself locally "should have significant weight" in assessing the reasonableness" of a local court's exercise of personal jurisdiction. See Rano v. Sipa Press, Inc., 987 F.2d 580, 588 (9th Cir. 1993) ("higher jurisdictional barrier" required for aliens).
Because plaintiff has failed established the first two prongs of specific personal jurisdiction, the Court need not decide whether the exercise of personal jurisdiction would be reasonable. Nonetheless, plaintiff offers no evidence as to why it would be reasonable to haul these Swiss defendants into court in California. The fact that one defendant — Mabetex — filed a lawsuit here six years ago does not make it reasonable to today require defendants to defend a lawsuit here that has no significant nexus to California.
3. Waiver
Finally, plaintiff argues that Mabetex has "waived" the personal jurisdiction argument by filing the 1996 case in this District. If plaintiff had filed his claims as counterclaims in the 1996 case, Mabetex could not argue that the Court lacked personal jurisdiction; Mabetex would have waived any personal jurisdiction defense by initiating the lawsuit and thus "making an appearance." William W Schwarzer, et al,Federal Civil Procedure Before Trial ¶ 3:64.1 (2001). The question here, however, is whether by filing the 1996 suit Mabetex has waived personal jurisdiction in this separate lawsuit filed in the year 2000.
Plaintiff cites no authority for the proposition that by filing suit against him in a previous case, Mabetex is foreclosed from raising a personal jurisdiction defense in a different case filed by plaintiff more than four years later (and served on Mabetex six years later). Plaintiff claims that the Court should treat this lawsuit as a "counterclaim" to the 1996 lawsuit because the claims could have been raised in that lawsuit and, in any event, the two lawsuits have been related.
This argument is meritless. The fact that the cases are related is meaningless; the cases have not been consolidated. Moreover, plaintiff had several years during which he could have moved to file counterclaims in the 1996 case; he chose not to do so. There is simply no basis for treating this separate lawsuit as a counterclaim in the earlier lawsuit.
CONCLUSION
Plaintiff has not met its burden of establishing subject matter jurisdiction or a prima facie case of personal jurisdiction over each foreign defendant. Accordingly, defendants' motion to dismiss is GRANTED.
IT IS SO ORDERED.