Response Reply

Cal. Super. - 6th Dist.May 10, 2018

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 FREDERICKS PEEBLES & MORGAN LLP 2020 L STREET SACRAMENTO, CA JOHN M. PEEBLES (BAR NO. 237582) JAMES QAQUNDAH (BAR NO. 270700) HILLARY WARREN (BAR NO. 321294) FREDERICKS PEEBLES & MORGAN LLP 2020 L Street, Suite 250 Sacramento, CA 95811 Telephone: (916) 441-2700 Facsimile: (916) 441-2067 Attorney for Defendant Mandaree Enterprises, LLC SUPERIOR COURT OF THE STATE OF CALIFORNIA IN AND FOR THE COUNTY OF SANTA CLARA ITBOONS TECHNOLOGIES, INC., Plaintiff(s), v. SUN MANAGEMENT CO., LLC, AKA SUN MANAGEMENT, LLC; UCTEK LLC; MANDAREE ENTERPRISES, LLC; and DOES 1 to 10, inclusive, Defendant(s). ) ) ) ) ) ) ) ) ) ) Case No. 18CV328049 SPECIALLY-APPEARING DEFENDANT MANDAREE ENTERPRISES, LLC’S REPLY IN SUPPORT OF MOTION TO QUASH Date : September 20, 2018 Time : 9:00 am Dept. : 9 Judge : The Honorable Mary Arand INTRODUCTION Plaintiff asks this court to assume jurisdiction over Mandaree Enterprises, LLC (“MEL”) in an action for breach of a Software Purchase Agreement (“Agreement”) to which MEL is not a party. Plaintiff primarily relies on its incorrect assertion that MEL emailed Plaintiff regarding the Agreement, and that such emails constitute sufficient contact between MEL and the State of California. However, MEL never emailed or had any contact with Plaintiff regarding the Agreement or otherwise. Rather, employees of Sun Management and UCTek, acting solely in that capacity, emailed Plaintiff from accounts hosted by MEL. Plaintiff further contends that jurisdiction is proper because Sun Management and UCTek are alter egos and agents of MEL. However, Plaintiff fails to meet its burden of proving alter ego, a standard no less exacting when defeating a motion to quash. In reality, MEL is an entirely distinct entity from Sun Management and UCTek and has no influence or control over their operations. Electronically Filed by Superior Court of CA, County of Santa Clara, on 9/13/2018 5:00 PM Reviewed By: R. Burciaga Case #18CV328049 Envelope: 1943023 18CV328049 Santa Clara - Civil R. Burciaga 2 SPECIALLY-APPEARING DEFENDANT MANDAREE ENTERPRISES, LLC’S REPLY IN SUPPORT OF MOTION TO QUASH 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 FREDERICKS PEEBLES & MORGAN LLP 1001 SECOND ST. SACRAMENTO, CA Plaintiff asserts that MEL did not provide any evidence regarding this Court’s jurisdiction. This statement is false, as MEL provided a sworn declaration of Clarence O’Berry. However, even if this statement were true, it is Plaintiff who bears the burden of establishing personal jurisdiction over MEL. (Schwarzenegger v. Fred Martin Motor Company (9th Cir. 2004) 374 F.3d 797, 800.)1 This burden must be met by putting forth competent evidence in affidavits and authenticated documentary evidence. (Ziller Elecs. Lab GmbH v. Super. Ct. (1988) 254 Cal. Rptr. 410, 416.) Plaintiff has failed to meet this burden, and therefore this action must be dismissed as to MEL. Finally, Plaintiff’s argument that MEL’s location on an Indian reservation should confer personal jurisdiction in the California courts is nonsensical. The relevant fact concerning location in this case is that MEL is not located in California. The fact that it is located in Indian country outside of California is irrelevant to personal jurisdiction. ARGUMENT A. The emails exchanged regarding the Agreement do not confer personal jurisdiction over MEL. Plaintiff argues that this Court has jurisdiction over MEL because certain employees of Sun Management sent Plaintiff emails from accounts hosted by MEL. (See Opposition to Mandaree’s Motion to Quash Service of Summons and Complaint Pursuant to Code of Civil Procedure Section 418.10 [hereinafter “Plaintiff’s Opposition”], at 1, 6, 7, 9, 10; Declaration of Rajeev Garg, Exhibit A, pp. 13, 5, 6.) Specifically, Plaintiff points to six emails sent by employees of Sun Management from @mellc.co email addresses, which are hosted by MEL, over an approximately two-week period. However, the fact that UCTek or Sun Management employees used an email address hosted by MEL does not mean that MEL itself emailed Plaintiff or acted on behalf of MEL when negotiating the Agreement. It is common for entities to share employees, or even directors or officers. The individuals who sent the six emails from @mellc.co email addresses, Frank Driscoll and Blair Gallagher, are employees of MEL and, separately, co-owners of Sun Management. (Declaration of Frank Driscoll, 1 “Because California’s long-arm jurisdictional statute is coextensive with federal due process requirements, the jurisdictional analyses under state law and federal due process are the same.” (Schwarzenegger, supra, 374 F.3d at 800- 01.) 3 SPECIALLY-APPEARING DEFENDANT MANDAREE ENTERPRISES, LLC’S REPLY IN SUPPORT OF MOTION TO QUASH 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 FREDERICKS PEEBLES & MORGAN LLP 1001 SECOND ST. SACRAMENTO, CA at ¶¶ 1-2; Declaration of Blair Gallagher, at ¶¶ 1-2) However, those individuals were not acting on behalf of MEL in any correspondence concerning Plaintiff. (Declaration of Frank Driscoll, at ¶ 9, Declaration of Blair Gallagher, at ¶ 9.) At no time were the employees of Sun Management or UCTek acting on behalf of MEL. (Declaration of Frank Driscoll, at ¶ 10; Declaration of Blair Gallagher, at ¶ 10) In fact, both Frank Driscoll and Mr. Gallagher specifically identified that they were communicating on behalf of Sun Management.2 For example, on January 20, 2017, Mr. Gallagher identified himself “as the Sum [sic] Management representative.” (Declaration of Rajeev Garg, Exhibit A, at p. 5.) On January 19, 2017, Frank Driscoll stated that “Sun Management accepts and approves the attached signed closing documents . . . .” (Declaration of Rajeev Garg, Exhibit A, at p. 6.) None of the emails identified by Plaintiff contain any indication that MEL was a party to a contract or in any way involved in or benefitted from the transaction. In other words, the emails did not contain anything to suggest that MEL should expect to be hauled into California courts concerning this transaction to which it was not involved. Rather, the Sun Management employees specified that they were acting on behalf of Sun Management alone. Plaintiff certainly knew, or should have known, that all discussions related to the parties to the contracts and not any third parties. Conversely, MEL never had any reason to believe that it was involved in any transaction involving Plaintiff, that it was engaging in contacts with a California entity, or that it might be hauled into California’s courts. The fact that Sun Management employees used @mellc.co email addresses does not automatically attribute their emails to MEL. Sun Management does not host email addresses for its employees or co-owners. (Declaration of Frank Driscoll, at ¶ 7; Declaration of Blair Gallagher, at ¶7.) Accordingly, Sun Management employees must use email addresses hosted by others. MEL, on the other hand, does host email addresses and provides @mellc.co email addresses to its employees. 2 The Sun Management representatives did not conduct any negotiations on behalf of UCTek. UCTek is owned by two companies - Sun Management and 5280 Investment Group, a Colorado company. (Declaration of Frank Driscoll, at ¶ 14.) Pursuant to its operating agreement, UCTek is managed by 5280 Investment Group and Mike Jones - who is a principle with 5280 Investment Group and listed as UCTek’s President - not Sun Management. (Declaration of Frank Driscoll, at ¶ 17.) As such, all of UCTek’s negotiations with Plaintiff were conducted by Mike Jones. (Declaration of Frank Driscoll, at ¶ 19.) Mike Jones is not an employee of MEL. (Declaration of Frank Driscoll, at ¶ 18.) 4 SPECIALLY-APPEARING DEFENDANT MANDAREE ENTERPRISES, LLC’S REPLY IN SUPPORT OF MOTION TO QUASH 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 FREDERICKS PEEBLES & MORGAN LLP 1001 SECOND ST. SACRAMENTO, CA (Declaration of Clarence O’Berry, ¶ 6; Declaration of Frank Driscoll, at ¶ 5.) At all times relevant to the instant action, MEL did not prohibit its employees from using @mellc.co email addresses for non-MEL business. (Declaration of Frank Driscoll, at ¶ 6; Declaration of Clarence O’Berry, at ¶ 7_.) For this reason, some MEL employees utilized their @mellc.co email address for personal and other non-MEL related business. (Declaration of Frank Driscoll, at ¶ 8; Declaration of Blair Gallagher, at ¶ 8.) Although using @mellc.co email addresses, the Sun Management representatives sent those emails in their sole capacity as representatives of Sun Management, and never on behalf of MEL. Even if MEL had emailed Plaintiff, this would not confer personal jurisdiction over MEL. Plaintiff relies on Hall v. LaRonde, (1997) 56 Cal.App.4th 1342, for the proposition that email communication alone can confer personal jurisdiction. However, Plaintiff’s reading of Hall is inaccurate. Hall, a case decided shortly after the advent of email, merely held that “[t]here is no reason why the requisite minimum contacts cannot be electronic.” (Id. at 1347.) Hall did not hold that email communications necessarily confer jurisdiction over an out-of-state defendant. In any event, Hall is distinguishable from this case. There, the defendant was party to the contract at issue, negotiated the contract by letter and telephone over a period of several months, and communicated “continuously” with plaintiff after the contract was executed. (Ibid.) By contrast, MEL is not party to the Agreement and has never once communicated with Plaintiff. Furthermore, MEL did not communicate or otherwise work with Plaintiff after the Software Purchase Agreement’s execution. Accordingly, Hall does not support a finding of personal jurisdiction in this case. B. MEL is not an alter ego or agent of either Sun Management or UCTek. Plaintiff argues that Sun Management and UCTek’s alleged actions and presence in California should be attributed to MEL for purposes of jurisdiction because they are alter egos or agents of each other.3 However, in order for such an argument to succeed, Plaintiff must have “allege[d] sufficient facts to establish” the elements of the alter ego doctrine. (Sheard v. Super. Ct. (1974) 114 Cal. Rptr. 743, 746; see also Regents of University of New Mexico v. Superior Court (1975) 52 Cal.App.3d 964, 970 n.7 [“[w]hen In personam jurisdiction depends on the validity of the substantive claim against the 3 MEL takes no position on this Court’s jurisdiction over Sun Management or UCTek. 5 SPECIALLY-APPEARING DEFENDANT MANDAREE ENTERPRISES, LLC’S REPLY IN SUPPORT OF MOTION TO QUASH 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 FREDERICKS PEEBLES & MORGAN LLP 1001 SECOND ST. SACRAMENTO, CA foreign defendant,” plaintiff must make “a prima facie showing that there is [ ] substantive merit to his case”].) To prove alter ego, two conditions must be met. 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[s] . . . do not really exist.” (F. Hoffman-La Roche, Inc. v. Superior Court (2005) 130 Cal.App.4th 782, 796; Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, 538.) Second, “there must be an inequitable result if the acts in question are treated as those of the corporation alone.” (F. Hoffman-La Roche, Inc., supra, 130 Cal.App.4th at 796; Sonora Diamond, supra, 83 Cal.App.4th at 538.) Plaintiff does not allege any facts to establish that there is a unity of interest or ownership between MEL and Sun Management or UCTek. In fact, that is because there is no such unity; MEL is a corporation chartered by the Three Affiliated Tribes, while Sun Management is owned by four individuals. Furthermore, Plaintiff has not alleged any facts to establish that there would be an inequitable result if the allegations in the complaint are attributed only to Sun Management and UCTek, the actual parties to the transaction. Plaintiff only alleges that MEL “manipulated and controlled Sun Management, and in turn, UCTek as well.” (Plaintiff’s Opposition, at 7; see DVI, Inc. v. Superior Court (2002) 104 Cal.App.4th 1080, 1099 [finding corporations were not alter egos for purposes of jurisdiction because allegation that one corporation “exercised complete dominance and control” was insufficient].) Such manipulation and control, Plaintiff contends, is evidenced solely by the fact that employees of UCTek and Sun Management communicated with Plaintiff using @mellc.co email addresses. However, the fact that two corporate entities may share employees, or even officers and directors, does not make them alter egos or agents of the other. (DVI, Inc. v. Superior Court (2002) 104 Cal.App.4th 1080, 1097; Sonora Diamond, supra, 83 Cal.App.4th 541.) Furthermore, the fact that representatives of one corporate entity used an email address hosted by another corporate entity, without the hosting entity’s knowledge, cannot alone create an alter ego or agency. MEL did not direct or otherwise cause Sun Management representatives to correspond with Plaintiff and in fact was not even aware of the correspondence using @mell.co email addresses 6 SPECIALLY-APPEARING DEFENDANT MANDAREE ENTERPRISES, LLC’S REPLY IN SUPPORT OF MOTION TO QUASH 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 FREDERICKS PEEBLES & MORGAN LLP 1001 SECOND ST. SACRAMENTO, CA until initiation of this lawsuit. (See Declaration of Clarence O’Berry, at ¶ 8.) Without knowing and purposeful direction by MEL, of which Plaintiff provides no evidence, personal jurisdiction cannot exist. (See Anglo Irish Bank Corp., PLC v. Superior Court (2008) 165 Cal.App.4th 969, 982) [“The proper jurisdictional question is . . . whether the defendant has purposefully directed its activities at the forum state by causing a separate person or entity to engage in forum contacts.”].)4 Plaintiff additionally offers no support for its conclusion that MEL “runs the day-to-day operations of both Sun Management and UCTek.” (See Plaintiff’s Opposition, at 3.) Instead, it points to MEL’s website, which states that MEL specializes in business development and has the “know-how” to manage new businesses. From this, Plaintiff speculates that MEL’s “entire purpose is to run and control other companies.” (Plaintiff’s Opposition, at 3.) However, even when a holding company operates solely through subsidiaries-which is not the case here, as MEL is not a parent or holding company-there is a “firm proposition that neither ownership nor control of a subsidiary corporation by a foreign parent corporation, without more, subjects the parent to the jurisdiction of the state where the subsidiary does business.” (DVI, Inc., supra, 104 Cal.App.4th at 1092.) Finally, Plaintiff attempts to draw some significance on the fact that MEL’s website calls MEL “a family of companies.” Plaintiff also includes as an exhibit a copy of MEL’s website listing the companies within MEL’s families. See Declaration of Ethan Solove, Exhibit A, pp. 11-14. Notably, neither Sun Management nor UCTek are listed on MEL’s website. See id. Again, this is because MEL does not own or control either company. (See Declaration of Clarence O’Berry, at ¶ 5; (See Declaration of Frank Driscoll, at ¶ 4.) 4 Plaintiff cites Anglo Irish Bank for the proposition that the “court need not decide” whether a foreign company is an alter ego of an in-state company. (Plaintiff’s Opposition, at 6.) However, in Anglo Irish Bank, the Court specifically found that the employees of the foreign company were acting on behalf of the foreign defendants while visiting California. (Id., supra, 165 Cal.App.4th at 974 [“[A]ctivities undertaken on behalf of a defendant may be attributed to the defendant for purposes of personal jurisdiction.”].). Here, the Sun Management representatives never acted on behalf of MEL. (Declaration of Frank Driscoll, at ¶¶ 9-10; Declaration of Blair Gallagher, at ¶¶ 9-10.) In fact, in Anglo Irish Bank, the Court considered evidence that the employees physically visited California “at the specific request of” the foreign company to solicit investors for the foreign defendants themselves. (Id. at 984.) Accordingly, Anglo Irish Bank actually counsels against finding personal jurisdiction over MEL. 7 SPECIALLY-APPEARING DEFENDANT MANDAREE ENTERPRISES, LLC’S REPLY IN SUPPORT OF MOTION TO QUASH 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 FREDERICKS PEEBLES & MORGAN LLP 1001 SECOND ST. SACRAMENTO, CA C. MEL’s on-reservation location and tribal sovereign immunity from suit are irrelevant to the personal jurisdiction inquiry at issue. Plaintiff alleges that jurisdiction over MEL is proper because MEL is “an entity that seeks to take advantage of its location on the Three Affiliate Tribes Reservation to avoid jurisdiction in cases like the one at bar . . . .” (Plaintiff’s Opposition, at 7.) Plaintiff seemingly confuses MEL’s location with the doctrine sovereign immunity. In any case, this argument lacks merit. As a limited liability corporation charted by the Three Affiliated Tribes of the Fort Berthold Reservation (“Three Affiliated Tribes” or “Tribe”), a federally recognized Indian tribe, MEL possesses sovereign immunity from suit. (Michigan v. Bay Mills Indian Community (2014) 134 S.Ct. 2024; People v. Miami Nation Enterprises (2016) 2 Cal.5th 222, 234 [“The rule that Indian tribes are immune from suit is now firmly established as a matter of federal law and is not subject to diminution by the States.”] [internal quotation marks and citation omitted].) Tribal sovereign immunity does not arise out of MEL’s location, but rather on the fact that the Tribe is a sovereign, similar, for example, to the sovereign immunity of the State of California. (Michigan v. Bay Mills Indian Cmty. (2014) 134 S. Ct. 2024, 2031 [tribal sovereign immunity applies to suits arising out of commercial activities, “even when they take place off Indian lands.”].) Moreover, MEL’s sovereign immunity is wholly irrelevant to the issue of whether minimum contacts exist to give rise to personal jurisdiction in California courts. (See Corzo v. Banco Cent. de Reserva del Peru (9th Cir. 2001) 243 F.3d 519, 522 [noting that, outside the context of the Foreign Sovereign Immunities Act, which is inapplicable here, questions of sovereign immunity, subject matter jurisdiction, and personal jurisdiction generally are distinct].) That MEL acknowledges a fact - that it possesses sovereign immunity from suit - on its website does not create personal jurisdiction, nor does it create any unfairness toward Plaintiff. If anything, the fact that MEL announces this fact on its website ensures that its business partners - of which Plaintiff is not one - are aware and can act accordingly. It appears that Plaintiff is attempting to raise MEL’s sovereign immunity from suit to suggest that Plaintiff is victim to some unfair scheme to deprive them of a remedy under its agreements with Sun Management and UCTek, and therefore invent personal jurisdiction where otherwise it does not exist. This specious argument exposes 8 SPECIALLY-APPEARING DEFENDANT MANDAREE ENTERPRISES, LLC’S REPLY IN SUPPORT OF MOTION TO QUASH 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 FREDERICKS PEEBLES & MORGAN LLP 1001 SECOND ST. SACRAMENTO, CA Plaintiff’s fundamental misunderstanding of sovereign immunity. Furthermore, MEL’s sovereign immunity in no way deprives Plaintiff of a remedy against other defendants with whom Plaintiff actually did business, though there may be other reasons why Plaintiff is not entitled to relief against those defendants. In actuality, it would be a manifest injustice to haul an out of state entity into California courts with no evidence that the foreign entity had any contacts with California or knowingly or purposefully directed any subsidiary or agent to engage in any such contacts. D. Continuing this matter for jurisdictional discovery would be fruitless. As discussed above, MEL enjoys sovereign immunity from suit, which independently deprives this Court of jurisdiction. (Michigan v. Bay Mills Indian Community (2014) 134 S.Ct. 2024.) While MEL has not filed a dispositive motion on the basis of sovereign immunity at this time, it will file such a motion if necessary. Furthermore, because MEL was in no way involved in any agreement or correspondence with Plaintiff and does not own or control Sun Management or UCTek, Plaintiff’s claims concerning MEL are mere speculation. Therefore, jurisdictional discovery would yield no evidence of contacts, and staying this matter to allow for jurisdictional discovery would only serve to waste the time and resources of this Court and the parties, including Plaintiff. E. Hearing date As an administrative matter, Plaintiff noted that MEL set the hearing date more than thirty days after filing its Motion to Quash and argued that the “motion should be denied on these grounds alone.” (Plaintiff’s Opposition, at 4 n.1.) MEL set the motion hearing for September 20, 2018 because, on June 14, 2018, the Court informed MEL’s counsel’s office that this was the first hearing date available. (See Declaration of Diana Crow.) CONCLUSION For the foregoing reasons, MEL respectfully requests that the Court grant its motion to quash Plaintiff’s Complaint for lack of personal jurisdiction pursuant to Section 418.10 of California’s Code of Civil Procedure in its entirety, dismiss this action with prejudice, and grant MEL such other and further relief as the Court deems just and proper. Respectfully submitted, 9 SPECIALLY-APPEARING DEFENDANT MANDAREE ENTERPRISES, LLC’S REPLY IN SUPPORT OF MOTION TO QUASH 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 FREDERICKS PEEBLES & MORGAN LLP 1001 SECOND ST. SACRAMENTO, CA Dated: September 13, 2018 FREDERICKS PEEBLES & MORGAN LLP By: /s/ James Qaqundah James Qaqundah Attorneys for Plaintiff(s)/Defendant(s) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 FREDERICKS PEEBLES & MORGAN LLP 2020 L STREET SACRAMENTO, CA