Cerner Middle East Limited v. Belbadi Enterprises, Llc

Motion to Dismiss for Lack of Jurisdiction Defendants' Motion to Dismiss Purusant to Fed. R. Civ. P. 12

D. Or.October 7, 2016

DEFENDANTS’ MOTION TO DISMISS Page 1 Gary I. Grenley, OSB #751380 E-Mail: ggrenley@gsblaw.com Paul H. Trinchero, OSB #014397 E-Mail: ptrinchero@@gsblaw.com Eryn Karpinski Hoerster, OSB #106126 E-Mail: ehoerster@gsblaw.com Garvey Schubert Barer Eleventh Floor 121 S.W. Morrison Street Portland, Oregon 97204-3141 Telephone: 503 228 3939 Facsimile: 503 226 0259 Attorneys for Defendants Belbadi Enterprises LLC and Orland Ltd. UNITED STATES DISTRICT COURT DISTRICT OF OREGON PORTLAND DIVISION CERNER MIDDLE EAST LIMITED, a Cayman Islands Exempted Company, Plaintiff, v. BELBADI ENTERPRISES LLC, a U.A.E. limited liability company, and ORLAND LIMITED a/k/a VANCOUVERCENTER, Defendants. Case 3:16-cv-01630-PK DEFENDANTS’ MOTION TO DISMISS Pursuant to Fed. R. Civ. P. 12(b)(2) and 12(b)5 ORAL ARGUMENT REQUESTED LR 7-1(a) CERTIFICATION Defendants Belbadi Enterprises LLC (“Belbadi”) and Orland Ltd. (“Orland”) hereby certify pursuant to LR 7-1(a) that they have conferred in good faith with the attorney for Plaintiff Cerner Middle East Limited (“Cerner”) to resolve all issues raised by this motion (the “Motion”), but the parties have been unable to reach agreement with respect to the issues at hand. Case 3:16-cv-01630-PK Document 25 Filed 10/07/16 Page 1 of 18 DEFENDANTS’ MOTION TO DISMISS Page 2 MOTIONS Defendants make a limited appearance and respectfully move this Court to dismiss the Verified Amended Complaint (the “Complaint”)1 of Plaintiff Cerner pursuant to Fed. R. Civ. P. 12(b)(2), (b)(5) and (b)(7), and 19(b). These Motions are supported by the Declaration of Paul H. Trinchero (“Trinchero Decl.”), the Declarations of Ahmed Saeed Al Badi Al Dhaheri (“Dhaheri Decl.”) and Ziad Elhindi (“Elhindi Decl.”) filed herewith and the record of the case. The Dhaheri Declaration is attached to the Trinchero Decl. as Exhibit 1. MEMORANDUM OF LAW PRELIMINARY STATEMENT Without bothering to follow necessary jurisdictional procedures, Cerner asks this Court to preside over a case brought by a Cayman Islands corporation with a principal place of business in Missouri, against Belbadi, a United Arab Emirates (“UAE”) company with a principal place of business in Abu Dhabi, seeking to enforce two Corporate Guarantees (the “Guarantees”) that apply UAE law, select a UAE forum, and secure the obligations of another UAE company - iCapital, LLC - that is not a party to this action. Cerner has contrived a flimsy jurisdictional rationale for bringing this case in Oregon - one that essentially is an assertion of quasi in rem jurisdiction based on Belbadi’s alleged ownership interest in Orland.2 But Cerner’s reliance on this quasi in rem theory is 1 Docket No. 19. 2 Plaintiff spuriously alleges that “Belbadi is the owner of the Portland and Vancouver area real estate collectively known as Vancouver Center,” which is demonstrably false. Complaint, ¶ 5 (Docket No. 19). Plaintiff goes on to allege “[i]n Oregon this real estate is registered to Orland,” already contradicting its claim that “Belbadi is the owner of the . . . real estate.” Id. Plaintiff purports to support this allegation by attaching a list of six lots owned by Orland in Tigard, Oregon (the “Tigard Properties”). See Complaint, ¶ 5, Exh. A (Docket No. 19, Exh. A). Tigard is not located near Vancouver, Washington, and is not the site of the Vancouver Center. The Elhindi Decl. rebuts Plaintiff’s wildly erroneous factual claims by identifying the true ownership structure of the Vancouver Center and vouching for Orland’s ownership of the Tigard Properties. See Elhindi Decl., ¶¶ 4-6. It also acknowledges that Orland registered the assumed business name “Vancouvercenter” in 1999 to protect that name for eventual, future development, but never operated under that name and never owned any of the properties comprising the Vancouver Center. Id. Case 3:16-cv-01630-PK Document 25 Filed 10/07/16 Page 2 of 18 DEFENDANTS’ MOTION TO DISMISS Page 3 totally misplaced. It is well settled that, in a plenary action seeking to determine liability rather than enforce an existing judgment, the exercise of quasi in rem “jurisdiction by attachment” runs afoul of constitutional due process. In this case, where liability has not been established against Belbadi in a court of competent jurisdiction, Cerner must sue Belbadi where Belbadi can be found, which is not in the State of Oregon. The Court should dismiss all claims against Belbadi pursuant to Fed. R. Civ. P. 12(b)(2) for lack of in personam jurisdiction. Orland is not the real party in interest to Cerner’s claims because it is not a signatory to the Guarantees. Cerner’s claims in this action against Orland seek to invoke a jurisdictional connection but are premised on a flawed theory of alter ego liability that both Belbadi and Orland vehemently dispute. This dispute notwithstanding, it is clear that any finding of liability against Orland would require the Court to determine, at minimum: (1) that the Guarantees are valid and enforceable agreements under UAE law; (2) that Belbadi is liable on the Guarantees and has no defense or right of offset to Cerner’s claims under UAE law; (3) that Belbadi has exercised complete domination and control over Orland, disregarding its separate corporate existence; and (4) that Belbadi has used this domination and control of Orland to facilitate wrongful conduct that harmed Cerner. In short, most of the findings that the Court would have to make to establish Orland’s derivative liability on the Guarantees are findings related to Belbadi’s conduct and contractual interests, not Orland’s. Belbadi is an indispensable party to this action because its constitutional rights would be significantly prejudiced if a suit were to proceed against Orland on an alter ego theory in Belbadi’s absence. Belbadi is not properly before this Court and does not consent to have its rights under the UAE Guarantees determined in this forum. The Court should dismiss the claims against Belbadi for want of in personam jurisdiction, and should dismiss Cerner’s Belbadi-derived claims against Orland under Fed. R. Civ. P. 12(b)(7) (failure to join a party under Rule 19) and 19(b), since these claims cannot proceed in Belbadi’s absence. The appropriate method for determining Belbadi’s liability under the Guarantees is an action against Belbadi before a foreign court of competent jurisdiction - not a backdoor lawsuit in an unrelated jurisdiction brought through an unsupported alter ego theory. Case 3:16-cv-01630-PK Document 25 Filed 10/07/16 Page 3 of 18 DEFENDANTS’ MOTION TO DISMISS Page 4 Cerner’s case for piercing the corporate veil between Belbadi and Orland is facially deficient.3 Assuming arguendo that Oregon and Ninth Circuit law (rather than UAE law) controls the veil-piercing analysis, Cerner has failed to specifically plead, much less show, that Belbadi’s alleged control over Orland was used to carry out wrongful conduct that resulted in harm to Cerner. A plaintiff asserting a veil-piercing or alter-ego theory must identify some wrongful conduct carried out by the controlling party through the vehicle of the controlled or dominated entity. The plaintiff must further show that this wrongful conduct caused it harm. Cerner’s conclusory allegations of “injustice” are not entitled to any presumption of truth and, because they are controverted, lend no support to the prima facie jurisdictional case that Cerner must make to survive a motion under Fed. R. Civ. P. 12(b)(2). On the facts alleged and shown, Cerner has not even carried its burden of demonstrating a need for jurisdictional discovery. Though Cerner makes the conclusory allegation that “Dhaheri and his companies . . . have misused and abused the corporate form, including but not limited to iCapital, Belbadi, Vandevco, the VanSubs and Orland to perpetrate a gross injustice on Cerner and defraud creditors,” Cerner does not actually identify what this injustice is. Cerner does not and cannot allege that Belbadi is undercapitalized or that Belbadi would be unable to satisfy any judgment that might be awarded on the Guarantees, by a court having competent jurisdiction. Similarly, Cerner does not and cannot allege that it was induced to accept Belbadi’s Guarantees because of any conduct of Orland’s or any representation made concerning Orland’s assets. Cerner sought and obtained numerous representations and warranties by Belbadi under the Guarantees, none of which relate specifically to Orland - which is not even mentioned in the Guarantees. Orland was formed in 1996,4 twelve years before execution of the Cerner Business Agreement (“CBA”)5 and sixteen years before execution of the Guarantees.6 Cerner cannot (and 3 Complaint, ¶¶ 54-85 (Docket No. 19). 4 Id., ¶ 10. Case 3:16-cv-01630-PK Document 25 Filed 10/07/16 Page 4 of 18 DEFENDANTS’ MOTION TO DISMISS Page 5 does not) allege that Orland was formed for illicit or untoward purposes, or to frustrate Cerner’s rights under the 2012 Guarantees. Cerner cannot (and does not) allege that Orland’s acquisition of real property in Oregon, which took place in 1996 and 1997, was undertaken to harm Cerner or frustrate its rights under the Guarantees. At the time Orland was formed, and at the time Orland acquired six properties located in Tigard, Oregon (the “Tigard Properties”), Cerner was a complete stranger to both Orland and Belbadi. Simply put, Cerner does not and cannot allege that Orland has contributed in any way to Belbadi’s purported breach of the Guarantees or that Orland has been used as a corporate shield to frustrate any right of Cerner’s under the Guarantees. Obviously, Cerner seeks to enforce the Guarantees against Orland in an attempt to avoid litigating in the UAE as the parties agreed. Most of the facts alleged in support of Cerner’s alter ego theory relate not to Belbadi’s supposed control of Orland (a showing that Oregon law requires before piercing the veil between those two companies), but to Belbadi’s majority owner Ahmed Saeed Al Badi Al Dhaheri (“Dhaheri”) and his purported domination of various other companies. As a matter of law, these conspiratorial speculations are irrelevant to the issue of whether Belbadi has abused Orland’s corporate form, therefore central to Cerner’s alter ego theory. When the Complaint is pruned to down to the handful of allegations that actually pertain to Orland, it becomes clear that Cerner’s alter ego theory rests on frail footing: a handful of wire transfers (the “Wire Transfers”) made to Orland, with bank notations that Cerner deems “suspicious.” Parties making wire transfers are not required to explain themselves in bank notations, and any references appended to the Wire Transfers are strictly for the convenience and information of the transferees and transferors. The vagueness of these internal notations gives rise to no plausible inference of accounting impropriety or wrongdoing, and is insufficient to establish a prima facie case 5 The CBA is a 2008 agreement between Cerner and non-party iCapital that was the subject of the underlying foreign arbitrations Cerner attempted to bring against iCapital and Mr. Dhaheri. Id., ¶¶ 16, 20, 43. 6 Belbadi executed the two Guarantees in December, 2012. Id., ¶¶ 23-24. Case 3:16-cv-01630-PK Document 25 Filed 10/07/16 Page 5 of 18 DEFENDANTS’ MOTION TO DISMISS Page 6 of corporate domination or abuse. These allegations do not even give rise to a sufficient inference or suggestion of abuse to warrant jurisdictional discovery. Cerner must do much more if it seeks to bootstrap litigation of the Guarantees into a forum where the parties never agreed to be sued. Even if the Wire Transfers could be interpreted as irregular - an unfounded conjecture that Belbadi roundly disputes - Cerner never explains how these Wire Transfers facilitated any “wrongful conduct” that harmed Cerner. Cerner cannot rely on its misguided allegations of alter ego liability to fabricate jurisdiction in this forum. If Cerner is able to obtain a judgment from a court having proper in personam jurisdiction over Belbadi, then Cerner could attempt to domesticate and enforce that judgment in this forum. But by proceeding directly to a suit here on the merits, based on the happenstance of Belbadi’s passive holdings in Oregon, Cerner has skipped this important step. The Court should not reward Cerner’s impatience by allowing it to end-run settled rules of personal jurisdiction. STATEMENT OF FACTS As alleged in the Complaint, Belbadi is a UAE limited liability company with its principal place of business in Abu Dhabi, UAE.7 Belbadi does not have a place of business in the State of Oregon, and does not regularly transact business within the State of Oregon.8 Belbadi does not own real property in the State of Oregon, and is not the owner of either (1) the Vancouver Center, which is property located in Vancouver, Washington and owned by Vandevco, not Orland, or (2) Orland, which owns property in Tigard, Oregon.9 Belbadi’s sole member is Dhaheri, a citizen and domiciliary of the UAE.10 Orland is an Oregon corporation, originally formed in 1996. While Orland owns real property in the state, that property consists entirely of the Tigard Properties.11 The Tigard Properties 7 Id., ¶ 4. 8 Elhindi Decl., ¶ 2. 9 Id., ¶¶ 3-6. 10 Id., ¶ 2. 11 Id., ¶ 6. Case 3:16-cv-01630-PK Document 25 Filed 10/07/16 Page 6 of 18 DEFENDANTS’ MOTION TO DISMISS Page 7 do not form part of the Vancouver Center, which is separately owned by various subsidiaries of Vandevco Limited, a Washington limited liability company.12 While Orland did register the assumed name “Vancouvercenter” in or around 1999, it has never used or operated under that name.13 Orland is owned by Willamette Enterprises.14 Willamette Enterprises is an exempted company incorporated in the Cayman Islands.15 While ultimate ownership of Willamette Enterprises through other companies is Belbadi, Belbadi does not own Orland nor the Tigard Properties as alleged by Cerner.16 On or about December 17, 2012, Belbadi executed two Guarantees in the UAE in favor of Cerner, undertaking to guarantee certain debts and obligations of iCapital.17 The Guarantees were executed in connection with a December 29, 2012 Settlement and Payment Agreement (“SPA”) between Cerner and iCapital, in settlement of the “First Arbitration” initiated by Cerner against iCapital.18 The Guarantees make no mention of Orland.19 While the Guarantees permit Cerner to “take and hold security,” they do not purport to permit Cerner to “take and hold security” from Orland or from any party other than the Guarantor, Belbadi.20 Neither the Guarantees nor any separate security agreement identify Belbadi’s indirect interest in Orland or property owned by Orland as security for the Guarantees.21 Upon information and belief, Cerner has never exercised its 12 Id., ¶ 4. 13 Id., ¶ 5. 14 Orland Limited’s Corporate Disclosure Statement (Docket No. 24). 15 Elhindi Decl., ¶ 4. 16 Id., ¶ 5 17 Complaint, ¶¶ 22-24. English and Arabic copies of the Guarantees are attached as Exhibits E and F to the Complaint (Docket No. 19, Exhs. E, F). 18 Complaint, ¶¶ 16 & 31. English and Arabic copies of the SPA are attached as Exhibit G to the Complaint (Docket No. 19, Exh. G). 19 See generally, Complaint, Exhs. E, F (Docket No. 19, Exhs. E, F). 20 Complaint, ¶ 25(c) (Docket No. 19); Exh. E, p. 3, ¶ 1(g)(2) (Docket No. 19, Exh. E). 21 See generally, Complaint, Exhs. E, F (Docket No. 19, Exhs. E, F). Case 3:16-cv-01630-PK Document 25 Filed 10/07/16 Page 7 of 18 DEFENDANTS’ MOTION TO DISMISS Page 8 power to “take and hold security” by filing financing statements against any specific property belonging to Belbadi.22 The First Arbitration arose out of iCapital’s alleged non-payment of amounts due under the CBA.23 The CBA, executed on July 27, 2008, provided for Cerner’s supply of software and related services to UAE hospitals being serviced by iCapital under a prime contract awarded by the MOH.24 Though the CBA and SPA are governed by Missouri law, and contain clauses requiring arbitration before the International Chamber of Commerce,25 the Guarantees expressly eschew these provisions in favor of UAE law and a UAE forum.26 Cerner has not sued Belbadi to enforce the Guarantees in the courts of the UAE, consistent with their forum selection jurisdiction clauses.27 Cerner has not obtained any judgment against Belbadi, based on the Guarantees or otherwise, from any court or arbitral body.28 Despite an obvious lack of personal jurisdiction, Cerner seeks to have Belbadi’s liability on the Guarantees decided, in the first instance, in the State of Oregon, through the present action.29 22 Plaintiff does not seek to enforce a collateral interest in specific property under Article 9 of the Uniform Commercial Code, but seeks a basic money judgment against Belbadi under a breach of contract theory. Complaint, ¶¶ 102-121. Plaintiff attempts to reframe the attachment issued by the state court as an “action to take security,” but misunderstands both the nature of the provisional remedy of attachment and the proper methods to be used for “take and hold security” under U.C.C. Article 9. 23 Complaint, ¶ 20. 24 Complaint, ¶ 11. A portion of the CBA, Amendment No. 5, is attached as Exhibit H to the Complaint (Docket No. 19, Exh. H). 25 SPA, ¶¶ 14-15 (Docket No. 19, Exh. G, ¶¶ 14-15); Amendment No. 5 to CBA, § 9.3, (Docket No. 19, Exh. H, § 9.3); Award, ¶ 1.5.5 (Docket No. 19, Exh I, ¶ 1.5.5) (quoting CBA governing law provision). 26 Corporate Guarantee attached as Exhibit E to Complaint, § 7(b) (Docket No. 19, Exh. E, § 7(b)); Corporate Guarantee attached as Exhibit F to Complaint, § 7(b) (Docket No. 19, Exh. F, § 7(b)). 27 Dhaheri Decl., ¶ 12. 28 Id. 29 On the same date this action was commenced in Multnomah County Circuit Court, Cerner filed a similar action against Belbadi and its affiliate Vandevco Limited in the Superior Court for the State of Washington. The Washington case was similarly removed and a motion to dismiss that case is currently pending. Cerner Middle East Limited v. Belbadi Enterprises LLC et al., U.S. District Court for the Western District of Washington, Case No. 3:16-cv-05706. Case 3:16-cv-01630-PK Document 25 Filed 10/07/16 Page 8 of 18 DEFENDANTS’ MOTION TO DISMISS Page 9 At the time of this Motion, Plaintiff has not filed any return of service in this Court or in the state court from which this proceeding was removed.30 Belbadi has not been served with process in this action through any of the channels prescribed by UAE law, and to the best of Belbadi’s knowledge, it has not been served for this matter by any other proper means.31 ARGUMENT I. The Court Lacks Necessary in Personam Jurisdiction Over Belbadi The threshold question of whether state or federal law applies to issues of service and personal jurisdiction hinges on the nature of the Court’s subject matter jurisdiction. See Go-Video, Inc. v. Akai Elec. Co., Ltd., 885 F.2d 1406, 1413 (9th Cir. 1989) (“To exercise personal jurisdiction over a non-resident defendant in a federal question case, the district court had to determine that a rule or statute potentially confers jurisdiction over the defendant and then conclude that asserting jurisdiction does not offend the principles of Fifth Amendment due process”). “When . . . subject matter jurisdiction is premised on a federal question, the exercise of personal jurisdiction over a non- resident defendant must be authorized by a rule or statute and consonant with the constitutional principles of due process.” Glencore Grain Rotterdam B.V. v. Shivnath Rai Harnarain Co., 284 F.3d 1114, 1123 (9th Cir. 2002) (dismissing case under the Recognition and Enforcement of Foreign Arbitral Awards (“Convention”) and the FAA for lack of personal jurisdiction where plaintiff “failed to identify any property of or conduct by [defendant] that might serve as the basis for the court’s jurisdiction over it”). “Where the federal statute or rule on which an action is premised does not authorize service to obtain jurisdiction over a defendant, the starting point is the forum state’s long- arm statute.” Doe v. Unocal Corp., 248 F.3d 915, 923 (9th Cir. 2001) (citing Fed. R. Civ. P. 4(k)(1)(A)). 30 Trinchero Decl., ¶ 3. 31 Elhindi Decl., ¶ 2. Case 3:16-cv-01630-PK Document 25 Filed 10/07/16 Page 9 of 18 DEFENDANTS’ MOTION TO DISMISS Page 10 This Court has subject matter jurisdiction over this matter pursuant to 9 U.S.C. §§ 203 & 205.32 In determining whether personal jurisdiction exists, Oregon and federal law both lead to the same conclusion. The exercise of quasi in rem jurisdiction is narrowly constrained by the minimum contacts and due process requirements of International Shoe Co. v. Washington, 326 U.S. 310 (1945), requirements that apply with equal force under state and federal law. As such, both Oregon and federal courts have concluded that a plaintiff asserting quasi in rem jurisdiction “by attachment,” in a dispute that does not relate to the property to be attached, must demonstrate some nexus between the defendant, the forum, and the litigation beyond the defendant’s mere ownership of property there. Plaintiff here, relying solely on Belbadi’s indirect ownership in Orland, in an action to enforce Guarantees having no relation to Orland or its Tigard Properties, has not and cannot demonstrate that such a nexus exists here. A. Federal Law Precludes Exercise of Quasi in Rem Jurisdiction Against Belbadi Federal courts have consistently refused recognition of quasi in rem jurisdiction in the absence of some nexus between the litigation, the forum, and the defendant. [I]n order to justify an exercise of jurisdiction in rem, the basis for jurisdiction must be sufficient to justify exercising “jurisdiction over the interests of persons in a thing.” The standard for determining whether an exercise of jurisdiction over the interests of persons is consistent with the Due Process Clause is the minimum- contacts standard elucidated in International Shoe. . . . [A]lthough the presence of the defendant's property in a State might suggest the existence of other ties among the defendant, the State, and the litigation, the presence of the property alone would not support the State's jurisdiction. . . . For in cases such as Harris and this one, the only role played by the property is to provide the basis for bringing the defendant into court. . . . In such cases, if a direct assertion of personal jurisdiction over the defendant would violate the Constitution, it would seem that an indirect assertion of that jurisdiction should be equally impermissible. Shaffer v. Heitner, 433 U.S. 186, 207-10 (1977) (internal citations and footnotes omitted). See also, Office Depot Inc. v. Zuccarini, 596 F.3d 696, 699-700 (9th Cir. 2010) (to assert “type two quasi in 32 Notice of Removal, pp. 3-5 (Docket No. 1); Opp. to Motion to Remand, pp. 6-10 (Docket No. 17); Glencore Grain Rotterdam B. V., 284 F.3d at 1120 (the Convention provides subject matter jurisdiction in the district courts over applications to recognize and enforce foreign arbitration awards). Case 3:16-cv-01630-PK Document 25 Filed 10/07/16 Page 10 of 18 DEFENDANTS’ MOTION TO DISMISS Page 11 rem” jurisdiction, where the in-forum property is unrelated to the dispute at bar, “[d]ue process requires a constitutionally sufficient relationship among the defendant, the forum, and the litigation”) (citing Shaffer, supra, 433 U.S. at 204). While these due process concerns may be satisfied in an action to execute upon an existing judgment, the mere presence of a defendant’s assets in the forum does not confer jurisdiction in a lawsuit that seeks to determine the defendant’s liability as an original matter. See H. Ray Baker, Inc. v. Associated Banking Corp., 592 F.2d 550, 552 (9th Cir. 1979) (“We turn to the question whether the relationship among the defendant, the forum, and the litigation permits the assertion of limited jurisdiction in this case. The presence of assets in California is a relevant contact, though not one that is sufficient by itself to confer jurisdiction”); Office Depot, supra, 596 F.3d at 700 (“Once it has been determined by a court of competent jurisdiction that the defendant is a debtor of the plaintiff, there would seem to be no unfairness in allowing an action to realize on that debt in a State where the defendant has property, whether or not that State would have jurisdiction to determine the existence of the debt as an original matter.”) (quoting Glencore Grain Rotterdam B.V., 284 F.3d at 1127; Shaffer, supra, 433 U.S. at 210, n. 36). Only after obtaining a determination of Belbadi’s liability “by a court of competent jurisdiction . . . as an original matter,” could Cerner proceed here to enforce that judgment against any assets Belbadi might have in the forum. Id. The most sensible approach would be for Cerner to bring suit in the UAE, the forum specified in the Guarantees, and the forum best suited to apply UAE law, which governs the Guarantees. In any event, it is clear that Cerner cannot commence plenary litigation under the Guarantees in this forum, where the only jurisdictional basis over Belbadi is its passive ownership of property. To the extent federal law governs the personal jurisdiction analysis, Cerner’s claim must be dismissed pursuant to Fed. R. Civ. P. 12(b)(2) because Cerner fails to allege a sufficient nexus between the parties, the subject of the litigation, and the State of Oregon. Case 3:16-cv-01630-PK Document 25 Filed 10/07/16 Page 11 of 18 DEFENDANTS’ MOTION TO DISMISS Page 12 B. Oregon Law Also Prevents Exercise of Quasi in Rem Jurisdiction over Belbadi Under Oregon law, the analysis of personal jurisdiction is identical to the analysis under federal law. Accordingly, the Court need not examine the nuances of its own subject matter jurisdiction to conclude that Belbadi has not been properly brought before this forum under either state or federal law. The Courts of Oregon have adopted Shaffer without reservation. See State ex rel. Dept. of Revenue v. Control Data Corp., 300 Or. 471, 474-75 (Or. 1986) (permitting quasi in rem jurisdiction in case where “creditor already has a judgment against the debtor” and “seeks only to collect this judgment by reaching an asset belonging to the debtor,” by distinguishing this from a case in which the plaintiff “attach[es] assets in the forum state as a way of getting jurisdiction to adjudicate a claim against an absent debtor”) (citing Shaffer, supra, 433 U.S. at 210, n. 36); C.O.W., Inc. v. Motor Vehicles Division, Oregon Dept. of Transp., 37 Or. App. 73, 77-78 (Or. App. 1978) (court could not base its jurisdiction on defendant’s ownership of property in the state, because to do so would “put the defendant in the position of appearing generally or suffering an undefended judgment against its interests. Shaffer tells us that is not constitutional due process”) (citing Shaffer, supra, 433 U.S. at 210, n. 36). Because Oregon and federal law are congruent on this issue, the Court should dismiss this action in full under Fed. R. Civ. P. 12(b)(2). C. Plaintiff Cannot Assert Jurisdiction Over Belbadi on an Alter Ego Theory On a motion to dismiss under Fed. R. Civ. P. 12(b)(2), “the plaintiff bears the burden of establishing that jurisdiction is proper.” CollegeSource, Inc. v. AcademyOne, Inc., 653 F.3d 1066, 1073 (9th Cir. 2011). “Where, as here, the defendant's motion is based on written materials rather than an evidentiary hearing, ‘the plaintiff need only make a prima facie showing of jurisdictional facts to withstand the motion to dismiss.’” Id. (quoting Brayton Purcell LLP v. Recordon & Recordon, 606 F.3d 1124, 1127 (9th Cir. 2010)). Though a plaintiff may not simply rest on the “bare allegations of [the] complaint,” uncontroverted allegations must be taken as true, and “[c]onflicts between parties over statements contained in affidavits must be resolved in the plaintiff's Case 3:16-cv-01630-PK Document 25 Filed 10/07/16 Page 12 of 18 DEFENDANTS’ MOTION TO DISMISS Page 13 favor.” Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004) (quoting Amba Mktg. Sys., Inc. v. Jobar Int'l, Inc., 551 F.2d 784, 787 (9th Cir. 1977)). The truth of disputed allegations in the complaint is not assumed for purposes of this prima facie analysis. See Mavrix Photo, Inc. v. Brand Technologies, Inc., 647 F.3d 1218, 1223 (9th Cir. 2011) (quoting Data Disc, Inc. v. Sys. Tech. Assocs., Inc., 557 F.2d 1280, 1284 (9th Cir. 1977)). When a plaintiff premises jurisdiction over a foreign defendant on an alter ego theory, the plaintiff “must make out a prima facie case ‘(1) that there is such unity of interest and ownership that the separate personalities [of the two entities] no longer exist and (2) that failure to disregard [their separate identities] would result in fraud or injustice.’” Unocal Corp., 248 F.3d at 926 (alterations in original) (quoting AT&T Co. v. Compagnie Bruxelles Lambert, 94 F.3d 586, 591 (9th Cir. 1996)). The courts of Oregon apply a similar standard, requiring that a plaintiff alleging one company’s domination and control over another go a step further to show that such control was used to carry out “improper conduct” that resulted in specific harm to the plaintiff: When a plaintiff seeks to collect a corporate debt from a shareholder by virtue of the shareholder's control over the debtor corporation rather than on some other theory, the plaintiff must allege and prove not only that the debtor corporation was under the actual control of the shareholder but also that the plaintiff's inability to collect from the corporation resulted from some form of improper conduct on the part of the shareholder. This causation requirement has two implications. The shareholder's alleged control over the corporation must not be only potential but must actually have been exercised in a manner either causing the plaintiff to enter the transaction with the corporation or causing the corporation's default on the transaction or a resulting obligation. Likewise, the shareholder’s conduct must have been improper either in relation to the plaintiff's entering the transaction or in preventing or interfering with the corporation's performance or ability to perform its obligations toward the plaintiff. State ex rel. Neidig v. Superior Nat. Ins. Co., 343 Or. 434, 454 (Or. 2007) (quoting Amfac Foods v. Int'l Systems, 294 Or. 94, 108-09, 654 P.2d 1092 (1982)). Cerner has not alleged, much less made a prima facie showing, that Belbadi’s purported control of Orland was exercised in a manner that caused Cerner to enter the Guarantees or caused Belbadi to default on any obligation under the Guarantees. Even in the unlikely event that the Wire Transfers could be interpreted as evidence of Belbadi’s control over Orland, there is no allegation, or Case 3:16-cv-01630-PK Document 25 Filed 10/07/16 Page 13 of 18 DEFENDANTS’ MOTION TO DISMISS Page 14 even a plausible inference, that those transfers induced Cerner to enter the Guarantees or interfered with Belbadi’s performance under the Guarantees, both events having allegedly occurred years apart. Cerner does not, and cannot, allege that Orland was formed, or its accounting practices were implemented, to defraud Cerner. The Guarantees contain no reference to Orland, and make no representations nor warranties about Orland. Plaintiff has not shown that Belbadi’s conduct, even if it amounted to control over Orland, was “improper . . . in relation to [Cerner’s] entering the transaction or in preventing or interfering with [Belbadi’s] performance or ability to perform its obligations toward [Cerner].” Id. As pled, Cerner’s alter ego theory has fatal holes that defeat any assertion of jurisdiction on this basis. Nor do the Wire Payments demonstrate the kind of “pervasive control over [Orland], such as when a parent corporation ‘dictates every facet of the subsidiary's business-from broad policy decisions to routine matters of day-to-day operation,’” indicative of the “unity of interest and ownership” that the Ninth Circuit requires to prove control. Unocal Corp., 248 F.3d at 926. See also, Neidig, supra, 343 Or. at 455, n. 16 (requiring “control, not merely majority or complete stock control, but complete domination, not only of the finances, but of policy and business practice in respect to the transaction so that the corporate entity as to this transaction had at the time no separate mind, will or existence of its own”). Cerner offers little more than speculation, based on lack of detail in the shorthand references appended to the Wire Payments, that Belbadi and Dhaheri dominated Orland in this manner. But transferors and recipients of wire transfers are not required to explain the purposes of these payments in wire references for the benefit of third parties who might later chance upon their bank records. Such notations exist strictly for the reference and convenience of the parties to the wire transfer. Cerner cannot build a case against Belbadi or Orland based on the lack of detail in these references. Most of the allegations offered by the Complaint in support of Plaintiff’s veil-piercing theory between Orland and Belbadi are wholly irrelevant to the Court’s analysis because they do not relate specifically to Orland. Orland cannot be held liable for Belbadi’s debts unless it is specifically Case 3:16-cv-01630-PK Document 25 Filed 10/07/16 Page 14 of 18 DEFENDANTS’ MOTION TO DISMISS Page 15 shown that “[Belbadi] actually controlled (or was under common control with) [Orland], that [Belbadi] used its control over [Orland] to engage in improper conduct, and that, as a result of the improper conduct, [Cerner] was harmed.” Neidig, supra, 343 Or. at 454-55. Plaintiff’s allegations of a conspiracy between Dhaheri and his alleged affiliated entities (none of which are parties here) are wholly irrelevant to the question of whether the Defendant here, Orland, was controlled. The only allegations of control made as to Orland are those detailing the Wire Payments. And these allegations cannot carry the day for Cerner. Cerner has failed to make a prima facie case of Belbadi’s control over Orland and it has failed to allege any specific injury that it suffered on account of this alleged control. Even if the Court could draw enough favorable inferences from the Complaint to find that the Wire Payments reflected Orland’s complete domination by other entities, the Court would still lack any basis for an assertion of jurisdiction over Belbadi on grounds that it is Orland’s alter ego. Accordingly, the Court should dismiss all claims against Belbadi pursuant to Fed. R. Civ. P. 12(b)(2). II. Because Belbadi Is an Indispensable Party, Cerner’s Remaining Claims Against Orland Should Be Dismissed Defendants acknowledge that their arguments regarding personal jurisdiction are apposite only to Belbadi, a foreign company lacking any significant contacts with this forum. The Court should also dismiss Cerner’s claims against Orland, not for want of in personam jurisdiction, but because it would be prejudicial, inefficient and fundamentally inequitable to have Belbadi’s alleged liability on the Guarantees determined for the first time through the backdoor of an alter ego suit against an Oregon subsidiary three companies removed.33 The Guarantees apply UAE law, specify a UAE forum, and center on underlying obligations that grow out of UAE contracts and relationships. The Court should not facilitate Cerner’s forum shopping attempts by permitting Cerner to litigate a 33 Orland is owned by Willamette Enterprises. Corporate Disclosure Statement (Docket No. 24). Willamette Enterprises is an exempted company incorporated in the Cayman Islands. Elhindi Decl., ¶ 4. While ultimate ownership of Willamette Enterprises through other companies is Belbadi, Belbadi does not own Orland nor the Tigard Properties as alleged by Cerner. Id. Case 3:16-cv-01630-PK Document 25 Filed 10/07/16 Page 15 of 18 DEFENDANTS’ MOTION TO DISMISS Page 16 UAE company’s liability under a UAE agreement through a roundabout action against Belbadi’s Oregon affiliate. Under an emerging consensus among federal courts, Belbadi is an indispensable party to Cerner’s derivative claims against Orland - both because Belbadi is a party to the Guarantees that Cerner seeks to enforce, and because any judgment against Orland would require a determination of Belbadi’s (1) liability on the Guarantees and (2) status as Orland’s alter ego. See Hall v. Club Corp. of America, 33 Fed. Appx. 873, 875-76 (9th Cir. 2002) (suit could not proceed against remaining defendant where court had dismissed defendant’s wholly owned subsidiary and alleged alter ego for lack of personal jurisdiction, and the subsidiary was a party to the contract plaintiff sought to enforce); Vedder Price Kaufman & Kammholz v. First Dynasty Mines, Ltd., No. 01 Civ. 3970 (WHP), 2001 WL 1190996, *3 (S.D.N.Y., Oct. 9, 2001) (holding subsidiary alleged to be alter ego of parent to be indispensable where it was primary participant in the dispute); Amoco Prod. Co. v. Aspen Group, 189 F.R.D. 614, 616 (D. Colo. 1999) (holding shareholders alleged to be alter egos of corporation to be indispensable); Enza Inc. v. We the People, Inc., 838 F. Supp. 975, 978 (E.D. Pa. 1993) (holding defendant corporation to be indispensable when alleged fraud occurred in its name or on its behalf); Dou Yee Enters. v. Advantek, Inc., 149 F.R.D. 185, 188-89 (D. Minn. 1993) (same); N.S.N. Int'l Indus. v. E.I. du Pont de Nemours & Co., Inc., 143 F.R.D. 30, 34 (S.D.N.Y. 1992) (holding corporation to be an indispensable party in technology misappropriation case where plaintiff made information available to defendant through corporation and had independent misappropriation claim against corporation); Rosengarten v. Int'l Tel. & Tel. Corp., 466 F. Supp. 817, 828 (S.D.N.Y. 1979) (holding corporation to be an indispensable party in an action by shareholders alleging fraud within the corporation). The Southern District of New York’s decision in Vedder, though unpublished, is uniquely instructive here: Several courts have held that Rule 19(b) requires dismissal of an action to set aside a contract where all parties cannot be joined. See . . . Lomayaktewa v. Hathaway, 520 F.2d 1324, 1325 (9th Cir. 1975), “[n]o procedural principle is more deeply imbedded in the common law than that, in an action to set aside a lease or a contract, all parties who may be affected by the determination of the action are indispensable”); . . . Case 3:16-cv-01630-PK Document 25 Filed 10/07/16 Page 16 of 18 DEFENDANTS’ MOTION TO DISMISS Page 17 While co-obligors such as defendants here generally are not deemed indispensable parties, this single fact does not alter the conclusion that FDM-Cayman is indispensable. The legal services to be rendered by [plaintiff] pertained primarily to an Armenian joint venture of which [the foreign subsidiary] is a partner, but [the in-state parent] is not. Thus, [the foreign subsidiary] appears to have a more prominent role in the underlying dispute than its parent. In addition, [plaintiff’s] claims for relief against defendants do not stand alone, but are inextricably intertwined with the affirmative defense of offset as a result of defendants’ claimed overpayments. . . . Therefore, dismissal is warranted for the further reason that [plaintiff’s] claims are part of a larger dispute involving a bundle of rights that indispensably requires the presence of [the foreign subsidiary], the principal obligor, to resolve. Vedder Price Kaufman & Kammholz, 2001 WL 1190996, at *2-3 (internal citations and quotations omitted). The key issues in any case by Cerner against Orland would center on Belbadi’s conduct and Belbadi’s rights and liabilities under the Guarantees. Specifically, this Court would have to determine that: the Guarantees were valid and binding on Belbadi; iCapital has legitimate unpaid obligations that would trigger Belbadi’s obligations under the Guarantees; neither iCapital nor Belbadi has any defense or right of offset to these obligations; Belbadi has so thoroughly dominated Orland that Orland should not be treated as a separate company; and that Belbadi controlled Orland to engage in “improper conduct” that resulted in harm to Cerner. Accordingly, Belbadi is an indispensable party to any action on the Guarantees, and Cerner’s claims against Orland should be dismissed pursuant to Fed. R. Civ. P. 19(b) and 12(b)(7). III. Belbadi Has Not Been Served Though Cerner filed a summons and complaint in the state court proceeding to commence this action, it has not at the time of this Motion filed any corresponding return of service.34 Cerner’s service of process is therefore presently incomplete. See Or. R. Civ. P. 7(F). Belbadi’s removal of this action necessitated its limited appearance in this action in the time provided by Fed. R. Civ. P. 81(c) to challenge personal jurisdiction and service. Belbadi vigorously contests this Court’s jurisdiction, and maintains that no further proceedings should be held in this matter until, at 34 Trinchero Decl., ¶ 3. Case 3:16-cv-01630-PK Document 25 Filed 10/07/16 Page 17 of 18 DEFENDANTS’ MOTION TO DISMISS Page 18 minimum (a) the Court decides the instant Motion to Dismiss and (b) Cerner properly joins Belbadi to this action by effectuating proper service of process. If Cerner ultimately fails to perfect service “within a reasonable time,” Savage & Assoc., P.C. v. Banda 26, S.A., 2004 WL 724945, *3 (Bankr. S.D.N.Y. Mar. 30, 2004), its failure would constitute an additional grounds of dismissal under Fed. R. Civ. P. 12(b)(5).35 WHEREFORE, Defendants Belbadi Enterprises LLC and Orland Ltd. respectfully request that the Court dismiss the Complaint in full, pursuant to Fed. R. Civ. P. 12(b)(2), (b)(5) and (b)(7), and 19(b) for lack of in personam jurisdiction, for insufficient service of process, and for the inability of this suit to proceed in the absence of an indispensable party. DATED this 7th day of October, 2016. Respectfully submitted, GARVEY SCHUBERT BARER By s/Gary I. Grenley Gary I. Grenley, OSB #751380 ggrenley@gsblaw.com Paul H. Trinchero, OSB #014397 ptrinchero@gsblaw.com Eryn Karpinski Hoerster, OSB #106126 ehoerster@gsblaw.com Tel: 503 228 3939 / Fax: 503 226 0259 Attorneys for Defendants Belbadi Enterprises LLC and Orland Ltd. GSB:8097748.4 35 Pursuant to Fed. R. Civ. P 4(m), the 120-day time limit for service of the summons and complaint does not apply to service in a foreign country under Rule 4(f) or Rule 4(j)(1). However, “a plaintiff does not have unlimited time to serve a defendant in a foreign country.” In re Bozel S.A., 549 B.R. 446, 449 (Bankr. S.D.N.Y. 2016)). “[W]here service is in a foreign country, the [c]ourt uses a flexible due diligence standard to determine whether service of process was timely.” Yellowave Corp. v. Mana, 2000 WL 1508249, at *2 (S.D.N.Y. Oct. 11, 2011) (quoting Travers Tool Co. v. S. Overseas Express Line, Inc., 2000 WL 194781, at *1 (S.D.N.Y. Feb. 17, 2000)); see also In re Southold, 148 B.R. at 730 (“Under this flexible due diligence standard, courts generally refused to dismiss cases where the delay was in the range of two or three months unless that delay caused the defendants hardship or prejudice.”) (collecting cases). Case 3:16-cv-01630-PK Document 25 Filed 10/07/16 Page 18 of 18