Defendants who caused injuries and deaths when they are sued will claim that California courts do not have jurisdiction over them and suit can only be brought elsewhere.
For example, a multi-millionaire developer who together with his San Diego limited liability corporation owned and operated a hotel in Baja California were sued for personal injuries to a California teenager who was seriously injured when he fell 15 feet as a result of a massive concrete balcony giving way.
The developer objected to being sued in San Diego County because he lived in Oregon even though at the time the of the fall, developer was imprisoned by the U. S. Bureau of Prisons at the Lompoc Federal Correctional Facility, Lompoc, California for bank fraud.
After being served with the defendant’s motion to quash service of process, the developer’s deposition was taken. His testimony showed that he availed himself of the privilege and benefits of California law by (1) conducting business activities in California before and after moving into the state, (2) starting a company in California, (3) targeting California charities to recruit potential hotel guests, (4) advertising to California residents on an Internet web site, and (5) living in California.
Proving the developer was subject to California law began with California’s long-arm statute, which allows a court to exercise personal jurisdiction over an out-of-state defendant on the basis of acts committed by an out-of-state defendant, providing that the defendant has a sufficient connection or contacts with the state.
California law authorizes the broadest possible exercise of judicial jurisdiction, except those limitations imposed by the U.S. Constitution. See Code Civ Proc. § 410.10; Magnecomp Corp. v. Athene Co. (1989) 209 Cal. App. 3d 526, 534.
“A state court’s assertion of personal jurisdiction over a nonresident defendant . . . comports with the requirements of the due process clause of the federal Constitution if the defendant has such minimum contacts with the state that the assertion of jurisdiction does not violate ‘traditional notions of fair play and substantial justice.’ ” Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal. 4th 434 (quoting International Shoe Co. v. State of Wash., Office of Unemployment Compensation and Placement (1945) 326 U.S. 310. In short, the law is perfect common sense: “A person who purposefully avails himself or herself of the benefits of doing business in the forum state must be prepared to answer lawsuits that relate to his or her activity there.” Id.
“Jurisdiction is proper … where the contacts proximately result from actions by the defendant himself that create a ‘substantial connection’ with the forum State” (emphasis in original) Burger King Corp. v. Rudzewicz (1985) 471 U.S. 462, 475.
General jurisdiction exists over a nonresident defendant when his contacts with the forum state are substantial, continuous, and systematic make it fair to subject him to jurisdiction for all purposes. Epic Communications, Inc. v. Richwave Technology, Inc. (2009) 179 Cal. App. 4th 314. In such a case, “it is not necessary that the specific cause of action alleged be connected with the defendant’s business relationship to the forum.” Cornelison v. Chaney (1976) 16 Cal.3d 143, 147.
If a nonresident defendant does not have substantial and systematic contacts in the forum sufficient to establish general jurisdiction, it may still be subject to jurisdiction if there is a sufficient nexus among the defendant, the litigation and the state. Vons, supra, 14 Cal. 4th 434. Jurisdiction will be proper if (1) the defendant has purposefully availed itself of forum benefits with respect to the matter in controversy; (2) the controversy is substantially related to or arises out of the defendant’s contacts with the forum; and (3) the assertion of jurisdiction would comport with fair play and justice. Snowney v. Harrah’s Entertainment, Inc. (2005) 35 Cal. 4th 1054.
The leading California authority on the exercise of specific jurisdiction is Vons Companies Inc., v. Seabest Foods, Inc., (1996) 14 Cal.4th 434. Vons involved an E. Coli outbreak at various restaurants in the Pacific Northwest allegedly caused by contaminated hamburger patties from a Vons meat packing plant in El Monte. Vons, which became embroiled in litigation in California, sought indemnity from franchisees in Washington State for mishandling the meat which the franchisees had purchased and cooked in Washington. While the food poisoning at the franchises occurred in Washington, the franchise agreements provided that any contract disputes would be litigated in California under California law.
The California Supreme Court held these facts demonstrated the Washington franchisees had “purposefully availed themselves of benefits in the forum by reaching out to forum residents to create an ongoing franchise relationship.” (Id. at 449.) The California Supreme Court dismissed the defendants’ protests that the entitles who were suing them were not parties to the franchise agreements, emphasizing, “[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 452 (emphasis added.)
The franchisees also argued Vons failed to show that its tort liability had anything to do with their franchise agreements, claiming that only breaches of the franchise agreements would suffice. The California Supreme Court rejected a mechanical proximate cause test for evaluating the connection between a nonresident defendant’s forum activities and a plaintiff’s cause of action. Instead, the Vons Court stressed that the cause of action must either “arise out of” or be “related to” the defendant’s forum activity in order to justify jurisdiction. (Id.at 451.) The Court was emphatic that a tort claim that is related to a California contract, such as the case here, is a sufficient link to establish jurisdiction. (Id. at 462-463.)
The Supreme Court held that a nonresident defendant’s contacts with forum state need not be proximate cause of plaintiff’s alleged injury for personal jurisdiction to be appropriate. Id. at 463 – 464. The Court specifically rejected the proximate cause test, pointing out that “ such a test would shield nonresidents who take advantage of forum benefits.” Id. at 463 – 464. Nor is it necessary for the forum contact to be substantively related to plaintiff’s cause of action. Id. at 459-460; 462.
In Snowney, defendant Harrah’s Entertainment, Inc. operated a group of hotels in Nevada, which were advertised to California residents by billboards, print ads, radio and television ads, and an Internet Web site. A California resident filed a class action against defendants for failing to give notice of an energy surcharge imposed on hotel guests. In concluding that California may properly exercise personal jurisdiction over defendant, the California Supreme Court discussed propriety of finding specific jurisdiction in cases involving the Internet:
- By touting the proximity of their hotels to California and providing driving directions from California to their hotels, defendants’ Web site specifically targeted residents of California … Defendants also concede that many of their patrons come from California and that some of these patrons undoubtedly made reservations using their Web site. As such, defendants have purposefully derived a benefit from their Internet activities in California … and have established a substantial connection with California through their Web site … In doing so, defendants have “purposefully availed [themselves] of the privilege of conducting business in” California “via the Internet.”
– Snowney, supra, 35 Cal. 4th at 1064–1065; citations omitted.
Here, not only did the developer derive the benefit of his website that targeted California customers, but he also specifically targeted California charities, and started a company in this State to do so.
The controversy at issue in this case is also related to developer’s contacts with California. As a result of his activities in selling hotel stays in California that Plaintiff became injured. Developer knew that California is a big market for Cabo visitors (in part due to its proximity and convenience). Thus, “[b]y purposefully and successfully soliciting the business of California residents, defendants could reasonably anticipate being subject to litigation in California in the event their solicitations caused an injury to a California resident.” Snowney, 35 Cal. 4th at 1062–1063.
In Moncrief v. Clark, an Arizona attorney communicated via telephone and email with California lawyer to facilitate the sale of farm equipment for his Arizona clients. Moncrief v. Clark (2015) 238 Cal. Appl. 4th 1000. The representations regarding the equipment were false, and California lawyer was sued by his own client for malpractice. California lawyer cross-complained against Arizona lawyer who moved to quash, arguing that because he only engaged in a single, fortuitous transaction with the California lawyer, he did not personally avail himself of the benefits of California. Id. at 1006–1007. Finding that the Arizona lawyer’s representations were made with the sole purpose of facilitating the sale between California lawyer’s client and Arizona lawyer’s client, such representations were purposely directed toward California, the Court of Appeal held that the Arizona lawyer was subject to California jurisdiction. Id. at 1008 – 1009. Here, the developer did not just engage in one transaction which was sufficient in Moncrief, but directed his efforts at the California customers continuously for years from Oregon and California. (Ex. A, 40:21–45:16; 43:7–45:16.)
The exercise of jurisdiction over the developer is fair. This state has an interest in providing its residents with a convenient forum for redressing injuries caused by out-of-state defendants. “‘Moreover, where individuals ‘purposefully derive benefit’ from their interstate activities … it may well be unfair to allow them to escape having to account in other States for consequences that arise proximately from such activities … Further, ‘because ‘modern transportation and communications have made it much less burdensome for a party sued to defend himself in a State where he engaged in economic activity,’ it usually will not be unfair to subject him to the burdens of litigating in another forum for disputes relating to such activity.’” Vons, 14 Cal.4th at 447. (Citations omitted.) In fact, the defendant was deposed in this case via Zoom. The only potential travel he might have to make will be for trial. Other than Deadbeat, no witnesses are located in his home state of Oregon.
Developer derived at least $3.5 million of income from his California company, Baja Escapes, LLC. As a result, it would be unfair to allow this defendant to reap the benefits of allowing him to do business with California residents while forcing injured residents to pursue their claims in another state.
The “minimum contacts” doctrine provides no mechanical yardstick for determining whether an out-of-state defendant is subject to jurisdiction in a California court. Rather, personal jurisdiction depends on the facts of each case, the test being whether, under those facts, California has a sufficient relationship with the defendant and the litigation to make it reasonable (“fair play”) to require him to defend the action in California courts. See World-Wide Volkswagen Corp. v. Woodson (1980) 444 US 286, 292; and Fisher Governor Co. v. Sup.Ct. (Prestwich) (1959) 53 C2d 222, 225-226.
Sufficient “nexus” with California was found and upheld jurisdiction where a trucker who made irregular deliveries in California caused an accident in Nevada en route to California. Cornelison v. Chaney (1976) 16 C3d 143, 149-150. The court considered whether subjecting defendant to California jurisdiction would be fair and reasonable in the light of the inconvenience to him in defending an action in California when balanced against the interests of plaintiff in suing locally and of the state in assuming jurisdiction. In that connection, the court pointed out that, though some of the witnesses who would testify at trial resided in Nevada, plaintiff was also a witness to the accident, that there was evidence in California on the amount of plaintiff’s damages, that from the perspective of a Nebraska resident faced with litigation outside his state, there was little difference in the burden between defending in Nevada or California, and that California had an interest in providing a forum since plaintiff was a California resident. Id. at 151.
The relevant period during which “minimum contacts” must have existed is when the cause of action arose rather than when the complaint was filed or served. See Boaz v. Boyle & Co. (1995) 40 Cal. App. 4th 700, 717: Cadle Co. II, Inc. v. Fiscus (2008) 163 Cal. App. 4th 1232, 1239.
If plaintiff is a local resident, the forum state may have more of an interest in the matter, making it easier to justify such exercise of jurisdiction. See Keeton v. Hustler Magazine, Inc. (1984) 465 U.S. 770, 780. Here, when the cause of action arose, on August 5, 2018, Deadbeat was living in California and running his businesses from California.
Incorporation of the developer’s LLC within California is equivalent to “domicile” for jurisdiction purposes; i.e., the corporation is subject to the general personal jurisdiction of California courts. A California corporation can be sued locally on any claim or cause of action, regardless of where the cause of action arose. (Cal. Prac. Guide Civ. Pro. Before Trial Ch. 3:210.1) Because developer’s LLC was incorporated in California, the San Diego Superior Court has general personal jurisdiction over it.
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