Parent Cos. Own Acts Establish Personal Jurisdiction

SK Trading Int’l Co. Ltd. v. Superior Court, A163590 (D1d4 Apr. 12, 2022)

Petitioner in this case is a Korean outfit whose California subsidiary is alleged to have engaged in a conspiracy to manipulate the price of a gasoline blendstock called CARBOB. Petitioner argues that there’s no personal jurisdiction. When the trial court disagreed, it took a writ under Code of Civil Procedure § 418.10(c).

It has long been established that having a domestic subsidiary is not, own its own, enough to give rise to personal jurisdiction over a foreign parent. The test, instead, looks to whether the parent’s own acts are significant enough, and sufficiently related to the claims that it’s fair to hale them into court here. 

In this case, the evidence showed that Petitioner/parent was not just a passive owner of a domestic sub. Parent’s execs took an active role in managing the California-based conduct that was part of the conspiracy. They had a role in hiring key, California-based personnel. They facilitated the creation and operation of a joint venture arrangement through which the conspiracy was carried out. That’s enough to meet the test.

The Court makes an interesting point in a footnote. For a long time, there was a open debate about how closely the in-state conduct needed to relate to the claims to satisfy the test. As I discussed in a post eight years ago, there were basically there takes. Some courts required the conduct to be the cause of the claim, some applied an “arising from or related to” test, and some asked whether the claims and contacts were “substantially connected.” The last test—generally viewed as the most liberal—had been adopted by the California Supreme Court. See Snowney v. Harrah’s Entmt. Inc., 35 Cal.4th 1054, 1068 (2005). But subsequent decisions of the U.S. Supreme Court—including a case that reversed the Cal Supremes—appear to have settled on the “arising from or related to” standard. See Bristol-Myers Squibb Co. v. Superior Court, 137 S.Ct. 1773, 1781 (2017) (casting doubt on the adequacy of substantial connection); Ford Motor Co. v. Montana Eighth Jud. Dist. Ct., 141 S.Ct. 1017, 1026 (2021) (rejecting proof-of-causation requirement).

Writ denied.

The Avails of Sales

Thurston v. Fairfield Collectables of Ga., LLC,  No. E072909 (D4d2 Aug. 26, 2020)

Defendant, which is located in Georgia, sells models over the Internet. It doesn’t have employees or stores in California, but it makes about 8 percent of its sales—about $350k annually—to customers here. Plaintiff, who is blind, brought an Unruh Act claim alleging that Defendant’s website did not accommodate her disability. The trial court quashed service for lack of personal jurisdiction.

So that gets us into the morass that is personal jurisdiction over the Internet. Personal jurisdiction requires: (1) contacts that demonstrate purposeful availment of the law of the forum state; (2) a connection between the contacts and the claim; and (3) the satisfaction of a gestalt test of overall reasonableness.

There are a whole bunch of tests for personal availment in the Internet context. The easiest one looks to whether the defendant used its Internet presence to make a substantial amount of sales to persons within forum state. Other tests also look for some state-specific direction of activity. The Court of Appeal here says that substantial sales are enough. But even if more direction were needed, there was some evidence that Defendant also mailed catalogs to Californians who requested them.

The Court says that relatedness is also satisfied. Even though Plaintiff never actually bought anything, her interaction with the website through which Defendant sold stuff to Californians was good enough. 

Finally, the exercise of jurisdiction was reasonable. Although Defendant argued that it was unfair to force it to comply with the laws of 50 different states, the jurisdiction question is different than the choice of law one. Just because Defendant can be made to litigate here, doesn’t mean California law will ultimately apply. 

Justice Menetrez dissents. His point is basically about relatedness. Because Plaintiff didn’t buy anything, her claim isn’t really related to any of Defendant’s California sales, regardless of volume. Her claim is, instead, based on the way that Defendant operated its website. But nothing about that purposefully availed itself of California. To me, that seems like a pretty good point.

Affirmed.

Contacts, Contracts, Indemnities.

Halyard Health v. Kimberly-Clark Corp., No. B294567 (D2d5 Jan. 2, 2020)

Back in the days before he represented Stormy Daniels, and before he got criminally charged with fraud, and long before he got arrested while in the process of getting disbarred, Michael Avenatti popped Kimberly-Clark Corp. and its spinoff Halyard with a $450 mm judgement for fraudulently representing the qualities of certain surgical gowns. The awards were later dialed way back to around $20 million, due to excessive punitive damages. The case is on appeal to the Ninth Circuit. 

This case, however, is a declaratory relief action about whether Halyard needs to indemnify Kimberly-Clark for its share of the punitive damages. That seems to be required under the terms of a “Distribution Agreement” spinning Halyard out as a separate company. But there’s questions about whether an indemnity for punis is valid. The court here doesn’t even reach the merits of that question, however, because the Court of Appeal finds that there isn’t personal jurisdiction over Kimberly-Clark.

There’s no question that personal jurisdiction here needs to be specific—i.e., the defendant’s contacts with the state need to be connected to the facts that give rise to the case. Generally, in California, that invokes a three part test: First, the defendant needs to have purposefully availed itself of California. Second, the controversy needs to arise out of the defendant’s contacts with the forum. Under the test applied in California, that means there needs to be a substantial relationship between the contacts and the claim. And third, the assertion of personal jurisdiction must “comport with fair play and substantial justice.”

The Court here finds that the analysis founders on the second point. It is true that Kimberly-Clark sells lots of stuff in California. (Which is how it got sued here.) But this case doesn’t really arise from those contacts—it arises instead from the general contractual indemnity from the Distribution Agreement, which was not California specific. Nor does the fact that California law might apply to the validity of the indemnity necessarily mean that the case arises from California contacts. The Court of Appeal ultimately holds that the fact that the obligation to be indemnified arose in California is insufficient to conclude that an action in contact over the enforceability of the indemnity agreement is substantially related to Kimberly-Clark's California contacts.

Justice Rubin dissents. His principal point of contention is that although the dispute arises out of the contract, it also arises out of the underlying obligation to be indemnified. As he sees it, “[g]iven the broad ‘substantial connection’ test used for the second prong in California, it is clear to me that a declaratory relief coverage action both arises out of, and relates to, more than the contract itself, but also to the underlying tortious activity.” He cites a number of declaratory relief cases in the insurance context in support.

Affirmed.

So Much for Diamler . . .

Bristol-Myers Squibb. Co. v. Superior Court, No. S221038 (Cal. Aug. 29, 2016)

Certain kinds of litigation gravitate towards California, even when neither the plaintiff nor the defendant is resident or headquartered here. (See, e.g., asbestos cases.) The conventional wisdom is that that state of affairs was likely to subside after the US Supreme Court did away with the broad “systematic and continuous” test for general personal jurisdiction in Daimler AG v. Bauman, 134 S. Ct. 746 (2014), which held that general jurisdiction is appropriate only where a company is “at home.”