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Hernandez v. Mimi's Rock Corp.

United States District Court, N.D. California
Aug 30, 2022
632 F. Supp. 3d 1052 (N.D. Cal. 2022)

Opinion

Case No. 21-cv-04065-JST

2022-08-30

Alfredo HERNANDEZ, Plaintiff, v. MIMI'S ROCK CORP., Defendant.

Michael D. Braun, Kuzyk Law, LLP, Los Angeles, CA, for Plaintiff. Craig C. Daniel, Gluck Daniel LLP, San Francisco, CA, for Defendant.


Michael D. Braun, Kuzyk Law, LLP, Los Angeles, CA, for Plaintiff. Craig C. Daniel, Gluck Daniel LLP, San Francisco, CA, for Defendant.

ORDER GRANTING MOTION TO DISMISS AND DENYING JURISDICTIONAL DISCOVERY

Re: ECF No. 22 JON S. TIGAR, United States District Judge

Before the Court is Defendant Mimi's Rock Corp.'s ("MRC") motion to dismiss. ECF No. 22. The Court will grant the motion.

I. BACKGROUND

Plaintiff Alfredo Hernandez, a resident of San Pablo, California, filed this putative class action against MRC, seeking redress for MRC's alleged "deceptive practices associated with advertising, labeling and sale of its Dr. Tobias Omega 3 Fish Oil Triple Strength dietary supplement ("Product") . . . ." ECF No. 1 ¶ 1.

For simplicity, the Court refers to Dr. Tobias Omega 3 Fish Oil Triple Strength simply as "Dr. Tobias Fish oil."

In December 2020, Hernandez purchased Dr. Tobias Fish Oil through the Amazon.com website. Id. ¶ 14. He did so in reliance on the product's label, which stated that it contains "800 mg EPA per serving" and "600 mg DHA per serving." Id. ¶ 5, 15. He now alleges that he was misled by the label, and "was injured in fact and lost money as a result of [MRC's] improper conduct." Id. ¶ 17, 19.

MRC is incorporated in and has its principal place of business in Ontario, Canada. Id. ¶ 10. One of MRC's subsidiaries is Mimi's Rock Inc. ("MRI"), another Canadian corporation. ECF. No. 22 at 6. MRI, in turn, has a wholly owned German subsidiary, Mimi's Rock GmbH ("MRG"). Id. And MRG has a wholly owned German subsidiary, DTI GmbH ("DTI"). Id. "DTI markets and sells Dr. Tobias Omega 3 Fish Oil through its own website, on amazon.com, and through other e-commerce sites." Id.

Pursuant to Federal Rules of Civil Procedure 12(b)(2) and 12(b)(6), MRC moves to dismiss Hernandez's complaint for lack of personal jurisdiction and failure to state a claim upon which relief can be granted. ECF No. 22 at 5. Hernandez opposes the motion, arguing that the Court has personal jurisdiction and, in the alternative, that he should be permitted to take limited jurisdictional discovery. ECF No. 24 at 2, 17 n.7. He also opposes the 12(b)(6) motion on the merits. See ECF No. 24 at 17, 22, 27. II. SUBJECT-MATTER JURISDICTION

Because the Court dismisses the complaint for lack of personal jurisdiction, it does not reach MRC's motion under Rule 12(b)(6).

The Court has subject-matter jurisdiction under 28 U.S.C. § 1332(d)(2).

III. PERSONAL JURISDICTION

A. Legal Standard

"In opposition to a defendant's [Rule 12(b)(2)] motion to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of establishing that jurisdiction is proper." Boschetto v. Hansing, 539 F.3d 1011, 1015 (9th Cir. 2008). Where "the motion is based on written materials rather than an evidentiary hearing, 'the plaintiff need only make a prima facie showing of jurisdictional facts.' " Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004) (quoting Sher v. Johnson, 911 F.2d 1357, 1361 (9th Cir. 1990)). In such cases, courts "only inquire into whether [the plaintiff's] pleadings and affidavits make a prima facie showing of personal jurisdiction." Caruth v. Int'l Psychoanalytical Ass'n, 59 F.3d 126, 128 (9th Cir. 1995). "Although the plaintiff cannot simply rest on the bare allegations of its complaint, uncontroverted allegations in the complaint must be taken as true. Conflicts between parties over statements contained in affidavits must be resolved in the plaintiff's favor." Schwarzenegger, 374 F.3d at 800 (internal quotation marks and citations omitted).

"Federal courts ordinarily follow state law in determining the bounds of their jurisdiction over persons." Daimler AG v. Bauman, 571 U.S. 117, 125, 134 S.Ct. 746, 187 L.Ed.2d 624 (2014). "California's long-arm statute allows the exercise of personal jurisdiction to the full extent permissible under the U.S. Constitution." Daimler AG, 571 U.S. at 117, 134 S.Ct. 746; see also Cal. Code Civ. Proc. § 410.10 ("A court of this state may exercise jurisdiction on any basis not inconsistent with the Constitution of this state or of the United States."). "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." In re Boon Glob. Ltd., 923 F.3d 643, 650 (9th Cir. 2019) (quoting Schwarzenegger, 374 F.3d at 800-01).

Due process "requires that each party 'have certain minimum contacts' with the forum state 'such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.' " Id. (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945)). "The strength of contacts required depends on which of the two categories of personal jurisdiction a litigant invokes: specific jurisdiction or general jurisdiction." Ranza v. Nike, Inc., 793 F.3d 1059, 1068 (9th Cir. 2015). "A court with general jurisdiction may hear any claim against that defendant, even if all the incidents underlying the claim occurred in a different State." Bristol-Myers Squibb Co. v. Superior Ct., 582 U.S. 255, 137 S. Ct. 1773, 1780, 198 L.Ed.2d 395 (2017) (emphasis in original). General jurisdiction over a corporation is appropriate only when the corporation's contacts with the forum state "are so 'continuous and systematic' as to render [it] essentially at home in the forum State." Daimler AG, 571 U.S. at 127, 134 S.Ct. 746 (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919, 131 S.Ct. 2846, 180 L.Ed.2d 796 (2011)).

"Specific jurisdiction is very different." Bristol-Myers, 137 S. Ct. at 1780. For the court to exercise specific jurisdiction, the lawsuit must arise out of or relate to the defendant's contacts with the forum. Id. "In other words, there must be an affiliation between the forum and the underlying controversy, principally, [an] activity or an occurrence that takes place in the forum State and is therefore subject to the State's regulation." Id. (internal quotation marks and citation omitted). "[S]pecific jurisdiction is confined to adjudication of issues deriving from, or connected with, the very controversy that establishes jurisdiction." Goodyear, 564 U.S. at 919, 131 S.Ct. 2846 (internal quotation marks omitted).

B. Discussion

MRC argues that the Court lacks both general and specific jurisdiction in this case. ECF No. 22 at 11. In response, Hernandez does not contest the question of general jurisdiction, but contends that this Court can exercise specific jurisdiction over MRC because "there is a single company responsible for the sale of [Dr. Tobias Fish Oil] in the United States, and it is MRC." ECF No. 24 at 8-9.

Hernandez first argues that the Court can exercise specific jurisdiction over MRC because it is liable for the conduct of other companies within its corporate family, which Hernandez alleges are responsible for his injuries. He argues that MRC is liable for MRI's marketing and DTI's selling conduct under the law of alter-ego and agency liability. See ECF No. 24 at 8-12. Hernandez's first claim of specific jurisdiction thus rises or falls on whether he can establish either an alter-ego or agency relationship between MRC and MRI and MRC and DTI sufficient for conferring specific jurisdiction over MRC for the claims he alleges in his complaint.

Hernandez's second argument for specific jurisdiction is that MRC sold the product into California, the product injured Hernandez, and that exercising specific jurisdiction over MRC would not be unreasonable. See ECF No. 24 at 13-17 (arguing that "there is no dispute that Defendant sells the Dr. Tobias product to the consuming public," MRC "manufactures the product in the U.S.," "enjoys significant sales through Amazon.com," "maintains an active website wherein it transacts with California consumers," "sold its product to Plaintiff in California," which injured him, and cannot claim exercising specific jurisdiction over it would be unreasonable because MRC "has personally availed itself of jurisdiction in the U.S. by prosecuting an intellectual property claim in federal court for the Southern District of New York and defending a lawsuit in the Central District of California," and "defended and resolved a Proposition 65 claim against it in Superior Court for the State of California, County of Alameda") (emphasis in original). In the event the Court disagrees and finds that it lacks specific jurisdiction over MRC, Hernandez requests jurisdictional discovery.

1. Alter Ego Theory

A parent corporation's relationship with its subsidiary may confer personal jurisdiction over the parent if the subsidiary is acting as the parent company's alter ego, "so as to justify disregard of the corporate entity." Am. Tel. & Tel. Co. v. Compagnie Bruxelles Lambert, 94 F.3d 586, 591 (9th Cir. 1996) (citing Flynt Distrib. Co. v. Harvey, 734 F.2d 1389, 1393 (9th Cir. 1984)). To demonstrate that the parent and subsidiary are "not really separate entities," thereby satisfying the alter ego exception to the general rule that a subsidiary and the parent are separate entities, 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." Id. (citations omitted).

"The unity of interest and ownership prong . . . requires a showing that the parent controls the subsidiary to such a degree as to render the latter the mere instrumentality of the former. This test envisions pervasive control over the subsidiary, 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. Total ownership and shared management personnel are alone insufficient to establish the requisite level of control." Ranza v. Nike, Inc., 793 F.3d 1059, 1073 (9th Cir. 2015) (cleaned up). Similarly, the Ninth Circuit has found that evidence of a parent company's "(1) involvement in its subsidiaries' acquisitions, divestments and capital expenditures; (2) formulation of general business policies and strategies applicable to its subsidiaries, including specialization in particular areas of commerce; (3) provision of loans and other types of financing to subsidiaries; [and] (4) maintenance of overlapping directors and officers with its subsidiaries," insufficient "to negate [those] entities' separate personalities through the observance of corporate formalities." Id. at 1074 (quoting Doe v. Unocal Corp., 248 F.3d 915, 927 (9th Cir. 2001)).

Hernandez argues that MRC can be held liable for its subsidiaries' actions under the Ninth Circuit's alter-ego test. As to the unity of interest prong, Hernandez raises several arguments. Hernandez first contends that MRC is nothing but a "marketing company," which "is the 100% owner of [MRI], [MRG], and DTI." ECF No. 24 at 10. Hernandez also contends that MRC holds itself out as "an online dietary supplement and wellness company which markets and sells [Dr. Tobias] products" and self-describes as "asset-light." ECF No. 24 at 11 (citations omitted). As to MRC and MRI specifically, Hernandez contends that financial statements show that "there is no distinction between MRI and MRC," due to MRI's acquisition of MRC in 2019 through a reverse take-over which explained that "[MRC] will be deemed to be a continuation of MRI" in which "former MRI shareholders hold a majority of outstanding shares, the Board of Directors is comprised of MRI board members and the senior management of MRI became senior management of [MRC]." Id. (citation omitted). And as to MRC and DTI specifically, Hernandez contends that public filings show that MRC (through its subsidiary MRG) paid $30 million for DTI and the Dr. Tobias brand. Hernandez does not make any argument concerning the fraud-or-injustice prong.

The Court finds that Hernandez has failed to carry his burden of establishing a prima facie case that MRC can be sued for either MRI's or DTI's actions under an alter-ego theory. As an initial matter, Hernandez ignores the fraud-or-injustice prong of the alter-ego test. That alone dooms his alter-ego theory. See Freeman v. Summit Filtration Tech., LLC, No. 21-CV-06838-JSC, 2021 WL 5416242, at *5 (N.D. Cal. Nov. 19, 2021) (rejecting alter-ego argument when plaintiff failed to allege facts "suggest[ing] fraud or injustice"). Even putting that to one side, however, Hernandez's contentions and evidence fall short of showing that MRC exercises pervasive control over either MRI or DTI. Indeed, courts routinely reject alter ego liability when a plaintiff alleges the types of interactions between separate corporate entities that Hernandez points to here. See, e.g., Corcoran v. CVS Health Corp., 169 F. Supp. 3d 970, 983-84 (N.D. Cal. 2016) (rejecting unity of interest when "evidence show[ed] only that CVS Health wholly owns CVS Pharmacy, the two entities have overlapping officers and directors, CVS Health presents itself as one integrated company on its website and in government filings for marketing purposes, and CVS Health has been involved in discrete business decisions of CVS Pharmacy"); Gardner v. Starkist Co., 418 F. Supp. 3d 443, 463 (N.D. Cal. 2019) (explaining that neither total ownership and shared management personnel nor a parent company "reviewing and approving major decisions, placing several of its directors on the subsidiary's board, and involving itself in the subsidiary's pricing decisions" suffices to establish an alter-ego relationship). For these reasons, the Court concludes that it cannot exercise personal jurisdiction over MRC under an alter-ego theory.

2. Agency Theory

The Court is similarly unpersuaded by Hernandez's argument that it may exercise personal jurisdiction over MRC under an agency theory. "A corporation can purposely avail itself of a forum by directing its agents or distributors to take action there." Daimler AG, 571 U.S. at 135 n.13, 134 S.Ct. 746. Hernandez contends that "the agency test is satisfied by showing that the subsidiary functions as the parent corporation's representative in that it performs services that are 'sufficiently important to the foreign corporation that if it did not have a representative to perform them, the corporation's own officials would undertake to perform substantially similar services.' " See ECF 24 at 9-10 (citing Chan v. Society Expeditions, Inc., 39 F.3d 1398, 1405 (9th Cir. 1994)). But the Ninth Circuit has rejected the kind of agency analysis that Hernandez advances. Williams v. Yamaha Motor Co., 851 F.3d 1015, 1024 (9th Cir. 2017). Courts no longer ask whether the subsidiary "performs services that are sufficiently important to the foreign corporation that if it did not have a representative to perform them, the corporation's own officials would undertake to perform substantially similar services." See id. (cleaned up). The Ninth Circuit has explained that the "[f]undamental tenets of agency theory require that an agent 'act on the principal's behalf and subject to the principal's control.' " Id. at 1024-25 (quoting Restatement (Third) Of Agency § 1.01 (2006)). "Accordingly, under any standard for finding an agency relationship, the parent company must have the right to substantially control its subsidiary's activities." Id. Viewing Hernandez's opposition in the light most favorable to his position, he has failed to show that MRC controls MRI or DTI such that their "contacts could be attributed" to MRC. Id. (emphasis omitted). Hernandez's agency theory therefore fails.

3. Specific Jurisdiction Analysis

Hernandez also argues that the Court has specific jurisdiction over MRC. The Ninth Circuit has established a three-part test for analyzing whether a court can exercise specific jurisdiction. A court may not exercise specific jurisdiction unless all three prongs are satisfied. "(1) The non-resident defendant must purposefully direct his activities or consummate some transaction with the forum or resident thereof; 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 be one which arises out of or relates to the defendant's forum-related activities; and (3) the exercise of jurisdiction must comport with fair play and substantial justice, i.e. it must be reasonable." Schwarzenegger, 374 F.3d at 802 (quoting Lake v. Lake, 817 F.2d 1416, 1421 (9th Cir. 1987)). "The plaintiff bears the burden of satisfying the first two prongs of the test. If the plaintiff fails to satisfy either of these prongs, personal jurisdiction is not established in the forum state. If the plaintiff succeeds in satisfying both of the first two prongs, the burden then shifts to the defendant to 'present a compelling case' that the exercise of jurisdiction would not be reasonable." Id. (citations omitted).

a. Purposeful Direction

Courts determine whether a defendant purposefully directed its actions at the forum by applying the three-part "effects test" from Calder v. Jones, 465 U.S. 783, 104 S.Ct. 1482, 79 L.Ed.2d 804 (1984), which requires that "the defendant allegedly must have: (1) committed an intentional act, (2) expressly aimed at the forum state, (3) causing harm that the defendant knows is likely to be suffered in the forum state." Adobe Sys. Inc. v. Cardinal Camera & Video Ctr., Inc., No. 15-CV-02991-JST, 2015 WL 5834135, at *2 (N.D. Cal. Oct. 7, 2015).

Hernandez argues that MRC committed an intentional act because "there is no dispute that Defendant sells the Dr. Tobias product to the consuming public." ECF No. 22 at 13. For that proposition, Hernandez cites his complaint, ECF No. 1 ¶ 1, which states, "Defendant's deceptive practices associated with the advertising, labeling and sale of its Dr. Tobias Omega 3 Fish Oil Triple Strength dietary supplement . . . ."

Contrary to Hernandez's assertion, however, MRC specifically argues that it does not sell Dr. Tobias Fish Oil. See ECF 22 at 11-12 (arguing that the Court lacks specific jurisdiction because "[t]he product is sold by DTI, which is a separate entity, incorporated in Germany, and thrice removed from MRC"). Although the Court must take Hernandez's "uncontroverted allegations in the complaint . . . as true," Schwarzenegger, 374 F.3d at 800, Hernandez "cannot simply rest on the bare allegations of its complaint" to establish personal jurisdiction over MRC. In re Boon Global Ltd., 923 F.3d at 650 (quotation marks and citation omitted). Nor must the Court "assume the truth of allegations in [his complaint] which are contradicted by affidavit." Mavrix Photo, Inc. v. Brand Techs., Inc., 647 F.3d 1218, 1223 (9th Cir. 2011).

The sworn record contradicts Hernandez's contention that MRC sells Dr. Tobias Fish Oil in the United States. MRC's declarations state that DTI sells Dr. Tobias Fish Oil. See ECF No. 25-1 at 2 (attesting that DTI owns the Amazon.com account through which DTI sells Dr. Tobias Fish Oil); ECF No. 22-14 (attesting that DTI "markets and sells . . . Dr. Tobias Omega 3 Fish Oil"). Hernandez's own opposition also supports MRC's statements. Indeed, although Hernandez contends that "MRC confirmed that it is 'an online dietary supplement and wellness company which market[s] and sells its products under the Dr. Tobias, All Natural Advice and Maritime Naturals brand names [which includes] the #1 selling Omega 3 Fish Oil on Amazon.com,' " ECF No. 24 at 11, the evidence Hernandez cites for that argument in fact states that "DTI sells market leading nutritional products online in the United States under the 'Dr. Tobias' brand. DTI's products are offered under a single established brand, which includes 31 nutraceutical products [which] include[es] the #1 on-line Omega 3 Fish Oil product in the United States." See id. at 11, n.4 (citing Exhibit B to the Braun Declaration, ECF No. 24-3 at 6) (emphasis added). Hernandez thus fails to establish prima facie evidence that MRC sells fish oil in the United States.

Hernandez also appears to argue that MRC is subject to specific jurisdiction because MRI launched a website that sells Dr. Tobias Fish Oil in the United States. See ECF No. 24 at 12, n.5. Even if MRI's contacts with the forum state were enough to give the Court jurisdiction over MRI, they are not sufficient for jurisdiction over MRC, which is the only entity sued here.

In short, Hernandez has not made a prima facie showing of the first prong of the specific jurisdiction test. Because Hernandez's failure to satisfy his burden under the first prong of the specific jurisdiction test precludes the Court from exercising specific jurisdiction over MRC, the Court need not address whether he satisfies the other two prongs of that test. See Schwarzenegger, 374 F.3d at 802 (holding that, "[i]f the plaintiff fails to satisfy either of [the first or second] prongs, personal jurisdiction is not established in the forum state").

IV. JURISDICTIONAL DISCOVERY

Because the Court has found that Hernandez has not made a prima facie showing of personal jurisdiction over MRC, the Court now addresses his request for limited jurisdictional discovery.

A. Legal Standard

"A district court has broad discretion to permit or deny jurisdictional discovery." Gillespie v. Prestige Royal Liquors Corp., 183 F. Supp. 3d 996, 1001 (N.D. Cal. 2016) (citation and quotation omitted). "[D]iscovery should be granted when . . . the jurisdictional facts are contested or more facts are needed." Laub, 342 F.3d at 1093; see also Boschetto at 1020 (jurisdictional discovery may be appropriate "where pertinent facts bearing on the question of jurisdiction are controverted or where a more satisfactory showing of the facts is necessary").

In this district, courts have held that "a plaintiff need not make out a prima facie case of personal jurisdiction before it can obtain jurisdictional discovery." Calix Networks, Inc. v. Wi-Lan, Inc., No. 09-cv-06038-CRB (DMR), 2010 WL 3515759, at *4 (N.D. Cal. Sept. 8, 2010) (citing eMag Solutions, LLC v. Toda Kogyo Corp., No. 02-cv-1611-PJH, 2006 WL 3783548, at *2 (N.D. Cal. Dec. 21, 2006) ("[i]t would . . . be counterintuitive to require a plaintiff, prior to conducting discovery, to meet the same burden that would be required to defeat a motion to dismiss.")). A plaintiff must merely present "a 'colorable basis' for jurisdiction, or 'some evidence' constituting a lesser showing than a prima facie case." Id. (citing Google, Inc. v. Egger, No. 08-cv-03172-RMW, 2009 WL 1228485, at *1 (N.D. Cal. Apr. 30, 2009); eMag Solutions, 2006 WL 3783548, at *2 (same); Focht v. Sol Melia S.A., No. 10-cv-0906-EMC, 2010 WL 3155826, at *2 (N.D. Cal. Aug. 9, 2010)). But "[w]here a plaintiff's claim of personal jurisdiction appears to be both attenuated and based on bare allegations in the face of specific denials made by defendants, the Court need not permit even limited discovery." Terracom v. Valley Nat'l Bank, 49 F.3d 555, 562 (9th Cir. 1995) (citations omitted). "[L]imited discovery should not be permitted to conduct a fishing expedition." Johnson v. Mitchell, No. CIV S-10-1968 GEB, 2012 WL 1657643, at *7 (E.D. Cal. May 10, 2012) (internal quotation marks and citations omitted).

B. Discussion

In Terracom, the Ninth Circuit held that the plaintiff was not entitled to jurisdictional discovery because it "failed to demonstrate how further discovery would allow it to contradict" the specific denials made by the defendants that weighed against a finding of personal jurisdiction. 49 F.3d at 560, 562. Hernandez requests permission to conduct limited jurisdictional discovery without providing an explanation of how discovery might change the outcome of the Court's jurisdictional findings. ECF No. 24 at 17 n.7. Accordingly, the Court denies his request for limited jurisdictional discovery.

CONCLUSION

For the reasons set forth above, the Court grants MRC's motion to dismiss and denies Hernandez's request for permission to conduct jurisdictional discovery. Hernandez may amend his complaint within 21 days solely to cure the deficiencies identified in this order.

IT IS SO ORDERED.


Summaries of

Hernandez v. Mimi's Rock Corp.

United States District Court, N.D. California
Aug 30, 2022
632 F. Supp. 3d 1052 (N.D. Cal. 2022)
Case details for

Hernandez v. Mimi's Rock Corp.

Case Details

Full title:Alfredo HERNANDEZ, Plaintiff, v. MIMI'S ROCK CORP., Defendant.

Court:United States District Court, N.D. California

Date published: Aug 30, 2022

Citations

632 F. Supp. 3d 1052 (N.D. Cal. 2022)

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