As You Sow v. Crawford Laboratories, Inc.

• Decision Date: 26 November 1996
• Docket Number: No. A071842,A071842
• Citation: 50 Cal.App.4th 1859,58 Cal.Rptr.2d 654
• Court: California Court of Appeals
• Parties: , 96 Cal. Daily Op. Serv. 8592, 96 Daily Journal D.A.R. 14,193 AS YOU SOW, Plaintiff and Appellant, v. CRAWFORD LABORATORIES, INC., Defendant and Respondent.

Page 654

58 Cal.Rptr.2d 654

50 Cal.App.4th 1859, 96 Cal. Daily Op. Serv. 8592,

96 Daily Journal D.A.R. 14,193

AS YOU SOW, Plaintiff and Appellant, v. CRAWFORD LABORATORIES, INC., Defendant and Respondent.

No. A071842.

Court of Appeal, First District, Division 2, California.

Nov. 26, 1996.

As Modified Dec. 13, 1996.

Chanler & Somers, Clifford A. Chanler, Mark Todres, Jenny Cohn, for Plaintiff and Appellant.

Bartko, Zankel, Tarrant & Miller, Richard T. Tarrant, Christopher D. Sullivan, for Defendant and Respondent.

LAMBDEN, Associate Justice.

As You Sow (AYS), a nonprofit organization, appeals the trial court's order quashing service of summons over Crawford Laboratories, Inc. (Crawford) for lack of personal jurisdiction. Crawford shipped some of its products to a General Services Administration (G.S.A.) depot in Stockton, California pursuant to an out-of-state contract. G.S.A. determined the final destination of Crawford's products but Crawford knew some products would remain in California. We must decide whether Crawford's contacts with California were sufficient to provide the trial court with general jurisdiction. If too tenuous for general jurisdiction, were Crawford's direct sales to private distributors in California on sixteen separate occasions over a period of six years sufficient for limited jurisdiction?

We find Crawford's contacts with California failed to provide the trial court with general jurisdiction but did furnish California with limited jurisdiction over Crawford so as not to offend the due process clause. Accordingly, we reverse.

BACKGROUND

AYS, a nonprofit organization, investigates and sometimes prosecutes possible Proposition 65 ¹ (California's Safe Drinking Water and Toxic Enforcement Act of 1986) violations. ² Health and Safety Code section 25249.6 ³ requires a warning for products containing hazardous materials.

Crawford, an Illinois company, manufactures paint and related products. According to AYS's investigation, the products Crawford manufactured and sold to G.S.A. and private distributors in California contained materials listed pursuant to Proposition 65 as carcinogens and/or reproductive toxins. ⁴ These products, AYS asserts, did not comply with the warning requirements of Proposition 65. AYS notified the various public enforcement agents and Crawford pursuant to Health and Safety Code section 25249.7, subdivision (d), of its intent to sue.

On January 24, 1995, AYS filed a complaint against Crawford alleging violations of Proposition 65 and Business and Professions Code section 17200 et seq. (Unfair Trade Practices Act). Crawford filed a motion to quash service of summons asserting California had no personal jurisdiction over it. The court granted two continuances for AYS to conduct discovery.

Discovery established Crawford had made 16 individual sales to private California distributors between the years 1988 and 1994. According to Ben Schmetterer, President of Crawford, sales to private customers in California never amounted to more than one percent of Crawford's annual sales. ⁵ The gross sales for each of these years were as follows:

According to Schmetterer's declaration, Crawford has never (1) maintained an office or warehouse in California; (2) been licensed or registered to do business in California; (3) had an agent for service of process in California; (4) maintained a mailing address or phone number in California; (5) owned any real property or personal property in California; (6) had employees in California for business related activities; (7) held a meeting in California; or (8) maintained a bank account or paid taxes in California. ⁶

In addition to its sales to private customers, Crawford sold its products to G.S.A. and shipped some of its products to the G.S.A. depot in Stockton, California. ⁷ Crawford paid shipping costs, maintained risk of loss, and retained legal title until the goods arrived; but independent shipping companies carried the products to the G.S.A. in accord with the G.S.A.'s directions. ⁸ Once the Stockton depot received Crawford's products, the G.S.A. decided where to send them and arranged for their delivery by independent shipping companies. ⁹ Products shipped to California either remained in California or went to 16 different western states and Pacific overseas locations. ¹⁰

All contract negotiations with G.S.A. occurred outside of California. Crawford entered into the contract with G.S.A. in Auburn, Washington, and negotiations occurred among individuals in Auburn and Chicago, Illinois. ¹¹ The contract required Crawford to send its invoices to the G.S.A. in Kansas City, Missouri, and the Kansas City office sent all payments. Crawford stated it never communicated with anyone at the Stockton depot.

The trial court heard the motion to quash service of summons on July 13, 1995. At the hearing, the court stated: "There's some just inherent unfairness with the concept, and that's what bothers me. I'm not saying there might not be some technical argument you might have on your side, but for a company to do--as I recall the number--$700 dollars a year to $7,000 a year business in California, a company that's doing $3 million to $6 million nationwide, outside of the government agency thing, of course, they're exempt from the statute--I just think it's unfair...." When counsel for AYS argued one contact was sufficient for limited jurisdiction the court responded, "Oh, I think technically you may have an argument."

Just before granting the motion to quash, the court concluded: "I think your [counsel for AYS] argument was very persuasive and probably technically correct and probably at an appellate level, they'll buy it a hundred percent, but I still think in the fairness on the facts of this case, you should not bring a foreign corporation into California to do what you're attempting to do. Substantial sanctions. I mean, they're asking Crawford Labs to be subjected to substantial sanctions for very a [sic] minuscule amount of business.

"I just don't think it's fair. I just don't think it's fair. Technically parts of your argument might be correct. I'll let somebody else decide that."

DISCUSSION

AYS contends the trial court erred in quashing service of summons because Crawford's business contacts in California satisfied the requirements for both general and limited jurisdiction. Crawford responds the proper standard of review is abuse of discretion, but, under either standard of review, the court properly granted its motion to quash. For the reasons set forth below, we apply de novo review and find Crawford's contacts with California inadequate for general jurisdiction but sufficient for limited jurisdiction.

I. Standard of Review

Once a defendant moves to quash out-of-state service of process for lack of jurisdiction, the plaintiff has the burden of proving jurisdiction by a preponderance of the evidence. (Felix v. Bomoro Kommanditgesellschaft (1987) 196 Cal.App.3d 106, 110, 241 Cal.Rptr. 670 (Felix).) When the evidence conflicts, we review the trial court for abuse of discretion. (Id. at p. 111, 241 Cal.Rptr. 670.) When the parties do not dispute the facts, we review the issue of jurisdiction de novo. (Ibid.)

The determinative facts in this case are not disputed. ¹² We, therefore, review de novo the legal significance of the undisputed facts.

II. Jurisdiction

Under Code of Civil Procedure section 410.10, a California court "may exercise jurisdiction on any basis not inconsistent" with the federal or state Constitutions. A state may constitutionally exercise personal jurisdiction over a nonresident defendant when the defendant "purposefully established 'minimum contacts' in the forum State." (Burger King Corp. v. Rudzewicz (1985) 471 U.S. 462, 474, 105 S.Ct. 2174, 2183, 85 L.Ed.2d 528.) Additionally, the defendant's contacts with the forum must make it reasonable for the person to "anticipate being haled into court there" (World-Wide Volkswagen Corp. v. Woodson (1980) 444 U.S. 286, 297, 100 S.Ct. 559, 567, 62 L.Ed.2d 490) so it " 'does not offend "traditional notions of fair play and substantial justice." ' " (Id. at p. 292, 100 S.Ct. at 564, citing Internat. Shoe Co. v. Washington (1945) 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95.)

A state has general jurisdiction over a nonresident defendant for all causes of action if the defendant's activities within the state are " 'extensive or wide-ranging' " or " 'substantial ... continuous and systematic.' " (Cornelison v. Chaney (1976) 16 Cal.3d 143, 147, 127 Cal.Rptr. 352, 545 P.2d 264.) The issue of jurisdiction depends on the particular facts of each case and cannot be decided by applying a mechanical test or a precise formula. (Id. at p. 150, 127 Cal.Rptr. 352, 545 P.2d 264.)

Less extensive activity may not support general jurisdiction, but may justify limited jurisdiction for the "purposes of a particular cause of action depending upon the nature and quality of the acts, the degree of relation to the asserted cause of action, and the balance between the convenience of the parties and the interest of the state in asserting jurisdiction. [Citations.]" (Secrest Machine Corp. v. Superior Court (1983) 33 Cal.3d 664, 669, 190 Cal.Rptr. 175, 660 P.2d 399 (Secrest).) "In cases where jurisdiction is based on the defendant's occasional activities the United States Supreme Court has said that '... it is essential ... that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.' " (Id. at p. 669, 190 Cal.Rptr. 175, 660 P.2d 399, citing Hanson v. Denckla (1958) 357 U.S. 235, 253, 78 S.Ct. 1228, 1239-40, 2 L.Ed.2d 1283.)

AYS argues the trial court incorrectly discounted the sales to the G.S.A. when considering its jurisdiction over Crawford. ¹³ The sales and delivery to the Stockton depot, AYS contends, represented substantial, continuous,...