Axiom Foods, Inc. v. Acerchem Int'l, Inc.

• Decision Date: 01 November 2017
• Docket Number: No. 15-56450.,15-56450.
• Citation: 874 F.3d 1064
• Parties: AXIOM FOODS, INC., a California corporation; Growing Naturals, LLC, an Arizona limited liability company, Plaintiffs-Appellants, v. ACERCHEM INTERNATIONAL, INC., an entity of unknown origin, Defendant, and Acerchem UK Limited, a United Kingdom limited company, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

874 F.3d 1064

AXIOM FOODS, INC., a California corporation; Growing Naturals, LLC, an Arizona limited liability company, Plaintiffs-Appellants,

v. ACERCHEM INTERNATIONAL, INC., an entity of unknown origin, Defendant,andAcerchem UK Limited, a United Kingdom limited company, Defendant-Appellee.

No. 15-56450.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted April 3, 2017—Pasadena, California

Filed November 1, 2017

Jim D. Bauch (argued) and Daniel C. Lapidus, Lapidus & Lapidus PLC, Beverly Hills, California, for Plaintiffs-Appellants.

Henry L. Self III (argued) and Brian G. Wolf, Lavely & Singer P.C., Los Angeles, California, for Defendant-Appellee.

Before: DAVID M. EBEL,^* MILAN D. SMITH, JR., and N. RANDY SMITH, Circuit Judges.

OPINION

M. SMITH, Circuit Judge:

Axiom Foods, Inc. and Growing Naturals, LLC (collectively, Appellants) appeal from the district court's dismissal of their copyright infringement action against Acerchem UK Limited for lack of personal jurisdiction. We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

Appellant Axiom Foods, Inc. (Axiom) is a California corporation that supplies organic and chemical-free products made from whole-grain brown rice, peas, and other "superfoods," to the food, beverage, and nutraceutical industries. Appellant Growing Naturals, LLC (GN) is an Arizona limited liability company that develops and sells natural food products, such as plant-based proteins and rice milk powders. GN partners with Axiom to produce and sell goods containing Axiom's products. Appellants do business in California.

Acerchem International, Inc. (Acerchem International), which is based in Shanghai, China, is a wholesale manufacturer of health and nutritional products, including rice protein. Appellee Acerchem UK Limited (Acerchem UK), a United Kingdom limited company, is a wholly-owned subsidiary of Acerchem International. Acerchem UK maintains its principal place of business in the United Kingdom, and does not conduct business in the United States.

On November 20, 2014, Elva Li, an employee of Acerchem UK, sent a newsletter promoting Acerchem UK's rice protein products to 343 email addresses. Appellants' "As Good as Whey" and "Non-GMO" logos were used in the newsletter. Most of the newsletter's recipients were located in Western Europe. No more than ten recipients were located in California.

Appellants subsequently registered their copyrights for the "As Good As Whey" and "Non-GMO" logos with the United States Copyright Office. After the registrations became effective, Appellants filed a complaint against Acerchem International and Acerchem UK in the Central District of California, on February 6, 2015.¹ The complaint asserted two claims for copyright infringement pursuant to 17 U.S.C. § 501 based on Acerchem UK's use of Appellants' logos in its November 20, 2014 newsletter.

Acerchem UK filed a motion to dismiss the complaint for lack of personal jurisdiction and failure to state a claim. The district court ordered jurisdictional discovery and granted the parties leave to file supplemental briefing.

On September 11, 2015, the district court granted Acerchem UK's motion to dismiss for lack of personal jurisdiction.² The district court declined to rule on Acerchem UK's motion to dismiss for failure to state a claim. Appellants timely appealed.

STANDARD OF REVIEW

We review de novo "[a] district court's determination of whether personal jurisdiction may be properly exercised." Washington Shoe Co. v. A-Z Sporting Goods Inc. , 704 F.3d 668, 671 (9th Cir. 2012).

ANALYSIS

I. Specific Jurisdiction

A. General Principles

"Federal courts apply state law to determine the bounds of their jurisdiction over a party." Williams v. Yamaha Motor Co. , 851 F.3d 1015, 1020 (9th Cir. 2017) (citing Fed. R. Civ. P. 4(k)(1)(A) ). California authorizes its courts to exercise jurisdiction "to the full extent that such exercise comports with due process." Id. (citing Cal. Civ. Proc. Code § 410.10 ). Accordingly, "the jurisdictional analyses under [California] state law and federal due process are the same." Mavrix Photo, Inc. v. Brand Techs., Inc ., 647 F.3d 1218, 1223 (9th Cir. 2011).

Due process "constrains a State's authority to bind a nonresident defendant to a judgment of its courts." Walden v. Fiore , –––U.S. ––––, 134 S.Ct. 1115, 1121, 188 L.Ed.2d 12 (2014). A nonresident defendant must have "certain minimum contacts with [the forum] such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.’ " Int'l Shoe Co. v. Washington , 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945) (quoting Milliken v. Meyer , 311 U.S. 457, 463, 61 S.Ct. 339, 85 L.Ed. 278 (1940) ).

"The inquiry whether a forum State may assert specific jurisdiction over a nonresident defendant ‘focuses on the relationship among the defendant, the forum, and the litigation.’ " Walden , 134 S.Ct. at 1121 (quoting Keeton v. Hustler Magazine, Inc. , 465 U.S. 770, 775, 104 S.Ct. 1473, 79 L.Ed.2d 790 (1984) ) (internal quotation marks omitted). Specifically, "the defendant's suit-related conduct must create a substantial connection with the forum State." Id. Our "primary concern" is "the burden on the defendant." Bristol-Myers Squibb Co. v. Superior Court , ––– U.S. ––––, 137 S.Ct. 1773, 1780, 198 L.Ed.2d 395 (2017) (quoting World-Wide Volkswagen Corp. v. Woodson , 444 U.S. 286, 292, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980) ).

Two principles animate the "defendant-focused" inquiry. Walden , 134 S.Ct. at 1122. First, the relationship between the nonresident defendant, the forum, and the litigation "must arise out of contacts that the ‘defendant himself ’ creates with the forum State." Id. (quoting Burger King Corp. v. Rudzewicz , 471 U.S. 462, 475, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985) ). Second, the minimum contacts analysis examines "the defendant's contacts with the forum State itself, not the defendant's contacts with persons who reside there." Id. It follows that "a defendant's relationship with a plaintiff or third party, standing alone, is an insufficient basis for jurisdiction." Id. at 1123.

These principles apply to cases involving intentional torts. Id. "A forum State's exercise of jurisdiction over an out-of-state intentional tortfeasor must be based on intentional conduct by the defendant that creates the necessary contacts with the forum." Id. While "a single act can support jurisdiction," the act must first "create[ ] a ‘substantial connection’ with the forum." Burger King , 471 U.S. at 475 n.18, 105 S.Ct. 2174 (citation omitted). Put differently, " ‘some single or occasional acts' related to the forum may not be sufficient to establish jurisdiction if ‘their nature and quality and the circumstances of their commission’ create only an ‘attenuated’ affiliation with the forum." Id. (quoting Int'l Shoe , 326 U.S. at 318, 66 S.Ct. 154 ). A defendant's " ‘random, fortuitous, or attenuated’ contacts" will not suffice. Walden , 134 S.Ct. at 1123 (quoting Burger King , 471 U.S. at 475, 105 S.Ct. 2174 ).

There are three requirements for a court to exercise specific jurisdiction over a nonresident defendant: (1) the defendant must either "purposefully direct his activities" toward the forum or "purposefully avail[ ] himself of the privileges of conducting activities in the forum"; (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." Dole Food Co., Inc. v. Watts , 303 F.3d 1104, 1111 (9th Cir. 2002). "The plaintiff bears the burden of satisfying the first two prongs of the test." Schwarzenegger v. Fred Martin Motor Co. , 374 F.3d 797, 802 (9th Cir. 2004). If the plaintiff meets that burden, "the burden then shifts to the defendant to ‘present a compelling case’ that the exercise of jurisdiction would not be reasonable." Id. (quoting Burger King , 471 U.S. at 476–78, 105 S.Ct. 2174 ).

Where, as here, a case sounds in tort, we employ the purposeful direction test. See id. The test, often referred to as the "effects" test, derives from Calder v. Jones , 465 U.S. 783, 104 S.Ct. 1482, 79 L.Ed.2d 804 (1984). Washington Shoe , 704 F.3d at 673. The defendant 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." Id. (quoting Mavrix Photo , 647 F.3d at 1228 ).

Under the first prong of this test, Appellants must show that Acerchem UK committed an intentional act. Schwarzenegger , 374 F.3d at 806. Li added Appellants' logos to the newsletter and sent it to a list of recipients. This was unquestionably an intentional act, so the first prong of the test is satisfied.

Appellants must next demonstrate that Acerchem UK "expressly aimed" its intentional act at the forum. Id. Before we address the second prong of the test, we must consider the impact of Walden on the test to be employed.

B. The Impact of Walden

We have held that "individualized targeting" satisfies the express aiming requirement. See Washington Shoe , 704 F.3d at 678–79 ; see also Brayton Purcell LLP v. Recordon & Recordon , 606 F.3d 1124, 1130 (9th Cir. 2010). A theory of individualized targeting alleges that a defendant "engaged in wrongful conduct targeted at a plaintiff whom the defendant knows to be a resident of the forum state." Washington Shoe , 704 F.3d at 675 (quoting Dole Food Co. , 303 F.3d at 1111 ). In the context of copyright infringement, we have held that a defendant's "alleged willful infringement of [a plaintiff's] copyright, and its knowledge of both the existence of the copyright and the forum of the copyright holder," established "individualized targeting." Id. at 678–79.

Appellants claim that they have satisfied the express aiming requirement. They rely on the strength of their own forum connections, coupled with evidence suggesting Acerchem UK knew of those...