California Software Inc. v. Reliability Research

• Decision Date: 02 April 1986
• Docket Number: No. CV-85-6569-AHS.,CV-85-6569-AHS.
• Court: U.S. District Court — Central District of California
• Parties: CALIFORNIA SOFTWARE INCORPORATED, a California corporation; and Reliacomm Corporation, Plaintiffs, v. RELIABILITY RESEARCH, INC., a Nevada corporation; James J. White; and Larry Martin, Defendants.

631 F. Supp. 1356

CALIFORNIA SOFTWARE INCORPORATED, a California corporation; and Reliacomm Corporation, Plaintiffs, v. RELIABILITY RESEARCH, INC., a Nevada corporation; James J. White; and Larry Martin, Defendants.

No. CV-85-6569-AHS.

United States District Court, C.D. California.

April 2, 1986.

Donald S. Burris, Sarah A. Hiestand, Barton S. Selden, Burris & Anthony, Santa Monica, Cal., for plaintiffs.

Michael A. Painter, Henry W. Holmes, Jr., J. Thomas Cairns, Jr., Cooper, Epstein & Hurewitz, Beverly Hills, Cal., for defendants.

OPINION AND ORDER ON MOTION TO DISMISS

STOTLER, District Judge.

On October 4, 1985, plaintiffs California Software, Inc. and Reliacomm, Inc. filed a complaint alleging that defendants Reliability Research, Inc. (hereinafter referred to as "RRI"), James White and Larry Martin made false statements through the use of the telephone, the mails, and a nationwide computer network concerning plaintiffs' right to market a software program. Defendants moved to dismiss the complaint for lack of personal jurisdiction. The issue presented is whether defendants' utilization of the foregoing means of communicating with plaintiffs' prospective customers both in and out of California for the purpose stated supports an exercise of jurisdiction in this forum. By this Order, the Court finds limited jurisdiction over two of these defendants. Accordingly, defendants RRI and White's motion is denied and defendant Martin's motion is granted.

I. BACKGROUND

In 1985, Reliacomm employed California Software to provide marketing and consulting services for a new system of computer software known as resCue/MVS ("the product"). Under the employment contract, California Software agreed to promote and sublicense the product on behalf of Reliacomm. Both plaintiffs are California corporations having their principal places of business in California.

Reliability Research, Inc. ("RRI"), a Nevada corporation with its principal place of business in Vermont, has as its sole business the development of a single software program. RRI granted UCCEL,¹ a Texas corporation, an exclusive license to market the software. RRI employs two individuals, Larry Martin, a citizen of Connecticut, the corporation's president and vice-president, and James White, a citizen of Vermont, its treasurer.

Plaintiffs brought this action as a result of defendants' allegedly tortious communications with certain business entities throughout the United States and Canada. Their claims for intentional interference with prospective economic advantage, slander of title, libel, slander, civil conspiracy, unfair competition, and intentional interference with their right to pursue a lawful business arise out of two sets of communications made by defendant White with potential purchasers of the resCue/MVS software.

First, White communicated directly with the following three California residents, each of whom had seriously considered sublicensing plaintiffs' software: (1) Gibraltar Savings & Loan in Los Angeles, which received a letter dated May 3, 1985; (2) the Atlantic Richfield Company (ARCO) in Los Angeles, which received a telephone call in the Spring of 1985; and (3) Southern California Gas Company in Monterey Park, which received communications by both the mail and the telephone in the Fall of 1985. White told these companies of a title dispute over the product in a New York action and that, if successful, RRI would cancel all sublicenses to the product marketed by California Software and seek damages from plaintiffs and their sublicensees.

Second, on July 23, 1985, White placed a message on a nationally disseminated computer based information service known as the Computer Reliability Forum (the "CRF"), which is operated by defendants. Operators of large computer installations, having a license from UCCEL, utilize the CRF to share information regarding computer hardware and software. Although one may use the CRF to respond to a specific inquiry, the system acts as a bulletin board, its messages being available and visible to all its users.

White's CRF message stated that RRI was currently attempting to establish its ownership of the resCue/MVS software in a lawsuit filed in New York against California Software. The message further stated that RRI would hold any licensee of the product financially responsible for its use if RRI prevailed in the lawsuit.² White's message was received by at least three users of the CRF network: Pacific Northwest Bell in the State of Washington; Marine Midland Bank in Buffalo, New York; and Canada Trust in Ontario, Canada. White placed the message on the CRF in response to inquiries made by these prospective purchasers of the product. The message was also made available to ARCO in California, although no evidence indicates that this CRF message influenced ARCO's decision not to purchase the product.³

Plaintiffs claim that these communications contained false and malicious information which discouraged those who received the messages from purchasing plaintiffs' product. Prior to White's interference, the prospective customers had expressed interest in the resCue/MVS software.

II. DISCUSSION

This Court has diversity jurisdiction over the instant matter pursuant to 28 U.S.C. § 1332. In diversity actions, California courts exert personal jurisdiction over nonresident defendants to the fullest extent permissible under the Fourteenth Amendment to the U.S. Constitution. Cal.Code of Civ.Proc. § 410.10. Thus, it must be determined whether defendants have sufficient contacts with the State of California to satisfy due process requirements such that it is appropriate to exercise general or limited jurisdiction. Data Disc, Inc. v. Systems Technology Associates, Inc., 557 F.2d 1280, 1287 (9th Cir.1977).⁴

In order for this Court to assert jurisdiction, the non-resident defendants' contacts with the forum state, though minimal, must be of such quality and quantity that "maintenance of the suit does not offend traditional notions of fair play and substantial justice." International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed.2d 95 (1945). A finding of minimum contacts satisfies the due process requirement that the non-resident defendants have "fair warning that a particular activity may subject them to the jurisdiction of a foreign sovereign." Shaffer v. Heitner, 433 U.S. 186, 218, 97 S.Ct. 2569, 2587, 53 L.Ed.2d 683 (1977) (Stevens, J., concurring in judgment); Burger King Corp. v. Rudzewicz, ___ U.S. ___, 105 S.Ct. 2174, 2182, 85 L.Ed.2d 528 (1985). The defendants' "conduct and connection with the forum State must be such that they should reasonably anticipate being haled into court there." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 567, 62 L.Ed.2d 490 (1980).

In the Ninth Circuit, a plaintiff bears the burden of establishing jurisdictional facts, although the plaintiff's burden may vary according to the nature of the proceeding and the type of evidence the Court permits the plaintiff to present. Data Disc, 557 F.2d at 1285. At this preliminary stage of the proceedings, before the parties have undertaken discovery, a plaintiff need not establish jurisdiction by a preponderance of the evidence but may merely set forth a prima facie showing based on the affidavits of knowledgeable witnesses. Id.

A. General Jurisdiction

Plaintiffs failed to meet their burden in demonstrating general jurisdiction over any defendant. A defendant may be haled into a forum state's courts to defend against causes of action unrelated to his conduct there if his activities in the state are "substantial" or "continuous and systematic." Perkins v. Benguet Consolidated Mining Co., 342 U.S. 437, 446-47, 72 S.Ct. 413, 418-19, 96 L.Ed. 485 (1952); Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 413-14, 104 S.Ct. 1868, 1872, 80 L.Ed.2d 404 (1984); Wells Fargo & Co. v. Wells Fargo Express Co., 556 F.2d 406, 413 (9th Cir.1977); Cubbage v. Merchent, 744 F.2d 665, 669 (9th Cir.1984), cert. denied, ___ U.S. ___, 105 S.Ct. 1359, 84 L.Ed.2d 380 (1985).

The evidence submitted indicates that neither the corporate defendant nor the two individual defendants maintain sufficient contacts with the State of California to support a finding of general jurisdiction. RRI is not licensed to do business in California and has no offices, agents, employees, telephone listings, bank accounts, or property within the State. Admittedly, RRI is a user of the CRF network and presumably maintains regular communications with California users. The mere act of transmitting information through the use of interstate communication facilities is not, however, sufficient to establish jurisdiction over the sender. Thomas P. Gonzalez v. Consejo Nacional de Produccion de Costa Rica, 614 F.2d 1247, 1254 (9th Cir.1980).

B. Limited Jurisdiction

On the other hand, this Court may assert limited jurisdiction over the non-resident defendants if their activities in the forum give rise to or are related to the litigation. Helicopteros, 466 U.S. at 414, 104 S.Ct. at 1872. The Court's inquiry must focus on the "relationship among the defendant, the forum, and the litigation." Shaffer, 433 U.S. at 204, 97 S.Ct. at 2580. In examining this relationship, the Ninth Circuit applies the following three-prong test to evaluate whether the nature and quality of those contacts justify the assertion of limited jurisdiction:

1. The non-resident defendant must do some act or consummate some transaction within the forum or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the protections and benefits of its laws.

2. The claim must be one which arises out of or results from the defendant's forum-related activities.

3. Exercise of jurisdiction must be reasonable.

Data Disc, 557 F.2d at 1287. In Data Disc the Court found that defendant's intentional...