Directv, Inc. v. Eq Stuff, Inc.

Decision Date08 May 2002
Docket NumberNo. CV0200292DDPVBKX.,CV0200292DDPVBKX.
Citation207 F.Supp.2d 1077
PartiesDIRECTV, INC., a California corporation, Plaintiff, v. EQ STUFF, INC.; et al., Defendants.
CourtU.S. District Court — Central District of California

Michelle M. Inouye, Kirkland & Ellis, Los Angeles, CA, Christian S. Genetski, Marc J. Zwillinger, Gregory F. Corbett, Kirkland & Ellis, Washington, DC, for plaintiff.

Sarah J. Barney, Sonja Mila Panajotovic, Brobeck Phleger & Harrison, Los Angeles, CA, Stephen S. Korniczky, Anatoly Weiser, Brobeck Phleger & Harrison, San Diego, CA, for EQ Stuff, Inc., Michael Sean Worley, Betina Worley, defendants.

Michael Sean Worley, St. Augustine, FL, pro se.

Betina Worley, St. Augustine, FL, pro se.

Jacob M. Slania, R. Bruce Wayne, Post Kirby Noonan & Sweat, San Diego, CA, for Taylor Patterson, GBR Enterprises, Inc., defendants.

J. Christopher Jaczko, Allison Hughes Goddard, Cooley Godward, San Diego, CA, Ernest Elijah Price, Leslie Diane Heath, Ropers Majeski Kohn & Bentley, Los Angeles, CA, for Ontech, Inc., defendant.

Neil M. Sunkin, Arter & Hadden, Ernst & Young PLZ, Los Angeles, CA, for Compass Bank, intervenor.

ORDER DENYING DEFENDANTS' MOTION TO DISMISS

PREGERSON, District Judge.

This matter comes before the Court on the defendants' motion to dismiss. After reviewing and considering the materials submitted by the parties, the Court denies the motion.

BACKGROUND

On January 11, 2002, the plaintiff, DIRECTV, Inc., ("DIRECTV" or the "plaintiff") filed the instant action against EQ Stuff, Inc. ("EQ Stuff"), Michael and Betina Worley (the "Worleys"), Anna Bouzas, Taylor Patterson ("Taylor Patterson"), GBR Enterprises, Inc. ("GBR"), and OnTech, Inc. ("OnTech"). The plaintiff alleges against all the defendants violations of The Digital Millennium Copyright Act, 17 U.S.C. §§ 1203 (the "DMCA"); The Communications Act, 47 U.S.C. § 605(e)(3)(a) (the "Communications Act"); and The Wiretap Act, 18 U.S.C. § 2520(a) (the "Wiretap Act"). On the same day, the plaintiff filed an ex parte application for a temporary restraining order (TRO), based on violations of the DMCA and the Communications Act. On January 16, 2002 the Court granted the TRO. On March 12, 2002, the Court granted the preliminary injunction.

Before the Court is a motion to dismiss and/or to transfer venue filed by EQ Stuff and the Worleys. The Worleys base their motion to dismiss on lack of personal jurisdiction.1 The Worleys and EQ Stuff move to dismiss Count IV of the plaintiff's First Amended Complaint ("FAC") for failure to state a claim. The defendants OnTech, GBR, and Taylor Patterson join in the portion of the motion to dismiss Count IV of the FAC. In the alternative, EQ Stuff and the Worleys seek to have the case transferred to Florida.2

DISCUSSION
I. Motion to Dismiss for Lack of Personal Jurisdiction
A. Legal Standard

The plaintiff bears the burden of establishing personal jurisdiction. Ziegler v. Indian River County, 64 F.3d 470, 473 (9th Cir.1995). If the court, however, has not heard testimony or made factual determinations, the plaintiff must only make a prima facie showing of personal jurisdiction. Id. The plaintiff may use affidavits of knowledgeable witnesses in meeting its burden of proving jurisdiction. Data Disc, Inc. v. Systems Tech. Assoc., Inc., 557 F.2d 1280, 1285 (9th Cir.1977). In determining whether the plaintiff has met this burden, the Court must take the allegations in the plaintiff's complaint as true and resolve disputed jurisdictional facts in the plaintiff's favor. American Tel. & Tel. Co. v. Compagnie Bruxelles Lambert, 94 F.3d 586, 588-89 (9th Cir.1996).

The Court's exercise of personal jurisdiction over a non-resident defendant must be consistent with the Constitution. Kransco Mfg., Inc. v. Markwitz, 656 F.2d 1376, 1377 (9th Cir.1981). Courts have adopted a two-tiered approach to analyze whether a non-resident defendant's contacts with the forum state are sufficiently substantial so as to comport both with the Constitution and with traditional notions of fair play and substantial justice. International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945). This two-tiered approach involves a determination of whether a court has general or specific jurisdiction over a defendant.

B. Analysis

1. Specific Personal Jurisdiction

Specific personal jurisdiction may be exercised when the "nature and quality" of the defendant's contacts with the forum state are significant in relation to the specific cause of action. Data Disc, 557 F.2d at 1287. In order for the forum state to properly assert jurisdiction over an out of state defendant, the defendant must have purposefully directed its activities towards residents of the forum state. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985). Further, the forum-related activities must be related to the claim, and the exercise of jurisdiction must be reasonable. Ballard v. Savage, 65 F.3d 1495, 1498 (9th Cir.1995).

a. Purposefully Directed Activities

Although EQ Stuff is subject to jurisdiction in California, the Worleys argue, as individuals, they are not subject to such jurisdiction. The plaintiff, however, contends that the Worleys personally engaged in and directed intentional contacts with customers and business partners in California, activity which the plaintiff argues gives rise to personal jurisdiction. (Pl's Opp. at 1.)

Regarding the Worley's personal involvement with California customers, the plaintiff submits the following evidence: (1) Mrs. Worley was individually in charge of shipping products; and (2) over 2,500 products were sold and shipped to California residents. (Id. at 5.)

Regarding the Worley's personal involvement with business partners in California, the plaintiff submits the following evidence: (1) Mr. Worley individually commissioned the production of devices from California suppliers, including co-defendant OnTech, and High Speed Designs, Inc.; (2) a preliminary accounting shows that the defendants spent over $1 million on costs of goods sold; (3) the defendants contracted with several California companies that provided ongoing services necessary for the operation of their website—namely Card Services International and PayPal; and (4) the defendants had a business services contract with California co-defendant GBR, where the personal contact was Taylor Patterson, a relative of Mr. Worley. (Pl's Opp. at 6-7.)

Moreover, the plaintiffs contend that in each of these business relationships with California entities, Mr. and/or Mrs. Worley were the "guiding force" and the personal contacts with the entities. (Id. at 7.) For example, the Pay Pal accounts to which payment for EQ Stuff products were sent were registered in both Michael and Betina Worley's names, and payments sent to these accounts were deposited directly into the Worley's personal bank account.

Based upon the evidence submitted, the Court finds that the Worleys have purposefully directed activities at California by filling orders that the Worleys knew were bound for California, and by conducting business relationships with several California companies that provided ongoing services necessary for the operation of the EQ Stuff website. As such, the Court finds that the defendants have purposefully directed activities at the forum state of California.

b. Forum-Related Activities

The second requirement for specific jurisdiction is that the contacts constituting purposeful availment must be the ones that gave rise to the current suit.3 Bancroft & Masters, Inc. v. Augusta Nat'l Inc., 223 F.3d 1082, 1088 (9th Cir.2000). This element is established if the plaintiff would not have been injured "but for" the defendant's activities. Panavision Int'l, L.P. v. Toeppen, 141 F.3d 1316, 1322 (9th Cir.1998); Ballard, 65 F.3d at 1500.

Here, the plaintiffs case is premised on the sale, via the Internet, of allegedly illegal goods into California that allow people to pirate DIRECTV's signals. (Pl's Opp. at 7.) Moreover, the plaintiff would not have suffered injury in the forum but for the Worley's conduct. Clearly, the Worley's contacts are closely related to the plaintiffs causes of action.

c. Reasonableness

The final requirement for specific jurisdiction is reasonableness.4 An otherwise valid exercise of personal jurisdiction is presumed to be reasonable. Ballard, 65 F.3d at 1500. Thus, once a court finds purposeful availment, it is the defendant's burden to "present a compelling case" that the exercise of jurisdiction would be unreasonable. Id. (citing Burger King Corp., 471 U.S. at 477, 105 S.Ct. 2174). This determination requires the balancing of seven factors: (1) the extent of purposeful interjection; (2) the burden on the defendant of defending in the forum; (3) the extent of conflict with the sovereignty of the defendant's state; (4) the forum state's interest in the dispute; (5) the most efficient forum for judicial resolution of the dispute; (6) the importance of the forum to the plaintiffs interest in convenient and effective relief; and (7) the existence of an alternative forum. Gray & Co., 913 F.2d at 761. The Court address the factors most significant to the decision in the instant case.

i. Purposeful interjection

"Even if there is sufficient interjection into the state to satisfy the purposeful availment prong, the degree of interjection is a factor to be weighed in assessing the overall reasonableness of jurisdiction under the reasonableness prong." Core-Vent, 11 F.3d at 1488 (internal citation omitted). Here, the Worleys sold and shipped goods into California over 2500 times and established significant business relations with multiple California entities. Accordingly, the Court finds that the purposeful interjection factor weighs in favor of the Court's exercise of personal jurisdiction.

ii. The Worley's burden of defending in California

The Worleys contend that it would be extremely burdensome to litigate this...

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