Expeditors Int'l of Wash. v. Santillana

• Decision Date: 10 February 2023
• Docket Number: 2:20-cv-00349-LK
• Parties: EXPEDITORS INTERNATIONAL OF WASHINGTON, INC., Plaintiff, v. ARMANDO CADENA SANTILLANA, Defendant.
• Court: U.S. District Court — Western District of Washington

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EXPEDITORS INTERNATIONAL OF WASHINGTON, INC., Plaintiff, v. ARMANDO CADENA SANTILLANA, Defendant.

No. 2:20-cv-00349-LK

United States District Court, W.D. Washington, Seattle

February 10, 2023

ORDER ADOPTING REPORT AND RECOMMENDATION IN PART MODIFYING IT IN PART, AND DISMISSING EXPEDITORS WASHINGTON'S COMPLAINT

LAUREN KING, UNITED STATES DISTRICT JUDGE

This matter comes before the Court on Judge Brian A Tsuchida's Report and Recommendation (“R&R”) regarding Defendant Armando Cadena Santillana's motion to dismiss Plaintiff Expeditor's International of Washington, Inc.'s (“Expeditors Washington”) First Amended Complaint. Dkt. No. 55. The Court adopts the R&R in part, modifies it in part, and dismisses Expeditors Washington's complaint.

I. BACKGROUND

The Court adopts the discussion of the background and procedural history of this case set forth in the R&R, Dkt. No. 55 at 1-7, but briefly recounts some relevant background here.

Cadena first moved to dismiss Expeditors Washington's complaint on September 10, 2020. Dkt. No. 23. In a report and recommendation dated October 26, 2020, Judge Tsuchida recommended granting the motion to dismiss, Dkt. No. 31 at 1, and the Court adopted that report and recommendation over Expeditors Washington's objections on August 17, 2021. Dkt. Nos. 32, 38. Expeditors Washington then filed an amended complaint on September 7, 2021, Dkt. No. 39, and Cadena again moved to dismiss, Dkt. No. 42. Judge Tsuchida recommended granting Cadena's new motion to dismiss, Dkt. No. 55, and Expeditors Washington objected again, Dkt. No. 56.

Expeditors Washington's amended complaint asserts claims for declaratory judgment, conversion, and constructive trust. Dkt. No. 39 at 7-9. The R&R recommends that the amended complaint be dismissed for lack of personal jurisdiction, lack of standing, and failure to state a claim, for the following reasons:

(1) First, the Court lacks personal jurisdiction over Cadena with respect to each of the claims. As to the declaratory judgment claim, the forum-selection clause cannot establish personal jurisdiction because it is invalid due to this forum being “seriously inconvenient” under M/S Bremen v. Zapata Off-Shore Company, 407 U.S. 1 (1972). Dkt. No. 55 at 8-14. As to the conversion and constructive trust claims, the Court lacks an independent basis to exercise personal jurisdiction over Cadena, and should decline to exercise pendent personal jurisdiction. Id. at 15-18.

(2) Second, Expeditors Washington lacks standing to assert each of its claims. It lacks standing to assert its declaratory judgment claim because the parties' rights and obligations under the Stock Option Agreements^[1]depend on the discretion of an independent entity that is not a party to this case, precluding a final settlement of the legal relations at issue. Dkt. No. 55 at 24-26. It lacks standing to assert its conversion claim because the only injury it alleges is a diminution in the value of dividends paid to it as a shareholder in Expeditors Mexico,^[2] and courts have consistently held that such a loss of dividends is insufficient to confer standing on a shareholder. Dkt. No. 55 at 18-21. Expeditors Washington also lacks standing to assert its constructive trust claim because it has failed to allege that it has a legally protected interest in the property at issue. Id. at 21-23.

(3) Third, Expeditors Washington has failed to state claims for conversion and constructive trust. With respect to its conversion claim, Expeditors Washington fails to allege a property interest in the allegedly converted funds. Dkt. No. 55 at 26-28. With respect to its constructive trust claim, Expeditors Washington either did not confer the alleged benefit on Cadena, or Cadena is not the legal title holder of the property in question. Id.

(4) The R&R also denied as untimely and futile Expeditors Washington's request to file a second amended complaint to add a claim for tortious interference with business expectancy and/or to allow it to take assignment of claims from Expeditors Mexico. Dkt. No. 55 at 23-24. Expeditors Washington waited nearly 20 months to assert these new theories, and the new claims would succumb to the same defects as its existing claims, including its inability to assert standing as a shareholder. Likewise, an assignment of claims at this stage would trigger a presumption that jurisdiction had been established only by collusion. Id.

Expeditors Washington argues that the R&R erred in its conclusions regarding: (1) the enforceability of the forum-selection clauses in the three Stock Option Agreements between Expeditors Washington and Cadena; and (2) Expeditors Washington's standing to seek declaratory judgment regarding the parties' rights and obligations under the Stock Option Agreements. Dkt. No. 56 at 4. Expeditors Washington does not object to any of the other conclusions in the R&R.

II. LEGAL STANDARD

This Court must “make a de novo determination of those portions of the report or specified proposed findings or recommendations to which” a party objects. 28 U.S.C. § 636(b)(1)(C); see Fed. R. Civ. P. 72(b)(3) (“The district judge must determine de novo any part of the magistrate judge's disposition that has been properly objected to.”); United States v. Reyna-Tapia, 328 F.3d 1114, 1121 (9th Cir. 2003) (en banc) (same). The Court “may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge.” 28 U.S.C. § 636(b)(1)(C); see Fed.R.Civ.P. 72(b)(3). However, the Federal Magistrates Act “does not on its face require any review at all . . . of any issue that is not the subject of an objection.” Thomas v. Arn, 474 U.S. 140, 149 (1989); see Reyna-Tapia, 328 F.3d at 1121 (“[T]he district judge must review the magistrate judge's findings and recommendations de novo if objection is made, but not otherwise.” (emphasis in original)).

III. DISCUSSION

A. The Court Has Jurisdiction Under 28 U.S.C. § 1332(a)(2)

Expeditors Washington asserts, and Cadena does not dispute, that Cadena “is a resident of Mexico,”^[3]Expeditors Washington is a citizen of Washington State, and more than $75,000 is in dispute. Dkt. No. 39 at 1; Dkt. No. 47 at 18 n.13. Indeed, with respect to Expeditors Washington's declaratory judgment claim alone, it appears that over $75,000 is in dispute. Dkt. Nos. 44-6, 49-6, 49-7. Accordingly, the Court finds that the requirements of 28 U.S.C. § 1332(a)(2) are met.

B. The Court Has Personal Jurisdiction Over Cadena With Respect to a Portion of Expeditors Washington's Declaratory Judgment Claim

The Court declines to adopt the R&R's conclusion that the Court lacks personal jurisdiction over Cadena with respect to Expeditors Washington's declaratory judgment claim, Dkt. No. 55 at 8-14, and instead finds that it has such jurisdiction over the portion of that claim covered by the forum-selection clauses in the Stock Option Agreements, Dkt. Nos. 44-7-44-9, 49-2-49-4.^[4] The forum-selection clauses are sufficient to establish personal jurisdiction over Cadena because he consented to personal jurisdiction by assenting to the Stock Option Agreements, and no exception to enforceability of the clauses applies. Specifically, the difficulties Cadena would face from litigating in this forum during the COVID-19 pandemic do not establish an exceptional reason or extraordinary circumstance that would cause him grave difficulties or inconvenience.

Because a forum-selection clause “represents the parties' agreement as to the most proper forum,” it should be “given controlling weight in all but the most exceptional cases.” Atlantic Marine Const. Co. v. U.S. Dist. Ct. for W. Dist. of Texas, 571 U.S. 49, 60, 63 (2013) (cleaned up). In other words, such clauses should be enforced “unless extraordinary circumstances unrelated to the convenience of the parties clearly disfavor” enforcement. Id. at 52. A plaintiff succeeds in showing that such “exceptional” and “extraordinary” circumstances exist when:

(1) the clause is invalid due to “fraud or overreaching,” (2) “enforcement would contravene a strong public policy of the forum in which suit is brought, whether declared by statute or by judicial decision,” or (3) “trial in the contractual forum will be so gravely difficult and inconvenient that [the litigant] will for all practical purposes be deprived of his day in court.”

Yei A. Sun v. Advanced China Healthcare, Inc., 901 F.3d 1081, 1088 (9th Cir. 2018) (quoting Bremen, 407 U.S. at 15, 18). Thus, absent a valid exception under Bremen, the forum-selection clauses in the parties' Stock Option Agreements establish the Court's personal jurisdiction over Cadena with respect to Expeditors Washington's request for declaratory judgment relating to those Agreements.

Cadena argues, and the R&R agrees, that he has shown that this district would be a “gravely difficult and inconvenient forum” due to the risk of contracting or spreading COVID-19 while traveling internationally during the COVID-19 pandemic. Dkt. No. 42 at 20-21; Dkt. No. 55 at 13-14; Dkt. No. 57 at 9-10. Cadena and the witnesses he plans to call are located in Mexico. Dkt. No. 42 at 21. Cadena claims that he and his witnesses would have to travel to Washington to defend in this forum and as a result would risk exposure to COVID-19 infection, and risk spreading an infection to others. Dkt. No. 43 at 3-4. He has also suffered from a severe Herpes Zoster, or shingles, infection, which a doctor has advised him could be reactivated by, or cause complications with, a COVID-19 infection. Id. at 4. Cadena further expresses concern about potentially infecting his wife and daughter, with whom he lives, or his 91-year-old father, to whom he provides necessary assistance such as delivery of groceries. Id. at 5.

Cadena...