J. M. Sahlein Music Co. v. Nippon Gakki Co., Ltd.

• Citation: 197 Cal.App.3d 539,243 Cal.Rptr. 4
• Decision Date: 30 November 1987
• Docket Number: No. A035468,A035468
• Parties: J.M. SAHLEIN MUSIC CO., INC., Plaintiff and Appellant, v. NIPPON GAKKI CO., LTD., Defendant and Respondent.
• Court: California Court of Appeals

Page 4

243 Cal.Rptr. 4

197 Cal.App.3d 539

J.M. SAHLEIN MUSIC CO., INC., Plaintiff and Appellant, v. NIPPON GAKKI CO., LTD., Defendant and Respondent.

No. A035468.

Court of Appeal, First District, Division 4, California.

Nov. 30, 1987.

Publication Ordered Dec. 30, 1987.

Review Denied Feb. 3, 1988.

Charles S. Holden, James Duryea, Jr., Law Offices of James Duryea, Jr., San Francisco, for plaintiff and appellant

Jamie M. Bennett, Hogan & Hartson, Washington, D.C., Curtis Karnow, Landels, Ripley & Diamond, San Francisco, for defendant and respondent.

SABRAW, Associate Justice.

Plaintiff J.M. Sahlein Music Co., Inc. (Sahlein) appeals from an order quashing service of summons on defendant Nippon Gakki Co., Ltd. (Nippon Gakki). We find the forum- and claim-related contacts identified by plaintiff insufficient to warrant personal jurisdiction over defendant, and affirm.

BACKGROUND

According to the second amended complaint, Nippon Gakki is a Japanese corporation which manufactures acoustic guitars. Nippon Gakki sells the guitars to its subsidiary, defendant Yamaha International Corporation (Yamaha), which imports them. Yamaha and Sahlein are both California corporations. Yamaha has apparently acceded to jurisdiction and is not a party to this appeal.

The complaint charges that Yamaha wrongfully terminated Sahlein's distributorship of acoustic guitars manufactured by Nippon Gakki. The fifth cause of action charges that Nippon Gakki conspired with Yamaha to interfere with the advantageous relationships between Sahlein and its customers.

Service of process was effected on Nippon Gakki by mail in Japan. After discovery was conducted on the jurisdictional issues, Nippon Gakki moved to quash service. The trial court granted the motion. The appeal lies (Code Civ.Proc., § 904.1, subd. (c)), and is timely (Cal.Rules of Court, rules 2(a), 2(b)(3).)

ANALYSIS

The courts of this state may exercise personal jurisdiction on any basis consistent with the state and federal constitutions. (Code Civ.Proc., § 410.10.) Under the due process clause of the federal constitution, the basic prerequisite for personal jurisdiction is that the defendant have such "minimum contacts" with the forum state that maintenance of suit would not offend " 'traditional notions of fair play and substantial justice.' " (Internat. Shoe Co. v. Washington (1945) 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95; Helicopteros Nacionales de Colombia v. Hall (1984) 466 U.S. 408, 414, 104 S.Ct. 1868, 1872, 80 L.Ed.2d 404.)

If a defendant has sufficiently extensive "contacts" with the forum state, it may be subject to suit there on all claims wherever they arise. ( Helicopteros Nacionales, supra, 466 U.S. at 414, 104 S.Ct. at 1872.) In other cases, the jurisdictional sufficiency of the defendant's contacts depends on an assessment of the " 'relationship among the defendant, the forum, and the litigation.' " ( Helicopteros Nacionales, supra, 466 U.S. 408, 414, 104 S.Ct. 1868, 1872, quoting Shaffer v. Heitner (1977) 433 U.S. 186, 204, 97 S.Ct. 2569, 2580, 53 L.Ed.2d 683.) Here, Sahlein disavows any claim that Nippon Gakki has such extensive contacts with California as to be subject to "general" jurisdiction. Therefore the dispositive question is whether Nippon Gakki's forum-related contacts warrant personal jurisdiction with respect to the specific claim for interference with Sahlein's business.

The contacts asserted by Sahlein to support jurisdiction are (1) Nippon Gakki's parent-subsidiary relationship with Yamaha; (2) Nippon Gakki's contractual relationship with Yamaha; (3) communications "between" Nippon Gakki and Yamaha concerning the acoustic guitar business; (4) visits by Nippon Gakki personnel to California to review Yamaha operations; (5) Nippon Gakki's general activities in California and nationwide to promote its products; (6) Nippon Gakki's receipt of proceeds from the sale of guitars to Yamaha and of cash distributions from Yamaha; and (7) communications "between" Nippon Gakki and Yamaha concerning the events which culminated in the termination of Sahlein's distributorship.

Of the seven categories noted, only the last comes close to being claim-related. The remaining six consist of nothing more than would normally be expected where a domestic corporation is owned by, and has contracted with, a foreign corporation. But the ownership of a locally incorporated subsidiary does not warrant the exercise of jurisdiction over a foreign corporation unless the foreign parent "manipulates the subsidiary to the detriment of creditors or the subsidiary is the alter ego of the parent. (Empire Steel Corp. v. Superior Court (1961) 56 Cal.2d 823, 831 [17 Cal.Rptr. 150, 366 P.2d 502].)" (Westinghouse Electric Corp. v. Superior Court (1976) 17 Cal.3d 259, 274, 131 Cal.Rptr. 231, 551 P.2d 847; see Cannon Mfg. Co. v. Cudahy Co. (1925) 267 U.S. 333, 45 S.Ct. 250, 69 L.Ed. 634.) No such showing is attempted here and Sahlein appears to concede that the parent-subsidiary relationship is not sufficient to subject Nippon Gakki to jurisdiction.

Sahlein places great reliance on Nippon Gakki's entry into a written contract appointing Yamaha as its exclusive master distributor in the United States. The contract provides that California law will govern its enforcement and interpretation. These factors would tend to support the exercise of jurisdiction over Nippon Gakki in a suit arising from the contract. (See Burger King Corp. v. Rudzewicz (1985) 471 U.S. 462, 105 S.Ct. 2174, 2187, 85 L.Ed.2d 528.) However, the present claim does not arise from the contract, except perhaps in the extremely broad sense that all of Yamaha's activities may have involved the exercise of rights and powers derived from the contract. Jurisdiction cannot rest on such a slender reed. An asserted contact must be something more than a remote "link in the chain of events" leading to the litigation. (Pacific Atlantic Trading Co. v. M/V Main Exp. (9th Cir.1985) 758 F.2d 1325, 1329.)

The case of Hylwa v. Palka (9th Cir.1987) 823 F.2d 310 cited by Sahlein, is distinguished on this ground. The dispute there arose from a personal services contract between a California resident and a foreign defendant. In contrast, Sahlein is a stranger to the contract and Sahlein's claim has no substantial connection with it.

Nippon Gakki's manufacturing and marketing activities, and its receipt of benefits from those activities, might support jurisdiction in an action arising from those activities or from the product itself. This is the situation presented in most of the cases relied on by Sahlein. (See Davis v. Superior Court (1976) 62 Cal.App.3d 484, 133 Cal.Rptr. 115 [local promotion of contraceptive device by its developers supported jurisdiction over them in action for personal injuries]; Buckeye Boiler Co. v. Superior Court (1969) 71 Cal.2d 893, 80 Cal.Rptr. 113, 458 P.2d 57 [manufacturer subject to jurisdiction for personal injuries caused by defective product]; Rowe v. Dorrough (1984) 150 Cal.App.3d 901, 198 Cal.Rptr. 131 [order quashing service on manufacturer of Yamaha motorcycles reversed in personal injury action]; Rice Growers Assn. v. First National Bank (1985) 167 Cal.App.3d 559, 214 Cal.Rptr. 468 [financers, builder, and designer of ship intended for use in California held subject to jurisdiction in suit alleging defects]; but see Asahi Metal Ind. v. Super. Ct. of Cal., Solano Cty. (1987) 480 U.S. 102, 107 S.Ct. 1026, 94 L.Ed.2d 92, revg. (1985) 39 Cal.3d 35, 216 Cal.Rptr. 385, 702 P.2d 543 [unreasonable to exercise jurisdiction in indemnity cross-action against foreign manufacturer of tire part].) The point is not simply that most of these cases involved personal injuries. The point is that they presented a substantial link between acts by the defendant, the forum state, and the injuries for which redress was sought. Without some similar connection here, we fail to see how it would be consistent with "fair play and substantial justice" to hold Nippon Gakki subject to jurisdiction in a dispute arising from the severance of a relationship between an importer and distributor of its products.

Nippon Gakki contends that all non-claim-related contacts are wholly irrelevant to the jurisdictional analysis. We need not go that far to dispose of this case. As noted above, the focal point of the analysis must be the interrelationship of the defendant's conduct, the forum, and the claim. For present purposes it is enough to observe that the less substantial that interrelationship, the less the...