Newport Components v. NEC Home Electronics

• Decision Date: 29 September 1987
• Docket Number: No. 86-5613-DT(Bx).,86-5613-DT(Bx).
• Citation: 671 F. Supp. 1525
• Court: U.S. District Court — Central District of California
• Parties: NEWPORT COMPONENTS, INC., a California corporation and Logic Array, Inc., a California corporation, Plaintiffs, v. NEC HOME ELECTRONICS (U.S.A.), INC., a Delaware corporation; NEC Corporation, a Japanese corporation; and NEC Home Electronics, Ltd., a Japanese corporation, Defendants.

671 F. Supp. 1525

NEWPORT COMPONENTS, INC., a California corporation and Logic Array, Inc., a California corporation, Plaintiffs, v. NEC HOME ELECTRONICS (U.S.A.), INC., a Delaware corporation; NEC Corporation, a Japanese corporation; and NEC Home Electronics, Ltd., a Japanese corporation, Defendants.

No. 86-5613-DT(Bx).

United States District Court, C.D. California.

September 29, 1987.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Gary B. Lovell, Jacob J. Stettin, Newport Beach, Cal., for plaintiffs.

J. Eric Isken, Christopher C. Larkin, Graham & James, Los Angeles, Cal., for defendants.

AMENDED OPINION AND ORDER ON MOTION TO DISMISS WITH REVISIONS

TEVRIZIAN, District Judge.

Two local electronics equipment distributors filed this action against a Japanese multi-national manufacturer of electronics products and two of its wholly-owned subsidiaries. Following several preliminary motions, the Japanese parent company and its Japanese subsidiary filed the present motion to dismiss on various procedural and substantive grounds. The Court took this matter under submission following oral argument. Having read and considered all briefs and documentary evidence presented, including the supplemental briefs filed after oral argument, the Court now grants the motion in part and denies the motion in part as follows:

I. FACTS AND PROCEDURE

Plaintiff Newport Components, Inc. ("NCI") is a wholesale distributor of electronics products headquartered in Newport Beach, California. Plaintiff Logic Array, Inc. ("Logic") is a Newport Beach-based retailer of electronics components, and one of the vendors to whom NCI distributed its products.

Defendant NEC Home Electronics (U.S. A.), Inc. ("NECHE-USA") is a Delaware corporation engaged in the distribution of electronics equipment in the United States. NECHE-USA is a wholly-owned subsidiary of NEC America, Inc., a New York corporation not a party to this action, which is, in turn, wholly owned by defendant NEC Corporation ("NEC"), a Japanese corporation. NEC is a worldwide manufacturer and distributor of computer and communications equipment with Fiscal Year 1985-86 consolidated net sales of more than $2 billion.¹ Defendant NEC Home Electronics, Ltd. ("NECHE-Japan"), a Japanese corporation, is a separate wholly-owned subsidiary of NEC that both distributes NEC's products and manufactures its own computer equipment for sale at the retail level.

On November 27, 1985, NCI and NECHE-USA entered into a written distributorship agreement under which NCI would distribute to retail dealers, among other NEC products, a self-synchronizing high resolution color computer monitor marketed under the trade name "MultiSync."² The present dispute arose when NECHE-USA terminated this distributorship agreement on July 28, 1986.³

Plaintiffs allege that NECHE-USA wrongfully terminated NCI as part of a conspiracy to fix prices and restrain competition in the high resolution color monitor market. Specifically, they allege in relevant part that "distributors, such as NCI, who sell too cheaply to retailers, such as Logic Array, are terminated as distributors whereas those distributors who comply with defendants' pricing instructions are not terminated and are rewarded for their participation in the conspiracy to maintain high prices." Complaint, ? 24(a).⁴

Plaintiffs filed this action on August 27, 1986, and at the same time sought a Temporary Restraining Order ("TRO") preventing NECHE-USA from terminating the November 27, 1985, distributorship agreement. This Court granted the TRO with the condition that plaintiffs not place additional orders for products with NECHE-USA. On September 8, 1986, the Court denied plaintiffs' application for a preliminary injunction preventing NECHE-USA from terminating the distributorship, but enjoined NECHE-USA from refusing to sell and deliver to NCI all back-ordered MultiSync monitors on the same terms and conditions afforded other authorized NECHE-USA distributors. The Court also stayed this action pending arbitration pursuant to an arbitration clause in the distributorship agreement, but allowed discovery to proceed on the federal and state antitrust claims. Plaintiffs undertook mail service of the summons and complaint separately on defendants NEC and NECHE-Japan on December 20, 1986.

II. PRESENT MOTIONS BEFORE THE COURT

NEC and NECHE-Japan filed the present motion to dismiss pursuant to Rules 4 and 12 of the Federal Rules of Civil Procedure as follows:

(1) To dismiss all causes of action against NEC on the ground the Court lacks jurisdiction over the person of NEC (Fed.R.Civ.Proc. 12(b)(2));

(2) To dismiss all causes of action against NEC and NECHE-Japan on the ground these defendants have not been properly served with process (Fed.R.Civ.Proc. 12(b)(5));

(3) To dismiss all causes of action against NEC and NECHE-Japan for failure to effect service of process within 120 days after the complaint was filed (Fed.R.Civ.Proc. (4)(j)); and

(4) To dismiss the first, third, fourth, fifth, and sixth causes of action against NEC and NECHE-Japan for failure to state a claim upon which relief can be granted (Fed.R.Civ.Proc. 12(b)(6)).

III. JURISDICTION OVER THE PERSON

NEC moves to be dismissed from this action for lack of in personam jurisdiction. This defendant argues that although it admittedly markets its products in California through NECHE-USA and other wholly-owned subsidiaries, it does not have sufficient contacts itself with the forum state to confer personal jurisdiction.

Due process protects a corporate entity from being brought into a forum with which it has established no meaningful "`contacts, ties, or relations.'" Burger King Corp. v. Rudzewicz, 471 U.S. 462, 105 S.Ct. 2174, 2184, 85 L.Ed.2d 528 (1985), quoting International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945). Due process requirements are satisfied, however, when in personam jurisdiction is asserted over a nonresident corporate defendant that has "certain minimum contacts with the forum such that the maintenance of the suit does not offend `traditional notions of fair play and substantial justice.'" International Shoe, supra, 326 U.S. at 316, 66 S.Ct. at 158, quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 342, 85 L.Ed. 278 (1940); Asahi Metal, Inc. v. Superior Court, ___ U.S. ___, 107 S.Ct. 1026, 1031, 94 L.Ed.2d 92 (1987); Helicopteros Nationales De Colombia, S.A. v. Hall, 466 U.S. 408, 414, 104 S.Ct. 1868, 1872, 80 L.Ed.2d 404 (1984). At bottom, a nonresident "defendant's conduct and connection with the forum state should be such that he 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); Burger King, supra, 105 S.Ct. at 2182 (defendant must have "fair warning that a particular activity may subject it to the jurisdiction of a foreign sovereign"), quoting Shaffer v. Heitner, 433 U.S. 186, 218, 97 S.Ct. 2569, 2587, 53 L.Ed.2d 683 (1977) (Stevens, J., concurring in judgment). The issue presented here is whether NEC's contacts with the forum are such that it could have anticipated being subject to the present litigation.

A. Standard of Review

Plaintiffs, as the parties seeking to invoke the Court's jurisdiction, bear the burden of establishing that personal jurisdiction exists. Scott v. Breeland, 792 F.2d 925, 927 (9th Cir.1986); Data Disc., Inc. v. Systems Tech. Assoc., Inc., 557 F.2d 1280, 1285 (9th Cir.1977). On a motion to dismiss, plaintiffs are "`obligated to come forward with facts, by affidavit or otherwise, supporting personal jurisdiction.'" Scott, supra, quoting Amba Marketing Systems, Inc. v. Jobar International, Inc., 551 F.2d 784, 787 (9th Cir.1977). At this stage in the litigation, however, with discovery ongoing, plaintiffs need not establish jurisdiction by a preponderance of evidence but may merely set forth a prima facie showing that NEC is properly before the Court. Fields v. Sedgwick Associated Risks, Ltd., 796 F.2d 299, 301 (9th Cir.1986); Data Disc., supra, 557 F.2d at 1285; California Software, Inc. v. Reliability Research, 631 F.Supp. 1356, 1359 (C.D.Cal.1986).

In an effort to make this prima facie showing, plaintiffs rely on three distinct theories of personal jurisdiction. First, they argue that this Court has "specific jurisdiction" over NEC by virtue of a relationship among NEC, California as the forum state, and the present litigation. Second, they argue that "general jurisdiction" exists over NEC on the basis of this defendant's overall contacts with the forum state. Finally, although not clearly articulated, plaintiffs appear to claim the Court has jurisdiction over NEC in light of this defendant's "aggregate" or "cumulative" contacts with the United States as a whole. To support these theories, plaintiffs present evidence of the following uncontroverted facts:

(1) One of NEC's wholly-owned California subsidiaries, NEC Electronics, Inc. ("NEC Electronics"), imports ninety percent of the NEC computer chips it sells from the parent company. Moreover, NEC retains "control" of this subsidiary by virtue of the fact that NEC corporate directors constitute a majority of NEC Electronics' board of directors.

(2) Prior to November, 1983, NEC was the owner within the United States of the trademark "NEC," registered with the United States Patent & Trademark Office under Registration Nos. 964,056 and 1,070,387. In November, 1983, NEC transferred this trademark to NEC Electronics. NEC also has placed advertisements promoting this trademark in various publications circulated in the United States;

(3) NEC has voluntarily availed itself of the federal courts to redress grievances;

(4) Since at least 1963 and continuing to date, NEC has registered with the United States Securities and Exchange Commission and actively traded on the over-the-counter market American Deposit Receipts ("ADRs"); and

(5) During...