Picot v. Weston

• Decision Date: 19 March 2015
• Docket Number: No. 12–17098.,12–17098.
• Citation: 780 F.3d 1206
• Parties: Bernard PICOT, Plaintiff–Appellant, and Paul David Manos, Plaintiff, v. Dean D. WESTON, Defendant–Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

780 F.3d 1206

Bernard PICOT, Plaintiff–AppellantandPaul David Manos, Plaintiff

v.Dean D. WESTON, Defendant–Appellee.

No. 12–17098.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Dec. 9, 2014.

Filed March 19, 2015.

Thomas M. Boehm (argued), Law Offices of Thomas M. Boehm, Los Gatos, CA, for Plaintiff–Appellant.

David H. Schwartz (argued), Angeline Elizabeth O'Donnell, Law Offices of David H. Schwartz, San Francisco, CA, for Defendant–Appellee.

Appeal from the United States District Court for the Northern District of California, Edward J. Davila, District Judge, Presiding. DC No. 5:12 cv–01939 EJD.

Before: A. WALLACE TASHIMA and RICHARD A. PAEZ, Circuit Judges, and GORDON J. QUIST, Senior District Judge.^*

OPINION

TASHIMA, Circuit Judge:

Plaintiff Bernard Picot, a resident of California, appeals the district court's dismissal of his action against Defendant Dean Weston, a resident of Michigan, for lack of personal jurisdiction. From 2010 to 2012, Picot and Weston worked together with a third man, Paul David Manos, to develop and market an electrolyte for use in hydrogen fuel cells. After Picot and Manos sold the electrolyte technology without telling Weston, Weston claimed that he was entitled to a one-third share of the proceeds under an oral agreement. In response, Picot and Manos sued Weston in California seeking a declaration that no oral agreement was made, and for damages for intentional interference with their sales contract. The district court dismissed the suit for lack of personal jurisdiction. We affirm.

I.

Weston is a resident of Waterford, Michigan.¹ He has made a career of developing technologies for use in Michigan's automotive industry through his corporation, Engineering Interests, Inc., which is incorporated in Michigan and headquartered in Sterling Heights, Michigan. Outside the events involved in this suit, neither Weston nor Engineering Interests has ever conducted business in California. Picot is a resident of Santa Clara County, California.

Weston and Picot met each other through Manos, a mutual business associate and a resident of Nevada. Weston and Manos have known each other since 2005. In 2009, Manos and Picot were looking to get involved with a hydrogen technology being developed in Texas. Manos asked Weston if he could help by traveling to Texas to assess the technology, which Weston did. Eventually, the three men determined that the technology being developed in Texas was unworkable, and began efforts to develop and sell their own electrolyte formula for use in hydrogen fuel cells.

Exactly how the three men decided to work together is hotly disputed. Weston claims that in 2009, he and Manos met in Michigan and reached an oral agreement under which Weston would help develop, test, fund, and market the technology. In exchange, Weston would receive $20,000 per month and a one-third share of any profits from the sale of the technology. Weston states that Manos claimed to have authority to enter into the agreement on behalf of Picot, as well as himself. On February 1, 2010, Manos, Picot, and Weston met at a restaurant in Howell, Michigan. Weston claims that at this meeting, Picot confirmed his agreement to the oral profit-sharing deal. Picot and Manos acknowledge the meeting, but deny the existence of any oral agreement.

Weston spent twenty to seventy hours per week working to develop and market the technology at his office in Sterling Heights, Michigan. Picot and Manos occasionally worked out of his office as well. Weston's marketing efforts focused largely on soliciting investors or purchasers in the Michigan automotive industry including General Motors, Chrysler, Hummer, and Penske Automotive. He also procured a $450,000 investment from a Michigan resident, and contracted with the University of Michigan for technological help.

On two occasions, Weston left his Michigan office to travel to California. First, in January 2010, Weston traveled to southern California for approximately two weeks to help Manos set up a demonstration for a potential client Picot had contacted. Second, in June 2010, Weston went to Sacramento at Manos' and Picot's request to help with another demonstration. On both occasions, Manos and Picot compensated Weston for his work and related expenses.

On three occasions, Weston met with Tracy Coats, a resident of Cleveland, Ohio, at the University of Michigan. Coats is the majority owner of HMR Hydrogen Master Rights, Ltd. (“HMR”), a Delaware corporation with offices in Ohio. At one of these meetings, Coats and Weston videotaped a demonstration of the technology. At another, Weston and Coats conducted a Skype presentation for a potential customer in China.

In 2011, Manos and Picot began negotiating with Coats and another part-owner of HMR, Carl Le Souef, a resident of Australia, for HMR to purchase the technology. The negotiations were successful, and Manos and Picot agreed to sell the technology to HMR for $35 million. They agreed that the money would be paid into two pass-through trusts, one in Wyoming and one in Australia. The contract was executed in Los Angeles, California, and became effective December 12, 2011. This agreement was followed by a series of emails and phone calls between Weston and Manos. On February 8, 2012, Weston sent Manos an email referencing earlier conversations and asking about his share of the proceeds from the sale to HMR. Immediately after that email Weston called Manos and demanded $250,000 or he would “do everything in his power to destroy” Manos and Picot.

In March 2012, Coats told Weston about the $35 million sale price, and informed him that Manos and Picot had each already received $1.1 million. On March 20, 2012, Weston's lawyer sent Manos and Picot an email threatening to sue if they did not pay Weston his share of the proceeds pursuant to their oral agreement. As a result of the threatened litigation and other unspecified statements by Weston, HMR stopped making payments to Manos and Picot.

Three days after the threatening email, Picot and Manos filed suit against Weston in California Superior Court for the County of Santa Clara seeking: (1) a declaration that no oral agreement existed between them and Weston; and (2) damages for intentional interference with the HMR sales contract. Weston removed the action to the United States District Court for the Northern District of California on the basis of diversity jurisdiction. Weston then moved to dismiss the complaint for lack of personal jurisdiction and improper venue and, in the alternative, to transfer venue to the Eastern District of Michigan. The district court concluded that it lacked personal jurisdiction over Weston on either of the two claims, granted the motion to dismiss, and denied the motion to transfer as moot. Picot, but not Manos, timely appealed.

II.

We review de novo a district court's dismissal for lack of personal jurisdiction. Wash. Shoe Co. v. A–Z Sporting Goods Inc., 704 F.3d 668, 671 (9th Cir.2012). “[T]he plaintiff bears the burden of demonstrating that jurisdiction is appropriate.” Schwarzenegger, 374 F.3d at 800. Where, as here, a defendant's motion to dismiss is based on a written record and no evidentiary hearing is held, “the plaintiff need only make a prima facie showing of jurisdictional facts.” Id. (quoting Sher v. Johnson, 911 F.2d 1357, 1361 (9th Cir.1990) ).

III.

“Federal courts ordinarily follow state law in determining the bounds of their jurisdiction over persons.” Daimler AG v. Bauman, –––U.S. ––––, 134 S.Ct. 746, 753, 187 L.Ed.2d 624 (2014). Because “California's long-arm statute allows the exercise of personal jurisdiction to the full extent permissible under the U.S. Constitution,” our inquiry centers on whether exercising jurisdiction comports with due process. Id.; see Cal.Code Civ. Proc. § 410.10 (“A court of this state may exercise jurisdiction on any basis not inconsistent with the Constitution of this state or of the United States.”). Due process requires that the defendant “have certain minimum contacts” with the forum state “such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.’ ” Int'l Shoe Co. v. Wash., 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 85 L.Ed. 278 (1940) ).

Depending on the strength of those contacts, there are two forms that personal jurisdiction may take: general and specific. Boschetto v. Hansing, 539 F.3d 1011, 1016 (9th Cir.2008). Picot does not contend that Weston is subject to general jurisdiction in California; instead, he argues that specific jurisdiction exists. When a plaintiff relies on specific jurisdiction, he must establish that jurisdiction is proper for “each claim asserted against a defendant.” Action Embroidery Corp. v. Atl. Embroidery, Inc., 368 F.3d 1174, 1180 (9th Cir.2004). If personal jurisdiction exists over one claim, but not others, the district court may exercise pendent personal jurisdiction over any remaining claims that arise out of the same “common nucleus of operative facts” as the claim for which jurisdiction exists. Id. at 1181.

We employ a three-part test to assess whether a defendant has sufficient contacts with the forum state to be subject to specific personal jurisdiction:

(1) The non-resident defendant must purposefully direct his activities or consummate some transaction with the forum or resident thereof; or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws;

(2) the claim must be one which arises out of or relates to the defendant's forum-related activities; and

(3) the exercise of jurisdiction must comport with fair play and substantial justice, i.e. it must be reasonable.

Schwarzenegger, 374 F.3d at 802. The plaintiff has the burden of proving the first two prongs.

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