Pure, Ltd. v. Shasta Beverages, Inc.

• Decision Date: 29 July 1988
• Docket Number: Civ. No. 88-00101.
• Citation: 691 F. Supp. 1274
• Parties: PURE, LTD., a Hawaii corporation, Plaintiff, v. SHASTA BEVERAGES, INC., a Delaware Corporation, and National Beverage Corp., a Delaware Corporation, Defendants.
• Court: U.S. District Court — District of Hawaii

691 F. Supp. 1274

PURE, LTD., a Hawaii corporation, Plaintiff, v. SHASTA BEVERAGES, INC., a Delaware Corporation, and National Beverage Corp., a Delaware Corporation, Defendants.

Civ. No. 88-00101.

United States District Court, D. Hawaii.

July 29, 1988.

William M. Swope, Darryl H.W. Johnston, David Schulmeister and Colin O. Miwa, Cades, Schutte, Fleming & Wright, Honolulu, Hawaii, for plaintiff.

William McCorriston and Bryan Yee, Goodsill, Anderson, Quinn & Stifel, Honolulu, Hawaii, Robert Jossen and Walter Siegel, Sheriff, Friedman, Hoffman & Goodman, New York City, for defendants.

ORDER DENYING DEFENDANT NATIONAL BEVERAGE CORP.'S MOTION TO DISMISS

KAY, District Judge.

This matter came on for hearing on May 16, 1988, upon Defendant National Beverage Corp.'s Motion to Dismiss. William C. McCorriston and Mark E. Recktenwald appeared for defendant Shasta Beverages, Inc. ("Shasta") and defendant-movant National Beverage Corp. ("National"). David Schulmeister and William M. Swope appeared for Plaintiff, Pure, Ltd. ("Pure"). The court, having examined the motions, the memoranda filed in support and in opposition thereto, and having heard the arguments of counsel hereby finds as follows.

I.

Shasta, a Delaware corporation whose primary place of business is Hayward, California, is a wholly-owned subsidiary of National. National's headquarters is in Fort Lauderdale, Florida. Pure is a Hawaii corporation with its assets and principal place of business in Hawaii. Shasta and Pure originally entered into negotiations regarding the distribution of Pure's product "Hawaiian Water" mineral water in California and potentially national distribution. Subsequently, Shasta and Pure entered into a distribution agreement for "Hawaiian Water" on September 19, 1986. Part of that agreement called for a marketing plan to be prepared and delivered to Pure by Shasta by December 19, 1986. According to the affidavit of Marcus Bender, shortly after the September 19, 1986 contract was signed, the Shasta management changed. The Vice President of National, Mr. Smith, also became an executive officer of Shasta. In addition, Mr. Healy became Chief Executive Officer of National and assumed a similar dual role with regard to Shasta. Pure alleges that Mr. Smith told Pure that all decisions regarding the contract must be approved by the Board of Directors of National.

The complaint alleges that Shasta did not provide a marketing plan by December 19, 1986. However, in the interim an Addendum Agreement was signed by the parties on October 9, 1986. Amendment No. 2 was executed on February 20, 1987 amending and modifying the September 19, 1986 contract (hereinafter collectively referred to as "Agreement").

On April 28, 1987, apparently in furtherance of the business relationship and pursuant to the Agreement, the parties, including Mr. Healy and Mr. Smith for National and Shasta, met to discuss a quality testing report and a marketing plan for "Hawaiian Water" provided for in the Agreement. In the morning session of discussions on April 28, 1987 the parties allegedly agreed that a California rollout would commence in the near future. However, in the afternoon session, Mr. Healy and Mr. Smith allegedly wanted to rescind the California rollout unless defendant Pure agreed to renegotiate the Agreement. The renegotiation terms included Shasta's acquisition of a 51% interest in Pure and a subsequent 100% interest after a set threshold of royalties were received by Pure, in addition to the agreement being terminable at any time by Shasta at its sole discretion.

Pure subsequently filed suit in February 1988. Defendant National has brought this motion to dismiss based upon this court's alleged lack of personal jurisdiction under Fed.R.Civ.P. 12(b)(2) and Pure's failure to state a claim for which relief may be granted under Fed.R.Civ.P. 12(b)(6).

II.

Pure states in Count I of its complaint that it detrimentally relied upon the signed contract and proceeded to drill a well and contract for special flexible tanks to ship the water to California. Pure states that it has spent or contracted for a sum in excess of $1,200,000.00 to fulfill its obligations under the Agreement. Accordingly, Pure claims breach and wrongful repudiation of the agreement by National and Shasta.

Count II alleges that National wrongly caused, induced or directed Shasta's breach and repudiation of the agreement with an intent to interfere and lessen Pure's contractual rights. Accordingly, Pure claims that National intentionally interfered with Pure's contractual rights.

Count III alleges that the wrongful repudiation of the Agreement was motivated by predatory and bad faith intent by Shasta and National to misappropriate the contractual rights of Pure under the agreement. Accordingly, Pure seeks punitive damages.

Count IV alleges that the above conduct constituted a breach by Shasta of the covenant of good faith and fair dealing implied in every contract and accordingly seeks damages for the breach of the covenants of good faith and fair dealing.

National brings this motion to dismiss on the basis that plaintiff has failed to allege that National had sufficient contacts to Hawaii to subject it to the jurisdiction of this court. In addition, National alleges that plaintiff has failed to state a claim against National for which relief can be granted. National alleges in its moving papers that Pure has claims against National in only Counts II and III of the complaint and National therefore only addresses its arguments to dismiss based upon Counts II and III. However, upon review of the complaint by the court, Count I specifically names National in Pures' claim of breach of contract. Because National has not addressed the breach of contract claims against National in its moving papers, the court will only review Counts II and III for purposes of National's motion to dismiss.

Personal Jurisdiction

Defendant National asserts that plaintiff has failed to satisfy its burden of alleging that National has sufficient contacts with the State of Hawaii sufficient to subject it to the jurisdiction of this court. FDIC v. British-American Insur. Co., Ltd., 828 F.2d 1439, 1441 (9th Cir.1987). In scrutinizing a motion to dismiss based upon lack of personal jurisdiction, the court looks to the uncontroverted allegations of the complaint, affidavits and depositions. Colwell Realty Investments, Inc. v. Triple T Inns of Arizona, Inc., 785 F.2d 1330 (5th Cir.1986). For purposes of its motion to dismiss for lack of personal jurisdiction only, National has not contested the allegations of the complaint.

In this diversity suit, personal jurisdiction is alleged over National, a foreign corporation, based on Hawaii's long-arm statute, Haw.Rev.Stat. § 634-35(a). Plaintiff contends that § 634-35(a)(2) provides for jurisdiction when there is a "commission of a tortious act within this State." Hawaii's long-arm statute, Haw.Rev.Stat. § 634-35, provides in pertinent part:

Any person, whether or not a citizen or resident of this State, who in person or through an agent does any of the acts hereinafter enumerated, thereby submits such person, and, if an individual, the person's personal representative, to the jurisdiction of the courts of this State as to any cause of action arising from the doing of any of the acts:

* * * * * *

(2) the commission of a tortious act within this State;

National asserts that the allegations of the complaint are insufficient to bring National within reach of the Hawaii long-arm statute, Haw.Rev.Stat. § 634-35. National also argues that, even if the allegations of the complaint are construed to be sufficient to invoke Haw.Rev.Stat. § 634-35, that the complaint nevertheless fails to allege sufficient "minimum contacts" between National and the State of Hawaii to satisfy the due process limitations imposed by the Fourteenth Amendment of the United States Constitution upon a State's exercise of personal jurisdiction over non-residents.

The Supreme Court of Hawaii has determined that a tortious act is committed within the State of Hawaii under Haw.Rev.Stat. § 634-35(a)(2) if the injury, or the injurious consequences of the allegedly tortious act, occurs within the state. Kailieha v. Hayes, 56 Haw. 306, 536 P.2d 568 (1975); Duple Motor Bodies, Ltd. v. Hollingsworth, 417 F.2d 231, 233 (9th Cir.1969).

National has cited decisions based upon construction of the tortious act clause of the Illinois long-arm statute upon which Haw.Rev.Stat. § 634-35 was originally modelled. See, e.g., Turnock v. Cope, 816 F.2d 332 (7th Cir.1987). However, the Supreme Court of Illinois in the 1981 case of Green v. Advance Ross Electronics Corp., 86 Ill.2d 431, 56 Ill.Dec. 657, 427 N.E.2d 1203 (1981) limited the reach of the Illinois long-arm statute thereby diverging from Hawaii's interpretation and construction of its long-arm statute, which is more expansive, extending jurisdiction of the State's courts to the extent permitted by the due process clause of the Fourteenth Amendment. Cowen v. First Insurance Company of Hawaii, Ltd., 61 Haw. 644, 649, 608 P.2d 394, 399 (1980); Kailieha v. Hayes, supra.

The complaint alleges interference by National with the Agreement between Shasta and Pure which has allegedly resulted in economic injuries to Pure. These economic injuries include damages and expenditures it incurred in Hawaii by drilling a water well on the Island of Hawaii, contracting for flexible tanks to transport the water from the Island of Hawaii to Shasta's continental U.S. bottling facilities, design of the labels and containers for the products to have been bottled and sold by Shasta under the Agreement, and the loss of royalty payments that it would have received in Hawaii had Shasta performed. The complaint alleges that Pure's injury occurred in Hawaii, as the result of National's alleged tortious acts. Therefore, the court finds that Pure has alleged tortious acts by National, which for...