Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_12-cv-01498/USCOURTS-casd-3_12-cv-01498-0/pdf.json

Nature of Suit Code: 370
Nature of Suit: Other Fraud
Cause of Action: 28:1332 Diversity-Account Receivable

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

NATIONALEFT, INC., a California

corporation,

Plaintiff,

CASE NO. 12cv1498-WQH-JMA

ORDER

vs.

CHECKGATEWAY, L.L.C., an Arizona

Limited Liability Company; JOHN

KIRCHHEFER, an individual; BRIAN

BONFIGLIO, an individual; and DOES 1

through 50, inclusive,

Defendants.

HAYES, Judge:

The matter before the Court is the Motion to Dismiss the First Amended Complaint

Under Rules 12(b)(2), 12(b)(3) and 12(b)(6) and, Alternatively, Motion to Transfer Venue

(“Motion to Dismiss”). (ECF No. 15).

I. Background

On June 19, 2012, Plaintiff NationalEFT, Inc. initiated this action by filing a Complaint

against Defendants Checkgateway, L.L.C., John Kirchhefer and Brian Bonfiglio. (ECF No.

1). 

On August 10, 2012, all Defendants jointly filed a motion to dismiss, or, alternatively,

transfer venue. (ECF No. 12). Defendants contended, inter alia, that the Complaint should be

dismissed because the Court does not have personal jurisdiction over Defendants.

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On September 4, 2012, Plaintiff filed a First Amended Complaint. (ECF No. 13).

A. Allegations of the First Amended Complaint

Plaintiff is a California corporation with its principal place of business in San Diego,

California. Id. ¶ 1. Defendant Checkgateway has its principal place of business in Maricopa

County, Arizona, “doing business in all states including in the State of California, and the

successor in interest to First American Payment Processing, Inc.” Id. ¶ 2. Defendants

Kirchhefer and Bonfiglio are employees of Checkgateway with principal places of residence

in Maricopa County, Arizona. Id. ¶¶ 4-5, 7.

Checkgateway “is an Automated Clearing House (ACH) that processes electronic

payments or the electronic movement of funds from one entity or person to another (‘ACH

transactions’).” Id. ¶ 8. “ACH transactions are used for credit and debit payments, direct

deposit payroll, and other common payments. Both the government and private businesses

(both hereafter referred to as ‘Merchants’) use ACH transactions.” Id. ¶ 9. “The ACH

transactions serviced by [Checkgateway] originate when a consumer makes a credit or debit

card payment to a Merchant.... The Merchant, directly or through accounting software,

electronically sends the transaction data to [Checkgateway] to facilitate the transfer of money

from the consumer’s [bank] to the Merchant.” Id. ¶ 11. Checkgateway “charges Merchants

fees for payment processing and authentication services.” Id. ¶ 13.

“Most Merchants do not have the time, skill, market knowledge, or desire to shop or

negotiate ACH services.... Such Merchants utilize the services of consultants (Merchant

Consultants) to assist Merchants in the development and management of their electronic

payment systems.” Id. ¶ 15. Checkgateway “relies on Merchant Consultants (called ISO’s by

[Checkgateway]) for over 90% of its business.... In exchange for these referrals,

[Checkgateway] agrees to pay transaction based fees and commissions to the Merchant

Consultant.” Id. ¶ 16.

In March 2002, Plaintiff was a Merchant Consultant doing business in San Diego,

California. Id. ¶ 19. Beginning in March 2002, Checkgateway directly solicited Plaintiff via

e-mail to “court Plaintiff to purchase its services and become an ISO for” Checkgateway. Id.

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¶ 21. “Plaintiff began using [Checkgateway]’s services in December of 2002.” Id.

Checkgateway “engaged substantial, continuous and systematic activities within the

State of California,” including: Checkgateway “contracted for and conducted continuous and

long term ACH service activities with California based Merchants and Merchant Consultants,

including but not limited to Plaintiff”; Checkgateway “provided ACH transaction services to

consumers, Merchants and Merchant Consultants on ACH transactions originating throughout

California”; Checkgateway “actively and directly solicited California Merchants and

Merchants Consultants including but not limited to Plaintiff, via a webpage, through a direct

e-mail, telephone contact, trade publications and regular attendance at trade shows and

conventions in California where CGW make direct, fact-to-face contact with California

Merchants and Merchants Consultants including but not limited to Plaintiff”; and

Checkgateway “maintained a secure online active website accessed from and relied upon by

California Merchants and Merchant Consultants, including Plaintiff to conduct and monitor

business with [Checkgateway].” Id. ¶ 22.

The First Amended Complaint alleges 20 claims for fraud, tortious interference with

prospective economic advantage, conversion, breach of fiduciary duty, breach of contract, and

breach of the covenant of good faith and fair dealing. The claims allege that Checkgateway

improperly failed to pay or underpaid commissions for two named merchants (“Blue Hippo”

and “EFTCanada”) and other unnamed merchants in violation of the contract between Plaintiff

and Checkgateway. Id. ¶¶ 83-88, 145-49. The First Amended Complaint alleges that

Checkgateway “open[ed] separate House Account(s) for [merchants referred by Plaintiff or

Plaintiff’s ‘sub-agents’] through which [Checkgateway] would process [merchant] transactions

separate from [Checkgateway]’s referral agreement with Plaintiff and without accounting or

payment to Plaintiff.” Id. ¶ 32. The First Amended Complaint requests compensatory and

punitive damages.

B. Motion to Dismiss

On September 21, 2012, Defendants filed the Motion to Dismiss on the following

grounds: (1) this Court lacks personal jurisdiction over all Defendants; (2) venue is improper

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in this District; (3) “all of [Plaintiff]’s tort claims are barred by the economic loss rule”;

Plaintiff’s “claim for intentional interference with prospective economic advantage fails to

state a claim because [Plaintiff] has not alleged an independent contractual relationship with

a third party”; Plaintiff’s “claim for negligent misrepresentation against the Individual

Defendants fails to state a claim because the Individual Defendants owe no independent duty

to [Plaintiff]”; Plaintiff’s “request for punitive damages fails because none of its tort claims

survives dismissal and California law prohibits the recovery of punitive damages for claims

arising out of a contract”; and, “[a]ny claims that survive dismissal should be transferred to the

District of Arizona pursuant to 28 U.S.C. § 1404(a).” (ECF No. 15-1 at 6). In support of the

Motion to Dismiss, Defendants submitted declarations from Kirchhefer and Bonfiglio, and a

copy of the contract between Plaintiff and Checkgateway. (ECF Nos. 15-2, 15-3, 17-1).

On October 15, 2012, Plaintiff filed an opposition to the Motion to Dismiss, including

a declaration from Plaintiff’s president, Donald Cook. (ECF No. 16).

C. Evidence Submitted by the Parties

Checkgateway is incorporated under the laws of the State of Arizona. (Kirchhefer Decl.

¶ 5, ECF No. 15-2). Checkgateway’s principal, and only, place of business is located in

Maricopa County, Arizona. Id. ¶ 6. Checkgateway does not own any real or personal property

in California, maintain any offices in California, maintain a local telephone number in

California, have a designated agent for the service of process in California, maintain any bank

or other deposit accounts within California, or pay taxes within California. Id. ¶¶ 7-12. 

Checkgateway “does not target any print, television, or radio advertising specifically toward

the State of California.” Id. ¶ 13. “Checkgateway rarely attends trade shows in California. 

In the past 8 years, Checkgateway has attended approximately 4 trade shows in the state. 

These tradeshows were not based in California, but instead were traveling trade shows that

toured throughout the country.” Id. ¶ 34.

Kirchhefer and Bonfiglio each stated that they have never been a resident of California,

employed in California, paid income taxes in California, owned any real or personal property

in California, maintained a bank or other deposit account within California, regularly traveled

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to California, or personally entered into a contract with a resident of California. Id. ¶¶ 22-25,

28, 30; Bonfiglio Decl. ¶¶ 19-23, 25, 27, ECF No. 15-3. Kirchhefer and Bonfiglio each stated

that they “have never visited the State of California in order to conduct business with

[Plaintiff], or in relation to the ISO Agreement [with Plaintiff],” and “[w]ith the exception of

the present suit, [they] have never sued or been sued personally in the State of California.” 

(Kirchhefer Decl. ¶¶ 27, 29, ECF No. 15-2; Bonfiglio Decl. ¶¶ 24, 26, ECF No. 15-3).

“In 2002, Checkgateway, through its predecessor First American Payment Processing,

Inc. (‘First American’), negotiated a merchant reseller/Independent Services Organization

(‘ISO’) agreement with [Plaintiff] NationalEFT, Inc. (the ‘ISO Agreement’).” (Kirchhefer

Decl. ¶ 14, ECF No. 15-2). Donald Cook, President of Plaintiff, stated: “Throughout the

negotiation and at the time I accepted and signed [Checkgateway]’s ISO Agreement, I was in

San Diego. [Checkgateway] and its employees and officers contacted me here and sent the

proposed ISO Agreement to me here in San Diego. I did not make any counter-offers or

demands at the time I accepted and agreed to the terms of the ISO Agreement.” (Cook Decl.

¶ 7, ECF No. 16-1). Kirchhefer stated: “The ISO Agreement was executed on December 6,

2002 when I signed it in the State of Arizona in my capacity as the National Sales Manager on

behalf of First American.... I signed the ISO Agreement after Don Cook, President of

[Plaintiff], had already signed the document on behalf of [Plaintiff].” (Kirchhefer Decl. ¶¶ 17-

18, ECF No. 15-2). Kirchhefer and Bonfiglio stated that “the ISO Agreement (and any other

agreement that may exist between First American or Checkgateway and [Plaintiff]) was

negotiated over the telephone and/or by the exchange of drafts via facsimile or other electronic

means such as email.” Id. ¶ 15; Bonfiglio Decl. ¶ 15, ECF No. 15-3. Kirchhefer and Bonfiglio

stated that “no First American or Checkgateway employee has ever traveled to the State of

California in order to meet with [Plaintiff] related to the ISO Agreement, whether negotiating

or performing the Agreement.” (Kirchhefer Decl. ¶ 16, ECF No. 15-2; Bonfiglio Decl. ¶ 16,

ECF No. 15-3).

“Of the approximately 8,000 merchants Checkgateway has ever contracted with since

its inception (including its predecessor, First American), only approximately 10% have ever

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been located in California.” (Suppl. Bonfiglio Decl. ¶ 4; ECF No. 17-1). “Checkgateway does

not directly access consumer bank accounts in California (or any other state).” Id. ¶ 5. 

“Checkgateway presently has contracts with 40 ISOs. Other than [Plainitff], only four of these

ISOs are located in California.” Id. ¶ 6. Bonfiglio stated that “none of the merchants upon

which [Plaintiff] bases its complaint, Blue Hippo, Legal Club, and EFT Canada, is located in

California.” Id. ¶ 7.

II. Personal Jurisdiction

Defendants move to dismiss this action for lack of personal jurisdiction pursuant to

Federal Rule of Civil Procedure 12(b)(2). “In opposition to a defendant’s motion to dismiss

for lack of personal jurisdiction, the plaintiff bears the burden of establishing that jurisdiction

is proper.” Boschetto v. Hansing, 539 F.3d 1011, 1015 (9th Cir. 2008) (citation omitted). In

the absence of an evidentiary hearing, “the plaintiff need only make a prima facie showing of

the jurisdictional facts.” Id. (quotation omitted). “The plaintiff cannot simply rest on the bare

allegations of its complaint, but uncontroverted allegations in the complaint must be taken as

true. We may not assume the truth of allegations in a pleading which are contradicted by

affidavit, but we resolve factual disputes in the plaintiff’s favor.” CollegeSource, Inc. v.

AcademyOne, Inc., 653 F.3d 1066, 1073 (9th Cir. 2011) (quotations omitted).

The exercise of personal jurisdiction over a nonresident defendant must be authorized 

under the state’s long-arm statute and must satisfy the due process clause of the United States

Constitution. See Pac. Atl. Trading Co. v. M/V Main Express, 758 F.2d 1325, 1327 (9th Cir.

1985). “California’s long-arm statute is co-extensive with federal standards, so a federal court

may exercise personal jurisdiction if doing so comports with federal constitutional due

process.” Boschetto, 539 F.3d at 1015; see also Cal. Civ. Pro. Code § 410.10. “For a court

to exercise personal jurisdiction over a nonresident defendant consistent with due process, that

defendant must have ‘certain minimum contacts’ with the relevant forum ‘such that the

maintenance of the suit does not offend traditional notions of fair play and substantial justice.’” 

CollegeSource, 653 F.3d at 1073 (quoting Int’l Shoe Co. v. Washington, 326 U.S. 310, 316

(1954)). Under due process analysis, a defendant may be subject to either general or specific

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personal jurisdiction. See Helicopteros Nacionales de Columbia, S.A. v. Hall, 466 U.S. 408,

414 (1984).

A. General Jurisdiction

“A court may assert general jurisdiction over foreign (sister-state or foreign-country)

corporations to hear any and all claims against them when their affiliations with the State are

so continuous and systematic as to render them essentially at home in the forum State.”

Goodyear Dunlop Tires Operations, S.A. v. Brown, --- U.S. ---, 131 S. Ct. 2846, 2851 (2011). 

“For general jurisdiction to exist over a nonresident defendant..., the defendant must engage

in ‘continuous and systematic general business contacts,’ that approximate physical presence

in the forum state.” CollegeSource, 653 F.3d at 1073 (quoting Helicopteros, 466 U.S. at 416). 

“The standard is met only by continuous corporate operations within a state that are thought

so substantial and of such a nature as to justify suit against the defendant on causes of action

arising from dealings entirely distinct from those activities.” Id. (quotation omitted). “To

determine whether a nonresident defendant’s contacts are sufficiently substantial, continuous,

and systematic, we consider their ‘[l]ongevity, continuity, volume, economic impact, physical

presence, and integration into the state’s regulatory or economic markets.’” Id. (quoting

Tuazon v. R.J. Reynolds Tobacco Co., 433 F.3d 1163, 1172 (9th Cir. 2006)). “The standard

for general jurisdiction is an exacting standard, as it should be, because a finding of general

jurisdiction permits a defendant to be haled into court in the forum state to answer for any of

its activities anywhere in the world.” Id. (quotation omitted).

Defendants contend that “Checkgateway is a small, Arizona-based company. Although

the Internet enables Checkgateway to serve merchants nationwide (in the same way it allows

[Plaintiff] to serve merchants nationwide), Defendants simply do not have the kind of

continuous and systematic contact with California necessary to subject them to general

personal jurisdiction in the state.” (ECF No. 17 at 2).

Plaintiff contends that Checkgateway “is directly involved in millions of California

based merchant/consumer transactions in business establishments in California and derives its

income from these transactions. These services also constitute continuous and systematic

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business contacts with California.” (ECF No. 16 at 9). Plaintiff contends that “ACH

transaction companies like [Checkgateway] are woven into the fabric of California’s economy

and reap millions if not billions of dollars of profit from the State’s merchants and consumers

on an annual basis. Given the nature and scope of their relationship to this state, such

companies can and should reasonably expect to be haled into court here.” Id. at 10.

“The Supreme Court has found general personal jurisdiction over a non-resident

defendant in only one case.” Mavrix Photo, Inc. v. Brand Techs., Inc., 647 F.3d 1218, 1224

(9th Cir. 2011) (citing Perkins v. Benguet Consol. Mining Co., 342 U.S. 437 (1952)). “The

facts of Perkins illustrate the nature and extent of the contacts required for general

jurisdiction.” Id. In Perkins, the defendant was a Philippine corporation whose mining

operations were suspended while the Japanese occupied the Philippines during World War II.

See Perkins, 342 U.S. at 447. The corporation’s president, who was also its general manager

and principal stockholder, returned to his home in Ohio, where he ran a corporate office. See

id. The president kept business files in Ohio; handled corporate correspondence from Ohio;

drew employees’ salaries from accounts in Ohio banks and distributed paychecks; held

directors’ meetings while he was in Ohio; and “carried on in Ohio a continuous and systematic

supervision of the necessarily limited wartime activities of the company.” Id. at 448. The

Court therefore upheld the exercise of personal jurisdiction over the corporation in Ohio. Id.

In Tuazon v. R.J. Reynolds Tobacco Co., 433 F.3d 1163 (9th Cir. 2006), the Court of

Appeals for the Ninth Circuit found that general personal jurisdiction existed in Washington

over a North Carolina cigarette company that had been licensed to do business in the state for

more than 60 years, had advertised in purely local publications for more than 50 years, kept

a permanent office and workforce in-state, engaged in local political activity, had made

“hundreds of millions of dollars in annual net sales in recent years” in the state, and whose

“market share in Washington was 29-31%, while its national market share was 23-24%.” Id.

at 1167, 1173. 

By contrast, in CollegeSource, the Ninth Circuit held that an out-of-state corporation

was not subject to general personal jurisdiction in California despite evidence and allegations

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that the corporation “misappropriated [plaintiff]’s catalogs and course descriptions in

California; markets its services to California students and educational institutions; has three

hundred registered users and two paid subscribers in California; and maintains a highly

interactive website.” CollegeSource, 653 F.3d at 1074. In Shute v. Carnival Cruise Lines, 897

F.2d 377 (9th Cir. 1990), reversed on other grounds by Carnival Cruise Lines, Inc. v. Shute,

499 U.S. 585 (1991), the Ninth Circuit held that no general jurisdiction existed in Washington

over Carnival Cruise Lines, and stated: “Its contacts [in Washington] are limited to advertising

in the local media, the mailing of brochures and the payment of commissions to travel agents,

the conducting of promotional seminars, and the sale of its vacation cruises to residents of

Washington.” Shute, 897 F.2d at 381. In uBID, Inc. v. GoDaddy Group, Inc., 623 F.3d 421

(7th Cir. 2010), the court held that no general jurisdiction existed in Illinois over an Arizona

company despite “extensive and deliberate” contacts, including extensive nationwide and local 

advertising, entering into contracts with many Illinois residents, hosting of websites accessible

from Illinois, and “Illinois customers in the hundreds of thousands, [who] delivered many

millions of dollars in revenue to GoDaddy [per] year.” Id. at 424, 426; see also Keeton v.

Hustler Magazine, Inc., 465 U.S. 770, 772, 779 & n.11 (1984) (no general jurisdiction despite

circulation of 10,000-15,000 copies of nonresident defendant’s magazine in forum per month);

Scott v. Breeland, 792 F.2d 925, 928 (9th Cir. 1986) (“systematic” sale of records in California

by the Oak Ridge Boys, a country music band from Tennessee, as well as “the occasional

music performance” in California, insufficient to confer general jurisdiction).

Based upon the uncontradicted allegations of the First Amended Complaint and the

evidence presented by the parties, over the course of the company’s existence, Checkgateway

solicited and contracted with approximately 1,000 California merchants to provide services to

facilitate California-based ACH transactions. Checkgateway currently has contracts with four

California-based ISOs other than Plaintiff. Checkgateway attended four traveling trade shows

in California during the past eight years. These contacts are not as systemic, deliberate and

extensive as the contacts which have been found sufficient to confer general jurisdiction in

Perkins and Tuazon. Instead, Checkgateway’s contacts are similar to, or less than, the contacts

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found insufficient to confer general jurisdiction in Shute, Keeton and Scott. See also Bancroft

& Masters, Inc. v. Augusta Nat’l Inc., 223 F.3d 1082, 1086 (9th Cir. 2000) (“[E]ngaging in

commerce with residents of the forum state is not in and of itself the kind of activity that

approximates physical presence within the state’s borders.”). The Court finds that Plaintiff has

failed to make a prima facie showing of the jurisdictional facts necessary to show that this

Court has general personal jurisdiction over Checkgateway.1

B. Specific Jurisdiction

A court exercises specific personal jurisdiction over a defendant where “the cause of

action arises out of or has a substantial connection to the defendant’s contacts with the forum.” 

Glencore Grain Rotterdam B.V. v. Shivnath Rai Harnarain Co., 284 F.3d 1114, 1123 (9th Cir.

2002) (citation omitted). The Ninth Circuit analyzes specific jurisdiction according to a threeprong test:

(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 forumrelated activities; and

(3) the exercise of jurisdiction must comport with fair play and substantial

justice, i.e. it must be reasonable.

Boschetto, 539 F.3d at 1016 (quotation omitted). “The plaintiff bears the burden on the first

two prongs. If the plaintiff establishes both prongs one and two, the defendant must come

forward with a compelling case that the exercise of jurisdiction would not be reasonable. But

if the plaintiff fails at the first step, the jurisdictional inquiry ends and the case must be

dismissed.” Id. (quotation omitted).

“Under the first prong of our three-part specific jurisdiction test, [plaintiff] must

establish that [defendant] either purposefully availed itself of the privilege of conducting

activities in California, or purposefully directed its activities toward California.... [A]vailment

and direction are ... two distinct concepts. A purposeful availment analysis is most often used

1

 Plaintiff does not contend that general personal jurisdiction exists over the individual

Defendants.

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in suits sounding in contract. A purposeful direction analysis, on the other hand, is most often

used in suits sounding in tort.” Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 802

(9th Cir. 2004). “Whether an action is based on contract or tort depends upon the nature of the

right sued upon, not the form of the pleading or relief demanded. If based on breach of

promise it is contractual; if based on breach of a noncontractual duty it is tortious. If unclear

the action will be considered based on contract rather than tort.” Amtower v. Photon

Dynamics, Inc., 158 Cal. App. 4th 1582, 1602 (2008); see also Rains v. Criterion Sys., Inc.,

80 F.3d 339, 343 n.2 (9th Cir. 1996) (“The label that a plaintiff places on his pleadings,

however, does not determine the nature of his cause of action.”). In Boschetto, the Court of

Appeals for the Ninth Circuit held that a complaint related to the sale of an automobile which

alleged state law causes of action for violation of the California Consumer Protection Act,

breach of contract, misrepresentation, and fraud “sound[s] primarily in contract” and should

be “analyzed ... under a purposeful availment standard.” Boschetto, 539 F.3d at 1016. 

Similarly, while the First Amended Complaint alleges both breach of contract and tort claims,

each of the claims are premised on Defendants’ alleged broken contractual promises (ECF No.

13 ¶¶ 26-28, 30, 154), and for each of the claims, the First Amended Complaint alleges that

Plaintiff was damaged in the form of lost “transactional fees, monthly fees, commissions and

other income, including but not limited to the Agreed Upon Fees and Commissions” and the

“Sub-Agent Agreed Fees and Commissions.” Id. at ¶¶ 37, 46, 58, 68, 73, 79, 88, 97, 106, 115,

124, 134, 142, 149 163, 172, 181, 190, 191, 200 205. The Court finds that the First Amended

Complaint sounds primarily in contract and should be analyzed under a purposeful availment

standard.2

 See Boschetto, 539 F.3d at 1016. 

 “To have purposefully availed itself of the privilege of doing business in the forum, a

defendant must have performed some type of affirmative conduct which allows or promotes

the transaction of business within the forum state. Our evaluation of the jurisdictional

significance of a defendant’s contract or other business in the forum is not rigid and

2

 The Court makes no finding or ruling as to Defendants’ contention that “[b]ecause

all of [Plaintiff]’s claims arise in contract, tort recovery is unavailable” by operation of the

economic loss rule. (ECF No. 15-1 at 18).

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formalistic, but rather practical and pragmatic.” Id. (quotation omitted). “The first step of the

[purposeful availment] specific jurisdiction analysis involves a qualitative evaluation of the

defendant’s contact with the forum state.... Th[e] purposeful availment requirement is the test

for the fundamental determination of whether ‘the defendant’s conduct and connection with

the forum State are such that he should reasonably anticipate being haled into court there.’” 

Lake v. Lake, 817 F.2d 1416, 1421 (9th Cir. 1987) (quoting World-Wide Volkswagen Corp. v.

Woodson, 444 U.S. 286, 297 (1980)). In applying purposeful availment standard, “we are

guided by the Supreme Court’s admonition that the formation of a contract with a nonresident

defendant is not, standing alone, sufficient to create jurisdiction.” Boschetto, 539 F.3d at 1017

(citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 478 (1985) (“If the question is whether

an individual’s contract with an out-of-state party alone can automatically establish sufficient

minimum contacts in the other party’s home forum, we believe the answer clearly is that it

cannot.”)).

In Burger King Corp., the Supreme Court held that a Michigan franchisee had

purposely availed himself of the privilege of conducting activities in Florida when the

franchisee “entered into a carefully structured 20-year relationship that envisioned continuing

and wide-reaching contacts with Burger King in Florida.” Burger King Corp., 471 U.S. at 480. 

The franchise agreement required the franchisee’s “voluntary acceptance of the long-term and

exacting regulation of his business from Burger King’s Miami headquarters.” Id. In

explaining why the Court of Appeals erred in holding that the Florida court did not have

personal jurisdiction over the franchisee, the Supreme Court stated: “we believe the Court of

Appeals gave insufficient weight to provisions in the various franchise documents providing

that all disputes would be governed by Florida law.” Id. at 481.

In Thomas P. Gonzalez Corp. v. Consejo Nacional de Produccion de Costa Rica, 614

F.2d 1247 (9th Cir. 1980), plaintiff was an international grain trader based in California who

sold 15 shipments of grain to the defendant, a Costa Rican interest, and who purchased two

shipments of grain from the defendant, all over a four-year period. See id. at 1249. All

contracts specified delivery in Costa Rica and none of the shipments were delivered to or

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originated from California. See id. The court found that plaintiff’s California residency, the

fact that plaintiff would suffer financial impacts in California, and the parties’ use of the mail

and telephone between California and Costa Rica were insufficient to establish the purposeful

availment prong for California jurisdiction. See id. at 1253-54.

Based upon the uncontradicted allegations of the First Amended Complaint and the

evidence presented by the parties, Checkgateway and the individual Defendants–while at all

relevant times in Arizona–solicited and entered into a contract with Plaintiff, a California

resident. This alone, is insufficient to constitute purposeful availment. See Burger King Corp.,

471 U.S. at 478; Thomas P. Gonzalez Corp., 614 F.2d at 1254 (“The [defendant] validly argues

that use of the mails, telephone, or other international communications simply do not qualify

as purposeful activity invoking the benefits and protection of the state.”) (citation omitted); see

also McGlinchy v. Shell Chem. Co., 845 F.2d 802, 816 (9th Cir. 1988) (“[N]o authorized

agents of [defendant] were alleged to have performed or executed any portion of the contract

in California. The parties conducted contract execution and termination by international mail. 

Such contacts are insufficient to constitute an act purposefully availing [defendant] of

California laws.”). The contract, see ECF No. 15-2 at 8-9, does not state that all disputes are

to be governed by California law, cf. Burger King Corp., 471 U.S. at 481, and does not

mention California except when listing Plaintiff’s mailing address. The contract does not

provide that Plaintiff was required to perform any actions in California, or solicit any

merchants in California. The seven-paragraph, two-page contract does not contain detailed

provisions indicating “voluntary acceptance of the long-term and exacting regulation of [either

party’s] business.” Cf. id. at 480.

The evidence indicates that this dispute does not include any merchants located in

California. (Suppl. Bonfiglio Decl. ¶ 4; ECF No. 17-1; Kirchhefer Decl. ¶ 33, ECF No. 15-2;

Bonfiglio Decl. ¶ 30, ECF No. 15-3). There is no evidence or allegation that Plaintiff solicited

or referred any California-based merchant while performing the contract at issue. The

allegations and evidence that Checkgateway does business with California businesses

unrelated to the contract at issue are not sufficient to confer specific personal jurisdiction. See

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Goodyear Dunlop Tires Operations, 131 S. Ct. at 2851 (“In contrast to general, all-purpose

jurisdiction, specific jurisdiction is confined to adjudication of issues deriving from, or

connected with, the very controversy that establishes jurisdiction.”) (quotation omitted); cf.

Boschetto, 539 F.3d at 1016 (for specific jurisdiction, “the claim must be one which arises out

of or relates to the defendant’s forum-related activities”). The allegations and evidence that

Plaintiff performed its portion of the contract at its offices in California is likewise insufficient

to confer specific personal jurisdiction over Defendants. See McGlinchy, 845 F.2d at 816

(“[Plaintiffs]’ statement that they performed 90% of their activities in the Bay Area, even if

accurate, describes only unilateral activity.... [S]uch activity fails to create personal

jurisdiction over [defendant].”). The fact that Plaintiff is a California resident and Defendants’

alleged out-of-state actions caused a California resident injury is insufficient to confer personal

jurisdiction in a case sounding primarily in contract. See Thomas P. Gonzalez Corp., 614 F.2d

at 1253 (“The [defendant] correctly notes that only its activities in California, and not

[plaintiff]’s, can supply the basis for jurisdiction. It is not sufficient that the plaintiff is a

California resident, or that an act outside California imposes an economic burden on a

California resident.”) (citations omitted); see also Gray & Co. v. Firstenberg Machinery Co.,

Inc., 913 F.2d 758, 760-61 (9th Cir. 1990) (“The foreseeability of causing injury in another

state is not a sufficient basis on which to exercise jurisdiction.”) (citing Burger King Corp.,

471 U.S. at 474).

The Court concludes that Plaintiff has failed to satisfy its burden of showing that any

Defendant purposefully availed itself of the privilege of doing business in California. Plaintiff

has failed to satisfy its burden of establishing the first prong of the Ninth Circuit’s three-prong

specific jurisdiction test. See Boschetto, 539 F.3d at 1016. Therefore, “the jurisdictional

inquiry ends.” Id. (“[I]f the plaintiff fails at the first step, the jurisdictional inquiry ends....”)

(quotation omitted).

III. Dismiss or Transfer the Action

Having concluded that the Court lacks personal jurisdiction over Defendants, the Court

must determine whether to dismiss this action pursuant to the Federal Rule of Civil Procedure

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12(b)(2) or transfer this action to another court pursuant to 28 U.S.C. § 1631. See Pamplona

ex rel. Pamplona v. Hernandez, No. 08cv2205, 2009 WL 578578, at *3 (S.D. Cal., Mar. 5,

2009) (after concluding that the court did not have personal jurisdiction over two defendants,

“[t]he Court must determine whether transfer [pursuant to § 1631] is more appropriate than

dismissal”). “The transfer of civil actions among federal courts to cure jurisdictional defects

is governed by 28 U.S.C. § 1631.” Cruz-Aguilera v. INS, 245 F.3d 1070, 1074 (9th Cir. 2001). 

Section 1631 provides: “Whenever a civil action is filed in a court ... and that court finds that

there is a want of jurisdiction, the court shall, if it is in the interest of justice, transfer such

action ... to any other such court in which the action ... could have been brought at the time it

was filed....” 28 U.S.C. § 1631. A § 1631 transfer is appropriate if “(1) the transferring court

lacks jurisdiction; (2) the transferee court could have exercised jurisdiction at the time the

action was filed; and (3) the transfer is in the interest of justice.” Cruz-Aguilera, 245 F.3d at

1074; see also id. (“When determining whether transfer is in the interest of justice, courts have

considered whether the failure to transfer would prejudice the litigant, whether the litigant filed

the original action in good faith, and other equitable factors.”); Miller v. Hambrick, 905 F.2d

259, 262 (9th Cir. 1990) (“Normally transfer will be in the interest of justice because normally

dismissal of an action that could be brought elsewhere is ‘time-consuming and

justice-defeating.’”) (quoting Goldlawr, Inc. v. Heiman, 369 U.S. 463, 467 (1962)).

In opposition to Defendants’ motion, Plaintiff failed to address whether, in the event

the Court found jurisdiction to be lacking, Plaintiff requests dismissal or transfer of this action

to the District of Arizona pursuant to 28 U.S.C. § 1631. No later than ten days from the date

this Order is filed, and without waiving any objections to this Order, Plaintiff may file a

request for this action to be transferred to the District of Arizona. If Plaintiff does not file a

request for this action to be transferred within ten days, the Court will dismiss this action

without prejudice pursuant to Federal Rule of Civil Procedure 12(b)(2).

IV. Conclusion

IT IS HEREBY ORDERED that Plaintiff has failed to satisfy its burden of showing that

this Court has personal jurisdiction over Defendants. The Motion to Dismiss remains pending. 

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No later than ten days from the date this Order is filed, and without waiving any objections to

this Order, Plaintiff may file a request for this action to be transferred to the District of

Arizona. If Plaintiff does not file a request for this action to be transferred within ten days, the

Court will grant the Motion to Dismiss and dismiss this action without prejudice pursuant to

Federal Rule of Civil Procedure 12(b)(2). 

DATED: February 15, 2013

WILLIAM Q. HAYES

United States District Judge

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