Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_14-cv-03682/USCOURTS-cand-5_14-cv-03682-3/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Injunctive &amp; Declaratory Relief

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

PHARMATECH SOLUTIONS, INC.,

Plaintiff,

v.

SHASTA TECHNOLOGIES, LLC,

Defendant.

Case No. 14-cv-03682-BLF 

ORDER GRANTING MOTION TO 

DISMISS FOR LACK OF SUBJECT 

MATTER JURISDICTION; DENYING 

MOTION TO DISMISS FOR FAILURE 

TO STATE A CLAIM AS MOOT; AND 

DISMISSING ACTION

[RE: ECF 30]

Defendant Shasta Technologies, LLC (“Shasta”) seeks dismissal of the first amended 

complaint (“FAC”) under Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter 

jurisdiction and under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon 

which relief may be granted. The Court has considered the briefing and the oral argument 

presented at the hearing on April 16, 2015. For the reasons discussed below, the motion to 

dismiss for lack of subject matter jurisdiction is GRANTED, the motion to dismiss for failure to 

state a claim is DENIED AS MOOT, and the action is DISMISSED for lack of subject matter 

jurisdiction.

 I. BACKGROUND

Plaintiff PharmaTech Solutions, Inc. (“PharmaTech”) filed the complaint in this 

declaratory relief action on August 14, 2014 and, pursuant to a stipulation of the parties, filed the 

operative first amended complaint (“FAC”) on February 20, 2015. The FAC alleges the following 

facts: Defendant Shasta Technologies, LLC (“Shasta”) was the owner of a product known as the 

GenStrip, “a diagnostic test strip to be used in conjunction with diagnostic test meters, i.e., devices 

that measure a person’s blood sugar at any particular point in time.” FAC ¶ 5, ECF 28. The 

GenStrip was manufactured for Shasta by a company called Conductive Technologies, Inc. 

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(“CTI”). Id. In June 2011, PharmaTech entered into an exclusive distributorship agreement for 

the GenStrip with Shasta and one of Shasta’s investors, Broadtree, Inc. (“Broadtree”). Id. ¶ 6. 

Shasta marked the GenStrip boxes with the logo of Johnson & Johnson and its subsidiary, 

Lifescan (collectively, “Lifescan”), along with a photograph of Lifescan’s “One Touch” blood 

monitoring device. FAC ¶ 7. Lifescan, which had not consented to the use of its marks or images 

on the GenStrip, sued Shasta, PharmaTech, and CTI in this district for violations of the Lanham 

Act. Id. In May 2013, the district court presiding over that action issued a preliminary injunction 

enjoining the use of GenStrip boxes bearing the Lifescan logo and One Touch photograph. Id. ¶ 8. 

As a result, thousands of GenStrip boxes that PharmaTech had ordered and paid for became 

unusable; PharmaTech had to order 74,256 replacement boxes. Id. ¶¶ 7-9.

In December 2013, the United States Food and Drug Administration (“FDA”) conducted a 

surprise inspection of Shasta’s manufacturing facility in Sherwood, Oregon. FAC ¶ 10. It turned 

out that the facility was the residential home of one of Shasta’s owners and members, Calvin A. 

Knickerbocker III. Id. The FDA determined that the residence did not qualify as a manufacturing 

facility. Id. Shasta then told the FDA that the manufacturers of the GenStrip were CTI and 

PharmaTech. Id. ¶ 11. 

Upon hearing about these events, PharmaTech’s board of directors held a telephonic 

meeting on March 5, 2014 to formulate a plan designed to keep the FDA from removing the 

GenStrip from the market and to keep the GenStrip product “alive.” FAC ¶ 12. PharmaTech 

decided to (1) execute a binding term sheet to purchase the GenStrip and its mark from Shasta; (2) 

hire a consultant to write and implement a suitable quality control plan meeting all FDA standards 

and regulations with respect to the GenStrip, to be jointly administered by PharmaTech and CTI; 

and (3) change PharmaTech’s principal executive offices to York, Pennsylvania and register 

PharmaTech as a foreign corporation authorized to conduct business in Pennsylvania. Id. 

On March 20, 2014, PharmaTech, Shasta, and Broadtree executed a written binding term 

sheet under which PharmaTech agreed to purchase the GenStrip. FAC ¶ 19. On April 21, 2014, 

PharmaTech entered into a “Quality Control Agreement” with CTI. Id. ¶ 13. Finally, 

PharmaTech opened offices in York, Pennsylvania and registered as a foreign corporation 

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authorized to conduct business in Pennsylvania. Id. The FDA registered the York, Pennsylvania 

address as the official facility of PharmaTech. Id. 

While PharmaTech was taking these steps to save the GenStrip product, the FDA sent 

Shasta a warning letter dated April 8, 2014, stating that the FDA’s December 2013 inspection of 

Shasta’s facility in Sherwood, Oregon had revealed that Shasta was not compliant with the 

governing Quality System Regulation. FAC ¶ 15 and Exh. A. Among other things, the warning 

letter demanded that Shasta take immediate remedial action and voluntarily recall the GenStrip. 

Id. Shasta did not respond. Id. The FDA subsequently issued a “Worldwide Safety Warning 

Letter” to users, distributors, physicians, and others, halting the sale, use, and advertisement of the 

GenStrip. Id. ¶ 16 and Exh. B. The FDA also directed users, sellers, and distributers to return any 

GenStrips to the original point of sale. Id. Shasta’s name and logo appeared on the 74,256 

GenStrip boxes that PharmaTech had ordered to replace boxes bearing LifeScan’s name and logo. 

Id. ¶ 17. Because Shasta no longer can market the GenStrip, PharmaTech believes that it will be 

required to take back and replace approximately 50,040 of those 74,256 GenStrip boxes. Id. 

Based upon these allegations, PharmaTech asserts a single claim against Shasta entitled 

“Declaratory and Injunctive Relief Re The Parties [sic] Binding Written Term Sheet.” Shasta 

moves to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1) and failure to state a 

claim under Rule 12(b)(6). 

 II. Subject Matter Jurisdiction – Rule 12(b)(1)

A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1) raises a 

challenge to the Court’s subject matter jurisdiction. Fed. R. Civ. P. 12(b)(1). “In civil cases, 

subject matter jurisdiction is generally conferred upon federal district courts either through 

diversity jurisdiction, 28 U.S.C. § 1332, or federal question jurisdiction, 28 U.S.C. § 1331.” 

Peralta v. Hispanic Business, Inc., 419 F.3d 1064, 1068 (9th Cir. 2005). The FAC alleges subject 

matter on the basis of diversity of citizenship.

1

 FAC ¶ 1. Diversity jurisdiction lies in “all civil 

 

1 Although PharmaTech asserts a claim for declaratory relief, “the Declaratory Judgment Act does 

not extend the jurisdiction of the federal courts”; a plaintiff asserting a declaratory judgment action 

must plead an independent basis for subject matter jurisdiction. Medtronic, Inc. v. Mirowski 

Family Ventures, Inc., 134 S. Ct. 843, 848 (2014) (internal quotation marks and citation omitted). 

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actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest 

and costs, and is between . . . citizens of different States.” 28 U.S.C. § 1332(a)(1). Shasta 

contends that diversity does not exist because both it and PharmaTech are citizens of California.

“A Rule 12(b)(1) jurisdictional attack may be facial or factual.” Safe Air For Everyone v. 

Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004). In a facial attack, the movant asserts that the lack of 

subject matter jurisdiction is apparent from the face of the complaint. Id. In a factual attack, the 

movant disputes the truth of allegations that otherwise would give rise to federal jurisdiction. Id.

“In resolving a factual attack on jurisdiction, the district court may review evidence beyond the 

complaint without converting the motion to dismiss into a motion for summary judgment.” Id.

“The court need not presume the truthfulness of the plaintiff’s allegations.” Id. Once the moving 

party has presented evidence demonstrating the lack of subject matter jurisdiction, the party 

opposing the motion must present affidavits or other evidence sufficient to establish subject matter 

jurisdiction. Id.

Shasta mounts a factual attack here, because although the FAC suggests that it and 

PharmaTech are citizens of different states, see FAC ¶¶ 3-4, Shasta asserts that in fact both

companies are citizens of California. The FAC alleges that Shasta “is an Oregon limited liability 

company, with its principal place of business at 16923 SW Richen Park Circle, Sherwood, 

Oregon.” FAC ¶ 4. While this allegation suggests that Shasta is an Oregon citizen, a limited 

liability company is “a citizen of every state of which its owners/members are citizens.” Johnson 

v. Columbia Prop. Anchorage, LP, 437 F.3d 894, 899 (9th Cir. 2006). One of Shasta’s 

owners/members, Calvin A. Knickerbocker, Jr., is a citizen of California. See Calvin A. 

Knickerbocker, Jr. Decl. ¶¶ 3-4, ECF 30-2. PharmaTech does not dispute Shasta’s California 

citizenship. 

Shasta’s motion thus turns on whether PharmaTech also is a citizen of California. For 

purposes of diversity jurisdiction, a corporation is deemed to be a citizen of both its state of 

incorporation and the “state where it has its principal place of business.” 28 U.S.C. § 1332(c). 

The FAC alleges that PharmaTech “is a Nevada Corporation with its principal executive offices

located at 925 Borom Road, York, Pennsylvania.” FAC ¶ 3 (emphasis added). Presumably, this 

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allegation is intended to suggest that PharmaTech’s principal place of business is located in 

Pennsylvania, which would make PharmaTech a citizen of Nevada and Pennsylvania. Shasta

contends that PharmaTech’s principal place of business is not in York, Pennsylvania but in 

Westlake Village, California.

A corporation’s principal place of business is “the place where a corporation’s officers 

direct, control, and coordinate the corporation’s activities.” Hertz Corp. v. Friend, 559 U.S. 77, 

92 (2010). “[I]t should normally be the place where the corporation maintains its headquarters –

provided that the headquarters is the actual center of direction, control, and coordination, i.e., the 

‘nerve center,’ and not simply an office where the corporation holds its board meetings (for 

example, attended by directors and officers who have traveled there for the occasion).” Id. at 93. 

Shasta points out that the original complaint alleged that PharmaTech’s “principal place of 

business” is in Westlake, California, while the FAC alleges that PharmaTech’s “principal 

executive offices” are in York, Pennsylvania. Compare Compl. ¶ 3 with FAC ¶ 3. Shasta argues 

that PharmaTech should be bound by its original allegation. However, PharmaTech’s attorney has 

submitted a declaration stating that he drafted the original complaint and that the allegation therein 

regarding the company’s principal place of business being in Westlake was due to his 

inadvertence. Troff Decl. ¶ 3, ECF 37. The Court accepts counsel’s representation and has not 

considered the allegation in the original complaint.

Both sides rely upon the declaration and deposition testimony of Keith Berman

(“Berman”), who is referred to as PharmaTech’s “principal executive officer,” “CEO,” and 

“director,” and who was deposed as PharmaTech’s Rule 30(b)(6) witness. The record does not 

present any significant factual disputes as to the operations of PharmaTech. The parties differ, 

however, in the legal conclusions to be drawn from the record evidence. PharmaTech’s Board of 

Directors consists of Berman, who lives in Westlake, California, and two other individuals who 

live in Northern California and Illinois. Berman Decl. ¶ 14. All Board meetings are conducted by 

telephone. Thus there is no obvious location from which PharmaTech’s “officers direct, control, 

and coordinate the corporation’s activities.” Hertz, 559 U.S. at 92. 

PharmaTech has offices in Westlake, California, where Berman lives, and in York, 

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Pennsylvania, where the GenStrip is manufactured. Berman Dep. 14:5-9; Berman Decl. ¶¶ 9-10. 

PharmaTech has six or seven employees working at the Westlake office. Berman Decl. ¶ 15. 

Those employees “operate PharmaTech’s Call Center, i.e., the place where any customer 

complaints or other customer communications take place.” Id. Berman himself works out of both 

the Westlake office and the York office. Berman Dep. 14:10-12. However, he travels to the York 

office only twice a month and, possibly, not even that often. See Berman Dep. 14:19 (“twice a 

month”); Berman Decl. ¶ 13 (“often every other week”). No other PharmaTech employees ever 

work at the York office. Berman Dep. 16:7-9. The York office is located at the same address as 

the CTI factory, and it doubles both as Berman’s office and a storage site for recalled GenStrips. 

Berman Dep. 17:14-18; Berman Decl. ¶¶ 9-10. CTI is the independent contractor that actually 

produces the GenStrip while PharmaTech is the “manufacturer” for FDA compliance purposes. 

Duval Decl. ¶¶ 4-6.

This evidence does not present any obvious answer with respect to the location of 

PharmaTech’s “nerve center.” This Court finds Shasta’s motion to present one of the “hard cases” 

that the Supreme Court has recognized exists “in this era of telecommuting, [when] some 

corporations may divide their command and coordinating functions among officers who work at 

several different locations, perhaps communicating over the Internet.” Hertz, 559 U.S. at 95-96. 

Berman states in his declaration that he makes all decisions regarding manufacture of the 

GenStrip, including FDA compliance, when in York, and “[c]onsequently, PharmaTech’s ‘nerve 

center’ with respect to the GenStrip, is in York, Pennsylvania.” Berman Decl. ¶ 13 (emphasis 

added). However, the Supreme Court has made clear that a company’s nerve center is a single 

place. Hertz, 559 U.S. at 93. Thus the question presented by Shasta’s motion is not the location 

of the PharmaTech’s nerve center with respect to the GenStrip, but rather the nerve center of the 

company as a whole. 

At the hearing, PharmaTech’s counsel pointed to Berman’s declaration statement that 

PharmaTech is not involved in the manufacture or distribution of any product other than the 

GenStrip, see Berman Decl. ¶ 16, and argued that as a result the company’s nerve center with 

respect to the GenStrip necessarily is its nerve center for purposes of diversity. However, based 

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upon this record, Berman appears to be the man on the ground with respect to running 

PharmaTech, and he spends only a few days a month at the York location. The rest of the month, 

the York location is “nothing more than a mail drop box, a bare office with a computer,” Hertz, 

559 U.S. at 97, and more particularly in this case, a store room for returned product. Moreover, 

while Berman’s deposition testimony and declaration indicate that all decisions regarding 

manufacturing are made in York, they do not speak to where PharmaTech makes decisions 

regarding marketing, sales, customer relations, strategic planning, financial control and review, or 

other aspects of PharmaTech’s operations. In fact PharmaTech only accounts for what may be as 

little as one or two days per month of Berman’s activities.

2

 

PharmaTech argues that its Board affirmatively decided to move its “principal executive 

offices” to York and that the York address is the one registered with the FDA. See Berman Decl. 

¶¶ 9-10. The Supreme Court rejected a similar argument in Hertz, stating that “we reject 

suggestions such as, for example, the one made by petitioner that the mere filing of a form like the 

Securities and Exchange Commission’s Form 10-K listing a corporation’s ‘principal executive 

offices’ would, without more, be sufficient proof to establish a corporation’s ‘nerve center.’” 

Hertz, 559 U.S. at 97. 

“The burden of persuasion for establishing diversity jurisdiction, of course, remains on the 

party asserting it.” Hertz, 559 U.S. at 96. The Court concludes that PharmaTech has failed to 

meet that burden here. Based upon this record, the York office appears to be the “bare office with 

a computer” described in Hertz; in fact, it is not even clear that the York office has a computer. 

Accordingly, the Court concludes that PharmaTech has failed to present evidence sufficient to 

establish that the York office, rather than the Westlake office, is PharmaTech’s nerve center. 

Because the Westlake office is PharmaTech’s nerve center, PharmaTech is a California citizen. 

As both PharmaTech and Shasta are citizens of California, diversity jurisdiction does not lie.

Shasta’s motion to dismiss based upon lack of subject matter jurisdiction is GRANTED. 

 

2 Berman states in his declaration that he travels to York “often every other week” (suggesting that 

at times he travels less) and he does not indicate whether the trips last longer than a single day. 

Berman Decl. ¶ 13. 

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In light of the Court’s disposition on jurisdiction grounds, the motion to dismiss for failure to state 

a claim is MOOT.

 III. ORDER

(1) The motion to dismiss for lack of subject matter jurisdiction is GRANTED;

(2) The motion to dismiss for failure to state a claim is DENIED AS MOOT; and

(3) The action is DISMISSED; the Clerk shall close the file.

IT IS SO ORDERED.

Dated: April 20, 2015

______________________________________

BETH LABSON FREEMAN

United States District Judge

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