Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_07-cv-00991/USCOURTS-cand-3_07-cv-00991-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

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United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

U.S. MERCHANT SYSTEMS, LLC.,

Plaintiff,

 v.

A FURNITURE HOMESTORE LLC, et al.,

Defendants. /

No. C 07-0991 CRB

MEMORANDUM AND ORDER OF

TRANSFER

Plaintiff US Merchants Systems (“USMS”) provided defendant A Furniture

Homestore, a retail furniture store in Honolulu, Hawaii (“Ashley Honolulu”), with credit card

service and payment to Ashley’s customers for chargebacks. Ashley Honolulu closed its

doors and now allegedly owes plaintiff $483,000. Plaintiff filed this state law action in

California state court and defendants removed it to federal court on diversity jurisdiction

grounds. Now pending for the Court’s decision is the motion to dismiss for lack of personal

jurisdiction of Ashley Honolulu and the two individual defendants, and the motion to dismiss

or transfer for improper venue of defendant GE Commercial Distribution Finance

Corporation. After carefully considering the parties’ arguments and evidence, the Court

concludes that oral argument is unnecessary, see Local Rule 7-1(b), and GRANTS the

motions to transfer to Hawaii.

Case 3:07-cv-00991-CRB Document 12 Filed 05/03/07 Page 1 of 7
United States District Court

For the Northern District of California

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ALLEGATIONS OF THE COMPLAINT

Plaintiff USMS entered into a merchant agreement with Ashley Honolulu on June 11,

2004 “whereby USMS provided credit card transaction acceptance service to Ashley

Honolulu.” First Amended Complaint ¶ 14. As part of that agreement, Ashley Honolulu

agreed to maintain sufficient funds in a business bank account to cover any obligations and

fees, including, credit card transaction returns made by customers, known as “chargebacks.” 

Id. The agreement contains a personal guaranty signed by Fernando Godina in which

Godina agrees to be a party to the contract. Id. ¶ 15. Godina also allegedly signed the

agreement on behalf of Ashley Honolulu and is identified on the agreement as the 100%

owner of Ashley Honolulu.

Since entering the agreement, Ashley Honolulu and Godina have failed to fund their

account and USMS has been forced to make reimbursements to Ashley Honolulu’s

customers in the amount of at least $483,000. Id. ¶¶ 16-19. USMS makes claims against

Ashley Honolulu, Godina, and Michael Cutler (alleged to be an officer and controller of

Ashley Furniture), for breach of contract, account stated, money paid, intentional

misrepresentation, negligent misrepresentation, and concealment.

USMS also alleges that on or about December 30, 2006, defendant GE Commercial

Distribution Finance Corporation (“GE”) conducted an auction sale of Ashley Honolulu’s

property and improperly converted the proceeds from the sale for its own use. Id. ¶ 68.

Plaintiff makes a claim for conversion and constructive trust against GE.

Defendants Godina, Cutler and Ashley Honolulu move to dismiss for lack of personal

jurisdiction or in the alternative to transfer to Hawaii. Defendant GE moves to dismiss for

improper venue or, in the alternative, to transfer to Hawaii.

LEGAL STANDARD

Plaintiff has the burden of proving personal jurisdiction and venue. Pebble Beach Co.

v. Caddy, 453 F.3d 1151, 1154 (9th Cir. 2006); Piedmont Label Co. v. Sun Garden Packing

Co., 598 F.2d 491, 496 (9th Cir. 1979). In assessing plaintiff’s showing, the court may

consider evidence presented in affidavits and other evidence procured through the discovery

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process. But when the court acts on the motion without holding an evidentiary hearing,

plaintiff need only make a prima facie showing of jurisdictional facts to withstand the motion

to dismiss. When not directly controverted, plaintiff’s version of the facts must be taken as

true, and conflicts between the facts contained in the parties’ affidavits should be resolved in

favor of plaintiff. Autodesk v. RK Mace Engineering, Inc., 2004 WL 603382 *2 (N.D. Cal.

March 11, 2004). However, once the defendant has contradicted allegations contained in the

complaint, plaintiff may not rest on the pleadings, and must instead present admissible

evidence to support the finding of personal jurisdiction. See Data Disc, Inc. v. Systems

Technology Associates, Inc., 557 F.2d 1280, 1284-85 (9th Cir. 1977).

The Ninth Circuit has adopted a three-part test for determining specific jurisdiction:

(1) whether defendant has purposefully availed himself of the privileges of conducting

activity in the forum; (2) whether the claim arises out of or results from defendant’s forumrelated activities; and (3) whether the exercise of jurisdiction is reasonable. Pebble Beach,

453 F.3d at 1153.

DISCUSSION

Plaintiff claims that venue and personal jurisdiction are proper in this District pursuant

to a forum selection clause in the June 11, 2004 written agreement. The clause states: “This

agreement shall be governed by, interpreted and construed in all respects in accordance with

and under the laws of the State of California. The parties hereto agree that, with respect to

any claim arising out of this agreement, such claims shall be submitted for dispute resolution

in the City of Fremont, County of Alameda, State of California. (Emphasis added).

The agreement identifies only Ashley Honolulu and Godina as parties to the

agreement, it therefore cannot confer personal jurisdiction and proper venue over Cutler and

GE. The Court will accordingly address Cutler and GE separately from Ashley Honolulu

and Godina.

A. Personal Jurisdiction of Ashley Honolulu and Godina

Ashley Honolulu and Godina contend that the venue selection clause does not apply

because Godina never signed the agreement. 

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United States District Court

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1. The evidence

a. Cutler’s declarations

Michael Cutler, the President of Cutler and Associates which is one of two managers

of Ashley Honolulu, attests that Godina, who resides in Nevada, is not and never was a

manager of Ashley Honolulu; instead, he is a passive investor with a small ownership

interest. He had no authority to sign anything on Ashley Honolulu’s behalf. The

representation on the application that he is a 100% owner is false.

Cutler attests further that he was completely unaware of the written contract upon

which plaintiff brings this lawsuit until the action was filed. He contends that the only

person with whom Ashley Honolulu communicated as to the USMS credit card account was

Jason Taylor of Revenueworx, Salt Lake City, Utah. Taylor was a representative for USMS

and his name is on the June 11, 2004 contract as USMS’s agent.

Cutler states further that Ashley Honolulu would never have signed the purported

June 11, 2004 agreement because the terms are much less favorable than the terms with their

previous credit card company. He claims that Jason Taylor solicited Ashley Honolulu by

physically coming to the Hawaii store and indicating that he could get Ashley Honolulu a

slightly lower transaction rate. Ashley Honolulu switched to USMS, but never saw nor

signed the purported June 11, 2004 contract. All of Ashley Honolulu’s contacts with USMS

occurred in Hawaii; none in California. 

b. Godina’s declarations

Godina denies ever seeing or signing the June 11, 2004 contract. He offers an

example of his signature which is dissimilar from the signature on the June 11 contract. He

explains that in May 2004, in Reno, Nevada (where Godina lives), he had contact with Jason

Taylor with respect to a merchant service account established by a furniture store that Godina

was operating in Reno. He attests that he never had any contact with Taylor about Ashley

Honolulu. He speculates that Taylor obtained the personal information about Godina that

appears on the June 11 contract from the merchant service contract Godina set up for the

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Reno furniture store. The only communication he ever had with Taylor is when Taylor

physically came to Godina’s Reno furniture store.

c. Plaintiff’s evidence

Plaintiff does not offer any evidence from Jason Taylor, the only USMS

representative whose name appears on the June 11 contract; instead, plaintiff offers only the

declaration Cihat Zeyt, the CEO of USMS. Zeyt contends that he “was personally involved

in the merchant agreement relating to” Ashley Honolulu and Godina, but he does not specify

how he was personally involved. He does not offer any evidence as to whether Godina

actually signed the contract or whether anyone at Ashley Honolulu ever saw the contract

before this lawsuit was filed; indeed, Godina attests that he has never met nor even spoken

with Zeyt.

2. Analysis

Plaintiff offers no evidence to contradict Ashley Honolulu’s unequivocal evidence

that it never saw nor signed the June 11 contract. 

Plaintiff asks for discovery on the issue of the forgery, but it has not even made a

prima facie showing that Godina’s signature is not a forgery. In any event, once the

defendant has contradicted the complaint’s allegations, plaintiff may not rest on the pleadings

and must instead present admissible evidence to support the finding of personal jurisdiction. 

See Data Disc, Inc., 557 F.2d at 1284. It has not done so even though such evidence should

be in plaintiff’s control if its exists. The forum selection clause cannot be enforced.

Once the forum selection clause is put aside, there is no basis for asserting personal

jurisdiction over Godina. There is no evidence that Godina ever had any contact with

California, or even USMS, with respect to Ashley Honolulu. There may be personal

jurisdiction of Ashley Honolulu, however, because it did have a merchant relationship with

USMS, a California business, and USMS provided it with credit card transaction services. 

B. Personal Jurisdiction of Michael Cutler

The only contact Cutler is alleged to have made in California is a telephone call to

Zeyt at USMS in December 2006, after approximately 90 percent of the asset liquidation had

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occurred. Cutler called to obtain information to respond to inquiries from the State of

Hawaii Consumer Protection Department as to which customers had received refunds. The

record reflects that during that single conversation Cutler did not supply USMS with any

information about Ashley Honolulu, other than that it had closed.

This single contact is insufficient to confer personal jurisdiction on Cutler. The

conversation did not give rise to the agreement upon which USMS brings this lawsuit. Nor

does USMS allege that Cutler said anything false or fraudulent in the conversation nor did

anything in that conversation that led to this lawsuit. At a minimum, personal jurisdiction of

Cutler is questionable.

C. Venue of the claims against GE 

GE moves to dismiss the claims against it for improper venue. GE loaned money to

Ashley Honolulu for the purchase of inventory and took a secured interest in that inventory. 

In December 2006/January 2007 it liquidated that inventory to satisfy its loan to Ashley

Honolulu. Plaintiff claims the liquidation was improper. Aside from the merits of such a

claim, there is no venue in this District. Plaintiff relies on its argument as to the forum

selection clause, but GE is not a party to the agreement and, in any event, as discussed above,

the forum selection clause is not valid. Thus, the claims against GE cannot be brought in this

District.

CONCLUSION

As all defendants move, at least in the alternative, to transfer venue of this action to

federal court in Hawaii, and by doing so consent to personal jurisdiction in Hawaii, the Court

concludes that in the interests of justice and for the convenience of the parties this action

should be so transferred.

 The only issue preventing a transfer is the forum selection clause and, as is explained

above, plaintiff has not even made a prima facie showing that the forum selection clause is

valid. Moreover, this Court does not have personal jurisdiction of Godina or Cutler, so the

claims against them must be dismissed or transferred. Similarly, venue of the claims against

GE is improper in this District; so those claims, too, must be dismissed or transferred. 

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For the Northern District of California

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G:\CRBALL\2007\0991\orderoftransfer.wpd 7

Finally, everything of relevance in this case occurred in Hawaii, including the solicitation of

the agreement in the first place. Accordingly, this action is TRANSFERRED to the United

States District Court for the District of Hawaii.

IT IS SO ORDERED.

Dated: May 3, 2007 

CHARLES R. BREYER

UNITED STATES DISTRICT JUDGE

Case 3:07-cv-00991-CRB Document 12 Filed 05/03/07 Page 7 of 7