Opinion ID: 216921
Heading Depth: 1
Heading Rank: 21

Heading: Related Agreements

Text: DCAG can require MBUSA and its Authorized Resellers to execute  any agreement relating to . . . any other matter related to this Agreement in the form from time to time adopted by [DCAG] as long as those Agreements are not an unreasonable burden on MBUSA.
On November 22, 2005, the district court issued an order tentatively granting defendant's motion to dismiss for lack of personal jurisdiction. Bauman I, 2005 WL 3157472. The district court applied the two part test for general jurisdiction developed in Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 416, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984): 1) whether defendant had systematic and continuous contacts with California, and 2) whether the assertion of general jurisdiction was reasonable. The district court found that it did not have general jurisdiction over DCAG because DCAG did not have systematic and continuous contacts with California; Bauman I, 2005 WL 3157472, at , the court found that DCAG itself did not have such contacts and, moreover, that the plaintiffs had failed to show that MBUSA was DCAG's agent such that MBUSA's contacts could be imputed to DCAG. Id. at . The district court acknowledged that without MBUSA or another distributor, DCAG would not be able to sell Mercedes-Benz vehicles in California. Id. at . In deciding that there was no agency relationship, however, the district court relied heavily on its conclusion that it is not clear that [DCAG] would be required to perform such functions itself to avail itself of the California, luxury-vehicle market. Id. The district court admitted that the agency question was a close question, but found that MBUSA's contacts should not be imputed to the defendant. Id. In its tentative order, the district court also found that personal jurisdiction over DCAG would not be reasonable, although it made a number of factual findings that caused it to question the correctness of that finding. It found that DCAG had purposefully interjected itself into California by initiating lawsuits in California courts to challenge the state's clean air laws and to protect DCAG's patents and other business interests. Id. at . Moreover, it found that the sale of DCAG's vehicles in California is not an isolated occurrence but arises from the efforts of DCAG to serve the California market. Id. The district court recognized that DCAG would be slightly burdened if it was forced to litigate the case in the United States; but, it found that the burden would be minimal because DCAG is a sophisticated, global business, has previously litigated in California, retains permanent counsel in California, and has subsidiaries in California. Id. The district court concluded that California has at least an abstract interest in adjudicating plaintiffs' dispute, but found that California had little direct interest in adjudicating the case. Id. at . The district court decided that the other factors in the reasonableness inquiry were either difficult to balance or weighed slightly in favor of the plaintiffs or of DCAG. Id. at , . The district court tentatively held that exercise of personal jurisdiction would be unreasonable, however, primarily because it found that Argentina was available as an alternative forum. Id. at -. Because the question was a close one, the district court did not issue a final decision; instead, it allowed for limited jurisdictional discovery regarding the agency relationship between DCAG and MBUSA and the availability of Argentina and Germany as alternative fora. Id. at . On February 12, 2007, following the limited jurisdictional discovery, the district court issued its final order granting DCAG's motion to dismiss. [9] Bauman II, 2007 WL 486389, at . The court wrote that it conclude[d] that distribution is not a task that DCAG would have to undertake itself, but for the existence of MBUSA, and therefore, the court found that this mean[t] that the court lacked personal jurisdiction over DCAG. Id. at . The court, however, went on to hold that it did  not need to reach this conclusion, as DCAG has demonstrated that both Argentina and Germany provide plaintiffs with an adequate alternative forum for their claims. [10] Id. (emphasis added). The appellants timely appealed, asserting that the district court erred in finding that it lacked jurisdiction over DCAG.
DCAG argued in the district court that the court did not have personal jurisdiction over DCAG or subject matter jurisdiction over plaintiffs' claims. The district court chose to resolve the personal jurisdiction question first. The district court's discretionary decision to do so was proper. See Sinochem Int'l Co. v. Malaysia Int'l Shipping Corp., 549 U.S. 422, 431, 127 S.Ct. 1184, 167 L.Ed.2d 15 (2007) ([t]here is no mandatory sequencing of jurisdictional issues. . . [A] federal court has leeway to choose among threshold grounds for denying audience to a case on the merits.) (quoting Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 584-85, 119 S.Ct. 1563, 143 L.Ed.2d 760 (1999) (internal quotation marks omitted)). Therefore, the only question before us is whether the district court had personal jurisdiction over DCAG. We review a dismissal for lack of personal jurisdiction de novo. Butcher's Union Local No. 498 v. SDC Inv., Inc., 788 F.2d 535, 538 (9th Cir.1986). In doing so, we apply the following rule: [w]hen a district court acts on a . . . motion to dismiss [for lack of personal jurisdiction] without holding an evidentiary hearing, the plaintiff need make only a prima facie showing of jurisdictional facts to withstand the motion. Unocal, 248 F.3d at 922 (emphasis added) (first alteration in original) (quoting Ballard, 65 F.3d at 1498). In other words, when as here, the district court did not hold an evidentiary hearing, the plaintiffs need only demonstrate facts that if true would support jurisdiction over the defendant. Id. (emphases added).
In evaluating the appropriateness of personal jurisdiction over a nonresident defendant, we ordinarily examine whether such jurisdiction satisfies the requirements of the applicable state long-arm statute and comport[s] with federal due process. Chan v. Society Expeditions, Inc., 39 F.3d 1398, 1404-05 (9th Cir.1994). Because California permits the exercise of personal jurisdiction to the full extent permitted by due process, Bancroft & Masters, Inc. v. Augusta Nat. Inc., 223 F.3d 1082, 1086 (9th Cir.2000), we need only determine whether jurisdiction over DCAG comports with due process. See Unocal, 248 F.3d at 923. Before doing so, we note that [t]here are two types of personal jurisdiction: general and specific. Ziegler v. Indian River County, 64 F.3d 470, 473 (9th Cir.1995). Specific jurisdiction is only relevant if the defendant's contacts with the forum give rise to the cause of action before the court. Unocal, 248 F.3d at 923. By contrast, when the cause of action does not arise out of or relate to the foreign corporation's activities in the forum State, the State is exercising general jurisdiction over the defendant. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414, 415 n. 9, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984) (citations and internal quotation marks omitted). The parties agree that the claims here do not arise out of DCAG's contacts with California, and the plaintiffs press only general jurisdiction over DCAG. We therefore turn to an examination of whether general jurisdiction over DCAG in California comports with due process; in doing so, we conduct a two-part inquiry. First, we examine whether the defendant ha[d] the requisite contacts with the forum state to render it subject to the forum's jurisdiction. Unocal, 248 F.3d at 925 (quoting Amoco Egypt Oil Co. v. Leonis Navigation Co., 1 F.3d 848, 851 (9th Cir. 1993)). Second, if it did, we then turn to an examination of whether the assertion of jurisdiction is fair and reasonable. Id.
In determining the requisite contacts of a defendant, we look to whether its activities in the forum are `substantial' or `continuous and systematic,' even if the cause of action is unrelated to those activities. Sher v. Johnson, 911 F.2d 1357, 1361 (9th Cir.1990) (quoting Data Disc, Inc. v. Systems Tech. Associates, 557 F.2d 1280, 1287 (9th Cir.1977)). In other words, we ask whether a defendant's continuous corporate operations within [the] state are. . . 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. Tuazon v. R.J. Reynolds Tobacco Co., 433 F.3d 1163, 1169 (9th Cir.2006) (quoting Int'l Shoe Co. v. Wash., 326 U.S. 310, 318, 66 S.Ct. 154, 90 L.Ed. 95 (1945)) (quotation marks and brackets omitted). Here, there is no doubt that MBUSA has the requisite contacts. [11] The question is whether MBUSA's extensive contacts with California warrant the exercise of general jurisdiction over DCAG. Under the controlling law, if one of two separate tests is satisfied, we may find the necessary contacts to support the exercise of personal jurisdiction over a foreign parent company by virtue of its relationship to a subsidiary that has continual operations in the forum. The first test, not directly at issue here, is the alter ego test. It is predicated upon a showing of parental control over the subsidiary. The two prongs of the alter ego test are as follows: (1) that there is such unity of interest and ownership that the separate personalities of the two entities no longer exist and (2) that failure to disregard their separate identities would result in fraud or injustice. The first prong of this test has alternately been stated as requiring a showing that the parent controls the subsidiary to such a degree as to render the latter the mere instrumentality of the former. Unocal, 248 F.3d at 926 (internal citations, quotation marks, and brackets omitted). The second test, which is applicable here, is the agency test. That test is predicated upon a showing of the special importance of the services performed by the subsidiary: The agency test is satisfied by a showing that the subsidiary functions as the parent corporation's representative in that it performs services that are sufficiently important to the foreign corporation that if it did not have a representative to perform them, the corporation's own officials would undertake to perform substantially similar services. Id. at 928 (quoting Chan, 39 F.3d at 1405) (emphasis added) (internal quotation marks omitted); see also Harris Rutsky & Co. Ins. Servs., Inc. v. Bell & Clements Ltd., 328 F.3d 1122, 1135 (9th Cir.2003). For the agency test, we ask: Are the services provided by MBUSA sufficiently important to DCAG that, if MBUSA went out of business, DCAG would continue selling cars in this vast market either by selling them itself, or alternatively by selling them through a new representative? We answer this question in the affirmative. In addition, this test requires the plaintiffs to show an element of control, albeit not as much control as is required to satisfy the alter ego test. [12] We conclude that DCAG has more than enough control to meet the agency test, because DCAG has the right to control nearly every aspect of MBUSA's operations.