Court Opinion

ID: 6319813
Source: CourtListenerOpinion
Date Created: 2022-03-03 18:00:41.791636+00
Date Added: 2024-06-11T09:01:39.953759
License: Public Domain

FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

IN RE REJUVI LABORATORY, INC.,          No. 21-15530
                          Debtor,
                                          D.C. No.
                                       3:20-cv-05541-
MARIA CORSO,                               MMC
                         Appellant,

                v.                         OPINION

REJUVI LABORATORY, INC., DBA
Rejuvi Laboratory,
                         Appellee.

     Appeal from the United States District Court
        for the Northern District of California
     Maxine M. Chesney, District Judge, Presiding

      Argued and Submitted November 18, 2021
              San Francisco, California

                 Filed March 3, 2022

 Before: Mary M. Schroeder, William A. Fletcher, and
           Eric D. Miller, Circuit Judges.

            Opinion by Judge W. Fletcher
2                   IN RE REJUVI LABORATORY

                            SUMMARY*

                             Bankruptcy

    The panel reversed the district court’s decision reversing
the bankruptcy court’s order allowing creditor Maria Corso’s
claim in the bankruptcy proceedings of Rejuvi Laboratory,
Inc., a chapter 11 debtor.

    Corso sought recognition and enforcement of a default
money judgment for personal injuries against Rejuvi, granted
by an Australian court. The bankruptcy court allowed
Corso’s claim. The district court reversed, holding that under
California’s Uniform Foreign-Country Money Judgments
Recognition Act, the Australian court did not have personal
jurisdiction over Rejuvi, and so the foreign-country judgment
should not be recognized.

    Reversing the district court and remanding, the panel held
that Rejuvi, a California corporation, waived any objection to
personal jurisdiction by voluntarily appearing in the South
Australian district court when it sought relief from the default
judgment. Accordingly, the Australian court’s default
judgment against Rejuvi was enforceable under the Uniform
Act.

    *
      This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
                 IN RE REJUVI LABORATORY                      3

                         COUNSEL

Grant Kim (argued), James Till, and David Nealy, LimNexus
LLP, San Francisco, California, for Appellant.

Stephen D. Finestone (argued) and Ryan Andrew Witthans,
Finestone Hayes LLP, San Francisco, California, for
Appellee.

                          OPINION

W. FLETCHER, Circuit Judge:

    Maria Corso seeks recognition and enforcement of a
default money judgment for personal injuries against Rejuvi
Laboratory, Inc. (“Rejuvi”) granted by an Australian district
court. She presented the judgment as a claim in federal
bankruptcy court in the Northern District of California. The
bankruptcy court allowed the claim, but the district court
reversed. The district court held that under California’s
Uniform Foreign-Country Money Judgments Recognition Act
(“Uniform Act”), the Australian district court did not have
personal jurisdiction over Rejuvi.

    We have jurisdiction under 28 U.S.C. § 158(d)(1) and
reverse. We hold that Rejuvi waived any objection to
personal jurisdiction by voluntarily appearing in the South
Australian district court when it sought relief from the default
judgment.
4                IN RE REJUVI LABORATORY

                        I. Background

    Maria Corso is a resident of South Australia, a State in the
Commonwealth of Australia. Rejuvi is a California
corporation that produces and sells cosmetic products,
including a tattoo removal paste. Rejuvi operates a facility in
South San Francisco, employs 6 to 9 people, and generates an
annual revenue of about $1.4 million.

    Rejuvi sells its products in the international market
through a network of distributors. In July 2006, Rejuvi
entered into an exclusive distribution agreement with Arias
Holdings, located in the State of Queensland, Australia.
Arias Holdings handled the sale of Rejuvi products in all of
Australia, either directly or through subcontracts with others.
From 2006 to 2009, Rejuvi made sales in Australia totaling
$97,196.80, including $6,560 of tattoo removal products.

    Rejuvi’s CEO, Wei Cheng, made two sales trips to
Australia. Between November 24 and 30, 2006, he was in
Brisbane, in Queensland, and Sydney, in the State of New
South Wales. Between August 10 and 23, 2007, he was in
Sydney, and in Melbourne, in the State of Victoria. Arias
Holdings organized “seminars” on these sales trips, at which
Cheng gave lectures about Rejuvi products, and Tammy
Nguyen, a “master trainer” employed by Rejuvi,
demonstrated the use of Rejuvi’s tattoo removal paste.

   Corso had tattoos on her right ankle and on her back. In
September 2007, Corso spoke about removing her tattoos
with Michelle Babich, a co-owner of Platinum Beauty, a
business in South Australia. Babich had attended one of
Cheng’s seminars in Sydney, and she told Corso that she had
experience applying Rejuvi’s tattoo removal paste. Corso
                 IN RE REJUVI LABORATORY                       5

subsequently underwent a tattoo removal procedure using
Rejuvi’s paste and was severely injured.

    In September 2009, Corso sued Rejuvi, Arias Holdings,
and Michelle and Branko Babich (co-owners of Platinum
Beauty) in the district court of South Australia. Australia has
a federal system that is similar to ours in that each Australian
state has a constitution and judiciary. The district court is the
principal trial court in South Australia.

    Rejuvi did not respond to Corso’s suit. On May 6, 2010,
Corso applied for default judgment against Rejuvi. The next
day, the registrar of the South Australian district court
granted a default judgment because Rejuvi had filed no
defense. In a letter sent on June 7, 2013, the district court
informed Rejuvi that it had set a trial date for “assessment of
damages.”

    According to the evidence credited by the South
Australian district court at the assessment of damages, the
treatment Corso received on her tattoos caused chemical
burns, resulting in scars whose treatment required five
surgeries. Despite the surgeries, Corso still had scars on her
ankle and back. The tattoo treatment also caused a tumor to
form on Corso’s left kidney. Corso suffered from chronic
pain, nerve damage, depression, and post-traumatic stress
disorder. In June 2016, the district court entered judgment
against Rejuvi for AU$1,020,508.55, exclusive of interest,
costs, and “consequential orders.”

    In October 2016, Corso filed suit in federal district court
for the Northern District of California, seeking enforcement
of her Australian judgment. Rejuvi answered, contending
that the South Australian district court lacked personal
6               IN RE REJUVI LABORATORY

jurisdiction over it. Rejuvi later opposed Corso’s motion for
summary judgment on a different ground, contending that the
Australian default judgment was not final and noting that
Rejuvi had retained Australian counsel to file an application
to set aside the judgment. The federal district court
suspended proceedings to allow the Australian court to
consider Rejuvi’s application to set aside the default
judgment.

    In June 2018, after a hearing at which Rejuvi appeared
and made arguments, the South Australian district court
refused to set aside its 2016 default damage judgment.
Rejuvi appealed to the Supreme Court of South Australia, but
did not pursue the appeal.

                   II. Proceedings Below

    In September 2018, Rejuvi filed for bankruptcy in federal
bankruptcy court. Rejuvi’s filing showed total assets of
$2,870,211 and total liabilities (including the disputed claim
from Corso) of $1,357,213. On January 9, 2019, Corso filed
a proof of claim, seeking to enforce the 2016 South
Australian judgment for $1,242,240 (including accumulated
interests, costs, and legal fees).

    On December 9, 2019, the bankruptcy court, applying our
three-part test in Schwarzenegger v. Fred Martin Motor Co.,
374 F.3d 797, 802 (9th Cir. 2004), concluded that the South
Australian district court had specific personal jurisdiction
over Rejuvi. The bankruptcy court found that Rejuvi had
sufficient minimum contacts because it directed its products
to South Australia, provided seminars and training in
Australia, and could foresee being sued in a forum where it
sold its tattoo removal product. On July 25, 2020, the
                 IN RE REJUVI LABORATORY                        7

bankruptcy court issued its final order allowing Corso’s claim
in the amount of $1,118,958.80 (after disallowing some of
Corso’s claimed fees and costs).

    The district court reversed. It held that the South
Australian district court lacked personal jurisdiction over
Rejuvi, on the ground that Rejuvi had no control over its
Australian distributor, and that Rejuvi had purposefully
directed its activities to Australia as a whole rather than to the
forum state of South Australia. It held that Rejuvi had not
waived its personal jurisdiction defense by voluntarily
appearing in the South Australian district court in seeking to
set aside the default judgment.

    Corso timely appealed.

                    III. Standard of Review

    “We review the district court’s decision on appeal from
a bankruptcy court order de novo.” In re Cloobeck, 788 F.3d
1243, 1245 (9th Cir. 2015) (citing In re Greene, 583 F.3d
614, 618 (9th Cir. 2009)). “We review the bankruptcy court’s
conclusions of law de novo, and its factual findings for clear
error.” Id.

                          IV. Analysis

    “The validity of a creditor’s claim against the bankruptcy
estate is governed by the state law in force in the judicial
district wherein the bankruptcy is proceeding.” In re Hashim,
213 F.3d 1169, 1171 (9th Cir. 2000) (citing Grogan v.
Garner, 498 U.S. 279, 283 (1991)). In California, the
Uniform Act governs recognition and enforcement actions
commenced on or after January 1, 2008. Cal. Civ. Proc. Code
8                IN RE REJUVI LABORATORY

§ 1724(a); Naoko Ohno v. Yuko Yasuma, 723 F.3d 984, 990
(9th Cir. 2013).

    Under the Uniform Act, California courts “shall recognize
a foreign-country judgment” that “[g]rants or denies recovery
of a sum of money” and that “[u]nder the law of the foreign
country where rendered, is final, conclusive, and
enforceable.” Cal. Civ. Proc. Code §§ 1715(a), 1716(a).
There are several exceptions to the Uniform Act’s general
rule of recognition. As relevant here, a court “shall not
recognize a foreign-country judgment if . . . [t]he foreign
court did not have personal jurisdiction over the defendant.”
Id. § 1716(b)(2). “[A] foreign court lacks personal
jurisdiction over a defendant” if either of two conditions is
met: (1) “[t]he foreign court lacks a basis for exercising
personal jurisdiction that would be sufficient according to the
standards governing personal jurisdiction in [California];” or
(2) “[t]he foreign court lacks personal jurisdiction under its
own law.” Id. § 1717(a). However, a foreign-country
judgment “shall not be refused recognition for lack of
personal jurisdiction” if “[t]he defendant voluntarily appeared
in the proceeding, other than for the purpose of protecting
property seized or threatened with seizure in the proceeding
or of contesting the jurisdiction of the court over the
defendant.” Id. § 1717(b)(2). Finally, a court “shall not
recognize a foreign-country judgment if . . . [i]n the case of
jurisdiction based only on personal service, the foreign court
was a seriously inconvenient forum for the trial of the
action.” Id. § 1716(c)(1)(E).

    We hold that the South Australian district court’s default
judgment against Rejuvi is enforceable under the Uniform
Act, on the ground that Rejuvi waived its personal
jurisdiction challenge by voluntarily appearing in South
                 IN RE REJUVI LABORATORY                       9

Australian district court in its attempt to set aside the default
judgment.

    In neither its 2017 application to the South Australian
district court to set aside the default judgment, nor its 2018
appeal to the South Australian Supreme Court, did Rejuvi
contest personal jurisdiction. In its 2017 application, Rejuvi
did not challenge personal jurisdiction in the South Australian
district court. Rejuvi argued only that it lacked knowledge of
the Australian proceedings because it was not served with
Corso’s statements of claims, and that it had a defense on the
merits because Corso’s injuries were caused by misuse of the
paste. A challenge to a judgment based on an asserted lack
of knowledge of the judicial proceedings that led to the
judgment is different from a challenge to personal
jurisdiction. Further, a challenge to a judgment based on a
failure to serve process is different from a challenge to
personal jurisdiction, unless (as it is not the case here) the
assertion of jurisdiction is based solely upon the service of
process. In 2018, Rejuvi filed an appeal to the South
Australian Supreme Court on the same grounds, again
without challenging personal jurisdiction.

    Rejuvi’s counsel suggested during the federal bankruptcy
proceedings that CEO Cheng’s declaration in the South
Australian district court, supporting Rejuvi’s 2017 application
to set aside the default judgment, implicitly raised the issue
of minimum contacts and objected to personal jurisdiction.
However, Cheng’s declaration mentioned Rejuvi’s contacts
with Australia in only two paragraphs—one describing
Rejuvi’s relationship with its Australian distributor, and the
other stating that Rejuvi sold 247 units of its tattoo remover
in Australia, only one of which prompted a complaint.
Rejuvi’s counsel conceded in the bankruptcy court that these
10               IN RE REJUVI LABORATORY

paragraphs did not make “a specific argument about personal
jurisdiction.”

    Even if Rejuvi’s counsel had argued specifically in the
Australian district court that that court lacked personal
jurisdiction, that would not have saved its jurisdictional
objection under the Uniform Act. The Act allows a defendant
to make a special appearance in a foreign court solely for the
purpose of arguing jurisdiction without subjecting itself to the
jurisdiction of that court. But except for cases in which
seizure of property is at issue (which is not at issue here), the
Act does not allow a defendant to appear without subjecting
itself to jurisdiction if it appears for a purpose other than
contesting jurisdiction.       See Cal. Civ. Proc. Code
§ 1717(b)(2). In its appearance before the South Australian
district court, Rejuvi argued for relief on grounds other than
lack of personal jurisdiction. It therefore does not come
within the safe harbor of § 1717(b)(2).

    In holding that Rejuvi waived its personal jurisdiction
objection, we find persuasive a recent district court decision.
In De Fontbrune v. Wofsky, 409 F. Supp. 3d 823, 834 (N.D.
Cal. 2019), the district court ruled that defendants’ initiation
of proceedings seeking vacation of a French default judgment
precluded them from raising personal jurisdiction as a
defense under California’s Uniform Act. In De Fontbrune,
the plaintiffs obtained a copyright infringement money
judgment from a French court after defendants failed to
attend the French court hearing. Id. at 830. Defendants
subsequently initiated proceedings in the French court
seeking to vacate the French default judgment on substantive
grounds. The French court declined to provide relief. Id.
The district court held that because the defendants had
presented arguments on the merits in the French court, they
                 IN RE REJUVI LABORATORY                    11

could not object under the Uniform Act to the exercise of
personal jurisdiction by that court: “Defendants cannot
voluntarily submit to the jurisdiction of the French courts to
bring a challenge on the merits of the [money judgment] and
simultaneously complain that the French courts lack
jurisdiction over them.” Id. at 833 (citing Dow Chem. Co. v.
Calderon, 422 F.3d 827, 834 (9th Cir. 2005)).

    We also find persuasive a series of New York cases. In
essentially identical language to California’s Uniform Act,
New York’s version of the Act requires New York courts to
recognize a foreign-country judgment where “the defendant
voluntarily appeared in the proceeding, other than for the
purpose of protecting property seized or threatened with
seizure in the proceeding or of contesting the jurisdiction of
the court over the defendant.” N.Y. C.P.L.R. 5305. The New
York cases read the Uniform Act “to foreclose a defendant
from contesting a foreign judgment for lack of personal
jurisdiction once the defendant has done anything more than
it had to do to preserve its jurisdictional objection.” CIBC
Mellon Trust Co. v. Moral Hotel Corp., 100 N.Y. 2d 215, 225
(2003) (holding that defendants’ application to set aside the
English judgments and to defend on the merits constitutes a
voluntary appearance in the foreign proceeding and waiver of
their personal jurisdiction challenge under the Uniform Act);
S.C. Chimexim S.A. v. Volco Enters. Ltd., 36 F. Supp. 2d 206,
210, 215 (S.D.N.Y. 1999) (holding that the defendant waived
its personal jurisdiction challenge after appealing a default
judgment in Romanian court, even though the defendant
raised the personal jurisdiction defense in its foreign appeal,
because the appeal also presented arguments on the merits);
Nippon Emo-Trans Co., Ltd. v. Emo-Trans, Inc., 744 F. Supp.
1215, 1226 (E.D.N.Y. 1990) (concluding that the defendant
was precluded from challenging the jurisdiction of a Japanese
12               IN RE REJUVI LABORATORY

court because the defendant presented arguments on the
merits).

    Rejuvi’s only remaining argument against enforcing the
judgment is that the South Australian district court “was a
seriously inconvenient forum for the trial of the action” under
Cal. Civ. Proc. Code § 1716(c)(1)(E). But the exception for
seriously inconvenient forum applies only “[i]n the case of
jurisdiction based only on personal service.” Id. That is, the
exception applies only to cases of so-called “tag jurisdiction.”
The South Australian district court based its jurisdiction over
Rejuvi on the fact that the causes of action “arose in South
Australia,” rather than personal service alone. The seriously
inconvenient forum exception under the Uniform Act thus
does not apply.

    In light of our holding that Rejuvi submitted to the
jurisdiction of the South Australian district court when it
sought to set aside the default judgment, we need not reach
the question whether it was otherwise subject to that court’s
jurisdiction.

                         Conclusion

    We hold that Rejuvi waived its personal jurisdiction
defense under the Uniform Act by voluntarily appearing in
the South Australian district court in an attempt to set aside
the 2016 default judgment. We REVERSE and REMAND
to the district court for proceedings not inconsistent with this
opinion. We GRANT Corso’s motion to take judicial notice
of Rules 230 and 242 of the 2006 Civil Rules of the District
Court of South Australia.

     REVERSED AND REMANDED.