Court Opinion

ID: 4311930
Source: CourtListenerOpinion
Date Created: 2018-09-12 20:00:34.138256+00
Date Added: 2024-06-11T14:43:34.025910
License: Public Domain

NOT FOR PUBLICATION                           FILED
                    UNITED STATES COURT OF APPEALS                        SEP 11 2018
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                           FOR THE NINTH CIRCUIT

DELPHIX CORP.,                                  No.    16-16572

                Plaintiff-Appellant,            D.C. No. 5:16-cv-00606-BLF

 v.
                                                MEMORANDUM*
EMBARCADERO TECHNOLOGIES,
INC.,

                Defendant-Appellee.

DELPHIX CORP.,                                  No.    16-16697

                Plaintiff-Appellee,             D.C. No. 5:16-cv-00606-BLF

 v.

EMBARCADERO TECHNOLOGIES,
INC.,

                Defendant-Appellant.

                   Appeal from the United States District Court
                       for the Northern District of California
                  Beth Labson Freeman, District Judge, Presiding

                     Argued and Submitted December 6, 2017
                            San Francisco, California

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
Before: RAWLINSON and OWENS, Circuit Judges, and RICE,** Chief District
Judge.

      Delphix appeals the district court’s order dismissing the case for lack of

personal jurisdiction. Embarcadero cross-appeals the district court’s order finding

the court had subject matter jurisdiction. We have jurisdiction pursuant to 28

U.S.C. § 1291. We review the district court’s factual findings for clear error and

the issue of jurisdiction de novo. Reebok Int’l, Ltd. v. McLaughlin, 49 F.3d 1387,

1390 (9th Cir. 1995). We affirm in part and reverse in part.

      “Where, as here, the defendant’s motion is based on written materials rather

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

jurisdictional facts to withstand the motion to dismiss.” Ranza v. Nike, Inc., 793
F.3d 1059, 1068 (9th Cir. 2015) (citation and internal quotation marks omitted).

While “a plaintiff may not simply rest on the bare allegations of the complaint,”

“uncontroverted allegations must be taken as true, and conflicts between parties

over statements contained in affidavits must be resolved in the plaintiff’s

favor.” Id. (citation, internal quotation marks, and brackets omitted).

      When a defendant moves to dismiss for lack of personal jurisdiction, the

plaintiff bears the burden of demonstrating that the court has jurisdiction. Harris

Rutsky & Co. Ins. Servs., Inc. v. Bell & Clements Ltd., 328 F.3d 1122, 1128–29

      **
             The Honorable Thomas O. Rice, Chief United States District Judge
for the Eastern District of Washington, sitting by designation.

                                          2
(9th Cir. 2003). However, the plaintiff must make “only a prima facie showing of

jurisdictional facts to withstand the motion to dismiss.” Doe v. Unocal Corp., 248
F.3d 915, 922 (9th Cir. 2001). For purposes of deciding whether a prima facie

showing has been made, “the court resolves all disputed facts in favor of the

plaintiff.” Pebble Beach Co. v. Caddy, 453 F.3d 1151, 1154 (9th Cir. 2006); In re

W. States Wholesale Nat. Gas Antitrust Litig., 715 F.3d 716, 741 (9th Cir. 2013),

aff'd sub nom. Oneok, Inc. v. Learjet, Inc., 135 S. Ct. 1591, 191 L. Ed. 2d 511

(2015).

      A. Subject Matter Jurisdiction

      The district court properly found the court had subject matter jurisdiction.

Per the Declaratory Judgment Act, 28 U.S.C. § 2201, the court may “declare the

rights and other legal relations of any interested party.” “[T]he question in each

case is whether the facts alleged, under all the circumstances, show that there is a

substantial controversy, between parties having adverse legal interests, of sufficient

immediacy and reality to warrant the issuance of a declaratory judgment.” Md.

Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273 (1941).

      The district court correctly found that “the record of communication

between the parties both before and after this suit was filed and the ongoing TTAB

[Trademark Trial and Appeal Board] proceedings paint a clear picture of a

‘substantial controversy’ that is ‘definite and concrete’ enough to be addressed by

                                          3
the Court.” Although Embarcadero highlights it never threatened litigation,

Embarcadero (1) asserted the elements of trademark infringement in its opposition

to Delphix’s registration for its word mark and petition to cancel Delphix’s logo

mark, (2) represented it saw no way forward with Delphix’s use of DELPHIX as

its company name or for its products and services during settlement talks, and (3)

refused to sign a covenant not to sue Delphix for its use of the DELPHIX mark

after Delphix brought this action. Without a declaratory judgment, Delphix would

be forced to either play it safe and change its company and product name, thereby

foregoing the goodwill and incurring transition costs, or push forward and risk

having to destroy infringing product, pay additional damages, and disgorge profits

to Embarcadero. These circumstances are ripe for a declaratory judgment.

      B. Personal Jurisdiction

      The district court erred in finding there was no personal jurisdiction. There

are two categories of in personam jurisdiction. In 1984, the Supreme Court

explicitly recognized the distinction between what has come to be called “general

jurisdiction” and “specific jurisdiction.” 4 Wright, et al., Fed. Prac. & Proc. Civ. §

1067.5 (4th ed. 2018) (citing Helicopteros Nacionales de Colombia, S.A. v. Hall,

466 U.S. 408 (1984)); accord BNSF Ry. Co. v. Tyrrell, 137 S. Ct. 1549, 1558

(2017) (“[W]e have distinguished between specific or case-linked jurisdiction and

general or all-purpose jurisdiction.”).

                                          4
      A general jurisdiction inquiry is very different from a specific jurisdiction

inquiry. “Unlike the specific jurisdiction analysis, which focuses on the cause of

action, the defendant and the forum, a general jurisdiction inquiry is dispute blind,

the sole focus being on whether there are continuous and systematic contacts

between the defendant and the forum.” 4 Fed. Prac. & Proc. Civ. § 1067.5

(quoting Dickson Marine Inc. v. Panalpina, Inc., 179 F.3d 331, 339 (5th Cir.

1999)); see also Daimler AG v. Bauman, 571 U.S. 117, 127 (2014).

      “[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.” Daimler, 571 U.S. at 127 (quoting

Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011)).

The “paradigm” forums in which a corporate defendant is “at home” are the

corporation’s place of incorporation and its principal place of business. Id. at 137.

The exercise of general jurisdiction is not limited to these forums; in an

“exceptional case,” a corporate defendant’s operations in another forum “may be

so substantial and of such a nature as to render the corporation at home in that

State.” Id. at 138-39 & n.19.

      “[C]ourts must examine the defendant’s contacts with the forum at the time

of the events underlying the dispute when determining whether they have

                                          5
jurisdiction.” Steel v. United States, 813 F.2d 1545, 1549 (9th Cir. 1987). “[O]ne

cannot defeat personal jurisdiction by a move away from the state in which the

underlying events took place.” Id. Accordingly, a general jurisdiction inquiry

should consider all of a defendant’s contacts with the forum state prior to the filing

of the lawsuit, rather than just those contacts that are related to the particular cause

of action the plaintiff asserts. 4 Fed. Prac. & Proc. Civ. § 1067.5. In determining

“how far back from either the accrual or filing of the claim they will look; most

courts use a ‘reasonable time’ standard yielding timeframes of roughly three to

seven years.” Id. (citing e.g., Helicopteros, 466 U.S. at 409–11 (seven year look)).

      Here, Embarcadero is a Delaware corporation that maintained its

headquarters in California up until at least October 2015. At that time,

Embarcadero was purchased by Idera, Inc., a Texas-based company. Embarcadero

claims that its headquarters are now in Austin, Texas. Understandably, it took

months to transfer Embarcadero’s headquarters and change its corporate records to

reflect its new location. Plaintiff filed suit on February 4, 2016. In July 2016,

Plaintiff gathered and proffered to the district court extensive evidence showing

Embarcadero continued to represent that its headquarters were located in

California.

      For at least two decades Embarcadero’s headquarters were located in

California and it engaged in “continuous and systematic” activities within

                                           6
California, including directing or performing all the alleged conduct which

generates the subject matter jurisdiction for this suit. That conduct started in April

2012 and continued through May 2016. The purchase of Embarcadero by Idera,

Inc. in October 2015 did not instantaneously dissolve the general jurisdictional

nexus Embarcadero had established by its continuous and systematic operations in

California.

      Moreover, were these facts viewed through the lens of specific personal

jurisdiction, the result would be the same. Critically, the instant action is about

Delphix’s right to use the DELPHIX mark as its business name and on its product

(in light of Embarcadero’s rights to the DELPHI mark). This issue is beyond the

jurisdiction of the TTAB proceeding in Virginia, which only involved the disputed

right to register the mark. As such, when Embarcadero challenged Delphix’s right

to use the DELPHIX mark during settlement talks in California, this conduct was

not directed at Virginia, but rather was directed at Delphix in California, where

both companies were operating at that time.

      When every aspect of the case – from the parties to the underlying disputed

rights – is completely centered in California, we cannot say the exercise of specific

jurisdiction in California would be unfair or unreasonable. See Bancroft &

Masters, Inc. v. Augusta Nat’l, Inc., 223 F.3d 1082, 1086 (9th Cir. 2000),

overruled in part on other grounds by Yahoo! Inc. v. La Ligue Contre Le Racisme

                                           7
Et L’Antisemitisme, 433 F.3d 1199, 1207 (9th Cir. 2006) (en banc). Costs are to be

taxed against the Defendant-Appellee and Cross-Appellant Embarcadero

Technologies, Inc..

      AFFIRMED IN PART; REVERSED IN PART.

                                        8
                                                                                  FILED
                                                                                  SEP 11 2018
                                                                             MOLLY C. DWYER, CLERK
                                                                                U.S. COURT OF APPEALS
Delphix Corporation v. Embarcadero Technologies, Case No. 16-16572
Rawlinson, Circuit Judge, concurring in part and dissenting in part:

      I agree with the majority that the district court had subject matter

jurisdiction. However, I do not agree that the district court erred in finding that it

lacked general or specific personal jurisdiction.

      The majority’s overly expansive imposition of general jurisdiction, in a case

in which the underlying dispute is limited to proceedings before the Trademark

Trial and Appeal Board (TTAB) in Virginia, does not satisfy “the demanding

nature of the standard for general personal jurisdiction over a corporation.”

Martinez v. Aero Caribbean, 764 F.3d 1062, 1070 (9th Cir. 2014). “Because the

assertion of judicial authority over a defendant is much broader in the case of

general jurisdiction than specific jurisdiction, a plaintiff invoking general

jurisdiction must meet an exacting standard for the minimum contacts required.”

Ranza v. Nike, Inc., 793 F.3d 1059, 1069 (9th Cir. 2015) (citation and internal

quotation marks omitted). “General jurisdiction requires affiliations so continuous

and systematic as to render the foreign corporation essentially at home in the forum

State, i.e., comparable to a domestic enterprise in that State.” Id. (citation and

alteration omitted). “The paradigmatic locations where general jurisdiction is

                                           1
appropriate over a corporation are its place of incorporation and its principal place

of business.” Id. (citation omitted). “Only in an exceptional case will general

jurisdiction be available anywhere else.” Id. (citation and internal quotation marks

omitted).

      Relying on a secondary source, the majority asserts that “a general

jurisdiction inquiry should consider all of a defendant’s contacts with the forum

state prior to the filing of the lawsuit, rather than just those contacts that are related

to the particular cause of action the plaintiff asserts.” Majority Disposition, p. 6.

However, the majority does not follow through in applying this standard for

general jurisdiction because it fails to consider all of Embarcadero’s contacts with

California prior to Delphix’s lawsuit. The record reflects that, prior to the filing of

Delphix’s lawsuit in February, 2016, Embarcadero transferred its principal place of

business and associated operations to Texas. Laurie Crawford (Crawford),

Embarcadero’s Director of Human Resources, explained that, prior to its

acquisition by Idera, Embarcadero relocated its main sales office and former CEO

to Texas, and “[t]he only sales people that Embarcadero had outside of Texas

pre-acquisition were a small number of specialty sales representatives.” Crawford

related that “[b]y January 1, 2016, there were no employees working in the San

Francisco Embarcadero office location,” and the remaining California employees

                                            2
were IT specialists and software developers who were not in management

positions. Crawford stated that, in February, 2016, only thirty-seven of

Embarcadero’s three hundred and twenty-four employees remained in California.

Similarly, Atanas Popov (Popov), Embarcadero’s General Manager, conveyed that

“most all operations and all management were centered in Texas by the end of

2015.” Chris Smith, Embarcadero’s Chief Operating Officer, explained that all of

Embarcadero’s officers and directors resigned on October 9, 2015, and were

replaced with officers and directors in Texas. Thus, Embarcadero amply

demonstrated that its principal place of business was in Texas.

      The listing of California addresses for Embarcadero in pre-litigation

licensing agreements, trademark registrations, websites, social media posts, and

other documents does not establish the requisite systematic contact for general

jurisdiction. See Majority Disposition, pp. 6-7. Popov explained that, during the

corporate transition, Embarcadero had “over 700,000 URL’s or webpages” that

were “modified in phases” with update prioritization for web pages generating the

most significant business usage. Popov emphasized that “contact information on

social media channels was not updated urgently as it [was] not used for sales . . .”

Heidi Farris, Embarcadero’s chief marketing officer, conveyed that, because

Embarcadero is an online company, any listings of physical office addresses were

                                          3
immaterial to its customers, and Embarcadero’s license agreements were updated

to reflect the Texas address. It is evident that Embarcadero was not “at home” in

California such as to warrant the imposition of general jurisdiction. See Daimler

AG v. Bauman, 571 U.S. 117, 138-39 (2014) (explaining that “the inquiry . . . is

not whether a foreign corporation’s in-forum contacts can be said to be in some

sense continuous and systematic, it is whether that corporation’s affiliations with

the State are so continuous and systematic as to render it essentially at home in the

forum State”) (citation, alteration, footnote reference, and internal quotation marks

omitted).

        The majority’s reliance on Steel v. United States, 813 F.2d 1545 (9th Cir.

1987) to support its conclusion that Embarcadero’s near total relocation to Texas

was immaterial is misplaced. See Majority Disposition, pp. 5-6. In Steel, we

recognized that the defendant’s move from one state to another was not controlling

for purposes of specific jurisdiction. See Steel, 813 F.2d at 1549. We articulated

that:

        When a court is exercising specific jurisdiction over a defendant,
        arising out of or related to the defendant’s contacts with the forum, the
        fair warning that due process requires arises not at the time of the suit,
        but when the events that gave rise to the suit occurred. . . .

Id. (citation and internal quotation marks omitted) (emphasis added). Applying

                                            4
this standard, we held that the defendant was subject to specific jurisdiction, not

general jurisdiction, despite his move from California to Virginia, because the

defendant’s “contacts with California during the marriage, separation, and divorce

proceedings determine whether the district court has personal jurisdiction over him

in the declaratory judgment action.” Id. at 1549-50. It was within the context of

imposing specific jurisdiction that we observed that “one cannot defeat personal

jurisdiction by a move away from the state in which the underlying events took

place.” Id. at 1549 (giving the example of continuing jurisdiction for acts

committed while doing business in the state) (citation omitted) (emphasis added).

In contrast to the example of acts committed while doing business in the state, the

“underlying events” involved in the present appeal occurred solely as the result of

proceedings before the TTAB in Virginia, not in California, and Embarcadero had

relocated its headquarters and operations to Texas prior to the ensuing litigation. 1

Simply stated, this is not the “exceptional case” where general jurisdiction exists

outside the “place of incorporation [or the] principal place of business.” Ranza,
793 F.3d at 1069.

      1
         The majority maintains that Embarcadero “direct[ed] or perform[ed] all
the alleged conduct” in California. Majority Disposition, p. 7. However, the
majority fails to mention that “the alleged conduct” was singularly linked to the
TTAB proceedings in Virginia, and not in California.
                                           5
      The majority’s application of specific jurisdiction suffers from similar

factual and legal deficiencies. See Majority Disposition, pp. 7-8. The majority’s

assertion that the facts supporting a finding of general jurisdiction also support

imposition of specific jurisdiction, see id. at 7, “elide[s] the essential difference

between case-specific and all-purpose (general) jurisdiction.” Daimler, 571 U.S. at

132 (citation omitted). “There are three requirements for a court to exercise

specific jurisdiction over a nonresident defendant: (1) the defendant must either

purposefully direct his activities toward the forum or purposefully avail himself of

the privileges of conducting activities in the forum; (2) the claim must be one

which arises out of or relates to the defendant’s forum-related activities; and (3) the

exercise of jurisdiction must comport with fair play and substantial justice, i.e. it

must be reasonable.” Axiom Foods, Inc. v. Acerchem Int’l, Inc., 874 F.3d 1064,

1068 (9th Cir. 2017) (citation, alteration and internal quotation marks omitted).

      It is important to keep in mind the plaintiff’s burden to “satisfy [ ] the first

two prongs of the test.” Id. (citation omitted). In other words, the plaintiff must

establish that the defendant in this case “purposefully direct[ed] [its] activities

toward the forum or purposefully avail[ed] [itself] of the privileges of conducting

activities in the forum.” Id. (citation and internal quotation marks omitted).

      Delphix Corporation, as the plaintiff, failed to meet its burden of proof

                                            6
because the record in this case points much more strongly toward a lack of specific

personal jurisdiction than toward the existence of specific personal jurisdiction.

      The majority seeks to impose specific personal jurisdiction on the basis that

Embarcadero “directed conduct” toward Delphix in California “during settlement

talks.” Majority Disposition, p. 7 (emphasis added). However, purposeful

direction requires the intentional commission of an act by the defendant that is

“expressly aimed at the forum state.” Morrill v. Scott Fin. Corp., 873 F.3d 1136,

1142 (9th Cir. 2017); see also Panavision Intern., L.P. v. Toeppen, 141 F.3d 1316,

1321 (9th Cir. 1998) (applying purposeful direction test in trademark case because

“it is akin to a tort case”) (citations omitted). Indeed, Delphix acknowledges that

the purposeful direction test applies. Under the purposeful direction test, Delphix

is unable to demonstrate that Embarcadero’s enforcement action before the TTAB

in Virginia was intentionally directed at California. Indeed, the majority’s approach

belies the fact that the only action relating to the trademark dispute initiated by

Embarcero was the trademark challenge before the TTAB. Embarcadero has never

filed a lawsuit in California or elsewhere regarding Delphix’s use of the trademark.

      Importantly, there is absolutely no indication in the record that the

settlement discussions relied upon by the majority as a basis for specific

jurisdiction were divorced from the TTAB proceedings. It also does not appear

                                           7
that such discussions would have occurred in the absence of Embarcadero’s

enforcement action before the TTAB. Embarcadero’s enforcement action does not

otherwise involve California.

      Notably, in Morrill, we affirmed the finding of a lack of personal

jurisdiction despite these actions by the defendant: making phone calls into the

forum state, sending snail mail and email to the forum state, filing civil actions in

the forum state, and appearing pro hac vice in the forum state. See 873 F.3d at

1142-43.

      To the extent the majority seeks to impose specific jurisdiction based on

activities unrelated to Delphix’s trademark claims that the majority deemed

relevant for general jurisdiction, the Supreme Court has held otherwise. See

Majority Disposition, p. 7 (stating that facts relating to general jurisdiction “when

viewed through the lens of specific personal jurisdiction” would produce the same

result); but see also Bristol-Myers Squibb Co. v. Superior Ct. of Cal., 137 S. Ct.
1773, 1781 (2017) (articulating that “[i]n order for a court to exercise specific

jurisdiction over a claim, there must be an affiliation between the forum and the

underlying controversy, principally, an activity or an occurrence that takes place in

the forum State. When there is no such connection, specific jurisdiction is lacking

regardless of the extent of a defendant’s unconnected activities in the State”)

                                           8
(citation, alteration, and internal quotation marks omitted).

      The majority asserts that the “instant action is about Plaintiff’s right to use

the DELPHIX mark as its business name and on its product (in light of

Embarcadero’s rights to the DELPHI mark).” Majority Disposition, p. 7.

According to the majority, “[t]his issue is beyond the jurisdiction of the TTAB

proceedings in Virginia, which only involved the disputed right to register the

mark.” Id. (emphasis in the original). But it is unclear how the TTAB’s limited

jurisdiction over certain claims demonstrates that Embarcadero purposefully

directed its activities toward California. See Morrill, 873 F.3d at 1142 (explaining

that purposeful direction requires “[a]n intentional act” rather than the results of

that act, “even the most direct, immediate, and intended”) (citation omitted).

       The majority maintains that specific jurisdiction exists because “when

Embarcadero challenged Delphix’s right to use the DELPHIX mark during

settlement talks in California, this conduct was not directed at Virginia, but rather

was directed at Delphix in California, where both companies were operating at the

time.” Majority Disposition, p. 7 (emphasis in the original). This is precisely the

approach that the Supreme Court has rejected as untenable for exercising specific

jurisdiction. The Supreme Court has emphasized that “[a] forum State’s exercise

of jurisdiction over an out-of-state intentional tortfeasor must be based on

                                           9
intentional conduct by the defendant that creates the necessary contacts with the

forum.” Walden v. Fiore, 571 U.S. 277, 286 (2014). Our analysis “looks to the

defendant’s contacts with the forum state itself, not the defendant’s contacts with

persons who reside there.” Id. at 285 (citation omitted). “[T]he plaintiff cannot be

the only link between the defendant and the forum. Rather, it is the defendant’s

conduct that must form the necessary connection with the forum State that is the

basis for its jurisdiction over him.” Id. at 285 (citations omitted). Indeed, “the

mere fact that [the defendant’s] conduct affected plaintiffs with connections to the

forum State does not suffice to authorize jurisdiction.” Id. at 291. The majority’s

reliance on the fact that “settlement talks in California” were “not directed at

Virginia, but rather to Delphix’s right to use the mark in California and abroad”

contravenes these limits on specific jurisdiction. Majority Disposition at 7. Under

the majority’s approach, any time a licensor seeks to enforce its rights before the

TTAB or other agencies pursuant to a licensing agreement, it would automatically

be subject to the jurisdiction of the forum state in which the licensee is located,

particularly if the licensor engaged in settlement discussions regarding the use of

the license. However, neither the mere existence of a licensing agreement nor

settlement discussions regarding that agreement supports such an expansive

application of personal jurisdiction unmoored from actions directed at the forum

                                          10
state by the defendant. See id. I am not prepared to extend our precedent that far.

I respectfully dissent.

                                         11