District Court Grants Third-Party Cross-Claim Malaysian Defendant’s Motion to Dismiss for Lack of Personal Jurisdiction

The World in U.S. Courts: Winter 2015 - Personal Jurisdiction | December.11.2014

Allphin v. Peter K. Fitness, LLC, U.S. District Court for the Northern District of California, December 11, 2014

Plaintiff, an individual claiming injuries arising from her use of a defective fitness band, brought products liability claims against Defendants, Peter K. Fitness and Fulco Fulfillment. The defendants filed cross-claims for indemnification and contribution against Ideal Jacobs (Malaysia) Corporation (“IJ Malaysia”), along with various other parties.

At issue was whether the Court could exercise personal jurisdiction over IJ Malaysia, which was alleged to be a limited-share public company incorporated in Malaysia and “an investment holding company” for a Chinese company. Personal jurisdiction in California was allegedly based on IJ Malasia having committed a tortious act in the state. In particular, IJ Malaysia was alleged to have designed, constructed, and sold the fitness band upon which Plaintiff’s claims were based. It was also alleged to be a subsidiary of a corporation authorized to conduct business in California and thus itself subject to personal jurisdiction in the state. Finally, it was alleged to be part of a joint venture with other cross-claim defendants, and that the contacts of all should be considered in determining whether jurisdiction exists over any.

IJ Malaysia filed a motion to dismiss the cross-claim, contending that it is not subject to general or specific jurisdiction in California because it has no contacts with the United States or California. IJ Malaysia argued that it is “merely a holding company,” and not a party to any contractual agreement with either of the named defendants. It also denied that it was involved in the design, construction, fabrication, or sale of the fitness band at issue.

After taking judicial notice of various website information of the respective parties to the litigation, the Court applied the three-prong test established for personal jurisdiction: whether (1) the non-resident defendant purposefully directed his activities or consummated some transaction within the forum or a resident of the forum, or purposefully availed himself of the privilege of conducting activity in the forum; (2) the claim arises out of or relates to defendant’s forum-related activities; and (3) the exercise of jurisdiction comports with fair play and substantial justice (i.e., is reasonable).

The Court applied the personal jurisdiction standard for tort-based actions and assessed whether IJ Malaysia’s activities were “purposefully directed” at California, and found that they were not. First, the Court found that the actions of an individual who held positions with both IJ Malaysia and a U.S. company were insufficient to confer jurisdiction upon IJ Malaysia, as it was unclear on whose behalf the individual was acting during his contacts with California. Second, under the “representative services doctrine,” the Court found that IJ Malaysia, as a passive holding company would be subject to jurisdiction on the basis of its Chinese subsidiary’s actions only where “the local subsidiary performs a function that is compatible with, and assists the parent in the pursuit of, the parent’s own business.” Here, the subsidiary’s contacts with California were insufficient to confer jurisdiction. Finally, even assuming that IJ Malaysia was not a passive holding company, the Court determined that its potential contacts with California did not give rise to the claims alleged in the complaint. Though the Court granted IJ Malaysia’s motion to dismiss for lack of personal jurisdiction, it also granted Defendants request for limited jurisdictional discovery on the issue.

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