Opinion
B292647
07-09-2020
MICHAEL SMITH et al., Plaintiffs and Appellants, v. TODD McNULTY et al., Defendants and Respondents.
Law Office of Justian Jusuf, Justian Jusuf; Law Offices of Sahag Majarian II and Sahag Majarian II for Plaintiffs and Appellants. Gordon Rees Scully Mansukhani, Matthew G. Kleiner and Andrea K. Scripps for Defendants and Respondents.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Los Angeles County Super. Ct. No. BC692644) APPEAL from an order of the Superior Court of Los Angeles County, Ann I. Jones, Judge. Affirmed. Law Office of Justian Jusuf, Justian Jusuf; Law Offices of Sahag Majarian II and Sahag Majarian II for Plaintiffs and Appellants. Gordon Rees Scully Mansukhani, Matthew G. Kleiner and Andrea K. Scripps for Defendants and Respondents.
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Named putative-class plaintiffs Michael Smith and Yolanda Dawn Johnson, who live and work in California, sued their employer and payroll processor claiming that plaintiffs' wage statements falsely identified the payroll processor as their employer in violation of California labor laws. Four specially appearing, non-Californian, individual defendants, who are the owners and members of the defendant companies, moved to quash service of the summons and complaint. The trial court granted the motions after finding that plaintiffs failed to demonstrate sufficient contacts with California to establish personal jurisdiction over any of the individual defendants. We agree with the trial court and affirm the order granting the motion to quash.
BACKGROUND
I. The complaint
Plaintiffs filed an unverified class action complaint on behalf of themselves and other temporary employees of Infinity Staffing Solutions, LLC, d/b/a Lyneer Staffing Solutions (Infinity) in California whose wage statements identified Ciera Staffing, LLC (Ciera) as the employer.
The complaint named several defendants, including Infinity, Ciera, and Staff4Jobs, LLC, d/b/a Lyneer Staffing Solutions (Staff4Jobs), all New Jersey domestic limited liability companies authorized to do business in California (collectively, the LLC defendants). Plaintiffs also sued New Jersey residents Gary Spinner, Todd McNulty, and James S. Radvany, and New Yorker Bryan F. Smith (together, the individual defendants), who are variously officers and members of the LLC defendants.
The gravamen of the complaint is that the individual defendants created the LLC defendants in a misguided application of Futrell v. Payday California, Inc. (2010) 190 Cal.App.4th 1419 to conceal the true identities of the class plaintiffs' employers. Futrell held, among other things, that a payroll processing company, who "handl[ed] the ministerial tasks of calculating pay and tax withholding, and . . . issuing paychecks, drawn on its own bank account" (id. at p. 1432), and who identified itself as the " 'employer of record' " (id. at p. 1427) for a producer of television commercials, was not the employer for purposes of the Labor Code and wage and hour laws (id. at pp. 1433, 1435).
Plaintiffs' complaint alleges that Infinity leases and operates nine "Lyneer Staffing Solutions offices in California." Infinity assigns its thousands of California employees to work on a temporary basis for its client companies and had its own payroll department to pay its employees. After Futrell, the individual defendants formed Ciera to act as the employer of record for Infinity's employees in California. Ciera handles all payroll functions, including paying wages, withholding taxes, and issuing W-2 forms for Infinity. Staff4Jobs only exists on paper. Since the formation of Ciera, wage statements issued to Infinity employees identify Ciera as their employer.
Plaintiffs were two of the temporary employees of Infinity in California assigned to work for one of that company's clients in California. Against the individual defendants and Infinity, their complaint seeks statutory penalties and alleges a representative action under the Labor Code Private Attorneys General Act (of 2004 (Lab. Code, § 2698 et seq.) for the failure to identify the correct employer under Labor Code section 226, subdivision (a)(8). II. The individual defendants' motion to quash
The complaint also asserts causes of action for breach of contract, negligent misrepresentation, and professional negligence against Staff4Jobs and Ciera.
Although the LLC defendants have not objected to personal jurisdiction, the individual defendants, all of whom were personally served outside California, specially appeared and moved to quash service of the summons and complaint on them for lack of personal jurisdiction. They supported their motion with declarations they had submitted in another California action, Argulo v. Infinity Staffing Solutions et al. (Super. Ct. Kern County, 2017, No. BCV-16-101739), to save the cost and avoid the inconvenience of re-execution, as the facts in the declarations were unchanged.
According to the declarations, Spinner, the sole member of Ciera, McNulty, the chief executive officer and comanaging member of Infinity, and Radvany, the chief financial officer and comanaging member of Infinity, are all residents of New Jersey, where they intend to remain. None of the three has ever lived in California. Defendant Smith, president of Infinity and a New York resident, lived in California from 1994 through 2001.
The individual defendants each declared they had no property or assets in California. They never met with plaintiff Argulo in California. All work they performed on behalf of Infinity and Ciera pertaining to the litigation occurred outside of California. Infinity sent pay checks to McNulty and Radvany in New Jersey and to Smith in New York. Ciera sent Spinner's compensation to him in New Jersey. None of the individual defendants consented to jurisdiction. III. Plaintiffs' opposition to the motion to quash
The opposition argued that the individual defendants aimed their Futrell scheme directly at California to avoid liability for unpaid wages owed to thousands of temporary employees in this state in violation of the California Labor Code. Nine of the approximately 60 Infinity offices in the country are in California. Plaintiffs also argued that notions of "fair play" required that the individual defendants defend their action in California because it would be unfair and unjust to force plaintiffs to pursue their California wage claims in three separate states, and because California has a strong public policy of enforcing its wage and hour laws.
Plaintiffs demonstrated that the LLC defendants, all New Jersey domestic limited liability companies, were registered to do business in California. Ciera's registration application was signed by Spinner, and Staff4Jobs's registration application was signed by Radvany.
Plaintiffs also included the staffing services agreement signed by Radvany for Staff4Jobs and Spinner for Ciera, under which the former LLC engaged the latter to provide payroll and back office services between March 2015 and March 2018. The opposition cited three additional staffing services agreements between Infinity and Ciera for terms lasting from May 2012 through March 2020, signed by Radvany for Infinity, and two of which were signed by Spinner for Ciera. All of the agreements were executed in New Jersey and stated they were governed by the laws of New Jersey. Radvany also executed a lease for Infinity's office space in Bakersfield. Plaintiffs' attorney declared that the Bakersfield lease was the only one he received despite his request for production of all of Infinity's leases in California.
Spinner testified in his deposition taken in Argulo that he is the chief operating officer of Infinity. He hatched the idea of forming Ciera and presented it to Radvany who "took it to" McNulty. Ciera is a "single-member LLC" and Spinner is the sole member. Ciera has no president, secretary, or treasurer, and so Spinner is "it" at Ciera. Spinner works at Ciera's office in New Jersey. Infinity had about 3,000 California employees during its services contract with Ciera. Ciera's only customers in California are Infinity and Staff4Jobs.
Smith testified that he ran a department in New Jersey in charge of hiring and training. IV. The trial court's order granting the motion to quash
The trial court found that plaintiffs failed to meet their burden to establish personal jurisdiction by substantial evidence and granted the individual defendants' motion to quash. Plaintiffs timely appeal.
DISCUSSION
I. Minimum contacts and the standard of review
California's long arm statute permits courts to exercise jurisdiction over nonresidents "on any basis not inconsistent with the Constitution of this state or of the United States." (Code Civ. Proc., § 410.10.) "The exercise of jurisdiction over a nonresident defendant comports with these Constitutions 'if the defendant has such minimum contacts with the state that the assertion of jurisdiction does not violate " 'traditional notions of fair play and substantial justice.' " ' " (Pavlovich v. Superior Court (2002) 29 Cal.4th 262, 268.) Minimum contacts exist when the defendant's contacts with the forum state are such that the defendant had " 'fair warning' " that its activities might subject it to personal jurisdiction in that forum. (Burger King Corp. v. Rudzewicz (1985) 471 U.S. 462, 472.) The test "asks 'whether the "quality and nature" of the defendant's activity is such that it is "reasonable" and "fair" to require him to conduct his defense in that State.' [Citations.] The test 'is not susceptible of mechanical application; rather, the facts of each case must be weighed to determine whether the requisite "affiliating circumstances" are present.' " (Snowney v. Harrah's Entertainment, Inc. (2005) 35 Cal.4th 1054, 1061 (Snowney).) "In judging minimum contacts, a court properly focuses on 'the relationship among the defendant, the forum, and the litigation.' " (Calder v. Jones (1984) 465 U.S. 783, 788.) "Each defendant's contacts with the forum State must be assessed individually." (Id. at p. 790.)
General personal jurisdiction, in which the cause of action need not be related to the defendant's contacts, attaches to a nonresident defendant whose "contacts in the forum state are 'substantial . . . continuous and systematic' " (Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 445) and "so wide-ranging that they take the place of physical presence in the forum as a basis for jurisdiction" (id. at p. 446). Absent such extensive contacts, a nonresident defendant may be subject to specific, or " ' "case-linked" ' " personal jurisdiction (David L. v. Superior Court (2018) 29 Cal.App.5th 359, 366), meaning jurisdiction in an action arising out of or related to the defendant's contacts with the forum state (HealthMarkets, Inc. v. Superior Court (2009) 171 Cal.App.4th 1160, 1167). For specific personal jurisdiction to attach, " 'the defendant's suit-related conduct must create a substantial connection with the forum [s]tate.' " (David L., at p. 366.) The "defendant's relationship with a plaintiff or third party, standing alone, is an insufficient basis for jurisdiction." (Walden v. Fiore (2014) 571 U.S. 277, 286.)
A plaintiff opposing a motion to quash service of process for lack of personal jurisdiction has the initial burden to demonstrate facts establishing a basis for personal jurisdiction. (Snowney, supra, 35 Cal.4th at p. 1062.) "The plaintiff must provide specific evidentiary facts, through affidavits and other authenticated documents, sufficient to allow the court to independently conclude whether jurisdiction is appropriate." (Strasner v. Touchstone Wireless Repair & Logistics, LP (2016) 5 Cal.App.5th 215, 222.) If the plaintiff satisfies that burden, the burden shifts to the defendant to show that the exercise of jurisdiction would be unreasonable. (Snowney, at p. 1062.) When, as here, the evidence in connection with the motion to quash is undisputed, we independently review the trial court's ruling. (Vons Companies, Inc. v. Seabest Foods, Inc., supra, 14 Cal.4th at p. 449.) II. No general personal jurisdiction over Spinner.
The individual defendants incorrectly argue that plaintiffs forfeited their contention concerning general personal jurisdiction over Spinner for failure to raise it below. Plaintiffs did raise the issue below and the trial court addressed it.
Plaintiffs' evidence that the LLC defendants are authorized to do business, and have nine offices and thousands of employees, in California may be sufficient to demonstrate general jurisdiction over the LLC defendants. (See Bristol-Myers Squibb Co. v. Superior Court of Cal., San Francisco Cty. (2017) 582 U.S. ___ [137 S.Ct. 1773, 1780].) But the LLC defendants do not contest jurisdiction. Plaintiffs contend that Spinner is likewise subject to general personal jurisdiction in California because he conducted business here since 2012 on a continuous basis through his alter ego Ciera. The individual defendants counter that jurisdiction may not be conferred on them simply by virtue of their status as members of the LLC defendants and plaintiffs have not demonstrated facts sufficient to pierce the corporate veil.
In the case of a foreign limited liability company, general personal jurisdiction over its members may be established by use of the alter ego doctrine. (Curci Investments, LLC v. Baldwin (2017) 14 Cal.App.5th 214, 221; Corp. Code, § 17703.04, subd. (b).) The legal separation between a limited liability company and its members "may be disregarded by the courts 'when [a corporation or LLC] is used [by one or more individuals] to perpetrate a fraud, circumvent a statute, or accomplish some other wrongful or inequitable purpose.' [Citations.] In those situations, the corporation's or LLC's actions will be deemed 'to be those of the persons or organizations actually controlling the corporation [or LLC], in most instances the equitable owners.' " (Curci Investments, at p. 221.)
Two conditions must be met to invoke the doctrine: "First, there must be such a unity of interest and ownership between the corporation and its equitable owner that the separate personalities of the corporation and the shareholder do not in reality exist. Second, there must be an inequitable result if the acts in question are treated as those of the corporation alone." (Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, 538.) "Conditions under which the corporate entity may be disregarded vary by circumstance, but courts often consider commingling of funds, personal use of corporate assets, inadequate corporate records, lack of employees, offices, or operating funds, . . . inadequate capitalization" (CADC/RADC Venture 2011-1 LLC v. Bradley (2015) 235 Cal.App.4th 775, 789), disregard of corporate formalities, and failure to maintain an arm's-length relationship among related entities (Zoran Corp. v. Chen (2010) 185 Cal.App.4th 799, 811-812).
The only evidence plaintiffs have presented on the question of alter ego is that Ciera has no president, secretary, or treasurer, and so Spinner was "it" at Ciera. But a limited liability company can have a single member and maintain its corporate separateness. (See Corp. Code, § 17704.01, subd. (a).) And "that a person owns all of the corporate stock and makes all of the management decisions is insufficient to cause the court to disregard the corporate entity." (Leek v. Cooper (2011) 194 Cal.App.4th 399, 415.) As plaintiffs presented no evidence concerning corporate structure or formalities, funding, capitalization, or the use of corporate funds, they have not demonstrated a unity of interest and ownership between Spinner and Ciera necessary to pierce Ciera's corporate veil to establish general personal jurisdiction over Spinner. III. No specific personal jurisdiction over any of the individual defendants
Plaintiffs contend that the individual defendants are subject to case-linked or specific jurisdiction. They argue that California has rejected the so-called fiduciary shield doctrine. That "doctrine prevents the exercise of personal jurisdiction over an individual whose activities were performed solely in a corporate or employment capacity." (Goehring v. Superior Court (1998) 62 Cal.App.4th 894, 905.)
Admittedly, an "individual's status as an employee acting on behalf of his or her employer does not insulate the individual from personal jurisdiction based on his or her forum contacts." (Anglo Irish Bank Corp., PLC v. Superior Court (2008) 165 Cal.App.4th 969, 981.) Personal jurisdiction over a corporation does not automatically establish personal jurisdiction over its officers, directors, agents and employees. (See Calder v. Jones, supra, 465 U.S. at p. 790.) Rather, as noted, we must separately assess each defendant's contact with the forum. (Ibid.)
Courts may exercise specific personal jurisdiction over a nonresident defendant only if: "(1) 'the defendant has purposefully availed himself or herself of forum benefits' [citation]; (2) 'the "controversy . . . 'arises out of' [the] defendant's contacts with the forum" ' [citations]; and (3) ' "the assertion of personal jurisdiction would comport with 'fair play and substantial justice.' " ' " (Pavlovich v. Superior Court, supra, 29 Cal.4th at p. 269, italics added.) "These guidelines are not susceptible of mechanical application, and the jurisdictional rules are not clear-cut. Rather, a court must weigh the facts in each case to determine whether the defendant's contacts with the forum state are sufficient." (Bridgestone Corp. v. Superior Court (2002) 99 Cal.App.4th 767, 774.)
The first prong of the test, the purposeful availment, " ' "inquiry . . . focuses on the defendant's intentionality. [Citation.] This prong is only satisfied when the defendant purposefully and voluntarily directs [its] activities toward the forum so that [it] should expect, by virtue of the benefit [it] receives, to be subject to the court's jurisdiction based on" [its] contacts with the forum.' [Citations.] Thus, purposeful availment occurs where a nonresident defendant ' "purposefully direct[s]" [its] activities at residents of the forum' [citation], " 'purposefully derive[s] benefit" from' its activities in the forum [citation], "create[s] a "substantial connection" with the forum' [citation], ' "deliberately" has engaged in significant activities within' the forum [citation], or 'has created "continuing obligations" between [itself] and residents of the forum' [citation]. By limiting the scope of a forum's jurisdiction in this manner, the ' "purposeful availment" requirement ensures that a defendant will not be haled into a jurisdiction solely as a result of "random," "fortuitous," or "attenuated" contacts.' " (Snowney, supra, 35 Cal.4th at pp. 1062-1063.)
Toward this end, plaintiffs rely on the so-called effects test of purposeful availment established in Calder v. Jones, supra, 465 U.S. 783. The individual defendants counter that the Calder effects test only applies to cases involving intentional and business torts. However, there are several tests for purposeful availment. (See Gilmore Bank v. AsiaTrust New Zealand Ltd. (2014) 223 Cal.App.4th 1558, 1572.) The purposeful availment prong does not turn mechanically on whether the plaintiff's claim sounds in intentional tort, contract, or violation of a statute. (See id. at p. 1571.) "Rather, a court must apply ' "a 'highly realistic' approach" ' on a case-by-case basis and select the most appropriate test for purposeful availment based on the particular facts presented." (Ibid.)
Here, plaintiffs have not shown any purposeful availment to establish sufficient minimum contacts with California to confer personal jurisdiction over any of the individual defendants. With respect to Spinner, not only does the record lack evidence to pierce Ciera's corporate veil to confer personal jurisdiction over him, but plaintiffs have not shown the requisite purposeful availment. Plaintiffs argue that it was Spinner's idea to create Ciera and he applied for Ciera to do business in California. Yet, Ciera is not a defendant in the Labor Code causes of action. What is more important, "the mere causing of an effect ' "is not necessarily sufficient to afford a constitutional basis for jurisdiction." ' " (Goehring v. Superior Court, supra, 62 Cal.App.4th at p. 908.) Plaintiffs add that Spinner executed the staffing contracts with Infinity on behalf of Ciera. But those contracts were executed in New Jersey and specify in their choice of law clause that the laws of New Jersey govern those contracts. Otherwise, the individual defendants demonstrated that Spinner never came to California, and plaintiffs presented no counter evidence that he reached into California by making telephone calls, sending emails, or contacting or speaking to anyone in California related to the injury alleged in this lawsuit.
Smith is president of Infinity and ran its department in New Jersey in charge of hiring and training. But Smith has not lived in California in nearly two decades and plaintiffs presented no evidence that he came to California in connection with the LLC defendants, trained any employees in California, or made any attempts to reach into California by soliciting employees or business, making telephone calls, executing contracts, or sending emails to California. And, the alleged injury is not related to hiring and training.
Radvany's signature on Infinity's staffing services agreements making Ciera the employer of record for Infinity's temporary employees, is insufficient alone to demonstrate purposeful availment of the benefits of California to impose specific personal jurisdiction over him. As noted, those contracts were executed in New Jersey and chose New Jersey law as the governing law, and plaintiffs cited no other contact Radvany had with the forum.
The evidence concerning McNulty is even more attenuated. He was a member of Infinity and was aware of Spinner's decision to start Ciera. But, the "purposes and acts of one party—even an alleged co-conspirator—cannot be imputed to a third party." (In re Automobile Antitrust Cases I & II (2005) 135 Cal.App.4th 100, 113.)
Jayone Foods, Inc. v. Aekyung Industrial Co. Ltd. (2019) 31 Cal.App.5th 543, relied on by plaintiffs, actually demonstrates the individual defendants' lack of minimum contacts. In Jayone Foods, in the context of a wrongful death action against the importer of a cleaning agent, the importer cross-complained against the Korean distributor of the cleaning agent, who then challenged personal jurisdiction. (Id. at p. 548.) The appellate court held that the importer had shown purposeful availment because the Korean distributor engaged in a number of direct sales transactions with multiple California distributors, sold thousands of units of its products here, all of its products were shipped through California, the distributor and importer had regular email and telephone communications, and the distributor came to California. (Id. at pp. 556-558.) Jayone Foods has nothing to do with the question of jurisdiction over individual members of LLC defendants. Moreover, plaintiffs have not shown that the individual defendants here maintained similar contacts with California as had the Korean distributor.
As plaintiffs have failed to meet the purposeful availment prong for the individual defendants, we need not address the other factors of minimum contacts for specific personal jurisdiction over them. IV. Discovery
Plaintiffs contend that the trial court erred in denying their request to conduct more discovery into personal jurisdiction. "A plaintiff attempting to assert jurisdiction over a nonresident defendant is entitled to an opportunity to conduct discovery of the jurisdictional facts necessary to sustain its burden of proof." (In re Automobile Antitrust Cases I & II, supra, 135 Cal.App.4th at p. 127.) A ruling on a request for continuance falls within the discretion of the trial court. A continuance may be denied if there is no showing discovery would likely produce evidence sufficient to establish jurisdiction. (Beckman v. Thompson (1992) 4 Cal.App.4th 481, 487.) Despite repeated requests from the trial court, plaintiffs were unable to explain what evidence they sought, or that any such evidence would likely lead to jurisdiction-related facts. Moreover, plaintiffs had already deposed Spinner and Smith where they had the opportunity to discover relevant information. That the defense of those depositions was "obstreperous" did not undermine what facts Spinner and Smith did testify to. Even on appeal, plaintiffs do not point to any discovery that would likely produce more facts related to jurisdiction. The denial of additional discovery was not an abuse of discretion.
DISPOSITION
The order is affirmed. Respondents are awarded their costs on appeal.
NOT TO BE PUBLISHED.
DHANIDINA, J. We concur:
EDMON, P. J.
EGERTON, J.