DMITRY PITERMAN v. GOLD COAST EXOTIC IMPORTS LLC, et al.
Case No. 5:20-cv-07724-EJD
UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION
May 10, 2021
EDWARD J. DAVILA United States District Judge
The Court took both motions under submission for decision without oral argument pursuant to Civil Local Rule 7-1(b). For the reasons below, the Court GRANTS the Gold Coast Motion, GRANTS the Rolls-Royce Motion and COMPELS arbitration of this action.
I. Background
Plaintiff is a resident of Monterey, California. Dkt. No. 1, Complaint, ¶ 3; see also Declaration of Dmitry Piterman in Support of Plaintiff‘s Opposition to Defendants Gold Coast Exotic Imports LLC and Joseph Perillo‘s FRCP 12(B)(2) Motion to Dismiss (“Perillo Decl.“) ¶ 3. In late September 2018, Plaintiff was in Europe conducting internet research in the hopes of buying a car when he discovered that Gold Coast (doing business as “Rolls Royce Motor Cars Gold Coast“) was advertising for sale a 2018 Rolls Royce Dawn (the “Vehicle“). Id. Plaintiff called the dealership and inquired about the Vehicle. Soon thereafter, Plaintiff returned to California and continued to exchange emails with the Gold Coast personnel regarding his potential purchase of the Vehicle. He requested additional photographs of the Vehicle and more information about its year, mileage, identification number and other features. Id. at Ex. 2. Gold Coast sent the requested information and also requested information back from Plaintiff so that it could complete a credit check. Id.
On or about, October 11, 2018, Gold Coast sent a purchase and sale contract for the Vehicle to Plaintiff at his residence in California by Federal Express. Plaintiff signed the contract in California and mailed back it to Defendants from California. See Id. ¶ 4. On or around October 20, 2018, the parties finalized an agreement by which Plaintiff would lease the Vehicle for $390,995. Compl. ¶ 10. The transaction was memorialized in a written Motor Vehicle Lease Agreement (“Lease Agreement“). Id.; see Declaration of Andrew K. Stefatos (“Stefatos Decl.“) ¶ 3, Ex. 1. At no point prior to executing the Lease Agreement did any Defendant disclose that the Vehicle had been in an accident, that the warranty had been commenced 8 months earlier, that the car did not have its original paint, that the car was not new, that the car was a “demo,” or that the car was an “executive vehicle.” Compl. ¶ 11.
In May 2020, Plaintiff took the car to a Rolls-Royce dealer in Los Gatos for standard service work and because the paint appeared to be blistering. Id. ¶ 12. The Los Gatos dealership observed that the rear body panels, the rear bumper, and the gas cap filler were out of alignment due to torsion from an accident and that the car had been repainted. Id. Upon further
In or around September 2021, Plaintiff filed an arbitration demand with the AAA. Section 41 of the Lease Agreement contains an Arbitration Clause. Lease Agreement ¶ 41. The Arbitration Clause is set forth in its own section and is titled (in capitalized, bold lettering), ”Arbitration Clause PLEASE REVIEW – IMPORTANT – AFFECTS MY LEGAL RIGHTS.” Id. The Arbitration Clause states in pertinent part:
NOTICE: Either you or I may choose to have any dispute between us decided by arbitration and not in a court or by jury trial. If a dispute is arbitrated, I will give up my right to participate as a class representative or class member on any Claim I may have against you including any right to class arbitration or any consolidation of individual arbitrations. Discovery and rights to appeal in arbitration are generally more limited than in a lawsuit, and other rights you and I would have in court may not be available in arbitration.
Any claim or dispute whether in contract, tort, statute or otherwise (including the interpretation and scope of this clause, and the arbitrability of the claim or dispute), between me and you or your employees, agents, successors or assigns, which arise out of or relate to my credit application, lease, purchase or condition of this Vehicle, this Lease or any resulting transaction or relationship (including any such relationship with third parties who do not sign this Lease) shall, at your or my election, be resolved by neutral, binding arbitration and not by a court action. Any claim or dispute is to be arbitrated by a single arbitrator on an individual basis and not as a class action or other mass action. I expressly waive any right I may have to arbitrate a class action. I may choose the following arbitration organization and its applicable rules: the National Arbitration Forum, Box 50191, Minneapolis, MN 55405-0191 (www.adrforum.com), or any
organization that I may choose subject to your approval. I may get a copy of the rules of these organizations by contacting the arbitration organization or visiting its website.
Id. On September 21, 2020, the AAA sent a letter to Plaintiff and former counsel for Gold Coast, stating:
“Prior to the filing of this arbitration, the business failed to comply with the AAA‘s policies regarding consumer claims. Accordingly, we must decline to administer this claim and any other claims between Rolls Royce Gold Coast aka Gold Coast Exotic Imports LLC and its consumers at this time. These policies can be found on our web site, www.adr.org, in the Consumer Due Process Protocol (“Protocol“) and the Consumer Arbitration Rules (“Consumer Rules“), including the Costs of Arbitration.”
Gold Coast Motion at Ex. 3 (“AAA Letter“). The parties dispute when and the extent to which each of the Defendants were aware of Plaintiff‘s attempt to arbitrate or of the AAA‘s declination.
Plaintiff then filed the present action on November 2, 2020, alleging (1) breach of contract, (2) fraud, (3) breach of the implied covenant of good faith and fair dealing, (4) unfair business practices, and (5) rescission. The Rolls-Royce Defendants each filed an Answer. Dkt Nos. 8-10. After the deadline to answer passed, Plaintiff filed a Motion for Entry of Default against Gold Coast and Mr. Perillo and the Clerk of Court issued an Entry of Default as to those Defendants. Dkt. Nos. 23, 24. The same day that the Clerk entered default, the Gold Coast Defendants filed their Motion to Dismiss for Lack of Personal Jurisdiction; or, In the Alternative, To Compel Arbitration. Shortly thereafter, the Rolls-Royce Defendants also filed a Motion to Compel Arbitration.
II. Gold Coast Defendants’ Motion to Dismiss
The Gold Coast Defendants argue that this Court lacks personal jurisdiction over them because they are not residents of California and they do not have the requisite “minimum contacts” with California, such that subjecting them to personal jurisdiction in this Court would offend traditional notions of fair place and substantial justice. Defendants further argue, in the alternative, that the Court should compel arbitration pursuant to the Lease Agreement‘s arbitration clause. Because “[t]he district court must have personal jurisdiction over each individual third-party entity before compelling them to arbitrate,” the Court first considers whether personal
A. Legal Standard
Under
“For a court to exercise personal jurisdiction over a nonresident defendant consistent with due process, that defendant must have ‘certain minimum contacts’ with the relevant forum ‘such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.‘” Mavrix Photo, Inc. v. Brand Techs., Inc., 647 F.3d 1218, 1223 (9th Cir. 2011) (quoting Int‘l Shoe Co. v. State of Wash., Off. of Unemployment Comp. & Placement, 326 U.S. 310, 316 (1945)).
Personal jurisdiction may be either general or specific. General personal jurisdiction exists when the defendant is “fairly regarded at home” in the jurisdiction. Bristol-Myers Squibb Co. v. Superior Ct. of California, San Francisco Cty., 137 S. Ct. 1773, 1780 (2017). Specific jurisdiction exists “where the cause of action arises out of or has a substantial connection to the defendant‘s contacts with the forum.” Apple Inc. v. Allan & Assocs. Ltd., 445 F. Supp. 3d 42, 51 (N.D. Cal. 2020) (citing Glencore Grain Rotterdam B.V. v. Shivnath Rai Harnarain Co., 284 F.3d 1114, 1123 (9th Cir. 2002). The Ninth Circuit has established a three-prong test to
- The non-resident defendant must purposefully direct his activities or consummate some transaction with the forum or resident thereof; or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws;
- the claim must be one which arises out of or relates to the defendant‘s forum-related activities; and
- the exercise of jurisdiction must comport with fair play and substantial justice, i.e. it must be reasonable.
Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 802 (9th Cir. 2004). “The plaintiff bears the burden of satisfying the first two prongs of the test.” Id. If the plaintiff does so, the burden then shifts to the defendant to “present a compelling case” that the exercise of jurisdiction would not be reasonable. Id.
Under the first prong, a plaintiff must establish that the defendant either “purposefully availed” itself of the privileges of California or “purposefully directed” its activities toward California. The Ninth Circuit has explained that “in tort cases, we typically inquire whether a defendant ‘purposefully direct[s] his activities’ at the forum state, applying an ‘effects’ test that focuses on the forum in which the defendant‘s actions were felt, whether or not the actions themselves occurred within the forum.” Mavrix Photo, Inc., 647 F.3d at 1228 (citing Yahoo! Inc. v. La Ligue Contre Le Racisme Et L‘Antisemitisme, 433 F.3d 1199, 1206 (9th Cir. 2006) (en banc)). “The ‘effects’ test, which is based on the Supreme Court‘s decision in [Calder v. Jones], requires that the defendant allegedly must have (1) committed an intentional act, (2) expressly aimed at the forum state, (3) causing harm that the defendant knows is likely to be suffered in the forum state.” Mavrix Photo, Inc., 647 F.3d at 1228; citing Calder v. Jones, 465 U.S. 783 (1984).
B. Defendant Gold Coast
Gold Coast is an Illinois licensed motor vehicle dealer located in Illinois. Compl. ¶ 4. It has never been licensed nor qualified to do business in the State of California, nor sought to be licensed or qualified to do business in California. Declaration of Joseph J. Perillo (“Perillo Decl.“) ¶ 2. The dealership has no physical location, operations, or employees in California and does not advertise in California. Id. ¶¶ 3-4. Plaintiff does not dispute these facts and does not raise any allegations or arguments related to general jurisdiction. Rather, Plaintiff argues that specific personal jurisdiction over Gold Coast is proper because Gold Coast conducts commercial activity on its website. Opp. at 4-5.
The Ninth Circuit utilizes a sliding scale when examining whether a website provides grounds for personal jurisdiction. See Cybersell, Inc. v. Cybersell, Inc., 130 F.3d 414, 418–19 (9th Cir. 1997). “At one end of the scale [are] active sites ‘where a defendant clearly does business over the Internet’ and ‘enters into contracts with residents of a foreign jurisdiction that involve the knowing and repeated transmission of computer files over the Internet,’ which support[s] jurisdiction.” Mavrix Photo, Inc., 647 F.3d at 1226 (quoting Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119, 1124 (W.D. Pa. 1997)). “At the other end [are] passive sites ‘where a defendant has simply posted information on an Internet Web site which is accessible to users in foreign jurisdictions,’ and which do[es] not support jurisdiction.” Id. at 1226–27 (quoting Zippo Mfg. Co., 952 F. Supp. at 1124). Under this analysis, the Court determines jurisdiction by examining the “level of interactivity and commercial nature of the exchange that occurs on the Web site.” Id. at 1227 (quoting Zippo Mfg. Co., 952 F. Supp. at 1124).
Plaintiff argues that Gold Coast does business on its website such that its website should be considered “active.” In support of this argument, Plaintiff alleges that he first discovered the Vehicle by viewing it on Gold Coast‘s website. Dkt. No. 27-1, Declaration of Dmitry Piterman in Support of Plaintiff‘s Opposition to Defendants Gold Coast Exotic Imports LLC and Joseph Perillo‘s FRCP 12(B)(2) Motion to Dismiss (“Piterman Decl.“) ¶ 3. He further alleges that he exchanged a number of email communications with Gold Coast regarding the details of the
The Court does not find this argument persuasive. As an initial matter, the only part of the transaction that allegedly occurred on the website itself was Plaintiff‘s initial viewing of the vehicle listing, which occurred while Plaintiff was in Europe, not California. The Ninth Circuit has held that “merely advertising over the Internet is not sufficient to confer jurisdiction throughout the United States, even though the advertisement or website at issue may be viewed nationwide.” Boschetto v. Hansing, 539 F.3d 1011, 1022 (9th Cir. 2008) (citing Pebble Beach Co. v. Caddy, 453 F.3d 1151, 1157–58 (9th Cir. 2006)).
The remainder of Plaintiff‘s interactions with Gold Coast allegedly occurred via telephone, email, or FedEx, outside of the confines of the website. Plaintiff does not raise any other allegations about business conducted on Gold Coast‘s website. In the absence of any allegations suggesting that Plaintiff‘s transaction occurred through the website or that Gold Coast uses its website to conduct business in California generally, the Court finds that Gold Coast‘s internet presence alone does not provide a basis for personal jurisdiction. Cf. Zippo Mfg. Co., 952 F. Supp. at 1125–26 (finding that defendant‘s “electronic commerce with Pennsylvania residents” through its website constituted purposeful availment where defendant had contracted with thousands of Pennsylvania residents and several internet service providers).
Plaintiff next argues that personal jurisdiction exists based on Gold Coast‘s “purposeful direction” of the vehicle into California under the Calder test. See Calder, 465 U.S. 783. Plaintiff‘s argue that Gold Coast purposefully directed its conduct toward California by: (1) “distributing in California goods originating elsewhere in Illinois,” (2) “generat[ing] numerous internet and email correspondences to Plaintiff in California in order to obtain Plaintiff‘s business, and thereafter . . . to finalize the subject transaction;” and (3) attempting to solicit new business
In Boschetto, the Ninth Circuit considered whether a Wisconsin-based auto dealer‘s sale of a vehicle through eBay provided sufficient minimum contacts to support personal jurisdiction in California. Just as in this case, the parties in Boschetto communicated by email to arrange the sale and delivery of the vehicle, and the buyer paid to have the vehicle shipped to California. The Ninth Circuit held that the dealer was not subject to personal jurisdiction, finding that “the lone transaction for the sale of one item does not establish that the Defendants purposefully availed themselves of the privilege of doing business in California.” Id. at 1017. The court went on to explain that “[t]he arrangement between [plaintiff] and [defendant] which is, at bottom, a contract for the sale of a good, is insufficient to have created a substantial connection with California” where the contract involved no ongoing obligations in California. Id.
The same is true in the present case. Gold Coast‘s “lone transaction” for the sale of the Vehicle to a California resident is not sufficient to create personal jurisdiction over Gold Coast in California. See id. (“we are guided by the Supreme Court‘s admonition that the formation of a contract with a nonresident defendant is not, standing alone, sufficient to create jurisdiction“) (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 478 (1985) (“If the question is whether an individual‘s contract with an out-of-state party alone can automatically establish sufficient minimum contacts in the other party‘s home forum, we believe the answer clearly is that it cannot.“)); see also Glob. Commodities Trading Grp., Inc. v. Beneficio de Arroz Choloma, S.A., 972 F.3d 1101, 1110 (9th Cir. 2020) (explaining that “signing a single contract with a forum resident on behalf of a corporation would not subject a corporate officer to personal jurisdiction in a claim for breach of contract“).
This is true even though the parties negotiated the deal through email while Plaintiff was physically in California. The Boschetto court also considered the exchange of email
Finally, Plaintiff argues that Gold Coast “continued to solicit his business” following the transaction. The only allegation or argument Plaintiff raises on this point is that a Gold Coast manager emailed Plaintiff a link for a 2020 Lamborghini Huracan EVO Roadster in October 2019. One isolated, unrelated email from Gold Coast to a resident of California is not sufficient to establish that Gold Coast “purposefully availed” itself of the privileges of California or “purposefully directed” its activities toward California.
Thus, the Court finds that Plaintiff failed to meet his burden of showing specific personal jurisdiction over Defendant Gold Coast.
C. Defendant Perillo
Mr. Perillo is the manager and dealer operator of Gold Coast. Perillo Decl. ¶ 1. The parties largely do not distinguish Defendants Perillo and Gold Coast. Indeed, Plaintiff did not raise any arguments or allegations specific to Mr. Perillo in his Opposition. Courts, however, “do not impute a corporation‘s forum contacts to each of the corporation‘s employees.” Glob. Commodities Trading Grp., Inc., 972 F.3d at 1109. Rather, “each party‘s ‘contacts with the forum [s]tate must be assessed individually.‘” In re Boon Glob. Ltd., 923 F.3d at 651 (citing Calder, 465 U.S. at 790).
Plaintiff alleges Mr. Perillo is an “individual residing in Chicago, Illinois,” and that he made knowing misrepresentations regarding the Vehicle. Compl. ¶ 23. In his Declaration,
The Court finds that Plaintiff has failed to allege any basis for personal jurisdiction against Defendant Gold Coast or Defendant Perillo. Therefore, the Motion to Dismiss is GRANTED. Because the Court grants the Gold Coast Defendants’ Motion on personal jurisdiction grounds, it need not reach the Gold Coast Defendants’ alternative request to compel arbitration.
III. Rolls-Royce Defendants’ Motion to Compel Arbitration
A. Legal Standard
The Federal Arbitration Act (“FAA“) declares “that a written agreement to arbitrate . . . ‘shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract,‘” and thereby establishes a “liberal federal policy favoring arbitration.” Moses H. Cone Mem‘l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983) (quoting
“The Supreme Court has consistently recognized ‘the emphatic federal policy in favor of arbitral dispute resolution,’ a policy that ‘applies with special force in the field of international commerce.‘” Balen v. Holland Am. Line Inc., 583 F.3d 647, 652 (9th Cir. 2009) (quoting
B. Discussion
The Rolls-Royce Defendants argue that the Lease Agreement contains a valid and fully enforceable arbitration clause that allows them to compel arbitration. Specifically, they argue that the Rolls-Royce Defendants are third-party beneficiaries of the Lease Agreement. A non-signatory who is an intended third-party beneficiary of an arbitration agreement has the right to enforce the arbitration agreement.
This arbitration clause in the Lease Agreement, by its express terms, applies to claims relating to the “condition of this Vehicle” or arising out of any relationship, “including any such relationship with third parties who do not sign this Lease.” Lease Agreement ¶ 41. The arbitration clause includes any claims against affiliates of the dealership and their assignee, Financial Services Vehicle Trust (“FSVT“), as identified and detailed in Sections 2 and 20 of the Lease Agreement. Rolls-Royce Defendants are all affiliates of FSVT. Declaration of Travis Brown in Support of Defendant‘s Motion to Compel Arbitration and Stay of Action (“Brown Decl.“) ¶¶ 6-8.
The Lease Agreement also contemplates that Rolls-Royce provides the warranty covering the condition of the Vehicle. Rolls-Royce is, accordingly, an intended third-party beneficiary of
Plaintiff does not dispute that the arbitration clause is valid and enforceable, or that Rolls-Royce Defendants are permitted to compel arbitration as third-party beneficiaries under the Lease Agreement. Rather, Plaintiff argues that Rolls-Royce Defendants waived their right to arbitrate by failing to pay arbitration fees when Plaintiff originally initiated arbitration. The waiver of a right to arbitration is disfavored, and the party asserting waiver “bears a heavy burden of proof.” Fisher v. A.G. Becker Paribas Inc., 791 F.2d 691, 694 (9th Cir. 1986). The party seeking to establish waiver must demonstrate: “(1) knowledge of an existing right to compel arbitration; (2) acts inconsistent with that existing right; and (3) prejudice to the party opposing arbitration resulting from such inconsistent acts.” Id.; see also Rushing v. Williams-Sonoma, Inc., No. 16-CV-01421-WHO, 2020 WL 6787135, at *2 (N.D. Cal. Oct. 8, 2020) (same).
Plaintiff claims that Gold Coast and Mr. Perillo failed to pay arbitration fees to the AAA. Plaintiff points to the AAA Letter, which indicates that “[p]rior to the filing of this arbitration, the business failed to comply with the AAA‘s policies regarding consumer claims. . . including the Costs of Arbitration.” AAA Letter at 1. The AAA Letter does not explain which entity failed to comply with its policies or how, stating only that it “must decline to administer this claim and any
The Court finds that Plaintiff failed to demonstrate that the Rolls-Royce Defendants waived their right to compel arbitration. Thus, the Court GRANTS Rolls-Royce Defendants’ Motion to Compel.
IV. Conclusion
For the reasons stated above, the Court GRANTS the Gold Coast Defendants’ Motion to Dismiss for Lack of Personal Jurisdiction, GRANTS the Rolls-Royce Defendants’ Motion to Compel Arbitration, and STAYS this action pending arbitration. The parties shall file a joint status report within fourteen days of the resolution of arbitration proceedings.
IT IS SO ORDERED.
Dated: May 10, 2021
EDWARD J. DAVILA
United States District Judge
