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Ferguson v. Smith

United States District Court, D. Oregon

July 18, 2018

CAROL FERGUSON and LYNDA FREEMAN, on behalf of themselves and, in addition, on behalf of other similarly situated, Plaintiffs,
v.
MARIA SMITH, an individual; ALL STAR AUTO GROUP, INC., a Delaware corporation; the SMITH AUTO GROUP, an unregistered conglomeration of entities owned by Maria Smith; GLADSTONE AUTO, LLC, an Oregon limited liability company; and CARROS, INC., an Oregon corporation, Defendants.

          FINDINGS AND RECOMMENDATION

          STACIE F. BECKERMAN, UNITED STATES MAGISTRATE JUDGE.

         This matter comes before the Court on a motion to dismiss filed by Defendants Maria Smith (“Smith”), All Star Auto Group, Inc. (“All Star”), the Smith Auto Group (“Smith Auto”) (collectively, the “Smith Defendants”), Gladstone Auto, LLC (“Gladstone Auto”), and Carros, Inc. (“Carros”) (collectively with the Smith Defendants, “Defendants”). The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1331. For the reasons explained below, the Court recommends that the district judge grant in part and deny in part Defendants' motion to dismiss.

         BACKGROUND

         Plaintiffs Carol Ferguson (“Ferguson”) and Lynda Freeman (“Freeman”) are Oregon residents who worked in the automotive sales industry. Smith has a direct ownership interest in two Oregon-based auto dealerships, Gladstone Auto and Carros, and oversees the operation of those dealerships. On March 1, 2018, Plaintiff brought this suit, individually and on behalf of others similarly situated, alleging that Defendants willfully failed to pay them, and other similarly situated individuals, minimum and overtimes wages in violation of the Fair Labor Standards Act (“FLSA”) and Oregon state law. On May 3, 2018, Defendants filed a motion to dismiss, wherein the Smith Defendants argued that Plaintiffs' complaint should be dismissed for lack of personal jurisdiction and Defendants collectively argued that Plaintiffs fail to state a plausible claim for relief.

         ANALYSIS I.STANDARD OF REVIEW

         A. Lack of Personal Jurisdiction

         “When a defendant moves to dismiss for lack of personal jurisdiction, ‘the plaintiff bears the burden of demonstrating that jurisdiction is appropriate.'” Morrill v. Scott Fin. Corp., 873 F.3d 1136, 1141 (9th Cir. 2017) (quoting Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004)). “Where, as here, the motion is based on written materials rather than an evidentiary hearing, ‘the plaintiff need only make a prima facie showing of jurisdictional facts.'”[1] Schwarzenegger, 374 F.3d at 800 (quoting Sher v. Johnson, 911 F.2d 1357, 1361 (9th Cir. 1990)). In determining whether the plaintiff has made such a showing, the court must accept uncontroverted allegations in the complaint as true and resolve any factual conflicts in affidavits in the plaintiff's favor. Id. (citing AT&T v. Compagnie Bruxelles Lambert, 94 F.3d 586, 588 (9th Cir. 1996)).

         B. Failure to State a Claim

         “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. “The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Mashiri v. Epstein Grinnell & Howell, 845 F.3d 984, 988 (9th Cir. 2017) (internal quotation marks omitted) (citing Iqbal, 556 U.S. at 678)).

         II. DISCUSSION

         A. Personal Jurisdiction

         The Smith Defendants move to dismiss Plaintiffs' complaint for lack of personal jurisdiction. See Fed. R. Civ. P. 12(b)(1). It is well settled that “[p]ersonal jurisdiction over each defendant must be analyzed separately.” Harris Rutsky & Co Ins. Servs., Inc. v. Bell & Clements Ltd., 328 F.3d 1122, 1130 (9th Cir. 2003) (citation omitted). Accordingly, the Court will individually consider whether it may exercise personal jurisdiction over Smith, All Star, and Smith Auto.

         “Federal courts ordinarily follow state law in determining the bounds of their jurisdiction over [defendants].” Picot v. Weston, 780 F.3d 1206, 1211 (9th Cir. 2015) (quoting Daimler AG v. Bauman, 571 U.S. 117, 125 (2014)). “Oregon law authorizes personal jurisdiction over defendants to the full extent permitted by the United States Constitution.” Ranza v. Nike, Inc., 793 F.3d 1059, 1068 (9th Cir. 2015) (citation omitted). The Court must therefore inquire whether its exercise of jurisdiction over Smith, All Star, and Smith Auto “comports with the limits imposed by federal due process.” See id. (“We therefore inquire whether the District of Oregon's exercise of jurisdiction over [defendant] ‘comports with the limits imposed by federal due process.'”).

         “Due process requires that the defendant ‘have certain minimum contacts' with the forum state ‘such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.'” Picot, 780 F.3d at 1211 (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). “The strength of contacts required depends on which of the two categories of personal jurisdiction a litigant invokes: specific jurisdiction or general jurisdiction.” Ranza, 793 F.3d at 1068. In this case, Plaintiffs invoke specific jurisdiction. (See Pls.' Resp. at 2, stating that “plaintiffs contend that this Court has specific jurisdiction over [the Smith] defendants rather than general jurisdiction”). The Ninth Circuit employs the following three-prong test to determine if a defendant has sufficient minimum contacts to be subject to specific personal jurisdiction:

(1) [t]he 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;
(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.

Picot, 780 F.3d at 1211 (quoting Schwarzenegger, 374 F.3d at 802). Plaintiffs bear the burden of proving the first two prongs. Id. If Plaintiffs fail “‘to satisfy either of these prongs, personal jurisdiction is not established in the forum state.'” Morrill, 873 F.3d at 1142 (citation omitted). If Plaintiffs satisfy both of the first two prongs, the burden shifts to the Smith Defendants to “‘set forth a compelling case that the exercise of jurisdiction would not be reasonable.'” Picot, 780 F.3d at 1212 (quoting CollegeSource, Inc. v. AcademyOne, Inc., 653 F.3d 1066, 1076 (9th Cir. 2011)).

         1. Prong One

         Under the first prong of the specific jurisdiction test, Plaintiffs must show that the Smith Defendants “purposefully direct[ed]” their activities toward Oregon, or “purposefully avail[ed]” themselves of the privilege of conducting activities in Oregon. In the Ninth Circuit, courts “generally apply the purposeful availment test when the underlying claims arise from a contract, and the purposeful direction test when they arise from alleged tortious conduct.” Morrill, 873 F.3d at 1142 (citing Schwarzenegger, 374 F.3d at 800). The latter test applies here given the nature of the underlying claims. See, e.g., Huddleston v. John Christner Trucking, LLC, No. 1:17-cv-00925, 2017 WL 4310348, at *4 (E.D. Cal. Sept. 28, 2017) (“‘Although a FLSA claim for relief ostensibly arises from an employment contract, courts have likened FLSA claims to tort claims and have applied the purposeful direction standard.'”) (citations omitted).

         The “purposeful direction” or “effects” test is derived from Calder v. Jones, 465 U.S. 783 (1984). See Axiom Foods, Inc. v. Acerchem Int'l, Inc., 874 F.3d 1064, 1069 (9th Cir. 2017) (noting that the purposeful direction test is “often referred to as the ‘effects' test, ” which is derived from Calder). “Under this test, a defendant purposefully directed his activities at the forum if he: ‘(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.'” Picot, 780 F.3d at 1215 (quoting Schwarzenegger, 374 F.3d at 803). Application of this test requires the court to focus on the defendant's contacts with the forum state itself, not on the defendant's contacts with persons who reside in the forum state, because “a ‘mere injury to a forum resident is not a sufficient connection to the forum'” state to establish personal jurisdiction. Id. (citation omitted); see also Walden v. Fiore, 571 U.S. 277, 290 (2014) (explaining that “an injury is jurisdictionally relevant only insofar as it shows that the defendant has formed a contact with the forum State, ” and that “[t]he proper question is not where the plaintiff experienced a particular injury or effect but whether the defendant's conduct connects him to the forum in a meaningful way”).

         a. ...


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