Copenbarger v. Chaparral Energy

Filed 9/20/07 Copenbarger v. Chaparral Energy CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

Appeal from an order of the Superior Court of Orange County, Jamoa A. Moberly, Judge. Affirmed.

Copenbarger & Ross and Mark A. Ross for Plaintiffs and Appellants.

Haight Brown & Bonesteel, Bruce Cleeland, Rita Gunasekaran and J. Alan Warfield for Defendant and Respondent.

* * *

Defendant Chaparral Energy, L.L.C. (Chaparral) successfully moved to quash service of a complaint filed by Lloyd G. Copenbarger, Jr., and Paul D. Copenbarger, cotrustees of the Copenbarger Trust (the trust) in a dispute involving an Oklahoma oil well. The court agreed with Chaparral that it lacked the requisite minimum contacts to sustain California jurisdiction. The trust argues that such contacts exist, or alternatively, that it should have been granted a continuance to conduct discovery on the issue. We disagree and affirm.

I

FACTS

Plaintiffs Lloyd G. Copenbarger, Jr., and Paul D. Copenbarger are cotrustees of the Copenbarger Trust (the trust). They are California residents and administer the trust in California. The trust owns certain unleased mineral and gas property in Oklahoma.

Chaparral is an Oklahoma limited liability company. In March 2004, Chaparral filed an action with the Oklahoma Corporation Commission (OCC) seeking to force pool the interests of numerous property owners for drilling purposes. A forced pooling action is filed before the OCC in order to force oil and gas mineral owners to choose between paying certain costs in advance of drilling or selling their mineral interests in the well to be drilled. Chaparral sent notice of this action to the trust.

The trust elected to participate in the drilling costs and so notified Chaparral. In January 2005, a Chaparral employee, Mark Dixon, contacted Paul Copenbarger and advised him that there might be the opportunity to participate in the interests of other landowners who had opted out. Paul told Dixon that the trust would be interested in such an opportunity. A subsequent letter and telephone call between Paul and Dixon discussed this further.

In February 2005, the OCC issued an order pooling the interests in the impacted properties. The trust initially paid $204,183.51 of the estimated drilling costs, representing the share of the land it owned. It later paid an initial $57,145.22 of the estimated costs, based on the trusts election to participate in place of owners who had opted out. The trust therefore paid total estimated drilling costs of $261,328.73.

Chaparral drilled the well, but it was later plugged as a dry hole. Chaparral then invoiced the trust for an additional $182,179.04, representing the actual drilling costs exceeded the estimate by this amount.

On May 30, 2006, the trust filed a complaint against Chaparral in Orange County Superior Court for declaratory relief, accounting, and breach of fiduciary duty. The trust essentially alleged it was overcharged for the drilling and plugging of the well.^[1] The trust served Chaparral on August 7.

On August 11, 2006, Chaparral filed a motion to quash service, arguing that it lacked the requisite minimum contacts in California. It also filed an ex parte application to shorten time or to specially set the hearing on the motion to quash. Its stated basis for filing the application was that the assigned courts clerk had advised that the earliest that its motion could be heard was October 3, more than the 30 days prescribed by Code of Civil Procedure section 418.10 subdivision (b), for hearing a motion to quash. The trust opposed, offering to waive the statutory requirements and requesting that the motion be heard after October 30, 2006 so that it could conduct discovery into Chaparrals minimum contacts in California.

The ex parte application was heard on August 18, 2006, with both parties appearing. The court set the hearing for September 5, which was within the statutory deadline for hearing a motion to quash.

At the September 5 hearing, the court granted the motion to quash. Its order stated: There is no evidence that Defendant purposely availed itself of the benefits of California law, or has done business in California. The fact that some owners of Oklahoma real estate happen to be California residents is a fortuitous connection that is insufficient to create jurisdiction in California under either general or specific jurisdiction. It is not commercially reasonable to expect an oil exploration company to defend itself in the California courts, merely because California residents chose to invest in Oklahoma land or oil rights. Any contacts that Defendant has had with . . . California are incidental. The court also denied the trusts request to continue the matter to permit additional discovery: Plaintiffs have not indicated that they will be able to show that Defendant explores for oil in California or actively solicits business from California residents who are already investors in Oklahoma oil rights. Plaintiffs now appeal.

II

DISCUSSION

Burden of Proof and Standard of Review for Personal Jurisdiction

When a defendant moves to quash service of process on jurisdictional grounds, the plaintiff has the initial burden of demonstrating facts justifying the exercise of jurisdiction. [Citation.] Once facts showing minimum contacts with the forum state are established, however, it becomes the defendants burden to demonstrate that the exercise of jurisdiction would be unreasonable. [Citation.] When there is conflicting evidence, the trial courts factual determinations are not disturbed on appeal if supported by substantial evidence. [Citation.] When no conflict in the evidence exists, however, the question of jurisdiction is purely one of law and the reviewing court engages in an independent review of the record. [Citation.] (Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 449 (Vons Companies).)

General Principles of Personal Jurisdiction

As stated in Vons Companies, supra, 14 Cal.4th 434, Californias long-arm statute authorizes California courts to exercise jurisdiction on any basis not inconsistent with the Constitution of the United States or the Constitution of California. (Code Civ. Proc.,  410.10.) A state courts assertion of personal jurisdiction over a nonresident defendant who has not been served with process within the state comports with the requirements of the due process clause of the federal Constitution 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. [Citations.]

(Id. at pp. 444-445.)

General Jurisdiction

Personal jurisdiction may be either general or specific. A nonresident defendant may be subject to the general jurisdiction of the forum if his or her contacts in the forum state are substantial . . . continuous and systematic. [Citations.] In such a case, it is not necessary that the specific cause of action alleged be connected with the defendants business relationship to the forum. [Citations.] Such a defendants contacts with the forum are so wide-ranging that they take the place of physical presence in the forum as a basis for jurisdiction. [Citation.] (Vons Companies, supra, 14 Cal.4th at pp. 445-446.)

Activities such as maintaining a business office in the state may be sufficient to create general jurisdiction. (Koninklijke L. M. v. Superior Court (1951) 107 Cal.App.2d 495, 500-501.) A physical office, however, is not a necessary predicate. A hotel chain that entered into hundreds of licensing agreements, maintained a reservations

system, and collectively advertised with its licensees was subject to general jurisdiction in California. (Hesse v. Best Western Internat., Inc. (1995) 32 Cal.App.4th 404, 410.)

In contrast, advertising and maintaining a reservations telephone line alone has been held insufficiently pervasive and substantial activities to subject a Las Vegas hotel to general jurisdiction in California. (Circus Circus Hotels, Inc. v. Superior Court (1981) 120 Cal.App.3d 546, 567 (disapproved on other grounds in Snowney v. Harrahs Entertainment, Inc. (2005) 35 Cal.4th 1054, 1066-1067.) Similarly, purchasing goods and services, even at regular intervals, is not enough by itself to subject a nonresident to general jurisdiction. (Helicopteros Nacionales de Colombia, S.A. v. Hall (1984) 466 U.S. 408, 416.)

The trust argues that Chaparrals contacts are sufficient for general jurisdiction. Not only did the RESPONDENT seek out the APPELLANTS, compel them to participate in the pooling agreement, and solicit their funds for additional pooling interests, all amounting to over $260,000 in business with, and benefit from, the APPELLANTS, but the RESPONDENT has had business dealings with no fewer than sixteen (16) other California residents in its pooling agreements and other mineral related activities from 2000 to 2006.

What the trust omits from its argument, however, is that Chaparral did not voluntarily decide to solicit California residents for any pooling agreement relating to Oklahoma properties. The notices it provided and the inclusion of California landowners prior to seeking a pooling order was compelled by Oklahoma law. (See Okla. Stat. tit. 52, 87.1(e).) Chaparral, obviously, has no control over where the landowners reside, and it would be absurd to suggest that compliance with the Oklahoma statute is sufficient to subject Chaparral to jurisdiction in every state where owners happen to reside. The fact that at least 16 California owners of out-of-state property have received such notices or engaged in pooling activity with Chaparral since 2000 is no more availing. These

contacts are not substantial, continuous and systematic, and so wide-ranging that they substitute for Chaparrals physical presence in California. (Vons Companies, supra, 14 Cal.4th at pp. 445-446.)

Indeed, the evidence support Chaparrals contention that it has no such presence, and the trust points to no other activities that would justify general jurisdiction. We therefore find the court did not err in concluding that general jurisdiction did not exist.

Specific Jurisdiction

If the nonresident defendant does not have substantial and systematic contacts in the forum sufficient to establish general jurisdiction, he or she still may be subject to the specific jurisdiction of the forum, if the defendant has purposefully availed himself or herself of forum benefits [citation], and the controversy is related to or arises out of a defendants contacts with the forum. [Citations.] (Vons Companies, supra, 14 Cal.4th at p. 446.)

The test for specific jurisdiction consists of two parts. First, we consider whether the defendant purposefully availed himself of forum benefits and whether the controversy relates to the defendants contacts with the forum. (Vons Companies, supra, 14 Cal.4th at p. 446.) If the first prong is met, we must then consider whether exercise of jurisdiction would be reasonable. (Id. at p. 449.)

The United States Supreme Court explained the meaning of purposeful availment in Burger King Corp. v. Rudzewicz (1985) 471 U.S. 462 (Burger King): This purposeful availment requirement ensures that a defendant will not be haled into a jurisdiction solely as a result of random, fortuitous, or attenuated contacts, [citations] or of the unilateral activity of another party or a third person, [citation]. Jurisdiction is proper, however, where the contacts proximately result from actions by the

defendant himself that create a substantial connection with the forum State. [Citations.] Thus where the defendant deliberately has engaged in significant activities within a State, [citation], or has created continuing obligations between himself and residents of the forum, [citation], he manifestly has availed himself of the privilege of conducting business there, and because his activities are shielded by the benefits and protections of the forums laws it is presumptively not unreasonable to require him to submit to the burdens of litigation in that forum as well. (Id. at pp. 475-476, fns. omitted.)

The trust argues: The RESPONDENT purposely directed its pooling activities to the APPELLANTS who are California residents thereby availing itself of the laws and jurisdiction of this State. The RESPONDENT knew the APPELLANTS were California residents. This argument strikes us as somewhat absurd. Chaparral did not voluntarily direct its activities toward the trust it had no choice but to do so in order to comply with Oklahoma law. The trust could just as easily have resided in any other state or foreign nation. The fact that it happened to be resident in California was merely random or fortuitous. It does not demonstrate that Chaparral has manifestly has availed himself of the privilege of conducting business in California. (Burger King, supra, 471 U.S. at p. 476.)

The trust has a slightly better argument with respect to the secondary contract that Chaparral proposed to the trust regarding participating in the interests of other landowners who had opted out. That, at least, was a choice on Chaparrals part. But entering into a contract with a California party is not sufficient to establish purposeful availment. (Burger King, supra, 471 U.S. at p. 478.) Rather, a court must evaluate the contract terms and the surrounding circumstances to determine whether the defendant purposefully established minimum contacts within the forum. Relevant factors include prior negotiations, contemplated future consequences, the parties course of

dealings, and the contracts choice-of-law provision. [Citation.] (Goehring v. Superior Court (1998) 62 Cal.App.4th 894, 907.)

The surrounding circumstances here support the conclusion that Chaparral proposed the additional interest to the trust because it was already a participating landowner. The trust happened to be resident in California. Thus, the trusts residence was again happenstance and does not support the idea that Chaparral purposefully availed itself of the benefits and protections of conducting business in California.

Further, the contract was a single transaction. While that can be sufficient to create jurisdiction, it must create a substantial connection between the defendant and the forum state. A single or occasional act that creates only an attenuated connection with the forum is insufficient. (Burger King supra, 471 U.S. at p. 475, fn. 18.) This was indeed such an attenuated connection.

The trust also urges us to consider the effects of Chaparrals activities in California. One way for a court to find purposeful availment is the effects test articulated by the United States Supreme Court in Calder v. Jones (1984) 465 U.S. 783 (Calder). In Calder, a reporter and editor of the National Enquirer challenged Californias jurisdiction over them in a libel suit brought by a California resident. The court held: The allegedly libelous story concerned the California activities of a California resident. It impugned the professionalism of an entertainer whose television career was centered in California. The article was drawn from California sources, and the brunt of the harm, in terms both of respondents emotional distress and the injury to her professional reputation, was suffered in California. In sum, California is the focal point both of the story and of the harm suffered. Jurisdiction over petitioners is therefore proper in California based on the effects of their Florida conduct in California.

(Id. at pp. 788-789, fn. omitted.)

Further, [Petitioners] intentional, and allegedly tortious, actions were expressly aimed at California. Petitioner South wrote and petitioner Calder edited an article that they knew would have a potentially devastating impact upon respondent. And they knew that the brunt of that injury would be felt by respondent in the State in which she lives and works and in which the National Enquirer has its largest circulation. Under the circumstances, petitioners must reasonably anticipate being haled into court there to answer for the truth of the statements made in their article. [Citations.] (Calder, supra, 465 U.S. at pp. 789-790.) Thus, in examining the relationship between the defendant, the forum, and the litigation the facts were sufficient to justify jurisdiction. (Id.at

p. 788.)

As our Supreme Court has noted, courts throughout the country have struggled to apply Calder outside the defamation context. (Pavlovich v. Superior Court (2002) 29 Cal.4th 262, 270-271.) Despite this struggle, most courts agree that merely asserting that a defendant knew or should have known that his intentional acts would cause harm in the forum state is not enough to establish jurisdiction under the effects test. (Ibid.) The court adopted a test which requires not only harm, but an act intentionally directed at the forum state. (Id. at pp. 271-273.)

There is simply no such evidence of such an act here. The initial notice was sent in accordance with Oklahoma law. Later, Chaparral suggested purchasing a further interest to an already participating landowner. Nothing suggests any of Chaparrals acts were intentionally directed at California it was mere happenstance that the trust was resident here. Thus, we find no occasion to apply the Calder test.

Because we conclude the minimum contacts standard was not met, we need not reach the reasonableness prong of the analysis. The constitutionally required due process standard for specific jurisdiction has not been met, and therefore the trial court correctly quashed service of process on Chaparral.

Continuance to Conduct Discovery

Finally, the trust argues that it should have been granted a continuance to conduct discovery on the jurisdiction issues. The granting of a continuance for discovery lies in the discretion of the trial court, whose ruling will not be disturbed in the absence of manifest abuse. [Citation.] (Beckman v. Thompson (1992) 4 Cal.App.4th 481, 487.) The appropriate test for abuse of discretion is whether the trial court exceeded the bounds of reason. When two or more inferences can reasonably be deduced from the facts, the reviewing court has no authority to substitute its decision for that of the trial court. (Shamblin v. Brattain (1988) 44 Cal.3d 474, 478-479.)

To support its argument that a continuance was likely to lead to facts supporting jurisdiction, the trust points to a declaration by attorney Charles L. Puckett, Jr., its Oklahoma counsel. Puckett stated that he was of the opinion that additional time would produce evidence of additional OCC cases involving Chaparral in which Calfornia residents were parties, payments made to California residents, oil and gas leases granted to Chaparral by California residents, other oil and gas related contracts between Chaparral and California residents, and additional civil court litigation.

Because none of the contacts to which Pucketts declaration referred addressed the matter before the court, the type of contacts Puckett was seeking would have needed to be so pervasive and substantial as to justify general jurisdiction over Chaparral. The court could readily have found, however, that even if all of these contacts were discovered, they would still be insufficient for this purpose. Moreover, the court could have concluded that at least some of this investigation (such as computer research as to Chaparrals litigation history) could have occurred while the motion was pending. Thus, we find no abuse of discretion.

III

DISPOSITION

The order is affirmed. Chaparral is entitled to its costs on appeal.

MOORE, ACTING P. J.

WE CONCUR:

ARONSON, J.

FYBEL, J.

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^[1] On January 24, 2007, the OCC issued an order determining that the drilling costs were reasonable and necessary. Chaparral requests we take judicial notice of this order. Although we do not find it especially pertinent to the issues present on appeal, we grant the request pursuant to Evidence Code sections 452, subdivision (c), 453 and 459.