Kurtz v. Samuelson

Filed 10/26/06 Kurtz v. Samuelson CA3

NOT TO BE PUBLISHED

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

THIRD APPELLATE DISTRICT

(Butte)

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Eric P. Kurtz, doing business as Eric P. Kurtz Insurance Agency, sued Missouri residents Michael Samuelson and Business Insurance Management (BIM) for indemnification in a workers’ compensation insurance dispute. The trial court dismissed the action against Samuelson and BIM for lack of personal jurisdiction. We shall affirm. Kurtz has not carried his burden of demonstrating that constitutionally sufficient “minimum contacts” exist between California (on one hand) and Samuelson and BIM (on the other) to justify the imposition of jurisdiction by California courts. BACKGROUND

The Transaction

The facts underlying the transaction are undisputed.

Sacramento County resident Eric P. Kurtz is what is known as a professional employer organization (PEO) broker. In general terms, a PEO leases employees to its clients, who are themselves business entities. The PEO handles the payroll and tax withholding for their leased employees, and usually procures their worker’s compensation and health insurance as well. The PEO charges clients for these employee-related costs, and charges a commission for its administrative services as well. One of the benefits of joining a PEO is that it assembles a larger pool of employees to be considered by the insurer in rating the risk.

Michael Samuelson’s business, BIM, is also a PEO broker. BIM’s only office is in Carthage, Missouri; BIM does not conduct business in California, does not advertise in California, and does not solicit clients or customers in California. Samuelson never resided in California, and never traveled to California in connection with the transaction at issue.

In early 2004, Kurtz telephoned Samuelson on behalf of Kurtz’s client, Four Seasons Roofing, seeking information regarding a California-based PEO. Before Kurtz called Samuelson, the two were not acquainted.

Samuelson responded that he did not know of any PEOs in California, but offered to call Julian Foote, a California PEO broker with whom he was acquainted, to get the name of a PEO that he could then pass along to Kurtz.

Foote told Samuelson about a PEO called SoftEx; Foote said he could get a quote from SoftEx for Kurtz’s client.

Samuelson then telephoned Kurtz to get the necessary information about Kurtz’s client Four Seasons Roofing; with the information Kurtz provided, Samuelson prepared a submittal and sent it to Foote.

Foote forwarded the submittal to SoftEx; SoftEx prepared a quote for Four Seasons Roofing. Foote sent the SoftEx quote to Samuelson, who sent it on to Kurtz. In a handwritten note on the facsimile transmission to Kurtz, Samuelson wrote, “Here is contract + quote. [Foote] said you need contract + quote signed + then Softex will call + get them started. I spoke with them about changing rates + we decided not to change them this time. However we will be able to get more commission on new cases. I will pay you 1.5% on this account.”

Kurtz then brokered a PEO agreement between his client Four Seasons and SoftEx.

SoftEx paid the commission for this transaction, which was shared between Kurtz and BIM on a 50-50 basis, in accordance with the regular custom and practice among PEO brokers.

In May 2004, SoftEx’s president was arrested and charged by the Los Angeles County District Attorney with fraud for the alleged embezzlement of nearly $1 million in insurance premiums.

The Lawsuit

In September 2005, Four Seasons Roofing employee Daniel Holmes filed the complaint initiating this action, alleging he fell from a roof in the course of his employment, and that Four Seasons Roofing had no worker’s compensation insurance in force at the time of his injury.

In that action, Kurtz filed a cross-complaint for indemnification and contribution against Samuelson and BIM.

After they were served in Missouri with the cross-complaint, Samuelson and BIM moved to quash service on the ground California lacks personal jurisdiction over them because neither “purposely avail[ed] themselves of the privilege of conducting activities in California” and their mere “contracting and communicating with a California resident are insufficient ‘minimum contacts’ with California to establish personal jurisdiction.”

In a declaration submitted in support of the motion to quash, Samuelson averred: “Neither BIM nor I had any direct dealings with SoftEx or Four Seasons Roofing. Our only dealings were with Kurtz and Foote. We have had no other business dealings with Kurtz, and only one previous contact with Foote. All that I did in connection with this transaction was to have a few telephone calls with Kurtz and Foote, and I filled out the PEO submittal form based on information which I received from Kurtz. . . . I then forwarded this submittal form to Foote. The rather minimal amount of work which I did was done entirely in Missouri. [] At no time was I ever asked by Kurtz to conduct a due diligence investigation of SoftEx, or to in any manner confirm or vouch for SoftEx’s solvency, reputation, or business ethics. Had I been asked to do so by Kurtz, I would have declined, and I would have told Kurtz that since he and SoftEx were both doing business in California, he (Kurtz) could better conduct such inquiry himself.”

Opposing the motion to quash, Kurtz blamed Samuelson for his client’s connection to SoftEx. Kurtz averred: “I had no dealings directly with SoftEx. [] I did not receive any forms or quotes from SoftEx. All of the information that I received came directly from either Mr. Samuelson or Mr. Foote, the individual contacted by Mr. Samuelson. [] I did not provide any information directly to SoftEx. All of the information, including completed forms signed by the insured were sent directly to Mr. Samuelson or Mr. Foote. [] I did not know Mr. Foote prior [to] this transaction and my contacts with him were solely at the direction of Mr. Samuelson and [BIM].”

The trial court granted the motion to quash by Samuelson and BIM, and ordered the cross-complaint against them to be dismissed.

DISCUSSION

When a defendant moves to quash service of process for lack of specific jurisdiction, “‘the plaintiff has the initial burden of demonstrating facts justifying the exercise of jurisdiction.’ [Citation.] ‘If the plaintiff meets this initial burden, then the defendant has the burden of demonstrating “that the exercise of jurisdiction would be unreasonable.”’ [Citations.] Where, as here, ‘”no conflict in the evidence exists . . . the question of jurisdiction is purely one of law and the reviewing court engages in an independent review of the record.”’ [Citation.]” (Snowney v. Harrah’s Entertainment, Inc. (2005) 35 Cal.4th 1054, 1062.)

California courts may exercise personal jurisdiction on any basis consistent with the Constitution of California or 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.’”‘ [Citations.]” (Pavlovich v. Superior Court (2002) 29 Cal.4th 262, 268, quoting International Shoe Co. v. Washington (1945) 326 U.S. 310, 316 [90 L.Ed. 95]; Snowney v. Harrah’s Entertainment, Inc., supra, 35 Cal.4th at p. 1061.)

“‘The concept of minimum contacts . . . requires states to observe certain territorial limits on their sovereignty. It “ensure[s] that the States, through their courts, do not reach out beyond the limits imposed on them by their status as coequal sovereigns in a federal system.’” [Citations.] To do so, the minimum contacts 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.’ [Citation.]” (Snowney v. Harrah’s Entertainment, Inc., supra, 35 Cal.4th at p. 1061.)

Under the minimum contacts test, personal jurisdiction may be either general or specific. (Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 445.) Because Kurtz does not claim general jurisdiction, we consider only whether specific jurisdiction exists here.

“When determining whether specific jurisdiction exists, courts consider the ‘”relationship among the defendant, the forum, and the litigation.”’ [Citations.] A court may exercise specific jurisdiction over a nonresident defendant only if: (1) ‘the defendant has purposefully availed himself or herself of forum benefits’ [citation]; (2) ‘the “controversy is related to or ‘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’”’ [citations].” (Pavlovich v. Superior Court, supra, 29 Cal.4th at p. 269.)

The California Supreme Court recently held with respect to the purposeful availment prong of the specific jurisdiction inquiry: “‘”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 directs” [its] activities at residents of the forum’ [citation], ‘”purposefully derives 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 . . . .’ [Citation.] Instead, the defendant will only be subject to personal jurisdiction if ‘”it has clear notice that it is subject to suit there, and can act to alleviate the risk of burdensome litigation by procuring insurance, passing the expected costs on to customers, or, if the risks are too great, severing its connection with the state.”’ [Citations.]” (Snowney v. Harrah’s Entertainment, Inc., supra, 35 Cal.4th at pp. 1062-1063.)

With respect to the second prong of the specific jurisdiction test -- the relatedness requirement -- the Court held: “[W]e [have] adopted a substantial connection test and held that the relatedness requirement is satisfied if ‘there is a substantial nexus or connection between the defendant’s forum activities and the plaintiff’s claim.’ [Citation.] In adopting this test, we observed that ‘for the purpose of establishing jurisdiction the intensity of forum contacts and the connection of the claim to those contacts are inversely related.’ [Citation.] ‘[T]he more wide ranging the defendant’s forum contacts, the more readily is shown a connection between the forum contacts and the claim.’ [Citation.] Thus, ‘[a] claim need not arise directly from the defendant’s forum contacts in order to be sufficiently related to the contact to warrant the exercise of specific jurisdiction.’ [Citation.] Moreover, the ‘forum contacts need not be directed at the plaintiff in order to warrant the exercise of specific jurisdiction.’ [Citation.] Indeed, ‘”’[o]nly when the operative facts of the controversy are not related to the defendant’s contact with the state can it be said that the cause of action does not arise from that [contact].’”’ [Citations.]” (Snowney v. Harrah’s Entertainment, Inc., supra, 35 Cal.4th at p. 1068.)

Finally, the third prong of the specific jurisdiction analysis addresses fair play and substantial justice. The Court held: “In making this [fairness] determination, the ‘court “must consider the burden on the defendant, the interests of the forum State, and the plaintiff’s interest in obtaining relief. It must also weigh in its determination ‘the interstate judicial system’s interest in obtaining the most efficient resolution of

controversies; and the shared interest of the several States in furthering fundamental substantive social policies.’”’ [Citations.]” (Snowney v. Harrah’s Entertainment, Inc., supra, 35 Cal.4th at p. 1070.)

Applying these standards to the facts of this case, we agree with the trial court that California may not exercise specific jurisdiction over Samuelson and BIM, because the first prong of specific jurisdiction test is not met. Samuelson and BIM did not purposefully avail themselves of forum benefits: they did not purposefully and voluntarily direct their activities toward California; there was no evidence BIM engaged in advertising or otherwise initiated contact with Kurtz, his client, or other California residents; no evidence BIM or Samuelson had a business relationship with any California resident other than Kurtz; and no evidence of a substantial connection between Samuelson and BIM, on one hand, and California, on the other. (Compare, e.g., Snowney v. Harrah’s Entertainment, Inc., supra, 35 Cal.4th at pp. 1065-1066 [Nevada hotels advertised extensively in California, maintained a Web site and toll-tree telephone number, regularly sent mailings, and obtained a significant percentage of patrons from California].)

Rather, the uncontested evidence established that Samuelson had only a peripheral role in a single, isolated transaction of brokering insurance. To create an expectation of being haled

into court in this state, a party’s contacts must be more than “random,” “fortuitous,” or “attenuated.” (See Snowney v. Harrah’s Entertainment, Inc., supra, 35 Cal.4th at p. 1063.) The contact between California and Samuelson/BIM was both “random” and “attenuated.”

Kurtz is correct that electronic communication may form the basis for California’s exercise of personal jurisdiction, but only when used as part of a continuing relationship between the nonresident and the state. “‘While, in isolation, telephone and mail communications may not establish a substantial connection between a nonresident and a forum, when these communications form an integral part of an ongoing business relationship, such contacts are relevant in assessing the nature and extent of defendant’s conduct within a forum.’” (Italics added, West Corp. v. Superior Court (2004) 116 Cal.App.4th 1167, 1174, quoting Electro-Catheter Co. v. Surgical Specialities Instrument Corp. (D.N.J. 1984) 587 F.Supp. 1446, 1455; see also Hall v. LaRonde (1997) 56 Cal.App.4th 1342, 1345-1348, 1367 [telephone, facsimile, and e-mail contact between California plaintiff and New York defendant sufficed to establish the requisite contact for personal jurisdiction purposes where parties had a continuing relationship, which included the ongoing payment of royalties by the defendant].) Here, Samuelson communicated with California residents Kurtz and Foote by telephone and facsimile, and passed along information between the two, after formatting it into a submittal and request for insurance benefits. But there is no evidence of any ongoing relationships between Samuelson and anyone in California, and no evidence this was anything other than a one-time transaction between the parties.

Nor do we agree with Kurtz’s suggestion that BIM “purposefully availed” itself of forum benefits because it collected a commission and thereby “‘”purposefully derives benefit” from’” its activities in California. (See Snowney v. Harrah’s Entertainment, Inc., supra, 35 Cal.4th at pp. 1062-1063.) Under the circumstances presented here, a handful of conversations or facsimiles sent from Missouri, which relate solely to an isolated transaction, do not constitute activities in California sufficient to satisfy the first prong of the test for finding specific jurisdiction.

Finally, we do not agree with Kurtz that Samuelson “purposefully availed“ himself of forum benefits because he “purposefully sought additional business” in California. Kurtz points only to Samuelson’s having written in one facsimile enclosure to Kurtz “we will be able to get more commission on new cases.” This ambiguous statement can scarcely be construed as an intentional and purposeful direction of activities toward residents of California. (Cf. Snowney v. Harrah’s Entertainment, Inc., supra, 35 Cal.4th at pp. 1063, 1065-1066.)

Kurtz failed to sustain his burden of demonstrating facts justifying the exercise of jurisdiction over Samuelson and BIM. The court properly granted their motion to quash.

DISPOSITION

The judgment is affirmed. Respondents to recover their costs on appeal. (Cal. Rules of Court, rule 27(a)(1).)

SIMS , Acting P.J.

We concur:

HULL , J.

CANTIL-SAKAUYE , J.

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