Opinion
CASE NO. 2:21-CV-00753 RAJ
2022-09-28
AMAZON.COM SERVICES LLC, a Delaware limited liability company, Plaintiff, v. PARADIGM CLINICAL RESEARCH INSTITUTE, INC., a California corporation; Ramprasad Dandillaya, M.D., an individual; and Juan Jesus Rojas de Borbon, an individual, Defendants.
Arthur A. Simpson, Davis Wright Tremaine, Seattle, WA, Heming Xu, Pro Hac Vice, Rasheed McWilliams, Pro Hac Vice, Scott R. Commerson, Sherron L. Wiggins, Pro Hac Vice, Davis Wright Tremaine, Los Angeles, CA, Anna Rachella Buono, Davis Wright Tremaine, Portland, OR, for Plaintiff. Christopher Owen Murray, Brownstein Hyatt Farber Schreck LLP, Denver, CO, for Defendant Paradigm Clinical Research Institute Inc. Eric M. George, Pro Hac Vice, Serli Polatoglu, Pro Hac Vice, Ellis George Cipollone O'Brien Annaguey LLP, Los Angeles, CA, Jonathan Freund, Pro Hac Vice, Freund Legal, Beverly Hills, CA, Keith David Petrak, Byrnes Keller Cromwell LLP, Seattle, WA, for Defendants Ramprasad Dandillaya, Juan Jesus Rojas de Borbon.
Arthur A. Simpson, Davis Wright Tremaine, Seattle, WA, Heming Xu, Pro Hac Vice, Rasheed McWilliams, Pro Hac Vice, Scott R. Commerson, Sherron L. Wiggins, Pro Hac Vice, Davis Wright Tremaine, Los Angeles, CA, Anna Rachella Buono, Davis Wright Tremaine, Portland, OR, for Plaintiff. Christopher Owen Murray, Brownstein Hyatt Farber Schreck LLP, Denver, CO, for Defendant Paradigm Clinical Research Institute Inc. Eric M. George, Pro Hac Vice, Serli Polatoglu, Pro Hac Vice, Ellis George Cipollone O'Brien Annaguey LLP, Los Angeles, CA, Jonathan Freund, Pro Hac Vice, Freund Legal, Beverly Hills, CA, Keith David Petrak, Byrnes Keller Cromwell LLP, Seattle, WA, for Defendants Ramprasad Dandillaya, Juan Jesus Rojas de Borbon. ORDER Richard A. Jones, United States District Judge
I. INTRODUCTION
This matter comes before the Court on Defendants Ramprasad Dandillaya, M.D. and Juan Jesus Rojas de Borbon's Motion to Dismiss the First Amended Complaint ("Amended Complaint"); and Plaintiff Amazon.com Services, LLC's ("Amazon") motions to dismiss Defendant Paradigm Clinical Research Institute Inc.'s Counterclaims and Amended Counterclaims. Dkt. ## 23, 37, 43. For the reasons set forth below, the Court GRANTS in part and DENIES in part Defendants' Motion to Dismiss and GRANTS in part and DENIES in part Amazon's motion to dismiss Defendant Paradigm Clinical Research Institute Inc.'s Amended Counterclaims. Amazon's motion to dismiss Paradigm's Counterclaims is DENIED as moot. Dkt. # 37.
II. BACKGROUND
The following is taken from Amazon's Complaint, which is assumed to be true for the purposes of Defendants' motion to dismiss. Sanders v. Brown, 504 F.3d 903, 910 (9th Cir. 2007); see also Dole Food Co. v. Watts, 303 F.3d 1104, 1107 (9th Cir. 2002).
Plaintiff Amazon is a limited liability company organized under Delaware law with its principal place of business in Seattle, Washington. Dkt. # 21 (Am. Compl.) ¶ 9. Defendant Paradigm Clinical Research Institute Inc. ("Paradigm") is a California limited liability company with its principal place of business in Torrance, California. Id. ¶ 10. Defendants Ramprasad Dandillaya, M.D. and Juan Jesus Rojas de Borbon (collectively, "Individual Defendants") are residents of California. Id. ¶¶ 11, 12. Amazon alleges that Paradigm was never sufficiently capitalized to engage in significant commercial transactions and merely the alter ego of Dandillaya and de Borbon. Id. ¶¶ 11, 16. Dandillaya and de Borbon were the only two members of Paradigm's board of directors during the relevant time period, and Dandillaya served as Paradigm's only corporate officer. Id. ¶¶ 16, 17.
After the COVID-19 pandemic began, personal protective equipment ("PPE") was in great demand across the globe. Id. ¶ 25. Amazon's existing PPE vendors could not keep up with demand, and so Amazon sought to obtain additional FDA-approved nitrile gloves from other sources. Id. In April 2020, a third-party connected Amazon's Procurement & Sourcing team with de Borbon, who held himself out to be Paradigm's agent. Id. ¶ 26. Due to the relationships Paradigm had through its clinical research, de Borbon claimed that Paradigm had established connections with medical glove manufacturers and brands and could procure nitrile gloves in larger quantities than most other vendors. Id. ¶¶ 28, 33.
Over several weeks in April 2020, Amazon and Paradigm negotiated the terms of a prospective sale of nitrile gloves. Id. ¶¶ 36-42. As part of the negotiations, de Borbon insisted that Amazon pay a deposit of 50% of the total purchase price for the gloves upfront, with the remaining 50% payment to be provided upon delivery of the gloves. Id. ¶ 36. Before finalizing any contract to purchase medical products, Amazon requires vendors to submit a safety data sheet or "SDS" pertaining to the product for review. Id. ¶ 39. The SDS contains several pieces of information: the product manufacturer's name, brand, and factory location; photographs and specifications of the subject product and factory; the manufacturer's FDA registration number; the FDA 510(k) premarket approval number for the product; and additional certificates and registrations relating to product quality standards. Id. Based upon representations made by de Borbon and Paradigm, Amazon proceeded with its Paradigm order. Id. ¶ 42.
In late April 2020, Amazon issued two purchase orders to Paradigm, PO-82 and PO-84, where Amazon offered to purchase 80 million pairs of blue nitrile gloves in exchange for $20 million. Id. ¶ 43. Both purchase orders contain the following definitions: (a) "Goods" means "the goods, software, and other items supplied or to be supplied under this Purchase Order (if any)"; (b) "Project" means "all Goods and Services"; (c) "Purchaser" means "the entity specified as the purchaser on the first page of this Purchase Order"; (d) "Services" means "the services provided or to be provided under this Purchase Order (if any)"; and (e) "Supplier" means "the individual or entity specified as the supplier." Dkt. # 27 at 7. Both PO-82 and PO-84 name Amazon as the "Purchaser" and Paradigm as the "Supplier." Id. at 6.
In May 2020, Paradigm thereafter entered a contract with a newly-formed California company called Karma Family LLC ("Karma") to purchase 120 million nitrile gloves. Am. Compl. ¶ 49. Amazon alleges that the purpose of this contract was to pass off the gloves obtained from Karma as ones obtained directly from one or more FDA-approved nitrile glove manufacturers. Id. Amazon alleges that de Borbon, on behalf of Paradigm, indicated that the gloves Paradigm would provide under the purchase orders would be manufactured by (1) W.A. Rubbermate Co., Ltd. ("Rubbermate"), and branded as "Skymed,"; and (2) VRG Khai Hoan ("VRG"), branded as "V Gloves." Id. ¶ 55. For both, de Borbon provided FDA registration numbers, a 510(k) premarket approval numbers, and other certificates and registration information. Id. ¶ 59.
On May 18, 2020, de Borbon sent Amazon's Account Representative a 38-second video entitled "PCRI [i.e., Paradigm] proof Video," which he claimed to be evidence of "your gloves being made." Id. ¶ 62. Then, on or about June 24, 2020, Amazon received from Paradigm approximately 1.25 million pairs of purportedly nitrile gloves. Id. ¶ 68. Soon thereafter, at Amazon's request, Paradigm sent a third-party laboratory two packages consisting of 100 nitrile gloves each to ensure that the gloves met Amazon's PPE standards. Id. ¶ 65. Paradigm again represented that the gloves were made by Rubbermate. Id.
On July 29, 2020, Karma received information that it had procured inauthentic and non-conforming nitrile gloves. Id. ¶ 71. Amazon alleges that Paradigm, de Borbon, and Dandillaya were also made aware that Karma had procured inauthentic and non-conforming nitrile gloves. Id. ¶ 72. On August 12, 2020, Amazon noted that the testing laboratory's sample report referenced the nitrile gloves' manufacturer as a company called Sufficiency Economy City Ltd ("Sufficiency"), not Rubbermate. Id. ¶ 73. As a manufacturer, Sufficiency had not gone through the SDS process and its 510(k) status was unknown to Amazon. Id. ¶ 74.
Upon being contacted by Amazon, Rubbermate denied any connection to Skymed or Paradigm. Id. ¶ 76. Rubbermate officials subsequently confirmed to Amazon that it had no relationship with Paradigm, de Borbon, or Dr. Dandillaya, and never had any such relationship. Id. ¶ 77. After being confronted by Amazon with this information, Dr. Dandillaya emailed Amazon representatives and insisted that W.A. Rubbermate was the manufacturer of the delivered under PO-82. Id. ¶ 78. Amazon demanded that Paradigm retake possession of the gloves delivered under PO-82 and refund all amounts Amazon had already paid. Id. ¶ 82. Amazon sent a demand letter to Paradigm in which it canceled the entirety of PO-84 pursuant to section 9 of the Purchase Order, which allows the cancellation, with notice, of any order prior to shipment without charge. Id. ¶ 81.
***
Paradigm counterclaims for breach of contract, breach of the duty of good faith and fair dealing, and tortious interference with business relations. Dkt. # 42 (Am. Countercl.). Paradigm alleges in or around April 2020, Amazon contracted with Paradigm to purchase 80 million pairs of nitrile gloves for a total of $20 million. Id. ¶ 10. The parties executed two Purchase Orders, PO-82 and PO-84, dated April 24, 2020 and April 27, 2020, respectively. Id. ¶ 11. Under PO-82, Amazon agreed to purchase 20 million pairs of non-powder, blue nitrile gloves for $5 million. Id. This consisted of 4 million medium pairs of gloves, 10 million pairs of large gloves, and 6 million pairs of extra-large gloves. Id. Under PO-84, Amazon agreed to purchase 60 million pairs of non-powder, blue nitrile gloves for $15 million. Id. ¶ 12. This consisted of 12 million pairs of medium gloves, 30 million pairs of large gloves, and 30 million pairs of extra-large gloves. Id. The description of both PO-82 and PO-84 are entirely generic, stating only that the gloves shall be, "blue nitrile gloves." Id. ¶ 22. There is no limitation on thickness, manufacturer or any other description. There is also no requirement that the gloves be of a specific brand. Id.
According to Section 4 of both PO-82 and PO-84, Amazon and Paradigm agreed that Paradigm will be deemed to have accepted the PO Terms and Conditions upon the earliest of (a) Paradigm's signing and returning a copy of the PO to Amazon, (b) Paradigm's shipping of the gloves to Amazon or invoicing Amazon for the gloves, (c) Paradigm starting performance of the services or invoicing Amazon for such services, or (d) Paradigm's acceptance of the PO by other commercially acceptable means. Dkt. # 38-1 at 3. In May 2020, Paradigm agreed to provide SkyMed-branded gloves to fulfill PO-82 and V Glove branded gloves manufactured by VRG to fulfill PO-84. Id. ¶ 30. In June 2020, Paradigm alleges that it sent sample gloves to Amazon for its inspection and approval pursuant to PO-82. Id. ¶ 31. Paradigm alleges that it also prepared a "Sample Experience Report" for Amazon's use, which concluded "no obvious abnormality found" with the SkyMed gloves. Id. Amazon tested the gloves, vetted the gloves, and asked questions to Paradigm related to the gloves. Id. ¶ 32. Following its investigation, Amazon determined that the gloves met their quality standards, and they accepted 1.25 million pairs of gloves sent under PO-82. Id. Thereafter, Amazon paid an additional $156,250 following acceptance of the 1.25 million pairs of gloves. Id.
On or around July 7, 2020, de Borbon communicated with agents of Amazon. Id. ¶ 33. He provided Amazon a final shipping schedule that Paradigm put together from the manufacturers of the gloves. Id. The final shipping schedule showed seven different shipments for nitrile gloves—some were from SkyMed in support of PO-82 and some of the gloves were from VRG in support of PO-84. Id. The final shipping schedule showed a total of 80 million pairs of gloves to be shipped in different sizes with estimated delivery dates. Id. Paradigm alleges that it was ready, willing, and able to ship the remainder of the gloves to Amazon, but Amazon delayed shipment. Id. ¶ 34. Amazon constantly changed its point of contact for Paradigm, constantly changed its departments that Paradigm was working with, and continuously changed its delivery location for the gloves. Id.
On or around August 10, 2020, Dr. Dandillaya communicated with Amazon again, and stated that "all of the product purchased passed Amazon criteria prior to [the] PO being issued, and [he] even went beyond that by sending [the] SkyMed and VRG product to SGS for testing. No issues [were] identified so far to [his] knowledge." Id. ¶ 43. On or around August 11, 2020, Rachel Anderson, a representative of Amazon, and the individual who entered into the POs with Paradigm, admitted that she "agree[s] that [Amazon's] SGS partner review[e]d the gloves and approved." Id. ¶ 44.
Notwithstanding this, on or around August 31, 2020, Amazon informed Dr. Dandillaya that it desired to cancel all shipments and POs related to SkyMed. Id. ¶ 49. It alleged that the gloves were fraudulently produced based off an alleged statement from W.A. Rubbermate. Id. Paradigm explained to Amazon that when the PO was first initiated, SkyMed had been working with W.A. Rubbermate but there had likely been a falling out. Id. ¶ 49. Nonetheless, Paradigm further explained that Amazon reviewed and approved all of the gloves sent to Amazon for specifications and quality. Id. ¶ 53.
On or around September 22, 2020, counsel for Amazon contacted Paradigm to cancel both PO-82 and PO-84. Id. ¶ 59. Counsel for Amazon did not identify any issue with the VRG gloves under PO-84 but justified cancelling PO-84 based on alleged material misstatements by Paradigm about SkyMed under PO-82. Id. Paradigm alleges that Amazon is contracting directly with Paradigm's contacts following its demand to cancel the purchase orders. Id. ¶ 62. Amazon is therefore interfering with contracts between Paradigm and SkyMed and Paradigm and VRG. Id.
On June 8, 2021, Amazon filed a complaint against Paradigm and Individual Defendants for breach of contract, violation of the Washington Consumer Protection Act, RCW § 19.86 ("WCPA"), and fraudulent inducement. Dkt. #1. After Individual Defendants moved to dismiss, Amazon amended its complaint as a matter of right. Dkt. ## 15, 21. Individual Defendants have moved to dismiss the Amended Complaint for lack of personal jurisdiction and failure to state a claim. Dkt. # 23. Separately, Paradigm answered and counterclaimed against Amazon for breach of contract, breach of the duty of good faith and fair dealing, and tortious interference with business relations. Dkt. # 30. On October 18, 2021, after Amazon moved to dismiss, Paradigm amended its counterclaims. Dkt. ## 37, 42. Amazon then moved to dismiss the amended counterclaims. Dkt. # 43.
"It is well-established in our circuit that an 'amended complaint supersedes the original, the latter being treated thereafter as nonexistent.' " Ramirez v. Cty. of San Bernardino, 806 F.3d 1002, 1008 (9th Cir. 2015). Accordingly, Amazon's motion to dismiss Paradigm's original counterclaims is denied as moot. Dkt. # 37.
III. LEGAL STANDARD
A. Personal jurisdiction
"When a defendant moves to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of demonstrating that the court has jurisdiction over the defendant." Pebble Beach Co. v. Caddy, 453 F.3d 1151, 1154 (9th Cir. 2006). "Although the court 'may not assume the truth of allegations in a pleading which are contradicted by affidavit,' the court resolves factual disputes in the plaintiff's favor." Toy v. Honeywell Int'l Inc., 2019 WL 1904215, at *3 (N.D. Cal. Apr. 29, 2019) (quoting CollegeSource, Inc. v. AcademyOne, Inc., 653 F.3d 1066, 1073 (9th Cir. 2011)). When the court does not conduct an evidentiary hearing, the plaintiff need only make a prima facie showing of facts supporting personal jurisdiction to avoid dismissal. See Myers v. Bennett Law Offices, 238 F.3d 1068, 1071 (9th Cir. 2001).
However, courts are not required to determine jurisdiction on the papers alone. The decision whether to grant jurisdictional discovery is within the discretion of the district court. See Wells Fargo & Co. v. Wells Fargo Express Co., 556 F.2d 406, 430 n.24 (9th Cir. 1977). Denial of jurisdictional discovery "is not an abuse of discretion when it is clear that further discovery would not demonstrate facts sufficient to constitute a basis for jurisdiction," id., or when the request is "based on little more than a hunch that it might yield jurisdictionally relevant facts," Boschetto v. Hansing, 539 F.3d 1011, 1020 (9th Cir. 2008).
B. Failure to state a claim
Fed. R. Civ. P. 12(b)(6) permits a court to dismiss a complaint for failure to state a claim. The rule requires the court to assume the truth of the complaint's factual allegations and credit all reasonable inferences arising from those allegations. Sanders v. Brown, 504 F.3d 903, 910 (9th Cir. 2007). A court "need not accept as true conclusory allegations that are contradicted by documents referred to in the complaint." Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). The plaintiff must point to factual allegations that "state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 568, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). If the plaintiff succeeds, the complaint avoids dismissal if there is "any set of facts consistent with the allegations in the complaint" that would entitle the plaintiff to relief. Id. at 563, 127 S.Ct. 1955; Ashcroft v. Iqbal, 556 U.S. 662, 679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).
A court typically cannot consider evidence beyond the four corners of the complaint, although it may rely on a document to which the complaint refers if the document is central to the party's claims and its authenticity is not in question. Marder v. Lopez, 450 F.3d 445, 448 (9th Cir. 2006). A court may also consider evidence subject to judicial notice. United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003).
IV. DISCUSSION
A. Judicial notice
Both parties seek judicial notice of the purchase orders that form the basis of the parties' dispute. See Dkt. ## 27, 44. Amazon also requests judicial notice of a 2021 report from the Federal Trade Commission ("FTC") entitled "Protecting Consumers During the COVID-19 Pandemic: A Year in Review" as well as several other documents. Dkt. # 35. These include publicly available documents filed in a bankruptcy case relating to Defendant de Borbon in the Central District of California, publicly available documents filed with California's Secretary of State, and screenshots of a website for a company called "Borbon d'Anjou Holdings," allegedly affiliated with Individual Defendants. Id. Individual Defendants object to judicial notice of the FTC report, the documents relating to the bankruptcy proceeding, and the website screenshots of Borbon d'Anjou Holdings. Dkt. # 41.
It is well-established that courts may take judicial notice of court filings and other matters of public record. See Reyn's Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 (9th Cir. 2006) (citing Burbank-Glendale-Pasadena Airport Auth. v. City of Burbank, 136 F.3d 1360, 1364 (9th Cir. 1998)). Under the doctrine of incorporation by reference, the Court may not only consider documents attached to the complaint on a 12(b)(6) motion, but also documents whose contents are alleged in the complaint, provided the complaint "necessarily relies" on the documents or contents thereof, the document's authenticity is uncontested, and the document's relevance is uncontested. Coto Settlement v. Eisenberg, 593 F.3d 1031, 1038 (9th Cir. 2010); Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005) (a court may review documents where "the plaintiff's claim depends on the contents of a document, the defendant attaches the document to its motion to dismiss, and the parties do not dispute the authenticity of the document, even though the plaintiff does not explicitly allege the contents of that document in the complaint."). The purpose of this rule is to "prevent plaintiffs from surviving a Rule 12(b)(6) motion by deliberately omitting documents upon which their claims are based." Swartz v. KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007) (internal quotation marks omitted).
With these principles in mind, the Court takes judicial notice of the purchase orders' provisions. Dkt. # 34-1. Notice is limited to what the purchase orders say; notice is not appropriate for the substantive truth of any representations made in the contracts. Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001). Judicial notice is proper because the purchase orders are integral to the complaint and no party disputes their identity and accuracy.
The Court will also take judicial notice of the existence of the business records on file with the California Secretary of state and the bankruptcy proceeding against Defendant de Borbon. The existence and authenticity of a document which is a matter of public record is judicially noticeable, but the veracity and validity of their contents (the underlying arguments made by the parties, disputed facts, and conclusions of fact) are not. See, e.g., Lee v. City of Los Angeles, 250 F.3d at 690 (a court may take judicial notice of another court's opinion, but not of the truth of the facts recited therein). Accordingly, the Court will not take notice of the facts asserted within those documents as requested by Amazon.
The Court will also not take judicial notice of the FTC report. Judicial notice is inappropriate where the facts to be noticed are irrelevant and not needed to resolve the motions before the Court. See Ruiz v. City of Santa Maria, 160 F.3d 543, 548 n. 13 (9th Cir. 1998). The Court will also not take judicial notice of the website printouts relating to Borbon d'Anjou Holdings. Private corporate websites, particularly when describing their own business, generally are not the sorts of sources whose accuracy cannot reasonably be questioned. Veridian Credit Union v. Eddie Bauer, LLC, 295 F. Supp.3d 1140, 1147 n. 3 (W.D. Wash. 2017); Spy Optic, Inc. v. Alibaba.Com, Inc., 163 F.Supp.3d 755, 763 (C.D. Cal. 2015) ("[P]rivate corporate websites, particularly when describing their own business, generally are not the sorts of sources whose accuracy cannot reasonably be questioned.").
B. Personal Jurisdiction
Individual Defendants move to dismiss for lack of personal jurisdiction. Dkt. # 23 at 17. They make main two arguments regarding jurisdiction. First, they argue that their alleged contacts with Washington do not constitute purposeful availment, nor purposeful direction at the forum. Second, they argue that Paradigm's contacts with Washington cannot be imputed to them.
1. Forum Contacts of a Corporate Officer/Director
"[U]nder the fiduciary shield doctrine, a person's mere association with a corporation that causes injury in the forum state is not sufficient in itself to permit that forum to assert jurisdiction over the person." Davis v. Metro Prods., Inc., 885 F.2d 515, 520 (9th Cir. 1989). But courts can exercise personal jurisdiction over a corporate officer where a plaintiff demonstrates that the officer is personally liable for wrongdoing in the forum or if the corporation is the alter ego of the individual officer. Id. at 520-21. A "corporate officer or director is, in general, personally liable for all torts which he authorizes or directs or in which he participates, notwithstanding that he acted as an agent of the corporation and not on his own behalf." Comm. for Idaho's High Desert, Inc. v. Yost, 92 F.3d 814, 823 (9th Cir. 1996). Thus, "a corporate officer's contact on behalf of a corporation is sufficient to subject the officer to personal jurisdiction where the officer 'is a primary participant in the alleged wrongdoing or had control of, and direct participation in the alleged activities.' " Allstar Mktg. Group, LLC v. Your Store Online, LLC, 666 F. Supp. 2d 1109, 1120 (C.D. Cal. 2009); see also Facebook, Inc. v. Power Ventures, Inc., 844 F.3d 1058, 1069 (9th Cir. 2016) ("[T]he actions of a corporate entity can be imputed to an individual officer who is the 'guiding spirit behind the wrongful conduct, or the central figure in the challenged corporate activity.' ").
Accordingly, the Court will examine Dandillaya and de Borbon's own individual contacts with Washington, whether conducted in a personal or official capacity, to determine if they are sufficient to warrant the exercise of jurisdiction over them in connection with forum-related claims.
2. Specific Jurisdiction
Plaintiff has the burden of establishing personal jurisdiction. Ziegler v. Indian River County, 64 F.3d 470, 473 (9th Cir. 1995). "It is well established that where the district court relies solely on affidavits and discovery materials, the plaintiff need only establish a prima facie case of jurisdiction." Rano v. Sipa Press, Inc., 987 F.2d 580, 587 n.3 (9th Cir. 1993). "Federal courts apply state law to determine the bounds of their jurisdiction over a party." Williams v. Yamaha Motor Co., 851 F.3d 1015, 1020 (9th Cir. 2017) (citing Fed. R. Civ. P. 4(k)(1)(A)). Washington's long-arm statute, RCW 4.28.185, "extends jurisdiction to the limit of federal due process." Shute v. Carnival Cruise Lines, 113 Wn. 2d 763, 771, 783 P.2d 78 (1989).
Personal jurisdiction can be found on either of two theories: general jurisdiction and specific jurisdiction. Bancroft & Masters, Inc. v. Augusta Nat'l Inc., 223 F.3d 1082, 1086 (9th Cir. 2000). A defendant with "substantial" or "continuous and systematic" contacts with the forum state is subject to general jurisdiction. Id. "The inquiry whether a forum State may assert specific jurisdiction over a non-resident defendant focuses on the relationship among the defendant, the forum, and the litigation." Axiom Foods, Inc. v. Acerchem Int'l, Inc., 874 F.3d 1064, 1068 (9th Cir. 2017) (internal quotations omitted). As Amazon does not assert that Individual Defendants are subject to general jurisdiction, the Court will consider whether they are subject to specific jurisdiction.
The Ninth Circuit applies a three-prong test to determine whether the exercise of specific jurisdiction over a non-resident defendant is appropriate. Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 802 (9th Cir. 2004). First, defendant has either purposefully directed his activities toward the forum or purposely availed himself of the privileges of conducting activities in the forum. Id. Second, the claims must arise out of the defendant's forum-related activities. Finally, the exercise of jurisdiction must be reasonable. Axiom Foods, Inc., 874 F.3d at 1068. Plaintiff bears the burden of satisfying the first two prongs. Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 802 (9th Cir. 2004). The burden then shifts to defendant to make a "compelling case" that the exercise of jurisdiction would not be reasonable. Id.
a. Purposeful Availment and Purposeful Direction
The Ninth Circuit has clarified that the "purposeful availment" and "purposeful direction" standards are distinct—the former applies to contract claims and the latter to tort claims. Schwarzenegger, 374 F.3d at 802. Amazon brings claims against Individual Defendants sounding in both contract and tort. Accordingly, the Court will evaluate contacts under both purposeful availment and purposeful direction tests.
Purposeful Availment. In such cases, courts "ask whether a defendant has 'purposefully avail[ed] [himself] of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.' " Picot v. Weston, 780 F.3d 1206,1212 (9th Cir. 2015) (quoting Schwarzenegger, 374 F.3d at 802) (alterations in original). "A showing that a defendant purposefully availed himself of the privilege of doing business in a forum state typically consists of evidence of the defendant's actions in the forum, such as executing or performing a contract there." Schwarzenegger, 374 F.3d at 802; see also Yahoo! Inc. v. La Ligue Contre Le Racisme Et L.'Antisemitisme, 433 F.3d 1199, 1206 (9th Cir. 2006) (stating that courts "typically inquire whether a defendant 'purposefully avails itself of the privilege of conducting activities' or 'consummate[s] [a] transaction' in the forum, focusing on the activities such as delivering goods or executing a contract.").
Amazon fails to demonstrate purposeful availment over Individual Defendants. Notably, Individual Defendants did not seek out Amazon in Washington in the first instance; instead, the parties were introduced by a third party and over email. Am. Compl. ¶ 26. All preliminary negotiations took place via electronic communications, and neither de Borbon nor Dandillaya was physically present in Washington at any point during the negotiation process. See Coast Equities, LLC v. Right Buy Properties, LLC, 701 F. App'x 611, 613 (9th Cir. 2017) (holding that contract negotiations between real estate developers and investors conducted via email and phone communications were not sufficient to establish purposeful availment). As for contacts occurring by phone or e-mail, the Ninth Circuit has held that [t]he making of telephone calls and the sending of letters to the forum state [is] legally insufficient to enable the court to exercise personal jurisdiction over the non-resident defendant." Peterson v. Kennedy, 771 F.2d 1244, 1262 (9th Cir. 1985). Nor is it alleged that Individual Defendants were signatories or guarantors of either deal with Amazon. Ultimately, the Amended Complaint fails to show that the individual defendants undertook an "activity or an occurrence" within the forum State and "therefore subject to the State's regulation." Bristol-Myers Squibb Co. v. Superior Ct. of California, San Francisco Cnty., 582 U.S. 255, 137 S. Ct. 1773, 1780, 198 L.Ed.2d 395 (2017).
Amazon contends that Individual Defendants are nonetheless subject to personal jurisdiction under the "alter ego" doctrine and thus Paradigm's forum contacts can be imputed to them. Dkt. # 33 at 21-25. To allege liability under the "alter ego" doctrine, a plaintiff must show "(1) that there is such unity of interest and ownership that the separate personalities or the two entities no longer exists, and [that] (2) that failure to disregard their separate identities would result in fraud or injustice." Williams v. Yamaha Motor Co. Ltd., 851 F.3d 1015, 1021 (9th Cir. 2017) (citing Ranza v. Nike, Inc., 793 F.3d 1059, 1073 (9th Cir. 2015)). To survive a motion to dismiss, a plaintiff asserting application of the alter ego doctrine to extend personal jurisdiction must "allege specifically both the elements of alter ego liability, as well as facts supporting each." MH Pillars Ltd. v. Realini, 2017 WL 916414, at *12 (N.D. Cal. Mar. 8, 2017) (internal citation omitted).
In support of its argument, Amazon notes that "Dandillaya was Paradigm's sole corporate officer," that "Paradigm was incorporated with the specific intent to shield Dandillaya and de Borbon from personal liability for their wrongful and fraudulent conduct," and that Paradigm's Articles of Incorporation state "[t]he liability of the directors of the corporation for monetary damages shall be eliminated to the fullest extent permissible under California law." Am. Compl. ¶¶ 11, 12, 17. Additionally, Amazon alleges that "Individual Defendants treated Paradigm's corporate funds as their own, including for purposes of paying their personal debts," and argues "de Borbon was both heavily indebted and impecunious at the time of Defendants' fraudulent acts." Id. ¶ 15; Dkt. # 33 at 24. Finally, Amazon alleges that Paradigm was never sufficiently capitalized to engage in significant commercial transactions and is "a shell company owned by another corporation that de Borbon formed when he was destitute and which he fully owns and controls." Id. ¶ 16; Dkt. # 33 at 25.
These allegations are largely conclusory and merely mimic the language of factors that courts use to determine alter ego status. While it is true that there is common ownership between Paradigm and other de Borbon entities, "[c]ommon ownership alone is insufficient to support disregard of the corporate form." Offshore-Inland Servs. of Ala., Inc. v. R/V DEEPOCEAN QUEST, 2007 WL 2908584, at *9 (W.D. Wash. Oct. 2, 2007) (citations omitted). Amazon makes much of the fact that de Borbon has suffered personal tax issues, but provides no support that Paradigm is actually inadequately capitalized. See Commodity Futures Trading Commission v. Topworth Int'l, Ltd., 205 F.3d 1107, 1112-13 (9th Cir. 2000) (noting that undercapitalization is a significant factor in veil-piercing analysis). Indeed, there are no factual allegations that Paradigm and the other de Borbon entities share the same bank account or otherwise commingle funds. In fact, Individual Defendants filed declarations expressly stating the opposite. Dkt. # 24 at ¶ 7; Dkt. # 25 at 3. Conclusory allegations such as these have been insufficient to establish "alter ego" status within the Ninth Circuit. See, e.g., Stewart v. Screen Gems-EMI Music, Inc., 81 F. Supp. 3d 938, 962-63 (N.D. Cal. 2015) (observing that conclusory allegations based solely on information and belief are insufficient to state a claim for alter ego where the information and belief allegations merely mimic the language of factors that courts use to determine alter ego and do not supply any specific facts).
Amazon also fails to show that failure to pierce the corporate veil would produce an inequitable result. Williams, 851 F.3d at 1021. Again, there are no facts to support Amazon's allegation that Individual Defendants commingled their personal funds of with Paradigm's funds. There are no facts supporting Amazon's allegation that either Individual Defendant treated any of Paradigm's assets as his own. Perhaps more importantly, there are no facts supporting Amazon's allegation that Paradigm ever owned less than an adequate amount of assets to carry on its business or pay its debts.
Purposeful Direction. To show purposeful direction, a plaintiff must sufficiently allege that the defendant: (1) committed an intentional act, (2) expressly aimed at the forum state, (3) that caused harm the defendant knows is likely to be suffered in the forum state. See Dole Food Co. v. Watts, 303 F.3d 1104, 1111 (9th Cir. 2002).
In Walden v. Fiore, the Supreme Court emphasized that under the Calder effects test, "[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." 571 U.S. 277, 278, 134 S.Ct. 1115, 188 L.Ed.2d 12 (2014). In other words, in tort actions, while conducting the minimum contacts inquiry, courts are to focus on "the relationship among the defendant, the forum, and the litigation." Id. at 291, 134 S.Ct. 1115. "And it is the defendant, not the plaintiff or third parties, who must create contacts with the forum State." Id. Under Walden, a "theory of 'individualized targeting,' which relies on a plaintiff's strong connection to a forum and the defendant's knowledge that the plaintiff is a resident of that forum and will experience foreseeable harm in that forum, on its own will [no longer] support a finding of 'express aiming' or specific jurisdiction." Axiom Foods, Inc., 874 F.3d at 1069; see also Elghasen v. RBS Computer, Inc., 692 F. App'x 940, 941 (9th Cir. 2017).
Amazon sufficiently alleges that Individual Defendants committed intentional acts. See Am. Compl. ¶¶ 17-18, 34-39. Plaintiff alleges that Individual Defendants "intentionally commit[ed] tortious conduct," by making statements it knew to be false in order to induce Amazon to enter into contracts. Id. Although Individual Defendants disputes some of Plaintiff's factual allegations, conflicting facts are resolved in favor of Amazon for the purposes of determining personal jurisdiction. See AT &T v. Compagnie Bruxelles Lambert, 94 F.3d 586, 588 (9th Cir. 1996). As such, the intentional act element is satisfied.
However, Amazon has failed to provide facts showing that Defendants "expressly aimed" their acts at Washington. The Ninth Circuit has held that intentional misrepresentation is "not the type of reputation-based tort that establishes a larger connection with the forum state." Hatset v. Century 21 Gold Coast Realty, 649 F. App'x 400, 402 (9th Cir. 2016). Here, Amazon's allegations concerning the misrepresentations and other communications between the parties only serve to connect Individual Defendants to Amazon and not to the state of Washington or its public. See id. ("[Defendant] communicated with [Plaintiff] while [Plaintiff] was physically present in California, but these communications connect only [Defendant] to [Plaintiff], not to California specifically.") Amazon's tort-based claims turn on these same facts and thus fail to establish any additional contacts between Individual Defendants and Washington. Accordingly, Amazon has failed to sustain its burden of demonstrating that the relationship between the Individual Defendants, the litigation, and the forum is sufficient to support the Court's exercise of personal jurisdiction over them.
Accordingly, the Court GRANTS Individual Defendants' motion to dismiss for lack of personal jurisdiction. As such, Individual Defendants' 12(b)(6) motion is DENIED as moot. Amazon requests jurisdictional discovery on its "alter ego" theory. Dkt. # 33 at 25. Since further discovery on the "alter ego" issue might well demonstrate facts sufficient to constitute a basis for jurisdiction, the Court grants Amazon's request for jurisdictional discovery on this issue. Harris Rutsky & Co. Ins. Servs. v. Bell & Clements Ltd., 328 F.3d 1122, 1135 (9th Cir. 2003).
C. Counterclaims
Paradigm counterclaims against Amazon for breach of contract with respect to both purchase orders, breach of the duty of good faith and fair dealing, and tortious interference with business relations. Dkt. # 42. Amazon moves to dismiss for failure to state a claim. Dkt. # 43.
1. Breach of Contract
To state an actionable claim for breach of contract under RCW 62A, Paradigm must "show proof of a valid contract, a breach, and resulting damages." Glob. Cure Med. LLC v. Alfa Pharma LLC, 2020 WL 6075920, at *5 (W.D. Wash. Oct. 15, 2020).
Here, the Amended Counterclaim alleges that Amazon issued PO-82 to Paradigm for 20 million pairs of disposable, blue nitrile gloves in exchange for $5,000,000. Am. Countercl. ¶ 64. PO-82 specified 4 million medium pairs of gloves, 10 million pairs of large gloves, and 6 million pairs of extra-large gloves. Am. Countercl. ¶ 65. As for PO-84, the Amended Counterclaim alleges that Amazon issued PO-84 for 60 million pairs of non-powder, blue nitrile gloves in exchange for $15,000,000. PO-84 specified 12 million medium, 30 million large, 18 million extra-large. Am. Countercl. ¶ 65.
The first question for the Court is whether Paradigm pleads the existence of a valid contract. A valid contract requires mutual assent to its essential terms, generally in the form of an offer and an acceptance. Weiss v. Lonnquist, 153 Wn. App. 502, 510, 224 P.3d 787 (2009). As the offeror, Amazon controlled the terms of the transaction. Dkt. # 38-1; Dkt. # 38-2. Notably, under the express language of the purchase orders, they do not constitute a "firm offer" within the meaning of Section 2-205 of the Uniform Commercial Code or any other laws or regulations with similar effect, and "may be revoked at any time prior to acceptance." Nor do the purchase orders meet the requirements for a "firm offer" under U.C.C. § 2-205. Per Section 4 of PO-82, Amazon and Paradigm agreed that Paradigm will be deemed to have accepted the PO Terms and Conditions upon the earliest of "(a) Paradigm's signing and returning a copy of the PO to Amazon, (b) Paradigm's shipping of the gloves to Amazon or invoicing Amazon for the gloves, (c) Paradigm starting performance of the Services or invoicing Amazon for such services, or (d) Paradigm's acceptance of the PO by other commercially acceptable means." Am. Countercl. ¶13; Dkt. # 38-1 (stating that "Supplier" will have deemed to have accepted the PO terms).
This question is answered easily with respect to PO-82. Paradigm alleges Amazon Paradigm shipped 1.25 million pairs of gloves under PO-82. Am. Countercl. ¶¶ 11, 74. The same is not true with respect to PO-84. Unlike with PO-82, Paradigm does not allege that it signed and returned a copy of the PO-84 to Amazon, shipped gloves to Amazon under PO-84, or invoiced Amazon for the gloves. Neither party addresses whether Paradigm's acceptance of PO-84 by other commercially acceptable means. UCC § 2-206(1)(a) provides that offers generally invite acceptance "in any manner and by any medium reasonable in the circumstances." However, viewing the allegations in the light most favorable to Paradigm, the Court finds that Paradigm alleges acceptance of PO-84. Specifically, Paradigm alleges that it agreed to provide V Glove branded gloves manufactured by VRG to fulfill PO-84 in May 2020, and, provided Amazon a final shipping schedule in July 2020. Am. Countercl. ¶¶ 75, 116.
Paradigm also adequately alleges breach and resulting damages with respect to PO-82. Although Amazon disputes the gloves were conforming and accepted, the Amended Counterclaim expressly alleges that Amazon accepted the gloves following a due diligence investigation and inspection of the gloves. Am. Countercl. ¶¶ 11, 74 118. Amazon then delayed delivery of the remaining gloves and then wrongfully cancelled the remaining order. Id. ¶¶ 134, 144. Paradigm alleges that it incurred damages from Amazon's breach of PO-82 including, but not limited to, $2,343,750, the remainder of the amount owed by Amazon, the loss of the gloves delivered to Amazon, and damages to its name and reputation. At this stage of the proceedings, that is enough to state a claim.
Amazon nonetheless argues that Paradigm's breach of contract claims cannot stand because Section 9 expressly permits Amazon to "terminate or modify all or any portion" of the Purchase Order either prior to shipment or acceptance of the goods:
9. Cancellation and Modifications. Purchaser may terminate or modify all or any portion of this Purchase Order prior to shipment of any Goods or Supplier's commencement of performance of Services at no charge and without liability by giving Supplier written notice of such termination or change. Purchaser may terminate or modify this Purchase Order for any Goods after shipment and prior to Purchaser's acceptance of such Goods, and Purchaser will pay only the shipping expenses for returning such Goods to Supplier's shipping location and incur no further charge or liability. Upon cancellation of a Purchase Order related to Services after Supplier has commenced performance of such Services, Supplier will promptly terminate the Services and Purchaser is only liable
to pay for Services performed and liabilities incurred prior to cancellation (except that if the specified fees are a fixed amount, Purchaser will pay a pro rata fee to the extent the Services are complete). Upon cancellation, Supplier will promptly deliver to Purchaser, without request, all deliverables, Work Product and other items, and all data, reports, summaries, estimates, and any other information or materials as Supplier may have collected or created in performing Services. Supplier is not entitled to payment under any outstanding invoice until delivery of the foregoing items to Purchaser is complete.
Dkt. # 38-1 at 3; Dkt. # 38-2 at 3.
Viewing the allegations in a light most favorable to Paradigm, the Court finds that the cancellation provision does not preclude Paradigm from stating a claim with respect to PO-82, as Paradigm alleges that it shipped and Amazon accepted the nitrile gloves under PO-82 before cancelling.
However, the Court finds that Paradigm fails to allege Amazon breached PO-84. Again, Section 9 expressly permits a purchaser to "terminate or modify all or any portion" of the Purchase Order either prior to shipment or acceptance of the goods. Dkt. # 38-1 at 3; Dkt. # 38-2 at 3. Paradigm does not allege that it shipped any nitrile gloves under PO-84 or invoiced Amazon under PO-84 prior to Amazon's canceling of the contract. Paradigm attempts to save this claim by arguing that "[w]hile Section 9 of the POs permit limited cancellation and modifications, the POs require that '[u]pon cancellation of a Purchase Order related to Services after Supplier has commenced performance of such Services, Supplier will promptly terminate the Services and Purchaser is only liable to pay for Services performed and liability incurred prior to cancellation . . .' " Dkt. # 46 at 8. This argument has no merit. Based upon the express terms of the purchase orders, this was a contract for "Goods" and not a contract for "Services." See Dkt. # 27 at 7 ("Goods" means "the goods, software, and other items supplied or to be supplied under this Purchase Order"); RCW 62A.2-105 (defining "Goods" as "all things" that are "movable at the time of identification to the contract for sale" other than money, investment securities, and "things in action."). For the same reason, Paradigm's argument that Amazon breached by failing to pay within 60 days under Section 6 also fails. See Dkt. # 38-1 at 3 (requiring payment 60 days after "Purchaser's acceptance of the Project"). Accordingly, the Court DENIES Amazon's motion to dismiss with respect to PO-82, and GRANTS Amazon's motion to dismiss with respect to PO-84 without prejudice.
2. Breach of Duty of Good Faith and Fair Dealing
Washington courts have held that "[i]n every contract there is an implied covenant of good faith and fair dealing which obligates the parties to cooperate with one another so that each may obtain the full benefit of performance." Cavell v. Hughes, 29 Wash.App. 536, 539, 629 P.2d 927 (1981). The duty of good faith and fair dealing can arise even when there is no breach of an express contract term. Rekhter v. Dep't of Soc. & Health Servs., 180 Wn.2d 102, 111-112, 323 P.3d 1036 (2014). "There is no one-size-fits-all definition of good faith and fair dealing." Microsoft Corp. v. Motorola, Inc., 963 F. Supp. 2d 1176, 1184 (W.D. Wash. 2013). "It may violate the duty of good faith and fair dealing to, for example, (1) evade the spirit of a bargain; (2) willfully render imperfect performance; (3) interfere with or fail to cooperate in the other party's performance; (4) abuse discretion granted under the contract; or (5) perform the contract without diligence." Id. (citing RESTATEMENT (SECOND) OF CONTACTS § 205 cmt. d).
That said, "the duty [of good faith and fair dealing] arises only in connection with terms agreed to by the parties." Johnson v. Yousoofian, 84 Wash. App. 755, 762, 930 P.2d 921 (1996) ("The implied duty of good faith is derivative, in that it applies to the performance of specific contract obligations. If there is no contractual duty, there is nothing that must be performed in good faith." (citations omitted)). The crux of Paradigm's claim here is that Amazon wrongfully delayed and cancelled the purchase orders without evidence, documentation, or any other information in support and then contracted with Paradigm's contacts. Am. Countercl. ¶¶ 144-47. However, because the duty of good faith and fair dealing is not "free-floating" but "exists only in relation to performance of a specific contract term," this claim fails. Badgett v. Sec. State Bank, 116 Wn.2d 563, 570, 807 P.2d 356 (1991). Paradigm fails to specify a contract term requiring Amazon to provide evidence, documentation, or support for cancellation, or specify any duties relating to delays in acceptance of the gloves. Nor does Paradigm specify any contractual duties prohibiting Amazon from contracting with Paradigm's contacts. Therefore, the Court GRANTS Amazon's motion to dismiss this counterclaim without prejudice.
3. Tortious interference with contractual relations
A claim for tortious interference requires a plaintiff to allege facts sufficient to show: (1) the existence of a valid contractual relationship or business expectancy; (2) that defendants had knowledge of that relationship or expectancy; (3) intentional interference inducing or causing breach or termination of the relationship or expectancy; (4) that defendants interfered for an improper purpose or used improper means; and (5) resultant damage. Leingang v. Pierce Cnty. Med. Bureau, Inc., 131 Wn.2d 133, 157, 930 P.2d 288 (1997).
The Court agrees with Amazon that Paradigm's allegations are insufficient to make a claim. Paradigm only alleges that "Amazon is contracting directly with Paradigm's contacts following its demand to cancel the POs. Amazon is therefore interfering with contracts between Paradigm and SkyMed and Paradigm and VRG." Am. Countercl. ¶ 62. Amazon is correct that Paradigm fails to allege that Amazon knew of its contracts with SkyMed or VRG. The only factual allegation relating to Amazon's contact with distributors concerns W.A. Rubbermate, which Paradigm purports is a manufacturer and not a brand. Countercl. ¶ 49 ("It appears that Amazon unilaterally reached out to the alleged contact for W.A. Rubbermate."); id. ¶ 139 (stating that "SkyMed is a brand, and that the company uses different manufacturers to produce their gloves depending whether a customer is requesting Nitrile, Latex or Vinyl"); id. ¶ 143 ("W.A. Rubbermate was likely attempting to circumvent and cut Paradigm out of the picture in order to work directly with Amazon and generate a greater profit."). Accordingly, the Court GRANTS Amazon's motion to dismiss this counterclaim without prejudice.
V. CONCLUSION
For the foregoing reasons, the Court GRANTS in part and DENIES in part Individual Defendants' Motion to Dismiss and GRANTS in part and DENIES in part Amazon's motion to dismiss Defendant Paradigm Clinical Research Institute Inc.'s Amended Counterclaims. Amazon's motion to dismiss Paradigm's original counterclaims is DENIED as moot. Dkt. ## 23, 37, 43. Amazon is to complete jurisdictional discovery within sixty (60) days of the Court's order. Any disputes related to the jurisdictional discovery shall be directed to the Magistrate Judge assigned to the case. Lastly, the Court GRANTS Amazon leave of court, once jurisdictional discovery is complete, to file an Amended Complaint. The Amended Complaint shall be filed within twenty (20) days from the completion of jurisdictional discovery.