California Court of Appeal, T.A.W. Performance, LLC v. Brembo, S.P.A., Docket No. A157400, A157841

 

Personal Jurisdiction

 

California Law

 

Contract Drafting

 

Exclusive Distribution Agreement

 

Role of the Choice of Law Provision

 

California Franchise Act

 

Export

 

Motion to Quash Service of the Summons

 

 

On July 1, 2014, Brembo, an Italian joint stock corporation with its headquarters in Italy, and TAW, a California limited liability company with its principal office in North Carolina, entered into a written “Exclusive Distribution Agreement” (hereinafter the agreement).  Brembo manufactured brake systems for vehicles (hereinafter referred to as products), which were exported for international sale.  Under the agreement, TAW was appointed as the sole and exclusive distributor of Brembo’s products to be resold by TAW to third parties within the “Territory” of the United States, Canada, and Mexico.

 

The agreement had a five-year term, from July 1, 2014 to June 30, 2019. Early termination could be effectuated by either party giving at least one (1) year’s notice in writing. In the event of a dispute not resolved by mediation, the parties consented “to the exclusive jurisdiction of the state and federal courts of the State of New York for all disputes or controversies which may arise between the Parties out or in connection with this Agreement or its construction, interpretation, effect, performance or non-performance, or the consequences thereof. Each Party agrees that such courts, to the exclusion of all other courts, tribunals and administrative bodies, shall have exclusive jurisdiction with respect to any and all such disputes and controversies and that any and all such disputes and controversies shall be determined only by litigation in one of such courts . . ..” The parties also agreed that the agreement and “any dispute or claim arising out of or in connection with it or its subject matter or formation” would be governed by the laws of the State of New York.

 

In 2018, while Brembo’s New York state lawsuit was pending, TAW filed this California lawsuit seeking monetary damages based on Brembo’s alleged wrongful termination of the agreement without cause. In its first amended complaint (FAC), TAW alleged it was a “California limited liability Company, formerly headquartered in Sonoma California, currently located in Cramerton, North Carolina with offices in Sonoma, California” and that “Richard Martin is the principal and controlling member of TAW. He is a United Kingdom citizen and non- immigrant alien, living in the United States pursuant to a valid E-2 Visa, who at all relevant times has been residing in Sonoma, California.” TAW further alleged Brembo was “an Italian corporation located in Italy that does business in the State of California by and through subsidiaries and California based distributors.”

 

The FAC included causes of action for breach of contract and violations of California’s Franchise Relations Act (Bus. & Prof. Code
§ 20001(a)-(c)) (Franchise Act).

 

Brembo moved to quash service of summons on the ground it did not have sufficient contacts with California for the court to exercise either general or specific jurisdiction.

 

“A court may assert general jurisdiction over foreign (sister-state or foreign-country) corporations to hear any and all claims against them when their affiliations with the State are so ‘continuous and systematic’ as to render them essentially at home in the forum State. [Citation.]” (Goodyear Dunlop Tires Operations, S.A. v. Brown (2011) 564 U.S. 915, 919 (Goodyear).)

 

In contrast to general jurisdiction, specific jurisdiction “depends on an ‘affiliation between the forum and the underlying controversy,’ principally, activity or an occurrence that takes place in the forum State and is therefore subject to the State’s regulation. [Citations.] In contrast to general, all-purpose jurisdiction, specific jurisdiction is confined to adjudication of ‘issues deriving from, or connected with, the very controversy that establishes jurisdiction.’ [Citation.]” (Goodyear, supra, 564 U.S. at p. 919.) In other words, “when determining whether specific jurisdiction exists, courts consider the ‘ “ ‘relationship among the defendant, the forum, and the litigation.’ ” ’ ” (Pavlovich v. Superior Court (2002) 29 Cal.4th 262, 269 (Pavlovich), quoting Helicopteros Nacionales de Colombia, S.A. v. Hall (1984) 466 U.S. 408, 414 (Helicopteros), quoting Shaffer v. Heitner (1977) 433 U.S. 186, 204 (Shaffer).)

 

Thus, “a court may exercise specific jurisdiction over a nonresident defendant only if: (1) ‘the defendant has purposefully availed himself or herself of the forum benefits’ (Vons, supra, 14 Cal.4th at p. 446); (2) ‘the “controversy is related to or ‘arises out of’ the defendant’s contacts with the forum” ’ (ibid., quoting Helicopteros, supra, 466 U.S. at p. 414); and (3) ‘ “the assertion of personal jurisdiction would be reasonable in that it would comport with ‘fair play and substantial justice.’ ” ’ (Vons, supra, 14 Cal.4th at p. 447, quoting Burger King Corp. v. Rudzewicz (1985) 471 U.S. 462, 472-473 [85 L.Ed. 528, 105 S. Ct. 2174] (Burger King)).” (Pavlovich, supra, 29 Cal.4th p. 269.)

 

Pertinent to the matter before us, the Burger King court specifically found that a choice of law provision by which the parties stipulated “in advance to submit their controversies for resolution” in a specific jurisdiction may be germane to the jurisdictional analysis. (Id. at p. 472, fn. 14; see Id. at pp. 482-483 [Burger King court admonished Court of Appeals for failure to give adequate consideration to choice of law provision in parties’ franchise agreement in determining question of personal jurisdiction over defendant franchisee].)

 

While the parties had a prior relationship in California, six months before and at the time of the execution of the 2014 agreement the parties’ relationship was no longer “California-directed in any meaningful sense.” (Halyard Health, supra, 43 Cal.App.5th at p. 1076.) TAW had moved its principal place of business to North Carolina and the distribution agreement was not limited to California but included the entirety of the United States, Canada, and Mexico. Under the agreement, Brembo shipped its products to TAW’s principal place of business in North Carolina. Of particular significance given the 2014 agreement’s anticipation of nationwide and international distribution of Brembo products through resales by TAW, Brembo made a commercially reasonable effort “to alleviate the risk of burdensome litigation” in any portion of the designated distribution territory by including choice of law and forum selection clauses limiting the forum in which TAW could file a lawsuit to New York. (World-Wide Volkswagen, supra, 444 U.S. at p. 297.)

 

We see no merit to TAW’s assertion that Brembo’s shipment of its products to North Carolina is insignificant, compared to where the products were eventually resold by TAW (i.e. California), because pursuant to the Uniform Commercial Code title to the goods passed to TAW in California where TAW was required to pay state excise taxes on the products it resold in the state. As our high court has admonished, we do not look at TAW’s contacts with California, but instead limit our analysis to an evaluation of Brembo’s contacts with the state. Even assuming title to the goods passed to TAW in California, we fail to see how that circumstance demonstrates that Brembo purposefully availed itself of the benefits and protections of the laws of California. Simply put, TAW’s unilateral resale of Brembo’s products in California is not sufficient to demonstrate that Brembo purposefully availed itself of the privilege of conducting business in California.

 

Choice-of-law and forum selection clauses, “standing alone”, are not dispositive, and may be discounted where a foreign corporation’s other minimum contacts establish jurisdiction in the forum state. However, they may “reinforce” whether or not a foreign corporation has made such “a deliberate affiliation with the forum state” as to support a conclusion that it should have reasonably foreseen “possible litigation there.”

 

Here, Brembo’s contacts with the United States were already directed away from California before the parties entered into the agreement. TAW had moved its principal place of business to North Carolina, Brembo was shipping its products to North Carolina, and TAW’s resale of Brembo’s products was expanded to include the entirety of the United States, Canada, and Mexico. Given these circumstances, Brembo made a concerted effort to “alleviate the risk of burdensome litigation” (World-Wide Volkswagen, supra, 444 U.S. at p. 297) by limiting dispute resolution to New York.

 

(…) Whether or not the enforceability of the parties’ 2014 agreement is governed by California law has nothing to do with whether enforceability may be determined by a California court.

 

Lastly, we are not persuaded by TAW’s assertions that the trial court abused its discretion by refusing to consider Brembo’s direct sales, marketing, advertising, and issuance of warranties for its products that were resold by TAW to California consumers as relevant factors. Such evidence would not be relevant, let alone material, to the subject of this lawsuit, Brembo’s alleged wrongful termination of the agreement. The controversy therefore lacks any substantial connection to Brembo’s purported contacts with California through its direct sales, marketing and advertising activities and its issuance of warranties for its products sold in California.

 

(Halyard Health, supra, 43 Cal.App.5th at p. 1073; see Id. at p. 1069 [specific jurisdiction not demonstrated where, among other factors, defendant foreign corporation’s California “sales” in the millions were not sufficiently connected to the gist of plaintiff’s declaratory relief action concerning the meaning and enforceability of an indemnification clause in the parties’ agreement].)

 

 

(California Court of Appeal, August 17, 2020, T.A.W. Performance, LLC v. Brembo, S.P.A., Docket No. A157400, A157841, Certified for Partial Publication)