Apple Inc. v. Allan & Assocs. Ltd.

445 F.Supp.3d 42

APPLE INC., Plaintiff,

v.ALLAN & ASSOCIATES LIMITED, et al., Defendants.

Case No. 5:19-cv-8372-EJD

United States District Court, N.D. California, San Jose Division.

Signed March 27, 2020

Melanie Marilyn Blunschi, Elizabeth Claire Gettinger, Latham & Watkins LLP, San Francisco, CA, for Plaintiff.

Michael F. Donner, Anthony James Dutra, Hanson Bridgett LLP, San Francisco, CA, for Defendants.

ORDER GRANTING DEFENDANTS' MOTION TO DISMISS WITH LEAVE TO AMEND

Re: Dkt. No. 16

EDWARD J. DAVILA, United States District Judge

Plaintiff Apple Inc. designs, markets, and sells computers, tablets, and phones. In an effort to combat the flow of electronics into landfills, Plaintiff established an environmentally friendly recycling program whereby Apple consumers can trade in or turn over their used devices to Plaintiff and Plaintiff will arrange for eco-friendly destruction and recycling of the device. Because Apple parts are valuable and sought-after, Plaintiff hired Defendant Allan & Associates Limited ("AAL") to oversee and secure the recycling process. Specifically, pursuant to the Parties' contract, Defendant AAL was supposed to witness, in-person, the destruction of Apple devices to ensure that during the recycling process, device-components are not stolen and then sold on the black market. Defendant AAL allegedly breached this contract.

Under an "alter ego" theory, Plaintiff alleges Defendants A2 Global Risk Limited ("A2") and Bradley James Allan ("Allan") are liable for Defendant AAL's breach. Defendants allege that this Court lacks personal jurisdiction over Defendants A2 and Allan and that the applicable statute of limitations bars Plaintiff's claim. Accordingly, Defendants move this Court to dismiss Plaintiff's complaint. Having considered the Parties' briefs,¹ the Court GRANTS Defendants' motion to dismiss.

I. BACKGROUND

A. Factual Background

1. The Relationship Among AAL, A2, and Mr. Allan

Plaintiff alleges that "each defendant is and was the agent and/or alter ego of each other defendant." Id. ¶ 12. Defendant Allan resides in Hong Kong, China. Complaint for Breach of Contract ("Compl.") ¶ 7, Dkt. 27. He is the founder and sole shareholder and director of both AAL and A2. Id. Defendant AAL is a security and crisis management consulting company that is organized, located, and headquartered in Hong Kong, China. Id. ¶ 8. Defendant A2 is a security risk management consulting company also headquartered in Hong Kong, China. Id. ¶ 9. Both companies have their principal places of business in Hong Kong, though (notably) at different addresses. See id. ¶¶ 8, 9.

Plaintiff contends AAL and A2 are "the same company" and thus are responsible for each other's debts. Id. ¶ 10. As support, Plaintiff cites the following:

• In April 2016, Defendant AAL listed A2 as a "service" on its website. Id.

• On August 8, 2018, Defendant Allan indicated the companies were a single company by referring them as "Allan & Associates / A2 Global Risk" in a post on his LinkedIn profile. Id.

• Until recently, the AAL website redirected visitors to the A2 website. Id.

• AAL and A2 have all or substantially the same employees and the companies conduct the same business. Id.

2. Plaintiff and Defendant AAL's Services Agreement

As stated, this case arises out of Plaintiff's E-Waste program. Id. ¶¶ 14–17. On March 1, 2012, Plaintiff hired Defendant AAL to oversee the recycling process discussed above. Plaintiff sent its materials to a specialized recycling company ("the Recycling Company"). Id. ¶ 18. Pursuant to the Services Agreement, Defendant AAL was supposed to enforce certain security measures at this facility. Id. Specifically, the Agreement required Defendant AAL to (1) escort the product, (2) verify product types, quantities, and weights, (3) verify packaging materials and seals, (4) verify recycling processes and outcomes, and (5) secure the product. Id. ¶ 19. This meant that Defendant AAL had to "accompany" vehicles carrying Apple products, be "on-site" for verifications, and have a "physical presence" while "observing and documenting" the recycling process. Id. ¶¶ 19–21.

These provisions ensured that AAL employees would witness (in-person) the destruction of Apple materials so as to protect Apple's parts and products from theft and disclosure to third parties. Id. ¶¶ 22–23. Defendant AAL also had to submit signed certifications confirming that it complied with all security measures required under the Agreement. Id. ¶ 25.

In September 2013, Plaintiff began sending materials for destruction and recycling to the Recycling Company. Id. ¶ 26. Defendant AAL sent Plaintiff regular "On-Site Destruction Reports," which contained certification that Defendant AAL was performing its obligations under the Agreement, i.e. , Defendant AAL certified that its employees were "in-person" witnessing and overseeing the destruction and recycling process and following other security measures. Id. ¶ 26 ("The On-Site Destruction Reports specifically stated that ‘Allan & Associates have audited the destruction of [specific shipments] in order to obtain adequate assurance regarding the undertaken procedures and conditions’ and noted the number of pallets of Apple parts that had been ‘destroyed beyond use by the’ Recycling Company personnel." (alteration in original)). From September 2013 through 2016, Defendant AAL submitted monthly invoices for work performed under the Parties' contract. Id. ¶ 27. Plaintiff paid each invoice. Id.

In "late" 2015, Plaintiff began to notice discrepancies in its data and thought that Recycling Company employees may be stealing Apple parts. Id. ¶ 29. Members of Plaintiff's audit compliance and global security team visited the Recycling Company's recycling facility to conduct an investigation. Id. ¶ 30. There, Plaintiff learned that Recycling Company employees were stealing Apple parts and finished devices, including large quantities of the main logic boards.² Id. ¶¶ 29, 30. Plaintiff's investigation revealed that Recycling Company employees were able to circumvent Plaintiff's security measures because Defendant AAL did not witness the destruction process. Id. ¶30. In other words, Defendant AAL allegedly did not perform its obligations under the Services Agreement. Id. Specifically, Plaintiff contends that while AAL employees were on-site at the Recycling Center facilities, they did not watch the recycling process to confirm that Apple's materials were destroyed. Id. ¶ 31. Instead, AAL employees would weigh the material at the beginning and end of the recycling process; thus certifying only the weight of the products. Id. When AAL employees left, Recycling Company employees allegedly would steal valuable Apple product and then fill boxes with a mix of Apple and non-Apple scrap material so that the beginning and end weights matched. Id. Plaintiff alleges that it discovered Defendant AAL's breach "at the end of 2015." Id. ¶ 30.

B. Procedural History

On November 15, 2019, Plaintiff filed its Complaint in Santa Clara County Superior Court. Defendants removed the case to federal court. See Dkt. 1. On January 17, 2020, Defendants filed their motion to dismiss Plaintiff's Complaint arguing that Plaintiff has not (and cannot) establish personal jurisdiction over Defendants A2 and Allan and that Plaintiff's claim is barred by the statute of limitations. Motion to Dismiss ("Mot."), Dkt. 16. Plaintiff filed an opposition on February 18, 2020. Opposition to Motion to Dismiss ("Opp."), Dkt. 20. On February 25, 2020, Defendants filed their reply. Reply re Motion to Dismiss ("Reply"), Dkt. 30.

II. LEGAL STANDARDS

A. Personal Jurisdiction

Under Federal Rule of Civil Procedure 12(b)(2), defendants may move to dismiss for lack of personal jurisdiction. While the plaintiff bears the burden of showing that the Court has personal jurisdiction over the defendant, the court "resolves all disputed facts in favor of the plaintiff." See Pebble Beach Co.v. Caddy , 453 F.3d 1151, 1154 (9th Cir. 2006) (quotation marks and citation omitted). The Court may consider evidence presented in affidavits and declarations in determining personal jurisdiction. Data Disc, Inc. v. Sys. Tech. Assocs., Inc. , 557 F.2d 1280, 1285 (9th Cir. 1977) ; but see Ballard v. Savage , 65 F.3d 1495, 1498 (9th Cir. 1995) ("When a district court acts on a defendant's motion to dismiss under Rule 12(b)(2) without holding an evidentiary hearing, the plaintiff need make only a prima facie showing of jurisdictional facts to withstand the motion to dismiss. That is, the plaintiff need only demonstrate facts that if true would support jurisdiction over the defendant." (citations omitted)). "The plaintiff cannot simply rest on the bare allegations of its complaint, but uncontroverted allegations in the complaint must be taken as true." Mavrix Photo, Inc. v. Brand Techs., Inc. , 647 F.3d 1218, 1223 (9th Cir. 2011) (quotation marks and citation omitted). "The Court may not assume the truth of allegations that are contradicted by affidavit." In re Cathode Ray Tube (CRT) Antitrust Litig. , 27 F. Supp. 3d 1002, 1008 (N.D. Cal. 2014) (citing Data Disc, Inc. , 557 F.2d 1280, 1284 (9th Cir. 1977) ).

In a diversity action, like this one, a court may exercise personal jurisdiction over a non-resident defendant³ if jurisdiction is proper under California's long-arm statute and if the exercise of that jurisdiction does not violate federal due process. Fireman's Fund Ins. Co. v. Nat'l Bank of Coops. , 103 F.3d 888, 893 (9th Cir. 1996). Because California's long-arm statute authorizes the court to exercise personal jurisdiction over a non-resident defendant on any basis not inconsistent with the California or federal Constitution, the statutory and constitutional inquiry merge into a single due process test. See Cal. Code Civ. Proc. § 410.10.

Due process requires that a non-resident defendant have "certain minimum contacts" with the relevant forum "such that the maintenance of the suit does not offend ‘traditional...