T.A.W. Performance, LLC v. Brembo, S. P.A.

53 Cal.App.5th 632

267 Cal.Rptr.3d 771

T.A.W. PERFORMANCE, LLC, Plaintiff and Appellant,

v.BREMBO, S.P.A., Defendant and Respondent.

A157400, A157841

Court of Appeal, First District, Division 3, California.

Filed August 17, 2020

Certified for Partial Publication.^*

Law Offices of Merrill C. Haber, Merrill C. Haber, Bryan W. Dillon, Sebastopol, for Plaintiff and Appellant.

Schnader Harrison Segal & Lewis, Stephen H. Dye, San Francisco, Brandy S. Ringer, for Defendant and Respondent.

Petrou, J. Plaintiff T.A.W. Performance, LLC (TAW) appeals from the trial court's (1) grant of defendant Brembo, S.p.A.’s (Brembo) motion to quash service of the summons for lack of personal jurisdiction; and (2) denial of TAW's motion for reconsideration. We affirm.

I. BACKGROUND

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.

On August 1, 2016, Brembo sent a termination notice letter to TAW at its North Carolina address providing that the agreement would terminate in one year's time, on July 31, 2017. Both parties filed lawsuits in advance of the agreement's termination date. TAW first filed in New York federal court but then voluntarily dismissed its lawsuit. In July 2017, Brembo filed a New York state lawsuit seeking damages for TAW's alleged failure to pay for products shipped to TAW in North Carolina. TAW filed a counterclaim seeking damages based on Brembo's alleged failure to enforce the agreement's exclusivity provisions against other distributors and its termination of the agreement without explanation. In its counterclaim, TAW confirmed it had specifically consented to the exclusive jurisdiction of the New York courts for all disputes arising between the parties in connection with the agreement.

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). As to the Franchise Act, TAW alleged the parties’ agreement met the elements of a franchise agreement, and Brembo's termination violated the Franchise Act as: (a) no franchisor may terminate a franchise prior to the expiration of its term except for good cause; and (b) "any condition, stipulation or provision purporting to bind any person to waive compliance with any provision" of the franchise law "is contrary to public policy and void." According to TAW, Brembo's termination of the agreement pursuant to its provision allowing for unilateral termination upon one-year's notice did not constitute good cause for termination under the Franchise Act.

II. THE MOTION TO QUASH SERVICE OF SUMMONS FOR LACK OF PERSONAL JURISDICTION WAS PROPERLY GRANTED

A. The Motion to Quash Service

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.

Relying on a declaration of its in-house chief legal and corporate affairs officer, Umberto Simonelli, Brembo asserted the court had no basis to exercise general jurisdiction for the following reasons: Brembo was an Italian corporation with its principal place of business and corporate headquarters in Italy; it was not authorized to do business in California; it maintained no offices in California; no current employees resided in California; it had no assets in California; and it paid no taxes in California. Additionally, Brembo designed and manufactured self-branded design equipment for motorcycles and motor vehicles in Italy; it did not manufacture any equipment in California; it did not sell products to the general public in California but instead sold equipment to distributors; it did not maintain a dealer network in California; and it did not engage in marketing efforts directed at California. Brembo had one United States subsidiary, Brembo North America, Inc., which was a distinct and separate entity, incorporated in Delaware with a principal place of business in Plymouth, Michigan.

Brembo further asserted the court had no basis to exercise specific jurisdiction for numerous reasons, including that TAW had moved its principal place of business to North Carolina prior to entering into the agreement and Brembo's act of contracting with a California entity was not sufficient to support specific jurisdiction. TAW's contacts with California were likewise insufficient as all purchase orders were sent by TAW to Brembo in Italy and Brembo did not ship any products to TAW in California. Further, the parties agreed New York was to be the exclusive forum for dispute resolution and never looked to California as shown by TAW's earlier dismissed federal lawsuit and its counterclaim filed in Brembo's pending New York state lawsuit.

In opposition, TAW asserted it did not need to establish general jurisdiction over Brembo because TAW could "easily" establish Brembo had "minimum contacts" to support specific jurisdiction since it had entered into an agreement with TAW (a California resident) to resell its products in California, and TAW now claimed damages based on Brembo's breach of that agreement. Relying on a declaration from its managing member Richard Martin, TAW also asserted Brembo had "many" other contacts with California supporting an exercise of specific jurisdiction: (1) Brembo purposefully directed its activities at California by creating a continuing obligation between itself and a California resident to resell large amounts of its products in California, over many years; (2) TAW had sold more than $2.7 million of Brembo's products in California over the past three years; (3) California accounted for 28.7 percent of TAW's sales of Brembo's products in the United States; (4) before TAW moved to North Carolina, Brembo shipped its products directly to California, handled warranties in California, and directly marketed its products in California; (5) TAW's California lawsuit arose out of Brembo's forum-related activities, namely, Brembo's wrongful termination of the 2014 agreement, which out-of-state forum selection clause was expressly void under the Franchise Act.

In reply, Brembo noted TAW conceded Brembo was not subject to general jurisdiction by failing to make any argument in support of that basis for jurisdiction. Brembo further asserted that evidence of certain events that preceded the 2014 agreement or that occurred after Brembo's alleged breach of the 2014 agreement, and its general activities in California, were not related to the wrongful termination claim and therefore could not support specific jurisdiction.

On March 28, 2019, the court granted Brembo's motion to quash service as TAW had not met its burden of demonstrating that Brembo had a sufficient nexus with California to support personal jurisdiction. In so concluding, the court explained that TAW conceded there was no general jurisdiction. As to specific jurisdiction, the court found TAW failed to satisfy its burden to demonstrate Brembo's contacts with California for a variety of reasons that fundamentally boiled down to the agreement being between "a company doing business in Italy, and one doing business in North Carolina, who had agreed to settle any claims per New York law" and TAW's failure to demonstrate Brembo had any special connection with California that would support the exercise of jurisdiction over Brembo.

In light of its determination that Brembo was not subject to specific jurisdiction, the trial court did not address whether the exercise of personal jurisdiction over Brembo would be reasonable. Nor...