Hukui Tech, Inc. v. Intelligent Solutions, LLC

Background

Hukui Tech, Inc., Hukui Technology, Inc., and Hukui Bio Co., LTD. sued Intelligent Solutions, LLC and others over the distribution of COVID-19 diagnostic tests. Hukui Tech had entered into a distribution agreement with Co-Diagnostics Inc. in March 2020. It also entered into a customer referral agreement with Intelligent Solutions, which provided sales-lead services for Hukui Tech’s distribution of the tests.

Co-Diagnostics later took the position that Hukui Tech was required to be its sole distributor and could not use other sub-distributors. Co-Diagnostics sued Hukui Tech in Utah state court, and Hukui Tech filed counterclaims alleging that Co-Diagnostics had prematurely ended their business relationship. The Utah court granted summary judgment against Hukui Tech and in favor of Co-Diagnostics on November 7, 2023.

The federal case originally asserted 10 contract-related claims against Intelligent Solutions and Joseph Sarro. In an amended complaint filed in March 2024, the plaintiffs added Joseph Featherstone and Seth Egan. The plaintiffs alleged that Featherstone and Egan acted outside their official roles at Co-Diagnostics to enrich themselves by inducing Co-Diagnostics and Intelligent Solutions to breach contracts with Hukui Tech.

Personal Jurisdiction

Personal jurisdiction is a court’s authority to decide claims against a particular defendant. The court explained that California’s jurisdictional statute reaches as far as federal due process allows. Due process requires a defendant to have sufficient “minimum contacts” with the state so that exercising jurisdiction is fair.

The court first considered general jurisdiction, which can allow a court to hear any claim against a defendant when the defendant is essentially at home in the state. Featherstone and Egan were domiciled in Utah, not California. The plaintiffs argued that the defendants had sufficient California contacts because they allegedly sold COVID-19 tests to California consumers, sold tests through California-connected distributors, and attended or arranged attendance at California business conferences.

The court held that these alleged contacts were not so substantial, continuous, and systematic that Featherstone and Egan could be considered essentially at home in California. It therefore found no general jurisdiction.

The court next considered specific jurisdiction, which applies only when the claims arise out of or relate to the defendant’s contacts with the forum state. Because the plaintiffs alleged that Featherstone and Egan committed the tort of inducing a breach of contract, the court applied the purposeful-direction test. That test asks whether the defendants committed an intentional act, expressly aimed at the forum state, that caused harm they knew was likely to occur there.

The plaintiffs identified alleged California-related conduct, including sales and shipments of COVID-19 tests, distribution agreements with Hukui Tech, shipments to California end users, solicitation of California municipalities, redirection of profits, and attendance at California conferences. The court did not decide whether these acts satisfied the purposeful-direction requirement. Instead, it held that the plaintiffs had not shown that the claims against Featherstone and Egan arose out of or related to those California activities.

The court noted that Intelligent Solutions was based in Nevada and Featherstone and Egan lived in Utah. The plaintiffs had not shown that interactions between Intelligent Solutions and Featherstone or Egan relating to the alleged inducement occurred outside those two states. The court also found that the alleged sales, shipments, and conference attendance in California were not alleged to have induced Intelligent Solutions’s breach. The court stated that merely knowing a third party in California would be affected was not enough to establish specific jurisdiction.

The court also declined to rely on the plaintiffs’ post-hearing request for judicial notice concerning Intelligent Solutions’s California offices. The filing was procedurally improper because it came after briefing without advance permission. In addition, even if considered, it did not establish that the offices existed when the alleged inducement occurred, that Featherstone or Egan interacted with people there, or that they knew those people were in California.

Disposition

The court granted Featherstone’s and Egan’s motion to dismiss for lack of personal jurisdiction. It did not reach the question of proper venue. The court dismissed the plaintiffs’ claims against Featherstone and Egan without prejudice and without leave to amend.