AboveGEM, Inc. v. Organo Gold Management, Limited

Background

AboveGEM provided software and web-based services to Organo Gold Management, Organo Gold International, and related entities from March 2012 through November 2018. By November 2018, Organo Gold Management allegedly owed AboveGEM approximately $450,000. The parties entered into a settlement agreement under which Organo Gold Management would make an initial payment and ten monthly payments, with Organo Gold Holdings serving as guarantor. After the initial payment and several installments, no further payments were made.

AboveGEM filed six claims: breach of contract; violation of California’s Unfair Competition Law; constructive trust; conversion; violation of the Racketeer Influenced and Corrupt Organizations Act against Organo Gold Management and Paul Caldwell; and RICO conspiracy against those defendants. Organo Gold International moved to dismiss the first four claims. Organo Gold Management, Organo Gold Holdings, and Caldwell separately moved to dismiss all claims. Both motions relied on lack of personal jurisdiction and failure to state a claim.

Evidentiary Issues

The court struck a supplemental declaration submitted by Organo Gold International with its reply because it contained new information. The court nevertheless considered declarations submitted with both motions when analyzing personal jurisdiction. It overruled AboveGEM’s hearsay objection because AboveGEM had not controverted the factual statement at issue, and the jurisdictional analysis at this stage could consider uncontroverted affidavit facts.

Personal Jurisdiction

Personal jurisdiction is a court’s authority over a particular defendant. The court explained that general jurisdiction allows a defendant to be sued on any matter when its connections with the state are sufficiently continuous, while specific jurisdiction applies when the claims arise from or relate to the defendant’s activities in the state.

The court found no general jurisdiction over any defendant. AboveGEM did not assert general jurisdiction, and the defendants’ places of incorporation, principal places of business, and domicile did not support it in California.

The court also found no specific jurisdiction. As to Organo Gold International, the court recognized that the company had some business relationship with AboveGEM, had initially entered into the underlying services agreement before it was assigned to another Organo Gold entity, and made several payments. But those contacts were not sufficiently connected to the settlement agreement at issue. Its one-time $40,000 payment did not establish purposeful availment, and AboveGEM’s claims arose from the failure to make payments under the settlement agreement rather than from that payment.

As to Organo Gold Management, Organo Gold Holdings, and Caldwell, the court acknowledged the defendants’ earlier, substantial business relationship with AboveGEM. However, the claims were based on the later settlement agreement and the defendants’ alleged failure to perform it, not on the earlier services relationship. The court found no evidence that the defendants traveled to or created contracts in California during the settlement negotiations. The contemplated performance involved payments to a California plaintiff, but the court held that AboveGEM’s location alone could not supply the defendants’ necessary connection to California. The settlement agreement did not reference California and selected Hong Kong law. Because AboveGEM failed to establish the required connection between the defendants’ forum-related conduct and its claims, the court did not reach the final reasonableness element of specific jurisdiction.

Alter Ego Theory

AboveGEM argued that the court could attribute the contacts of Organo Gold Management and Organo Gold Holdings to Organo Gold International and Caldwell under alter ego theories. Alter ego liability can, in limited circumstances, allow a court to treat related entities or an individual as responsible for another entity’s conduct. The court rejected the theory because, even if alter ego liability existed, the Hong Kong defendants had no California contacts that could be attributed to Organo Gold International or Caldwell.

Disposition

The court held that it lacked personal jurisdiction over Organo Gold International, Organo Gold Management, Organo Gold Holdings, and Paul Caldwell. Judge Phyllis J. Hamilton granted defendants’ motions to dismiss and dismissed the defendants without prejudice. The court stated that AboveGEM could refile in another jurisdiction that could properly exercise personal jurisdiction over the defendants.