Arc Wood & Timbers, LLC v. Riverwood Flooring & Paneling, Inc.

Background

Arc Wood & Timbers, LLC, identified as a California limited liability company with its principal place of business in San Rafael, California, and Riverwood Flooring & Paneling, Inc., a Georgia corporation with its principal place of business in Cairo, Georgia, supplied and procured lumber for high-end residential and commercial projects. Keith Lacy was Riverwood’s president and chief executive officer.

Between 2011 and 2020, Arc Wood and Riverwood entered into 71 agreements worth approximately $2.3 million. The dispute concerned a July 31, 2018 agreement under which Arc Wood agreed to pay $537,500 for 215 truckloads of bald cypress logs, to produce approximately 430,000 board feet of lumber for the KR Project in Kauai, Hawaii. Arc Wood alleged that the defendants failed to deliver 296,000 board feet while retaining its deposit, forcing Arc Wood to obtain comparable lumber elsewhere. Arc Wood sued for breach of contract and fraud in the inducement.

Personal-Jurisdiction Standard

The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction, meaning the court’s legal power to require the defendants to defend the case there. The court explained that Arc Wood had the burden to make a preliminary factual showing supporting jurisdiction. The court could exercise general jurisdiction only if the defendants’ affiliations with California were so continuous and systematic that the defendants were essentially at home there. It could exercise specific jurisdiction only if the defendants purposefully conducted activities involving California, the claims arose out of or related to those activities, and exercising jurisdiction would be reasonable.

Because the claims included both contract and tort theories, the court considered both purposeful availment, which asks whether a defendant deliberately engaged in significant forum-related activities or created continuing obligations with forum residents, and purposeful direction, which asks whether the defendant directed conduct at the forum.

Court’s Analysis

Arc Wood relied on the parties’ long business relationship, Lacy’s 2013 visit to California, and Riverwood’s alleged shipment of cypress samples to Arc Wood in California. The court held that these facts did not establish a preliminary showing of specific personal jurisdiction.

The court emphasized that the parties’ 71 transactions over roughly a decade did not show that Riverwood had affirmatively reached out to California to solicit business. The court also found no evidence or plausible allegation that Riverwood had shipped lumber to California for the projects, as opposed to producing lumber for pickup in Georgia. For the KR Project negotiations, Arc Wood used a local agent to conduct in-person discussions with Lacy in Georgia. The court concluded that the center of gravity of the parties’ business relationship was not California.

The court found that Lacy’s 2013 California visit did not establish jurisdiction because there was no evidence that he traveled to California to negotiate the KR Project or as part of the parties’ ongoing business relationship. His explanation that the trip was a family vacation was unrebutted. The court also ruled that, even assuming the sample shipment went to Arc Wood in California, the samples were considered for a project in Hawaii and did not show that the defendants deliberately targeted the California market.

The court therefore concluded that Arc Wood had not made the required preliminary showing supporting specific personal jurisdiction. Because that failure was sufficient, the court did not need to address the remaining factors. The court additionally stated that, even if the first jurisdictional requirement were satisfied, Arc Wood had not shown that its claims arose out of or related to the defendants’ California contacts. The agreement concerned lumber sourced from Georgia for a Hawaii project, and there was no evidence or plausible allegation that performance was to occur in California.

Disposition

The court granted the defendants’ motion to dismiss for lack of personal jurisdiction. It dismissed the complaint with leave to amend because it could not conclude that amendment would necessarily be futile. Any amended complaint had to be filed within 28 days of the order. The court also noted that the defendants should address, in the alternative, whether transfer to the Middle District of Georgia would be appropriate if further litigation occurred in the Northern District of California.