Woolfson v. Conn Appliances, Inc.

Background

Aaron Woolfson, described as a database and Telephone Consumer Protection Act expert, founded TelSwitch, Inc., described as a California-based telecommunications and technology company. From mid-2016 through April 2017, Woolfson provided consulting and expert legal services to Conn Appliances, a Texas-based retail furniture and appliance outlet. Munsch Hardt Kopf & Harr, P.C. (MHKH), a Texas law firm, primarily handled the related telephone-consumer-protection cases.

Woolfson traveled to Conn Appliances’ facilities in Texas to inspect its telephone systems and operating procedures. He prepared an expert report that was filed in a Texas federal case and later prepared similar reports, including a report for an arbitration. Plaintiffs alleged that Conn Appliances and MHKH later submitted an altered version of that report in another case, creating the false impression that plaintiffs had been retained as experts without being paid for that work.

Woolfson asserted a copyright-infringement claim. Woolfson and TelSwitch also asserted claims under California’s unfair-competition law and for quantum meruit, a claim seeking payment for the reasonable value of services allegedly provided.

Motions and Personal Jurisdiction

Conn Appliances moved to dismiss for lack of personal jurisdiction, meaning the court’s legal power over that defendant. MHKH filed a separate motion on the same ground. The defendants jointly moved to dismiss for improper venue or, alternatively, to transfer the case to the Southern District of Texas.

The court rejected plaintiffs’ argument that either defendant was subject to general jurisdiction in California. Conn Appliances was incorporated and headquartered in Texas, had no stores, facilities, or employees in California, did not direct advertising to California residents, and derived approximately 0.03% of its total sales from California residents over six years. Its registration to do business in California, appointment of a service agent, sales to California residents, and collection lawsuits involving California residents did not make it essentially at home in California.

MHKH had three offices, all in Texas, and primarily represented Texas-based commercial entities in Texas matters. Its limited California litigation appearances and occasional attorney visits to California did not approximate a physical presence sufficient for general jurisdiction.

The court also found no specific jurisdiction. For the quantum-meruit claim, the court applied a purposeful-availment test because the claim was based on a quasi-contract. Although Conn Appliances and MHKH contacted plaintiffs in California and retained or designated them for work in multiple cases, the contracts did not require work in California, referred to California, or contain a California choice-of-law provision. The matters involved the American Arbitration Association or courts outside California, and the work product was to be delivered to Conn Appliances in Texas. Plaintiffs’ decision to perform most of the work in California was not, by itself, a sufficient contact by the defendants with California.

For the copyright and unfair-business-practices claims, the court applied a purposeful-direction test. The court accepted that Conn Appliances’ alleged submission of an altered report was an intentional act, but found that plaintiffs had not shown the act was expressly aimed at California or that the relevant injury was sufficiently connected to California. The defendants’ knowledge that Woolfson lived in California, their communications with California residents, and plaintiffs’ work from California were not enough. The court applied the same reasoning to MHKH.

Jurisdictional Discovery and Amendment

Plaintiffs asked for permission to investigate additional jurisdictional facts or to amend the complaint. The court denied jurisdictional discovery because plaintiffs’ suggestions that the defendants might have had other California-based vendors, witnesses, professionals, or service providers amounted only to speculation rather than a concrete basis for discovering relevant facts.

The court granted plaintiffs leave to amend for the limited purpose of pleading claims based on another allegedly improper use of a Woolfson report that defendants had acknowledged and that had at least some arguable connection with California. The court expressly made no finding about the effect of that possible amendment.

Disposition

The court granted Conn Appliances’ motion to dismiss for lack of personal jurisdiction and granted MHKH’s motion to dismiss for lack of personal jurisdiction. It denied plaintiffs’ request for jurisdictional discovery and granted, for the limited purpose stated above, plaintiffs’ request for leave to amend. It denied as moot the defendants’ joint motion to dismiss for improper venue or, alternatively, to transfer the case to the Southern District of Texas. Judge Maxine M. Chesney also continued the case-management conference to June 17, 2022.