Woolfson v. Conn Appliances, Inc.

Background

Aaron Woolfson, a Telephone Consumer Protection Act expert and founder of TelSwitch, Inc., provided consulting and expert legal services to Conn Appliances, Inc. from mid-2016 through April 2017. Conn Appliances is described as a Texas-based retail furniture and appliance outlet, and the TCPA cases were handled primarily by Munsch Hardt Kopf & Harr, P.C., a Texas law firm. Woolfson traveled to Conn Appliances’ facilities in Texas, inspected its telephone systems and procedures, and prepared an expert report. He later prepared a similar report for an arbitration.

According to the amended complaint, Conn Appliances stopped paying plaintiffs shortly after Woolfson prepared the later report, and plaintiffs stopped working for Conn Appliances in April 2017. In July 2020, Woolfson learned that Conn Appliances and MHKH had listed him as an expert and submitted an altered version of his report in a TCPA case. The amended complaint alleged that defendants used the altered report without paying plaintiffs for that retention.

Woolfson asserted copyright infringement. Woolfson and TelSwitch asserted claims under California’s unfair-business-practices statute and for quantum meruit, a claim seeking the reasonable value of services or goods provided. In an earlier order, the court dismissed the initial complaint for lack of personal jurisdiction but allowed plaintiffs to amend to plead claims based on defendants’ use of the report in another TCPA case, identified in this opinion as the Parras case.

Personal Jurisdiction

Conn Appliances and MHKH renewed their motions to dismiss for lack of personal jurisdiction. The court analyzed specific personal jurisdiction, which allows a court to hear claims connected to a nonresident defendant’s activities in the forum state. For the copyright and unfair-business-practices claims, the court applied the “purposeful direction” test, asking whether defendants committed intentional acts expressly aimed at California that caused harm defendants knew was likely to occur there.

The court found that defendants intentionally submitted altered versions of the report in the Hernandez and Parras cases. It further found that defendants expressly aimed the alleged conduct at California by submitting the altered report in the Parras case, which was scheduled for an in-person hearing in San Francisco, and that defendants knew the arbitration would take place in California. The court also found that harm in California was foreseeable because plaintiffs were known to reside there.

The court concluded that the copyright and unfair-business-practices claims related to defendants’ California-connected conduct. It rejected the argument that plaintiffs had to show the conduct was a “but-for” cause of the harm at this stage. The court also declined to decide defendants’ argument that their conduct did not amount to copyright infringement because that argument concerned the merits rather than personal jurisdiction.

The court considered whether exercising jurisdiction would be reasonable and found that defendants had not presented the required compelling case against jurisdiction. Among other things, the court found that defendants purposefully involved themselves in California by submitting the report in a proceeding involving a California resident, that California had a strong interest in providing a remedy to its residents, and that the remaining factors did not outweigh those considerations.

For the quantum meruit claim, the court exercised pendent personal jurisdiction. That term refers to jurisdiction over an additional claim arising from the same core facts as a claim over which the court already has jurisdiction. The court found that the quantum meruit claim shared a common core of facts with the copyright and unfair-business-practices claims.

Venue and Transfer

Defendants also sought dismissal for improper venue or, alternatively, transfer to the Southern District of Texas. The court first held that defendants’ attempt to incorporate their earlier venue arguments by reference did not properly present those arguments under Federal Rule of Civil Procedure 10(c). The court nevertheless addressed the venue issues.

For the copyright claim, the court found venue proper in the Northern District of California because the Parras arbitration was scheduled for an in-person hearing in San Francisco and the court’s personal-jurisdiction analysis supported venue there. The court also found pendent venue for the closely related unfair-business-practices and quantum meruit claims.

The court denied transfer under 28 U.S.C. § 1404(a). It found that the convenience of the parties, local interest, and each forum’s familiarity with the applicable law were essentially balanced. No party addressed court congestion or the possibility of consolidating claims, and electronic records reduced the importance of access to evidence. The court also found that defendants had not adequately identified relevant witnesses, their locations, and the substance and importance of their testimony.

Disposition

Judge Maxine M. Chesney denied Conn Appliances’ renewed motion to dismiss for lack of personal jurisdiction, denied MHKH’s motion to dismiss for lack of personal jurisdiction, and denied defendants’ joint motion to dismiss for improper venue or, alternatively, to transfer the action to the Southern District of Texas. The opinion did not decide whether plaintiffs ultimately proved copyright infringement, unfair business practices, or entitlement to payment.