Infospan, Inc. v. Emirates Nbd Bank Pjsc , 903 F.3d 896 ( 2018 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
INFOSPAN, INC.; INFOSPAN No. 16-55090
(GULF) INC.,
Plaintiffs-Appellees, D.C. No.
8:14-cv-01679-JVS-AN
v.
EMIRATES NBD BANK PJSC, OPINION
Defendant-Appellant.
Appeal from the United States District Court
for the Central District of California
James V. Selna, District Judge, Presiding
Argued and Submitted July 11, 2018
Pasadena, California
Filed September 7, 2018
Before: Marsha S. Berzon and N. Randy Smith, Circuit
Judges, and P. Kevin Castel,* District Judge.
Opinion by Judge N.R. Smith
*
The Honorable P. Kevin Castel, United States District Judge for the
Southern District of New York, sitting by designation.
2 INFOSPAN V. EMIRATES NBD BANK PJSC
SUMMARY**
Personal Jurisdiction
The panel reversed the district court’s judgment
compelling arbitration of claims concerning a contract and
remanded for dismissal on the ground that the district court
lacked personal jurisdiction over the defendant.
The panel reversed the district court’s determination that
the defendant waived its personal jurisdiction defense through
its litigation conduct. The panel concluded that the defendant
preserved the defense by timely asserting it and litigating it to
an adverse ruling, and did not waive the defense by litigating
other defenses and counterclaims in a related matter between
similar parties.
The panel held that the district court lacked personal
jurisdiction over plaintiffs’ claims for declaratory and
injunctive relief because the defendant, a United Arab
Emirates bank, lacked sufficient contacts with the United
States.
**
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
INFOSPAN V. EMIRATES NBD BANK PJSC 3
COUNSEL
Daniel Scott Schecter (argued) and Nima H. Mohebii, Latham
& Watkins LLP, Los Angeles, California; Stephanie N.
Grace, Latham & Watkins LLP, San Diego, California;
Kathryn H. Ruemmler and J. Scott Ballenger, Latham &
Watkins LLP, Washington, D.C.; for Defendant-Appellant.
William A. Isaacson (argued), Sandra M. Calhoun, Jonathan
Shaw, and David Boyd, Boies Schiller Flexner LLP,
Washington, D.C.; David L. Zifkin, Boies Schiller Flexner
LLP, Santa Monica, California; Terry Bird, Bird Marella
Boxer Wolpert Nessim Drooks Licenberg & Rhow, Los
Angeles, California; for Plaintiffs-Appellees.
OPINION
N.R. SMITH, Circuit Judge:
A defendant that timely asserts that the district court lacks
personal jurisdiction and litigates the issue to an adverse
decision from the district court does not waive the personal
jurisdiction defense by vigorously litigating defenses to the
merits, including by asserting counterclaims against other
parties. Emirates NBD Bank PJSC (the “Bank”) was entitled
to litigate its defenses and counterclaims in a related matter
between similar parties without waiving the issue of personal
jurisdiction, because the Bank had timely asserted the
personal jurisdiction defense and received an adverse ruling
(that jurisdiction was proper) from the district court.
Accordingly, we reverse the district court’s waiver
determination, and remand for dismissal because the district
court lacked personal jurisdiction over the Bank.
4 INFOSPAN V. EMIRATES NBD BANK PJSC
I.
The underlying dispute in this matter concerns a contract
between InfoSpan (Gulf), Inc. (“InfoSpan Gulf”), a Cayman
Islands corporation, and the UAE Bank. Early in 2007,
InfoSpan Gulf approached Emirates Bank International
(which later merged with the National Bank of Dubai to
become the Bank) in Dubai with a proposal to provide stored
value cards to customers in the United Arab Emirates
(“UAE”). In May 2007, the parties reached an agreement and
entered a contract (the “SVC Agreement”). All negotiations
took place in Dubai. Under the SVC Agreement, InfoSpan
Gulf would provide the Bank with innovative prepaid stored
value cards . The cards would help the Bank provide a better
banking solution for migrant workers by allowing the workers
to transmit money internationally via short message service
(“SMS”) text messages, receive direct deposits, and make
purchases. InfoSpan Gulf and the Bank would each share in
the fees associated with the cards. The cards would be
processed by InfoSpan Gulf and issued by Emirates Bank
International in the UAE. The parties entered the SVC
Agreement in Dubai, and the SVC Agreement stated that it
was governed by UAE law and subject to jurisdiction in the
UAE courts.
Over the ensuing two years, the relationship between the
Bank and InfoSpan Gulf broke down, culminating in the
Bank’s termination of the SVC Agreement on May 4, 2009.
In 2011, InfoSpan Gulf and its affiliate InfoSpan, Inc.
(“InfoSpan”) sued the Bank in federal district court in
California alleging tort and contract claims (“InfoSpan I”).
The Bank moved to dismiss the complaint on personal
jurisdiction grounds, and the district court initially granted the
Bank’s motion on July 27, 2012. However, after InfoSpan
INFOSPAN V. EMIRATES NBD BANK PJSC 5
moved for reconsideration, the district court partially reversed
course, finding personal jurisdiction for InfoSpan to assert its
tort claims against the Bank. In reversing its ruling on
InfoSpan’s claims, the district court did not disturb its ruling
that there was no personal jurisdiction over InfoSpan Gulf’s
contract claims.
The parties next litigated whether InfoSpan Gulf was an
indispensable party. The Bank also sought to have InfoSpan’s
tort claims sent to arbitration, asserting that they arose out of
the SVC Agreement between InfoSpan Gulf and the Bank.
The court resolved the indispensable party and arbitration
issues against the Bank, and InfoSpan Gulf was voluntarily
dismissed to preserve diversity jurisdiction.
In 2014, the Bank requested leave to amend its answer to
allege counterclaims against InfoSpan for the return of funds
paid to InfoSpan Gulf under an alter ego theory. In its
proposed amended pleading, the Bank again asserted and
preserved its objection to personal jurisdiction. InfoSpan
argued that the counterclaims were subject to a mandatory
arbitration clause. The Bank did not oppose arbitration;
instead it reasserted that all claims (including InfoSpan’s tort
claims) should be subject to arbitration. The district court
denied the amendment on timeliness grounds without
reaching the arbitration issue.
After the district court denied the amendment, InfoSpan
initiated a second federal lawsuit (“InfoSpan II”) against the
Bank in California on October 17, 2014. This second suit is
the subject of the present appeal. In the second lawsuit,
InfoSpan sought to compel arbitration under the SVC
Agreement of its declaratory judgment claim, asserting that
the Bank’s breach of contract and related claims lacked merit.
6 INFOSPAN V. EMIRATES NBD BANK PJSC
InfoSpan claimed that, although no such claims were
pending, there remained an imminent threat that they would
be asserted.
As it turned out, after InfoSpan voluntarily amended its
complaint in InfoSpan I in November 2014, the Bank
reasserted its counterclaims in its answer to the amended
complaint (the Bank again reasserted its objection to personal
jurisdiction in its amended answer). However, the Bank later
voluntarily dismissed its counterclaims without prejudice in
InfoSpan I.
Meanwhile, in InfoSpan II, the Bank moved to dismiss the
suit on personal and subject matter jurisdiction grounds. The
district court issued a tentative ruling denying the motion to
dismiss. InfoSpan then sought to amend its complaint to add
InfoSpan Gulf as a party and seek arbitration of InfoSpan
Gulf’s contract claims (previously dismissed in InfoSpan I for
lack of personal jurisdiction) in the United States. The Bank
did not oppose the amendment, but it once again expressly
reserved its objections to jurisdiction. After InfoSpan Gulf
was added, the Bank renewed its motion to dismiss—pointing
to the district court’s earlier ruling that personal jurisdiction
was lacking as to the contract claims.
In its ruling on the motion to dismiss, the district court
held that the Bank had waived its personal jurisdiction
defense and submitted to jurisdiction by litigating InfoSpan
I. The district court specifically identified the Bank’s decision
to litigate its counterclaims in InfoSpan I proceedings as a
component of the waiver. With respect to subject matter
jurisdiction, the district court held that there was a cognizable
case-or-controversy over arbitration arising from the Bank’s
refusal to arbitrate the claims in California.
INFOSPAN V. EMIRATES NBD BANK PJSC 7
After the district court entered final judgment, compelling
arbitration in InfoSpan II, the Bank timely appealed.
Meanwhile, InfoSpan I went to trial on the tort claims,
resulting in a defense verdict on all claims. InfoSpan timely
appealed the adverse judgment, which we affirmed in
InfoSpan I, No. 17-55000.
II.
We review the “district court’s determination that [the
Bank] waived” the defense of personal jurisdiction “for an
abuse of discretion.” CFPB v. Gordon, 819 F.3d 1179, 1187
(9th Cir. 2016), cert. denied, 137 S. Ct. 2291 (2017). “[T]he
first step of [the] abuse of discretion test is to determine de
novo whether the [district] court identified the correct legal
rule to apply to the relief requested.” Enyart v. Nat’l
Conference of Bar Examiners, Inc., 630 F.3d 1153, 1159 (9th
Cir. 2011) (quoting United States v. Hinkson, 585 F.3d 1247,
1261–62 (9th Cir. 2009) (en banc)). If not waived, we review
the merits of the personal jurisdiction issue de novo. See
Pebble Beach Co. v. Caddy, 453 F.3d 1151, 1154 (9th Cir.
2006).
III.
The district court suggested that, although the Bank fully
litigated the merits of its personal jurisdiction defense in
InfoSpan I, it nonetheless waived the issue by vigorously
defending the case after the personal jurisdiction issue was
decided against it. Specifically, the district court faulted the
Bank for its assertion of counterclaims against InfoSpan in
InfoSpan I and its other strategic efforts to get the case sent to
arbitration in the UAE.
8 INFOSPAN V. EMIRATES NBD BANK PJSC
Our cases are clear that once the issue of personal
jurisdiction has been adjudicated on the merits against a
party, that party may fully participate and defend the
litigation up to and including filing its own counterclaims.
See Hillis v. Heineman, 626 F.3d 1014, 1018 (9th Cir. 2010)
(acknowledging the Ninth Circuit rule that “the filing of a
permissive counterclaim does not constitute a waiver of a
personal jurisdiction defense asserted in the same pleading”
(internal quotation marks and citations omitted)); SEC v.
Ross, 504 F.3d 1130, 1149 (9th Cir. 2007) (identifying Ninth
Circuit precedent that filing a “compulsory counterclaim . . .
does not thereby waive any jurisdictional defenses [the party]
has previously or concurrently asserted” and filing a
“permissive counterclaim” likewise does not waive
jurisdictional defenses “asserted in the same pleading”
(internal quotation marks and citations omitted)); Stewart v.
Ragland, 934 F.2d 1033, 1036 n.5 (9th Cir. 1991) (noting that
where a party timely asserts a personal jurisdiction defense
and the court “denies the motion . . . the party may proceed to
trial on the merits without waiving the jurisdictional
challenge”); Gates Learjet Corp. v. Jensen, 743 F.2d 1325,
1330 n.1 (9th Cir. 1984) (“[W]e hold that the filing of a
permissive counterclaim does not constitute a waiver of a
personal jurisdiction defense asserted in the same pleading.”).
In concluding that the Bank’s litigation conduct amounted
to waiver of the issue of personal jurisdiction, the district
court relied on our decision in Peterson v. Highland Music,
Inc., 140 F.3d 1313 (9th Cir. 1998), as amended on denial of
reh’g and reh’g en banc (June 15, 1998). The district court’s
reliance on Peterson was misplaced. Peterson’s waiver
holding is limited to improper “deliberate, strategic” conduct
with respect to how the issue of personal jurisdiction itself is
asserted, such as by “sandbagging” opposing counsel. See id.
INFOSPAN V. EMIRATES NBD BANK PJSC 9
at 1318–19. Peterson did not find fault with a party’s
vigorous litigation of its other claims or defenses in
conjunction with or after litigating a timely asserted personal
jurisdiction defense to an adverse decision by the district
court. See id.
The cases cited in Peterson, suggesting waiver of an
asserted personal jurisdiction defense, involved
circumstances (1) where the defense was listed in the answer
but never affirmatively litigated, Cont’l Bank, N.A. v. Meyer,
10 F.3d 1293, 1296–97 (7th Cir. 1993); Yeldell v. Tutt,
913 F.2d 533, 538–39 (8th Cir. 1990); and (2) where the
district court invited discovery on the jurisdictional issue and
a renewed motion to dismiss if evidence supported a lack of
personal jurisdiction, but the defendant did not avail himself
of the opportunity, Rice v. Nova Biomedical Corp., 38 F.3d
909, 915 (7th Cir. 1994). See Peterson, 140 F.3d at 1318–19
(citing the foregoing cases). In each case, waiver arose from
the defendant’s conduct in failing to properly request a ruling
on the issue of personal jurisdiction—not from vigorous
litigation of remaining claims or defenses following an
adverse ruling on personal jurisdiction.
In both InfoSpan I and II, the Bank timely asserted
personal jurisdiction as a defense and litigated the issue to a
decision from the district court. Nothing more was required
to preserve the issue,1 and subsequent litigation of defenses
1
Here, the Bank reasserted its personal jurisdiction defense at every
turn after receiving an adverse ruling on the issue. A party need not
continuously seek re-consideration of the issue to preserve it for appeal.
Absent an invitation from the district court to re-litigate the issue in light
of a material change in the facts or the pleadings, a defense of personal
jurisdiction that has been timely asserted and litigated to an adverse
decision from the district court will remain preserved for appeal.
10 INFOSPAN V. EMIRATES NBD BANK PJSC
and counterclaims did not waive the Bank’s properly
preserved defense of personal jurisdiction. Because the
district court reached its waiver determination on the basis of
an erroneous interpretation of our decision in Peterson, we
conclude that it abused its discretion. See Enyart, 630 F.3d at
1159 (“If the [district] court failed to [identify the correct
legal rule], [the panel] must conclude it abused its discretion.”
(quoting Hinkson, 585 F.3d at 1262)).
IV.
On the merits, InfoSpan and InfoSpan Gulf have not met
their burden to identify sufficient facts to establish specific
personal jurisdiction over the Bank in California.2 The district
court did not address the merits of the personal jurisdiction
issue in its order denying the defense on waiver grounds. But
the court did address the merits of the personal jurisdiction
issue at the outset of InfoSpan I. That ruling, although not law
of the case in InfoSpan II, correctly determined that InfoSpan
Gulf had not alleged that the Bank had sufficient contacts
with the United States to establish personal jurisdiction over
the contract claims asserted.
2
InfoSpan and InfoSpan Gulf agree that California courts do not have
general personal jurisdiction over the Bank. They do cite Federal Rule of
Civil Procedure 4(k)(2) as an alternative basis for jurisdiction, but
exercising jurisdiction under this standard must be “consistent with the
United States Constitution and laws.” Fed. R. Civ. P. 4(k)(2). Given the
dearth of evidence with respect to the Bank’s contacts with the United
States, this standard likewise cannot be met. See Holland Am. Line Inc. v.
Wärtsilä N. Am., Inc., 485 F.3d 450, 462 (9th Cir. 2007) (concluding that
“scant, fleeting, and attenuated” contacts with the United States were
insufficient for jurisdiction under Rule 4(k)(2)).
INFOSPAN V. EMIRATES NBD BANK PJSC 11
“Federal courts apply state law to determine the bounds
of their jurisdiction over a party.” Axiom Foods, Inc. v.
Acerchem Int’l, Inc., 874 F.3d 1064, 1067 (9th Cir. 2017)
(quoting Williams v. Yamaha Motor Co., 851 F.3d 1015, 1020
(9th Cir. 2017)). “California authorizes its courts to exercise
jurisdiction ‘to the full extent that such exercise comports
with due process.’” Id. (quoting Williams, 851 F.3d at 1020);
see Cal. Code Civ. Proc. § 410.10.
“Due process ‘constrains a State’s authority to bind a
nonresident defendant to a judgment of its courts.’” Id. at
1068 (quoting Walden v. Fiore, 571 U.S. 277, 283 (2014)).
“A nonresident defendant must have ‘certain minimum
contacts with [the forum] such that the maintenance of the
suit does not offend traditional notions of fair play and
substantial justice.’” Id. (alteration in original) (quoting Int’l
Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). “The
inquiry whether a forum State may assert specific jurisdiction
over a nonresident defendant ‘focuses on the relationship
among the defendant, the forum, and the litigation.’” Id.
(quoting Walden, 571 U.S. at 284).
Two principles animate the “defendant-
focused” inquiry. Walden, [571 U.S. at 284].
First, the relationship between the nonresident
defendant, the forum, and the litigation “must
arise out of contacts that the ‘defendant
himself’ creates with the forum State.” Id.
(quoting Burger King Corp. v. Rudzewicz, 471
U.S. 462, 475 (1985)). Second, the minimum
contacts analysis examines “the defendant’s
contacts with the forum State itself, not the
defendant’s contacts with persons who reside
there.” Id. [at 285]. It follows that “a
12 INFOSPAN V. EMIRATES NBD BANK PJSC
defendant’s relationship with a plaintiff or
third party, standing alone, is an insufficient
basis for jurisdiction.” Id. at [286].
Id. (emphasis omitted). With these principles in mind, there
are three requirements for personal jurisdiction in contract
cases: “(1) the defendant must . . . purposefully avail himself
of the privileges of conducting activities in the forum; (2) the
claim must be one which arises out of or relates to the
defendant’s forum-related activities; and (3) the exercise of
jurisdiction must comport with fair play and substantial
justice, i.e. it must be reasonable.” Id. (internal quotation
marks and original alterations omitted) (quoting Dole Food
Co. v. Watts, 303 F.3d 1104, 1111 (9th Cir. 2002)). The
plaintiff bears the burden of establishing the first two prongs;
if this threshold burden is met, the defendant must establish
that the third prong is not met—i.e. that exercise of
jurisdiction is not fair—to avoid jurisdiction. Id. at 1068–69.
In this case, a UAE bank entered a contract with a
Cayman Islands corporation to provide pre-paid cards in the
UAE. There is no indication that the Bank conducted any
unilateral activities in California (or elsewhere in the United
States, with the exception of a single inspection of facilities
in Miami). There is certainly no evidence that any minimal
contacts with California, through email and phone calls to
California or through an investigation conducted in California
by one of the Bank’s agents, form the basis for InfoSpan
Gulf’s contract-focused claims, which arise from the Bank’s
and InfoSpan Gulf’s conduct in the UAE. Accordingly, there
is no basis for personal jurisdiction over the Bank in this suit
for declaratory judgment.
INFOSPAN V. EMIRATES NBD BANK PJSC 13
V.
We reverse the district court’s decision that the Bank
waived its personal jurisdiction defense, and we conclude (for
the same reasons the district court identified in InfoSpan I)
that there is no basis for personal jurisdiction over the Bank
in this suit for declaratory and injunctive relief.
REVERSED.