Wonderworks Pte. v. Hewlett-Packard CA6

Filed 5/16/16 Wonderworks Pte. V. Hewlett-Packard CA6
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SIXTH APPELLATE DISTRICT
WONDERWORKS PTE. LTD., H042330
(Santa Clara County
Plaintiff and Appellant, Super. Ct. No. 1-14-CV-273632)
v.
HEWLETT-PACKARD COMPANY, et. al.,
Defendants and Respondents.
In this action against Hewlett-Packard Company and two related entities, the court
granted defendants’ motion to stay the action pending its adjudication in Malaysia.
Plaintiff WonderWorks appeals, contending that the doctrine of forum non conveniens
should not have been applied, as the public and private interests underlying the litigation
did not warrant depriving WonderWorks of its chosen forum. We agree that on the
particular facts before us, the stay constituted an abuse of discretion and requires reversal.
Background
The following factual summary is derived from WonderWorks’s first amended
complaint, supplemented by declarations and accompanying evidence submitted by the
parties. WonderWorks was “incorporated” in Singapore but was wholly owned and
managed by Sri Rajan, a California resident. Defendant Hewlett-Packard Company
(HP Co.) was a Delaware corporation with its principal place of business in Palo Alto.
Defendant Hewlett-Packard Enterprise Services, LLC (HPES) was a wholly owned
subsidiary of HP Co. which identified its principal office as being in Texas; according to
1
WonderWorks, however, Palo Alto was the place where HPES employees conducted
“significant business . . . with respect to the subject matter of this case.” Like HPES,
Hewlett-Packard Malaysia (HPM) was a wholly owned subsidiary of HP Co.,
incorporated and operating in Malaysia. According to the 2015 complaint, HPES and
HPM were agents or, alternatively, alter egos of HP Co., which commingled funds and
interchanged employees among the three entities. HP Co. “instructed and controlled”
HPES and HPM, using these subsidiaries “as a mere conduit for the affairs of HP Co.,
including by directing HPES and HPM to carry out the acts alleged in this complaint, for
the benefit of HP Co.” The complaint referred to the HP entities collectively as “HP.”
In late 2009 or early 2010, HPM sought to procure a contract with Bank Negara
Malaysia (BNM), the central bank of Malaysia. According to Bee Wah Lim (Lim), the
“Country General Manager” of HPM, “BNM was looking for a company to develop an
Integrated Statistical System (‘ISS’) that BNM could use to help manage and monitor the
reporting activity and filings made by Malaysian financial institutions and other regulated
Malaysian entities.” In April 2011, BNM awarded the contract to HPM.
In its complaint WonderWorks alleged that defendants had induced it to join them
on a bid for the BNM contract. WonderWorks’s role, it was told, would be to sell its
software to thousands of businesses in Malaysia that would be required to use the
software in filing its financial reports to BNM. According to the complaint, “The
Defendants told Plaintiff that after the system was in place in Malaysia, it would be
replicated on the cloud for other customers worldwide. Defendants promised Plaintiff
extraordinary profits if it would join this venture.” WonderWorks spent “millions of
dollars” in preparation and then “performed admirably. However, Defendants botched
the project and in the end did not pay Plaintiff for most of the work they had contracted to
Plaintiff. Defendants also coerced Plaintiff to perform work outside the contract for
which they did not pay. Ultimately, Defendants abandoned the project due to their own
ineptitude and misconduct in order to cut their own losses, which eliminated the promised
2
sales of Plaintiff’s software. Defendants also told Plaintiff that the worldwide cloud
replication that had been promised had not actually been a reality.”
WonderWorks elaborated on these allegations by identifying HPM as the entity
that had represented that WonderWorks would eventually earn “many millions of dollars
in profit” once the BNM system was installed; meanwhile, WonderWorks would be
“fully paid for all of its work and [its] software.” HPM had also represented to
WonderWorks that “HP would partner with WonderWorks on an exclusive basis to
replicate the BNM System on a revolutionary cloud-based system” which could be used
by “regulators and reporting entities throughout the world.” HP Co., according to the
complaint, “was an integral part of the contractual arrangement with WonderWorks.”
HPM assured plaintiff that HP Co. was “committed to funding this Cloud System, and
that it was on the agenda of the parent company’s highest executives, including CEO Leo
Apotheker of HP Co. in Palo Alto, California.” HP Co. and HPES accordingly
“approved all material aspects of HPM[‘s] putting together this deal with Plaintiff for the
BNM System, and thereafter monitored and/or managed it closely until . . . HP Co. and
HPES employees themselves took direct hands-on control of and/or significantly
influenced, reviewed, and approved commercial, legal, risk, and technical aspects of the
project.”
The eventual agreement between HP and WonderWorks contemplated that
WonderWorks would provide its software components and services to the BNM system.
HP also agreed to pay license fees for WonderWorks software that was later installed on
servers at HP and BNM. The two components of the integrated agreement were a
Statement of Work (SOW) and a “Global Supply Chain Services – Standard Terms and
3
Conditions for Services and Software” (GSCS).1 By July of 2011 HPM began issuing
purchase orders that carried their own conditions as well as being subject to the GSCS.
WonderWorks then expended more than $8 million in hiring independent
contractor programmers to fulfill its contractual obligations. After HP obtained
WonderWorks’s proprietary software specifications and learned how WonderWorks
components should be integrated, “HP began to engage in serious misconduct.” Among
WonderWorks’s allegations were HP’s (1) intentionally failing to disclose all of the
hardware on which WonderWorks’s software had to be installed, resulting in its failure to
pay “millions of dollars” in license fees to WonderWorks; (2) failing to pay millions of
dollars on invoices submitted by WonderWorks; (3) inducing WonderWorks to continue
the work and provide additional licenses while promising to pay the outstanding fees and
invoices; (4) forcing WonderWorks to make modifications to components HP had
acquired for the BNM system in order to avoid additional fees payable to BNM, even
though such modifications were outside the scope of WonderWorks’s contract, by
threatening to remove WonderWorks from the BNM system and cloud system projects;
(5) blaming WonderWorks for HP’s own misguided decision to use a faulty, end-of-life
component, thereby damaging WonderWorks’s reputation and causing its loss of profit;
(6) unjustly blaming WonderWorks for HPM’s own failure to deliver the BNM system
on time; and (7) imposing economic duress on WonderWorks by canceling payments on
already approved invoices. WonderWorks also alleged that HP had led WonderWorks to
believe that they would be partners in the worldwide cloud system; yet HP never intended
to partner with WonderWorks on the system and failed to fund it. WonderWorks
asserted that “HP’s true intent was to obtain [WonderWorks’s] expertise, incorporate
WonderWorks software into HP’s offering for the BNM System without properly
1
The SOW stated that it was an agreement between HPM and WonderWorks, but
it also stated that it was “issued by HP in support of HP’s [BNM] project.”
4
compensating [WonderWorks], and then to use pretext to expel [WonderWorks] from
participation and profit in the BNM System and future Cloud System projects.”
“Eventually, due to its own incompetence and intentional misconduct and through no
fault of [WonderWorks], HP was unable to deliver the BNM System it had contracted to
build.” HP consequently negotiated an exit agreement with BNM and abandoned the
project. WonderWorks, however, at BNM’s request, stayed on to support a limited
version of the BNM system.
WonderWorks brought this action in November 2014, initially naming only HPES
and HPM. In its first amended complaint, filed January 23, 2015, it added HP Co. as a
defendant. Against all defendants WonderWorks claimed fraudulent misrepresentation,
fraudulent inducement (inducing WonderWorks through misrepresentations to enter into
contracts with HP), negligent misrepresentation, and fraudulent concealment with the
intent to induce WonderWorks to enter into the contract with HP and then to provide
software and services outside the scope of the contract.2
WonderWorks further alleged that even if they were not parties to the contracts
with HPM (either directly or as HPM’s principals), HP Co. and HPES were liable for
intentional interference with contractual relations, based on their employees’ control of
the contractual relationship between HPM and WonderWorks, their interference with
WonderWorks’s ability to perform, their interference with the payment of WonderWorks
for its software and services, and their prevention of WonderWorks’s realization of
2
This fourth cause of action alleged concealment of “various material facts,
including but not limited to (1) that they did not intend to disclose to BNM that the EAS
and XDA components were unsuitable for the BNM System and would need to be
replaced, but instead intended to force Plaintiff to design modifications for no additional
payment; (2) that they intended to obtain Plaintiff’s XBRL software and expertise, and to
misappropriate Plaintiff’s trade secrets and computer code, and then to exclude Plaintiff
from the BNM System project; and (3) that HP intended to eventually negotiate a
favorable exit agreement for themselves with BNM, and leave Plaintiff hanging without
payment.”
5
profits under the contracts with HPM. All defendants were allegedly liable for
intentional interference with prospective economic advantage by disrupting
WonderWorks’s relationship with BNM and the reporting entities to whom
WonderWorks supplied software and maintenance services. That disruption consisted in
“interference with contract, defamation and commercial disparagement, trade libel, fraud,
and other acts . . . .” And HP Co. and HPES were similarly liable to WonderWorks, a
third-party beneficiary, based on their intentional interference with contracts between the
reporting entities and HPM, which would have benefited WonderWorks through its
license and maintenance fees.
In three additional causes of action WonderWorks alleged breach of contract
against all defendants for unpaid invoices, unpaid license fees, and the benefits
WonderWorks would have obtained as third-party beneficiary of the contracts with the
reporting entities. WonderWorks further alleged breach of the covenant of good faith and
fair dealing arising from its contracts with HP, negligence in performing under HP’s
contract with BNM, and “defamation and commercial disparagement” for blaming
WonderWorks’s software for HP’s decision to use and continue using XDA3 and its
“unjustified withholding of important and complete input components from Plaintiff.”
Finally, WonderWorks asserted quantum meruit against defendants for the “fair and
3
XDA, along with EAS, was a component HP had procured for the BNM system.
As WonderWorks described them, both were “end-of-life” software unsupported by the
manufacturer, but HP “forced” WonderWorks to modify XDA and EAS so that HP
would not have to pay for replacement components. Although WonderWorks advised
HP that the modifications would not be suitable for the system, and although the
modifications were outside the scope of the parties’ agreement, HP threatened to reduce
WonderWorks’s share of future cloud system revenue and remove it from the BNM and
cloud projects. WonderWorks provided the modifications but was not paid for them.
Eventually, HP did replace EAS with a WonderWorks software component (for which
WonderWorks was not paid), but its decision “to fraudulently conceal an unsupported,
end-of-life XDA poses significant known and unknown limitations to the BNM System.”
6
reasonable value of the services” WonderWorks had provided “under coercion” by
defendants.
In its original complaint naming only HPES and HPM, WonderWorks had
asserted that venue was proper in Santa Clara County because it was the principal place
of business in California for HPES “and because certain acts and omissions of HPES that
are alleged herein occurred in Santa Clara County.” WonderWorks further stated that
high-level executives of HPES who were involved “with the substance of this case” had
business addresses in Palo Alto, the “headquarters” of HP Co.
After receiving the original complaint, HPES and HPM filed their forum non
conveniens motion, claiming that California was a “seriously inconvenient forum” with
“absolutely no nexus to California.” According to its argument, the dispute had
“absolutely no connection” to California because it involved “a Singaporean plaintiff
(WonderWorks) suing a Malaysian defendant (HP Malaysia) and an out-of-state
defendant (HPES) over a contract for delivery of a software system to a Malaysian
third-party [sic] (Malaysia’s central bank, BNM).” Malaysia, on the other hand, had
“significant ties” to both the parties and the dispute.
On January 23, 2015, having obtained a continuance of the hearing on HPES and
HPM’s motion, WonderWorks filed its first amended complaint adding HP Co. as a
defendant. WonderWorks asserted that venue was proper in Santa Clara County because
HP Co. had its principal place of business there, and because HPES employees conducted
“significant business” in Palo Alto, HP Co.’s headquarters. WonderWorks also pointed
out that HPES, a wholly owned subsidiary of HP Co., was registered with the California
Secretary of State as a foreign corporation qualified to do business within the state.
On January 29, 2015 WonderWorks asked the court to take the motion off
calendar without prejudice to its being refiled so that it could be heard with the inclusion
of the new defendant, HP Co., which had not yet appeared or declared its willingness to
submit to jurisdiction in Malaysia. Counsel for WonderWorks pointed out that the
7
existing motion did not address HP Co.’s role in the events underlying the dispute, and
absent an extended hearing date defendants would either initiate piecemeal litigation with
its own forum non conveniens motion or address the opposition to the existing motion in
its reply—a reply that likely would raise new arguments regarding HP Co. without an
opportunity for WonderWorks to respond.
This time a different judge of the superior court, the Honorable William J. Elfving,
denied WonderWorks’s request to take the forum non conveniens motion off calendar.
WonderWorks then filed its opposition to the motion. WonderWorks pointed out that its
identity as a Singaporean company was in name only, as it belonged solely to Rajan, a
California resident. WonderWorks maintained that it was more convenient to litigate in
California because the HP enterprise was based here, Rajan lived here, many of the acts
occurred here, and the majority of the important witnesses were in California or
elsewhere in the United States, not in Malaysia. Addressing defendants’ assertion that
the case was only “a Malaysian dispute” between HPM and WonderWorks,
WonderWorks responded that HP Co. and HPES were “involved in the BNM project
from beginning to end, and their personnel were decision-makers on the project.”
WonderWorks also pointed out that the three documents that composed the parties’
contractual relationship were required by their terms to be read as a single, integrated
agreement, and that the term “HP” in these documents was defined to mean HP Co. as
well as its subsidiaries (except for the financial terms section).
In their reply defendants insisted that Malaysia, not California, was the appropriate
forum, because the dispute arose from a subcontract between HPM and WonderWorks,
which pertained to work to be performed for a Malaysian bank and which was governed
by Malaysian law. In support of this reply defendants submitted additional declarations
from two witnesses, Donn Deffebach of HPES and Lim of HPM. WonderWorks
objected on the ground that new facts had been offered in defendants’ reply without its
having an opportunity to respond. The court did not expressly rule on the objection.
8
The hearing on the motion took place on February 26, 2015. The court filed its
decision that day denying the motion to dismiss but granting the alternative request to
stay the action pending its adjudication in Malaysia. This appeal followed.
Discussion
The doctrine of forum non conveniens is rooted in equity. It allows a court to
decline to exercise its jurisdiction over a case when it determines that the case “may be
more appropriately and justly tried elsewhere.” (Stangvik v. Shiley Inc. (1991) 54 Cal.3d
744, 751 (Stangvik).) The Legislature sanctioned the application of this principle by
enacting Code of Civil Procedure section 410.30, which states, in subdivision (a), “When
a court upon motion of a party or its own motion finds that in the interest of substantial
justice an action should be heard in a forum outside this state, the court shall stay or
dismiss the action in whole or in part on any conditions that may be just.” As explained
in the Judicial Council’s comment to this section, the provision “authorizes a court to
decline to exercise its jurisdiction in appropriate instances on the ground that the plaintiff
has unfairly or unreasonably invoked the jurisdiction of an inconvenient forum.”
Our Supreme Court in Stangvik set forth a two-step analysis for a court
considering a forum non conveniens motion. The court “must first determine whether the
alternate forum is a ‘suitable’ place for trial. If it is, the next step is to consider the
private interests of the litigants and the interests of the public in retaining the action for
trial in California. The private interest factors are those that make trial and the
enforceability of the ensuing judgment expeditious and relatively inexpensive, such as the
ease of access to sources of proof, the cost of obtaining attendance of witnesses, and the
availability of compulsory process for attendance of unwilling witnesses. The public
interest factors include avoidance of overburdening local courts with congested
calendars, protecting the interests of potential jurors so that they are not called upon to
decide cases in which the local community has little concern, and weighing the
competing interests of California and the alternate jurisdiction in the litigation.”
9
(Stangvik, supra, 54 Cal.3d at p. 751, citing Piper Aircraft Co. v. Reyno (1981) 454 U.S.
235, 259-261 (Piper) and Gulf Oil Corp. v. Gilbert (1947) 330 U.S. 501, 507-509; see
also Morris v. AGFA Corp. (2006) 144 Cal.App.4th 1452, 1463-1464.) Also of potential
concern is “the interest in trying the case in a forum familiar with the applicable law, and
the interest in avoiding unnecessary conflicts of laws.” (Ravelo Monegro v. Rosa (9th
Cir. 2000) 211 F.3d 509, 512 (Ravelo Monegro).) These public and private interests are
to be “applied flexibly, without giving undue emphasis to any one element.” (Stangvik,
supra, at p. 753.)
The burden of proof is on the defendant, as the party asserting forum non
conveniens. (Stangvik, supra, 54 Cal.3d at p. 751.) On appeal, we review the ultimate
ruling for abuse of discretion, and the lower court’s ruling is entitled to “substantial
deference.” (Ibid.) However, the “threshold” determination—the suitability of the
alternative forum—is not part of the discretionary balancing of public and private
interests but is examined de novo. (Id. at p. 752, fn. 3; American Cemwood Corp. v.
American Home Assurance Co. (2001) 87 Cal.App.4th 431, 436; Investors Equity Life
Holding Co. v. Schmidt (2011) 195 Cal.App.4th 1519, 1528.)
1. Suitability of Malaysia
WonderWorks does not explicitly address this step of the convenience analysis by
asserting that Malaysia is an unsuitable alternative forum. This suitability determination
generally turns on whether the foreign tribunal will exercise personal and subject matter
jurisdiction and whether the cause of action will be barred there by its statute of
limitations. (Piper, supra, 454 U.S. at p. 255, fn. 22; Stangvik, supra, 54 Cal.3d at
p. 752.) Lead counsel for all three HP defendants represented to the trial court that
HP Co. and HPES would consent to jurisdiction in Malaysia and that all defendants
would agree to waive any statute of limitations applicable there. There was no evidence
presented that Malaysia would deprive WonderWorks entirely of a remedy. (See Boaz v.
Boyle & Co. (1995) 40 Cal.App.4th 700, 711 [“The ‘no remedy at all’ exception . . .
10
applies only in rare circumstances, such as where the alternative forum is a foreign
country in which the courts are not independent, or due process is not applied”]; Shiley
Inc. v. Superior Court (1992) 4 Cal.App.4th 126, 133-134; Guimei v. General Elec. Co.
(2009) 172 Cal.App.4th 689, 697 (Guimei).) We will assume, as do defendants, that
WonderWorks has conceded the suitability of Malaysia as an alternative forum.
2. Balance of Private and Public Interests
We next consider the trial court’s application of the private and public interest
factors intrinsic to a forum non conveniens analysis. Unfortunately, neither the court’s
comments at the hearing nor its ruling gives us a clue to its balancing of the applicable
factors. Its order consisted of nothing more than a statement that it had reviewed the
parties’ written and oral arguments and that the motion was “hereby GRANTED.”
“It is the trial court’s duty to weigh and interpret evidence and draw reasonable
inferences therefrom.” (National Football League v. Fireman’s Fund Ins. Co. (2013) 216
Cal.App.4th 902, 918.) Of course, a trial court need not express its reasons for its ruling
on a forum non conveniens motion. “It is axiomatic [that] we review judicial action and
not judicial reasoning.” (Cal-State Business Products & Services, Inc. v. Ricoh (1993) 12
Cal.App.4th 1666, 1676; accord, Campbell v. Parker-Hannifin Corp. (1999) 69
Cal.App.4th 1534, 1542.) Our role on appeal begins with the presumption that the lower
court “found every fact and drew every reasonable inference necessary to support its
determination. [Citation.]” (Guimei, supra, 172 Cal.App.4th at p. 699.) We will
interfere with a trial court’s exercise of discretion only if no judge could reasonably have
reached the challenged result. Here, however, in light of all the undisputed material facts,
we are compelled to conclude that this criterion has been met.
The most vigorously litigated issue between the parties centered on the degree of
deference due WonderWorks as plaintiff. Defendants argued in their motion that “very
little deference” should be accorded WonderWorks’s choice of forum because this was a
dispute strictly between foreign entities with “absolutely no nexus to California.” The
11
subcontract with WonderWorks, they urged, was “negotiated in Malaysia between
Malaysian and Singaporean entities” and governed by Malaysian law. WonderWorks
countered that Rajan, a California resident, was the real party in interest, that the
“Hewlett-Packard enterprise” is based in California, and that many of the acts giving rise
to its claims occurred here.
The United States Supreme Court has stated that a plaintiff’s choice of his home
forum should be respected “except upon a clear showing of facts [that] either (1) establish
such oppressiveness and vexation to a defendant as to be out of all proportion to
plaintiff’s convenience, which may be shown to be slight or nonexistent, or (2) make trial
in the chosen forum inappropriate because of considerations affecting the court’s own
administrative and legal problems. In any balancing of conveniences, a real showing of
convenience by a plaintiff who has sued in his home forum will normally outweigh the
inconvenience the defendant may have shown.” (Koster v. (American) Lumbermens Mut.
Casualty Co. (1947) 330 U.S. 518, 524.) Ordinarily courts resist disturbing a resident
plaintiff’s choice of forum, which is presumed to be convenient and “which may be
overcome only when the private and public interest factors clearly point towards trial in
the alternative forum.” (Piper, supra, 454 U.S. at p. 255.) “[A] state has a strong interest
in assuring its own residents an adequate forum for the redress of grievances.” (Stangvik,
supra, 54 Cal.3d at pp. 754-755.)
The “strong presumption” in favor of the plaintiff’s choice of forum is of less
force, however, and the plaintiff’s choice therefore entitled to less deference, in the case
of a foreign plaintiff. (Piper, supra, 454 U.S. at p. 255.) “When the home forum has
been chosen, it is reasonable to assume that this choice is convenient. When the plaintiff
is foreign, however, this assumption is much less reasonable. Because the central
purpose of any forum non conveniens inquiry is to ensure that the trial is convenient, a
foreign plaintiff’s choice deserves less deference.” (Id. at pp. 255-256; Stangvik, supra,
54 Cal.3d at p. 755.)
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On the other hand, whereas the strong presumption in favor of a resident plaintiff
may be weakened by countervailing indications of an oppressive and vexatious purpose,
it would be fallacious to conclude that the attenuated presumption in the case of a foreign
plaintiff is equivalent to a presumption that the plaintiff chose that forum for those
inimical purposes. (See Fromherz, A Call for Stricter Appellate Review of Decisions on
Forum Non Conveniens, (2012) 11 Wash. U. L.Rev. 527, 535 [charging federal courts
with inappropriate “negative deference” to foreign plaintiffs by assuming the forum was
chosen for an illegitimate reason].) In other words, “less deference is not the same thing
as no deference.” (Ravelo Monegro, supra, 211 F.3d at p. 514.) “Because the reason for
giving a foreign plaintiff’s choice less deference is not xenophobia, but merely a
reluctance to assume that the choice is a convenient one, that reluctance can readily be
overcome by a strong showing of convenience.” (Lony v. E.I. Du Pont de Nemours &
Co. (3d Cir. 1989) 886 F.2d 628, 634.) A court should therefore examine all relevant
factors in determining whether the plaintiff should be permitted to litigate in his or her
preferred location, not simply accord that preference no weight at all merely because the
plaintiff is based in a foreign country.
One of those relevant circumstances may be a plaintiff’s corporate identity. As the
Fourth Appellate District, Division Three commented recently, the rule of deference to a
corporate plaintiff’s forum choice is not applicable in the same way as to human
plaintiffs; a corporation may have formed in one state but operates in one or more other
states, “which might suggest that each of those states could provide a presumptively
convenient forum for litigation involving the corporate plaintiff, and each might claim
varying degrees of interest in [en]suring that corporation has an adequate forum for
redress of its grievances.” (Investors Equity Life Holding Company v. Schmidt (2015)
233 Cal.App.4th 1363, 1379.) In the case of a foreign corporation, it may be considered
a “ ‘pseudoforeign’ ” corporation if the majority of its shares are held by California
residents. (Id. at p. 1380.) In such a case, the corporate plaintiff “might have a good
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claim to whatever forum benefits would be afforded to a similarly situated domestic
corporation.” (Ibid.)
These considerations are equally applicable to plaintiff WonderWorks: While
nominally a Singaporean business, it is wholly owned and managed by Rajan, a
California resident. The address used during the negotiations was not a physical office
but a company that provided registration and other services for companies registered in
Singapore.4 In his declaration Rajan stated that when the original purpose of the
registration—to pursue a government grant—fell apart, he abandoned plans to do
anything with the entity and eventually returned to the United States. That the sole owner
of the plaintiff company lives in and works from California permits the inference that the
action is brought here for reasons of convenience, not oppression.
Aside from divergent portrayals of the location of each party’s operations, a major
source of disagreement was the location of the witnesses, one of the “private interest”
factors discussed in the abundant forum non conveniens precedent. WonderWorks
named witnesses based in the United States—notably, of course, Rajan, WonderWorks’s
owner.5 Defendants relied on witnesses in Malaysia, particularly Lim, who, as
“Country General Manager” for HPM, had participated in the negotiations and
discussions with WonderWorks regarding its subcontract for the BNM project.
Also a central point of dispute was the difference in the parties’ accounts of where
the material events took place. According to defendants, the evidence and material
witnesses were “practically all in Malaysia,” and the “operative time period for resolving
this dispute” was “neither the prologue nor the post script [sic]. Rather, this dispute turns
4
Counsel compared the registration address as “essentially a local equivalent of a
Mailbox[es] Et Cetera.”
5
Rajan also represented that “the few WonderWorks employees who worked on
the BNM project are relocating soon and I expect that they will live in California for the
next couple of years.”
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on the fundamental question of whether WonderWorks performed its contractual
obligations in the Statement of Work (‘SOW’), and the extent to which it should receive
compensation over and above the originally agreed upon amounts as Plaintiff demands.”
Thus, defendants argued, any involvement of non-HPM employees was peripheral and
“occurred either before [HPM] secured the BNM Project and engaged WonderWorks to
assist, or after the parties’ relationship had already deteriorated.”
Defendants adhere to this position on appeal. WonderWorks, however, maintains
that the scope of the case does indeed encompass the periods before and after the
commencement of the work. The first four causes of action, it points out, allege that
defendants fraudulently induced WonderWorks to become involved in the BNM project;
then, after the contracts were signed, HP made decisions that both impeded
WonderWorks’s performance and impaired its reputation and economic prospects. HP
employees in the United States, WonderWorks alleged, “were intimately involved with
both periods,” making “critical decisions before, during, and after the work on the BNM
project.”
In addressing this point of dispute, we consider the location of the acts pertaining
to HP’s negotiation of the contract with BNM, the recruitment of Rajan for
WonderWorks’s participation in the BNM project, and the extensive negotiations
between Rajan and various HP employees thereafter. In his declaration Rajan stated that
Steve Illingworth, an HP employee responsible for selecting contractors for the BNM
project, invited him to work on the project through WonderWorks, which Rajan had “no
intention of doing anything with” once his government proposal was declined.
WonderWorks also offered a declaration from Illingworth. Until December 31,
2010 Illingworth was employed by HP in Singapore, with responsibility for sales,
management, and related business functions for large and strategic accounts in southeast
Asia regions such as Malaysia. In his declaration Illingworth stated that he was closely
involved in the competitive bidding process for BNM project on behalf of HP. He did
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not report to employees of HPM but instead to his manager in the United States,
Uday Kumaraswami. As a “[l]arge and strategic” deal, the BNM project required
“detailed involvement of HP and HPES employees in the United States, including special
authorization and approval from senior US executives in HPES, HP Software, and HP
from all business units, including finance, legal, risk, delivery, and technology.” Many of
these United States executives were based in California. Those employees who were part
of HPM, such as Lim, interacted “routinely and regularly” by e-mail and telephone
regarding the status of the project “and to secure the necessary approvals from several
HPES, HP Software, and HP leaders in California.” Illingworth’s involvement in setting
up a competitive bidding position for the BNM project “required extraordinary
interactions, direction, authorization, approval, and control by several HPES,
HP Software, and HP leaders in California and other US office locations since BNM
demanded unlimited liability to be assumed by the awarded vendor.” HP’s “high level
executives” beyond HPM were required to engage in a “high level of involvement and
supervision,” because project delays or failures were required by BNM to be borne by
HP, and “[t]hus, decisions could be approved only by HP headquarters.” These
executives were the ones who approved the selection of WonderWorks for the BNM
project. Illingworth’s experience with deals of this size and nature convinced him that
executives from those HP entities in California would have continued to be intimately
involved with the project, even after Illingworth resigned at the end of 2010.6
In addition to Illingworth’s declaration, WonderWorks submitted copies of e-mails
between Rajan and various HP employees before and during Rajan’s work on the project.
6
In her reply declaration, however, Lim stated that the “substantive” work on
developing the BNM system was performed by a team of HPM employees overseen and
managed by her; once the proposal was submitted to BNM, “no US executives were
necessary for authorization or approval nor oversaw or managed the work.”
WonderWorks’s objection to defendants’ new evidence encompassed Lim’s reply
declaration.
16
The terms of the SOW were negotiated in May 2011 with HP’s Jose Ignacio Rosales,
with other HP employees included in the e-mail correspondence.7 Eventually Rosales
advised Rajan that HP needed to “work internally” and that as soon as he obtained “all
the approval,” he would e-mail Rajan with the next steps.
In August 2011 Gregory Yurkoski, a Global Software Portfolio Manager for HP in
California, was asked to get involved through a “Needs Request” from
“SharePointOperations.” He had a number of questions about the project and the supplier
(i.e., WonderWorks), and his e-mail to Tai at HPM advised her that “management will
not approve this to move forward without this information.”
By November 2011 delays were compromising the early relationship between the
parties. Markus Schneider (located in Germany) had already signed the SOW in June on
behalf of HPM, but Rajan had not yet signed. Incorporated into the pending agreement
was the “Malaysian Version” of the GSCS. Although a purchase order had already been
issued to WonderWorks, the GSCS was delayed in “Global HP Legal.” The negotiations
over the issues concerning the parties in November 2011 were handled from HP’s side by
Rajashree Jayaraman, a project director for HPES in Malaysia.
At this point Lim was not directly involved in the negotiations. On November 19,
2011, however, she complained to three employees (Tai, Eric Lim, and Jane Lian) that
the completion of HP’s agreements with WonderWorks was “very very slow.” She
suggested that if they did not close within one week, she “would like to escalate this to
VP of Global Procurement in the US,” and she accordingly urged completion “asap.”
One of Rajan’s concerns was that the SOW did not protect WonderWorks’s source
code and that its object code might be reverse-engineered. In December 2011 he
7
These e-mail negotiations involved Puie Yein Chow and Lee Yong Wong in
addition to Rosales, with copies of the correspondence sent to Mariah Tai and Betty Lau.
Lim was not included as an addressee at this stage.
17
expressed these concerns to Luann Manning in Global Procurement, who eventually
responded that “there is no reverse engineering.”8
On December 7, 2011, Rajan signed the SOW on behalf of WonderWorks.
The accompanying GSCS specified that the agreement “shall be interpreted and governed
by the laws of Malaysia.” The purchase orders issued to WonderWorks, however,
specified that they would be interpreted under and governed by California law. The
SOW, the GSCS, and the ensuing purchase orders were all in English.
By mid-2012 increasing tension had developed between Rajan and HP personnel,
primarily regarding protection of WonderWorks source code and payment of its invoices.
E-mail correspondence attached to Rajan’s declaration reflected considerable friction
between Rajan and HP executives over these issues. On June 13, 2012, Richard Bahnsen
at HP Hong Kong directed Lena Chan at HPM to freeze all WonderWorks invoices
because it was “refusing to comply with their obligations under their contract to hand
over their relevant source code,” which HP had been asking for “for several weeks now.”
Rajan insisted that “this is just not done” in the industry and that it was not part of the
SOW.9 He expressed additional concern about “illegal licenses now in use by HP” for
which HP had not paid, “HP blackmail to WonderWorks, and HP attempted theft of
WonderWorks IP.”
Rajan complained to Rajesh Narasimhan (at HP in Singapore) of “bullying tactics”
about the release of the source code. Narasimhan urged Rajan to talk to Steve
McGuinness (HPES in Singapore), who assured Rajan that his team had been reviewing
8
Lim, responding to WonderWorks’s list of various HP employees, stated that
Manning’s “[n]ame is familiar but not sure who she is.” Manning’s e-mail signature
listed a telephone number with a 303 area code.
9
The phrasing of the request for “source code” was eventually deemed
“unfortunate”; the parties’ agreement, McGuinness pointed out, was for WonderWorks to
provide “Developed Program Source Code.”
18
Rajan’s allegations and had consulted HP’s “Ethics Counsel.” When Rajan requested a
meeting to discuss outstanding issues, McGuinness asked Deffebach to become involved;
McGuinness would “not engage unless instructed” by Deffebach and “the team.”
Additional complaints about nonpayment of invoices for software and services
provided reached Narasimhan in early August 2012. Narasimhan urged Rajan to work
with McGuinness and Deffebach to resolve these issues. It would have been “improper”
for Narasimhan himself to “intervene and over rule [sic] [Deffebach’s] decisions.”
By September of 2012, Bahnsen, now at HPM, urged Rajan to meet with him and
Deffebach to “sort out” the issues between WonderWorks and HP. Deffebach likewise
appealed to Rajan “to engage with HP and specifically with me as the individual
responsible, and empowered, to effect a change in the status quo.”
Andrew Norton was a “Project” or “Program” director based in Singapore;
defendants agreed that he had been involved in the project. In Rajan’s declaration, he
stated, “[Norton] told me that he interacted with employees of [HP Co.] in the United
States who had decision-making authority on WonderWorks contract issues as well as
with Donn Deffebach. As problems got worse, Mr. Norton told me that reporting within
HP had moved up the management chain and included Kathy Garcia, who he said had
ultimate decision-making authority on the BNM project, including authority over project
expenses. He also told me that in 2012, Kathy Garcia, a Senior Vice President of
[HP Co.], became involved in the project to such an extent that she participated in regular
conference calls with team members.”
Lim asserted that Garcia had no “substantive involvement” in the BNM Project;
she “was not involved in the details nor exerted any authority over the management of the
project. Kathy Garcia’s role [was] to monitor costs and risk on a global scale for the
Enterprise Services business unit.” Lim did not believe that Garcia was involved in the
review or approval of purchase orders. In e-mail correspondence in May 2012, however,
Bahnsen had advised Rajan that purchase order authorization requests were “with Kathy
19
Garcia (she does her approvals on a weekly basis so should see those [purchase orders]
come through this week.”
Deffebach submitted two declarations describing his own participation in the
discussions around the conflict with WonderWorks. He stated that he worked directly
with HPM’s directors and officers and coordinated his efforts with Lim. He “did not
report or otherwise obtain the approval or consent” from anyone in the United States for
his work on the BNM project. He also stated that he never interacted with Kathy Garcia
of HPES in Texas, as she was not involved in the BNM project. Moreover, he said, no
one from any HP entity in the United States participated in communications about the
timing of payments to WonderWorks. It was his function to review contracts, costs,
revenue, and losses related to the project. Payment decisions were made locally by HPM
or, for larger payments, “perhaps sub-regionally.”
In Deffebach’s second declaration, submitted in February 2015, he explained the
disintegration of the BNM project. It was designated a “red account” when it began
encountering difficulties. At that point “worldwide senior management in HP
Company’s Applications & Business Services (‘ABS’) division of Enterprise Services
would be more aware of the account for financial reporting and forecasting purposes.”
Once an account receives a “red account” designation, the local Country Manager (Lim)
would be given assistance from the region. McGuinness and Ruma Balasubramanian
became involved after the BNM project had become a red account, but Deffebach led the
remediation plan, working under HPM’s supervision to “negotiate new terms” between
BNM and HPM. In this effort Deffebach reported to “senior level directors and officers
of [HPM], including Bee Wah Lim, and senior level management in the Asia Pacific and
Japan region, including Mr. McGuinness, Ms. Balasubramanian and Rajesh
Narasimhan.” Together with Deffebach, they were “the final decision-makers and had
full delegated authority with respect to the BNM Project, including payment to all of its
sub-contractors.”
20
Lim had been with HPM for more than 26 years by the time she wrote her first
declaration in December 2014. In that document she stated that her team “led the
negotiations and discussions with WonderWorks regarding their engagement as a
sub-contractor for [HPM] on the BNM Project.” Lim said that she “oversaw and
supervised all facets of the BNM Project, including our work with sub-contractors, such
as WonderWorks.” The focus of her declaration was the management, remediation
efforts, and eventual “winding down” of the BNM project.
Lim asserted that the HPM employees who had “information about the work and
interactions with WonderWorks” were “primarily located” in Malaysia. She also
suggested that BNM employees, who she believed were located in Malaysia, would be
witnesses in the case. In her second declaration, executed in February 2015, Lim noted
that BNM had served HPM with a notice to arbitrate, there being a conflict between them
over the transfer of software rights to the bank.
It is apparent from these declarations and the correspondence between the various
actors involved in the conflict with WonderWorks that this was not simply an
“intrinsically Malaysian dispute” between two foreign parties with “absolutely no nexus
to California.” Unquestionably, Lim was based in Malaysia at all times during the events
of which WonderWorks complained. But other witnesses were located in the United
States. WonderWorks’s primary witness, of course, Rajan, lives in California.
Deffebach was located in Singapore and Malaysia between December 2010 and
December 2012, but in December 2013 he moved to Portland, where he was located at
the time of his first declaration in December 2014.10 According to Deffebach,
McGuinness also was based in Singapore during the project, but he relocated to HPES in
10
Deffebach also told Rajan in their June 2012 exchange that he was from
Portland but was “currently ‘on loan’ to the [Asia Pacific and Japan] region, based in
Singapore . . . for a year or [two].
21
the United States in May 2013. Rajan believed McGuinness to be located in San
Francisco.
Other witnesses’ current locations were not part of the evidence supplied in the
parties’ moving and opposition papers; both Rajan and Lim suggested where they
believed numerous named witnesses and other individuals were located, but each
disputed the relevance of the names listed by the other. Rajan’s list, for example,
included Rosales in Mexico, Yurkoski in Palo Alto, Manning in Denver, and Norton in
Australia. Rajan believed Bahnsen to be in Hong Kong, while Narasimhan, he thought,
was in Singapore. Garcia was acknowledged to be based in the United States—according
to HP Co., in Plano, Texas.11
In her reply declaration Lim emphasized that it was HPM employees who
performed the “substantive work” on the BNM project, including working with
WonderWorks “to develop and implement the BNM information system in Malaysia.”
Only after the project began to encounter “problems,” she noted, did executives
Deffebach, Bahnsen, McGuinness, Norton, and Narasimhan become involved. But it was
those “problems” that formed the basis of several allegations in WonderWorks’s
complaint; they were not immaterial facts. Less material were the details of the various
employees’ performance of the contract between HPM and BNM, including those
employees who composed Lim’s “team.” As HP Co. or HPES executives actively
participated in the attempted resolution of the conflict with WonderWorks, the timing of
their involvement cannot be discounted as “peripheral,” as defendants contended.
Finally, to the extent that WonderWorks will rely on its software partner on the project,
11
Rajan listed three United States cities in which Garcia might be located:
Cupertino, California; Naples, Florida; and Plano, Texas.
22
UBmatrix, Inc.,12 it will require testimony from material witnesses from that Redwood
City company.
The location of the witnesses during the BNM project does not alone compel
litigation in Malaysia. Much of the communication concerning the parties’ difficulties in
implementing the project was conducted by e-mail from various locations. (See Note,
One-Way Ticket Home: The Federal Doctrine Of Forum Non Conveniens And The
International Plaintiff (1991-1992) 77 Cornell L.Rev 650, 677 [noting that advances in
technology facilitate litigation in any given forum, thus vitiating assertions of
inconvenience].) With the exception of Lim (who, WonderWorks points out, was not
shown to be unavailable or unwilling to appear in California), important witnesses
material to WonderWorks’s claims appear to be located in the United States. (See
Carijano v. Occidental Petroleum Corp. (2011) 643 F.3d 1216, 1231 (Carijano) [court
should have focused on materiality and importance of witnesses, not the number located
in the alternative forum].)13
The events from which this action arose also do not compel the conclusion that it
concerns only foreign entities with no connection to California. Defendants
overemphasize the fact that the project was to be implemented initially for a customer in
Malaysia (i.e., BNM), but WonderWorks’s claims address issues outside the scope of the
HPM-BNM contract. WonderWorks’s first four causes of action accused HPM
specifically of misrepresenting the benefits WonderWorks could accrue from the BNM
project; but upon information and belief it further alleged that senior management of
12
Illingworth, the HP manager who recruited Rajan for the BNM project,
explained in his declaration that UBmatrix was the company that had created the XBRL
financial reporting standard. When recruited, Rajan had already worked with UBmatrix
on the development of XBRL applications.
13
Defendants make the point that BNM was “the customer” on the project; but
they do not show how that fact is material to a determination of the fraud- and
contract-related issues.
23
HP Co. and HPES approved “all material aspects” of the deal between HPM and
WonderWorks. (Cf. Carijano, supra, 643 F.3d at p. 1230 [court erred in focusing on site
of contamination injury rather than mental state of defendants whose decisions resulted in
the injury].) WonderWorks also pointed out that the GSCS referred to “HP” in most
paragraphs as “Hewlett-Packard Company and its Affiliates.” The remaining nine causes
of action against the three defendants were directed at the conduct that deprived
WonderWorks of the expected benefit of its work on the BNM project. The fifth and
seventh causes of action (intentional interference with WonderWorks’s contractual
relations with HPM and with four reporting entities) were directed solely against HP Co.
and HPES.
Defendants’ emphasis on the location of the evidence likewise does not convince
us that the case belongs in Malaysia. If Rajan’s and Illingworth’s declarations accurately
portray the roles of the executives involved in the decisions to recruit WonderWorks—
and, later, to stop paying its invoices—then those decisions would have involved
individuals from the United States, not just Lim and the HPM team. Lim’s description of
the personnel involved and their Malaysian locations overemphasizes the nature of the
work on the BNM project, while overlooking the essence of the claims pertaining to
defendants’ conduct toward WonderWorks before and after the project was undertaken.
As noted, much of that evidence appears to be in electronic form, further weakening
defendants’ claim that the necessary documents are located in Malaysia. Defendants’
assertion that WonderWorks performed the work from Malaysia and that it continues to
do so was supported by no evidence.
Manu International, S.A., v. Avon Products, Inc. (2d Circ. 1981) 641 F.2d 62(Manu) illustrates the necessity of focusing on the causes of action in evaluating the
private and public interests at issue. There the plaintiff, a Belgian corporation, sued a
New York corporation for fraud, tortious interference with contract, and related wrongs
concerning a business operated by Manu’s representative in Taiwan. The district court
24
dismissed the action, ruling that Taiwan was the appropriate forum, as Taiwanese law
was applicable and there was insufficient local interest in having the case decided in
New York. The appellate court reversed. The court first noted that in today’s enhanced
methods of travel and communication the location of witnesses is less significant in
evaluating convenience. (Id. at p. 65; see also Calavo Growers of California v. Belgium
(2d Cir. 1980) 632 F.2d 963, 969 (conc. opn. of Newman, J.) [recognizing “the realities
of modern transportation and communications” which may be more efficient and
cost-effective than transferring a lawsuit].) The court recognized that the causes of action
did not, as the district court had found, complain of acts occurring in Taiwan, but alleged
fraudulent inducement in New York and misrepresentations in London; and some of the
significant witnesses resided in New York, Hong Kong, London, and Belgium. Even if
some witnesses were flown to New York for trial, it would be more cost effective than
flying “an equal or greater number of individuals to Taiwan, of hiring Taiwanese counsel
to defend and of keeping [Avon employees involved in the alleged conduct] away from
their positions in New York and London.” (Manu, supra, at p. 66.) “Thus, the location
of the witnesses is at least as conducive to trial in New York as to trial in Taiwan.”
(Ibid.) The court also noted that any problems with translation were likely to be less
serious in New York than in Taiwan, as most witnesses spoke English.
Of equal concern to the appellate court in Manu was its anticipation of an
inadequate opportunity for the plaintiff to have its day in court, given the hardship of
traveling to Taiwan, securing counsel there, and obtaining the attendance of witnesses
from New York, London, and Belgium. (Manu, supra, 641 F.2d 62 at p. 67.) It would be
“almost a perversion of the forum non conveniens doctrine to remit a plaintiff, in the
name of expediency, to a forum in which, realistically, it will be unable to bring suit
when the defendant would not be genuinely prejudiced by having to defend at home in
the plaintiff’s chosen forum.” (Ibid.)
25
Finally, turning to the public interest factors, the Manu court found that neither
Taiwan nor New York had any “particular affirmative public interest” in the case, and
either one would be burdened by having the case on its docket. Addressing the district
court’s heavy reliance on the need to apply Taiwanese law to some of the issues, the
circuit court acknowledged that this was a relevant fact, but while proof of foreign law
may be a burden, “it is not alone enough to push the balance of convenience strongly in
favor of the defendant.” (Manu, supra, 641 F.2d 62 at p. 68.) The United States
Supreme Court has also reminded courts that the need to apply foreign law “is not
sufficient to warrant dismissal when a balancing of all relevant factors shows that the
plaintiff’s chosen forum is appropriate.” (Piper, supra, 454 U.S. at p. 260, fn. 29; see
also Olympic Corp. v. Societe Generale (2d Cir. 1972) 462 F.2d 376, 379 [“the need to
apply foreign law is not in itself a reason to apply the doctrine of forum non
conveniens”].)
As for the public interests at stake in the case before us, we cannot find a
reasonable justification for the court’s ruling by either court congestion or lack of
community concern for cases of this nature. As discussed above, the allegations of the
complaint are directed not solely at HPM and its personnel but against HP entities in the
United States, including HP Co.’s headquarters in California. Nor does the record
disclose that Malaysia’s interests necessarily outweigh those of California, since the
principal allegations have to do less with the Malaysian bank than with the conduct of
United States-based executives toward a United States citizen and California resident.
Defendants suggest that “it strains credulity for WonderWorks to argue that a San Jose
jury would have any interest at all in resolving a foreign dispute regarding a financial
reporting system provided to a foreign bank.” But this position rests on the questionable
premises that this is purely a foreign dispute and that the issues are confined to the
reporting system the parties were to provide to the bank. We cannot say that California
jurors would be uninterested in deciding whether acts of fraud and contract interference
26
took place in this state to the detriment of a California resident, even if his company, the
nominal plaintiff, was registered in a foreign country.
Defendants’ reliance on the statement in the GSCS that it “shall be interpreted and
governed by the laws of Malaysia,” overstates the relevance of that document.
WonderWorks’s claims are not all based on the GSCS and SOW; most, as noted, in fact
pertain to events outside the terms of these documents.14 Accordingly, we cannot accept
defendants’ assumption that a California court would necessarily require “Malaysian
commercial law experts” to help resolve the controversy. Even to the extent that the
SOW and GSCS are at issue, defendants made no showing that these documents (which
are written in English) are subject to substantive law that is too abstruse for a California
jury to understand.
Thus, without reweighing the evidence in the record, we can only conclude that
defendants failed to show that the private and public interests at stake necessitated
denying WonderWorks its choice of forum. Seeing no evidence of an oppressive or
vexatious purpose in bringing the suit here, according “some deference” to the plaintiff,
and recognizing that the sole owner of this “pseudoforeign” entity is a California resident,
we cannot agree with the superior court’s implied determination that WonderWorks has
“unfairly or unreasonably invoked the jurisdiction of an inconvenient forum.” (Judicial
Council of Cal., com., reprinted at 14A West’s Ann. Code Civ. Proc. (2004 ed.) foll.
§ 410.30, p. 486; see Carijano, supra, 643 F.3d at p. 1229 [concerns about forum
shopping are “muted” where plaintiffs’ chosen forum is the defendant’s home jurisdiction
and has “a strong connection to the subject matter of the case”].) The gravamen of the
allegations, the nature of the events giving rise to the action, and the location of the
material witnesses indicate that the action can be conveniently litigated here. (Cf. Ravelo
14
To the extent that the terms of the purchase orders are material and applicable,
those documents stated that they would be “interpreted and governed” by California law.
27
Monegro, supra, 211 F.3d at p. 514 [forum non conveniens does not require plaintiff to
choose the “optimal forum” but is “an exceptional tool to be employed sparingly”].)
Accordingly, we find an abuse of discretion in the order staying the action in favor
of its adjudication in Malaysia. We express no opinion whatsoever regarding the likely
success or failure of this lawsuit. We hold only that defendants failed to meet their
burden to overcome the presumption that California is an appropriate forum in which to
litigate WonderWorks’s claims. In light of this conclusion, it is unnecessary to address
WonderWorks’s contentions that the trial court erred by denying WonderWorks’s request
to conduct additional discovery, abused its discretion by failing to allow WonderWorks
an opportunity to respond to evidence submitted by defendants in their reply, and abused
its discretion by failing to impose conditions on the stay that would have facilitated
litigation in Malaysia.
Disposition
The order staying the action is reversed.
28
_________________________________
ELIA, ACTING P.J.
WE CONCUR:
_______________________________
BAMATTRE-MANOUKIAN, J.
_______________________________
MIHARA, J.