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Wer1 World Network, A v. Cyberlynk Network Inc.

September 20, 2011

WER1 WORLD NETWORK, A
DAE-RLP HAWAII CORPORATION; AND IN-GRID WANG, INDIVIDUALLY, PLAINTIFFS,
v.
CYBERLYNK NETWORK INC., A ) WISCONSIN CORPORATION; MICHAEL ) SCOTT JEWSON, INDIVIDUALLY; ) JOHN DOES 1-10, JANE DOES 1- ) 10, DOE PARTNERSHIPS 1-10, ) DOE CORPORATIONS 1-10, AND ) DOE ENTITIES 1-10, DEFENDANTS.



The opinion of the court was delivered by: David Alan Ezra United States District Judge

ORDER: (1) GRANTING IN PART AND DENYING IN PART CYBERLYNK'S MOTION TO DISMISS COMPLAINT OR TRANSFER VENUE; AND (2) TRANSFERRING ACTION TO THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF WISCONSIN

On September 16, 2011, the Court heard Defendant CyberLynk Network, Inc.'s Motion to Dismiss Complaint or Transfer Venue to the Eastern District of Wisconsin. Louise Ing, Esq., and Brandon Segal, Esq., appeared at the hearing on behalf of Plaintiffs WeR1 World Network, Inc. ("WeR1") and In-grid Wang (collectively, "Plaintiffs"); John Zalewski, Esq., appeared at the hearing on behalf of Defendant CyberLynk Network, Inc. ("CyberLynk"). After reviewing the motion and the supporting and opposing memoranda, the Court GRANTS IN PART AND DENIES IN PART CyberLynk's Motion. The Court hereby TRANSFERS this action to the United States District Court for the Eastern District of Wisconsin pursuant to 28 U.S.C. § 1404(a).

BACKGROUND

Plaintiff WeR1 is a Hawaii corporation that creates and distributes children's television entertainment and other multimedia products, such as learning software and educational games. (Doc. # 13-1 ¶ 8.) Zodiac Island is WeR1's first children's television program. (Doc. # 13-2 ¶ 6.) Plaintiff In-grid Wang, a resident of Hawaii, is the founder, owner, and CEO of WeR1 and the affiliated Zodiac Island Group. (Id. ¶ 2.) Bernard Yaged, who resides in Hawaii, was the Chief Financial Officer of WeR1 and Zodiac Island Group from 2003 until 2009. (Doc. # 13-1 ¶¶ 2,7.)

Defendant CyberLynk, a Wisconsin corporation with its principal place of business in Wisconsin, is an internet service provider that offers various internet-based products, including file transport protocol ("FTP") hosting. (Doc. # 7-3 ¶¶ 2--4.) CyberLynk's FTP hosting provides clients with a central location to store files and is designed for business clients who wish to share software, photos, drawings, and large files within their business and for other authorized users. (Id. ¶ 4.)

On April 12, 2008, Yaged signed up for an FTP hosting account on CyberLynk's website on behalf of WeR1 because WeR1 needed a secure, centralized location to store its electronic data associated with Zodiac Island's production. (Doc. # 13-1 ¶¶ 13, 15.) After Yaged provided his registration information on the website, he received an email from CyberLynk indicating that CyberLynk had processed his application and created his FTP Server Account. (Id. ¶ 17; Doc. # 13-4.) The email also contained login information and a password for purposes of using and maintaining WeR1's server with CyberLynk. (Doc. # 13-4.) Shortly thereafter, WeR1 began using CyberLynk's FTP hosting services, regularly transmitting files electronically to CyberLynk's servers through the use of CyberLynk's FTP hosting website. (Doc. # 13-1 ¶ 18.)

On or about March 26, 2009, Yaged discovered that almost 300 gigabytes of WeR1's electronic data was missing from the servers maintained by CyberLynk. (Id. ¶ 19.) WeR1 was eventually able to recover 75% of the lost data, but 25% of the FTP data files could not be located and retrieved. (Doc. # 13-2 ¶ 12.)

On March 24, 2011, WeR1 and In-grid Wang filed suit against CyberLynk, Michael Scott Jewson, and John Does 1-10, Jane Does 1-10, Doe Partnerships 1-10, Doe Corporations 1-10, and Doe Entities 1-10 (collectively, "Defendants"). In the Complaint, Plaintiffs allege that Jewson, a former employee of CyberLynk, used a computer located at his parents' residence in Wisconsin to access CyberLynk's data servers without authorization and deliberately delete electronic data, including approximately 304 gigabytes of WeR1's data. ("Compl.," Doc. # 1 ¶ 25.) Plaintiffs further allege that CyberLynk failed to effectively perform regular site backup of the data on their servers and to take proper security precautions to prevent foreseeable security breaches. (Id. ¶¶ 35--36, 38--40.) The Complaint asserts claims against CyberLynk for breach of contract and negligence, and claims against Jewson for conversion and computer fraud and abuse. (Id. ¶¶ 34--50.)

On June 8, 2011, CyberLynk moved to dismiss for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure ("Rule") 12(b)(2); to dismiss for improper venue pursuant to Rule 12(b)(3); or in the alternative, to transfer this case to the Eastern District of Wisconsin pursuant to 28 U.S.C. § 1404(a). (Doc. # 7.) Plaintiffs filed an Opposition to the Motion on August 15, 2011 (Doc. # 13), and CyberLynk filed a Reply on August 22, 2011 (Doc. # 15).*fn1

STANDARD OF REVIEW

I. Motion to Dismiss for Lack of Personal Jurisdiction Pursuant to Federal Rule of Civil Procedure 12(b)(2), a defendant may move to dismiss a complaint for lack of personal jurisdiction. A plaintiff has the burden of establishing jurisdiction over a nonresident defendant. Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004); Ziegler v. Indian River County, 64 F.3d 470, 473 (9th Cir. 1995). When, as here, a district court acts on a defendant's motion to dismiss without holding an evidentiary hearing, the plaintiff need only make a prima facie showing of jurisdictional facts to withstand the motion to dismiss. Schwarzenegger, 374 F.3d at 800; Ziegler, 64 F.3d at 473.

In determining whether a plaintiff has made a prima facie showing of jurisdictional facts, the court must accept uncontroverted allegations in the complaint as true. Dole Food Co. v. Watts, 303 F.3d 1104, 1108 (9th Cir. 2002). Ifthe defendant presents evidence to contradict the allegations in the complaint, the plaintiff must go beyond the pleadings and present affirmative proof of personal jurisdiction through affidavits and declarations. See id. Conflicts between the parties' affidavits and other discovery materials must be resolved in favor of the plaintiff. Id.

II. Motion to Dismiss for Improper Venue A motion to dismiss based on a forum selection clause is treated as amotion to dismiss under Federal Rule of Civil Procedure 12(b)(3) for improper venue. Argueta v. Banco Mexicano, S.A., 87 F.3d 320, 324 (9th Cir. 1996). In "resolving motions to dismiss based on a forum selection clause, the pleadings are not accepted as true, as would be required under a Rule 12(b)(6) analysis. . . ." Id. "Analysis under Rule 12(b)(3) . . . permits the district court to consider facts outside of the pleadings[.]" Id. However, "the trial court must draw all reasonable inferences in favor of the non-moving party and resolve all factual conflicts in favor of the non-moving party[.]" Murphy v. Schneider Nat'l, Inc., 362 F.3d 1133, 1138 (9th Cir. 2004). In other words, "if the facts asserted by the non-moving party are sufficient to preclude enforcement of the forum selection clause, the non-moving party is entitled to remain in the forum it chose for suit unless and until the district court has resolved any material factual issues that are in genuine dispute." Id. at 1139.

When genuine issues of material fact are raised, the district court may resolve such issues by holding a pre-trial evidentiary hearing on the disputed facts. Id. "Whether to hold a hearing on disputed facts and the scope and method of the hearing is within the sound discretion of the district court." Id. Upon holding a hearing, "the district court may weigh evidence, assess credibility, and make findings of fact that are dispositive on the Rule 12(b)(3) motion." Id. at 1140. "These factual findings, when based upon an evidentiary hearing and findings on disputed material issues, will be entitled to deference." Id.

"Alternatively, the district court may deny the Rule 12(b)(3) motion while granting leave to refile it if further development of the record eliminates any genuine factual issue." Id. at 1139.

III. Motion to Transfer Venue Pursuant to 28 U.S.C. § 1404(a) "Section 1404(a) is intended to place discretion in the district court to adjudicate motions for transfer according to an "'individualized, case-by-case consideration of convenience and fairness.'" Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29 (1988) (quoting Van Dusen v. Barrack, 376 U.S. 612, 622 (1964)); see 28 U.S.C. § 1404(a) ("For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought."). A motion to transfer venue pursuant to Section 1404(a) requires the district court to consider both public factors, which go to the interests of justice, and private factors, which go to the convenience of the parties and witnesses. See Decker Coal Co. v. Commonwealth Edison Co., 805 F.3d 834, 843 (9th Cir. 1986).

DISCUSSION

I. Personal Jurisdiction

In order to exercise personal jurisdiction over a nonresident defendant, the Court must consider whether: (1) the forum state has an applicable long-arm statute that confers jurisdiction over nonresidents; and (2) the assertion of personal jurisdiction comports with the constitutional requirements of due process. Miracle v. N.Y.P. Holdings, Inc., 87 F. Supp. 2d 1060, 1064 (D. Haw. 2000); Complaint of Damodar Bulk Carriers, Ltd., 903 F.2d 675, 678 (9th Cir. 1990). Hawaii's long-arm statute provides that a defendant is subject to the jurisdiction of its courts if a plaintiff's cause of action arises from one of the following acts:

(1) The transaction of any business within this State;

(2) The commission of a tortious act within this State;

(3) The ownership, use, or possession of any real estate situated in this State;

(4) Contracting to insure any person, property, or risk located within this State at ...


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