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Pacific Helicopter Tours, Inc. v. Dragonfly Aviation, LLC

United States District Court, D. Hawaii

October 8, 2019

PACIFIC HELICOPTER TOURS, INC., a Hawaii limited Liability company, Plaintiff,
v.
DRAGONFLY AVIATION, LLC, a Texas limited liability company, Defendant.

          ORDER GRANTING DRAGONFLY AVIATION, LLC'S MOTION TO DISMISS

          ALAN C. KAY, SR. UNITED STATES DISTRICT JUDGE

         For the reasons set forth below, the Court GRANTS Defendant Dragonfly Aviation, LLC's Motion to Dismiss, ECF No. 5.

         FACTUAL BACKGROUND

         This case arises out of a dispute over a lease agreement between Pacific Helicopter Tours, Inc. (“Pacific Helicopter”) and Dragonfly Aviation, LLC (“Dragonfly”). Each party alleges that the other breached the terms of the lease agreement. Pacific Helicopter seeks to compel arbitration in Hawai‘i, while Dragonfly contends that the Hawai‘i case must be dismissed for procedural and jurisdictional defects or because it fails to state a claim. Alternatively, Dragonfly asks this Court to transfer venue to Texas, where a parallel lawsuit is pending.

         I. The Lease Agreement

         The dispute arose soon after the parties entered into a lease agreement (the ”Lease”), [1] whereby Dragonfly, a Texas limited liability company, agreed to lease a McDonnel-Douglas MD500D helicopter to Pacific Helicopter, a Hawai‘i limited liability company. Respondent's Notice of Removal of Action (“Removal Notice”), ECF No. 1, ¶¶ 6-9; Petition and Motion To Compel Arbitration (“Petition”), ECF No. 1-1, PageID#: 7.[2] The Lease, executed in June 2017, provides for a 24-month term and sets forth the mutual obligations of each party during the lease period. See Mot. Dismiss at 3; Opp. Br. at 4. The Lease was to take effect one month after the helicopter reached Pacific Helicopter's “Hanger 109.” Opp. Br. at 4 (citing the Lease).

         The Lease contains Texas choice of law provisions, Lease §§ 22.5, 30.1, as well as a clause providing that disputes over repairs to the helicopter that are due to the fault or negligence of Pacific Helicopters are subject to arbitration:

7.2 The LESSEE shall: . . .
7.2.2 Repair, at the expense of the LESSEE, the damages caused by the fault or negligence of the LESSEE, however, if the time life of the component to be repaired changes due to repair, the cost of such repair or overhaul will be prorated and subject to LESSOR Lease obligations. Any betterment on components time or overhaul life will be at the expense (subject to prior approval) of the LESSOR. In case of dispute, a mutually agreeable third-party arbitrator will determine applicable fault or negligence or shared fault or negligence.

         Lease § 7.2.2 (emphasis added).

         II. The Arbitration Demand and Lawsuits

         Pacific Helicopter alleges that, after delivery of the helicopter, it discovered that Dragonfly was in breach of the terms and conditions of the Lease.[3] See generally Petition. Invoking Section 7.2.2, Pacific Helicopter sought to arbitrate these disputes with Dragonfly. Id. Pacific Helicopter contacted Dispute Resolution & Prevention, Inc. (“DPR”) and sent an arbitration demand to Dragonfly on November 9, 2018. Petition at PageID#: 6-7; see also Arbitration Demand, ECF No. 1-1 at PageID#: 13-15. Dragonfly allegedly “repudiated [Pacific Helicopter's] Arbitration Demand and refuses to designate an arbitrator.” Petition at PageID#: 7.

         In response, on January 14, 2019, Pacific Helicopter filed the instant lawsuit in Hawai‘i state court (the “Hawaii Lawsuit”) seeking an order compelling Dragonfly to arbitration pursuant to the earlier arbitration demand. Petition at PageID#: 6. Dragonfly-apparently unaware of the pending Hawai‘i litigation-filed a separate lawsuit in a Texas state court (the “Texas Lawsuit”)[4] on April 19, 2019, alleging that Pacific Helicopter had breached several other provisions of the Lease.[5] Mot. Dismiss 5; see also Ex. B to Mot. Dismiss, ECF No. 5-5 (Texas amended petition).[6] Pacific Helicopter was served with the Texas Lawsuit on May 9, 2019. Mot. Dismiss 5 (citing Ex. D, ECF No. 5-7).

         On May 13, 2019, Pacific Helicopter faxed and emailed a copy of the Petition in the Hawaii Lawsuit to Dragonfly's attorney representing Dragonfly in the Texas Lawsuit. See Ex. E to Mot. Dismiss, ECF No. 5-8. On June 10, 2109, Dragonfly removed the Hawaii Lawsuit to this Court. See ECF No. 1.

         On June 19, 2019, Dragonfly filed a Motion to Dismiss for Lack of Personal Jurisdiction, Insufficient Process and Service of Process, and Failure to State a Claim Upon Which Relief Can Be Granted, or in the Alternative, for Change of Venue. ECF No. 5. Pacific Helicopter filed its Opposition Brief on September 17, ECF No. 14, and Dragonfly filed a Reply Brief on September 24, ECF No. 15. A hearing was held on Tuesday, October 8, 2019, at 11:00 a.m.

         STANDARDS

         I. Rules 12(b)(4) and 12(b)(5)

         Federal Rules of Civil Procedure (“Rule”) 12(b)(4) and 12(b)(5) authorize dismissal based on insufficient process and insufficient service of process, respectively. In assessing the sufficiency of process and service of process, courts may weigh the evidence and resolve disputed issues of fact in accordance with Rule 12(i). 5B Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 1353 (Civ.3d ed.) (“Any factual question raised by the affidavits or other evidence presented on a Rule 12(b)(4) or a Rule 12(b)(5) motion should be determined by the district court in accordance with Rule 12(i).”). If a court finds process or service of process insufficient, it may dismiss the action or retain the case but quash the service that was made on the defendant. Cranford v. United States, 359 F.Supp.2d 981, 984 (E.D. Cal. 2005).

         A motion to dismiss under Rule 12(b)(4), on the one hand, challenges the form of the summons. “[A] Rule 12(b)(4) motion is proper only to challenge noncompliance with the provisions of Rule 4(b) or any applicable provision incorporated by Rule 4(b) that deals specifically with the content of the summons.” Federal Practice and Procedure § 1353; see also Wasson v. Riverside Cty., 237 F.R.D. 423, 424 (C.D. Cal. 2006) (quoting same). “Defects in the form of summons are considered technical and a dismissal is not proper unless the party can demonstrate actual prejudice.” Crane v. Battelle, 127 F.R.D. 174, 177 (S.D. Cal. 1989).

         A motion to dismiss pursuant to Rule 12(b)(5), on the other hand, concerns the service of the summons and complaint. A plaintiff bears the burden of demonstrating that service was proper, which is determined under the requirements of Rule 4. Brockmeyer v. May, 383 F.3d 798, 801 (9th Cir. 2004); see also Kyung Cho v. UCBH Holdings, Inc., 890 F.Supp.2d 1190, 1198 (N.D. Cal. 2012). Courts have explained that Rule 4 is a flexible rule that should be liberally construed to uphold service so long as a party receives sufficient notice of the complaint. United Food & Commercial Workers Union, Local 197 v. Alpha Beta Co., 736 F.2d 1371, 1382 (9th Cir. 1984). However, because “[a] federal court does not have jurisdiction over a defendant unless the defendant has been served properly, ” Direct Mail Specialists v. Eclat Computerized Techs., Inc., 840 F.2d 685, 688 (9th Cir. 1988), “neither actual notice nor simply naming the defendant in the complaint will provide personal jurisdiction” absent substantial compliance with Rule 4's requirements, Benny v. Pipes, 799 F.2d 489, 492 (9th Cir. 1986).

         Where a defendant has not been served within 90 days after the complaint is filed, Rule 4(m) requires the court to either dismiss the action without prejudice against that defendant, or to order that service be made within a specified time. Rule 4(m) requires an extension of time for service, however, where the plaintiff has shown good cause for the failure to effect service.

         II. Rule 12(b)(2)

         The exercise of personal jurisdiction may be challenged under Rule 12(b)(2). The plaintiff bears the burden of showing that the Court has jurisdiction over the defendant. Mavrix Photo, Inc. v. Brand Techs., Inc., 647 F.3d 1218, 1223 (9th Cir. 2011). The Court may allow the plaintiff to submit affidavits, allow affidavits plus discovery, or conduct an evidentiary hearing. See Boschetto v. Hansing, 539 F.3d 1011, 1015, 1020 (9th Cir. 2008).

         When the Court rules without conducting an evidentiary hearing, “the plaintiff need only make a prima facie showing of jurisdictional facts” to avoid dismissal. Mavrix Photo, 647 F.3d at 1223. The Court must take as true all uncontroverted facts in the complaint but may not assume the truth of allegations which are contradicted by affidavit. CollegeSource, Inc. v. AcademyOne, Inc., 653 F.3d 1066, 1073 (9th Cir. 2011). The Court must resolve all factual disputes in the plaintiff's favor. Mavrix Photo, 647 F.3d at 1223. Nonetheless, “mere ‘bare bones' assertions of minimum contacts with the forum or ...


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