United States District Court, D. Idaho
MELALEUCA, INC., an Idaho corporation, and MELALEUCA CHINA WELLNESS PRODUCTS CO., LTD., a wholly-owned subsidiary of Melaleuca, Inc., Plaintiffs,
KOT NAM SHAN, an individual, and SHAKLEE CORP., a Delaware corporation, Defendants.
MEMORANDUM DECISION AND ORDER
C. Nye, U.S. District Court Judge
are three Motions pending before the Court. First, Plaintiffs
Melaleuca, Inc. (“Melaleuca”) and Melaleuca
(China) Wellness Products Co., Ltd. (“Melaleuca
China”) have moved for a preliminary injunction to, in
general, enjoin Defendant Kot Nam Shan (“Kot”)
from working for or with Defendant Shaklee Corporation
(“Shaklee”) while this litigation is ongoing.
Dkt. 40. In response, Shaklee filed a Motion to Dismiss for
Forum Non Conveniens (Dkt. 43) and Kot filed a Motion to
Dismiss on several grounds (Dkt. 47). The Court set an
expedited briefing schedule for these three Motions and then
held oral argument on March 23, 2018. For the reasons set
forth below, the Court finds good cause to GRANT Kot's
Motion to Dismiss on personal jurisdiction grounds and forum
non conveniens grounds. Accordingly, the Court DISMISSES the
claims Plaintiffs have asserted against Kot and directs
Plaintiffs to refile it claims against Kot (and any other
pertinent party, such as Shaklee China) in China. The Court
also finds it must DENY Shaklee's Motion for Forum Non
Conveniens. Finally, the Court DENIES the Motion for
Preliminary Injunction as moot.
Melaleuca is an international consumer goods company that
formulates, manufactures, and markets unique nutritional,
personal care, cosmetic, and household products. Melaleuca is
based in Idaho Falls, Idaho, but sells its products in 18
countries. Melaleuca has formed wholly owned subsidiaries in
many of the foreign countries in which it sells its products.
For example, Plaintiff Melaleuca China is Melaleuca's
subsidiary in China.
has invested significant time and resources in developing its
distribution operations and sales in China, “a key
international market for Melaleuca.” The relationships
between Melaleuca's corporate executives and independent
marketing executives in China is crucial to Melaleuca's
growth and success in China. Accordingly, Melaleuca's
competitors in China have tried to poach Melaleuca's
corporate executives in order to exploit their relationships
with Chinese marketing executives.
2010, Melaleuca hired Kot, a citizen of Hong Kong, as
Director of Sales with Melaleuca Southeast Asia Malaysia Sdn.
Bhd. (“Melaleuca Malaysia”). On April 26, 2010,
Kot and Melaleuca entered into a “Key Employee
Non-Interference and NonCompetition Agreement”
(“2010 Non-Competition Agreement”). Dkt. 40-5.
Melaleuca Malaysia was not a party to this Agreement. Under
this Agreement, Kot was prohibited from, among other things,
promoting direct competitors of Melaleuca, speaking with a
direct competitor's “independent business owners or
sales representatives, ” and representing himself as a
former Melaleuca employee for a 12-month period following his
“Termination Date.” Id. at 3-4. The
Agreement specifically identified Shaklee as a direct
competitor of Melaleuca. Id. On April 26, 2010, Kot
and Melaleuca also entered into a “Confidentiality and
Non-Solicitation Agreement” (the “2010
Confidentiality Agreement”) (collectively “2010
Agreements”). Dkt. 40-6. Among other things, the
Confidentiality Agreement prohibits Kot from sharing certain
identified categories of Melaleuca's confidential and
proprietary information. Id. Both of these
Agreements provide that they are governed by the laws of the
State of Idaho and that “the courts of the Seventh
Judicial District Court of the State of Idaho or of the
United States District Court for the District of Idaho”
have “exclusive jurisdiction” over “any
action arising out of or in any way related to the
interpretation and enforcement of the Agreement.” Dkts.
40-5, at 5; 40-6, at 4.
2011, Melaleuca China hired Kot as the Assistant General
Manager of Melaleuca China and, later that year, promoted him
to General Manager of Melaleuca China. On April 12, 2011, Kot
entered into a Key Employee Non-Interference and
NonCompetition Agreement (“2011 Non-Competition
Agreement”) and a Confidentiality and Non-Solicitation
Agreement (“2011 Confidentiality Agreement”)
(collectively “2011 Agreements”) with Melaleuca
China. Like with the 2010 Non-Competition
Agreement, the 2011 Non-Competition Agreement, among other
things, prevented Kot from promoting direct competitors of
Melaleuca, speaking with a direct competitor's
“independent business owners or sales representatives,
” and holding himself out as a former Melaleuca
employee, but this time for a period of 18 months after his
“Termination Date.” Dkt. 40-7, at 3-6. The 2011
Agreements are “governed in all respects by the laws of
the People's Republic of China” and provide that
“[t]he parties agree to submit to the non-exclusive
jurisdiction of the Courts of the People's Republic of
China.” Dkts. 40-7, at 8; 40-8, at 5. The 2011
Non-Competition Agreement also required Melaleuca China to
pay Kot a monthly base compensation in order to enforce the
non-compete obligation for the “Period of
September 19, 2017, Kot informed his supervisor, Jerry
Felton, that he would be resigning from his position
“to help his wife expand her bridal boutique business
into China and other markets and to begin importing and
selling luxury cars.” Dkt. 40-2, at 14. Based on
Kot's representations, Melaleuca China did not provide
Kot with the monthly base pay the 2011 Non-Competition
Agreement requires to trigger Kot's non-compete
December 2017, Melaleuca's CEO, Frank L. VanderSloot,
received an anonymous email with a subject line indicating
that Kot had joined Shaklee as its general manager.
Id. at 15. Jerry Felton, President of
Melaleuca's International Department, contacted Kot
directly to ask him if he had joined Shaklee. Kot denied that
he had and insisted that he planned only to work on his
wife's bridal business and his luxury car import
business. Ryan Nelson of Melaleuca also reached out to a
senior Shaklee representative, Marjorie Fine, regarding Kot.
Fine denied that Shaklee had hired Kot. The parties dispute
whether Fine made any statements regarding Shaklee's
recruitment of Kot.
January 8, 2018, Kot joined Shaklee (China) Co. Ltd.
(“Shaklee China”). That same day, Melaleuca received
WeChat messages from one of its Marketing Executives that
contained photographs of Kot on stage at a Shaklee event,
with Shaklee personnel, and shaking hands with the CEO of
Shaklee. Later that day, Felton received a text message from
Kot stating that he had joined Shaklee. Melaleuca's
Senior Vice President Danny Xu also received a phone call
from Kot in which Kot stated that he was going to be
introduced as a Shaklee employee. Thereafter, Plaintiffs
assert, Kot engaged in conduct prohibited by the 2010 and
2011 agreements, including meeting with Shaklee employees and
sales representatives, holding himself out as a former
Melaleuca employee, sharing confidential information about
Melaleuca, and contacting Melaleuca sales representatives in
an attempt to get them to leave Melaleuca for Shaklee.
filed suit against Kot and Shaklee in the Seventh Judicial
District of the State of Idaho, in and for the County of
Bonneville, on January 17, 2018. Concurrently therewith,
Melaleuca filed a Motion for Temporary Restraining Order and
Expedited Discovery. The next day, the state court issued an
order granting the Motion for Temporary Restraining Order and
Expedited Discovery. Melaleuca then posted a cash bond of
$10, 000 in accordance with the order. The state court also
scheduled a hearing on the Motion for Preliminary Injunction
for February 6, 2018.
removed the action to this Court based on diversity
jurisdiction on January 25, 2018. On January 29, 2018,
Defendants filed a series of motions. Counsel appearing for
Kot filed a Motion to Dismiss for a variety of reasons. Dkt.
6. Shaklee filed a Motion to Dismiss for Forum Non
Conveniens. Dkt. 7. Shaklee also filed a Motion to Dissolve
or Stay or Modify the state court's order granting the
Motion for Temporary Restraining Order and Expedited
Discovery. Dkt. 8. Finding it appropriate to do so, the Court
held a telephonic scheduling conference on January 31, 2018,
to discuss a schedule for briefing the pending Motions,
including a soon to be filed Motion for Preliminary
Injunction, and how the state court order affected these
proceedings. After a full discussion, the Court found it
appropriate to first determine whether any expedited
discovery (as Melaleuca had requested) was appropriate and
necessary before setting a briefing schedule for the other
pending Motions. Accordingly, the Court set an expedited
briefing schedule for Melaleuca's Motion for Expedited
Discovery. Dkt. 16. The Court also extended the temporary
restraining order put in place by the state court for an
addition 14 days. Dkt. 20. The Court ultimately denied the
Motion for Expedited Discovery on February 14, 2018. Dkt. 29.
It then set an expedited briefing schedule for the three
pending motions. Id. When the temporary restraining
order expired a few days later, the Court declined to extend
it. Dkt. 38.
on February 19, 2018, Melaleuca, now in conjunction with
Melaleuca China, filed an Amended Complaint. Dkt. 39. The
Amended Complaint sets forth seven causes of action: (1)
breach of the 2010 Non-Competition Agreement (against Kot)
(2) breach of the 2010 Confidentiality Agreement (against
Kot); (3) tortious interference with 2010 Agreements (against
Shaklee); (4) breach of the 2011 Non-Competition Agreement
(against Kot); (5) breach of the 2011 Confidentiality
Agreement (against Kot); (6) tortious interference with the
2011 Agreements (against Shaklee); and (7) fraud in the
inducement with regard to the 2011 Non-Competition Agreement
(against Kot). The Amended Complaint mooted the two pending
motions to dismiss. Plaintiffs also filed an Amended Motion
for Preliminary Injunction. Dkt. 40. After Skaklee refiled
its Motion to Dismiss for Forum Non Conveniens (Dkt. 43), and
Kot refiled his Motion to Dismiss (Dkt. 47), the Court reset
an expedited briefing schedule for all three Motions. Dkt.
49. Significantly, Kot's Motion asserts that this Court
should dismiss this case for four reasons: (1) the Court
lacks personal jurisdiction over him; (2) Plaintiffs have
failed to join Shaklee China, an indispensable party; (3)
forum non conveniens; and (4) insufficient service of
process. Dkt. 47. The Court scheduled and held oral argument
on the three pending Motions on March 23, 2018. The Court
starts its analysis with the Motions to Dismiss for Forum Non
Conveniens asserted by both Kot and Shaklee.
DEFENDANTS' MOTIONS TO DISMISS FOR FORUM NON
the doctrine of forum non conveniens, the Court has
discretion to dismiss a case where “litigation in a
foreign forum would be more convenient for the
parties.” Lueck v. Sundstrand Corp., 236 F.3d
1137, 1142 (9th Cir. 2001). In determining whether to grant a
motion for forum non conveniens, the Court must examine:
“(1) whether an adequate alternative forum exists, and
(2) whether the balance of private and public interest
factors favors dismissal.” Id. “The
defendant bears the burden of proving the existence of an
adequate alternative forum.” Id. (quoting
Cheng v. Boeing Co., 708 F.2d 1406, 1411 (9th Cir.
1983)). “Ordinarily, a plaintiff's choice of forum
will not be disturbed unless the ‘private interest'
and the ‘public interest' factors strongly favor
trial in a foreign country.” Id. at 1145.
Ninth Circuit advises that forum non conveniens is “an
exceptional tool to be employed sparingly, [not a] . . .
doctrine that compels plaintiffs to choose the optimal forum
for their claim.” Ravelo Monegro v. Rosa, 211
F.3d 509, 514 (9th Cir. 2000). “The doctrine of forum
non conveniens is a drastic exercise of the court's
‘inherent power' because, unlike a mere transfer of
venue, it results in the dismissal of a plaintiff's
case.” Carijano v. Occidental Petroleum Corp.,
643 F.3d 1216, 1124 (9th Cir. 2011). However, ultimately
“[a] forum non conveniens determination is committed to
the sound discretion of the district court.”
Lueck, 236 F.3d at 1143. In analyzing a motion to
dismiss for forum non conveniens, the Court must accept as
true the facts alleged by Plaintiffs. See Carijano,
643 F.3d at 1122 (citing Vivendi SA v. T-Mobile USA,
Inc., 586 F.3d 689, 691 n. 3 (9th Cir.2009)) (accepting
the facts alleged in plaintiff's complaint when reviewing
defendant's motion to dismiss for forum non conveniens).
Ninth Circuit has also directed district courts to
“make a choice of law determination in considering
whether to dismiss the action [for forum non
conveniens].” Lueck, 236 F.3d at 1143.
“However, the choice of law analysis is only
determinative when the case involves a United States statute
requiring venue in the United States, such as the Jones Act
or the Federal Employers' Liability Act.”
Id. at 1148 (citation omitted).
“[t]he purpose of a choice of law inquiry in a forum
non conveniens analysis is [only] to determine if one of
these statutes would apply.” Id.
Choice of Law Determination
Court first addresses the choice of law analysis. The Court
notes that Plaintiffs have in no way argued that a United
States statute mandates venue in a United States district
court. Thus, this choice of law analysis is “not
determinative.” Id. Nevertheless, the choice
of law determination may help guide the Court's
subsequent analysis, so the Court undertakes such a
courts sitting in diversity must apply ‘the forum
state's choice of law rules to determine the controlling
substantive law.'” Fields v. Legacy Health
Sys., 413 F.3d 943, 950 (9th Cir. 2005) (citation
omitted). Idaho applies the Restatement (Second) Conflict of
Laws including the “most significant relation
test” as set forth in section 145, Grover v.
Isom, 53 P.3d 821, 823-24 (Idaho 2002), and section 187
regarding choice of law clauses, to determine the applicable
law. As noted previously, Melaleuca asserts three torts and
four contract claims in this case.
cases, Idaho courts consider the following facts in making
their choice of law determination: “(a) the place where
the injury occurred, (b) the place where the conduct causing
the injury occurred, (c) the domicile, residence,
nationality, place of incorporation and place of business of
the parties, and (d) the place where the relationship, if
any, between the parties is centered.” Grover,
53 P.3d at 824. The most important factor is where the injury
support of their claims for tortious interference with
contract against Shaklee, Plaintiffs allege that Shaklee knew
about the 2010 and 2011 Agreements and intentionally
interfered with them by inducing Kot to work for Shaklee and
lying to Melaleuca employees about their actions in
recruiting and hiring Kot. In support of their claim for
fraud in the inducement, Plaintiffs allege that Kot
intentionally lied to them about his future employment plans
when he left Melaleuca China's employment so that
Melaleuca China would decline to pay him a monthly salary,
and, in doing so, free him of any non-competition obligations
under the 2011 Agreement.
relevant factors favor applying Chinese law to these three
torts. First, Melaleuca has repeatedly alleged that Kot's
breach of the Agreements harmed its business relationships,
operations, and sales in China. Thus, Plaintiffs' injury,
as alleged, occurred, and continues to occur, in China.
Second, most of the conduct causing the injury-Shaklee
China's employment of Kot and Kot's alleged
intentional lies about his future plans-occurred in China.
The Court notes, however, that Plaintiffs have alleged that
some of Shaklee's American employees were involved in the
tortious interference claims by recruiting Kot and lying to
Melaleuca's employees about their interest in Kot.
Presumably, these actions took place in California, where
Shaklee's principal place of business is located. Third,
Kot's former employer-Melaleuca China-and Kot's
apparent current employer-Shaklee China-are located in China.
It is true that Melaleuca is incorporated in Idaho and
Shaklee is incorporated in Delaware with its principal place
of business in California. However, the locations of these
two parties do not outweigh the locations of the other,
arguably, more relevant parties, which are all located in
China. Fourth, the parties' ...