Filed 3/29/16 Cottonwood Capital Property Management v. Superior Court CA4/3




                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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

                                     FOURTH APPELLATE DISTRICT

                                                DIVISION THREE


COTTONWOOD CAPITAL PROPERTY
MANAGEMENT II, LLC,

     Petitioner,
                                                                       G052620
         v.
                                                                       (Super. Ct. No. 30-2014-00764027)
THE SUPERIOR COURT OF ORANGE
COUNTY,                                                                OPINION

     Respondent;

NNN CENTURY HILLS TIC 01, LLC,
et al.

     Real Parties in Interest.



                   Original proceedings; petition for a writ of mandate to challenge an order of
the Superior Court of Orange County, Peter J. Wilson, Judge. Petition granted.
              Shumener, Odson & Oh, Betty M. Shumener, Henry H. Oh and Edward O.
Morales for Petitioner.
              No appearance for Respondent.
              Engstrom, Lipscomb & Lack, Walter J. Lack and Steven C. Shuman for
Real Parties in Interest.
                                *             *              *
              Petitioner Cottonwood Capital Property Management II, LLC
(Cottonwood) petitions for a writ of mandate directing the trial court to grant
Cottonwood’s motion to quash service of summons for lack of personal jurisdiction.
Real parties in interest NNN Century Hills TIC 01, LLC through NNN Century Hills
TIC 28, LLC (collectively, Owners) are 28 limited liability companies that contracted
with Daymark Realty Properties, Inc. (Daymark) to manage an apartment complex
Owners bought in Georgia. A few years later, Daymark entered into a subcontract with
Cottonwood to have it manage the apartments for Daymark.
              Owners filed this action against Cottonwood and Daymark after Owners’
lender foreclosed on the apartments because Cottonwood stopped making payments on
Owners’ purchase money loan. According to Cottonwood, it stopped making loan
payments because the apartments did not generate sufficient revenue to pay the operating
expenses and service Owners’ loan, and Owners refused to comply with Cottonwood’s
“capital call” seeking additional funds to cover the expenses and loan payments. Owners
alleged claims for breach of the subcontract, breach of the original property management
agreement, and various torts. Cottonwood moved to quash service, arguing it had not
purposefully availed itself of any California benefits by entering into and performing the
subcontract, and therefore it lacked sufficient minimum contacts with California to
constitutionally allow the state’s courts to exercise personal jurisdiction over it.
              We agree and grant the petition. Cottonwood is a Utah limited liability
company with its principal place of business in Utah. It has no offices, employees,

                                              2
agents, or assets in California and conducts no business in the state. Daymark and
Cottonwood negotiated and executed the subcontract in Utah, and Cottonwood had no
direct contractual relationship with Owners. Cottonwood performed the subcontract in
Georgia where the apartments were located and in Utah where its offices were located.
Cottonwood did not engage in any activities in California relative to the subcontract.
              Cottonwood’s California connections were limited to sending budgets,
plans, reports, miscellaneous communications, and the capital call to a subset of Owners
that had members living in California. These same connections also existed with the
12 other states where Owners’ members lived. Cottonwood did not seek out these
connections with California, which were incidental to Cottonwood’s performance under
the subcontract in Georgia and Utah. As explained below, we conclude these California
connections are too attenuated and random to constitute purposeful availment, and
therefore may not support the exercise of personal jurisdiction over Cottonwood.

                                             I

                           FACTS AND PROCEDURAL HISTORY

              Owners are 28 limited liability companies that purchased a 200-unit
apartment complex in Augusta, Georgia, and held title to the apartments as tenants in
common. Owners were formed in Delaware for the sole purpose of purchasing the
apartments; they conducted no other business and each Owner’s only asset was its
interest in the apartments. The members of each Owner were individuals, couples, or
family trusts that lived in 13 states, with the members of 10 Owners living in California.1
None of Owners’ members are parties to the underlying action.



       1
             The 13 states where Owners’ members lived are Arizona, California,
Colorado, Connecticut, Florida, Idaho, Nebraska, New Jersey, North Carolina,
Tennessee, Virginia, Washington, and Wyoming.


                                             3
              Owners financed the purchase of the apartments with a nearly $16 million
loan secured by a deed of trust and security agreement. In the loan documents, Owners
agreed Georgia law would govern any dispute relating to the loan and also agreed to
submit to personal jurisdiction in Georgia to resolve any dispute.
              Daymark is a California corporation with its principal place of business in
Orange County, California. In June 2007, Daymark’s predecessor in interest entered into
the “Property Management Agreement” (Management Agreement) with Owners to
“manage, lease, operate, and maintain the [apartments].”2 The Management Agreement
designated Daymark as “the sole and exclusive manager of the [apartments] to act on
behalf of [Owners]” and required Daymark to “keep the [apartments] clean and in good
repair, . . . order and supervise the completion of such repairs as may be required and . . .
generally do and perform, or cause to be done or performed, all things necessary,
required or desirable for the proper and efficient management, operation, and
maintenance of the [apartments].”
              Daymark’s responsibilities under the Management Agreement included
leasing the individual units, collecting rent, paying the mortgage, taxes, and other bills,
repairing and maintaining the apartments, interacting with the tenants, preparing an
annual operating budget and plan for Owners’ approval, providing Owners with quarterly
financial reports, establishing separate bank accounts for each Owner’s share of the
profits, and maintaining books and records of the income and expenses attributed to each
Owner’s interest in the apartments at Daymark’s office in California. The Management
Agreement authorized Daymark, “in its sole discretion, to subcontract some or all of the
property management functions described herein to local property managers and certain
other parties.” Finally, the Management Agreement included a choice-of-law provision
       2
              Triple Net Properties Realty, Inc., was the entity that contracted with
Owners and later became Daymark through a series of mergers and other transactions.
Triple Net Properties Realty is not a party to the underlying action.


                                              4
designating Georgia law, but it required arbitration in Orange County, California, for all
disputes relating to the Management Agreement.
              Cottonwood is a Delaware limited liability company with its principal place
of business in Salt Lake City, Utah. In 2012, representatives of Cottonwood attended a
conference in California where they met Daymark’s representatives. This chance
encounter led to two separate meetings in California when Cottonwood representatives
were attending other conferences. During these California meetings, Cottonwood
described its property management services and Daymark shared information about the
various portfolios of properties it held and managed. The two companies did not discuss
the terms of any particular deal during these meetings, but rather simply got to know each
other’s business.
              After the California meetings, Daymark and its attorneys traveled to Utah
to meet with Cottonwood. The two companies negotiated, drafted, and agreed to an
arrangement for Cottonwood to purchase the right to manage various properties Daymark
managed, including the apartments in Georgia. In November 2012, Cottonwood and
Daymark entered into the “Sub-Property Management Agreement” (Subcontract) for
Cottonwood to perform Daymark’s property management responsibilities for the
apartments.
              The Subcontract provides, “[Daymark] hereby hires and retains
[Cottonwood], and [Cottonwood] agrees to perform all of [Daymark’s] property
management obligations under the Management Agreement, subject to the exclusions,
terms and conditions contained in this Subcontract (collectively, the ‘Services’). It is
expressly understood that the Services are to be provided on a subcontract basis and that
this Subcontract does not constitute an assignment of the Management Agreement or any
right, title, or interest thereunder.” In exchange for Cottonwood performing Daymark’s
property management obligations, Daymark agreed to “assign[] to [Cottonwood]
[Daymark’s] rights to payment of the Management Fee and the Construction

                                             5
Management Fee and will instruct [Owners] to pay the Management Fee and the
Construction Management Fee directly to an account designated by [Cottonwood].”
              In the Subcontract, “[Cottonwood] covenants and warrants that it fully
understands and agrees to be subject to, bound by and fully perform all of [Daymark’s]
covenants, agreements, terms, provisions and conditions of the Management Agreement
arising as of the date hereof, except (i) as such terms, covenants, agreements and
provisions are specifically modified, excluded or limited by this Subcontract . . . .” The
Subcontract further provides it “is not intended to give or confer any benefits, rights,
privileges, claims, actions, or remedies to [Owners] or to any person or entity as a third
party beneficiary or otherwise.” Finally, the Subcontract includes a choice-of-law
provision designating Delaware law, but it does not include a forum selection or
arbitration clause.
              After a brief transition period, Cottonwood performed the day-to-day
management and maintenance services for the apartments through its onsite employees
and contractors, who were supervised by a regional manager located in Georgia.
Financial and other information relating to the apartments was compiled in Georgia and
transmitted to Cottonwood’s corporate offices in Utah, where Cottonwood analyzed the
information and prepared budgets, plans, reports, and other documents concerning the
apartments. Cottonwood stored this information in an online database it maintained in
Utah. It provided Owners with login information to access the database and also mailed
hard copies of these documents to Owners who requested them. Cottonwood provided
notice to Owners about the budgets and reports through e-mail and standard mail from its
offices in Utah. It also conducted regular conference calls to discuss its management, and
provided Owners with the information necessary to participate in the calls or listen to
recordings of previous calls. The calls were initiated from Cottonwood’s offices in Utah.
              Cottonwood experienced difficulties managing the apartments because they
did not generate sufficient revenue to pay the operating expenses and service Owners’

                                              6
property loan. Initially, Cottonwood maintained the apartments by obtaining necessary
services on credit and only paying for those services as they came due, but eventually
payment demands exceeded the available revenue. Cottonwood therefore made a capital
call on all Owners, seeking the additional funds necessary to pay the outstanding bills
while continuing to service the debt for the apartments. When Owners refused to comply
with the capital call, Cottonwood lacked the funds necessary to pay the outstanding
obligations, including the loan on the apartments. After Owners missed several loan
payments, the lender foreclosed.
              In 2014, Owners brought this action against Cottonwood and Daymark.
The operative first amended complaint alleged claims against Cottonwood for breach of
the Subcontract, breach of fiduciary duty, accounting, inducing breach of or intentional
interference with the loan on the apartments, intentional interference with prospective
economic relations, and negligent interference with prospective economic relations.3
Owners alleged Cottonwood mismanaged the apartments and caused the foreclosure by
paying certain operating expenses before paying the loan on the apartments, failing to
maintain the debt service coverage ratio required by the loan, failing to timely provide the
annual operating budget and other financial reports, incurring unauthorized expenses,
failing to maintain required state and local licenses, failing to make financial and other
documents available to Owners, and making an unauthorized capital call.
              Owners served the summons and first amended complaint on Cottonwood’s
agent for service of process in Delaware, and Cottonwood responded by moving to quash
service. Cottonwood argued it lacked sufficient minimum contacts with California to


       3
              The first amended complaint also alleged claims against Owners’ lender for
breach of the implied covenant of good faith and fair dealing, negligence, intentional
interference with prospective economic relations, negligent interference with prospective
economic relations, and wrongful foreclosure. The lender is not a party to this writ
proceeding.


                                              7
constitutionally subject it to personal jurisdiction in the state because Cottonwood
negotiated and entered into the Subcontract with Daymark in Utah to manage the
apartments in Georgia and the alleged acts and omissions by Cottonwood occurred in
either Georgia or Utah. Owners opposed the motion, arguing the totality of the
circumstances surrounding the Management Agreement and the Subcontract established
sufficient minimum contacts with California because Daymark is a California
corporation, Cottonwood assumed Daymark’s obligations under the Management
Agreement, and the Management Agreement required certain obligations to be performed
in California, including making financial and certain other documents relating to the
apartments available to Owners, providing budgets and financial reports to Owners’
members, and arbitrating any disputes under the Management Agreement.4
              The trial court agreed with Owners and denied Cottonwood’s motion to
quash. Cottonwood timely petitioned for writ relief. (Code Civ. Proc., § 418.10,
subd. (c).) We invited informal opposition, and after reviewing that opposition, we
issued an order to show cause why a writ of mandate should not issue ordering the court
to vacate its order denying Cottonwood’s motion to quash and enter a new order granting
the motion. After further briefing and oral argument, we now address the petition’s
merits.




          4
               Owners moved to augment the record with (1) pages from a deposition
transcript they cited to the trial court, but inadvertently failed to file with the court, and
(2) pages from a separate deposition transcript they neither cited nor filed with the trial
court. We deny the motion. “[T]he record cannot be ‘augmented’ with material that was
not before the trial court.” (In re Marriage of Forrest & Eaddy (2006) 144 Cal.App.4th
1202, 1209.) Nonetheless, considering those materials would not change our analysis or
conclusions.


                                              8
                                               II

                                         DISCUSSION

A.     Personal Jurisdiction Governing Principles
              “‘California courts may exercise personal jurisdiction on any basis
consistent with the Constitution of California and the United States. [Citation.] The
exercise of jurisdiction over a nonresident defendant comports with these Constitutions
“if the defendant has such minimum contacts with the state that the assertion of
jurisdiction does not violate ‘“traditional notions of fair play and substantial justice.”’”’”
(Snowney v. Harrah’s Entertainment, Inc. (2005) 35 Cal.4th 1054, 1061 (Snowney).)
              “‘The concept of minimum contacts . . . requires states to observe certain
territorial limits on their sovereignty. It “ensure[s] that the States, through their courts,
do not reach out beyond the limits imposed on them by their status as coequal sovereigns
in a federal system.”’ [Citations.] To do so, the minimum contacts test asks ‘whether the
“quality and nature” of the defendant’s activity is such that it is “reasonable” and “fair” to
require him to conduct his defense in that State.’” (Snowney, supra, 35 Cal.4th at
p. 1061.)
              “Under the minimum contacts test, ‘[p]ersonal jurisdiction may be either
general or specific.’” (Snowney, supra, 35 Cal.4th at p. 1062.) “A nonresident defendant
may be subject to the general jurisdiction of the forum if his or her contacts in the forum
state are ‘substantial . . . continuous and systematic.’ . . . Such a defendant’s contacts
with the forum are so wide-ranging that they take the place of physical presence in the
forum as a basis for jurisdiction.” (Vons Companies, Inc. v. Seabest Foods, Inc. (1996)
14 Cal.4th 434, 445-446.) Owners concede there is no basis for general jurisdiction over
Cottonwood in California, and therefore we focus on specific personal jurisdiction.
              “‘When determining whether specific jurisdiction exists, courts consider
the “‘relationship among the defendant, the forum, and the litigation.’” [Citations.] A


                                               9
court may exercise specific jurisdiction over a nonresident defendant only if: (1) “the
defendant has purposefully availed himself or herself of forum benefits” [citation];
(2) “the ‘controversy is related to or “arises out of” [the] defendant’s contacts with the
forum’” [citations]; and (3) “‘the assertion of personal jurisdiction would comport with
“fair play and substantial justice.”’”’” (Snowney, supra, 35 Cal.4th at p. 1062.)
                “Where a nonresident defendant challenges jurisdiction by way of a motion
to quash, the plaintiff bears the burden of establishing by a preponderance of the evidence
that minimum contacts exist between the defendant and the forum state to justify
imposition of personal jurisdiction. [Citations.] The plaintiff must present facts
‘“demonstrating that the conduct of defendants related to the pleaded causes [of action] is
such as to constitute constitutionally cognizable ‘minimum contacts.’”’” (Elkman v.
National States Ins. Co. (2009) 173 Cal.App.4th 1305, 1312-1313 (Elkman).) “‘If the
plaintiff meets this initial burden, then the defendant has the burden of demonstrating
“that the exercise of jurisdiction would be unreasonable.”’” (Snowney, supra, 35 Cal.4th
at p. 1062; see Greenwell v. Auto-Owners Ins. Co. (2015) 233 Cal.App.4th 783, 792
(Greenwell).)
                “‘On review, the question of jurisdiction is, in essence, one of law. When
the facts giving rise to jurisdiction are conflicting, the trial court’s factual determinations
are reviewed for substantial evidence. [Citation.] Even then, we review independently
the trial court’s conclusions as to the legal significance of the facts. [Citations.] When
the jurisdictional facts are not in dispute, the question of whether the defendant is subject
to personal jurisdiction is purely a legal question that we review de novo. [Citation.]’
[Citations.] The ultimate issue of whether an exercise of jurisdiction is fair and
reasonable is a legal determination subject to de novo review on appeal.” (Aquila, Inc. v.
Superior Court (2007) 148 Cal.App.4th 556, 568 (Aquila).)




                                              10
B.     California Lacks Specific Personal Jurisdiction Over Cottonwood

       1.     The Purposeful Availment Requirement
              “‘“The purposeful availment inquiry . . . focuses on the defendant’s
intentionality. [Citation.] This prong is only satisfied when the defendant purposefully
and voluntarily directs [its] activities toward the forum so that [it] should expect, by
virtue of the benefit [it] receives, to be subject to the court’s jurisdiction based on” [its]
contacts with the forum.’” (Snowney, supra, 35 Cal.4th at pp. 1062-1063.)
“‘“‘Purposeful availment’ requires that the defendant ‘have performed some type of
affirmative conduct which allows or promotes the transaction of business within the
forum state.’”’” (Stone v. State of Texas (1999) 76 Cal.App.4th 1043, 1048 (Stone).)
              “‘Thus, the “‘purposeful availment’ requirement ensures that a defendant
will not be haled into a jurisdiction solely as a result of ‘random,’ ‘fortuitous,’ or
‘attenuated’ contacts [citations], or of the ‘unilateral activity of another party or a third
person.’”’” (Elkman, supra, 173 Cal.App.4th at p. 1317, italics omitted.) “Instead, the
defendant will only be subject to personal jurisdiction if ‘“it has clear notice that it is
subject to suit there, and can act to alleviate the risk of burdensome litigation by
procuring insurance, passing the expected costs on to customers, or, if the risks are too
great, severing its connection with the state.”’” (Snowney, supra, 35 Cal.4th at p. 1063.)
              “‘For purposes of the purposeful availment prong, the “. . . United States
Supreme Court has described the forum contacts necessary to establish specific
jurisdiction as involving variously a nonresident who has ‘purposefully directed’ his or
her activities at forum residents [citation], or who has ‘purposefully derived benefit’ from
forum activities [citation], or ‘“purposefully avail[ed himself or herself] of the privilege
of conducting activities within the forum State, thus invoking the benefits and protections
of its laws,”’” or “‘“deliberately” has engaged in significant activities with a State
[citation] or has created “continuing obligations” between himself and residents of the
forum [citation].’” [Citation.] This disjunctive language, along with the Supreme

                                               11
Court’s rejection of mechanical or “‘talismanic’” formulas [citation], suggests that the
above formulations describe alternative, but not mutually exclusive, tests for purposeful
availment.’ [Citation.] Courts must make the necessary assessment ‘on a case-by-case
basis, focusing on the nature and quality of the defendant’s activities in the state or with
state residents.’”   (Greenwell, supra, 233 Cal.App.4th at pp. 792-793.)
              Elkman illustrates that simply having contacts with California or receiving
some benefits from the state is not enough to establish purposeful availment. The
nonresident defendant must intentionally and voluntarily establish the requisite contacts
with California. In Elkman, a nonresident insurer issued a long-term care policy to the
plaintiff when she lived in Florida. Consistent with Florida law, the policy included a
guaranteed renewal provision for the life of the plaintiff. A few years later, the plaintiff
moved to California, and from there she renewed the policy and continued to pay the
premiums. While still in California, the plaintiff made a claim under the policy. The
insurer paid for six months of care, but refused to pay for any further care based on the
policy’s terms. When the plaintiff sued in California to challenge the insurer’s policy
interpretation, the insurer moved to quash service for lack of personal jurisdiction.
(Elkman, supra, 173 Cal.App.4th at pp. 1309-1310.)
              The insurer presented evidence showing it was a Missouri corporation that
had never been licensed or authorized to do business in California, it maintained no office
or bank account in California, it had no agents licensed to sell its products in California,
and it never had advertised, applied for approval to issue insurance, or issued insurance in
California. In opposition, the plaintiff presented evidence showing the insurer had nearly
400 insureds who lived in California and the insurer received premiums, processed
claims, and paid claims from those insured. In reply, the insurer presented evidence
showing these insureds moved to California after obtaining their policies and the insurer
did not intentionally direct any activity toward California. (Elkman, supra,
173 Cal.App.4th at pp. 1310-1312.)

                                             12
                The trial court granted the motion to quash service and the Elkman court
affirmed, explaining “we conclude that [the insurer] did not subject itself to specific
jurisdiction in California merely by accepting premium payments from California and by
processing and paying claims submitted by its insureds for services rendered in this state.
[The insurer] did not ‘come here’ voluntarily, no matter how many insureds did. It was
the unilateral decisions of [the plaintiff] and other insureds to relocate to California which
caused [the insurer] to accept payments from this state and to process and pay claims for
services rendered in this state. These circumstances do not support a finding [the insurer]
purposefully availed itself of forum benefits so as to make it subject to specific
jurisdiction in California.” (Elkman, supra, 173 Cal.App.4th at p. 1321.)
                Edmunds v. Superior Court (1994) 24 Cal.App.4th 221 (Edmunds),
illustrates that a nonresident’s activities in California and directed toward the state do not
establish purposeful availment if those activities merely are incidental to pursuit of
interests or performance under a contract in another state. In Edmunds, a California
limited partnership hired a Hawaii attorney to represent it when the partnership was sued
in Hawaii over a lease it held on real property located in Hawaii. During the
representation, the attorney came to California to represent the partnership at its
deposition, wrote letters and made phone calls from and to California, and received
payment for his services from California. When the partnership’s limited partners later
sued the attorney for malpractice and other claims in California, the attorney moved to
quash service of process for lack of personal jurisdiction. The trial court denied the
motion and the attorney filed a writ petition challenging the court’s order. (Id. at
pp. 225-228.)
                The Court of Appeal granted the petition and directed the trial court to
grant the attorney’s motion because “[e]verything [the attorney] did was done in his
capacity as a Hawaii attorney, and he thus lacks the necessary close relationship to the
State of California in these matters to justify the assertion of personal jurisdiction over

                                              13
him.” (Edmunds, supra, 24 Cal.App.4th at p. 236.) As the Edmunds court explained, the
attorney was licensed to practice law in Hawaii rather than California, and he represented
the partnership in Hawaii state court litigation over real property located in Hawaii. “The
mere fact[] that to do so, he came to California, made phone calls and wrote letters to and
from this state, and accepted payment from a California client, do not establish
purposeful availment of the benefits and protections of California law” because the
actions were taken to further the attorney’s financial interests in his Hawaii law practice
and the partnership’s financial interests in the Hawaii real property. (Id. at pp. 234, 236.)

       2.     Cottonwood Did Not Purposefully Avail Itself of Any California Benefits
              Cottonwood contends the trial court erred in denying its motion to quash
service because Cottonwood did not intentionally engage in any conduct in or directed
toward California that purposefully availed it of any California benefits. We agree.
              Cottonwood is a Delaware limited liability company with its principal place
of business in Utah. It does not have any offices, employees, agents, bank accounts, or
assets in California. It is not licensed to do business in California, and although it
manages property in nearly 20 states, it never has managed property in California.
Cottonwood never has advertised in California or otherwise directed any advertisements
toward California residents.
              Cottonwood’s only contacts with California derive from the Subcontract it
entered into with Daymark, which is a California corporation with its principal office in
California.5 Entering into a contract with a California resident, however, is not enough
       5
               Owners point out Cottonwood also entered into more than 20 other
contracts similar to the Subcontract to manage properties for Daymark in numerous other
states. None of these contracts called for Cottonwood to manage property in California.
Moreover, in determining whether minimum contacts exist, it is the nature and quality of
the contacts that is determinative, not the quantity. (As You Sow v. Crawford
Laboratories, Inc. (1996) 50 Cal.App.4th 1859, 1869 (As You Sow).) We therefore focus
on the contacts arising from the Subcontract because Owners contend the contacts arising
from the other contracts are similar in nature and quality.

                                             14
for a nonresident defendant to purposefully avail itself of California benefits and be
subject to specific personal jurisdiction here. (Aquila, supra, 148 Cal.App.4th at p. 572;
Stone, supra, 76 Cal.App.4th at p. 1048; Burger King Corp. v. Rudzewicz (1985)
471 U.S. 462, 478-479 (Burger King).) To determine whether a nonresident’s contractual
relationship with a California resident constitutes purposeful availment, a court must
evaluate the contract’s terms and all the surrounding circumstances, including prior
negotiations, contemplated future consequences, the parties’ course of dealings, and the
contract’s choice-of-law provision. (Stone, at p. 1048; Burger King, at pp. 478-479.)
“Due process requires a ‘substantial connection’ between the contract at issue and the
forum state.” (Stone, at p. 1049.)
              For example, in Floyd J. Harkness Co. v. Amezcua (1976) 60 Cal.App.3d
687 (Harkness), a Mexican farmer did not purposefully avail himself of California
benefits by entering into a contract with a California corporation because the totality of
the circumstances surrounding the contract demonstrated there was no substantial
connection to California. (Id. at p. 692.) The parties negotiated the contract in Arizona
and Mexico, the corporation drafted and signed it in California, and the farmer signed it
in Mexico. Under the contract, the farmer agreed to grow vegetables in Mexico and
deliver them to the corporation in Arizona, and the corporation agreed to advance the cost
of growing the vegetables. To secure each advance, the farmer signed promissory notes
in Mexico and delivered them to the corporation’s agent in Arizona. The corporation
sent the advances from California to the farmer’s bank in Arizona, and the notes were
payable in California. When the farmer defaulted on the notes, the corporation sued in
California and the farmer moved to quash service. (Id. at pp. 689-690.)
              The trial court granted the motion and the Court of Appeal affirmed,
explaining “The acts of making notes executed elsewhere by a nonresident defendant
payable to a California resident in California or the acts of making interstate telephone
calls relative to the performance of a contract executed outside the state and performed

                                             15
outside the state do not invoke the benefits and protections of our laws.” (Harkness,
supra, 60 Cal.App.3d at p. 692.) The court further explained the corporation’s activities
in California were irrelevant to the question whether California had personal jurisdiction
over the farmer because “it is settled that we are not concerned with the performance of
the plaintiff in California but exclusively with the nonresident defendant’s activities in
this state. It is the latter activities which must provide the basis for jurisdiction.” (Id. at
pp. 691-692.)6
              Here, Cottonwood likewise did not purposefully avail itself of any
California benefits by negotiating, entering into, or performing the Subcontract because
there is no substantial connection between the Subcontract and California. Cottonwood
and Daymark negotiated and entered into the Subcontract in Utah. Owners were not part



       6
                Owners contend Harkness is distinguishable because the Harkness plaintiff
sought to establish the defendant’s purposeful availment based on the plaintiff’s rather
than the defendant’s forum activities. Although the plaintiff may have argued purposeful
availment based on its forum contacts, the Court of Appeal did not find a lack of
purposeful availment on that ground. Rather, the Court of Appeal properly considered
the totality of the circumstances surrounding the parties’ contractual relationship to
determine whether the defendant had purposefully availed himself of forum benefits.
Owners’ efforts to distinguish Harkness therefore are unpersuasive.

       More importantly, Owners support their argument by citing to a California Court
of Appeal opinion they acknowledge is unpublished (Bell v. Li-Huang (2010) 2010 WL
4720402). Acknowledging the opinion’s unpublished status does not make citing it
permissible. California Rules of Court, rule 8.1115 prohibits citation to a California
Court of Appeal opinion that was not certified for publication even though the opinion is
publicly available through online databases. (People v. Williams (2009) 176 Cal.App.4th
1521, 1529.) We caution counsel that citation to unpublished opinions may support an
award of sanctions, and counsel should refrain from doing so in the future. (See ibid.;
Alicia T. v. County of Los Angeles (1990) 222 Cal.App.3d 869, 885.) Indeed, “Counsel
would be well served to heed this advice by a leading treatise writer: ‘Do not, under any
circumstances, cite to an unpublished or depublished opinion (or any unpublished part of
a published opinion) . . . unless . . . one of the narrow exceptions to the noncitation rule
applies.’” (Williams, at p. 1529, italics omitted.)


                                               16
of those negotiations and they are not parties to the Subcontract.7 Under the Subcontract,
Cottonwood agreed to manage the Georgia apartments for Daymark on a subcontract
basis. Cottonwood did not assume any of Daymark’s liabilities under the Management
Agreement or any contractual obligations to Owners. Indeed, the Subcontract expressly
states it is not an assignment of the Management Agreement, and Owners are not third
party beneficiaries and are not entitled to “any benefits, rights, privileges, claims, actions,
or remedies” under the Subcontract. Cottonwood performed the day-to-day management
activities for the apartments in Georgia, and it performed various periodic administrative
activities for the apartments at its offices in Utah. It performed no activities relative to
the Subcontract in California.
              Under the Subcontract, Cottonwood’s contacts with California were limited
to sending communications about the apartments to a subset of Owners that had members
who happened to live in California. The Management Agreement required Daymark to
periodically provide Owners with information regarding the apartments and their
operations, including an annual budget, an annual operating plan, all information
necessary for Owners to prepare their taxes, a report concerning any claims or complaints
for damages, and a quarterly financial report. By entering into the Subcontract,
Cottonwood agreed to compile this information and communicate it to Owners for
Daymark.
              Cottonwood did so by compiling the information in Georgia, generating
budgets, reports, and other documents at its Utah offices, granting Owners access to these
documents via an online database Cottonwood maintained in Utah, and mailing hard
copies of the documents from Utah to Owners’ members who requested them.
Cottonwood also initiated monthly conference calls from Utah to discuss the apartments’
       7
             Shortly after entering into the Subcontract with Daymark, Cottonwood
proposed contracting directly with Owners to manage the apartments, but Owners
declined.


                                              17
operations, and it sent Owners e-mails about those calls and other operational issues. In
June 2013, Cottonwood sent each Owner a capital call when the revenue from the
apartments proved insufficient to cover the operating expenses and service Owners’ debt.
              Although Cottonwood’s communications with Owners about the
apartments reached California, Cottonwood did not purposefully seek or receive any
California benefits by engaging in those communications. Indeed, much like the
insurer’s California connections in Elkman were not purposeful because the insureds who
lived in California moved here after the insurer issued their policies, Cottonwood’s
California connections were not purposeful because it contracted in Utah to manage the
Georgia apartments for Daymark and some members of the Delaware limited liability
companies that owned the apartments happened to live here. (See Elkman, supra,
173 Cal.App.4th at p. 1321.)
              Owners’ members also happened to live in 12 other states and each of the
states where Owners’ members lived lacked any direct or substantial connection to the
subcontract or Cottonwood’s performance under the Subcontract because none of
Owners’ member lived in either Georgia or Utah. Cottonwood’s connection to each state
where Owners’ members lived therefore was entirely random and coincidental.
Cottonwood did not enter into the Subcontract seeking to establish a connection with any
of these states.8 (See Elkman, supra, 173 Cal.App.4th at p. 1317 [random, fortuitous, or
attenuated forum contacts do not establish purposeful availment].)
              Moreover, the contacts established through Cottonwood’s communications
with the handful of Owners’ members who lived in California were incidental to the
Subcontract’s purpose. Daymark did not hire Cottonwood to communicate with Owners’

       8
               The presence of more Owners and their members in California than any of
the other 12 states does not change the analysis. As explained above, the determinative
factor is the quality and nature of the contacts with the forum, not the number. (As You
Sow, supra, 50 Cal.App.4th at p. 1869.)


                                            18
members who lived in California; it hired Cottonwood to manage the apartments in
Georgia and keep Owners informed about their upkeep wherever Owners happened to be.
California contacts that merely are incidental to a nonresident’s performance of a contract
outside of California do not establish purposeful availment of California benefits.
(Edmunds, supra, 24 Cal.App.4th at pp. 234-236 [Hawaii attorney who represented
California client at deposition in California and sent communications to and from
California did not purposefully avail himself of California benefits because activities
were incidental to representing client in Hawaii state court litigation over Hawaii real
property]; Harkness, supra, 60 Cal.App.3d at p. 692 [communications to California
regarding contract executed and performed outside California did not establish purposeful
availment]; see R.E. Sanders & Co. v. Lincoln-Richardson (1980) 108 Cal.App.3d 71, 78
[mail and telephone communications to California plaintiff about out-of-state investment
did not constitute purposeful availment].)
              Finally, the absence of any intent by Cottonwood to purposefully avail
itself of California benefits is further demonstrated by the Subcontract’s choice-of-law
provision and its provision declaring Owners are not third party beneficiaries and have no
rights, claims, or remedies under the Subcontract. As stated above, a contract’s
choice-of-law provision is an important consideration in the purposeful availment
analysis because it shows the nonresident intended to purposefully avail itself of the
benefits and protections of the designated state’s laws. (Burger King, supra, 471 U.S. at
p. 482.) Cottonwood and Daymark’s agreement to be bound by Delaware law therefore
suggests they did not intend for the Subcontract to have a significant connection with
California.9 (See Aquila, supra, 148 Cal.App.4th at p. 572.) Similarly, by disclaiming

       9
              It is interesting to note that Owners repeatedly have agreed that Georgia
law should govern disputes about the apartments and they even agreed to submit to
personal jurisdiction in Georgia. The documents for Owners’ loan on the apartments
included a Georgia choice-of-law provision and a submission to personal jurisdiction in
Georgia for any dispute about the loan. Similarly, although the Management Agreement

                                             19
any intent to create rights under the Subcontract in Owners, Cottonwood and Daymark
further demonstrated they did not intend Owners or their location to have a role in the
enforcement of the Subcontract.

       3.     Owners Failed to Point to Any Aspect of the Subcontract or Cottonwood’s
              Performance That Establishes Purposeful Availment
              To meet their burden in opposing the motion to quash, Owners point to
various provisions in both the Subcontract and the Management Agreement to show
Cottonwood purposefully availed itself of the benefits of conducting activities in
California by entering into and performing the Subcontract. Owners, however,
misconstrue the governing standards and the agreements.
              First, Owners contend Cottonwood purposefully availed itself of California
benefits because it created ongoing relationships and assumed continuing obligations
with California residents—both Daymark and Owners with members who lived in
California—simply by entering into the Subcontract. This argument fails for the reasons
already discussed. A nonresident does not purposefully avail itself of California benefits
simply by contracting with a California resident (Aquila, supra, 148 Cal.App.4th at
p. 572), and the totality of the circumstances show Cottonwood did not purposefully avail
itself of California benefits because the Subcontract was entered into and called for
performance outside of California with only incidental California connections (Edmunds,
supra, 24 Cal.App.4th at pp. 234-236; Harkness, supra, 60 Cal.App.3d at p. 692).
              Second, Owners contend Cottonwood purposefully availed itself of
California benefits by entering into the Subcontract because the agreement required
Cottonwood to perform at least one obligation in California. Owners point to the
Management Agreement’s provision requiring Daymark to maintain certain records

states any dispute between Owners and Daymark must be arbitrated in California, the
Management Agreement also designates Georgia law as the governing law for any
dispute under the agreement.


                                            20
regarding Owners’ interests in the apartments and to make those records available to
Owners at Daymark’s office in California. According to Owners, Cottonwood assumed
this obligation to maintain records in California by entering into the Subcontract and
agreeing to perform all of Daymark’s obligations under the Management Agreement.
Not so.
              The Subcontract states Cottonwood agreed to perform Daymark’s
obligations under the Management Agreement “except . . . as such terms, covenants,
agreements and provisions are specifically modified, excluded or limited by this
Subcontract.” Elsewhere, the Subcontract states Daymark “will provide all information,
books and records for the [apartments] (and for [Owners], to the extent in [Daymark’s]
possession) to [Cottonwood]. All files [then] shall be kept at the [apartments] or at
[Cottonwood’s] offices and will be available to [Daymark] and [Owners].” Cottonwood
therefore never agreed to maintain any records in California and Daymark’s obligation to
do so does not establish Cottonwood purposefully availed itself of any California
benefits.
              Next, Owners point to the arbitration provision in the Management
Agreement as evidence Cottonwood purposefully availed itself of the benefits and
protections of California law. That provision states Daymark and Owners agreed to
submit any dispute relating to the Management Agreement to binding arbitration in
Orange County, California. Based on that provision and the Subcontract’s provision
stating Cottonwood agreed to be bound by Daymark’s agreements in the Management
Agreement, Owners argue Cottonwood “agreed to litigate any . . . disputes [regarding the
Apartment’s management] within Orange County, California, thereby invoking the
benefits and protections of California law.” In making this argument, Owners do not
contend the Management Agreement’s arbitration provision is enforceable against
Cottonwood; rather, they simply argue it is evidence of Cottonwood invoking the benefits
and protections of California law when read with select provisions of the Subcontract.

                                            21
We are not persuaded because this contention ignores other provisions defining the
limited scope of what Cottonwood agreed to do by entering into the Subcontract.
              The Management Agreement authorized Daymark “to subcontract some or
all of the property management functions described herein.” Consistent with that
provision, the Subcontract states Cottonwood “agrees to perform all of [Daymark’s]
property management obligations under the Management Agreement . . . on a subcontract
basis,” and “this Subcontract does not constitute an assignment of the Management
Agreement.” Owners are not parties to the Subcontract, and it expressly states they are
not third party beneficiaries and have no “rights, privileges, claims, actions, or remedies”
under the Subcontract. The Subcontract does not include an arbitration provision nor
does it have a forum selection clause designating Orange County or any other forum.
Accordingly, when the two agreements are read together and in their entirety, they show
Cottonwood did not agree to litigate any claims in California by entering into the
Subcontract, even if the Management Agreement required Daymark to do so.
              Owners also cite the Subcontract’s indemnity provision as evidence
Cottonwood purposefully availed itself of California benefits. In the Subcontract,
Cottonwood agreed to defend and indemnify Daymark from any claims or liabilities
based on Cottonwood’s breach of the Subcontract, and Daymark agreed to defend and
indemnify Cottonwood from any claims or liability based on Daymark’s breach of the
Management Agreement or the Subcontract. According to Owners, any indemnity claims
against Cottonwood likely would arise out of litigation commenced in California because
Daymark is a California corporation, several of Owners’ members reside in California,
and the consultant Owners hired to advise them about the apartments resides in
California. Similarly, Owners contend any indemnity claim by Cottonwood against
Daymark likely would be asserted in California because Daymark is a California
corporation. Owners therefore conclude Cottonwood purposefully availed itself of



                                             22
California benefits because it is foreseeable any indemnity claims under the Subcontract
would arise in California. We disagree.
              Owners’ speculation about where indemnity claims under the Subcontract
might arise—or even where they might be filed—does not establish personal jurisdiction
over Cottonwood. “‘Liability and jurisdiction are independent.’ [Citation.] ‘Liability
depends on the relationship between the plaintiff and the defendants and between the
individual defendants; jurisdiction depends only upon each defendant’s relationship with
the forum.’” (Goehring v. Superior Court (1998) 62 Cal.App.4th 894, 904-905
(Goehring).) “Personal jurisdiction must be based on forum-related acts that were
personally committed by each nonresident defendant.” (In re Automobile Antitrust
Cases I & II (2005) 135 Cal.App.4th 100, 113.) “The purposes and acts of one party . . .
cannot be imputed to a third party to establish jurisdiction over the third party defendant”
(ibid.), not even when the parties are partners (Goehring, at pp. 904-905), coconspirators
(Automobile Antitrust Cases, at p. 113), or parent and wholly owned subsidiary
corporations (Aquila, supra, 148 Cal.App.4th at p. 571).
              As explained above, Cottonwood has not committed any forum-related acts
that would subject it to personal jurisdiction in California. The Subcontract was
negotiated and entered into in Utah and called for Cottonwood’s performance in Georgia
and Utah. Any claims against Daymark based on Cottonwood’s performance therefore
would be based on Cottonwood’s acts or omissions in Georgia or Utah and would not
subject Cottonwood to personal jurisdiction in California even if Daymark sought
indemnity from Cottonwood in California. Similarly, Daymark’s status as a California
corporation does not mean Cottonwood must seek indemnity from Daymark in
California, and Daymark’s California connections cannot be attributed to Cottonwood.
Owners fail to identify any act by Cottonwood relating to the indemnity provision in the
Subcontract that would subject Cottonwood to personal jurisdiction in California.



                                             23
              Next, Owners contend Cottonwood purposefully availed itself of the
benefits and protections of California law by filing a UCC Financing Statement with the
California Secretary of State to perfect the security interest the Subcontract granted
Cottonwood in Daymark’s right to payment under the Management Agreement. Owners
are mistaken. A nonresident’s use of a California procedure to protect its security interest
under a contract entered into and requiring performance in another state does not amount
to purposeful availment of California benefits. Indeed, several courts have rejected this
same contention because “‘[t]he filing of financing statements is not akin to soliciting
business in the forum, introducing products into the forum, or signing and performing a
contract within the forum.’” (Goehring, supra, 62 Cal.App.4th at p. 908.)
              Finally, Owners contend that if these California connections individually
are not sufficient to establish purposeful availment, they are sufficient when they are
considered collectively. Again, we disagree. None of the individual contacts Owners
rely on establish any connections with California. It therefore follows logically that no
California connection is shown when those factors are considered as a whole.
              Because we conclude Owners failed to meet their burden to establish
purpose availment, “it is unnecessary to address the other prerequisites for the exercise of
specific jurisdiction over a nonresident defendant, i.e., whether the controversy is related
to or arises out of the defendant’s contacts with the forum, and whether the assertion of
personal jurisdiction would comport with fair play and substantial justice.” (Elkman,
supra, 173 Cal.App.4th at p. 1321; see Jewish Defense Organization, Inc. v. Superior
Court (1999) 72 Cal.App.4th 1045, 1062.)
                                        DISPOSITION

              The petition for writ of mandate is granted. Let a peremptory writ of
mandate issue directing the respondent court to vacate its order denying Cottonwood’s




                                             24
motion to quash service of process and enter a new order granting the motion.
Cottonwood shall recover its costs for the proceedings in this court.



                                                 ARONSON, J.

WE CONCUR:



O’LEARY, P. J.



THOMPSON, J.




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