Civil Case (St.) 39908-02-24 Tomer Sharon v. Avi Nevo

Decision

Before me is the defendant's motion to dismiss the lawsuit in limine due to the lack of international jurisdiction of this court due to its improper forum, as well as a motion to order the dismissal of the claim against defendant 2.

This is a monetary claim in the amount of ILS 957,850, which was filed against the background of an engagement between the plaintiff - an Israeli resident who manages a business in Israel for the marketing of cosmetic laser machines, and defendant 1 - who lives in California, USA, for the establishment of a joint economic venture for the import of laser machines from China to the United States.  For this purpose, the two established a foreign company incorporated in the state of California.  However, due to a personal tragedy that befell defendant 1, he was not available for a certain period of time after the establishment of the company, and at a certain point, when disputes were discovered between the parties, he authorized his brother - a resident of Israel, defendant 2, to be in contact with the plaintiff on his behalf.  At the end of the day, no agreements were reached between the parties, and the plaintiff filed the lawsuit in which he petitions to receive a series of monetary remedies from the defendants for illegally taking money from the sale of 5 machines, for the cost of 4 additional machines, for estimating losses and for non-pecuniary damages.

The plaintiff's main arguments in the statement of claim

1. According to the statement of claim, the plaintiff runs a business in Israel for the marketing of cosmetic laser machines under the brand "Cosmetics Express". IN NOVEMBER 2023, THE PLAINTIFF, TOGETHER WITH DEFENDANT 1, WHO LIVES IN LOS ANGELES IN THE UNITED STATES, ESTABLISHED COSMETICS EXPRESS USA LLC, WHICH IS INCORPORATED IN THE STATE OF CALIFORNIA (HEREINAFTER: THE "FOREIGN COMPANY").  The foreign company was established in order to operate a business selling cosmetic laser machines in Los Angeles.  According to the plaintiff, the foreign company was based on the plaintiff's professional knowledge, and was also supposed to be based on defendant 1's work in Los Angeles.
2. The plaintiff further claims in the statement of claim that due to difficult personal circumstances that befell defendant 1, for about four months after the establishment of the foreign company he did not work and did not act at all in its affairs, and therefore its activity was in fact paralyzed, the branch of the foreign company did not operate and no sales were made, while the plaintiff continued to bear the expenses. According to the plaintiff, in order to reduce his losses, he demanded that defendant 1 transfer his shares in the foreign company to him for the sum of $40,000 and/or the amount that he would prove that he had invested in the foreign company, and to retire from all his positions in the foreign company.
3. The plaintiff also states in the statement of claim that he informed defendant 1 that he was sending him a "Bambi" proposal, but in response defendant 1 informed him that he must send the offer to his brother, defendant 2, who has a power of attorney on his behalf. In addition, the plaintiff claims that prior to filing the lawsuit, he discovered that defendant 2 approached the plaintiff's supplier in China, behind his back, in an attempt to work with him independently while concealing the matter from the plaintiff.

The main arguments of the defendants in the application:

4. In the framework of the motion before me, which was filed by the defendants even before they filed a statement of defense, the defendants petition for the dismissal of the claim in limine due to lack of international jurisdiction, and for the dismissal of the claim against defendant 2 due to the lack of a cause of action against him.
5. The application indicates that defendant 1 is a resident of the United States with an American passport and an Israeli passport, who has been living in the United States for about 15 years and is not a resident of Israel, while his brother, defendant 2, is a resident of Israel, but it is alleged that he was added to the lawsuit in an artificial and artificial manner, in order to constitute improper pressure on defendant 1 and in a failed attempt to grant the court authority.
6. The motion also indicates that the relationship between the parties was created in September 2023 at the initiative of a representative on behalf of the plaintiff known as Jenny, when defendant 1 came to visit Israel.  Later, a meeting was held in the presence of the plaintiff, defendant 1 and Jenny, in which the plaintiff expressed his desire to cooperate with defendant 1 in the state of California, USA, while proposing that the two establish a company in California that would deal with the import of cosmetic hair removal machines, which are manufactured in China, and will be shipped from China directly to the United States.  The defendants claim that under these agreements, the foreign company was established, which was incorporated in accordance with the law of the State of California, USA.
7. The defendants claim that the transaction was made between the plaintiff and defendant 1 because the plaintiff could not establish a company registered in California and open a bank account in the United States, since he is not a citizen or resident of the United States. Therefore, they believe that the legal issues that arise from this agreement require an understanding of U.S.  federal law as well as the laws of the State of California, and that the proper forum is in the U.S.  The defendants further claim that the remedy sought is the receipt of funds in the bank account of the foreign company, and that the fact that this is a claim to receive monetary payment in dollars constitutes an additional indication that the proper forum is the court in the United States.
8. With respect to defendant 2, the defendants emphasize that even according to the plaintiff, he did not conduct any business with defendant 2 and did not enter into any agreement with him. According to them, after a heavy personal tragedy befell defendant 1 (his daughter was hospitalized and remained in a coma for about two months until her unfortunate untimely death), the plaintiff chose not to understand his distress and two days after the end of the shiva, and when defendant 1 arrived in Israel in order to be alone with his family, the plaintiff did not allow him to do so and strove in every way to hold work meetings with him.  At that time, defendant 1 authorized defendant 2 to meet with the plaintiff on his behalf, in the form of a power of attorney for a short and limited period for the purpose of locating solutions to the disputes that had arisen, after they had already arisen, while he was in heavy mourning.  Therefore, the defendants seek to dismiss the claim against defendant 2, due to the lack of a cause of action.
9. The defendants claim that the court lacks international jurisdiction to hear the claim, and according to them, according to the tests set out in the case law, the forum authorized to hear the claim is the California court.
10. The defendants add that the conduct of the trial in Israel, and a decision according to Israeli law, will involve the forced expenditure of many resources. They claim that no evidence has been presented linking the proceeding to the State of Israel and the legal system operating there, while the administration of the trial in the United States will be more efficient and cheaper, since the relevant professionals, including bookkeepers and accountants, are located in the State of California.

The plaintiff's arguments in response to the motion

11. The plaintiff claims that the case deals with a business project in which most of the connections are related to Israel, and that the business spirit behind it is an Israeli company - the Yul-Rom company in a tax appeal (hereinafter: the "Israeli Company"), through which the machines for the company are purchased. The plaintiff also claims that all the parties are Israelis and citizens of Israel.
12. The plaintiff further claims that defendant 2 is involved in the business of defendant 1. According to him, in addition to the fact that defendant 1 informed him that he had to send the "Bambi" offer to his brother defendant 2, he also discovered that defendant 2 approached his supplier in China behind his back in an attempt to work with him independently, and this illustrates the plaintiff's clear connection to both brothers and to Israel.
13. On the legal level, the plaintiff argues that today the trend of case law tends to reduce rulings according to which the courts in Israel are not the proper forum, due to technological developments that make it easier to conduct a trial in Israel, even when parties that are not residents of Israel are involved.

The Defendants' Arguments in Response to the Response

14. The defendants reiterated their claims that the statement of claim deals with claims regarding the day-to-day conduct of the shareholders of the foreign company, to which the laws of the State of California apply. Defendant 1 was a necessary factor in the transaction because he is a U.S.  citizen, and without him the plaintiff could not have established a company there.  The business venture was supposed to operate from the state of California, the accounting ledgers show that the payment was made in United States dollars.
15. The defendants further claim that the plaintiff misled the court when he stated the residential address of defendant 1 in Israel, even though he knew that it was not his address, and did so in an attempt to confer jurisdiction on the court, and this should be attributed to the plaintiff when determining the appropriate forum.

Discussion and Decision

16. I will preface by saying that I have found that the request for dismissal should be rejected in limine due to the lack of international authority. I also found that the motion to delete the claim against defendant 2 should be dismissed.

The Existence of a Cause of Action and a Cause of Invention

17. In accordance with theCivil Procedure Regulations, 5779-2018 (hereinafter: "5661"), when a defendant is located outside the borders of the state, the jurisdiction of the Israeli court over this defendant is acquired if three conditions are met:
18. the existence of a cause of action, one of the grounds set forth in Regulation 166 of5611;
19. the existence of a cause of action, in accordance with Regulation 157(a) ofthe Constitution;

• The Israeli forum is the proper forum for the hearing of the claim in accordance with Regulation 168 of the Constitution.

For a discussion of these conditions and the adjustment of the interpretation given to them in the case law of theNew Regulations see Civil Case (Tel Aviv District) 53568-07-22 Office Textiles in Tax Appeal v.  Brooklinen Inc.  [Nevo], February 6, 2023) (hereinafter: "Office Textiles").

18. With regard to the examination of the cause of action, inCivil Case (Tel Aviv District) 40773-10-18 Ashland Inc.   Rotem Amfert Negev inTax Appeal [Nevo] (February 6, 2022) it was held that "the cause of invention seeks a sufficient connection of the dispute to Israel in a manner that justifies the expansion of the jurisdiction of the Israeli forum over the foreign defendant.  For example, if the dispute relates to land that is within the territory of the state; or it is based on an act or omission that occurred here; If a contract has been breached within the scope of the state or its laws apply to it, etc., all of these create a substantial connection of the dispute to the Israeli forum."

The defendants, for their part, did not deny the existence of the cause of action, but for the sake of good order, I will state the cause of invention set forth in Regulation 166(4)(a) of5641, according to which: