2006 WL 3388648 (E.D.N.Y. Nov. 21, 2006)
This opinion is the latest chapter in the suit against companies who allegedly provided chemical weapons to Iraq prior to the 1991 Gulf War. Plaintiffs are Gulf War veterans who claim that they were injured by exposure to chemical weapons. Two defendants, Buchi Labortechnik AG ("Buchi AG") and De Dietrich Process Systems, S.A. ("DDPS-SA"), moved to dismiss for lack of personal jurisdiction. The Court grants both motions.
Buchi AG is a Swiss pharmaceutical and food manufacturing company. First, Plaintiffs argue that Buchi AG does business in New York, however the Court finds that Plainitffs fail to allege sufficient contacts demonstrating such presence. Next, Plaintiffs attempt to secure jurisdiction based on Buchi AG's U.S. subsidiary/agent responsible for sale, Buchi Analytical. The Court rejects the Plaintiff's evidence here:
Plaintiffs rely on materials beyond the pleadings to support their jurisdictional allegations. They refer to the websites of Buchi AG and Buchi Analytical, which show identical product lists. See Pl. Opp. at 4; see also McCallion Decl. Exs. E, D. Additionally, plaintiffs excerpt a page purported to be from the "Buchi website" that lists Buchi Analytical as a "USA Partner." These pages do not inform the Court about the relationship between the two entities and are insufficient to raise an inference of agency.
Finally, Plaintiffs argue that jurisdiction pursuant to Rule 4(k)(2) is present. The Court rejects this theory as well, holding that the Plaintiffs failed to properly plead 4(k)(2).
Plaintiffs indeed fail to plead the requisite elements for Rule 4(k)(2) jurisdiction, in particular that jurisdiction is not available in any state, but that defendant has sufficient contacts with the United States through its subsidiary. Moreover, where a party's contacts with the United States hinge on an alleged identity between it and an affiliated corporation, courts require sufficient allegations of interdependence to find a prima facie case of jurisdiction under Rule 4(k)(2)
DDPS-SA is a French supplier of equipment, systems, solutions and services to the chemical and pharmaceutical industries. Again, Plaintiffs argue that jurisdiction is proper over DDPS-SA through its U.S. subsidiary, DDPS-Inc. However, the Court determines that the subsidiary does not conduct all the business in the U.S. that DDPS-SA otherwise would, and jurisdiction through the subsidiary is accordingly not appropriate.
Plaintiffs also assert, again without elaboration, that DDPS-INC is a "mere department" of DDPS-SA. See Pl. Opp. at 6. Yet plaintiffs' allegations fail to demonstrate the requisite control by the parent of the subsidiary for jurisdiction to exist under this theory. While both parties agree that DDPS-INC is a wholly-owned subsidiary of DDPS-SA, thus demonstrating common ownership, plaintiffs fail to refute the sworn affidavit of Bello which indicates that other aspects of control are absent. For example, DDPS-INC is not DDPS-SA's agent for service of process in New York or the United States. Bello Decl. ¶ 25. Moreover, DDPS-INC is financially independent of DDPS-SA.
Again, the court finds that Plaintiffs failed to plead sufficiently to claim jurisdiction under Rule 4(k)(2).
Finally, the Court examined the Plaintiffs' motion for jurisdictional discovery. Because the Court believes that Plaintiffs failed to adequately plead jurisdictional facts, it denied the motion for discovery.
Where, as here, there are insufficient allegations that a subsidiary is so identified with its parent corporation that the latter is properly subject to jurisdiction based on the subsidiary's contacts in New York, a plaintiff has failed to establish a prima facie case of jurisdiction over the parent corporation.
___
Personally, I find it surprising that with respect to the jurisdiction-through-subsidiary argument, the Court relied upon affidavits submitted by the defendant corporations rather than allowing jurisdictional discovery. The Plaintiffs apparently provided publicly available evidence from websites, etc., in an attempt to demonstrate jurisdiction, but the Court relied on affidavits to refute such evidence. To me, it would seem this would be a proper case for jurisdictional discovery limited to the relationship between the named Defendants and their U.S. subsidiaries/agents. What is expected in such a case? Generally, would one expect jurisdictional discovery here?
3 comments:
I share your surprise with respect to the jurisdiction-through-subsidiary argument in Stutts v. The De Dietrich Group. I suspect that, ceteris paribus,(i.e. the plaintiffs had been Canadian Gulf War veterans)a Canadian court would have applied the "real and substantial connection" test to establish personal jurisdiction over the foreign manufacturers, relying on the leading Supreme Court of Canada decisions (referenced below).
In Canada, we don't have "jurisdictional discovery" per se; however, most common-law provinces, including Ontario, give the plaintiff the right to cross-examine the defendant's affiants on any affidavits filed in support of a preliminary motion to dismiss for want of (personal) jurisdiction or a stay based upon forum non conveniens. The following is an excerpt (pp. 202-5) from my article "Bringing Locus into Focus": A Choice-of-Law Methodology for CISG-based Concurrent Contract and Product Liability Claims, Review of the Convention on Contracts for the International Sale of Goods (CISG), Pace Int'l L. Rev. (ed.) Munchen: Sellier, 2006, 179-223, which summarizes the Canadian position and may be of interest to subscribers to your internationalcivillitigation blog (a copy of the paper is also available on the SSRN website at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=578566)
Canadian Judicial Approach to Choice of Law in Tort
In Moran v. Pyle, the Supreme Court of Canada formulated a modern approach to product liability that focused on fairness:
"[T]he following rule can be formulated: where a foreign defendant carelessly manufactures a product in a foreign jurisdiction which enters into the normal channels of trade and he knows or ought to know both that as a result of his carelessness a consumer may well be injured and it is reasonably foreseeable that the product would be used or consumed where the plaintiff used or consumed it, then the forum in which the plaintiff suffered damage is entitled to exercise judicial jurisdiction over that foreign defendant. This rule recognizes the important interest a state has in injuries suffered by persons within its territory. It recognizes that the purpose of negligence as a tort is to protect against carelessly inflicted injury and thus that the predominating element is damage suffered. By tendering his products in the market place directly or through normal distributive channels, a manufacturer ought to assume the burden of defending those products wherever they cause harm as long as the forum into which the manufacturer is taken is one that he reasonably ought to have had in his contemplation when he so tendered his goods. This is particularly true of dangerously defective goods placed in the interprovincial flow of commerce."[52]
Clearly, Justice Dickson's reasoning demonstrated a "narrow protection" market state approach to interprovincial product liability, subsequently enshrined in provincial consumer protection legislation.
In Tolofson v. Jensen; Lucas (Litigation Guardian of) v. Gagnon, the Supreme Court of Canada articulated the policy considerations of certainty, ease of application, predictability and meeting normal expectations in holding that the lex loci delicti should be prevailing choice of law in tort:
"I have thus far framed the arguments favouring the lex loci delicti in theoretical terms. But the approach responds to a number of sound practical considerations. The rule has the advantage of certainty, ease of application and predictability. Moreover, it would seem to meet normal expectations. Ordinarily people expect their activities to be governed by the law of the place where they happen to be and expect that concomitant legal benefits and responsibilities will be defined accordingly. The government of that place is the only one with power to deal with these activities. The same expectation is ordinarily shared by other states and by people outside the place where an activity occurs. If other states routinely applied their laws to activities taking place elsewhere, confusion would be the result. In our modern world of easy travel and with the emergence of a global economic order, chaotic situations would often result if the principle of territorial jurisdiction were not, at least generally, respected. Stability of transactions and well grounded legal expectations must be respected. Many activities within one state necessarily have impact in another, but a multiplicity of competing exercises of state power in respect of such activities must be avoided."[53]
In Hunt v. T & N plc,[54] Justice La Forest stated that the assessment of the "reasonableness" of a foreign court's assumption of jurisdiction was not a mechanical accounting of connections between a case and a territory, but a decision "guided by the requirements of order and fairness."[55] Thus, a plaintiff's decision to enter into an international sales transaction is the core of the issue and unfairness to the defendant must be balanced in light of the precepts articulated by Justice La Forest in Tolofson wherein he states:
"...it may be unfortunate for a plaintiff that he or she was the victim of a tort in one jurisdiction rather than another and so be unable to claim as much compensation as if it had occurred in another jurisdiction. But such differences are a concomitant of the territoriality principle. While, no doubt, as was observed in Morguard, the underlying principles of private international law are order and fairness, order comes first. Order is a precondition to justice." [emphasis added][56]
In Beals v. Saldanha, the Supreme Court of Canada reinforced its earlier obiter comments in Morguard Investments Ltd. v. De Savoye: [57]
"In Moran, supra, at p. 409, it was recognized that where individuals carry on business in another provincial jurisdiction, it is reasonable that those individuals be required to defend themselves there when an action is commenced:
By tendering his products in the market place directly or through normal distributive channels, a manufacturer ought to assume the burden of defending those products wherever they cause harm as long as the forum into which the manufacturer is taken is one that he reasonably ought to have had in his contemplation when he so tendered his goods.
"That reasoning is equally compelling with respect to foreign jurisdictions."[58]
The Supreme Court of Canada majority's rationale for applying the Moran approach to foreign jurisdictions, a priori, appears logically sound applying market-state theory,[59] which is preferred over interest analysis.[60]
One argument is that the interposition of the CISG's principles of freedom of contract, uniformity and good faith with the Supreme Court of Canada's own observance of private international law principles of sovereignty, territoriality and comity,[61] points towards the application of the lex loci delicti for negligent tort claims.
In Britton v. O'Callaghan, Borins, J.A. of the Ontario Court of Appeal stated:
"Although Tolofson was a case involving a domestic tort and the rigid choice of tort law rule that it established applies to domestic torts, it is clear that both trial and appellate courts have interpreted and applied Tolofson as also establishing the same choice of law rule in the case of foreign torts, the lex loci delicti, with the exception that in rare cases the court may exercise a discretion to choose the lex fori to prevent an injustice. The motion judge was aware of his limited discretion and declined to exercise it. Although I would not endorse the motion judge's analysis in its entirety, I am of the opinion that he was correct to apply the choice of law rule mandated by Tolofson and to decline to exercise his discretion to declare that the substantive law of Ontario applied to the respondent's claim..."[62]
In Hanlan v. Sernesky [63] the Ontario General Division held that it was entitled to depart from the requirement of applying the lex loci where the circumstances were such that "the operation of the lex loci rule would work an injustice."[64]
Janet Walker has proposed a choice of law rule for torts (including cross-border torts), emphasizing the social context in which a tort occurs as a general rule, with the geographical context as an exception:
1. Where the relationship between the parties makes it reasonable for liability and recovery to be governed by the standards of a particular legal system, those standards should apply to claims between them in tort.
2. Where no such relationship exists, the law of the place where the tort occurs should ordinarily apply.[65]
Notwithstanding the reasonableness of the foregoing choice of law in tort approach, the lex loci delicti rule remains firmly entrenched in Canada.
Thank you very much for the comment. It is interesting to note the divergent approach taken by the Canadian courts.
You're quite welcome. I find the international civil litigation blawg to be timely, informative and engaging and I look forward to future postings.
Cheers from above the 49th parallel (technically (44° North),
Antonin I. Pribetic
Post a Comment