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finding general jurisdiction did not exist over third party defendant in forum state where defendant had only one customer in the state
Summary of this case from Caspers Ice Cream, Inc. v. Fatboy Cookie Co.Opinion
Case No. 01-4139-JAR
January 29, 2003
ORDER GRANTING MOTION TO DISMISS NOVA CHEMICALS AS THIRD-PARTY DEFENDANT
Plaintiff DJ's Rock Creek Marina, Inc. (DJ's Rock Creek) filed this action against Imperial Foam and Insulation Manufacturing Company (Imperial Foam), for breach of warranty and other claims arising from Plaintiff's purchase of dock floats from Imperial Foam. In turn, Imperial Foam filed a third party complaint against Nova Chemicals, Inc. (Nova) seeking indemnification, based on Nova having provided Imperial Foam with the expandable foam beads (expandable polystrene), a component part Imperial Foam used to manufacture the dock floats. In this diversity action, subject matter jurisdiction is not at issue. Plaintiff is a Kansas corporation; Imperial Foam is a Missouri corporation; and Nova is a Delaware corporation, whose registered agent and principal place of business is in Pennsylvania.
Nova moves to dismiss for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2) (Doc. 49). Imperial Foam, as the third-party plaintiff, bears the burden of establishing personal jurisdiction over the third-party defendant, Nova. This requires a showing that jurisdiction is proper under the laws of the forum state, Kansas, and that the exercise of jurisdiction would not offend due process. Although Nova's motion to dismiss was filed on July 24, 2002, Imperial Foam has yet to respond. District of Kansas Local Rules provide that a party must file a response to a motion to dismiss within twenty days or the motion will be deemed unopposed. Unopposed motions are "considered and decided as an uncontested motion, and ordinarily will be granted without further notice." Despite this local rule, in an abundance of caution, the Court will analyze whether the Court has personal jurisdiction over Nova.
OMI Holdings, Inc. v. Royal Ins. Co. of Canada, 149 F.3d 1086, 1091 (10th Cir. 1998) (quoting Rambo v. American Southern Ins. Co., 839 F.2d 1415, 1417 (10th Cir. 1988)).
Intercon, Inc. v. Bell Atlantic Internet Solutions, Inc., 205 F.3d 1244, 1247 (10th Cir. 2000).
See D. Kan. R. 6.1(e)(2) (providing a party twenty days to respond to a motion to dismiss).
D. Kan. R. 7.4.
See Reed v. Bennett, 312 F.3d 1190 (10th Cir. 2002) (holding that the district court erred in granting summary judgment in favor of employer solely based on former employee's failure to file a response to employer's summary judgment motion within the time period specified by the local rule governing summary judgment). W hile the court doubts that the rule set forth in Reed applies equally to motions to dismiss, the Court will proceed with analyzing whether personal jurisdiction is present.
In OMI Holdings, Inc. v. Royal Ins. Co. of Canada, the Tenth Circuit noted that because the Kansas long arm jurisdiction statute is liberally construed by Kansas courts, jurisdiction is generally considered proper under Kansas law and courts proceed directly to the due process issue. The Due Process Clause allows the exercise of personal jurisdiction over a nonresident defendant, so long as there are "minimum contacts" between the defendant and the forum state.
149 F.3d at 1090 (citing Federated Rural Elec. Ins. Corp. v. Kootenai Elec. Coop., 17 F.3d 1302, 1305 (10th Cir. 1994)).
Intercon, 205 F.3d at 1247 (citing World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 291 (1980)).
The minimum contacts standard may be met in one of two ways: specific jurisdiction or general jurisdiction. Specific jurisdiction exists if the nonresident defendant has purposefully availed itself of the privilege of conducting business in Kansas, and the injuries arise from the defendant's forum related activities. If a court's exercise of jurisdiction does not directly arise from a defendant's forum related activities, the court may nonetheless maintain general personal jurisdiction over the defendant based on the defendant's general business contacts with the forum state. General jurisdiction exists when the defendant's contacts with the forum state are "so continuous and systematic that the state may exercise personal jurisdiction even when the claims are unrelated to the defendant's contacts with the forum state." For such jurisdiction to exist, the defendant must be conducting "substantial and continuous local activity in the forum state."
OMI Holdings, 149 F.3d at 1091.
Helicopteros Nacionales de Colombia v. Hall, 466 U.S. 408, 415 (1984).
SF Hotel Co., L.P. v. Energy Investments, Inc., 985 F. Supp. 1032, 1033 (D.Kan. 1997) (citing Trierweiler v. Croxton and Trench Holding Corp., 90 F.3d 1523, 1532-33 (10th Cir. 1996)).
Soma Med. Intern. v. Standard Chartered Bank, 196 F.3d 1292, 1295 (10th Cir. 1999) (citations omitted).
Based on the record before the Court, the Court finds that both specific and general jurisdiction are clearly lacking. As to specific jurisdiction, Nova has not "purposefully availed" itself of the privilege of doing business in Kansas. Instead, Nova, a Pennsylvania corporation, manufactured a product, sold it to a Missouri corporation, Imperial Foam, and Imperial Foam unilaterally sold its product to a Kansas business. Imperial Foam's unilateral decision to sell its product, containing a component part made by Nova, does not translate to Nova availing itself of doing business in Kansas.
OMI Holdings, 149 F.3d at 1092.
Id. at 1093 (holding the "purposeful availment" requirement cannot be satisfied by the unilateral activity of the plaintiff or third-party).
General jurisdiction is also lacking. While there is no litmus test for determining what constitutes systematic and continuous contacts, the Supreme Court has provided some guidance. The following contacts, taken together, have been found to satisfy due process: (1) maintaining an office in the forum state; (2) keeping company files and directing directors' meetings in that office; (3) carrying on correspondence relating to the business; (4) distributing salary checks drawn on active bank accounts located in the forum state; (5) engaging a bank from the forum state to act as transfer agent; and (6) supervising, from the forum state, policies dealing with the rehabilitation of the corporation's properties outside the forum state. In addition, the Supreme Court has also emphasized the following factors in determining whether to exercise general jurisdiction over a nonresident defendant: (1) being authorized to do business in the forum state; (2) having an agent for service of process within the forum; (3) selling products and soliciting business in the forum; (4) signing contracts; (5) recruiting employees from the forum state; and (6) owning real or personal property in the forum state.
See Morrison v. WCCO Belting, Inc., 35 F. Supp.2d 1293 (D.Kan. 1999). See also Helicopteros, 466 U.S. at 416-18; Perkins v. Benguet Consol. Mining Co., 342 U.S. 437, 438 (1952).
Perkins, 342 U.S. at 438, 445.
Helicopteros, 466 U.S. at 411.
As noted by Nova, and uncontested by Imperial Foam, Nova has only one customer in Kansas, and its yearly sales to its lone Kansas customer has never been more than one-tenth of one percent of its total sales. Further, Nova does not have a place of business in Kansas, does not have employees in Kansas, does not have bank accounts in Kansas, and does not have property in Kansas.
The Court can locate no support indicating that contact with a forum consisting of a single customer constitutes systematic and continuous contacts necessary to confer general jurisdiction. Consistent with the Supreme Court decision in Helicopteros and Perkins, courts determining whether general jurisdiction exists have required much more than a single contact in the forum state. For example, in Morrison v. WCCO Belting, Inc., despite having continuous sales in Kansas, making sales calls to Kansas customers, directly shipping products into Kansas and having a Kansas-based sales representative, the defendant lacked the continuous and systematic contacts necessary for a finding of general personal jurisdiction. Likewise, Nova's single customer in Kansas is insufficient to constitute systematic and continuous contacts with the state. Thus, the Court finds it is without general jurisdiction to proceed with Imperial Foam's claims against Nova.
See Morrison, 35 F. Supp.2d at 1295 (noting that "[t]he Supreme Court's various opinions on the issue of general jurisdiction, `suggest very strongly that the threshold contacts required for general jurisdiction are very substantial, indeed.'") (citation omitted).
See, e.g., Congoleum Corp. v. DLW Aktiengesellschaft, 729 F.2d 1240, 1242 (9th Cir. 1984) ("[N]o court has ever held that the maintenance of even a substantial sales force within the state is a sufficient contact to assert [general] jurisdiction."); Harnischfeger Engineers, Inc. v. Uniflo Conveyor, Inc., 883 F. Supp. 608, 611-12 (D.Utah 1995) (finding no general jurisdiction over defendant who solicited business in and sold products to residents in the forum state); Modern Mailers, Inc. v. Johnson Quin, Inc., 844 F. Supp. 1048, 1052-55 (E.D.Pa. 1994) (finding no general jurisdiction over corporation that sold over $230,000 of its products to approximately twenty-nine customers in the forum and who had sales representatives who included the forum in their territories).
Even if the Court determined that Nova had minimum contacts necessary for general jurisdiction to exist, the Court would still be required to determine whether exercising jurisdiction over Nova would be reasonable. In OMI Holdings, the Tenth Circuit outlined the factors for considering the reasonableness of jurisdiction: the burden on the defendant; the forum state's interest in resolving the dispute; the plaintiff's interest in receiving convenient and effective relief; the interstate judicial system's interest in obtaining the most efficient resolution of controversies; and the shared interest of the several states in furthering fundamental substantive social policies. The court further observed that
The strength of these factors sometimes serve to establish the reasonableness of jurisdiction upon a lesser showing of minimum contacts than would otherwise be required. . . . Conversely, the factors may be so weak that even though minimum contacts are present, subjecting the defendant to jurisdiction in that forum would offend due process.
Id.
The court in OMI Holdings further noted that the burden on the defendant is of primary concern, though not determinative of the issue of reasonableness. In this case, it would clearly be burdensome on Nova to conduct litigation in Kansas as Nova does not have an office, employees, or a bank account in Kansas; does not own, use or possess any real estate in Kansas; nor does Nova have a significant business presence in Kansas. It is also clear that Kansas has an important interest in providing a forum where its residents can seek redress for injuries allegedly caused by nonresidents. Here, DJ's Rock Creek, the resident plaintiff, purchased an allegedly defective product from Imperial Foam, a nonresident, who in turn blames Nova, another nonresident. Although Kansas has an interest in plaintiff getting redress here, it has less interest in nonresident defendant Imperial Foam's third party complaint against nonresident Nova for indemnification. And, plaintiff's interest in effective and convenient relief is not affected by Imperial Foam's third-party petition against Nova. Thus, even if the Court was satisfied that Nova's single customer residing in Kansas constituted sufficient minimum contacts for general jurisdiction, the Court would have difficulty finding that exercising general jurisdiction over Nova would be reasonable under these circumstances. Therefore, the Court grants Nova's motion to dismiss for lack of personal jurisdiction.
Id.
IT IS THEREFORE ORDERED that the motion to dismiss Nova Chemicals, Inc. as a third-party defendant (Doc. 49) is GRANTED.
IT IS SO ORDERED.