The Dow Chemical Company v. Organik Kimya Holding A.S.
CA No. 12090-VCG
| Del. Ch. | Oct 19, 2017Background
- Dow (Delaware corporations) sued Organik Kimya entities alleging they misappropriated Dow’s trade secrets for opaque/emulsion polymers, sold in the U.S., and sought damages and injunctive relief.
- Organik Kimya US is a Delaware corporation (sole in-forum contact); other Organik defendants are foreign (Turkey, Luxembourg, Netherlands, Holding) and had no business presence in Delaware.
- Plaintiffs allege Organik hired former Dow employees (Dr. Dilip Nene, Leonardo Strozzi) who provided Dow recipes/secrets; those secrets enabled products (e.g., ORGAWHITE 2000, 850 RR) that led to U.S. sales and Behr’s approval.
- Organik incorporated Organik Kimya US in Delaware in May 2010; Plaintiffs contend the incorporation was integral to a scheme to monetize the stolen trade secrets and thus supplies Delaware long-arm jurisdiction over the foreign parents.
- After jurisdictional discovery, the Court found record evidence tying Organik Kimya Turkey (the parent) to the formation and U.S. commercialization effort sufficient to allege that Delaware incorporation was an integral component of the alleged wrongful scheme; no similar evidence tied the other foreign Organik entities to the Delaware incorporation.
- The Court granted the foreign defendants’ motion to dismiss in part and denied it in part: personal jurisdiction exists over Organik Kimya Turkey but not over Organik Kimya Netherlands, Organik Kimya Luxemburg, or Organik Kimya Holding; Rule 12(b)(6) merits issues were deferred.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Delaware courts have long-arm jurisdiction over foreign Organik entities based on the incorporation of Organik Kimya US in Delaware | Incorporation of the Delaware subsidiary was an integral act in the scheme to misappropriate and monetize Dow’s trade secrets (Papendick theory) | Formation of a Delaware subsidiary was routine, motivated by tax/ease reasons, and not integral to the alleged theft or US sales; most foreign entities did not participate in the incorporation | Jurisdiction permitted over Organik Kimya Turkey (parent that participated in formation); not permitted over other foreign Organik entities lacking evidence of participation |
| Whether a conspiracy theory can attribute Delaware contacts to nonresident conspirators | Conspiracy among Organik entities makes each liable for acts in Delaware (incorporation) | Conspiracy theory is narrow; plaintiffs failed to show the nonresident entities knew or should have known of the Delaware nexus; parent-subsidiary conspiracy is disfavored | Conspiracy theory rejected for Organik Kimya Netherlands, Luxemburg, and Holding for lack of evidence and because parent/subsidy generally cannot be treated as conspirators |
| Whether exercising jurisdiction over Organik Kimya Turkey would violate Due Process | Forming a Delaware subsidiary as integral to the wrongful scheme gives rise to reasonable anticipation of being haled into Delaware courts | Due process challenge (forum contacts insufficient) | Due process satisfied as Papendick and progeny recognize incorporation integral to the transaction supplies constitutionally adequate minimum contacts |
| Whether Delaware law (DUTSA) displaces common law claims and whether DUTSA applies extraterritorially (merits/12(b)(6) issues) | DUTSA displacement and extraterritoriality may not foreclose claims; merits not yet resolved | DUTSA displaces common law and may limit extraterritorial reach | Court deferred ruling on 12(b)(6) and DUTSA issues pending further proceedings |
Key Cases Cited
- Papendick v. Bosch, 410 A.2d 148 (Del. 1979) (formation of a Delaware subsidiary as an integral part of a transaction can confer jurisdiction)
- Istituto Bancario Italiano SpA v. Hunter Eng’g Co., 449 A.2d 210 (Del. 1982) (framework for conspiracy-based jurisdiction: five-element test)
- AeroGlobal Capital Mgmt., LLC v. Cirrus Indus., Inc., 871 A.2d 428 (Del. 2005) (due process minimum contacts discussion)
- World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980) (minimum contacts and reasonable anticipation standard)
- Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773 (2017) (forum-connection requirement for jurisdiction over nonresidents; distinguished by court on the facts)