REVA PAYROVI, Plaintiff, v. LG CHEM AMERICA, INC., et al., Defendants.
Case No. 5:20-cv-04144-EJD
UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION
September 29, 2020
Pursuant to
The Court further authorizes jurisdictional discovery as to the extent and nature of LGC America‘s advertising and marketing of LG HG2 18650 3000mAh lithium-ion batteries to California retailers such as Vape Society. LGC America‘s motion to dismiss is thus DENIED without prejudice to resubmit after jurisdictional discovery has been completed.
I. BACKGROUND
A. Factual Background
Plaintiff Reva Payrovi is a resident of the State of Texas. Exhibits re Notice of Removal, Original Complaint and Jury Demand (“Compl.“) ¶ 5, Dkt. No. 10. In March 2017, Plaintiff‘s daughter purchased a model LG HG2 18650 3000mAh lithium-ion battery (the “Battery“), intended to be used in electronic cigarettes, from Ipurchase Online d/b/a Vape Society Supply (“Vape Society“) through its webstore. Id. ¶ 2. In February, 2018, while in Texas, Plaintiff placed the Battery in his pant leg pocket, where it exploded and caught fire, causing Plaintiff to suffer second-degree and third-degree burns. Id. ¶ 3.
LGC America is a Delaware-incorporated entity with its principal place of business in Atlanta, Georgia. Declaration of Hyunsoo Kim (“Kim Decl.“) ¶ 3, Dkt. No. 14-1.1 Although Plaintiff alleges LGC America “has its principle place of business and nerve center” in San Jose, California, Compl. ¶ 6, LGC America avers that its corporate headquarters is in fact located in Atlanta, Georgia, and the President and Chief Financial Officer of LGC America both live and work in the State of Georgia. Id. ¶ 4.2 LGC Ltd. is a South Korean company with its headquarters and principle place of business in Seoul, South Korea. Declaration of Sooha Yang (“Yang Decl.“) ¶ 2, Dkt. No. 17. LGC Ltd., in particular, does not own or lease any property in California, and has no employees who work in California. Id. ¶¶ 5-6.
LGC America is a subsidiary of LGC Ltd. Compl. ¶ 12(N). Specifically, LGC America is wholly owned by LG Chem Michigan, Inc., which is wholly owned by LGC Ltd. Kim Decl. ¶ 5. While LGC Ltd. designs and manufactures products, including “manufactur[ing] 18650 lithium-ion cells for specific applications by sophisticated companies,” Yang Decl. ¶ 9, LGC America does “not have any manufacturing plants, and it focuses on sales and distribution only,” Kim Decl. ¶ 10.
Plaintiff alleges that the Battery was designed, manufactured, sold, and placed into the stream of commerce by Defendants. Compl. ¶¶ 2, 19. Defendants in their declarations both provide that they have “never designed, manufactured, distributed, advertised, or sold any lithium-ion cell
B. Procedural Background
Plaintiff originally filed a lawsuit in the District Court of Dallas County, Texas against Defendants as well as against Vape Society, arising out of the same events that are at issue here. Declaration of Christopher M. Sargoy (“Sargoy Decl.“) Exhibit B. The Dallas court dismissed Defendants from that lawsuit for lack of personal jurisdiction on February 18, 2020. Compl. ¶ 48. Plaintiff then filed this suit in Santa Clara County Superior Court. Id. ¶ 49. Defendant LGC Ltd. removed the case to this Court. Notice of Removal 1, Dkt. No. 1.
Defendants filed their motions to dismiss on June 30, 2020. LGC America Mot. 9; LGC Ltd. Mot. 9. Plaintiff opposes both motions. Plaintiff‘s Response to Defendant LG Chem, Ltd.‘s Motion to Dismiss (“Opp. to LGC Ltd.“), Dkt. No. 27; Plaintiff‘s Response to Defendant LG Chem America, Inc.‘s Motion to Dismiss (“Opp. to LGC America“), Dkt. No. 28.
II. LEGAL STANDARD
Under
There are two limitations that restrict a court‘s power to exercise personal jurisdiction over a nonresident defendant: the constitutional principles of due process and the applicable state personal jurisdiction rule. Sher v. Johnson, 911 F.2d 1357, 1360 (9th Cir. 1990). The Ninth Circuit has held that because California‘s personal jurisdictional rule is “coextensive with the outer limits of due process,” personal jurisdictional inquiries under California law are constrained solely by constitutional principles. Id. at 1361;
The Supreme Court has held that constitutional due process requires
III. DISCUSSION
A. Imputation of Contacts
In asserting that personal jurisdiction can be exercised over Defendants, Plaintiff alleges a wide variety of contacts between Defendants and the State of California. See Compl. ¶¶ 10, 12. However, the complaint rarely distinguishes which allegations pertain to which defendant(s), with distinctions made only in two places relating to jurisdiction. See id. ¶¶ 6, 7. “It is well established that, as a general rule, where a parent and a subsidiary are separate and distinct corporate entities, the presence of one ... in a forum state may not be attributed to the other.” Axiom Foods, Inc. v. Acerchem Int‘l, Inc., 874 F.3d 1064, 1071 (9th Cir. 2017) (quoting Holland Am. Line Inc. v. Wartsila N. Am., Inc., 485 F.3d 450, 459 (9th Cir. 2007)). This Court cannot impute the parent company‘s contacts to the subsidiary, or vice versa, absent allegations of agency, alter ego, or a similar relationship. See id. at 1071 n.5 (explaining that where a plaintiff has not met “the standard for finding an agency relationship” nor “spelled out an alter ego theory of liability allowing [the court] to attribute the activities of the parent entity to the subsidiary,” the contacts of one corporation would not be attributed to the other).
In this case, Plaintiff alleges that “the actions of the subsidiaries in establishing principal places of business in California, transacting business in California, selling and marketing products to individuals in California, and having regular, repeated conduct with California should be imputed to Defendant LG Chem, LTD,” because LGC Ltd. intended to use its subsidiaries as its marketing and production arms in the United States, and exercised “full, total and explicit control” over its subsidiaries. Compl. ¶ 12Q. In its declaration, however, LGC America avers that LGC Ltd., LG Chem Michigan, Inc., and LGC America are all separate legal entities, that LGC America has its own corporate officers, that LGC Ltd. does not pay any of LGC America‘s employees or expenses, and that LGC Ltd. does not manage the day-to-day activities of LGC America. Kim Decl. ¶¶ 5-8. In this case, Plaintiff has “not made a prima facie case for an agency relationship.” Axiom Foods, 874 F.3d at 1071 n.5 (citing Williams v. Yamaha Motor Co., 851 F.3d 1015, 1024-25 (9th Cir. 2017)) (“[U]nder any standard for finding an agency relationship, the parent company must have the right to substantially control its subsidiary‘s activities.“). Thus, this Court will not impute the contacts of LGC Ltd. and LGC America to each other.
B. General Jurisdiction
Plaintiff concedes in his opposition that, “because [Defendants are] neither incorporated in California nor ha[ve their] principal place[s] of business in this state, Plaintiffs’ [sic] argument focuses on the specific jurisdiction analysis.” Opp. to LGC Ltd. at 6; Opp. to LGC America at 6. Plaintiff similarly reiterates that “[p]ersonal jurisdiction is based on specific jurisdiction,” in the case management conference statement jointly filed by the parties. Joint Case Management Conference Statement (“Joint CMC“) 1, Dkt. No. 36. The Court agrees that there is no general jurisdiction over either defendant.
“A court may assert general jurisdiction over foreign (sister-state or foreign-country) corporations to hear any and all claims against them when their affiliations with the State are so ‘continuous and systematic’ as to render them essentially at home in the forum State.” Daimler AG v. Bauman, 571 U.S. at 127 (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 925 (2011)). “The paradigm forums in which a corporate defendant is at home, are the corporation‘s place of incorporation and its principal place of business.” BNSF Ry. Co. v. Tyrrell, 137 S. Ct. 1549, 1558 (2017) (citing Daimler, 571 U.S. at 137 and Goodyear, 564 U.S. at 924) (internal citations omitted). The general jurisdiction inquiry “calls for an appraisal of a corporation‘s activities in their entirety, nationwide and worldwide. A corporation that operates in many places can scarcely be deemed at home in all of them. Otherwise, ‘at home’ would be synonymous with ‘doing business’ tests framed before specific jurisdiction evolved in the United States.” Daimler, 571 U.S. at 139 n.20. Only in an “exceptional case” can a corporation‘s contacts in another state “be so substantial and of such a nature as to render the corporation at home in that State,” regardless of its incorporation or principle place of business. Id.
Defendant LGC America is incorporated in Delaware. Kim Decl. ¶ 3. Plaintiff alleged that LGC America has “its principle place of business office and nerve center in Santa Clara County, California.” Compl. ¶ 6. However, LGC America avers, and Plaintiff does not contest, that its headquarters are in fact located in Atlanta, Georgia. Kim Decl. ¶ 4. Plaintiff does not allege any other substantial contacts of LGC America with California, to support an exceptional finding. Accordingly, there is no general jurisdiction over LGC America in California.
Defendant LGC Ltd. is a Korean corporation, with its headquarters and principle place of business in Seoul, South Korea. Yang Decl. ¶ 3. While Plaintiff alleges a wide variety of contacts between LGC Ltd. and California, those contacts are not sufficient to support an exceptional finding that
C. Specific Jurisdiction
The Ninth Circuit has established a three prong test for analyzing a claim of specific personal jurisdiction:
(1) The non-resident defendant must purposefully direct his activities or consummate some transaction with the forum or resident thereof; or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws; (2) the claim must be one which arises out of or relates to the defendant‘s forum-related activities; and (3) the exercise of jurisdiction must comport with fair play and substantial justice, i.e. it must be reasonable.
Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 801 (9th Cir. 2004). The plaintiff bears the burden of satisfying the first two prongs, and only thereafter is the notion of fair play and substantial justice examined. See id.
1. Purposeful Availment
The first prong of the test includes both purposeful direction and purposeful availment, which are “two distinct concepts.” Id. Purposeful direction, which is analyzed under the Calder “effects” test, is limited to claims of intentional tort. Holland Am. Line, Inc. v. Wartsila N. Am., Inc., 485 F.3d 450 (9th Cir. 2007); see Calder v. Jones, 465 U.S. 783, 789 (1984) (distinguishing between intentional action and “mere untargeted negligence“). Plaintiff‘s action being one based upon strict products liability and negligence, Compl. ¶¶ 14-26, 32-39, this Court applies the “purposeful availment” framework which asks whether a defendant has “deliberately engaged in significant activities within a State” such that he “has availed himself of the privilege of conducting business there.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476 (1985).
In arguing that Defendants have purposefully availed themselves of the privilege of doing business in California, Plaintiff relies on the “stream of commerce plus” theory identified in Asahi Metal Indus. Co. v. Superior Court of California, 480 U.S. 102 (1987). Opp. to LGC Ltd. 7; Opp. to LGC America 7-8. The Asahi Court held that “[t]he placement of a product into the stream of commerce, without more, is not an act of the defendant purposefully directed toward the forum State.” Asahi, 480 U.S. at 112. However, the Asahi Court recognized that additional conduct such as “designing the product for the market in the forum State, advertising in the forum State, establishing channels for providing regular advice to customers in the forum State, or marketing the product through a distributor who has agreed to serve as the sales agent in the forum State,” could be sufficient. Id. Whether the “additional conduct” alleged is sufficient to constitute purposeful availment is a case-by-case analysis particular to each Defendant.
a. LGC America
Plaintiff alleges that LGC America established local distributors, directly sold or delivered its lithium-ion batteries to consumers in California, advertised to and
As an initial matter, LGC America‘s argument blurs the line between the first two prongs of the Ninth Circuit‘s specific jurisdiction test. Defendant is correct that, “[f]or a State to exercise jurisdiction consistent with due process, the defendant‘s suit-related conduct must create a substantial connection with the forum State.” Walden, 571 U.S. at 284. However, the Walden court made this statement in reference to the overarching concept of “minimum contacts’ necessary to create specific jurisdiction.” Id. at 283. At no point did the Walden court suggest that the component parts of this standard—the “purposeful availment” and “arising under” prongs—should be collapsed into one inquiry. See id. at 284 (analyzing “[t]wo related aspects of [the minimum contacts] relationship,” as distinct requirements).3 This Court considers each prong independently.
The relevant inquiry is whether LGC America‘s conduct in California is enough to constitute purposeful availment. A defendant purposefully avails itself of the forum state when it takes action to “target” that specific state. Rodoni v. Royal Outdoor Prod., Inc., 2019 WL 2300400, at *5 (D. Mont. May 30, 2019) (citing Moseley v. Suzuki Motor of Am., Inc., 2018 WL 539330, at *2 (D. Idaho Jan. 24, 2018)); see J. McIntyre Mach., Ltd. v. Nicastro, 564 U.S. 873, 877 (2011) (finding that specific jurisdiction was lacking where “at no time had [the defendant] advertised in, sent goods to, or in any relevant sense targeted the State.“) (emphasis added). In Rodoni, the court found that if “a national corporation with a national advertising presence . . . target[ed] or tailor[ed] its general advertising campaign to reach an audience within a certain state [it] thereby expos[ed] itself to jurisdiction.” Id. at *5.
Plaintiff alleges that LGC America advertised and targeted “numerous consumers throughout California,” and “has established local distributors.” Compl. ¶ 10H. This Court finds that these allegations of targeted conduct are sufficient to show purposeful availment by LGC America. See Asahi, 480 U.S. at 112 (finding that “advertising in the forum state” and “marketing the product through a distributor who has agreed to serve as the sales agent in the forum State” were both examples of conduct that might satisfy purposeful availment).
b. LGC Ltd.
Plaintiff alleges that LGC Ltd.‘s alleged contacts with California are even more extensive and purposeful than LGC America‘s contacts. Plaintiff alleges that LGC Ltd. designed, engineered, and installed “the largest battery system installed in North America” in 2014 in Tehachapi,
2. Arising Under
“In order for a state court to exercise specific jurisdiction, ‘the suit must ‘aris[e] out of or relat[e] to the defendant‘s contacts with the forum.‘” Bristol-Myers Squibb Co. v. Superior Court of California, 137 S. Ct. 1773, 1780 (2017) (quoting Daimler, 571 U.S. at 118) (alterations in original). In determining when a plaintiff‘s claims arise out of a defendant‘s forum-related conduct, “the Ninth Circuit follows the ‘but for’ test.” Menken v. Emm, 503 F.3d 1050, 1058 (9th Cir. 2007). In other words, Plaintiff “must show that he would not have suffered an injury ‘but for’ [Defendant]‘s forum-related conduct.” Id.
a. LGC America.
Plaintiff generally contends that LGC America‘s activities in selling and marketing its products in California are a but-for cause of his injury. Opp. to LGC America 10. In Bristol-Myers Squibb, a “group of plaintiffs—consisting of 86 California residents and 592 residents from 33 other States” sued a pharmaceutical manufacturer in California alleging that a certain drug had damaged their health. Bristol-Myers Squibb, 137 S. Ct. at 1778. The Supreme Court found personal jurisdiction lacking over the defendant with respect to the non-resident claims, because the non-residents purchased and ingested the drug elsewhere, and the defendant did not design or develop the drug in California. Id. at 1779. The Supreme Court explained that “specific jurisdiction is lacking regardless of the extent of a defendant‘s unconnected activities in the State” unless there is a connection between the defendant‘s activities and the “underlying controversy.” Id. at 1781.
Plaintiff argues that “[u]nlike the situation in Bristol-Myers, ... [LGC America], in concert with its parent company, LG Chem, Ltd., push[ed] its 18650 lithium-ion batteries to California battery suppliers and distributors” such as House of Batteries, a supplier located near Vape Society. Opp. to LGC America 12. Plaintiff argues that “[i]t is reasonable to suspect that Vape Society Supply received its lithium-ion batteries for ecig devices from House of Batteries and/or other California battery-suppliers that specifically partner with LG” and that “if LG had never aggressively distributed and marketed its lithium-ion batteries in California . . . Plaintiff would not have been harmed by the subject Battery.” Id. at 12-13.
Taking Plaintiff‘s allegations as true, it is possible that Plaintiff‘s injury would not have occurred but-for LGC America‘s marketing and distribution of the Battery to California battery suppliers. Although LGC America acknowledges that it currently subleases one rental property in California, previously sublet other properties in California, and currently has three employees who work and reside in California, Kim Decl. ¶¶ 4, 9, LGC America specifically denies that it did any business with Vape Society, or that it ever “distributed, advertised, or sold any lithium-ion cell for use by individual consumers as standalone, removable, rechargeable batteries in electronic cigarette or vaping devices,” id. ¶¶ 11-13. Thus, the parties dispute
b. LGC Ltd.
Unlike LGC America, LGC Ltd.‘s contacts involve investment, design, and manufacture. Plaintiff specifically argues that, “[b]ased on [its] partnerships and investments, it is reasonable to suspect that LG has gone as far as designing or developing the technology for its 18650 lithium-ion batteries, at least in part, on California soil.” Opp. to LGC Ltd. at 12. As with LGC America, LGC Ltd., maintains that it “does not design or manufacture 18650 lithium-ion cells for sale to individual consumers as standalone batteries.” Yang Decl. ¶ 10. Beyond that, however, LGC Ltd. avers that it does not own or lease any real property in California, does not have an office in California, and does not have any employees who work in California. Id. ¶¶ 3, 5-6. LGC Ltd. is not even registered to do business in California. Id. at ¶ 4. Accordingly, while LGC America‘s contacts might, upon a more satisfactory showing of facts, be a but-for cause of Plaintiff‘s injuries, the Court finds it implausible that LGC Ltd. designed or developed the Battery “on California soil.” LGC Ltd. Reply 5, Dkt. No. 30. Thus, Plaintiff has failed to establish a prima facie case that LGC Ltd. is subject to personal jurisdiction in this Court.
D. Jurisdictional Discovery
Plaintiff requests leave to conduct jurisdictional discovery as to Defendants. Opp. to LGC America 15. Opp. to LGC Ltd. 15. “A court may permit discovery to aid in determining whether it has personal jurisdiction.” EcoDisc Tech. AG v. DVD Format/Logo Licensing Corp., 711 F. Supp. 2d 1074, 1093 (C.D. Cal. 2010) (citing Wells Fargo & Co. v. Wells Fargo Express Co., 556 F.2d 406, 430 n.24 (9th Cir. 1977)). Jurisdictional discovery is discretionary, and “may be appropriately granted where pertinent facts bearing on the question of jurisdiction are controverted or where a more satisfactory showing of the facts is necessary.” Boschetto v. Hansing, 539 F.3d 1011, 1020 (9th Cir. 2008). There are circumstances when jurisdictional discovery is unwarranted. For example, in Bar Grp., LLC v. Bus. Intelligence Advisors, Inc., 215 F. Supp. 3d 524, 562 (S.D. Tex. 2017) the court denied jurisdictional discovery because plaintiff offered only “speculation as to jurisdiction” and was waging a “fishing expedition” into jurisdictional facts. In general, “a refusal to grant discovery to establish jurisdiction is not an abuse of discretion when ‘it is clear that further discovery would not demonstrate facts sufficient to constitute a basis for jurisdiction,‘” Laub v. United States Dep‘t of Interior, 342 F.3d 1080, 1093 (9th Cir. 2003). However, jurisdictional discovery should be granted where “discovery on th[e] issue might well demonstrate facts sufficient to constitute a basis for jurisdiction,” Harris Rutsky & Co. Ins. Servs. v. Bell & Clements Ltd., 328 F.3d 1122, 1135 (9th Cir. 2003).
Given LGC Ltd.‘s uncontroverted statements that it did not design or manufacture the Battery for use by individual consumers, that it does not own or lease property in California, that it has no employees in California, and that it is not even registered to do business in California, Plaintiff‘s suspicions about LGC Ltd.‘s
However, the facts underlying LGC America‘s contacts with California are more seriously in dispute. On the one hand, LGC America denies that it ever “distributed, advertised, or sold any lithium-ion cell for use by individual consumers as standalone, removable, rechargeable batteries.” Kim Decl. ¶ 11. On the other hand, Plaintiff argues that the Battery ended up on the shelves of Vape Society only because of LGC America‘s “aggressive marketing and distribution of its lithium-ion batteries in California.” Opp. to LGC America 13; see Compl. ¶ 10H(iii). Plaintiff‘s request for jurisdictional discovery into Defendant LGC America is based upon his specific suspicion that “Vape Society Supply received its lithium-ion batteries for ecig devices from House of Batteries and/or other California battery-suppliers that specifically partner with [LGC America]” because of LGC America‘s targeted marketing campaign in California. Opp. to LGC America at 12.
If LGC America in fact targeted and advertised to California retailers similar to Vape Society, and Vape Society received its lithium-ion batteries from such suppliers, it would be reasonable to find that such conduct was a but-for cause of Plaintiff‘s injury. See Rodoni v. Royal Outdoor Prod., Inc., 2019 WL 2300400, at *5 (D. Mont. May 30, 2019). In Rodoni, a Montana resident was injured by a collapsed railing purchased from Home Depot, originally designed outside of Montana by a national chain called Royal Outdoor Products (“Royal“). Rodoni alleged that Royal was a leading producer in the home improvement market and had entered into contracts to furnish materials to Home Depot in Montana. The district court found that “[t]hese facts, on their own, do not meet the necessary standard to show that Royal Defendants specifically targeted the Montana home-improvement market.” Id. at *5. Rather, the court authorized jurisdictional discovery, finding that Rodoni might “uncover facts that suggest that Royal Defendants specifically targeted Home Depot or other third-party distributors within Montana,” and that if Royal had “specifically targeted the Montana home-improvement market,” specific jurisdiction would exist. Id.
Accordingly, this Court finds that jurisdictional discovery is warranted as to the extent and nature of LGC America‘s advertising and marketing of LG HG2 18650 3000mAh lithium-ion batteries to California retailers such as Vape Society.
IV. CONCLUSION
For the above reasons, the Court GRANTS Defendant LGC Ltd.‘s motion to dismiss for lack of personal jurisdiction. Plaintiff‘s request for jurisdictional discovery is GRANTED as to Defendant LGC America, and LGC America‘s motion to dismiss is DENIED without prejudice to renew the motion after Plaintiff has had a full and fair opportunity to complete jurisdictional discovery consistent with this order. Only jurisdictional discovery requests may be propounded upon Defendant LGC America. Any disputes regarding the scope of jurisdictional discovery are referred to the magistrate judge.
IT IS SO ORDERED.
Dated: September 29, 2020
EDWARD J. DAVILA
United States District Judge