Elbert Cox, Jr., et al v. Koninklijke Philips, N.V., et al

Filing

OPINION filed: We AFFIRM the district court s orders and DENY KPNV s and Philips s motion for sanctions [5444605-2], decision not for publication. Ralph B. Guy, Jr., Circuit Judge; Alice M. Batchelder, Circuit Judge and Deborah L. Cook (authoring), Circuit Judge.

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NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 16a0252n.06
Case No. 15-6048
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT

FILED
ELBERT COX, JR.; CECIL WAYNE
FRANKLIN; JOHN SPEARS; WANDA
BEASLEY; DONALD KING; LINDSEY
PENNINGTON; TERESA PRESTON;
BEVERLY PRESLEY, Personal
Representative of the Estate of Annabell
Gordon,
Plaintiffs-Appellants,
v.
KONINKLIJKE PHILIPS, N.V., a
Netherlands Corporation, aka Royal Philips
Electronics, N.V. Koninklijke; PHILIPS
ELECTRONICS NORTH AMERICA
CORPORATION, a Delaware
Corporation,
Defendants-Appellees.

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May 09, 2016
DEBORAH S. HUNT, Clerk

ON APPEAL FROM THE UNITED
STATES DISTRICT COURT FOR
THE EASTERN DISTRICT OF
KENTUCKY

BEFORE: GUY, BATCHELDER, and COOK, Circuit Judges.
COOK, Circuit Judge.

Former employees at a glass and bulb manufacturing plant

brought this action against their employer, Philips Electronics North America Corporation
(“Philips”), and its Dutch parent company, Koninklijke Philips, N.V. (“KPNV”), for injuries
arising from exposure to hazardous chemicals during their employment. The district court
dismissed the employees’ claims against KPNV for want of personal jurisdiction, dismissed their

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claims against Philips as statutorily barred, and declined to award them costs in serving KPNV
process. The employees appeal those rulings, while KPNV and Philips seek sanctions. We
affirm the district court’s order but decline to award sanctions.
I.
Philips’s facility in Danville, Kentucky contained hazardous substances including
asbestos, mercury, arsenic, lead, and PCB compounds. The employees sued Philips and KPNV
for concealing or misrepresenting workplace dangers and deliberately exposing them to
hazardous substances, causing physical and emotional injuries. They assert claims sounding in
negligence, strict liability, negligent infliction of emotional distress, fraud, and fraudulent
concealment.
After filing the initial complaint, the employees requested that KPNV—a Dutch holding
company with no agent in the United States—allow its American-retained counsel to accept
service of process on its behalf. KPNV refused. The employees served process internationally
and then moved to recover the associated costs, arguing that Federal Rule of Civil Procedure 4(d)
obligated KPNV to avoid unnecessary expenses. The court denied the motion, noting that Rule
4(d) imposes no duty on foreign parties.
While the employees’ costs motion pended, KPNV moved to dismiss the complaint for
lack of personal jurisdiction.

After an evidentiary hearing, the court determined that

preponderating evidence failed to show that KPNV’s activities satisfied Kentucky’s long-arm
statute. See Ky. Rev. Stat. Ann. § 454.210. Without a basis to exercise jurisdiction, the court
granted KPNV’s motion to dismiss.
Philips also moved to dismiss the complaint, arguing that the exclusive-remedy provision
of the Kentucky Workers’ Compensation Act (KWCA) barred the employees’ claims. The
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employees countered that their claims either satisfied the KWCA’s deliberate-intention exception
or fell outside of its exclusive-remedy provision. The court initially granted Philips’s motion in
part and denied it in part, dismissing all but the employees’ fraud claims as barred by the
KWCA. Philips then moved for reconsideration, arguing that because the employees failed to
allege that Philips misrepresented workplace dangers with the specific intent to harm, the KWCA
also barred the fraud claims. Agreeing, the district court dismissed the remaining claims. This
appeal followed.
II.
The employees contend the district court erred by granting KPNV’s motion to dismiss for
lack of personal jurisdiction, granting Philips’s motion to dismiss for failure to state a claim, and
denying the employees’ motion to recover costs incurred in serving process. KPNV and Philips
move for sanctions. We address each issue in turn.
A. KPNV’s Motion to Dismiss
First, as regards dismissal for lack of jurisdiction, the employees maintain that Kentucky
law confers jurisdiction because their claims arise from KPNV’s: (1) transacting business,
(2) deriving substantial revenue, or (3) owning or having interest in real property in Kentucky.
We review the court’s legal conclusions de novo and its factual findings for clear error. See
Michigan Bell Tel. Co. v. Climax Tel. Co., 202 F.3d 862, 865 (6th Cir. 2000) (quoting RMI
Titanium Co. v. Westinghouse Elec. Corp., 78 F.3d 1125, 1134 (6th Cir. 1996)).
1.

Transacted Business

The employees claim that Kentucky’s long-arm statute confers jurisdiction because
KPNV “transact[ed] . . . business” in Kentucky when it signed a corporate guarantee on Philips’s
behalf.

See Ky. Rev. Stat. Ann. § 454.210(2)(a)(1).
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But Kentucky’s long-arm statute is

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narrower in scope than the federal due process clause, see Caesars Riverboat Casino, LLC v.
Beach, 336 S.W.3d 51, 55–57 (Ky. 2011), and even under the outer bounds of due process, “the
mere existence of a contract . . . is insufficient to confer personal jurisdiction.” Calphalon Corp.
v. Rowlette, 228 F.3d 718, 722 (6th Cir. 2000) (citing Nationwide Mut. Ins. Co. v. Tryg Int’l. Ins.
Co., Ltd, 91 F.3d 790, 795 (6th Cir. 1996)). Compare Churchill Downs Inc. v. NLR Entm’t,
LLC, No. 3:14-CV-166-H, 2014 WL 2200674, at *6–7 (W.D. Ky. May 27, 2014) (holding an
isolated contract insufficient to “transact business”), with KFC Corp. v. Wagstaff, 502 B.R. 484,
496 (W.D. Ky. 2013) (numerous, long-term contracts sufficient to “transact business”).
Even assuming the corporate guarantee showed KPNV transacted business in Kentucky,
the employees’ claims do not “aris[e] from” that contract.

See Ky. Rev. Stat. Ann.

§ 454.210(2)(a). Kentucky’s long-arm statute requires “a reasonable and direct nexus between
the wrongful acts alleged in the complaint and the statutory predicate for long-arm-jurisdiction.”
Caesars Riverboat Casino, 336 S.W.3d at 59 (citing Ky. Rev. Stat. Ann. § 454.210(2)(a)). Here,
the employees allege personal injuries resulting from chemical exposure; their claims have no
relation to the corporate guarantee KPNV signed.
2. Derived Substantial Revenue
Next, the employees maintain that the court has jurisdiction because KPNV “derive[d]
substantial revenue from goods used or consumed or services rendered in [Kentucky].” Ky. Rev.
Stat. Ann. § 454.210(2)(a)(4). They argue that KPNV likely derived substantial revenue from
the Danville facility because KPNV reported a $30 billion worth to the Securities and Exchange
Commission.

As the district court aptly noted, adopting this reasoning would subject to

Kentucky jurisdiction any large parent company with a subsidiary located in the state. See, e.g.,
Velandra v. Regie Nationale des Usines Renault, 336 F.2d 292, 296 (6th Cir. 1964) (“[M]ere
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ownership by a corporation of all of the stock of a subsidiary amenable to the jurisdiction of the
courts of a state may not alone be sufficient to justify holding the parent corporation likewise
amenable.”). We agree; the net-worth figure is insufficient.
3. Interest in Real Property
Last, the employees argue for grounding jurisdiction on KPNV’s “[h]aving an interest in,
using, or possessing real property in [Kentucky].” Ky. Rev. Stat. Ann. § 454.210(2)(a)(6). They
cite a state form referencing KPNV as “legal owner of generator,” which they take to be the
Danville facility. At the evidentiary hearing, however, the district court concluded that the form
merely identified KPNV as the corporate parent of Philips and was not indicative of title to
property. The employees fall short of persuading that the district court clearly erred in so
finding.
Because the employees present insufficient evidence that KPNV is amenable to service of
process under Kentucky law, we need not reach the federal due process issue. See Caesars
Riverboat Casino, 336 S.W.3d at 59. And though they seek remand for jurisdictional discovery,
the employees fail to show that the district court abused its discretion in conducting an
evidentiary hearing without such discovery. See Theunissen v. Matthews, 935 F.2d 1454, 1458
(6th Cir. 1991) (“[A district] court has discretion to select which [procedural] method it will
follow [in determining jurisdiction], and will only be reversed for abuse of that discretion.”).
B. Philips’s Motion to Dismiss
The employees also appeal the district court’s order granting Philips’s motion to dismiss.
Specifically, they argue the district court erred in determining that their claims fell outside of the
KWCA’s deliberate-intention exception, and that the KWCA’s exclusive-remedy provision
barred their negligent-infliction-of-emotional-distress and fraud claims. The employees also
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fault the court’s reconsideration. We review de novo, construing the complaint in the light most
favorable to the employees, accepting their allegations as true, and drawing all reasonable
inferences in their favor. Carrier Corp. v. Outokumpu Oyj, 673 F.3d 430, 444 (6th Cir. 2012).
1. Deliberate-Intention Exception to the KWCA’s Exclusive-Remedy Provision
The employees first argue that because Philips deliberately intended to injure them, their
claims survive the KWCA’s exclusive-remedy provision.

The KWCA “affords an injured

worker a remedy without proof of the common law elements of fault,” and is generally
“exclusive of the remedies available under common law.” Gen. Elec. Co. v. Cain, 236 S.W.3d
579, 606 (Ky. 2007) (citing Ky. Rev. Stat. Ann. § 342.690). Yet, if an employee is injured or
killed as a result of the “deliberate intention of his or her employer to produce such injury or
death,” the employee may bring a tort action in lieu of recovery under the KWCA. Ky. Rev.
Stat. Ann. § 342.610(4). This exception “is much narrower than ‘intent’ in general tort law,”
Rainer v. Union Carbide Corp., 402 F.3d 608, 616 (6th Cir. 2005), and applies only when an
employer has “determined to injure an employee and used some means appropriate to that end.”
Id. at 615 (quoting Moore v. Envtl. Const. Corp., 147 S.W.3d 13, 16 (Ky. 2004)).
Here, the employees ground their “determined-to-injure” bypass on the familiar argument
that Philips knew the dangers of the hazardous chemicals but nevertheless engaged in deliberate
and fraudulent acts to avoid providing a safe work environment. The Kentucky Supreme Court
rejected this exact argument, explaining:
The defendant who acts in the belief or consciousness that the act is causing an
appreciable risk of harm to another may be negligent, and if the risk is great the
conduct may be characterized as reckless or wanton, but it is not an intentional
wrong.

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Moore, 147 S.W.3d at 16–17 (quoting Williamson v. Water Mania, Inc., 721 So.2d 372, 373
(Fla. Dist. Ct. App. 1998)). Even accepting the employees’ allegations as true, they fail to allege
facts from which to infer that Philips harbored specific intent to injure. Without that intent, the
employees’ claims do not fall within the KWCA’s deliberate-intention exception.
Alternatively, the employees urge the court to adopt the “substantially certain” approach
used by other states, under which Philips would be responsible for conduct it knew or was
substantially certain would cause injury or death. See 9-103 Larson’s Workers’ Compensation
Law § 103.04D. But Kentucky has rejected that approach, see Moore, 147 S.W.3d at 19 n.20
(“[W]e do not adopt the substantial certainty test . . . .”), and we may not “ignore applicable state
law, even if the law is unpopular or represents a minority view.” Hosp. Underwriting Grp., Inc.
v. Summit Health Ltd., 63 F.3d 486, 493 (6th Cir. 1995).
2. Claims Not Covered By the KWCA
The employees press on, contending that even if their claims do not satisfy the deliberateintention exception, their negligent-infliction-of-emotional-distress and fraud claims survive as
outside of the KWCA. They cite limited case law suggesting an employee retains the right to
bring at common law claims not compensable under the KWCA. See Columbia Sussex Corp. v.
Hay, 627 S.W.2d 270, 279 (Ky. Ct. App. 1981) (holding that employees may bring slander-perse and false-imprisonment claims because “there is nothing for which the [KWCA] would
compensate”); see also Haggard v. Martin, No. 3:01-CV-614-H, 2002 WL 753230, at *8 (W.D.
Ky. Apr. 25, 2002) (citing Hay approvingly in dicta). These cases notwithstanding, the district
court determined that the overwhelming majority of cases bar common-law claims unless the
deliberate-intention exception is satisfied. See, e.g., Shamrock Coal Co. v. Maricle, 5 S.W.3d
130, 134 (Ky. 1999) (“[T]he fact that a remedy for a work-related injury is unavailable under the
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[KWCA] does not authorize bringing a civil action for damages in circuit court.” (citing Davis v.
Solomon, 276 S.W.2d 674, 676 (Ky. Ct. App. 1955))); Morrison v. Carbide & Carbon Chems.
Corp., 129 S.W.2d 547, 550 (Ky. Ct. App. 1939) (“The only exception made to [KWCA
exclusivity] is in cases where injury or death of an employee results through deliberate intention
of the employer to produce same and in which event resort may be had to courts of law.”
(emphasis added)).
We need not determine the state of Kentucky law, however, because the KWCA provides
the exclusive remedy for the employees’ claims. Yet, the employees argue that their emotional
distress did not result from physical trauma and thus falls outside of the KWCA. See Ryan’s
Family Steakhouse v. Thomasson, 82 S.W.3d 889, 893 (Ky. 2002) (noting such “mental-mental”
injuries are not compensable under the KWCA). But their complaint belies this assertion,
confirming that their emotional distress arises from their increased risk of developing future
disease as a result of chemical exposure. The employees next argue that their fraud claims are
claims for intentional injury and therefore not barred. Edwards v. Louisville Ladder, 957 S.W.2d
290, 294 (Ky. Ct. App. 1997) (“[T]he workers’ compensation system is the exclusive remedy for
any injuries falling within its purview, except for intentional injuries caused by the employer.”
(citing Morrison, 129 S.W.2d at 549–50)). As explained, merely asserting an intentional tort
fails to meet the statute’s heightened deliberate-intention exception.
3. Philips’s Motion to Reconsider
Last, the employees argue that the district court mistakenly granted Philips’s motion to
reconsider its initial order allowing the fraud claims to proceed. But by simply rehashing
arguments that we already rejected, the employees cannot demonstrate an abuse of discretion.
See Mallory v. Eyrich, 922 F.2d 1273, 1282 (6th Cir. 1991) (“District courts have inherent power
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to reconsider interlocutory orders and reopen any part of a case before entry of a final judgment.”
(citing Marconi Wireless Tel. Co. v. United States, 320 U.S. 1, 47–48 (1943))).
C. The Employees’ Motion to Recover Costs for Serving Process
Employees appeal the district court’s denial of its motion for costs incurred in serving
KPNV process, maintaining that Federal Rule of Civil Procedure 4(d) obliged KPNV to accept
service. Under that rule, courts must award costs “[i]f a defendant located within the United
States fails, without good cause, to sign and return a waiver requested by a plaintiff located
within the United States.” Fed. R. Civ. P. 4(d)(2) (emphasis added). KPNV is located in the
Netherlands; the rule imposed no obligation on it, and the district court committed no error in
denying the employees’ motion.
D. KPNV’s and Philips’s Motion for Sanctions
KPNV and Philips move for sanctions under Federal Rule of Appellate Procedure 38 and
28 U.S.C. § 1927. Rule 38 allows this court to award damages if appellants’ “arguments
essentially had no reasonable expectation of altering the district court’s judgment based on law
or fact.” B & H Med., L.L.C. v. ABP Admin., Inc., 526 F.3d 257, 270 (6th Cir. 2008) (quoting
Wilton Corp. v. Ashland Castings Corp., 188 F.3d 670, 677 (6th Cir. 1999)). Similarly, under 28
U.S.C. § 1927, this court may award costs if “an attorney kn[ew] or reasonably should [have]
know[n] that a claim pursued [was] frivolous, or that his or her litigation tactics [would]
needlessly obstruct the litigation of non-frivolous claims.” Shepherd v. Wellman, 313 F.3d 963,
969 (6th Cir. 2002) (quoting Jones v. Cont’l Corp., 789 F.2d 1225, 1232 (6th Cir. 1986)).
Though the employees’ arguments proved unconvincing—with their service-of-process-costs
argument being particularly weak—they are not frivolous.

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III.
For the above reasons, we AFFIRM the district court’s orders and DENY KPNV’s and
Philips’s motion for sanctions.

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