Fugate et al v. Boeing Co et al

Filing 68

REPORT AND RECOMMENDATIONS- GRANTING #23 MOTION to Dismiss for Lack of Jurisdiction Over the Person. Please note that when filing Objections pursuant to Federal Rule of Civil Procedure 72(b)(2), briefing consists solely of the Objections (no longer than ten (10) pages) and the Response to the Objections (no longer than ten (10) pages). No further briefing shall be permitted with respect to objections without leave of the Court. Objections to R&R due by 7/8/2013. Signed by Judge Sherry R. Fallon on 6/20/2013. (lih)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
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HERSHELL FUGATE and
SUSAN FUGATE,
Plaintiffs,
v.
BOEING CO., et al.,
Defendants.

Civil Action No. 13-152-SLR-SRF

REPORT AND RECOMMENDATION

I.

INTRODUCTION
Presently before the court in this diversity action is a motion to dismiss for lack of

personal jurisdiction (the "Motion" or "Motion to Dismiss") (D.I. 23) filed by Defendant Higbee,
Inc. ("Higbee") pursuant to Federal Rule of Civil Procedure 12(b)(2). Hershell Fugate and Susan
Fugate (the "Plaintiffs") oppose Higbee's Motion, and request leave to conduct jurisdictional
discovery. (D.I. 25 at 1, 3) For the reasons which follow, I recommend that the court GRANT
Higbee's Motion to Dismiss, and DENY the Plaintiffs' request for leave to conduct jurisdictional
discovery.

II.

BACKGROUND
A.

Procedural Background

The Plaintiffs filed this personal injury action against eighteen defendants, including
Higbee (collectively, the "Defendants"), on December 3, 2012, in the Superior Court of
Delaware. (D.I. 1, Ex. A) The Complaint alleges that Hershell Fugate ("Mr. Fugate") suffered
injuries as a result of exposure to asbestos throughout his employment and through personal
automotive work. (Id., Ex.

A~~

25-27). On January 29, 2013, the case was removed to this court

by Defendant United Technologies Corporation. (/d.)
1

On February 13, 2013, Higbee filed the pending Motion to Dismiss. (D.I. 23) The court
held oral argument on the merits of the Motion on June 19, 2013.

B.

Facts

The Plaintiffs claim that Mr. Fugate developed lung cancer, among other diseases and
health problems, as a result of exposure to asbestos throughout his employment: (1) as a jet
engine mechanic in the United States Air Force, from 1965 to 1968; (2) at the NY Railroad from
1968 to 1969; (3) as a launderer for Ford, in Michigan, from 1970 to 1975; (4) as a customer
service representative for Con Rail Railroad, in New York, from 1975-1999; and (5) while
performing personal automotive work from 1959 to 1964. (!d., Ex.

A~~

22, 25) The Plaintiffs

assert that the Defendants manufactured, sold, or distributed asbestos-containing products. (!d.,
Ex. A ~ 29) Plaintiffs reside in Georgia, and aver that the Georgia law is the substantive law of
this case. (!d., Ex.

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1-2, 24)

Defendant Higbee is a New York corporation with its principal place of business in
Syracuse, New York. (D.I. 24, Ex. B

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3) Higbee manufactures custom built products to

customers' specifications, and does not generally sell any products to distributors. (!d., Ex. B

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3) Higbee does not: have any offices in Delaware, 1 have any employees in Delaware, have any
independent contractors in Delaware, advertise in Delaware, use telephone calls, facsimile
messages, or other electronic messages to solicit potential Delaware customers, own or lease real
estate in Delaware, hold any interest in any asset or property within Delaware, or pay taxes in
Delaware. (!d., Ex. B ~~ 4-14)
Higbee's revenue from sales in Delaware during 2012 were approximately $7,591.00,
which represents 0.070% of Higbee's gross sales for the 2012 fiscal year. (!d., Ex. B ~ 15)
1

Higbee is not registered to do business in Delaware, and does not have a registered agent in
Delaware for service of process. (D.I. 24, Ex. B ~~ 3, 7)

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III.

LEGAL STANDARDS
A.

Motion to Dismiss for Lack of Personal Jurisdiction

Federal Rule of Civil Procedure 12(b)(2) directs the court to dismiss a case when the
court lacks personal jurisdiction over the defendant. Fed. R. Civ. P. 12(b)(2). When reviewing a
motion to dismiss pursuant to Rule 12(b)(2), a court must accept as true all allegations of
jurisdictional fact made by the plaintiff and resolve all factual disputes in the plaintiffs favor.

Traynor v. Liu, 495 F. Supp. 2d 444, 448 (D. Del. 2007). Once a jurisdictional defense has been
raised, the plaintiff bears the burden of establishing, with reasonable particularity, that sufficient
minimum contacts have occurred between the defendant and the forum to support jurisdiction.

See Provident Nat'[ Bank v. Cal. Fed. Sav. & Loan Ass'n, 819 F.2d 434,437 (3d Cir. 1987). To
meet this burden, the plaintiff must produce "sworn affidavits or other competent evidence,"
since a Rule 12(b)(2) motion "requires resolution of factual issues outside the pleadings." Time

Share Vacation Club v. Atl. Resorts, Ltd., 735 F.2d 61, 67 n.9 (3d Cir. 1984).
To establish personal jurisdiction, a plaintiff must produce facts sufficient to satisfy two
requirements by a preponderance of the evidence, one statutory and one constitutional. See id. at

66; Reach & Assocs. v. Dencer, 269 F. Supp. 2d 497, 502 (D. Del. 2003). With respect to the
statutory requirement, the court must determine whether there is a statutory basis for jurisdiction
under the forum state's long-arm statute. See Reach & Assocs., 269 F. Supp. 2d at 502. The
constitutional basis requires the court to determine whether the exercise of jurisdiction comports
with the defendant's right to due process. See id.; see also Int'l Shoe Co. v. Washington, 326 U.S.
310,316 (1945).
Under the Due Process Clause, a defendant is subject to the jurisdiction of a federal court
only when the defendant's conduct is such that it should "reasonably anticipate being haled into

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court there." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980). Personal
jurisdiction over a nonresident defendant is proper when either specific or general jurisdiction
exists. See Dollar Sav. Bank v. First Sec. Bank of Utah, NA., 746 F.2d 208, 211 (3d Cir. 1984).
"Specific personal jurisdiction exists when the defendant has 'purposefully directed his activities
at residents of the forum and the litigation results from alleged injuries that arise out of or related
to those activities."' BP Chems. Ltd. v. Fibre Corp., 229 F .3d 254, 259 (3d Cir. 2000) (quoting

Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472, (1985)). General jurisdiction exists when
the defendant's contacts with the forum are "continuous and systematic," whether or not the
contacts relate to the litigation. See id. (quoting Helicopteros Nacionales de Colombia v. Hall,
466 U.S. 408,416 (1984)).
B.

Jurisdictional Discovery

"Although the plaintiff bears the burden of demonstrating facts that support personal
jurisdiction, courts are to assist the plaintiff by allowing jurisdictional discovery unless the
plaintiffs claim is 'clearly frivolous."' Toys "R" Us, Inc. v. Step Two, SA., 318 F.3d 446,456
(3d Cir. 2003) (quoting Mass. Sch. of Law at Andover, Inc. v. American Bar Ass 'n, 107 F.3d
1026, 1042 (3d Cir. 1997). "A court must determine whether certain discovery avenues,
'if explored, might provide the 'something more' needed' to establish personal jurisdiction."

Registered Agents, Ltd. v. Registered Agent, Inc., 880 F. Supp. 2d 541, 548 (D. Del. 2012)
(quoting Toys "R" Us, 318 F.3d at 456). Ifthe plaintiff presents "factual allegations that suggest
'with reasonable particularity' the possible existence of the requisite 'contacts between [the
party] and the forum state,' the plaintiffs right to conduct jurisdictional discovery should be
sustained." Toys "R" Us, 318 F.3d at 456 (alteration in original) (quoting Mellon Bank (East)

PSFS, Nat'! Ass'n v. Farino, 960 F.2d 1217, 1223 (3d Cir. 1992). "A plaintiff may not, however,

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undertake a fishing expedition based only upon bare allegations, under the guise of jurisdictional
discovery." Eurofins Pharma US Holdings v. BioAlliance Pharma SA, 623 F.3d 147, 157 (3d
Cir. 2010) (citing Belden Techs., Inc. v. LS Corp., 626 F. Supp. 2d 448, 459 (D. Del. 2009)).
IV.

DISCUSSION
A.

Personal Jurisdiction

Plaintiffs fail to establish personal jurisdiction over Higbee, and therefore, the court
should grant Higbee's Motion to Dismiss.
To establish personal jurisdiction, a plaintiff must show by a preponderance of the
evidence that: (1) "there is a statutory basis for jurisdiction under the forum state's long-arm
statute," and (2) "the exercise of jurisdiction comports with the defendant's right to due process."
Boston Scientific Corp. v. Wall Cardiovascular Tech., 647 F. Supp. 2d 358, 364 (D. Del. 2009)
(citations omitted). Delaware's long-arm statute provides, in relevant part, that a court may
exercise personal jurisdiction over a defendant when the defendant or its agent:
(1) Transacts any business or performs any character of work or service in the
State; (2) Contracts to supply services or things in this State; ... [or] (4) Causes
tortious injury in the State or outside of the State by an act or omission outside the
State if the person regularly does or solicits business, engages in any other
persistent course of conduct in the State or derives substantial revenue from
services, or things used or consumed in the State.
10 Del. C. § 3104(c). Subsections (c)(1) and (c)(2) grant specific jurisdiction, which "requires
that the cause of action arise from the defendant's conduct in the forum state." Shoemaker v.
McConnell, 556 F. Supp. 2d 351, 354, 355 (D. Del. 2008) (citations omitted). Subsection (c)(4),
in contrast, "confers general jurisdiction, which requires that the defendant or its agents be
'generally present' in the forum state whether or not the tortious acts and injury occurred inside

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Delaware. 2 General jurisdiction may be applied when a defendant's contacts with the forum state
are 'continuous and substantial."' Id. at 355 (citations omitted). See also Registered Agents, 880
F. Supp. 2d at 546 (explaining that "the plaintiffs cause of action can be unrelated to defendant's
activities in the forum State, so long as defendant has 'continuous and systematic contacts with
the forum state."' (citations omitted)).
If the defendant is found to be within the reach of the long-arm statute, the court then
must analyze whether the exercise of personal jurisdiction comports with due process, in other
words, whether the plaintiff has demonstrated that the defendant "purposefully avail[ed] itself of
the privilege of conducting activities within the forum State," such that it should "reasonably
anticipate being haled into court there." World-Wide Volkswagen Corp., 444 U.S. at 297
(citations omitted).
In the present case, Plaintiffs fail to demonstrate a statutory basis for jurisdiction under
Delaware's long-arm statute. As a preliminary matter, the Plaintiffs' theory of personal
jurisdiction is not readily apparent from their pleadings. Plaintiffs seem to rely on 10 Del. C. §
3104(c)(l), as that is the only section of Delaware's long-arm statute cited in the Plaintiffs'
opposition brief. 3 (See D.I. 27 at 2) However, Plaintiffs do not assert any facts suggesting that
their cause of action arose from Higbee's activities in Delaware, 4 which is a requirement for
2

"While seemingly broad, the standard for general jurisdiction is high in practice and not often
met." Reach & Assocs., 269 F.Supp.2d at 505 (citation omitted).
3

The Plaintiffs' position on personal jurisdiction is further obscured by their assertion that
"additional discovery should confirm [Higbee's] business activities and likely others and
demonstrate that the Court has specific or general jurisdiction over Higbee." (D.I. 27 at 2)
(emphasis added)

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In fact, the Plaintiffs claim that Mr. Fugate was exposed to asbestos-containing products
"distributed by Higbee in the States of Pennsylvania, New York, [sic] Michigan" (D.I. 27 at 1),
which supports the conclusion that Plaintiffs' cause of action arose from Higbee's alleged
activities outside ofDelaware.

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jurisdiction under 10 Del. C. § 3104(c)(1). See Registered Agents, 880 F. Supp. 2d at 545-46.
Thus, subsection (c)(1) is inapplicable.
Under the facts presented, the only plausible basis for establishing jurisdiction over
Higbee is 10 Del. C. § 3104(c)(4). Plaintiffs do not assert general jurisdiction under subsection
(c)( 4). Nonetheless, they seek leave to conduct jurisdictional discovery to probe the extent of any
Delaware contacts Higbee may have.
In order to exercise jurisdiction under subsection (c)( 4 ), the court must find, among other
things, that Higbee "regularly does or solicits business" in Delaware, or "derives substantial
revenue from services, or things used or consumed" in Delaware. 10 Del. C. § 31 04( c)(4).
The court finds that Higbee does not regularly conduct or solicit business in Delaware.
As discussed previously, Higbee is a New York corporation that is not registered to do business
in Delaware, and does not have a registered agent in Delaware for service of process. (D.I. 24,
Ex. B ,;,; 3, 7) Furthermore, Higbee does not have any offices in Delaware, have any employees
in Delaware, have any independent contractors in Delaware, advertise in Delaware, solicit
potential Delaware customers, 5 own or lease real estate in Delaware, hold any interest in assets
or property within Delaware, or pay taxes in Delaware. (Id., Ex. B ,;,; 4-14) Therefore, Higbee
does not regularly conduct or solicit business in Delaware. This conclusion is in accord with
prior decisions from this court that involve substantially similar facts. See, e.g., M&M Techs.,

Inc. v. Gurtler Chems., Inc., 2005 WL 293509, at *4 (D. Del. Feb. 8, 2005) ("[Defendant] is a
North Carolina corporation, with no office or place of business in Delaware. [Defendant] has not
appointed any agent for service of process in Delaware and is not registered to do business in
5

While Higbee "does maintain an Internet website that it can use to solicit business from
Delaware, the mere existence of its website does not rise to the level of regularly soliciting
business in Delaware." M&M Techs., Inc. v. Gurtler Chems., Inc., 2005 WL 293509, at *4 (D.
Del. Feb. 8, 2005) (citing Motorola Inc. v. PC-Tel, 58 F. Supp. 2d 349,352 (D. Del. 1999)).

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Delaware. It has no local telephone listing, bank accounts, real estate or employees in Delaware.
It has not paid any taxes or franchise fees in Delaware. It has never commenced any legal action

or proceeding in the State of Delaware and has never been named as defendant in any action in
Delaware, except for the current litigation .... [Defendant] does not regularly ... advertise in
Delaware .... Thus, the court concludes that [defendant] does not regularly do or solicit business
in Delaware."); Bell Helicopter Textron, Inc. v. C&C Helicopter Sales, Inc., 295 F. Supp. 2d
400, 405 (D. Del. 2002) ("[Defendant] has no employees, local telephone listing, bank accounts,
or real estate in Delaware. Anything or anyone involved in [defendant's] business is located in
Canada. The Court further concludes that [defendant] does not solicit business in Delaware.
[Defendant] does not advertise in Delaware, nor has it ever held any accounts with customers in
Delaware. Thus, the Court concludes that [defendant's] conduct does not amount to regularly
doing business or soliciting business in Delaware.").
The court finds that Higbee does not derive substantial revenue from services, or things
used or consumed in Delaware. The only evidence in the record discloses that Higbee earned
approximately $7,591.00 from sales in Delaware during 2012, which represents 0.070% of
Higbee's gross sales for that fiscal year. (See D.I. 24, Ex. B

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15) Nevertheless, Higbee's

Delaware revenue is insufficient as a matter of law to confer jurisdiction. See M&M Techs., 2005
WL 293509, at *5 ("Delaware courts have broadly construed the term 'substantial revenue' to
mean that two to three percent of total revenue is sufficient to confer jurisdiction. However,
when a defendant's sales to customers in Delaware constitute less than one percent of total
revenue, it is not substantial enough to warrant an exercise of jurisdiction." (citing Bell
Helicopter, 295 F. Supp. 2d at 405; United States v. Canso!. Rail Corp., 674 F. Supp. 138, 144

(D. Del. 1987))).

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In sum, Higbee has not transacted any business in Delaware, nor has it ever engaged in
regular business or solicited business in Delaware. Its revenues derived from Delaware are not
substantial. Therefore, the requirements for general jurisdiction under section 31 04(c)(4) of the
Delaware long-arm statute have not been satisfied.
The burden of establishing personal jurisdiction is on the Plaintiffs. "Once a jurisdictional
defense has been raised, the plaintiff bears the burden of establishing with reasonable

particularity sufficient contacts between the defondant and the forum state to support
jurisdiction." Provident Nat'! Bank, 819 F.2d at 437 (emphasis added) (citing Gehling v. St.
George's Sch. of Med, Ltd, 773 F.2d 539, 542 (3d Cir. 1985)). See also Jeffreys v. Exten, 784 F.
Supp. 146, 151 (D. Del. 1992) ("When personal jurisdiction is challenged by a motion to
dismiss, the plaintiff has the initial burden of demonstrating a basis for long-arm jurisdiction.").
Higbee attached to its opening brief in support of its Motion the Affidavit of Lawrence E.
Higbee, Higbee's president. (See D.I. 24, Ex. B) Higbee relies upon this affidavit throughout its
opening brief. (See id at 2-3) Plaintiffs acknowledged at oral argument that they erroneously
claimed that "Higbee has not proffered any affidavit in support of its motion to dismiss." (D.I. 27
at 2) Despite the oversight, Plaintiffs' response to Higbee's Motion is technically insufficient.
"When a defendant files a motion to dismiss pursuant to [Rule] 12(b)(2), and supports that
motion with affidavits, plaintiff is required to controvert those affidavits with his own affidavits

or other competent evidence in order to survive the motion." Hansen v. Neumueller GmbH, 163
F.R.D. 471,474-75 (D. Del. 1995) (emphasis added) (citing Time Share Vacation Club, 735 F.2d
at 63). Consequently, Plaintiffs have not met their burden of overcoming Higbee's jurisdictional
defense.
Because Plaintiffs cannot establish a statutory basis for personal jurisdiction, the court

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need not reach the constitutional due process prong of the jurisdictional analysis. See Registered
Agents, 880 F. Supp. 2d at 547. Nonetheless, because the Delaware long-arm statute and the Due
Process Clause confer the same scope of jurisdiction, asserting personal jurisdiction over Higbee
would offend due process for the same reasons discussed above. See id. Plaintiffs fail to meet
their burden with respect to Higbee's Motion to Dismiss for lack of personal jurisdiction.

B. Jurisdictional Discovery
Just as Plaintiffs have failed to advance sufficient facts to establish personal jurisdiction,
Plaintiffs have also failed to advance sufficient factual allegations to justify jurisdictional
discovery.
Generally, "courts are to assist the plaintiff by allowing jurisdictional discovery unless
the plaintiffs claim is 'clearly frivolous."' Toys "R" Us, 318 F.3d at 456 (citation omitted). "A
plaintiff may not, however, undertake a fishing expedition based only upon bare allegations,
under the guise of jurisdictional discovery." Eurofins Pharma, 623 F.3d at 157 (citing Belden
Techs., 626 F. Supp. 2d at 459) Thus, in order to justify jurisdictional discovery, the plaintiff
must present "factual allegations that suggest 'with reasonable particularity' the possible
existence of the requisite 'contacts between [the defendant] and the forum state."' Toys "R" Us,
318 F.3d at 456 (quoting Farino, 960 F.2d at 1223).
In the present case, the Plaintiffs' factual allegations are insufficient to warrant
jurisdictional discovery. Plaintiffs assert the following in support of jurisdictional discovery:
Higbee offers sales via the Internet and thus potentially has conducted business in
Delaware through the sales of its products to customers there.
The [sic] Higbee has not proffered any affidavit in support of its motion to
dismiss. It [sic] does not aver that Higbee has never conducted business in
Delaware through the purchase of products that Higbee distributed in NY, MI,
and PA.

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Defendants [sic] in its Exhibit B state that Higbee is located in a 60,000
square foot building in the heart of Central New York. 6 In more recent
promotional literature, Higbee proclaims that it has customers around the world,
including the United State [sic] Military [sic]. It also states that it began its
business in 1932 with facilities in New York. 7
(D.I. 27 at 2) Even taking a broad view of all of Plaintiffs' allegations, Plaintiffs fail to assert,
with reasonable particularity, facts showing that Higbee might be subject to personal jurisdiction
under Delaware's long-arm statute. Plaintiffs' supposition that Higbee's Delaware accessible
website is enough to permit further inquiry relating to whether Higbee maintains continuous and
systematic contacts with Delaware lacks any legal basis to justify granting discovery, however
limited. 8 Plaintiffs' allegations fall more appropriately in the category of "clearly frivolous." See
Mass. Sch. of Law at Andover, 107 F.3d at 1042 (explaining that "a mere unsupported allegation

that the defendant 'transacts business' in an area is 'clearly frivolous"' (citations omitted)).
"To grant [Plaintiffs'] request for leave to conduct jurisdictional discovery under such
circumstances would be to allow [Plaintiffs] to 'undertake a fishing expedition based only upon
bare allegations, under the guise of jurisdictional discovery."' Registered Agents, 880 F. Supp.
2d at 548 (quoting Eurofins Pharma US Holdings, 623 F.3d at 157). "[T]here must be some
competent evidence to demonstrate that personal jurisdiction over the defendant might exist

6

Plaintiffs cite Higbee's Exhibit B in error, as none of the exhibits submitted by Higbee include
this information. (See D.I. 24, Exs. A, B) The proposition is actually found in Plaintiffs' own
submission. (See D.I. 27, Ex. 1)
7

These assertions represent the entirety of Plaintiffs' factual allegations in support of
jurisdictional discovery.
8

See Hansen, 163 F.R.D. at 475 ("'No affidavits have been supplied to this court by plaintiff,
and the memoranda which have been filed in response to defendants' motion contain speculation,
but no facts by which jurisdiction can be established .... Since plaintiff has met defendants'
affidavit evidence with mere speculation, plaintiffs request for an opportunity to conduct
discovery on the matter must be denied."' (alteration in original) (quoting Poe v. Babcock Jnt 'l,
PLC, 662 F. Supp. 4, 7 (M.D. Pa. 1985))).

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before allowing discovery to proceed. . . . [A] court cannot permit discovery as a matter of
course simply because a plaintiff has named a particular party as a defendant." Hansen, 163
F.R.D. at 475. Therefore, the court should not allow the jurisdictional discovery Plaintiffs seek.

V.

CONCLUSION
For the foregoing reasons, I recommend that the court grant Higbee's Motion to Dismiss

for lack of personal jurisdiction, and deny the Plaintiffs' request for leave to conduct
jurisdictional discovery.
This Report and Recommendation is filed pursuant to 28 U.S.C. § 636(b)(1)(B), Fed. R.
Civ. P. 72(b)(l), and D. Del. LR 72.1. The parties may serve and file specific written objections
within fourteen (14) days after being served with a copy of this Report and Recommendation.
Fed. R. Civ. P. 72(b)(2). The objections and responses to the objections are limited to ten (10)
pages each. The failure of a party to object to legal conclusions may result in the loss of the right
to de novo review in the District Court. See Sincavage v. Barnhart, 171 F. Appx. 924, 925 n.1
(3d Cir. 2006); Henderson v. Carlson, 812 F.2d 874,878-79 (3d Cir. 1987).
The parties are directed to the court's Standing Order in Non-Pro Se Matters for
Objections Filed Under Fed. R. Civ. P. 72, dated November 16, 2009, a copy of which is
available on the court's website, www.ded.uscourts.gov.

Dated: June 20, 2013
es Magistrate Judge

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