Nespresso USA, Inc. v. Ethical Coffee Company SA
MEMORANDUM OPINION. Signed by Judge Gregory M. Sleet on 7/13/2017. (mdb)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELA WARE
NESPRESSO USA, INC.,
ETHICAL COFFEE COMPANY SA,
ETHICAL COFFEE COMPANY SA and
ETHICAL COFFEE CORPORATION,
NESPRESSO USA, INC.,
NESTLE NESPRESSO SA, NESTLE SA
and NESTEC SA,
Civil Action No. 16-194-GMS
On December 21, 2015, N espresso USA filed a complaint against Ethical Coffee Company
SA ("ECC") requesting declaratory judgment that Nespresso USA does not infringe ECC's U.S.
Patent No. 9,113,746 (the "'746 Patent"). (D.I. 1 if 30-31). On April 18, 2016, ECC answered the
complaint, and counterclaimed that Nespresso USA, Nestle Nespresso SA, Nestle SA ("Nestle"),
and Nestec SA ("Nestec") infringe the '746 Patent, violate the Sherman Act, conduct unfair
competition, and commit unjust enrichment. (D.I. 24
if 1-3). 1
On August 10, 2016, Nestle and
Nestec filed a motion to dismiss for lack of personal jurisdiction under Federal Rule of Civil
Procedure 12(b)(2). (D.I. 51-52). For the reasons that follow, court will grant the motion to
Nestle is a corporation organized under the laws of Switzerland, and with its principal place
of business in Switzerland. (D.I. 54 if 2-3). Nestec is also a corporation organized under the laws
of Switzerland, and with its principal place of business in Switzerland. (D.I. 55
the named defendants are related to each other through a shared corporate hierarchy. (D.I. 41·ir78). Nespresso USA is a subsidiary of Nestle Nespresso SA, which is a direct subsidiary of Nestle.
(D.I. 54 if 13). Nestec is an affiliate of Nestle Nespresso SA, and Nespresso USA, and a wholly
owned subsidiary ofNestle. Id.
The degree to which Nestle and Nestec are involved with the actions giving rise to the
present suit is contested. (D.I. 52 at 3-5); (D.I. 58 at 2-8). ECC contends that Nestle and N~stec
"coordinate and execute the manufacture, import, marketing, distribution, and sale of the accused
Nespresso machines in the U.S." (D.I. 58 at 2). ECC uses the declaration of Jean-Paul Gaillard
("Gaillard"), the chairman and founder of ECC, to allege that "Nestle SA was and remains
responsible for ultimate decision making with respect to the development and manufacturing of
Nespresso products, production, research, and development and technical specifications." (D.I. 60
The unfair competition and unjust enrichment claims were dismissed on September 7, 2016. (D.I. 64). All claims
related to the infringement of the '746 Patent were dismissed on February 2, 2017. (D.I. 93). There are two pending
motions to amend the answer and counterclaims. (D.I. 72); (D.I. 94).
iii! 1, 7).
And that "Nestec SA was and is mainly a 'service company' with the task to ensure and
supervise implementation of Nestle SA central policies." Id.
Nestle and N estec deny the aforementioned allegations, and offer two declarations to allege
Nestle and Nestec do not have contacts with the United States or Delaware. (D.I. 54, 55). Ricardo
Cortes-Monroy, the Senior Vice President and General Counsel of Nestle, asserts that Nestle is
not registered to do business in the U.S., does not maintain a registered agent for service, own any
real property, offices, manufacturing plants, research facilities, have a mailing address or telephone
listing in the U.S., or engage in the espresso market in the U.S. through sales or product
development. (D.I. 54
Odette Dupont, the Vice President of Nestec, asserts similar
claims as Ricardo Cortes-Monroy, while also asserting Nestec has its own board of directors,
Nestec's officers make the day-to-day operating decisions of Nestec, and that "Nestec did not
design or manufacture Nespresso's Original Line machines." (D.I. 55 irir 5-14).
STANDARD OF REVIEW
The court must dismiss a case when it lacks personal jurisdiction over the defendant. Fed.
R. Civ. P. 12(b)(2); Freres v. SP! Pharma, Inc., 629 F. Supp. 2d 374, 382 (D. Del. 2009). The
plaintiff bears the burden of establishing that the defendants are properly subject to the court's
jurisdiction. See JCT Pharm., Inc. v. Boehringer Ingelheim Pharm., Inc., 147 F. Supp. 2d 268,
270-71 (D. Del. 2001 ). Because no evidentiary hearing occurred, the plaintiff bears the burden of
alleging facts sufficient to make a prima facie case of personal jurisdiction over the defendant.
Telcordia Techs., Inc. v. Alcatel S.A., No. 04-874 GMS, 2005 U.S. Dist. LEXIS 10194, at *5 (D.
Del. May 27, 2005). To satisfy this burden, the plaintiff must adduce facts which "establish with.
reasonable particularity" that jurisdiction over Nestle or Nestec exists. See Joint Stock Soc 'y v.
Heublein, Inc., 936 F. Supp. 177, 193 (D. Del. 1996).
Personal jurisdiction is derived from two separate sources: state statutory law and U.S.
constitri.tional due process. !named Corp. v. Kuzmak, 249 F.3d 1356, 1359-60 (Fed. Cir. 2001).
The Delaware long-arm statute, however, has been construed "broadly to confer jurisdiction to the
maximum extent possible under the Due Process Clause," so the focus of the inquiry traditionally
rests on the constitutional component. Del. Code. Ann. Tit. 10 § 3104 (West 2017); see Merck &
Co., Inc. v. Barr Labs., Inc., 179 F. Supp. 2d 368, 372 (D. Del. 2002) (citing Hercules Inc. v. Leu
Trust & Banking Ltd., 611A.2d476, 480-81 (Del. 1992)). 2
"[D]ue process requires only that in order to subject a defendant to a judgment in personam,
if he be not present within the terq.tory of the forum, he have certain minimum contacts with it
such that the maintenance of the suit does not offend traditional notions of fair play and substantial
justice." Int'l Shoe Co. v. State of Wash., Office of Unemployment Compensation & Placement,
326 U.S. 310, 316 (1945) (internal quotation marks omitted). Since the Supreme Court initially
announced this rule in International Shoe, the doctrine has split into two categories: specific and
general jurisdiction. Specific jurisdiction exists where "the defendant has 'purposefully directed'
his activities at residents of the forum, and the litigation results from alleged injuries that 'arise out
of or relate to' those activities." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472-73 (1985)
(internal citations omitted) (quoting Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 774 (1984);
The court recognizes that "Delaware law is ... unclear as to whether or not the long arm statute is
coextensive with the due process clause," and whether separate analyses are required. See Commissariat AL 'Energie
Atomique v. Chi Mei Optoelecs. Corp., 395 F.3d 1315, 1322 (Fed. Cir. 2005); see also JCT Phann., 147 F. Supp. 2d
at 271 n.4 ("[T]he Delaware Supreme Court has not collapsed the analysis under the Delaware long-arm statute into
the constitutional due process analysis, as some courts have done."). The parties have not challenged jurisdiction
under Delaware's long-arm statute, however, so the court directs its attention to the constitutional analysis.
Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 (1984)). In contrast, general
jurisdiction does not require that the cause of action arise out of contacts with the forum state.
Helicopteros, 466 U.S. 408 at 421. Rather, general jurisdiction exists where the defendant's
contacts with the forum "are so continuous and systematic as to render it essentially at home in the
forum State." Daimler AG v. Bauman, 134 S. Ct. 746, 761 (2014) (quoting Goodyear Dunlop
Tires Operations, S.A. v. Brown, 131 S. Ct. 2846, 2851 (2011)). Recent Supreme Court opinions
confirm that "specific jurisdiction has become the centerpiece of modem jurisdiction theory,"
whereas general jurisdiction-often referred to as "all-purpose" jurisdiction-"[has played] a
reduced role:" Id. at 755 (alteration in original) (quoting Goodyear, 131 S. Ct. at 2854).
A. General Jurisdiction
The court will first examine whether Nestle or Nestec are "at home" in Delaware, and
thereby subject to general jurisdiction. Daimler AG v. Bauman, 134 S. Ct. 746, 751 (2014).
Nespresso USA stated Nestle and Nestec are corporations organized in Switzerland, and have their
principal places of business in Switzerland. (D.I. 41·irir7-8). ECC agrees that Nestle and Nestec
are Swiss corporations with their principal places of businesses in Switzerland. (D.I. 24 iii! 7-8;
D.I. 46 iii! 7-8). For jurisdictional purposes, a corporation's principal place of business is its "nerve
center"-"the place where the corporation's high level officers direct, control, and coordinate the
corporation's activities." Hertz Corp. v. Friend, 559 U.S. 77, 80, 97 (2010). Because Nestle's and
Nestec's nerve centers are in Switzerland, and there are no ties between the companies and
Delaware that render them essentially at home in this state, they cannot be subject to general
jurisdiction here. See Daimler, 134 S. Ct. at 755-56, 760 (holding that the place of incorporation
and principal place of business are the primary loci where the exercise of general jurisdiction is
B. Specific Jurisdiction
1. Stream of Commerce Theory
ECC contends that Nestle and Nestec are subject to personal jurisdiction under the stream
of commerce theory. According to that theory, a foreign corporation can be subject to a forum
state's jurisdiction if the foreign entity "purposefully avails itself of the privilege of conducting
activities within the forum State, thus invoking the benefits and protections of its laws:" Hanson
v. Denckla, 357 U.S. 235, 253 (1958). ECC argues that Nestle and Nestec helped to "develop,
manufacture, import, distribute, market, and sell, the Nespresso products ... and monopolize the
U.S. marketplace." (D.I. 58 at 11). Further, ECC contends that Nestle's intent to serve the United
States generally, in addition to the billions of dollars Nestle made through the U.S. market,
demonstrates that Nestle can be held accountable for the sold products introduced into the U.S.
The court finds this argument unpersuasive for several reasons. One reason is that Nestle
did not introduce the N espresso machines into the stream of commerce. The record indicates
Nestle "had no role in the design, manufacture, distribution, marketing, or sale of the Nespresso
Original Line machines," (D.I. 69
ii 4), and "does not engage in any manufacturing or sales
activities related to espresso machines, espresso capsules, or any other product in the United
States." (D.I. 54
ir 10). Nestle also has no influence regarding the "pricing, product design,
manufacturing, or sales decisions made by Nestec S.A., ... or Nespresso USA." Id.
if 15. As a
result, ECC is unable to demonstrate Nestle or Nestec placed-or otherwise influenced the
placement of-the Nespresso machines into either the United States market generally or the
Delaware market specifically. Goodyear, 131 S. Ct. at 2849 ("[E]xercises of specific jurisdiction
... [are only allowed when] a nonresident defendant, acting outside the forum, places in the stream
of commerce a product that ultimately causes harm inside the forum.").
ECC contends that Nestle and Nestec, as parent companies of the Nespresso USA
subsidiary, can be held responsible for the actions ofNespresso USA. (D.I. 24i!'tf13-14). To the
extent this argument affects the stream of commerce analysis, Third Circuit case law has found
that "mere ownership of a subsidiary does not justify the imposition of liability on the parent."
Pearson v. Component Tech. Corp., 247 F.3d 471, 484 (3d Cir. 2001); see United States v.
Bestfoods, 524 U.S. 51, 69 (1998). In other words, ECC would have to demonstrate that Nestle
and N estec were responsible for introducing the N espresso machines into the stream of commerce,
and not simply that a subsidiary within the United States introduced the Nespresso machines. No
evidence in the record indicates that Nestle and Nestec are responsible for introducing the
Nespresso machines into the U.S. or Delaware markets, and therefore ECC's argument is
ECC also contends that N estec, by owning the patents for the N espresso machines involved
in this matter, is subject to personal jurisdiction. (D.I. 58 at 6-7). The court has previously
determined that "ownership of a United States patent, without more, cannot support the assertion
of personal jurisdiction over a foreign patentee in any state." Telcordia Techs., Inc. v. Alcatel S.A.,
No. 04-874 GMS, 2005 U.S: Dist. LEXIS 10194, at *23 (D. Del. May27, 2005) (quotingAdvanced
Cardiovascular Sys., Inc. v. Medtronic, Inc., 1996 U.S. Dist. LEXIS 11696, No. C-95-3577 DLJ,
1996 WL467293, at *6 n.5 (N.D. Cal. July 24, 1996)). Therefore, ECC would need to demonstrate
.additional criteria in order for Delaware to hold personal jurisdiction over Nestec. In addition, the
dismissal of all patent-related claims from the February 2, 2017 order strains the connection
between owning a U.S. patent and the issues at hand in the present case. (D.I. 93, 96).
For the reasons explained above, ECC has not made a prima facie showing that Nestle or
Nestec would be subject to Delaware's personal jurisdiction under a stream of commerce theory.
2. Agency Theory
ECC also contends that Nestle and Nestec are subject to personal jurisdiction under the
agency theory. (D.I. 58 at 1). The agency theory "examines the degree of control which the parent
exercises over the subsidiary." Applied Biosystems, Inc. v. Cruachem, Ltd., 772 F. Supp. 1458,
1463 (D. Del. Sept. 6, 1991). To determine whether an agency relationship exists, a court will
examine the following factors: "the extent of overlap of officers .and directors, methods of
financing, the division of responsibility for day-to-day management, and the process by which
each corporation obtains its business." Id. ECC alleges, inter alia, that Nestle and Nestec dictate
the policies and strategies of Nespresso USA, take credit for all Nespresso USA activities
regarding sales, employment, and property, place the Nestle logo on Nespresso products, control
the Nespresso websites, and share their corporate officers with Nespresso. (D.I. 58 at 2-8).
The presented evidence for the agency theory, however, is not sufficient to meet ECC's
burden. Although two individuals from Nespresso SA share a leadership role with Nestle, and one
additionally holds a leadership position with N estec, the court has previously found such a tenuous
connection to be a "minor overlap," which is "not dispositive" for finding agency. Telcordia, 2005
U.S. Dist. LEXIS 10194 at *11 (D. Del. May 27, 2005); see Bestfoods, 524 U.S. at 69 ("[I]t is
entirely appropriate for directors of a parent corporation to serve as directors of a subsidiary, and
that fact alone may not serve to expose the parent corporation to liability for its subsidiary's acts.").
As for the argument that agency over N espresso USA is found in an annual review attributing all
financial and corporate successes to Nestle, this line of reasoning does not establish that Nestle
controlled Nespresso USA regarding matters of patent infringement or antitrust, nor does it even
consider or allege whether such actions are normal for a large corporation with many subsidiaries.
Furthermore, "regulatory filings present[ing] the assets, liabilities, and financial earnings of its
subsidiaries as one indistinguishable whole" do not prove agency. Alcoa, Inc. v. Alcan, Inc., No.
06-451-SLR, 2007 U.S. Dist. LEXIS 51565, at *8-9 (D. Del. July 17, 2007) (internal quotation
marks omitted). For the same reasons, Nestle setting the corporate policies and procedures for all
subsidiaries is not sufficient evidence of agency. See Monsanto Co. v. Syngenta Seeds, Inc., 443
F. Supp. 2d-636, 644-45 (D. Del. 2006): As discussed previously, Nestec's ownership of U.S.
patents does not create the necessary contacts needed to invoke personal jurisdiction, and therefore
this argument fails to establish Nestle's or Nestec's control over Nespresso USA's or Nespresso
SA's day-to-day management.
Thus, ECC has failed to establish aprimafacie case for agency theory, and therefore cannot
support Nestle and Nestec being subjected to personal jurisdiction in Delaware.
C. Personal Jurisdiction under Federal Rule of Civil Procedure 4(k)(2)
ECC also argues that Federal Rule of Civil Procedure 4(k)(2) gives the court personal
jurisdiction over Nestle and Nestec. (D.I. 58 at 18). However, as discussed above, ECC has not
demonstrated that enforcing personal jurisdiction over Nestle or Nestec "is consistent with the
United States Constitution and laws." Fed. R. Civ. P. 4(k)(2)(B). The Fourteenth Amendmentin particular the Due Process Clause-forms the constitutional basis for the jurisdictional tests
created by International Shoe and progeny. Daimler AGv. Bauman, 134 S. Ct. 746, 748-51 (2014)
(providing history of modem jurisdictional analysis); Shaffer v. Heitner, 433 U.S. 186, 207 (1977)
("The standard for determining whether an exercise of jurisdiction ... is consistent with the Due
Process Clause is the minimum-contacts standards elucidated in International Shoe.") Since
minimum contacts have not been established through either a stream of commerce or agency
approach, ipso facto, personal jurisdiction cannot be predicated on Fed. R. Civ. P. 4(k)(2).
D. Jurisdictional Discovery
ECC argues that even if the court is reluctant to deny N estec and Nestle's motion it should,
at the least, orderjurisdictional discovery. District courts typically order jurisdictional discovery
when the plaintiff "presents factual allegations that suggest 'with reasonable particularity' the
possible exist.ence of the requisite 'contacts between [the party] and the forum state."' Toys "R"
Us, Inc. v. Step Two, S.A., 318 F.3d 446, 456 (3d Cir. 2003) (quoting Gehlingv. St. George's Sch.
of Med., Ltd., 773 F.2d 539, 542 (3d Cir. 1985)). The court finds that ECC has not carried its
ECC alleges that Nestec and Nestle's "participation in the design, manufacture, strategy
and daily management establishes a primafacie showing for jurisdictional discovery." (D.I. 58 at
20). As previously mentioned, the Declarations of Nestle's Senior Vice President and General
Counsel, and Nestec's Vice President, directly contradict ECC's allegations. See (D.I. 69 i-f 4)
("Nestle S.A. had no role in the design, manufacture, distribution, marketing, or sale of the
Nespresso Original Line machines."); (D.I. 55 ,-r 14) ("Nestec did not design or manufacture
Nespresso's Original Line machines.").
ECC also relies on inadmissible evidence. A finding of personal jurisdiction, if contested
under Rule 12(b)(2), requires factual evidence, and cannot rely on the bare pleadings or "affidavits
which parrot and do no more than restate plaintiff's allegations without identification of particular
defendants and without factual content." Time Share Vacation Club v. Atl. Resorts, Ltd., 735 F.2d
61, 66 (3d Cir. 1984). A plaintiff can satisfy its burden of establishing jurisdictional facts by
submitting an affidavit, but that affidavit will only have value when it is "based on the affiant' s
personal knowledge or [is] admissible for some other reason." Green Keepers v. Softspikes, Inc.,
No. 98-2255, 1998 U.S. Dist. LEXIS 15157, at *7 (E.D. Pa. Sep. 23, 1998).
One critical source for ECC' s argument, Gaillard' s declaration, does not supply the factual
evidence required to defeat a 12(b)(2) motion; the portions of Gaillard's declaration which are
based on "regular interaction with Nestle Group executives" are not facts within Gaillard's
personal knowledge, making them inadmissible hearsay. Fed. R. Evid. 80l(c); Green Keepers,
1998 U.S. Dist. LEXIS 15157, at *8. The situation presented here closely mirrors the factual
scenario in Green Keepers. There, the court found facts supplied in the "Carroll affidavit"information derived from "unidentified Green Keepers representatives, golf products distributors
and retailers, and from a magazine article"-to be clearly inadmissible hearsay. Id. at *8. The
information supplied was not within Carroll's personal knowledge and the plaintiff did not allege
other facts to establish the admissibility of the statements proffered. Id. Here, Gaillard similarly
submits "facts" he learned from interactions with unnamed Nestle executives; that evidence
constitutes information in Gaillard's possession, not facts within his personal knowledge. Like
the plaintiff in Green Keepers, ECC offered no other evidence to establish the admissibility of
Gaillard's hearsay statements. For.that reason, the court finds that Gaillard's statements based on
interactions with Nestle executives cannot be used to support ECC's burden of proof.
Gaillard's declaration also includes statements derived from his personal experience while
working for Nestle between 1988 and 1997. The court must disregard those statements as well
because they would be inadmissible as speculation if used for the purpose of proving how Nestle
acted when the controversy occurred between 2009 and the present. Fed. R. Evid. 602 ("A witness
may testify to a matter only if evidence is introduced sufficient to support a finding that the witness
has personal knowledge of the matter."); Green Keepers, 1998 U.S. Dist. LEXIS 15157, at *8;
ifif 25-48); (D.I. 60 ifif 2-8, 10, 13). These statements are also not supported by facts
making them admissible for any other reason, and, therefore, do not have value in advancing
Even if Gaillard' s statements were admissible and therefore given weight, they would not
establish a prima facie case as outlined by Supreme Court precedent.
The Supreme Court
instructed that demonstrating a prima facie case "requires more than labels and conclusions, and a
formulaic recitation of the elements ... will not do .... Factual allegations must be
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