Max Arnold & Sons, LLC et al v. Frigoglass North America et al
Filing
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MEMORANDUM OPINION & ORDER denying 15 Motion to Dismiss; denying 16 Motion to Dismiss; Telephone Conference set for 6/29/2012 at 8:30 AM before Senior Judge Thomas B. Russell.Signed by Senior Judge Thomas B. Russell on 6/18/2012. cc:counsel (KJA)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
PADUCAH DIVISION
CASE NO. 5:11-CV-00204-R
MAX ARNOLD & SONS, LLC and
FEDERATED MUTUAL INSUR. CO.
PLAINTIFFS
v.
FRIGOGLASS NORTH AMERICA and
SFA SOGUTMA SANAYI, et al.
DEFENDANTS
MEMORANDUM AND ORDER
Before the Court are motions to dismiss by two defendants (DN 15; DN 16). Plaintiffs
have responded (DN 19), the defendants have replied (DN 21; DN 22), and Plaintiffs have
submitted a sur-reply (DN 25). Certain co-defendants in this action have submitted briefing
opposing the present motions to dismiss as well (DN 20). These motions are now ripe for
adjudication. For the reasons that follow, they are DENIED. The Court will order a period of
jurisdictional discovery, after which these motions may be refiled.
BACKGROUND
This matter has its origins with a fire that damaged a convenience store in Mayfield,
Kentucky, owned and operated by Plaintiff Max Arnold & Sons, LLC (“Max Arnold”). The
blaze started in the early morning hours of October 30, 2010, near a reach-in electric cooler
located in the store. The complaint alleges, and the parties accept for the purposes of this
motion, that the origin of the fire was the cooler’s electrical system.
Defendant AHT Cooling System GMBH-NL, Deutchland (“AHT”) and Defendant ATC
Group, Inc. (“ATC”) were distributors of the cooler. Defendant Core-Mark International, Inc.
(“Coremark”) is a wholesale convenience store food and beverage distributor. Coremark owned
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the cooler in question and stocked it with food and beverages pursuant to a contractual
agreement with Max Arnold.
The present controversy surrounds the manufacturer of the cooler. Before the lawsuit,
representatives of Max Arnold discovered an identification plate on the cooler bearing the names
of AHT and Defendant SFA Sogutma Sanayi’s (“SFA”). SFA is a Turkish corporation engaged
in the business of designing, manufacturing, and distributing commercial refrigeration products.
SFA is a subsidiary of Frigoglass North America’s (“Frigoglass”), a corporation based in
Spartenburg, South Carolina, also involved in designing, manufacturing, and distributing
commercial refrigeration products. Despite the allegations of Max Arnold that SFA
manufactured the cooler in question, the present record is unclear on this pivotal piece of
information.
On December 1, 2011, Max Arnold and its insurer, Plaintiff Federated Mutual Insurance
Company (collectively “Plaintiffs”), filed this lawsuit in Graves County Circuit Court against the
above-named defendants. Plaintiffs seek to recover for the fire damage caused by the faulty
cooler. After a timely removal to this court, SFA and Frigoglass moved to dismiss for lack of
personal jurisdiction. Both state that they do not have sufficient contacts to Kentucky to justify
either specific or general personal jurisdiction.1
STANDARD
Rule 12(b)(2) of the Federal Rules of Civil Procedure permits a defendant to dismiss for
want of personal jurisdiction. In a diversity action, the Court must look to the law of the forum
state to determine whether personal jurisdiction exists. Intera Corp. v. Henderson, 428 F.3d 605,
615 (6th Cir. 2005); CompuServe, Inc. v. Patterson, 89 F.3d 1257, 1262 (6th Cir. 1996). “A
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Although SFA and Frigoglass are separate entities, the Court will analyze their motions together. The ultimate
decision to grant a period of discovery on personal jurisdiction obviates the need to bifurcate the Court’s analysis.
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Court’s exercise of personal jurisdiction over a nonresident defendant is appropriate only if it
meets the states’ long-arm statute and constitutional due process requirements.” Henderson, 428
F.3d at 615. The Court’s exercise of jurisdiction comports with due process when the defendant
has sufficient minimal contacts such that “traditional notions of fair play and substantial justice
are not offended.” Id. at 615-16 (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316
(1945)). The frequency of contacts is not determinative; the defendant’s conduct must be such
that he or she “should reasonably anticipate being hauled into court there.” World-Wide
Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980). Kentucky’s long-arm statute has been
understood to reach the limit permitted by the Constitution, thus the single issue is whether the
jurisdiction sought is within the requirements of due process.2 Tobin v. Astra Pharm. Prods.,
Inc., 993 F.2d 528, 542-43 (6th Cir. 1993).
“The minimum contacts requirement may be satisfied by a showing of either general
jurisdiction or specific jurisdiction.” Fortis Corporate Ins. v. Viken Ship Mgmt., 450 F.3d 214,
218 (6th Cir. 2006); Fairbrother v. American Monument Found., LLC, 340 F. Supp. 2d 1147,
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Kentucky’s long arm statute provides in pertinent part that:
(2) (a) A court may exercise personal jurisdiction over a person who acts directly or by an agent,
as to a claim arising from the person's:
1.
Transacting any business in this Commonwealth;
2.
Contracting to supply services or goods in this Commonwealth;
3.
Causing tortious injury by an act or omission in this Commonwealth;
4.
Causing tortious injury in this Commonwealth by an act or omission outside this
Commonwealth if he regularly does or solicits business, or engages in any other
persistent course of conduct, or derives substantial revenue from goods used or
consumed or services rendered in this Commonwealth, provided that the tortious
injury occurring in this Commonwealth arises out of the doing or soliciting of
business or a persistent course of conduct or derivation of substantial revenue
within the Commonwealth;
5.
Causing injury in this Commonwealth to any person by breach of warranty
expressly or impliedly made in the sale of goods outside this Commonwealth
when the seller knew such person would use, consume, or be affected by, the
goods in this Commonwealth, if he also regularly does or solicits business, or
engages in any other persistent course of conduct, or derives substantial revenue
from goods used or consumed or services rendered in this Commonwealth.
KRS § 454.210(2)(a)(1)-(5).
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1153 (D. Colo. 2004). General jurisdiction over a nonresident requires a showing of continuous
and systematic contacts with the forum state. Aristech Chemical Intern. Ltd. v. Acrylic
Fabricators Ltd.,138 F.3d 624 (6th Cir. 1998); see Helicopteros Nacionales de Colombia, S.A. v.
Hall, 466 U.S. 408, 415 (1984). In order for a nonresident to be subject to the jurisdiction of the
court under specific jurisdiction, i.e., for specific claims asserted, those claims must arise out of
or be related to activities that were significant and purposely directed by the defendant at a
resident of the forum state. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472-73 (1985). The
following criteria have historically been employed to determine if specific personal jurisdiction
is appropriate:
First, the defendant must purposefully avail himself of the privilege of acting in
the forum state or causing consequence in the forum state. Second, the cause of
action must arise from the defendant's activities there. Finally, the acts of the
defendant or consequences must have a substantial enough connection with the
forum state to make the exercise of jurisdiction over the defendant reasonable.
Tobin, 993 F.2d at 542-43 (quoting Theunissen v. Matthews, 935 F.2d 1454, 1460 (6th Cir.
1991)).
DISCUSSION
Plaintiffs’ complaint provides the barest of foundations regarding SFA’s and Frigoglass’s
connection to the present controversy. In the complaint, Plaintiffs allege that SFA and
Frigoglass transact business in Kentucky and are involved in “designing, manufacturing,
producing, advertising, marketing, distributing, and selling open aired coolers including that
certain open air cooler . . . placed in the business premises of [Max Arnold].” Complaint, DN 11 ¶¶ 4-5, 10-11. Absent from the complaint and present record is any indication about who
manufactured the cooler, who was responsible for its upkeep, and how it came to reside in the
convenience store. In response to these motions, Plaintiffs managed to attach several exhibits
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demonstrating Frigoglass is a multinational corporation with operations in the United States, that
it launched a joint business venture with Coca Cola Recycling LLC in Atlanta, Georgia, and it
offers on-site preventative maintenance for its refrigeration units. DN 19-2 p. 1-2; DN 19-3 p. 1;
DN 19-7 p. 11.
SFA and Frigoglass respond to the allegations in Plaintiffs’ complaint with their own
general assertions. Mehmet Cimsir, the director of SFA, contends that the company did not
construct the allegedly defective cooler “directly for” residents of Kentucky. Cimsir Affidavit,
DN 15-1 ¶ 3. He indicates SFA, in the state of Kentucky, does not advertise or sell products,
engage in business, maintain an office, derive income from sales, promote or market its products,
or pay taxes. Cimsir Affidavit, DN 15-1 ¶¶ 4-15. Amil Rao, vice president and secretary of
Frigoglass, affirms the company did not “manufacture, construct, assemble, market, distribute,
and/or sell the allegedly defective cooler.” Roa Affidavit, DN 16-1 ¶ 3. He further states
Frigoglass has had no contact with Max Arnold, does not keep corporate officers in Kentucky, is
not licensed and has no facilities in the state, and does not maintain any real property or other
assets in the state. Roa Affidavit, DN 16-1 ¶¶ 4-11.
The decision before the Court turns on how it should balance the factual allegations of
the complaint with the affirmations by SFA and Frigoglass. Though Plaintiffs have not offered
affidavits of their own on these Defendants’ responsibility for manufacturing and selling the
cooler in question, the record is not without some plausible foundation for such a ruling. SFA’s
corporate identification was affixed to the incident cooler. SFA and Frigoglass have operations
in the United States, and while Frigoglass denies it sold the cooler, the negative inferences of
Roa’s affidavit show the company may have other refrigeration products in Kentucky. Roa
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Affidavit, DN 16-1 ¶ 3 (limiting the scope of Frigoglass’s activity in Kentucky to the cooler “that
is subject of [this lawsuit]”).
The plaintiff bears the burden of establishing jurisdiction. Third Nat'l Bank v. Wedge
Group, Inc., 882 F.2d 1087, 1089 (6th Cir. 1989). The precise burden a plaintiff must shoulder
depends on a court’s response to a motion to dismiss for lack of personal jurisdiction. Serras v.
First Tennessee Bank Nat. Ass'n., 875 F.2d 1212, 1214 (6th Cir.1989). “Presented with a
properly supported 12(b)(2) motion and opposition, the court has three procedural alternatives: it
may decide the motion upon the affidavits alone; it may permit discovery in aid of deciding the
motion; or it may conduct an evidentiary hearing to resolve any apparent factual questions.”
Theunissen v. Matthews, 935 F.2d 1454, 1458 (6th Cir. 1991). If the court decides to resolve a
personal jurisdiction dispute on the motions and affidavits alone, the plaintiff need only make a
prima facie showing of jurisdiction, meaning enough facts to avoid a motion to dismiss. Welsh
v. Gibbs, 631 F.2d 436, 438 (6th Cir. 1980) (quoting Data Disc, Inc. v. Systems Tech., Assoc.,
Inc., 557 F.2d 1280, 1285 (9th Cir. 1977)). If the court permits jurisdictional discovery or
conducts an evidentiary hearing, the plaintiff is required to prove jurisdiction by a preponderance
of the evidence. Long John Silver's, Inc. v. DIWA III, Inc., 650 F. Supp. 2d 612, 619 (E.D. Ky.
2009); Steelcase, Inc. v. Mar-Mol Co., Inc., 210 F. Supp. 2d 920, 924 (W.D. Mich. 2002). The
district court has discretion to determine how best to resolve such an impasse. Theunissen, 935
F.2d at 1458.
Though the allegations in Plaintiffs’ complaint are plausible on their face, the fact
remains that Plainiffs are without a colorable narrative on the origins of the cooler and how the
other distributor-defendants came to possess it. The exhibits offered by Plaintiffs might be
enough to defeat these motions but they are an inadequate foundation to haul SFA and Frigoglass
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into this lawsuit without some reticence by the Court. As for SFA and Frigoglass, the Court
remains skeptical about their proclamations that they have no connection to the malfunctioning
cooler or the state of Kentucky. The presence of SFA’s corporate logo on the cooler and its
claim that it did not construct the cooler “directly for” residents of Kentucky leaves the door ajar
as to the company’s involvement. In addition, Frigoglass’s operations in states adjoining
Kentucky and its policy of on-site repairs to its equipment convinces the Court that the company
has understated its contacts with the forum state.
Further, the parties have not divulged the framework of Frigoglass and SFA’s corporate
relationship. The general rule holds that “a foreign parent corporation is not subject to the
jurisdiction of a forum state merely because a subsidiary is doing business there.” 36 C.J.S., Fed.
Courts § 32 (2010); Cannon Mfg. Co. v. Cudahy Packing Co., 267 U.S. 333 (1925). Rather,
courts consider various factors when determining jurisdiction over a parent, such as ownership or
control of the subsidiary or sale of the parent’s product by the subsidiary in the jurisdiction in
question. Velandra v. Regie Nationale des Usines Renault, 336 F.2d 292, 297 n. 21 (6th Cir.
1964). The Court is presently unfamiliar with the corporate structure of Frigoglass and SFA. It
would be remiss to make any jurisdictional decision without this information.
The record is inadequate to reach a decision on these motions. While Frigoglass and SFA
have called into question portions of the pleadings, dismissal is not justified. Alternatively,
without answers on where the cooler came from and who made it, the Court cannot in good
conscious retain jurisdiction over Frigoglass and SFA. The Court will deny the motions to
dismiss and permit a period of limited jurisdictional discovery.
CONCLUSION
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For the foregoing reasons, IT IS HEREBY ORDERED that Defendants’ motions to
dismiss (DN 15; DN 16) are DENIED. IT IS ALSO ORDERED that the Court will hold a
telephonic conference on Friday, June 29, 2012 at 8:30 A.M. CT. There, the Court will set
forth the discovery schedule for the dispute over personal jurisdiction. The Court shall initiate
the call.
June 18, 2012
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