Zon LED LLC v. Power Partners Inc et al
Filing
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ORDER granting 43 Power Partners, Inc.'s Motion to Dismiss Amended Complaint. Signed by Honorable Timothy D. DeGiusti on 9/19/2017. (mb)
IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF OKLAHOMA
ZON LED, LLC,
Plaintiff,
v.
POWER PARTNERS, INC.; et al.,
Defendants.
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Case No. CIV-16-1090-D
ORDER
Before the Court is Defendant Power Partners, Inc.’s Motion to Dismiss Amended
Complaint [Doc. No. 43], filed pursuant to Fed. R. Civ. P. 12(b)(2), (b)(6) and (c) and Fed.
R. Civ. P. 9(b). As one ground for dismissal, Power Partners, Inc. (“Power Partners”)
asserts a lack of personal jurisdiction in this forum because it is a nonresident defendant
with insufficient contacts to the State of Oklahoma to satisfy due process. “Jurisdiction is
a threshold question that a federal court must address before reaching the merits of a [case],
even if the merits question is more easily resolved and the party prevailing on the merits
would be the same as the party that would prevail if jurisdiction were denied.” Montoya v.
Chao, 296 F.3d 952, 955 (10th Cir. 2002) (citing Steel Co. v. Citizens for a Better Env’t,
523 U.S. 83, 93-94 (1998)); see Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 584 (1999)
(personal jurisdiction). Thus, the Court must decide the jurisdictional question raised by
Power Partners before reaching any merits issues presented by the Motion. 1
1
Power Partners asserts as its first ground for dismissal that Plaintiff’s claims are barred
by a settlement agreement executed in October 2014 to resolve litigation between Power Partners
Plaintiff Zon LED, LLC has filed a response [Doc. No. 51] in opposition to the
Motion, and Power Partners has filed a reply brief [Doc. No. 55] and a supplemental exhibit
[Doc. No. 60]. The Motion is fully briefed and ripe for decision. 2
Factual and Procedural Background
Plaintiff brings suit to recover damages allegedly caused by the failure of two LED
power supply products or “drivers” sold by Power Partners, which is a Massachusetts
corporation located in Massachusetts. Power Partners distributes products manufactured
by others; the drivers were produced by a Chinese company, Inventronics, Inc., which was
a named defendant in this case but was dismissed for lack of service. See 4/28/17 Order
[Doc. No. 63]. Plaintiff has also sued Inventronics USA, Inc., which is an Oklahoma
corporation located in Oklahoma City and alleged to be the “United States presence” and
“a distribution center” for Inventronics, Inc. See Am. Compl. [Doc. No. 37], ¶ 3. Plaintiff
is a Michigan limited liability company located in Michigan. 3 Plaintiff asserts claims of
common law fraud under Massachusetts law (see id. ¶ 38), and breaches of express and
and Plaintiff in Massachusetts. However, a release of claims is an affirmative defense and “does
not oust the district court of subject matter jurisdiction” Rural Water Dist. No. 2 v. City of
Glenpool, 698 F.3d 1270, 1274 (10th Cir. 2012); see Fed. R. Civ. P. 8(c).
2
Plaintiff makes an informal request in its brief for an opportunity to conduct jurisdictional
discovery “if the Court accepts the evidence submitted by [Power Partners] in contravention of the
Complaint.” See Pl.’s Resp. Br. [Doc. No. 51] at 5. Plaintiff argues that certain facts provided
through the declaration of Power Partners’ president, Frank Rene (Exhibit 3 to the Motion), are
incomplete or disputed. If the Court intends to rely on this evidence, Plaintiff requests “leave to
depose Rene and conduct brief paper discovery.” Id. at 6. As discussed infra, the Court’s ruling
is not based on any facts stated by Mr. Rene, and thus, Plaintiff’s request is moot.
3
Its members are citizens of Michigan and Ontario, Canada. See id. ¶ 1.
2
implied warranties under the Uniform Commercial Code, Okla. Stat. tit. 12A, §§ 2-313 to
2-315. 4 Federal subject matter jurisdiction is based on diversity of citizenship under
28 U.S.C. § 1332.
Power Partners initially moved for dismissal of the action on the same grounds
asserted in its present Motion. Upon examination of the Complaint, however, the Court
raised sua sponte a lack of sufficient factual allegations to establish the citizenship of
certain parties, and directed Plaintiff to amend its pleading. The Amended Complaint both
cured this deficiency and added factual allegations regarding shipments of drivers from
Inventronics USA, Inc. in Oklahoma to Plaintiff in Michigan. See Am. Compl. [Doc.
No. 37], ¶¶ 8, 11. Plaintiff also included as an additional exhibit, a copy of an invoice from
Inventronics USA, Inc. dated July 25, 2011. See id. Ex. 9 [Doc. No. 37-9]. Power Partners
has renewed its Motion in response to the Amended Complaint.
Standard of Decision
Plaintiff “bears the burden of establishing personal jurisdiction over [a] defendant.”
Intercon, Inc. v. Bell Atl. Internet Sol., 205 F.3d 1244, 1247 (10th Cir. 2000); see Rockwood
Select Asset Fund XI(6)-1, LLC v. Devine, Millimet & Branch, 750 F.3d 1178, 1179 (10th
Cir. 2014); Shrader v. Biddinger, 633 F.3d 1235, 1239 (10th Cir. 2011). Where, as here,
the issue is presented for decision on the basis of allegations and affidavits or written
materials, Plaintiff “need only make a prima facie showing that jurisdiction exists.”
Intercon, 205 F.3d at 1247 (internal quotation omitted); see Shrader, 633 F.3d at 1239;
4
The Amended Complaint cites the Oklahoma Statutes but does not explain why Plaintiff
believes the warranty claims are governed by Oklahoma law.
3
Employers Mut. Cas. Co. v. Bartile Roofs, Inc., 618 F.3d 1153, 1159 (10th Cir. 2010);
Dudnikov v. Chalk & Vermilion Fine Arts, Inc., 514 F.3d 1063, 1070 (10th Cir. 2008). At
this stage, the Court must accept “‘as true all well-pled (that is, plausible, non-conclusory,
and non-speculative) facts alleged in plaintiff[’s] complaint’” and “resolve any factual
disputes in the plaintiff’s favor.” Shrader, 633 F.3d at 1239 (quoting Dudnikov, 514 F.3d
at 1070); see Intercon, 205 F.3d at 1247.
To establish personal jurisdiction of a nonresident defendant, “a plaintiff must show
that jurisdiction is legitimate under the laws of the forum state and that the exercise of
jurisdiction does not offend the due process clause of the Fourteenth Amendment.”
Employers, 618 F.3d at 1159 (internal quotation omitted). Under Oklahoma law, the
personal jurisdiction inquiry is simply the due process analysis. Intercon, 205 F.3d at 1247;
see Monge v. RG Petro-Mach. (Grp.) Co., 701 F.3d 598, 613 (10th Cir. 2012). The familiar
due process standard requires “minimum contacts” between the defendant and the forum
state and a finding that the exercise of jurisdiction comports with “fair play and substantial
justice.” See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476 (1985) (quoting Int’l
Shoe Co. v. Washington, 326 U.S. 310, 320 (1945)); World-Wide Volkswagen Corp. v.
Woodson, 444 U.S. 286, 291, 297 (1980); Intercon, 205 F.3d at 1247.
Discussion
A. Minimum Contacts – Legal Standard
The minimum contacts standard may be satisfied by showing general or specific
personal jurisdiction. See Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S.
915, 919 (2011); see also Bristol-Myers Squibb Co. v. Superior Court of Cal., 137 S. Ct.
4
1773, 1179-80 (2017). General jurisdiction refers to a court’s power to hear claims against
a nonresident defendant whose “affiliations with the State in which suit is brought are so
constant and pervasive ‘as to render [it] essentially at home in the forum State.’” See
Daimler AG v. Bauman, 134 S. Ct. 746, 751 (2014) (quoting Goodyear, 564 U.S. at 919)
(alteration in Daimler). 5 Specific jurisdiction requires that “‘the suit’ must ‘aris[e] out of
or relat[e] to the defendant’s contacts with the forum.’” Bristol-Squibb, 137 S. Ct. at 1780
(quoting Daimler, 134 S. Ct. at 754) (internal quotation omitted and emphasis added in
Bristol-Myers).
Plaintiff relies solely on specific jurisdiction to establish personal
jurisdiction over Power Partners in Oklahoma. See Pl.’s Resp. Br. [Doc. No. 51] at 1
(“specific personal jurisdiction exists . . . as it relates to this transaction”).
Specific personal jurisdiction “requires, first, that the out-of-state defendant must
have ‘purposefully directed’ its activities at residents of the forum state, and second, that
the plaintiff’s injuries must ‘arise out of’ defendant’s forum-related activities.’” Dudnikov,
514 F.3d at 1071 (quoting Burger King, 471 U.S. at 472); see Intercon, 205 F.3d at 1247;
Pro Axess, Inc. v. Orlux Distrib., Inc., 428 F.3d 1270, 1277 (10th Cir. 2005). 6 To satisfy
5
“For an individual, the paradigm forum for the exercise of general jurisdiction is the
individual’s domicile; for a corporation, it is an equivalent place, one in which the corporation is
fairly regarded as at home.” Goodyear, 564 U.S. at 924; see Bristol-Myers, 137 S. Ct. at 1780;
Daimler, 134 S. Ct. at 760-61. “‘[O]nly a limited set of affiliations with a forum will render a
defendant amenable to’ general jurisdiction in that State.” Bristol Myers, 137 S. Ct. at 1780
(quoting Daimler, 134 S. Ct. at 760).
6
Stated differently: “Under the specific-jurisdiction requirement, a plaintiff satisfies the
minimum-contacts standard by showing that (1) the defendant has purposefully availed itself of
the privilege of conducting activities or consummating a transaction in the forum state, and (2) the
litigation results from alleged injuries that arise out of or relate to those activities.” Employers,
618 F.3d at 1160 (internal quotations and citations omitted).
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the first prong, Plaintiff must demonstrate that Power Partners “‘purposefully directed’ its
activities at the forum state . . . or ‘purposely availed’ itself of the privilege of conducting
activities or consummating a transaction in the forum state.” Dudnikov, 514 F.3d at 1071.
Purposeful availment generally requires affirmative conduct by the nonresident defendant
that creates a substantial connection to the state; “random, fortuitous, or attenuated
contacts” or “the unilateral activity of another party” is insufficient. See Burger King, 471
U.S. at 475 (internal quotations omitted).
B. Minimum Contacts – Application to Plaintiff’s Case
Aside from arguing that specific jurisdiction exists for this action against Power
Partners, Plaintiff’s theory of “minimum contacts” with the forum is not entirely clear.
Plaintiff seems to argue that its contractual relationship with Power Partners is sufficiently
connected to Oklahoma because Plaintiff’s contacts with Inventronics USA, Inc. led to the
sales transactions with Power Partners and because Power Partners distributes products of
Inventronics, Inc. and so necessarily has a relationship with Inventronics USA, Inc. See
Pl.’s Resp. Br. [Doc. No. 51] at 2-3, 5-6.
Although not cited in its response brief, Plaintiff provides the declaration of “an
equity owner and employee,” Arthur Stoll, stating that Plaintiff’s decision to purchase the
drivers began with conversations and meetings with “Inventronics USA’s Oklahoma-based
personnel . . . in June 17-19, 2011 in Philadelphia, PA” and an order of “drivers directly
from Inventronics USA in Oklahoma.” See Stoll Decl. [Doc. No. 51-1], ¶¶ 2, 4. Plaintiff
later decided to purchase the drivers from Power Partners because it could supply the same
products and “offered more favorable terms than Inventronics USA.” Id. ¶ 5. After
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problems arose, Plaintiff had communications regarding quality issues and product testing
with, and received input for decisions from, “Inventronics USA’s personnel.” Id. ¶ 7.
Mr. Stoll also states a belief based on his industry experience that “there is an agreement
between Inventronics USA and [Power Partners] specifying the nature and extent of their
relationship.” Id. ¶ 9. Based on Plaintiff’s arguments and factaul submission, the Court
understands that Plaintiff relies on a contract-based theory of specific personal jurisdiction
over Power Partners. 7
7
Plaintiff’s fraud claim against Power Partners might permit a tort-based jurisdictional
analysis under Calder v. Jones, 465 U.S. 783 (1984). The Tenth Circuit has held that in a tortbased action “‘purposeful direction’ has three elements: (a) an intentional action . . . that was (b)
expressly aimed at the forum state . . . with (c) knowledge that the brunt of the injury would be felt
in the forum state.” See Niemi v. Lasshoffer, 770 F.3d 1331, 1348 (10th Cir. 2014); Newsome v.
Gallacher, 722 F.3d 1257, 1264-65 (10th Cir. 2013); see Anzures v. Flagship Rest. Grp., 819 F.3d
1277, 1280 (10th Cir. 2016); Dudnikov, 514 F.3d at 1072. “In addition, a plaintiff’s injuries must
‘arise out of defendant’s forum-related activities.’” Anzures, 819 F.3d at 1280 (quoting Dudnikov,
514 F.3d at 1071). Recently, in Walden v. Fiore, 134 S. Ct. 1115, 1121 (2014), the Supreme Court
clarified the “purposeful direction” inquiry in tort cases and held “the defendant’s suit-related
conduct must create a substantial connection with the forum State.” This “defendant-focused”
inquiry requires that “the relationship between a defendant and the forum State must arise out of
contacts that the defendant himself creates with the forum State,” and those contacts must be “with
the forum State itself, not the defendant’s contacts with persons who reside there.” Id. at 1122
(internal quotation omitted, emphasis in original); see Anzures, 819 F.3d at 1280.
Plaintiff does not allege any intentional conduct by Power Partners related to the alleged
fraud that was aimed at Oklahoma or created a substantial connection with the state. Instead,
Plaintiff affirmatively states that “Massachusetts law should apply to the fraud claim because the
direct false representations were made from Power Partners in Massachusetts.” See Am. Compl.
[Doc. No. 37], ¶ 38. The only fraudulent conduct arguably connected to Oklahoma is an alleged
“bait and switch tactic” involving the use of higher-quality samples supplied by Inventronics USA,
Inc. Id. ¶¶ 32-34. Accepting this allegation as true, it suggests only Oklahoma-related conduct by
someone other than Power Partners based on the fortuitous circumstance that Inventronics USA,
Inc. is located here. These facts are insufficient to establish personal jurisdiction over Power
Partners in Oklahoma for injuries suffered in Michigan based on tortious conduct in
Massachusetts.
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As noted by the court of appeals, “[t]he application of [due process] standards to
contracts made between citizens of different states is not without difficulty” but is guided
by the Supreme Court’s opinion in Burger King. See Rainbow Travel Serv., Inc. v. Hilton
Hotels Corp., 896 F.2d 1233, 1237 (10th Cir. 1990). The Supreme Court in Burger King
“rejected the notion that personal jurisdiction might turn on ‘mechanical’ tests . . . or on
‘conceptualistic . . . theories of the place of contracting or of performance . . . .’” Burger
King, 471 U.S. at 478. “In order to assess whether minimum contacts occurred in a contract
case, we look at ‘prior negotiations and contemplated future consequences, along with the
terms of the contract and the parties’ actual course of dealing.’” AST Sports Science, Inc.
v. CLF Distrib. Ltd. 514 F.3d 1054, 1058 (10th Cir. 2008) (quoting Burger King, 471 U.S.
at 479). “A contract alone does not subject a nonresident defendant to the jurisdiction of
the subject forum,” but additional facts that demonstrate the pursuit of an ongoing business
relationship connected to the forum will support jurisdiction. See id. at 1059.
In this case, accepting Plaintiff’s well-pleaded factual allegations as true, Plaintiff’s
action against Power Partners arises from a series of sales transactions or commercial
contracts between them – both nonresidents of Oklahoma – involving goods manufactured
in China. The connection to Oklahoma arises from the alleged involvement of a third party
– Inventronics USA, Inc. – who cultivated Plaintiff’s interest in Inventronics, Inc.’s drivers
through initial discussions and sales, and induced Plaintiff to purchase the drivers for use
in its lighting products. Plaintiff suggests that Power Partners had an ongoing relationship
with Inventronics USA, Inc. as the American representative or agent of Inventronics, Inc.
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and that Power Partners’ connection to Inventronics USA, Inc. provides the necessary
contacts with Oklahoma to satisfy due process.
Upon consideration of the jurisdictional issue presented, the Court finds that
Plaintiff has not presented sufficient facts from which to conclude that the contractual
relationship between Plaintiff and Power Partners had a minimally sufficient connection
to Oklahoma to establish specific jurisdiction for this action. There was no written
agreement that defines the contours of their relationship. No factual information is
provided that would link Oklahoma in any significant way to the negotiations between
Plaintiff and Power Partners, their performance of a sales agreement, or the contemplated
consequences. Where Plaintiff provides information in the Amended Complaint regarding
alleged breaches of warranties by Power Partners, the facts appear to show communications
and contacts between Plaintiff in Michigan and Power Partners in Massachusetts. See Am.
Compl. [Doc. No. 37], ¶¶ 12-16, 23-24.
Accepting the well-pleaded facts presented by Plaintiff, the Court finds Plaintiff has
not alleged sufficient facts to show that Power Partners purposely availed itself of the
privilege of conducting sales-related activities in Oklahoma. Plaintiff has not shown the
sales agreements between Plaintiff and Power Partners, their negotiations and
communications, their performance, or any ongoing relationship between Plaintiff and
Power Partners regarding the sale of Inventronics, Inc.’s products had any substantial
connection to Oklahoma.
Plaintiff also has not shown that it and Power Partners
contemplated Inventronics USA, Inc. would have an established or continuing role in their
relationship or that Inventronics USA, Inc. actually played any significant part in their
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course of dealing. In short, one could not reasonably conclude that Power Partners
purposely availed itself of the privilege of conducting sales activities in Oklahoma or that
this action arises out of any Oklahoma activities by Power Partners. Therefore, Plaintiff
has failed to show that specific jurisdiction exists for a suit in Oklahoma regarding Power
Partner’s alleged breaches of warranties arising from sales of Chinese-made goods to
Plaintiff in Michigan.
The Supreme Court’s recent decision in Bristol-Myers is instructive. In that case,
the Supreme Court held that California courts lacked specific jurisdiction over a
nonresident pharmaceutical company, Bristol-Myers Squibb Company or “BMS,” for a
suit by nonresident plaintiffs bringing California-law claims for injuries allegedly caused
by a prescription drug, Plavix, that BMS manufactured and sold to consumers nationwide.
The Court found insufficient suit-related contacts between BMS and California to establish
specific jurisdiction there. The Court noted:
“[T]he nonresidents were not prescribed Plavix in California, did not
purchase Plavix in California, did not ingest Plavix in California, and were
not injured by Plavix in California. The mere fact that other plaintiffs were
prescribed, obtained, and ingested Plavix in California – and allegedly
sustained the same injuries as did the nonresidents – does not allow the State
to assert specific jurisdiction over the nonresidents’ claims. As we have
explained, “a defendant’s relationship with a . . . third party, standing alone,
is an insufficient basis for jurisdiction.” Walden, 571 U.S., at –, 134 S. Ct.
at 1123.
Bristol-Myers, 137 S. Ct. at 1781. 8 The Court rejected the plaintiffs’ argument that BMS’s
relationship with a California-based distributor was sufficient:
8
The Court had earlier noted that “BMS did not develop Plavix in California, did not
create a marketing strategy for Plavix in California, and did not manufacture, label, package, or
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[Plaintiffs] contend that BMS’s “decision to contract with a California
company [McKesson] to distribute [Plavix] nationally” provides a sufficient
basis for personal jurisdiction. But as we have explained, “[t]he requirements
of International Shoe . . . must be met as to each defendant over whom a state
court exercises jurisdiction.” Rush v. Savchuk, 444 U.S. 320, 332 (1980); see
Walden, 134 S. Ct. at 1123 (“[A] defendant's relationship with a . . . third
party, standing alone, is an insufficient basis for jurisdiction”). In this case,
it is not alleged that BMS engaged in relevant acts together with McKesson
in California. Nor is it alleged that BMS is derivatively liable for
McKesson’s conduct in California. And the nonresidents “have adduced no
evidence to show how or by whom the Plavix they took was distributed to
the pharmacies that dispensed it to them.” The bare fact that BMS contracted
with a California distributor is not enough to establish personal jurisdiction
in the State.
Id. at 1783 (citations to the record and parallel case citations omitted).
Similarly here, Plaintiff does not allege that Power Partners engaged in acts together
with Inventronics USA, Inc. in Oklahoma that are relevant to Plaintiff’s claims in this case
or that Power Partners is derivatively liable for Inventronics USA, Inc.’s conduct in
Oklahoma. The fact that Power Partners may have some contractual relationship with
Inventronics USA, Inc. is not enough to establish personal jurisdiction over Power Partners
for Plaintiff’s suit in Oklahoma regarding sales to Plaintiff in Michigan. Therefore, the
Court finds that Plaintiff has failed to show a sufficient basis for the exercise of specific
personal jurisdiction over Power Partners for this suit in Oklahoma.
work on the regulatory approval of the product in California. BMS instead engaged in all of these
activities in either New York or New Jersey.” Bristol-Myers, 137 S. Ct. at 1778 (record citations
omitted).
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Conclusion
For these reasons, the Court finds that Plaintiff has failed to allege sufficient facts
to establish personal jurisdiction over Power Partners in this forum and that this action
against Power Partners should be dismissed for lack of personal jurisdiction.
IT IS THEREFORE ORDERED that Defendant Power Partners, Inc.’s Motion to
Dismiss Amended Complaint [Doc. No. 43] is GRANTED. Defendant Power Partners,
Inc. is DISMISSED without prejudice for lack of personal jurisdiction.
IT IS SO ORDERED this 19th day of September, 2017.
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