NTCH-West Tenn, Inc. v. ZTE CORPORATION

Filing 106

ORDER DISMISSING AS MOOT DEFENDANTS INITIAL MOTION TO DISMISS (D.E. 10), DISMISSING AS MOOT PLAINTIFF'S MOTION FOR LEAVE TO CONDUCT JURISDICTIONAL DISCOVERY (D.E. 13), GRANTING DEFENDANT'S RENEWED MOTION TO DISMISS PLAINTIFFS COMPLAINT FOR LACK OF PERSONAL JURISDICTION (D.E. 90), AND DISMISSING CASE. Signed by Judge J. Daniel Breen on 11/9/17. (mbm)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TENNESSEE
EASTERN DIVISION
NTCH-WEST TENN, INC.,
Plaintiff,
v.

No. 1:12-cv-1172-JDB-egb

ZTE CORPORATION,
Defendant.
______________________________________________________________________________
ORDER DISMISSING AS MOOT DEFENDANT’S INITIAL MOTION TO DISMISS (D.E.
10), DISMISSING AS MOOT PLAINTIFF'S MOTION FOR LEAVE TO CONDUCT
JURISDICTIONAL DISCOVERY (D.E. 13), GRANTING DEFENDANT'S RENEWED
MOTION TO DISMISS PLAINTIFF’S COMPLAINT FOR LACK OF PERSONAL
JURISDICTION (D.E. 90), AND DISMISSING CASE
______________________________________________________________________________
I. INTRODUCTION
On August 2, 2012, the Plaintiff, NTCH-West Tenn, Inc. (“NTCH-TN”), brought this
action against the Defendant, ZTE Corporation (“ZTE Corp.”), alleging state law claims of
breach of contract, breach of covenant of good faith and fair dealing, breach of warranties,
promissory estoppel, negligence, fraudulent misrepresentation, tortious interference with
contract, and unjust enrichment, as well as violation of Tennessee Code Annotated § 47-18-101,
et seq. On October 24, 2012, ZTE Corp. filed a motion to dismiss the complaint for lack of
proper service and personal jurisdiction pursuant to Rules 12(b)(2), 12(b)(4), and 12(b)(5) of the
Federal Rules of Civil Procedure. (Docket Entry (“D.E.”) 10.) On November 19, 2012, before a
response was filed, the Defendant moved for a stay of this action pending the conclusion of
arbitration involving NTCH-TN and Defendant’s subsidiary, ZTE USA, Inc. (“ZTE USA”) (D.E.
16), which was granted in an order entered by United States Magistrate Judge Edward G. Bryant

on July 18, 2013 (D.E. 46), pursuant to an order of reference (D.E. 45). The arbitration, which
occurred in August and September 2013, did not encompass Plaintiff's claims against ZTE Corp.
On February 11, 2014, the arbitrator issued a Final Award, as corrected on March 11,
2014, denying the claims of NTCH-TN against ZTE USA. The Final Award was confirmed by
the United States District Court for the Middle District of Florida on October 6, 2015. On
December 15, 2016, the confirmation was affirmed by the Eleventh Circuit Court of Appeals. In
proceedings before the undersigned on February 7, 2017, the parties were advised that the Court
would continue the stay until after the March 15, 2017, deadline for appealing the Eleventh
Circuit's determination to the United States Supreme Court. (D.E. 82.) Based on notification by
Plaintiff's counsel in March 2017 that no petition for certiorari would be filed (D.E. 86) and that
this matter would proceed (D.E. 87), the parties were granted permission to supplement previous
motions or file new motions (id.). On May 11, 2017, the Defendant renewed its motion to
dismiss for lack of personal jurisdiction pursuant to Fed. R. Civ. P. 12(b)(2). (D.E. 90.) The
Court assumes the previous motion to dismiss (D.E. 10) is now moot and it is DISMISSED on
that basis.
II. STANDARD OF REVIEW
Dismissal of a complaint for lack of personal jurisdiction is permitted under Rule
12(b)(2) of the Federal Rules of Civil Procedure.

The burden of establishing personal

jurisdiction over a defendant is borne by the plaintiff. AlixPartners, LLP v. Brewington, 836
F.3d 543, 548 (6th Cir. 2016). "In deciding a motion to dismiss for lack of personal jurisdiction,
the district court may rely 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."

2

MAG IAS Holdings, Inc. v. Schmuckle, 854 F.3d 894, 899 (6th Cir. 2017) (quoting Theunissen v.
Matthews, 935 F.2d 1454, 1458 (6th Cir. 1991)) (internal quotation marks omitted).
“When the district court resolves a Rule 12(b)(2) motion solely on written submissions,
the plaintiff’s burden is relatively slight, and the plaintiff must make only a prima facie showing
that personal jurisdiction exists in order to defeat dismissal.”1 AlixPartners, 836 F.3d at 548-49
(quoting Air Prods. & Controls, Inc. v. Safetech Int'l, Inc., 503 F.3d 544, 549 (6th Cir. 2007))
(internal quotation marks omitted). Plaintiff must make this demonstration by a preponderance
of the evidence. Conn v. Zakharov, 667 F.3d 705, 711 (6th Cir. 2012). Where a motion to
dismiss is supported by affidavits, the plaintiff "may not rest upon allegations or denials in [its]
pleadings but [its] response by affidavit or otherwise must set forth specific facts showing that
the court has jurisdiction." Weller v. Cromwell Oil Co., 504 F.2d 927, 929-30 (6th Cir. 1974);
see also Flake v. Schrader-Bridgeport Int'l, Inc., 538 F. App'x 604, 616-17 (6th Cir. 2013)
(same, citing Weller). “The pleadings and affidavits submitted must be viewed in a light most
favorable to the plaintiff, and the district court should not weigh the controverting assertions of
the party seeking dismissal.” AlixPartners, 836 F.3d at 549 (quoting Air Prods., 503 F.3d at
549) (internal quotation marks omitted). However, "mere conclusory allegations will not satisfy
the 'specific facts' requirement." Preferred Care of Del., Inc. v. Konicov, Civil Action No. 5:15cv-88-KKC-EBA, 2016 WL 2593924, at *4 (E.D. Ky. May 4, 2016).

1

In response to the initial motion to dismiss, Plaintiff sought, on November 16, 2012,
leave to conduct jurisdictional discovery. (See D.E. 13.) However, it did not raise or make any
reference to that request in response to the renewed Rule 12(b)(2) motion. Rather, NTCH-TN
cited to the legal standard to be used in cases "based on solely written submissions." (D.E. 97 at
PageID 2276.) The Court is thus left to assume the request has been abandoned and
DISMISSES D.E. 13 as moot. Nor has either party sought an evidentiary hearing. Accordingly,
the Court will rule on the motion based on the affidavits and the pleadings.
3

III. THE COMPLAINT
The complaint contains the following allegations. ZTE Corp., incorporated under the
laws of the People's Republic of China, is a manufacturer and supplier of telecommunications
equipment, hardware, and related software licenses and support services.

The equipment

provided and that is the subject of the instant litigation was designed and manufactured by ZTE
Corp. in China. In the United States, the Defendant sells its products through ZTE USA, a
corporation organized under the laws of the State of New Jersey with its principal place of
business in Richardson, Texas.
On September 21, 2006, ZTE USA and PTA-FLA, Inc. (“PTA-FLA”), an affiliate of
Plaintiff, entered into an agreement for the purchase of equipment manufactured by ZTE Corp.
(the “ZTE Equipment”) and for related services in connection with the installation of a cellular
telephone network in Jacksonville, Florida (the “Florida Agreement”).2 This agreement included
a switch,3 modules for the switch such as multimedia messaging service (“MMS”), base stations,
other necessary equipment, and installation and support services required to bring the equipment
online. ZTE Corp. was a newcomer to the United States market and had no equipment in
operation in this country. It was represented to PTA-FLA that the ZTE Equipment would be
fully functional and compatible with United States standards and equipment and that personnel
would be able to install and service the equipment in the United States. ZTE USA also proposed
that PTA-FLA (as well as other entities related thereto) purchase remote switches for new

2

Neither NTCH-TN nor ZTE Corp. was a party to the Florida Agreement. (See D.E. 1-1
at PageID 14.)
3

In a related case in this Court brought by NTCH-TN against ZTE USA, Case No. 1:11cv-01169-JDB-egb, the Plaintiff defined a "switch" as "the brain of a telecommunications
network, directing call traffic throughout the network and to other networks." (Case No. 1:11cv-01169-JDB-egb, D.E. 86-2 at PageID 1935 n.1.)
4

markets to be developed, including initially Idaho and Tennessee, and take advantage of the
primary switch in Jacksonville to operate cellular telephone networks in the developing markets.
After the ZTE Equipment was delivered and installation began, PTA-FLA became aware
that it did not in fact meet United States standards as promised or otherwise comply with the
Florida Agreement. Specifically, the ZTE Equipment failed to comport with general standards
required to provide a quality customer experience; government-mandated standards including
those for the Commission on Accreditation of Law Enforcement, Local Number Portability, and
E911; and manufacturing-quality certifications, as well as standards for specific platforms,
including MMS and PTA-FLA’s billing systems.

Standard practices for installing such

equipment were also not followed, causing network disruption.
PTA-FLA notified ZTE Corp. of the issues surrounding the installation and was assured
they would be remedied. In attempting to work with ZTE Corp. to ensure the equipment worked
properly, PTA-FLA encountered numerous problems with Defendant’s engineers, including
missed appointments, limited English-speaking abilities, lack of product familiarity, failure to
adhere to United States procedures such as attempting fixes during nighttime maintenance
windows when customers would be least affected, and inability to identify and diagnose
problems.
In 2008, PTA-FLA sold its network to Metro PCS. Metro PCS refused, however, to
purchase the ZTE Equipment and required its removal from the network. In an attempt to
mitigate its damages and put the ZTE Equipment to some productive use, PTA-FLA sought to
redeploy in alternative markets the ninety-seven base stations purchased from ZTE Corp. for the
Florida market. To that end, PTA-FLA purchased two remote switches from ZTE Corp. for a

5

cellular telephone network to be installed in Jackson, Tennessee, by the Plaintiff. However, ZTE
Corp. failed to deliver the switches.
At around the same time, PTA-FLA affiliate Daredevil, Inc. (“Daredevil”) was
developing a cellular telephone network in St. Louis, Missouri. ZTE USA personnel suggested
that the bulk of the primary switch equipment, which was then located in Jacksonville, be moved
to Tennessee, and that Daredevil’s network and NTCH-TN’s Jackson network be configured and
engineered to function together. This arrangement was in lieu of the necessity for NTCH-TN to
have a remote switch in Tennessee that would operate off a primary switch in Jacksonville.
To implement the arrangement, PTA-FLA assigned its right to the nonfunctioning ZTE
Equipment to NTCH-TN. ZTE USA requested that NTCH-TN issue a separate purchase order
in the amount of $150,000 for a network “integration fee” to pay for the services of ZTE USA
and ZTE Corp. in making the ZTE Equipment operational in Jackson.4 NTCH-TN issued the
purchase order, which was dated June 12, 2009. At that time, ZTE USA owed a credit to PTAFLA and others affiliated with NTCH-TN in excess of $3.5 million. ZTE USA applied $150,000
of that credit to satisfy NTCH-TN’s obligations under the purchase order.
ZTE USA had previously shared technical documents drafted by ZTE Corp. detailing the
equipment’s capabilities with personnel of PTA-FLA and NTCH-TN. Neither ZTE USA nor
ZTE Corp. disclosed to NTCH-TN that the MMS platform previously sold to PTA-FLA and
transferred to NTCH-TN was not intended for commercial use. ZTE Corp. promised NTCH-TN
that it could fix problems with the ZTE Equipment and that it would ensure its proper
functionality for Plaintiff's anticipated utilization. Based on the representations, installation of
the ZTE Equipment in Jackson commenced.
4

The vendor listed on the purchase order is ZTE North America. There is no reference on
the document to ZTE Corp. (See D.E. 1-2 at PageID 53.)
6

However, the ZTE Equipment caused for NTCH-TN the same problems experienced by
PTA-FLA.

New issues also arose, including improper configuration of Evolution-Data

Optimized settings, resulting in significant network disruption and customer loss. Plaintiff was
required to suspend all data device sales while this difficulty was being addressed. ZTE Corp.
continued to assure NTCH-TN that it would remedy the problems. Nonetheless, the MMS still
did not function and, after years of attempts to fix it, ZTE Corp. finally acknowledged the ZTE
Equipment was merely a platform for experimentation in the American market.
ZTE Corp. assigned China-based software teams and sent engineers from China to
attempt repairs on the ZTE Equipment. NTCH-TN ultimately determined that these individuals
were incompetent and unable to complete the work. At its own cost, NTCH-TN engaged the
assistance of outside experts, who demonstrated to ZTE Corp. the deficiencies of the ZTE
Equipment, spawning another wave of failed attempts at repair and missed deadlines.
Plaintiff then informed ZTE Corp. that it would use a third-party vendor to provide MMS
service. ZTE Corp. requested that NTCH-TN postpone this action in order to permit it to fix the
problems, which it was again unable to remedy. NTCH-TN was forced to abandon use of the
ZTE Equipment because it did not operate properly and the continued malfunctions damaged its
reputation with customers. Plaintiff alleged in the complaint that it suffered a loss of some
12,000 customers and months of lost revenues, and was required to replace the ZTE Equipment
in its entirety at great expense.
IV. ANALYSIS
In a case based on diversity, whether a federal court in the forum state has personal
jurisdiction over an out-of-state defendant is dependent upon whether the state's courts would
have jurisdiction. Newberry v. Silverman, 789 F.3d 636, 641 (6th Cir. 2015). "This rule requires

7

the court to determine whether both the state's long-arm statute and the Due Process Clause of
the United States Constitution permit the exercise of jurisdiction." Id. (quoting Aristech Chem.
Int'l Ltd. v. Acrylic Fabricators Ltd., 138 F.3d 624, 627 (6th Cir. 1998)). As Tennessee’s longarm statute extends to the limit of the Due Process Clause, this Court need only determine
whether due process would permit a Tennessee court to exercise specific jurisdiction over ZTE
Corp. See Harmer v. Colom, 650 F. App’x 267, 272 (6th Cir. 2016).
The Due Process Clause permits two types of personal jurisdiction: general, or "allpurpose," and specific, or "case-linked," jurisdiction. Bristol-Myers Squibb Co. v. Super. Ct. of
Cal., San Francisco Cty., 137 S. Ct. 1773, 1779-80 (2017).

A court may assert general

jurisdiction over foreign entities “to hear any and all claims against them when their affiliations
with the State are so continuous and systematic as to render them essentially at home in the
forum State.” Daimler AG v. Bauman, 134 S. Ct. 746, 754 (2014) (internal quotation marks
omitted). Plaintiff concedes that this Court has no such jurisdiction over ZTE Corp.
Consequently, the Defendant must be subject to this Court’s specific jurisdiction, which
requires that ZTE Corp. “have minimum contacts with the state such that the maintenance of the
suit does not offend traditional notions of fair play and substantial justice.”

Maxitrate

Tratamento Termico E Controles v. Super Sys., Inc., 617 F. App’x 406, 408 (6th Cir.), cert.
denied, 136 S. Ct. 336 (2015) (internal quotation marks omitted). In considering whether
personal jurisdiction exists, the court takes into account a variety of interests, including "the
interests of the forum State and of the plaintiff in proceeding with the cause in the plaintiff's
forum of choice." Bristol-Myers Squibb, 137 S. Ct. at 1780 (quoting Kulko v. Super. Ct. of Cal.,
City & Cty. of San Francisco, 436 U.S. 84, 92 (1978)). "But the primary concern is the burden

8

on the defendant." Id. (citing World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292
(1980)) (internal quotation marks omitted).
Courts in this Circuit have been provided a three-pronged approach for determining
whether minimum contacts exist, set forth in Southern Machine Co. v. Mohasco Industries, Inc.,
401 F.2d 374 (6th Cir. 1968). See Means v. United States Conference of Catholic Bishops, 836
F.3d 643, 649 (6th Cir. 2016).
First, the defendant must purposefully avail [it]self of the privilege of acting in the
forum state or causing a 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 caused by the defendant must have a substantial
enough connection with the forum state to make the exercise of jurisdiction over
the defendant reasonable.
Id. (quoting Southern Machine, 401 F.2d at 381). If any element is not present, personal
jurisdiction may not be exercised. Miller v. AXA Winterthur Ins. Co., 694 F.3d 675, 680 (6th
Cir. 2012).
The first element is “essential to a finding of personal jurisdiction,” Means, 836 F.3d at
649 (internal quotation marks omitted), and has been described as the “constitutional touchstone
of personal jurisdiction,” AlixPartners, 836 F.3d at 550.
A defendant that has purposefully availed itself of the protection of the forum
state has clear notice that it is subject to suit there, and can act to alleviate the risk
of burdensome litigation by procuring insurance, passing the expected costs on to
customers, or, if the risks are too great, severing its connection with the State.
Kerry Steel, Inc. v. Paragon Indus., Inc., 106 F.3d 147, 150 (6th Cir. 1997) (citing World-Wide
Volkswagen, 444 U.S. at 297) (internal quotation marks omitted).
In deciding whether purposeful availment has occurred, the court must consider whether
the defendant "acted or caused a consequence in [the forum] such that [it] invoked the benefits
and protections of [the state's] law." Schmuckle, 854 F.3d at 900. This inquiry "ensures that [the

9

defendant] could have reasonably anticipated being haled into court there" and that it is not
brought before a court in the forum "solely as a result of 'random,' 'fortuitous,' or 'attenuated'
contacts." Id. (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985) & LAK, Inc.
v. Deer Creek Enters., 885 F.2d 1293, 1300 (6th Cir. 1989) (some internal quotation marks
omitted). Purposeful availment exists "if the defendant created a substantial connection with the
forum state by engaging in significant activities within the State, or by creating continuing
obligations to residents in that state." Id. (quoting Burger King, 471 U.S. at 475-76) (internal
quotation marks omitted). Business relationships fall under this umbrella if they are "intended to
be ongoing in nature," id., as opposed to a "one-shot affair," CompuServe, Inc. v. Patterson, 89
F.3d 1257, 1265 (6th Cir. 1996); see also AlixPartners, 836 F.3d at 551.
[A] defendant's contacts with the forum State may be intertwined with [its]
transactions or interactions with the plaintiff or other parties; a relationship with
the plaintiff or third party, standing alone, is an insufficient basis for jurisdiction.
Instead, the focus is on the defendant's contacts with the forum State itself.
Schmuckle, 854 F.3d at 900 (citing Walden v. Fiore, 134 S. Ct. 1115, 1123 (2014)) (internal
citation & quotation marks omitted); see also AlixPartners, 836 F.3d at 551 ("The minimum
contacts analysis focuses on the defendant's contacts with the forum State itself, not the
defendant's contacts with persons who reside there."). "[P]rior negotiations, contemplated future
consequences, the terms of [a] contract, and the actual course of dealing need be addressed to
evaluate, in a 'highly realistic' way, the intended future consequences that are the real object of
the business transaction." Lanier v. Am. Bd. of Endodontics, 843 F.2d 901, 910 (6th Cir. 1988);
see also Burger King, 471 U.S. at 479; Air Prods., 503 F.3d at 551.
Even a single act is sufficient to support personal jurisdiction "as long as it creates the
required relationship with the forum state." Fortis Corp. Ins. v. Viken Ship Mgmt., 450 F.3d 214,
220-21 (6th Cir. 2006). The nature and quality of such a single act, however, must be examined
10

through the prism of the Sixth Circuit's purposeful availment precedent. Nationwide Mut. Ins.
Co. v. Tryg Int'l Ins. Co., Ltd., 91 F.3d 790, 794 (6th Cir. 1996).
It appears from its brief that the Plaintiff asserts the Court's exercise of personal
jurisdiction over ZTE Corp. is appropriate under two theories:

ZTE USA's jurisdictional

contacts may be imputed to its parent under an alter-ego theory and Defendant's own contacts
with the forum were sufficient to establish personal jurisdiction. The Court will address these
contentions in turn.
In the complaint, NTCH-TN alleged that
[f]rom all appearances, ZTE Corp. dominates ZTE USA to the extent that all
substantive decision-making is done by ZTE Corp., ZTE USA is undercapitalized
such that at any given time ZTE USA does not maintain accounts with sufficient
operating capital to satisfy its obligations, and ZTE USA is merely an alter ego of
ZTE Corp.
(D.E. 1 at PageID 6-7.) The Sixth Circuit has recognized that
it is compatible with due process for a court to exercise personal jurisdiction over
an individual or a corporation that would not ordinarily be subject to personal
jurisdiction in that court when the individual or corporation is an alter ego or
successor of a corporation that would be subject to personal jurisdiction in that
court.
Estate of Thomson v. Toyota Motor Corp. Worldwide, 545 F.3d 357, 362 (6th Cir. 2008)
(quoting Patin v. Thoroughbred Power Boats Inc., 294 F.3d 640, 653 (5th Cir. 2002)); see also
ABC Debt Collections, LLC v. Gleason Corp., Case No. 16-14225, 2017 WL 2242362, at *4
(E.D. Mich. May 23, 2017) (same).

In the parent-subsidiary context, the alter-ego theory

"provides that a non-resident parent corporation is amenable to suit in the forum state if the
parent company exerts so much control over the subsidiary that the two do not exist as separate
entities but are one and the same for purposes of jurisdiction." Carrier Corp. v. Outokumpu Oyj,

11

673 F.3d 430, 450-51 (6th Cir. 2012) (quoting Estate of Thomson, 545 F.3d at 362); see also
Indah v. United States Sec. & Exch. Comm'n, 661 F.3d 914, 921 (6th Cir. 2011).
In support of its motion to dismiss, Defendant has presented the declarations of ZTE
Corp. executives Du Jin5 and Charlie Liang,6 in which the officials stated that ZTE USA is a
wholly-owned subsidiary for the purposes of marketing, distributing, selling, installing,
servicing, and supporting telecommunications equipment in the United States. (D.E. 10-5 (Decl.
of Du Jin) ¶¶ 15-16 at PageID 407; D.E. 10-6 (Decl. of Charlie Liang) ¶¶ 3, 5-7 at PageID 419.)
They further averred that the two corporations are separate and distinct entities that maintain
separate, lawful identities (D.E. 10-5 ¶ 14 at PageID 407, D.E. 10-6 ¶ 9 at PageID 420); the
subsidiary is adequately capitalized (D.E. 10-5 ¶ 17 at PageID 407, D.E. 10-6 ¶ 8 at PageID
420); there is no commingling of funds (D.E. 10-5 ¶ 20 at PageID 407, D.E. 10-6 ¶ 15 at PageID
420); the parent observes corporate formalities in its relations with the subsidiary (D.E. 10-5 ¶ 20
at PageID 407, D.E. 10-6 ¶ 16 at PageID 420); the companies maintain separate bank accounts
(D.E. 10-5 ¶ 20 at PageID 407-08, D.E. 10-6 ¶ 15 at PageID 420); and ZTE USA maintains its
own books, records, and corporate minutes; files its own tax returns; and holds separate board
meetings (D.E. 10-6 ¶¶ 11, 14, 16 at PageID 420). In addition, Liang asserted in his declaration
that ZTE Corp. and ZTE USA hire and pay employees independently and maintain separate
marketing departments, offices, and assets. (Id. ¶¶ 17-24 at PageID 421).
By way of response, Plaintiff has proffered the declaration of NTCH-TN Development
Manager Eric J. Steinmann. With respect to the alter-ego theory, Plaintiff cites to the following
portions of Steinmann's declaration:
5

Jin is employed by ZTE Corp. as Legal Director of Division 4. (D.E. 10-5 (Decl. of Du
Jin) ¶ 3 at PageID 405.)
6

Liang is the "Director of CEO Office" for ZTE USA. (D.E. 10-6 (Decl. of Charlie
Liang) ¶ 2 at PageID 419.)
12

4.

ZTE USA functions as a sales arm of ZTE Corp.

5.

ZTE Corp[.] manufactures and supplies telecommunications equipment,
hardware, related software, and related support services to United States
markets.

6.

ZTE Corp[.] equipment ships directly from China and requires ZTE
Corp[.] engineers from China to develop software, and come to the United
States to provide installation and commissioning support as well as trouble
shooting software and hardware issues from China and deploying
engineers on the ground in the United States.

7.

ZTE Corp[.] sent ZTE Corp[.] engineers from China to Tennessee on
multiple occasions to provide support and repair ZTE Corporation
equipment.

11.

ZTE Corp[.] employees assured NTCH-TN that it would be capable of
remedying the prior problems with the ZTE equipment and make sure the
network fully functioned with all [U.S.] regulatory requirements being
met.

(D.E. 97-1 (Decl. of Eric J. Steinmann) ¶¶ 4-7, 11 at PageID 2288-89.) Plaintiff maintains in its
brief, without citation to the record, that ZTE Corp. "consistently reviewed and directed the
operations of ZTE USA . . . in all circumstances." (D.E. 97 (NTCH-West Tenn, Inc.'s Mem. in
Opp'n to ZTE Corporation's Renewed Mot. to Dismiss Pl.'s Compl. for Lack of Personal
Jurisdiction) at PageID 2279.) It also argues that "ZTE Corp[.] was regularly involved in the
negotiations with NTCH-TN and its affiliates," citing paragraphs 6, 7, and 11 of Steinmann's
declaration. (Id.) As is clear from the quoted paragraphs set forth above, however, that they
neither contain nor support such an assertion.
A corporate entity does not purposefully avail itself "merely by owning all or some of a
corporation subject to jurisdiction." Dean v. Motel 6 Operating L.P., 134 F.3d 1269, 1273-74
(6th Cir. 1998); see also Knight Capital Partners Corp. v. Henkel AG & Co., KGaA, ___ F.
Supp. 3d ___, 2017 WL 2720005, at *7 (E.D. Mich. June 23, 2017) ("And it is well established
that mere corporate affiliation or beneficial ownership of a possibly involved entity by a distinct
13

corporate entity defendant is insufficient to establish minimum contacts."). NTCH-TN, however,
directs the Court's attention to the Sixth Circuit's decision in Third National Bank in Nashville v.
WEDGE Group Inc., 882 F.2d 1087 (6th Cir. 1989). In WEDGE, the court found appropriate the
exercise of specific jurisdiction by a federal court in Tennessee over a foreign parent company
arising from the acts of its in-forum subsidiary where the parent held 100 percent ownership of
the subsidiary which, along with its own subsidiaries, conducted business in Tennessee; its
officers served as directors of the subsidiary and met regularly -- as often as once a month -- in
Tennessee to review and direct the subsidiary’s operations; it was a party to an agreement with
its Tennessee subsidiary, and its Tennessee subsidiaries, to share income tax liability with those
Tennessee companies; its officers, in participating in loan negotiations between the plaintiff, a
Tennessee bank, and its subsidiary, deposited a check maintained at a Third National Bank
branch in the forum state; and it entered into an agreement with plaintiff and the subsidiary
which was executed in Tennessee. WEDGE, 882 F.2d at 1090. Under these circumstances, even
though the parent did not directly conduct business, own property, or have employees in the
state, the appellate court had “no hesitancy in concluding that, by these actions and contacts,
WEDGE ‘purposefully availed’ itself of acting and causing consequences in Tennessee and that
its contacts with the state were not 'random,' 'fortuitous,' [or] 'attenuated[.]'" Id.
Except for ZTE USA's status as a wholly-owned subsidiary of ZTE Corp., the facts of
WEDGE have nothing in common with those before this Court. Because such status alone falls
short of amounting to purposeful availment, see Dean, 134 F.3d at 1273-74, personal jurisdiction

14

over the Defendant in this forum has not been shown on grounds that ZTE USA is an alter-ego of
ZTE Corp.7
The Court will next consider whether the actions of ZTE Corp. itself constituted
purposeful availment. In addition to the portions of Steinmann's declaration set out above,
7

Plaintiff also posits that personal jurisdiction may exist where "the parent holds the
subsidiary out as its agent in the forum" (D.E. 97 at PageID 2278-79 (emphasis omitted)), citing
Cupp v. Alberto-Culver USA, Inc., 308 F. Supp. 2d 873 (W.D. Tenn. 2004). It argues there is a
"strong connection" between the parent and subsidiary to the extent ZTE Corp. "used ZTE USA
as its 'middleman' and agent for conducting business in the United States" (D.E. 97 at PageID
2279-80), relying on paragraphs four through seven of Steinmann's declaration (see supra page
13).
To the extent NTCH-TN intended to present a separate ground for purposeful availment
under agency principles, it fails for several reasons. First, "issues adverted to in a perfunctory
manner, unaccompanied by some effort at developed argumentation, are deemed waived. It is
not sufficient for a party to mention a possible argument in the most skeletal way, leaving the
court to put flesh on its bones." McPherson v. Kelsey, 125 F.3d 989, 995-96 (6th Cir. 1997)
(internal alterations omitted). The skeletal assertions set forth above are insufficient in the
Court's view to comprise a developed independent argument based on agency.
Secondly, Liang and Jin stated in their declarations that "[t]here is no agreement or
acknowledgment between ZTE USA and ZTE Corporation that one will act as the other's agent."
(D.E. 10-5 ¶ 21 at PageID 408, D.E. 10-6 ¶ 21 at PageID 421.) In the face of these statements,
NTCH-TN cannot rely solely on its pleadings, see Weller, 504 F.2d at 929-30, and Steinmann's
declaration offers nothing to the contrary.
Third, and finally, Cupp, if anything, favors the Defendant. In that case, the court
articulated:
Personal jurisdiction must be based on something that the defendant itself has
done involving the forum, or on evidence that the presumed corporate separation
between parent and subsidiary is a fiction, such as when the parent exercises
actual control over the subsidiary, or the parent holds the subsidiary out as its
agent in the forum.
Cupp, 308 F. Supp. 2d at 878. To illustrate this statement with an example, the court engaged in
a discussion of WEDGE and found it "entirely distinguishable" from the case before it, in which
the defendant parent's control over or connection with its subsidiary consisted solely of
ownership. Id. at 879. In concluding that Cupp had failed to meet his burden of establishing
"even a prima facie showing of facts" to support purposeful availment by the defendant, the court
reiterated the principle that "[c]orporate ownership alone is insufficient for the exercise of
personal jurisdiction." Id.
15

Plaintiff points to the following in support of the Court's exercise of jurisdiction over ZTE Corp.
arising from its own actions:
8.

ZTE Corp[.] promised that its equipment would meet United States
standards, which include UL certification.

9.

ZTE Corp[.] did not meet UL certification standards and attempted to
fraudulently put UL stickers on ZTE Equipment in China. A ZTE USA
employee told ZTE Corp[.] that this was improper and the stickers should
not be placed on the equipment.

10.

The engineers from China that ZTE Corp[.] sent to Tennessee were unable
to repair or make functional all network capabilities and NTCH-TN
eventually was required to engage a third-party to make certain
capabilities functional. This cost was not planned for in NTCH-TN's
budget.
*

12.

*

*

ZTE Corp[.] was either incapable or unwilling to make the network in
Tennessee fully functional.

(D.E. 97-1 ¶¶ 8-10, 12 at PageID 2289.) NTCH-TN also cites to an internal email chain
involving ZTE Corp. and ZTE USA personnel in November 2009. From the content of the
emails, one could infer that ZTE Corp. knew the equipment was not suitable for commercial use,
a fact of which ZTE USA was not aware until that time. (See D.E. 96-4 (NTCH-West Tenn,
Inc.'s Resp. to ZTE Corporation's Statement of Undisputed Facts in Supp. of its Mot. for Summ.
J.; NTCH-West Tenn, Inc.'s Statement of Undisputed Facts in Supp. of its Mem. in Opp'n to ZTE
Corporation's Mot. for Summ. J., Ex.) at PageID 2235-43.)
Jin, in his declaration, identified the movant's only contact with the forum as service
support provided to ZTE USA in Tennessee on three occasions in 2009.8 (D.E. 10-5 ¶ 91 at

8

As the Plaintiff recognizes, "[a] numerical count of the [contacts] has no talismanic
significance." LAK, 885 F.2d at 1301. Rather, "[t]he quality of the contacts as demonstrating
purposeful availment is the issue, not their number . . ." Id.
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PageID 413.) He added that Defendant never entered into a contract with, took any purchase
orders from, or delivered equipment to NTCH-TN. (Id. ¶¶ 150-51 at PageID 417-18.)
As noted herein, it is undisputed there was no written contract between ZTE Corp. and
NTCH-TN. Nor, for the reasons set forth in the previous discussion concerning alter-ego, may
contractual arrangements entered into by ZTE USA be imputed to its parent. Plaintiff asserts,
however, that the Defendant's promise to provide software support in China, equipment
manufactured in China, and technical support in Tennessee in an attempt to fix the ZTE
Equipment and make the network functional formed the basis of a separate, presumably oral,
contract with NTCH-TN. The mere fact that one enters into a contract is insufficient, without
more, to establish purposeful availment. Kerry Steel, 106 F.3d at 151. Instead, the Court must
determine whether ZTE Corp. intended to create a continuing, ongoing relationship with the
forum.
In its brief, the Plaintiff points to ZTE Corp.'s "regular[] involve[ment] in the negotiations
with NTCH-TN and its affiliates . . ." as evidence of purposeful availment. (D.E. 97 at PageID
2279.) To the extent the nonmovant is referring to discussions between the parties to this action
other than those relative to repairs to the ZTE Equipment, such a claim is not supported by the
complaint or Steinmann's declaration.
In looking at prior negotiations, contemplated future consequences, terms of any
agreement, and the actual course of dealing between these parties, the Court finds that the
relationship falls into the category of a "one-shot affair." Indeed, the Plaintiff appears to agree
with this characterization based on its reliance on the proposition that a single act can constitute
purposeful availment. The oft-cited case accompanying such assertions, which has also been
referenced here by NTCH-TN, is McGee v. International Life Insurance Co., 355 U.S. 220

17

(1957). Therein, the plaintiff was the beneficiary under a life insurance policy purchased by her
son, who had died by suicide. McGee, 355 U.S. at 221-22. The plaintiff, Lulu McGee, and the
decedent lived in California. Id. The insurance carrier, which refused to pay the claim, was
located in Texas and had never maintained offices or agents in California. Id. Nor was there
evidence to show the defendant had ever solicited or engaged in any insurance business in the
forum aside from the policy issued to McGee's son. Id. at 222. The Supreme Court held that the
California courts had personal jurisdiction over the insurer based on a contract that had a
"substantial connection" with the state. Id. at 223. The Court explained its position thusly:
It cannot be denied that California has a manifest interest in providing effective
means of redress for its residents when their insurers refuse to pay claims. These
residents would be at a severe disadvantage if they were forced to follow the
insurance company to a distant State in order to hold it legally accountable.
When claims were small or moderate individual claimants frequently could not
afford the cost of bringing an action in a foreign forum -- thus in effect making
the company judgment proof.
Id.
In Tryg, the Sixth Circuit observed that McGee "represents perhaps the broadest
application of the test set forth in" minimum contacts jurisprudence. Tryg, 91 F.3d at 796. The
court noted that the concerns leading to the Supreme Court's holding in McGee did not exist in
the case before it, where the plaintiff was not an individual but a large insurance corporation
"able to afford to travel to the defendant's jurisdiction to obtain redress," even if that travel was
to another country. Id. at 796-97. In distinguishing McGee, the appellate court also recognized
that the McGee Court did not have before it the circumstance of a foreign defendant and the
"special concerns" that arise in such cases. Id. at 797. As the Supreme Court cautioned in Asahi
Metal Industry Co., Ltd. v. Superior Court of California, Solano County, 480 U.S. 102, 114
(1987), "[t]he unique burdens placed upon one who must defend [it]self in a foreign legal system

18

should have significant weight in assessing the reasonableness of stretching the long arm of
personal jurisdiction over national borders." See Tryg, 91 F.3d at 797.
Here, there is no evidence that the Defendant intended to create a relationship with
Tennessee or its residents that was ongoing in nature. See Kerry Steel, 106 F.3d at 151 (where
the record shows only an "isolated transaction" without evidence of an intent to create an
ongoing relationship in the forum state, purposeful availment has not been established). Neither
has Plaintiff contended that the commerce of the State of Tennessee has been affected. While
NTCH-TN itself was financially affected in a negative way, that fact does not create purposeful
availment. As the court noted in Kerry Steel, "the locus of such a monetary injury is immaterial,
as long as the obligation did not arise from a privilege the defendant exercised in the forum
state." Id. (quoting LAK, 885 F.2d at 1303) (internal alteration & quotation marks omitted).
Moreover, considering the corporate nature of the Plaintiff, it does not appear to the Court that it
is unable to pursue its claims against the Defendant in a forum where personal jurisdiction is not
an issue.
Thus, the Court finds Plaintiff has failed to demonstrate a prima facie case of purposeful
availment. In light of that finding, the Court need not continue through the remaining Southern
Machine elements.

See LAK, 885 F.2d at 1303 ("The plaintiff having failed to pass the

'purposeful availment' test, we need not dwell on the other criteria of [Southern Machine][.]").
That said, the Court deems it necessary to comment on one of the arguments presented with
respect to the reasonableness prong -- that NTCH-TN will have no other remedy for the righting
of the wrongs it claims. While the Court is not unsympathetic to Plaintiff's plight, it simply
cannot exercise personal jurisdiction over the Defendant absent purposeful availment.

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V. CONCLUSION
For the reasons articulated herein, the Defendant's motion to dismiss filed October 24,
2012, (D.E. 10) and Plaintiff's motion for leave to conduct jurisdictional discovery filed
November 16, 2012, (D.E. 13) are DISMISSED as moot; Defendant's May 11, 2017, renewed
motion to dismiss for lack of personal jurisdiction (D.E. 90) is GRANTED; and this action is
DISMISSED in its entirety.

The Clerk is DIRECTED to enter judgment in favor of the

Defendant and to remove all remaining motions from pending status.
IT IS SO ORDERED this 9th day of November 2017.
s/ J. DANIEL BREEN
UNITED STATES DISTRICT JUDGE

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