Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_09-cv-01713/USCOURTS-azd-2_09-cv-01713-1/pdf.json

Nature of Suit Code: 365
Nature of Suit: Personal Injury - Product Liability
Cause of Action: 28:1441 Petition for Removal- Product Liability

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WO 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA 

Mark Monje and Beth Monje, husband and 

wife, individually and on behalf of their 

minor son; and RM, minor son, 

 Plaintiffs, 

v. 

Spin Master Inc., a Delaware corporation; 

Spin Master Limited, a Canadian company; 

Toys "R" US-Delaware Inc.; and Moose 

Enterprises Proprietary Limited, an 

Australian company, 

 Defendants. 

Spin Master, Inc., a Delaware corporation; 

Spin Master, LTD., a Canadian company, 

 Third-Party Plaintiffs, 

vs. 

Bureau Veritas S.A.; Bureau Veritas 

Consumer Products Services, Inc.; Eurofins 

Scientific SE, and Product Safety Labs, 

Inc., 

 Third-Party Defendants.

No. CV-09-1713-PHX-GMS

ORDER 

Third Party Defendants Eurofins Scientific SE (“ESSE”) and Product Safety Labs, 

Inc. (“PSL”) have moved to be dismissed from Defendant/Third-Party Plaintiff Spin 

Master, Inc.’s Amended Third Party Complaint (the “Complaint”) (Doc. 108) for lack of 

personal jurisdiction, moved to strike Spin Master’s designation of ESSE and PSL as 

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nonparties at fault in its Amended Answer, and, in the alternative, moved to stay this 

litigation. (Doc. 126.) Third-Party Defendant Bureau Veritas S.A. (“BVSA”) has likewise 

moved to dismiss the Complaint for lack of personal jurisdiction. (Doc. 131.) Third-Party 

Defendant Bureau Veritas Consumer Products Services, Inc. (“BVCPS”) has moved to 

dismiss the Complaint under Rule 12(b)(6) for failure to state a claim. (Doc. 130.) 

Finally, Spin Master filed a Motion, (Doc. 160), requesting that the Court order certain 

Parties to meet and confer again regarding the Motion to Strike, (Doc. 126). The Court 

grants the Motions to Dismiss for lack of personal jurisdiction, grants the Motion to 

Strike, denies the Motion to Stay as moot, denies the Motion to Dismiss under 12(b)(6), 

and denies Spin Master’s Motion. The claim against BVCPS remains.1

 

BACKGROUND2

 The underlying case involves a toy called “Bindeez”, which was designed by 

Defendant Moose Enterprises, Ltd., and which Spin Master marketed and sold in the 

United States as “Aqua Dots.” (Doc. 1-1 (Am. Compl.) ¶ 7.) Aqua Dots are small, 

colorful beads that children could use to make various crafts. (Id. ¶ 16.) Aqua Dots 

arrived on the shelves of United States retailers on April 1, 2007. (Id. ¶ 20.) Spin Master 

distributed around four million packages of Aqua Dots in the United States. (Doc. 106-1, 

Ex. 15.) 

 In June 2007, Spin Master commissioned BVCPS to conduct acute oral ingestion 

toxicity testing on a sample of Aqua Dots. (Doc. 108 ¶ 12.) BVCPS is a Massachusetts 

corporation with its principal place of business in Buffalo, New York. (Id. ¶ 4.) It is a 

subsidiary of BVSA, which is a French company headquartered in Neuilly-sur-Seine, 

France. (Doc. 131-1, Ex. 1 ¶ 3.) The Bureau Veritas group “offers a wide range of 

 

1

 The Parties’ requests for oral argument are denied because they have had an adequate opportunity to discuss the law and evidence and oral argument will not aid the Court’s decision. See Lake at Las Vegas Investors Group v. Pac. Malibu Dev., 933 F.2d 

724, 729 (9th Cir. 1991). 

2

 The Court takes as true the allegations contained in the Complaint at this stage of the litigation. Smith v. Jackson, 84 F.3d 1213, 1217 (9th Cir. 1996), with the exception of the disputed jurisdictional claims. 

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services to ensure a safety-assurance process and asset availability performance whatever 

the industry.” (Doc. 142-2, Ex. B.) 

 BVCPS subcontracted with PSL to perform the oral toxicity testing. (Doc. 108 ¶ 

13; Doc. 129-1, Exs. A, B.) PSL is a Delaware company whose offices are located in 

New Jersey. (Doc. 127 (Wnorowski Decl.) ¶ 2.) It is a member of the Eurofins group of 

companies, which is owned by ESSE, a Luxembourg holding company. (Doc. 128 

(Vaussy Decl.) ¶ 3.) Like the other members of the Eurofins Group, PSL performs 

laboratory testing of various products. (Doc. 108 ¶ 13.) 

 BVCPS and its subcontractor, PSL, understood that Spin Master marketed and 

sold Aqua Dots to children and that the testing was to ensure that the product would not 

endanger a child who ingested the dots. (Id.) Nevertheless, according to the allegations of 

the Third-Party Complaint, PSL unnecessarily delayed the testing and then did not 

administer the proper dosage to the test animals. (Id. ¶ 14–15.) 

At some point in 2007, Plaintiffs Mark and Beth Monje purchased Aqua Dots 

from a Toys “R” Us store in Maricopa County, Arizona. (Doc. 1-1 (Am. Compl.) ¶ 11.) 

In July of 2007, Plaintiff RM, the Monjes’ 18-month-old son, ate some Aqua Dots. (Id.) 

Unbeknownst to the Monjes, Aqua Dots contained 1,4-butanediol, a harmful toxin that, 

when metabolized, converts into GHB, also known as the “date rape” drug. (Id. ¶ 22.) 

RM experienced “significant seizures, continued vomiting, went into respiratory failure, 

required intubation, and slipped into a coma.” (Id. ¶ 13.) He was air-evacuated to Phoenix 

Children’s Hospital. (Id.) RM suffered severe and permanent injuries to his brain and 

central nervous system. (Id. ¶ 15.) Nurses found Aqua Dots in RM’s vomit. (Id. ¶ 13.) 

 PSL eventually provided its analysis to BVCPS, which sent it to Spin Master. 

(Doc. 108 ¶ 16.) The report stated that the Aqua Dots sample was “not . . . toxic as 

defined in and tested per 16 CFR 1500.3(c)(2)(i)(A), ‘Acute oral toxicity’ (FHSA 

regulations).” (Doc. 130-1, Ex. A.)3

 That report arrived on August 10, 2007, some time 

 

3

 The Court takes judicial notice of the toxicity report because it is a document “whose contents are alleged in a complaint and whose authenticity no party questions, but 

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after RM had ingested the Aqua Dots and suffered his injuries. (Id.; Doc. 1-1 (Am. 

Compl.) ¶ 11.) 

On November 7, 2007, the United States Consumer Product Safety Commission 

ordered the recall of all Aqua Dots after several reports of injuries similar to those 

suffered by RM surfaced in the media. (Doc. 1-1 (Am. Compl.) ¶ 21.) The Monjes bring 

a variety of product liability claims against Moose, Spin Master, and Toys “R” Us. Spin 

Master seeks common law and implied indemnification from ESSE, PSL, BVSA, and 

BVCPS. 

DISCUSSION 

 Three of the four Third-Party Defendants challenge the exercise of the Court’s 

jurisdiction over them. Because a jurisdictional challenge has been raised, the Court will 

consider those arguments before moving to question of whether Spin Master has stated a 

claim for common law immunity. 

I. PERSONAL JURISDICTION 

 A. Legal Standard

Spin Master, as the Third-Party Plaintiff, bears the burden of establishing personal 

jurisdiction. See, e.g., Ziegler v. Indian River Cnty., 64 F.3d 470, 473 (9th Cir. 1995). 

Once a defendant has moved to dismiss, “the plaintiff is obligated to come forward with 

facts, by affidavit or otherwise, supporting personal jurisdiction” over the defendant. 

Cummings v. W. Trial Lawyers Assoc., 133 F. Supp. 2d 1144, 1151 (D. Ariz. 2001) 

(internal quotations omitted). “[M]ere allegations of a complaint, when contradicted by 

affidavits, are not enough to confer personal jurisdiction over a non-resident defendant.” 

Chem Lab Prods., Inc. v. Stepanek, 554 F.2d 371, 372 (9th Cir. 1977); Data Disc, Inc. v. 

Sys. Tech. Assocs., 557 F.2d 1280, 1285 (9th Cir. 1977) (“[W]e may not assume the truth 

of allegations in a pleading which are contradicted by affidavit.”) A court may look to 

affidavits submitted by the parties in its determination. Doe v. Unocal Corp., 248 F.3d 

 which are not physically attached to the [plaintiff's] pleading,” Knievel v. ESPN, 393 F.3d 

1068, 1076 (9th Cir.2005) (quoting In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 

986 (9th Cir.1999) (alteration in original). 

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915, 922 (9th Cir. 2001). However, “conflicts between the facts contained in the parties’ 

affidavits must be resolved in [plaintiffs’] favor for purposes of deciding whether a prima 

facie case for personal jurisdiction exists.” AT&T v. Compagnie Bruxelles Lambert, 94 

F.3d 586, 588 (9th Cir. 1996). 

Because no statutory method for resolving the personal jurisdiction issue exists, 

the district court determines the method of its resolution. See Data Disc, 557 F.2d at 1285 

(citing Gibbs v. Buck, 307 U.S. 66, 71-72 (1939)). A district court may, but is not 

required to, allow discovery to help determine whether it has personal jurisdiction over a 

defendant. See id. at 1285 n.1. In addition, a district court may, but is not required to, hear 

evidence at a preliminary hearing to determine its jurisdiction. See id. at 1285 n.2. If the 

district court does not hear testimony or make findings of fact and permits the parties to 

submit only written materials, then the plaintiff must only make a prima facie showing of 

jurisdictional facts to defeat the defendant’s motion to dismiss. See Omeluk v. Langsten 

Slip & Batbyggeri A/S, 52 F.3d 267, 268 (9th Cir. 1995). Under this prima facie burden 

of proof, the plaintiff need only establish facts, through admissible evidence, that if true 

would support personal jurisdiction over the defendant. See Ballard v. Savage, 65 F.3d 

1495, 1498 (9th Cir. 1995). The Court has determined to proceed on the written materials 

submitted by the Parties and apply the lower prima facie standard. 

B. Analysis 

 To establish that personal jurisdiction over ESSE, PSL, and BVSA exists, Spin 

Master must demonstrate that (1) Arizona’s long arm statute confers jurisdiction over 

those Parties, and (2) that “the exercise of jurisdiction comports with the constitutional 

principles of Due Process.” See Rio Props. v. Rio Int’l Interlink, 284 F.3d 1007, 1019 

(9th Cir. 2002) (citation omitted); Fed. R. Civ. P. 4(k)(1)(A). Because Arizona’s longarm statute extends jurisdiction “to the maximum extent permitted by the . . . Constitution 

of the United States,” the personal jurisdiction inquiry collapses into a Due Process 

analysis. See Ariz. R. Civ. P. 4.2(a); Davis v. Metro Prod., Inc., 885 F.2d 515, 520 (9th 

Cir. 1989); Williams v. Lakeview Co., 199 Ariz. 1, 5, 13 P.3d 280, 282 (2000). Absent 

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traditional bases for personal jurisdiction (e.g., physical presence, domicile, and consent) 

the Due Process Clause requires that nonresident defendants have certain “minimum 

contacts” with the forum state such that the exercise of personal jurisdiction does not 

offend traditional notions of fair play and substantial justice. See Int’l Shoe Co. v. 

Washington, 326 U.S. 310, 316 (1945). 

 “In determining whether a defendant had minimum contacts with the forum state 

such that the exercise of jurisdiction over the defendant would not offend the Due Process 

Clause, courts focus on ‘the relationship among the defendant, the forum, and the 

litigation.’” Brink v. First Credit Resources, 57 F. Supp. 2d 848, 860 (D. Ariz. 1999) 

(quoting Shaffer v. Heitner, 433 U.S. 186, 204 (1977)). If a defendant’s contacts with the 

forum state are sufficient to satisfy the Due Process Clause, then the Court must exercise 

either “general” or “specific” jurisdiction over the defendant. See Helicopteros 

Nacionales de Colombia v. Hall, 466 U.S. 408, 414–15 nn.8–9 (1984); Ziegler, 64 F.3d at 

473. The nature of a defendant’s contacts with the forum state will determine whether the 

Court exercises general or specific jurisdiction over him. Helicopteros Nacionales, 466 

U.S. at 414–15 nn.8–9. Spin Master rests its jurisdictional case on the presence of general 

jurisdiction for each of the three Third-Party Defendants who have moved to dismiss. 

 The Court may assert general jurisdiction over ESSE, PSL, and BVSA only if the 

activities of each entity in Arizona are substantial or continuous and systematic. See 

Haisten v. Grass Valley Med. Reimbursement Fund, Ltd., 784 F.2d 1392, 1396 (9th Cir. 

1986)); Data Disc, 557 F.2d at 1287 (citing Perkins v. Benguet Consol. Mining Co., 342 

U.S. 437, 446–47 (1952)). If those contacts are present, then the reasonableness of 

exercising jurisdiction is considered. Bauman v. DaimlerChrysler Corp., 644 F.3d 909, 

919–20 (9th Cir. 2011), cert. granted, ___ S. Ct. ___, 11-965, 2013 WL 1704716 (Apr. 

22, 2013). 

In each case, Spin Master makes no argument that ESSE, PSL, or BVSA 

themselves have substantial or continuous and systematic contacts with Arizona. Instead, 

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Spin Master seeks to take the Arizona contacts of other non-party subsidiaries and funnel 

them back up to the parent companies (ESSE and BVSA) and out to a sister company 

(PSL). The Ninth Circuit has provided two theories to enable a plaintiff to take a 

subsidiary’s forum contacts and attribute them to the parent company. 

 1. Alter Ego 

First is the alter ego theory. To allow a court to impute a subsidiary corporation’s 

contacts with a forum to the parent, the plaintiff must make a prima facie showing that 

the “parent and subsidiary are not really separate entities . . . .” Unocal, 248 F.3d at 926. 

Since this is a diversity case, state law determines whether a parent company should be 

treated as the alter-ego of a subsidiary for jurisdictional purposes. See Hambleton Bros. 

Lumber Co. v. Balkin Enters., 397 F.3d 1217, 1227 (9th Cir. 2005) (noting that in 

diversity actions, federal courts must apply state law when evaluating alter-ego status); 

see also Davis v. Metro Prods., 885 F.2d 515, 520–21 (9th Cir. 1989) (sitting in diversity 

and applying Arizona’s test for piercing the corporate veil to determine whether a 

subsidiary’s contacts should be imputed to the parent). Under Arizona law, “corporate 

status will not be lightly disregarded.” Chapman v. Field, 124 Ariz. 100, 102, 602 P.2d 

481, 483 (1979). 

 To pierce the corporate veil or demonstrate alter-ego status, a “plaintiff[ ] must 

prove both (1) unity of control and (2) that observance of the corporate form would 

sanction a fraud or promote injustice.” Gatecliff v. Great Republic Life Ins. Co., 170 Ariz. 

34, 37, 821 P.2d 725, 728 (1991). In determining whether a parent and subsidiary share 

“unity of control,” Arizona courts often consider the following factors: stock ownership 

by the parent; common officers or directors; financing of subsidiary by the parent; 

payment of salaries and other expenses of subsidiary by the parent; failure of subsidiary 

to maintain formalities of separate corporate existence; similarity of logo; and plaintiff’s 

lack of knowledge of subsidiary’s separate corporate existence. Id. Isolated occurrences 

of a few of these factors are not enough to justify an alter ego theory. See Patterson v. 

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Home Depot, USA, Inc., 684 F. Supp. 2d 1170, 1177–79 (D. Ariz. 2010). In addition, the 

parent corporation must exert “substantially total control” over the subsidiary so that the 

subsidiary becomes “a mere instrumentality” of the parent. Gatecliff, 170 Ariz. at 37; 

Taeger v. Catholic Family & Cmty. Serv., 196 Ariz. 285, 297–98, 995 P.2d 721, 733–34 

(Ct. App. 2000). In sum, “[a]n alter ego or agency relationship is typified by parental 

control of the subsidiary’s internal affairs or daily operations.” Unocal, 248 F.3d at 926 

(citing Kramer Motors, Inc. v. British Leyland, Ltd., 628 F.2d 1175, 1177 (9th Cir. 

1980)). 

 a. ESSE

ESSE is a Luxemborg holding company. (Doc. 128 (Vaussy Decl.) ¶ 3.) It does 

not do any business in Arizona or any of the fifty states. (Id. ¶¶ 4–5.) ESSE has never 

engaged in any activities in Arizona. (Id.) As a holding company, ESSE has an ownership 

interest in many other companies that operate product safety testing labs. (Doc. 141-2, 

Ex. A.) According to its shareholder letter, these subsidiaries form the Eurofins Group. 

(Doc. 141-2, Ex. B at 4.) The Eurofins Group encompasses a network whose companies 

employ “over 10,000 staff in more than 150 laboratories across 30 countries.” (Id. at 3.) 

ESSE, however, does not perform any laboratory testing itself. It functions only as 

the “holding company” and “magage[s] its investments and the financing of the activities 

of its subsidiaries, provide[s] support, facilitate[s] communication and develop[s] 

resources that are available Group-wide.” (Id. at 18.) “The decentralized organization of 

the Group in autonomous clusters and business unites enables the subsidiaries to make 

decisions at the ground level and to maintain some independence.” (Id.) Nevertheless, 

“[s]trategic choices are determined and approved at a central level.” (Id.) 

Spin Master seeks to impute the Arizona contacts of one of ESSE’s subsidiaries, 

Eurofin Eaton Analytical (“EEA”), back to ESSE. EEA, which is not party to this case, is 

a Delaware company situated in Scottsdale, Arizona. (Doc. 141-2, Exs. D, K.) EEA 

appears to perform a range of product tests at its Arizona labs, but it did not test the Aqua 

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Dots product and is not involved in the underlying case. ESSE does not assert that 

general jurisdiction does not exist over EEA. 

None of the facts that Spin Master cites demonstrate that EEA functions as the 

alter ego of ESSE. Spin Master focuses on ESSE’s description of its subsidiaries as 

members of the “Eurofins North American Environmental family,” (Doc. 141-3, Ex. J), 

and the fact that ESSE aggregates its subsidiaries’ financial performance in ESSE’s 

financial reports (Doc. 141-2, Ex. B). That type of financial reporting is standard practice 

for a holding company like ESSE and will not result in a court breaking down the 

corporate walls between ESSE and EEA. See Unocal., 248 F.3d at 928 (“Likewise, 

references in the parent’s annual report to subsidiaries or chains of subsidiaries as 

divisions of the parent company do not establish the existence of an alter ego 

relationship.”). Nor does the fact that ESSE provided EEA “in excess of $1M in capital 

for increased equipment capacity”, (Doc. 141-3, Ex. J), establish unity of control. The 

provision of loans, so long as the companies observe corporate formalities, does not fuse 

a subsidiary and parent together for purposes of the law. See Unocal, 248 F.3d at 928; 

Kramer Motors, 628 F.2d at 1177. The Ninth Circuit has “found no alter ego relationship 

was created where the parent company guaranteed loans for the subsidiary, reviewed and 

approved major decisions, placed several of its directors on the subsidiary’s board, and 

was closely involved in the subsidiary’s pricing decisions.” Unocal, 248 F.3d at 928 

(citing Kramer Motors, 628 F.2d at 1177). 

ESSE appears to adequately observe corporate formalities. Its role is limited to 

“manag[ing] its investments and the financing of the activities of its subsidiaries, 

provid[ing] support, facilitat[ing] communication and develop[ing] resources that are 

available Group-wide.” (Doc. 141-2, Ex. B at 18.) The fact that “[s]trategic choices are 

determined and approved at a central level”, (id.), does not rise to unified control. As the 

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Supreme Court made clear in a case concerning corporate liability,4 there is an important 

distinction between oversight and control. See United States v. Bestfoods, 524 U.S. 51, 69 

(1998) (distinguishing “a parental officer’s oversight of a subsidiary from such an 

officer’s control over the operation of the subsidiary’s facility”). A parent company’s 

involvement in the affairs of its subsidiaries is to be expected. Thus, appropriate parental 

involvement includes “monitoring of the subsidiary’s performance, supervision of the 

subsidiary’s finance and capital budget decisions, and articulation of general policies and 

procedures[.]” Id. 

At best, then, the evidence submitted by the Parties shows merely that ESSE is a 

typical parent company. It provides general policies to its subsidiary, keeps track of its 

financial performance, and tries to implement a certain product culture. Only when a 

parent exerts day-to-day control over “the subsidiary’s internal affairs or . . . operations” 

does the subsidiary transform into the parent’s alter ego. Unocal, 248 F.3d at 926. Spin 

Master has not shown that ESSE dictates the day-to-day running of EEA’s business. 

The remaining arguments that Spin Master advances focus on the cosmetic and not 

the functional. For example, Spin Master relies on the fact that the EEA website uses the 

Eurofin logo and incorporates “Eurofin” into its company name. Similar or identical 

logos can be an outward indicator of internal domination, but do not demonstrate by 

themselves “that one company dominated another’s business activities or acted as its 

alter-ego.” Patterson, 684 F. Supp. 2d at 1179. Because Spin Master has not shown that 

ESSE exerts “substantially total control” over EEA, see Gatecliff, 170 Ariz. at 37, it 

cannot rely on an alter ego theory to establish personal jurisdiction over EEA. 

 b. PSL

 

4

 The Ninth Circuit has looked to these cases to assist in evaluating an alter ego theory for jurisdictional purposes. See Unocal, 248 F.3d at 926. 

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PSL is EEA’s sister company. Spin Master cited no authority for the idea that a 

company’s forum contacts can be imputed horizontally to a sister company through an 

alter ego theory. Even if such a theory were cognizable, Spin Master has presented no 

facts that would show that EEA was functioning as PSL’s alter ego. This theory does not 

establish jurisdiction over PSL. 

 c. BVSA

BVSA is a French company. (Doc. 131-1, Ex. 1 ¶ 3.) It has no physical presence 

in Arizona, owns no property in Arizona, does not have a bank account, and transacts no 

business in Arizona. (Id. ¶¶ 4–5.) It is the parent company of a group that uses the Bureau 

Veritas trademark, including BVCPS. (Id. ¶¶ 6–7.) BVSA’s website refers to “the Group” 

that comprises “more than 940 offices and 340 laboratories located in 140 countries.” 

(Doc. 142-2, Ex. A.) Its 2012 Full-Year Results report the financials of each BVSA 

company together. (Doc. 142-2, Ex. C.) BVSA also speaks of a unifying company culture 

that it wants to see manifest in each of its subsidiaries. (Id., Ex. F at 35.) “[T]he Chief 

Executives of the Group’s vertical operating businesses” serve on an Executive 

Committee (different than the Board of Directors), which serves as “the operational 

management body of the Group.” (Id., Ex. H.) These Chief Executives have 

responsibility over “the major geographic zones of the Industry & Facilities division, and 

of the support functions.” (Id.) 

Spin Master seeks to impute the Arizona contacts of a BVSA subsidiary back to 

the parent. One of BVSA’s subsidiaries is Bureau Veritas North America, Inc. 

(“BVNA”). BVNA is an Arizona corporation headquartered in Fort Lauderdale, Florida. 

(Doc. 142-2, Ex. I.) BVNA appears to have some facility that is located in Phoenix. (Id., 

Ex. J.) Nevertheless, BVNA’s general counsel has averred that BVNA does not have 

laboratories, real estate, or offices in Arizona. (Id. ¶ 4.) The President and CEO of BVNA 

serves on the Executive Committee. (Id., Exs. H, I.) 

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BVSA challenges Spin Master’s assumption that this Court would have general 

jurisdiction over BVNA. The standard for establishing general jurisdiction is “fairly high 

and requires that the defendant’s contacts be of the sort that approximate physical 

presence.” See Bancroft & Masters, Inc. v. Augusta Nat’l Inc., 223 F.3d 1082, 1086 (9th 

Cir. 2000) (internal citation and quotation marks omitted), holding modified in 

nonrelevant part by Yahoo! Inc. v. La Ligue Contre Le Racisme Et L’Antisemitisme, 433 

F.3d 1199 (9th Cir. 2006). In other words, exercise of general jurisdiction requires 

“continuous corporate operations within a state [that are] thought so substantial and of 

such a nature as to justify suit against [the defendant] on causes of action arising from 

dealings entirely distinct from those activities.” King v. Am. Family Mut. Ins. Co., 632 

F.3d 570, 579 (9th Cir. 2011) (internal quotation marks omitted). Indicia of this type of 

presence include “whether the defendant makes sales, solicits or engages in business in 

the state, serves the state’s markets, designates an agent for service of process, holds a 

license, or is incorporated there.” Bancroft & Masters, 223 F.3d at 1086 (citing Hirsch v. 

Blue Cross, Blue Shield of Kansas City, 800 F.2d 1474, 1478 (9th Cir. 1986)). 

BVNA is an Arizona corporation that is licensed to do business in this state. (Doc. 

142-2, Ex. I.) It has appointed a registered agent to receive service of process here. (Id.) 

According to its website, BVNA has some type of facility that is located in Phoenix. (Id., 

Ex. J.) While Spin Master has not produced any evidence that BVNA solicits business in 

Arizona, the facts that it has produced are sufficient to state a prima facie case for general 

jurisdiction. Critical to this analysis is that BVNA has chosen to incorporate itself under 

Arizona laws. The Court has found no cases—nor has BVSA cited any—where an entity 

that was incorporated in a given state, had a registered agent in that state, and had some 

facility in the state was nevertheless not subject to jurisdiction in that state. Accordingly, 

BVNA’s Arizona incorporation, registered agent, business license, and facility create 

sufficiently pervasive contacts to assume that it would be subject to general jurisdiction. 

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Nevertheless, for reasons similar to those discussed with ESSE in part I.B.1.a, 

Spin Master has not shown that BVNA is an alter ego of BVSA. BVSA’s description of 

its subsidiaries as members of “the Group” and aggregate financial reporting are standard 

practices for a parent company. See Bestfoods, 524 U.S. at 69; Unocal, 248 F.3d at 928 

(“Likewise, references in the parent’s annual report to subsidiaries or chains of 

subsidiaries as divisions of the parent company do not establish the existence of an alter 

ego relationship.”). While BVNA’s President and CEO sits on BVSA’s Executive 

Committee, which serves as “the operational management body of the Group”, (Doc. 

142-2, Exs. H, I), he does not sit on BVSA’s controlling board of directors. And, in any 

event, 

it is entirely appropriate for directors of a parent corporation to serve as 

directors of its subsidiary, and that fact alone may not serve to expose the 

parent corporation to liability for its subsidiary’s acts. This recognition that 

the corporate personalities remain distinct has its corollary in the well 

established principle of corporate law that directors and officers holding 

positions with a parent and its subsidiary can and do “change hats” to 

represent the two corporations separately, despite their common ownership. 

Bestfoods, 524 U.S. at 69; see also Kramer Motors, 628 F.2d at 1177 (no alter ego where 

parent placed several of its directors on the subsidiary’s board). While Arizona courts 

have looked to whether there are common officers or directors between the parent and 

subsidiary, see Gatecliff, 170 Ariz. at 37, Spin Master has not shown that the membership 

of BVNA’s CEO on BVSA’s Executive Committee results in BVSA’s essential control 

over BVNA’s day-to-day operations. Essential control is the ultimate touchstone of this 

inquiry and the facts Spin Master advances do not show that level of control. 

Consequently, “[Spin Master’s] evidence here establishes only that [BVSA] is an active 

parent corporation involved directly in decision-making about its subsidiaries’ holdings. 

Because [BVSA] and its subsidiaries observe all of the corporate formalities necessary to 

maintain corporate separateness, the . . . alter ego test is not satisfied . . . .” Unocal, 248 

F.3d at 928. 

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 2. Agent

 Another way to impute a subsidiary’s contacts to the parent company is to show 

that the subsidiary is acting as the agent for the parent. In this context, agency means 

“that the subsidiary functions as the parent corporation’s representative in that it performs 

services that are sufficiently important to the foreign corporation that if it did not have a 

representative to perform them, the corporation’s own officials would undertake to 

perform substantially similar services.” Bauman, 644 F.3d at 920. In addition, the parent 

company must have the right to control its agent, the subsidiary. Id. at 923. 

 a. ESSE

 Spin Master has not shown that EEA is such an integral part of ESSE’s investment 

portfolio that, absent EEA’s work in Arizona, ESSE itself would undertake to run an 

Arizona laboratory. ESSE is not a laboratory company—it is a holding company. As the 

Ninth Circuit has recognized, application of the agency theory to a holding company is 

inapt: “in the case of a holding company the parent could simply hold another type of 

subsidiary, in which case imputing the subsidiaries’ jurisdictional contacts to the parent 

would be improper.” Unocal, 248 F.3d at 929 (internal citations omitted). Holding 

companies do not engage in the business of the companies they own; they are “really in 

the business of investing, not selling products.” MMI, Inc. v. Baja, Inc., 743 F. Supp. 2d 

1101, 1112 (D. Ariz. 2010). ESSE’s business is investing in product safety companies, 

not performing product safety tests itself. ESSE’s companies have “over 10,000 staff in 

more than 150 laboratories across 30 countries.” (Id. at 3.) ESSE has more than one 

laboratory available to service the United States (EEA in Arizona, PSL in New Jersey). 

On these facts, EEA’s services are not so important that, in its absence, ESSE would 

immediately set up its own laboratory in Arizona. 

 In any event, Spin Master has also failed to show that ESSE has the necessary 

right to control EEA. While the showing of control is lessened under an agency theory 

than an alter ego theory, the parent still needs to have a substantial right to control the 

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subsidiary. See Bauman, 644 F.3d at 923. Control is a core component of agency law. 

Ruesga v. Kindred Nursing Ctrs., 215 Ariz. 589, 597, 161 P.3d 1253, 1261 (Ct. App. 

2007); Restatement (Third) of Agency § 1.01 (2006). For the reasons discussed in part 

I.B.1.a, Spin Master has failed to demonstrate that ESSE maintains the requisite level of 

control over EEA. Indeed, ESSE expressly disclaims such control: “The decentralized 

organization of the Group in autonomous clusters and business unites enables the 

subsidiaries to make decisions at the ground level and to maintain some independence.” 

(Doc. 141-2, Ex. B at 18.) ESSE’s reservation of power to make “strategic choices” is not 

a sufficient level of control to show the formation of an agency relationship. 

Consequently, Spin Master has not shown that ESSE’s control over EEA was “over and 

above that which is to be expected as an incident of ownership.” Patterson, 684 F. Supp. 

2d at 1182 (internal citation omitted). 

 b. PSL

 Spin Master does not advance any argument for why EEA functions as the 

effective agent for PSL, nor could it in light of the relationship between the two 

companies. 

 c. BVSA

 Spin Master also fails to establish the existence of an agency relationship between 

BVSA and BVNA, largely for the reasons discussed above in part I.B.2.a with ESSE. 

BVNA arguably plays a larger role in the operations of BVSA than EEA played for 

ESSE, but that role is not so essential that BVSA would immediately step in itself to fill 

BVNA’s role. Once more, this agency theory is ill-suited to the operations of holding 

companies, which function as investment vehicles, not separate enterprises. Furthermore, 

there is a much longer chain of companies between BVNA and BVSA: BVNA is a 

wholly owned subsidiary of U.S. Laboratories, Inc., which is a wholly owned subsidiary 

of Bureau Veritas Holdings Inc., which is a wholly owned subsidiary of BVSA. (Doc. 

151-1, Ex. 1 ¶ 3.) Spin Master has not demonstrated that BVSA would be forced to 

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bypass these entities to immediately fill the shoes of BVNA should BVNA somehow 

disappear. 

 And, again, Spin Master has not shown a sufficient level of control for an agency 

relationship to be present. On the evidence before the Court, BVSA exerts only that level 

of control that should be expected of a parent company. More is needed if Spin Master 

were to succeed in establishing personal jurisdiction via EEA. 

 In sum, Spin Master has failed to establish a prima facie case for jurisdiction over 

ESSE, PSL, and BVSA. Spin Master has not shown that any of those entities themselves 

have sufficiently pervasive contacts with Arizona to warrant the exercise of personal 

jurisdiction, nor has it shown that contacts of subsidiary or sister companies should be 

imputed to these Third-Party Defendants for jurisdictional purposes. Spin Master has 

requested an opportunity to conduct limited discovery on the question of jurisdiction. 

That request is denied. District courts retain discretion in how to evaluate the question of 

personal jurisdiction. See Data Disc, 557 F.2d at 1285 nn. 1–2. Spin Master has not 

shown any colorable basis for jurisdiction that later discovery might flesh out. 

Consequently, ESSE, PSL, and BVSA are dismissed from the case. 

II. MOTION TO STRIKE

 ESSE and PSL have moved to strike Spin Master’s designation of them as 

nonparties at fault. (Doc. 126.) Arizona’s comparative fault statute allows the trier of fact 

to consider the fault of non-parties when assessing percentages of fault. Ariz. Rev. Stat. § 

12-2506(B). In order for a party to take advantage of § 12-2506(B), however, it must 

“provide the identity, location, and the facts supporting the claimed liability of” any 

“person or entity not currently or formerly named as a party . . . within one hundred fifty 

(150) days after the filing of that party’s answer . . . .” Ariz. R. Civ. P. 26(b)(5).5

 Because 

 

5

 Contrary to the arguments of Spin Master in its Motion for an Order Directing the Parties to Further Meet and Confer (Doc. 160), ESSE and PSL’s citation to the 

previous version of the Rule did not affect their arguments or the Court’s disposition here. 

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the deadline for the filing of the Non-Party at Fault designation is inextricably 

intertwined with Arizona’s substantive law, this deadline protects substantive rights, and 

therefore, Arizona law applies in federal court. See Wester v. Crown Controls Corp., 974 

F. Supp. 1284, 1288 (D. Ariz. 1996). 

 The Parties dispute how to interpret Rule 26(b)(5)’s 150-day requirement. Spin 

Master filed its answer on October 15, 2009. (Doc. 12.) It did not designate any nonparties at fault in that Answer. The case was transferred to the Northern District of 

Illinois on December 10, 2009, to be consolidated as part of a multi-district litigation 

(“MDL”) involving Aqua Dots. (Docs. 13, 14.) The Northern District of Illinois 

remanded the case back to this Court on May 3, 2012. (Doc. 49.) Spin Master filed an 

Amended Answer on October 23, 2012. (Doc. 83.) This time, it designated ESSE and 

PSL as non-parties at fault pursuant to § 12-2506(B). (Id. ¶ 44.) Although Spin Master 

filed its Third-Party Complaint on the same day as the Amended Answer, the Amended 

Answer was docketed first and the Court assumes that ESSE and PSL were therefore 

“entit[ies] not currently or formerly named as a party” in the lawsuit at the time Spin 

Master filed its Amended Answer such that Rule 26(b)(5) applies. 

 This Court has previously held that the 150-day filing period runs from the initial 

answer. Daly v. Royal Ins. Co. of Am., CIV 00-0040-PHX-SRB, 2002 WL 1768887 at 

*17 (D. Ariz. July 17, 2002). Spin Master does not advance any argument for why it 

should be otherwise. In fact, the policy that Rule 26(b)(5) seeks to advance is served by 

counting from the initial answer: “As we have explained, the purpose of Rule 26(b)(5) is 

‘to identify for the plaintiff any unknown persons or entities who may have caused the 

injury in time to allow the plaintiff to bring them into the action before the statute of 

limitations expires.’” Scottsdale Ins. Co. v. Cendejas, 220 Ariz. 281, 286, 205 P.3d 1128, 

1133 (Ct. App. 2009) (quoting LyphoMed, Inc. v. Sup. Court, 172 Ariz. 423, 428, 837 

P.2d 1158, 1163 (Ct. App. 1992)). That policy is best served by starting the clock with 

the initial answer. 

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 Spin Master contends that the 150-day period should be tolled for the period of 

time this case was part of the Aqua Dots MDL and during the extension of time this 

Court granted in which to file an amended answer. The case joined the MDL for pre-trial 

discovery purposes 58 days after Spin Master filed its Answer. Contrary, however, to 

Spin Master’s arguments, the case was not “dormant and effectively stayed while 

consolidated with the MDL proceeding.” (Doc. 141 at 16.) A review of the docket shows 

that motions were filed and discovery requests were served during this period. (Docs. 21, 

24–26, 31.) Spin Master was not barred from complying with Rule 26(b)(5) during that 

period of time. In light of the policy considerations behind Rule 26(b)(5), the Court 

concludes that it should not be tolled in this situation. Nor are there equitable reasons to 

toll the period—Spin Master has not shown that it only recently came across evidence 

that ESSE and PSL may bear fault for the injuries alleged by the Monjes. Indeed, it sued 

ESSE and PSL for their involvement in the testing back in January 2009. (Doc. 129-1, 

Ex. D.) Accordingly, Spin Master failed to timely designate ESSE and PSL as non-parties 

at fault and that untimely designation will be stricken. 

 Spin Master also filed a Motion for an Order Directing the Parties to Further Meet 

and Confer and for Further Briefing, as Necessary (Doc. 160), in which it claims that 

ESSE and PSL never conferred with Spin Master regarding the argument that the 

designation of ESSE and PSL as nonparties at fault untimely. This Court has a standard 

Order that requires the Parties to “meet and confer prior to the filing of a motion to 

dismiss to determine whether it can be avoided. . . . [M]otions to dismiss must contain a 

certification of conferral indicating that the parties have conferred to determine whether 

an amendment could cure a deficient pleading, and have been unable to agree that the 

pleading is curable by a permissible amendment.” (Doc. 109.) By its terms, the Order 

applies only to motions to dismiss and not motions to strike. In addition, the designation 

of nonparty at fault was an affirmative defense asserted by Spin Master in its Answer to 

the underlying Complaint and not in its Third-Party Complaint against ESSE and PSL. 

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The required conferral is designed to address arguments relating to the Third-Party 

Complaint in which Spin Master asserts its claims against ESSE and PSL. Therefore, 

ESSE and PSL were under no obligation to meet and confer regarding their Motion to 

Strike. 

III. FAILURE TO STATE A CLAIM 

 A. Legal Standard

Rule 12(b)(6) is designed to “test the legal sufficiency of a claim.” Navarro v. 

Block, 250 F.3d 729, 732 (9th Cir. 2001). To survive dismissal for failure to state a claim 

pursuant to Federal Rule of Civil Procedure 12(b)(6), a complaint must contain more than 

“labels and conclusions” or a “formulaic recitation of the elements of a cause of action”; 

it must contain factual allegations sufficient to “raise a right to relief above the 

speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). While “a 

complaint need not contain detailed factual allegations . . . it must plead ‘enough facts to 

state a claim to relief that is plausible on its face.’” Clemens v. DaimlerChrysler Corp., 

534 F.3d 1017, 1022 (9th Cir. 2008) (quoting Twombly, 550 U.S. at 570). “A claim has 

facial plausibility when the plaintiff pleads factual content that allows the court to draw 

the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft 

v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556). The plausibility 

standard “asks for more than a sheer possibility that a defendant has acted unlawfully.” 

Id. When a complaint does not “permit the court to infer more than the mere possibility 

of misconduct, the complaint has alleged—but it has not shown—that the pleader is 

entitled to relief.” Id. at 679 (internal quotation omitted). 

When analyzing a complaint for failure to state a claim under Rule 12(b)(6), “[a]ll 

allegations of material fact are taken as true and construed in the light most favorable to 

the nonmoving party.” Smith v. Jackson, 84 F.3d 1213, 1217 (9th Cir. 1996). However, 

legal conclusions couched as factual allegations are not given a presumption of 

truthfulness, and “conclusory allegations of law and unwarranted inferences are not 

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sufficient to defeat a motion to dismiss.” Pareto v. FDIC, 139 F.3d 696, 699 (9th Cir. 

1998). 

B. Common Law Indemnification 

 BVCPS argues that Spin Master has failed to state a claim for common law and 

implied indemnity.6

 To prevail on a common law indemnity claim in Arizona, a plaintiff 

must show: “First, [that] it has discharged a legal obligation owed to a third party; 

second, [that] the indemnity defendant was also liable to the third party; and third, [that] 

as between itself and the defendant, the obligation should have been discharged by the 

defendant.” MT Builders, L.L.C. v. Fisher Roofing, Inc., 219 Ariz. 297, 303, 197 P.3d 

758, 764 (Ct. App. 2008) (citing Am. & Foreign Ins. Co. v. Allstate Ins. Co., 139 Ariz. 

223, 225, 677 P.2d 1331, 1333 (Ct. App. 1983)). BVCPS contests the adequacy of Spin 

Master’s pleading of the second and third elements. 

 1. Liability of BVCPS to the Monjes

 The Monjes allege that Spin Master and its co-defendants were “negligent, 

careless, and reckless in designing, manufacturing, marketing, distributing, and selling 

the Aqua Dots. (Doc. 1-1 (Am. Compl.) ¶ 49.) As it relates to the testing efforts that 

BVCPS performed for Spin Master, the Monjes contend that “Spin Master, indifferent to 

the significant risk to the health and safety of children, placed the Aqua Dots in the 

stream of commerce, without conducting safety tests.” (Id. ¶ 23.) The Monjes are 

therefore alleging that Spin Master was negligent for failing to conduct adequate tests, 

tests that would have revealed the toxicity of the chemical that coated the Aqua Dots. 

 

6

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143 at 14 n.3.) Neither Spin Master nor BVCPS, however, briefed the Motion in reliance 

on Arizona law. It is not clear on what basis Arizona law would apply to Spin Master’s claims against BVCPS. Yet because the Parties are assuming that Arizona law applies, the Court will proceed on that assumption for purposes of this Motion. 

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To claim indemnity, Spin Master asserts that BVCPS is independently liable to the 

Monjes. Liability from an indemnity defendant to a third party generally arises out of an 

independent legal duty between them. See Am. & Foreign Ins., 139 Ariz. at 225 (referring 

to liability as “duty”); see also Restatement (First) of Restitution § 76 cmt. a (1937) 

(“The rule . . . applies where two or more persons are subject to a duty to a third person . . 

. .”). Spin Master’s theory is that BVCPS itself was negligent in relation to the Monjes.7

 

The elements of a negligence case are well-known: “(1) a duty requiring the 

defendant to conform to a certain standard of care; (2) a breach by the defendant of that 

standard; (3) a causal connection between the defendant’s conduct and the resulting 

injury; and (4) actual damages.” Gipson v. Kasey, 214 Ariz. 141, 143, 150 P.3d 228, 230 

(2007). Consequently, BVCPS must show that the pleadings in this case do not establish 

the existence of duty that runs from BVCPS, the product testers, to the Monjes, the 

ultimate consumers, breach, causation, and damages. The Parties focus only on the issues 

of duty and causation. 

 a. Duty 

Duties of care may arise from special relationships. Stanley v. McCarver, 208 

Ariz. 219, 221 ¶ 7, 92 P.3d 849, 851 (2004). Typical touchstones of duty include a state’s 

statutes and cases and special relationships between the parties that derive from contracts, 

family relations, or specific undertakings. See id. at 221 (finding that radiologist, though 

not a doctor, performed a specific undertaking relative to a patient and that a duty should 

be implied). A special or direct relationship, however, is not essential in order for there to 

be a duty of care. Gipson, 214 Ariz. at 145. “The requirement of a formalized relationship 

between the parties has been quietly eroding . . . and, when public policy has supported 

the existence of a legal obligation, courts have imposed duties for the protection of 

 

7

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persons with whom no preexisting ‘relationship’ existed.” Stanley, 208 Ariz. at 221–22. 

Hence, the law now includes “specific undertakings” as a relationship that may give rise 

to a duty. 

Section 324A of the Restatement outlines the liability to a third party for negligent 

performance of an undertaking: 

One who undertakes, gratuitously or for consideration, to render services to 

another which he should recognize as necessary for the protection of a third 

person or his things, is subject to liability to the third person for physical 

harm resulting from his failure to exercise reasonable care to protect his 

undertaking, if (a) his failure to exercise reasonable care increases the risk 

of such harm, or (b) he has undertaken to perform a duty owed by the other 

to the third person, or (c) the harm is suffered because of reliance of the 

other or the third person upon the undertaking. 

Restatement (Second) of Torts § 324A (1965). An example would be if “A Telephone 

Company employs B to inspect its telephone poles. B negligently inspects and approves a 

pole adjoining the public highway. Because of its defective condition the pole falls upon 

and injures a traveler upon the highway. B is subject to liability to the traveler.” Id.

Arizona courts have relied upon § 324A to find liability to a third party. See Papastathis 

v. Beall, 150 Ariz. 279, 723 P.2d 97 (Ct. App. 1986). In Papastathis, a franchisor of a 

convenience store agreed to inspect, endorse, and recommend a certain type of rack on 

behalf a franchisee. Id. at 282. The franchisor was negligent in its inspection and, as a 

result, a customer was injured when a soda can fell from the rack. The Court found that 

the franchisor’s “failure to exercise reasonable care increased the risk of harm to the third 

party . . . .” Id. 

While the existence of a duty is a question of law for the court, see Gipson, 214 

Ariz. at 143, that inquiry does not operate in a factual vacuum. Instead, the relationships 

between the parties and their respective roles in the underlying injury shape the analysis. 

This is not to say that foreseeability is the touchstone in determining the existence of a 

duty under Arizona law—it is not. See id. at 144 (“To clarify, we now expressly hold that 

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foreseeability is not a factor to be considered by courts when making determinations of 

duty, and we reject any contrary suggestion in prior opinions.”). The need for a factual 

context, however, makes resolution of this question ill-suited to the limited review that a 

motion to dismiss entails. 

The cases Spin Master cites all involve closer relationships than the one between 

BVCPS and Aqua Dots consumers. In Stanley, the Arizona Supreme Court determined 

that a radiologist owed a duty of care to the recipient of an x-ray, relying on the close 

similarities between that situation and the doctor-patient relationship. 208 Ariz. at 222–

24. In SKR Consulting, Inc. v. MMLA Psomas, Inc., this Court recognized a duty running 

from a subcontractor to a contractor and the ultimate recipient of the services, an 

unexceptional proposition. No. CV-09-0611-PHX-GMS, 2009 WL 2450490 at *4 (D. 

Ariz. Aug. 11, 2009). While the general contractor hired the subcontractor, the services 

the subcontractor performed were expressly for the benefit of the ultimate consumer. Id. 

Here, that would be like the relationship between Eurofin and Spin Master, not the 

relationship between BVCPS and Aqua Dots consumers. Finally, Spin Master relies on 

the line of cases that recognize a duty between professionals and their clients. See 

Flagstaff Affordable Housing, LP v. Design Alliance, Inc., 221 Ariz. 433, 437, 212 P.3d 

125, 129 (Ct. App. 2009), vacated on other grounds, 223 Ariz. 320, 223 P.3d 664 (2010). 

Nevertheless, something akin to the situation that § 324A describes is present here. 

If BVCPS was negligent, as Spin Master alleges, then its failure to exercise reasonable 

care increased the likelihood consumers would suffer harm from the Aqua Dots. While 

the risk of injury from ingestion was constantly present in the Aqua Dots, that risk 

increased when the tests did not show oral toxicity. Before, Spin Master marketed a 

product that had not yet been tested; now, it could market a product that it had tested and 

was informed was non-toxic. The inherent harmfulness of the product remained 

unchanged, but the risk of injury increased due to the assurance and certification 

provided. Construing the facts pled in the Complaint in the light most favorable to Spin 

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Master, as the Court must on a 12(b)(6) Motion, it cannot say that no duty exists. One 

who undertakes to inspect and test a product on behalf of another could be held to have a 

duty to the ultimate purchaser of that product under a theory like § 324A. 

 b. Causation

Even if there is a duty, BVCPS argues that Spin Master has failed to adequately 

allege causation, a necessary component of liability and therefore a necessary component 

of a plea for indemnity. Spin Master has alleged that the way BVCPS (through Eurofin) 

conducted the testing was negligent. But that is insufficient by itself—even if the testing 

was negligent and produced a faulty result, Spin Master did not receive the results until 

after the injury in this case occurred. Therefore, BCVPS argues that any negligence on its 

part in performing the tests was not a proximate cause of the injuries at issue in this case. 

But Spin Master has also alleged negligence in the timing of the test, i.e., that 

BVCPS (through Eurofin) 

floundered and delayed unreasonably for weeks and weeks and was 

ultimately unable to perform the test in a competent and timely manner. 

Had Eurofins possessed the capability to perform the test properly, it would 

have been able to promptly begin the testing process. After dosing the 

animals with Aqua Dots beads, Eurofins would have achieved a test result 

within days or weeks of Spin Master’s original request. 

(Doc. 108 ¶ 14.) 

The causal chain that Spin Master lays is not so implausible as to warrant 

dismissal. Spin Master asserts two levels of negligence: (1) negligence in how fast the 

test was conducted and (2) negligence in how the test was conducted. According to Spin 

Master, had the test been completed on time and in a reasonable manner, it would have 

allowed Spin Master to put the brakes on the sale of Aqua Dots and issue appropriate 

warnings that could have stopped RM from ingesting that product. Those allegations are 

sufficient to sketch the causal chain, and a sketch is all that is needed at this stage. 

Plausible does not mean likely. See Anderson News, L.L.C. v. Am. Media, Inc., 680 F.3d 

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162, 184 (2d Cir. 2012) (“[T]o present a plausible claim at the pleading stage, the 

plaintiff need not show that its allegations suggesting an agreement are more likely than 

not true . . . .”). Causation is inherently a fact-based inquiry, and so factual development 

is necessary to actually determine whether BVCPS actually dragged its feet and whether 

it was actually negligent. For purposes of a Motion to Dismiss, however, Spin Master has 

adequately pled a causal chain. 

2. No Fault

A necessary component of any indemnity case is that the party asserting indemnity 

be without active fault. “‘[I]ndemnity is an all or nothing proposition damage-wise, and 

hence should be an all or nothing proposition fault-wise.’ Its purpose is neither to 

apportion damages nor to balance relative degrees of fault, but ‘to give full restitution to 

one who pays damages but is without personal fault.’ It permits one defendant to shift the 

entire loss to one who more justly deserves it.” Herstam v. Deloitte & Touche, LLP, 186 

Ariz. 110, 117–18, 919 P.2d 1381, 1388–89 (Ct. App. 1996) (quoting Transcon Lines v. 

Barnes, 17 Ariz. App. 428, 435, 498 P.2d 502, 509 (1972)). 

The Arizona Supreme Court has drawn a distinction between “active” and 

“passive” negligence. See Busy Bee Buffet v. Ferrell, 82 Ariz. 192, 310 P.2d 817 (1957). 

Thus indemnity is not allowed “where the conduct of the indemnitee made him an ‘active 

[participant] in the liability-creating event.’” Shea v. Sup. Court of Maricopa Cnty., 150 

Ariz. 271, 274, 723 P.2d 89, 92 (1986) (quoting Chrysler Corp. v. McCarthy, 14 Ariz. 

App. 536, 538, 484 P.2d 1065, 1067 (1971)). On the other hand, indemnity is available 

where “1) the party seeking indemnity is not at fault at all; or (2) if he was at fault, his 

causative contribution ended so that he is held liable only because of the continuing 

conduct of the indemnitor; or (3) where he is liable only because the law imposes liability 

upon him for the torts of the indemnitor.” Id. Passive negligence, then, can be “found in 

mere nonfeasance, such as the failure to discover a dangerous condition . . . .” Estes Co. 

v. Aztec Const., Inc., 139 Ariz. 166, 169, 677 P.2d 939, 942 (Ct. App. 1983). 

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Spin Master has admitted that “on or about November 24, 2006, Moose entered 

into a distribution agreement with Spin Master whereby the parties agreed that Moose 

would supply Spin Master with the Aqua Dots beads that are the subject of this 

litigation.” (Doc. 83 ¶ 6.) Spin Master also admits that “a Mercy Gilbert Medical Center 

nurse named Jonathan called the Spin Master customer care department regarding the 

ingestion of Aqua Dots. Upon information and belief, it appears that Jonathan was told 

that the Aqua Dots were non-toxic.” (Id. ¶ 9.) Spin Master admitted that it “distributed 

Aqua Dots beads in the United States, including in Maricopa County, Arizona.” (Id. ¶ 

12.) Thus, Spin Master may turn out to be liable for damages. 

Nevertheless, construing the allegations contained in the pleadings in the light 

most favorable to Spin Master, the Court cannot say with certainty whether Spin Master 

is at fault, and, if it is, whether its fault would be of the active or passive variety. For one, 

“[w]hether conduct constitutes active or passive negligence depends upon the 

circumstances of a given case.” Id. The fact-based nature of this question means that it is 

typically not resolved on at such an early stage. 

Moreover, the fact that Arizona’s strict products liability statutes may result in 

Spin Master’s liability if the Monjes can prove the facts supporting their claims is not 

dispositive of the fault question. See Transamerica Ins. Co. v. Trico Int’l, Inc., 149 Ariz. 

104, 716 P.2d 1041 (Ct. App. 1985) (“But the judgment was premised on strict liability 

rather than fault. If passive negligence does not defeat indemnification, a fortiori strict 

liability does not.”). A party’s liability does not equate with a finding of fault for 

purposes of indemnity. Under strict liability, fault is not at issue. See id. One can be 

strictly liable because of a status as a merchant or distributor or landowner and yet be 

without fault for purposes of indemnification. The ultimate question of fault is too illdefined on a motion to dismiss for the Court to say that “yes, it is clear that Spin Master 

was actively at fault in this case.” Those allegations have yet to be proven by the Monjes. 

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Spin Master’s ultimate liability, if there is any, could be of either the active or passive 

variety. Which one is a factual question inappropriate on a Motion to Dismiss. 

C. Implied Indemnification 

Spin Master also claims that BVCPS is liable under a theory of implied 

indemnification. “‘The obligation to indemnify may grow out of an implied contractual 

relation or out of liability imposed by law.’” First Bank of Ariz. v. Otis Elevator Co., 2 

Ariz. App. 596, 597, 411 P.2d 34, 35 (Ct. App. 1966) (quoting 42 C.J.S. Indemnity § 20 

at 594, 595). “In the absence of an express indemnity agreement, a party has a right to 

indemnity when there is an implied contract for indemnity or when justice demands there 

be the right.” INA Ins. Co. of N. Am. v. Valley Forge Ins. Co., 150 Ariz. 248, 252, 722 

P.2d 975, 979 (Ct. App. 1986). “[T]he cornerstone of implied indemnity is the 

relationship of the parties.” Schweber Electronics v. Nat’l Semiconductor Corp., 174 

Ariz. 406, 410, 850 P.2d 119, 123 (Ct. App. 1992). BVCPS argues that Spin Master has 

failed to state a claim for implied indemnity because (1) it has not adequately pled the 

existence of an agreement between Spin Master and BVCPS and (2) the facts as pled fail 

to establish that Spin Master was free for negligence. 

Neither ground is a basis for dismissing the claim. Arizona law does not 

necessarily require the existence of a contract between two parties to imply a right to 

indemnification. As the Schweber Electronics court noted, “[i]mplied indemnity is a 

concept born of . . . equitable principles” whose “cornerstone . . . is the relationship of the 

parties.” Id. The question whether indemnity would be implied exists independent of any 

contract between the parties. See id. at 410–11 (declining to decide the indemnity 

question on the existence or not of a contract between the parties, but looking instead to 

the “relationship of the parties”). Implied indemnity arises “if the evidence establishes an 

implied contract.” First Bank, 2 Ariz. App. at 597. Thus Spin Master’s claim did not rise 

or fall on whether it pled the existence of a specific contractual relationship between it 

and BVCPS. And, for the reasons described in part III.B.2, the question of Spin Master’s 

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fault is a factual question ill-suited to a Motion to Dismiss. Therefore, the implied 

indemnity claim remains. 

CONCLUSION 

 Spin Master has failed to put forth a prima facie case that this Court has personal 

jurisdiction over ESSE, PSL, and BVSA. Its indemnification claims against those Parties 

must be dismissed. Moreover, Spin Master’s designation of ESSE and PSL as nonparties 

at fault in its Answer was untimely and must be stricken. As for BVCPS, it has not shown 

that Spin Master’s Complaint fails to state a claim against it. Therefore, the claims 

against BVCPS remain. 

 IT IS THEREFORE ORDERED that ESSE and PSL’s Motion to Dismiss (Doc. 

126) is GRANTED. The Clerk of Court is directed to terminate ESSE and PSL from this 

case. 

IT IS FURTHER ORDERED that ESSE and PSL’s Motion to Strike (Doc. 126) 

is GRANTED. The designation of ESSE and PSL as non-parties at fault in Spin Master’s 

Amended Answer (Doc. 83 ¶ 44) is hereby stricken. 

IT IS FURTHER ORDERED that BVCPS’s Motion to Dismiss (Doc. 130) is 

DENIED.

 IT IS FURTHER ORDERED that BVSA’s Motion to Dismiss (Doc. 131) is 

GRANTED. The Clerk of Court is directed to terminate BVSA from this case. 

IT IS FURTHER ORDERED that Spin Master’s Motion (Doc. 160) is 

DENIED. 

 Dated this 30th day of May, 2013. 

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