Warshow v. Crompton Corp., No. 1566-02 CnC (Norton , J., Apr. 22, 2005)

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STATE OF VERMONT Chittenden County, ss.:

JOHN WARSHOW and DANA HOULIHAN

v.

CROMPTON CORPORATION; UNIROYAL CHEMICAL COMPANY, INC.; UNIROYAL CHEMICAL COMPANY LIMITED; FLEXSYS NV; FLEXSYS AMERICA LP; BAYER AG; BAYER CORPORATION; RHEIN CHEMIE RHEINAU GMBH; and RHEIN CHEMIE CORPORATION

ENTRY The plaintiffs have filed a class-action complaint against defendant chemical companies, seeking damages for the alleged price-fi xing of certain rubber-processing chemicals that third-party manufacturers used in pr oducing tires. The plaintiffs seek to
form a class of all tire consumers in Vermont since 1994. Several defendants—Crompton Corporation and its Uniroyal subsidiaries (“Crompto n”) and Flexsys NV and its subsidiary, Flexsys America LP (“Flexsys”)—have fil ed motions to dismiss for lack of personal jurisdiction.

The court’s personal jurisdiction over nonresident defendants, such as those here, extends “to the full extent permitted by the Due Pr ocess Clause.” Dall v. Kaylor , 163 Vt. 274, 275 (1995). Accordingly, the court looks to fe deral constitutional standards indetermining personal jurisdiction. N. Aircraft v. R eed , 154 Vt. 36, 41 (1990). The

plaintiff bears the burden of establishing personal jurisdiction by pleading specific facts

that, when accepted as true, satisfy Due Process st andards for personal jurisdiction.
Schwartz v. Frankenhoff , 169 Vt. 287, 295 (1999).

Due Process standards for personal jurisdiction re quire that nonresident defendants have “certain minimum contacts with [the forum stat e] such that the maintenance of the suit does not offend ‘traditional notions of fair p lay and substantial justice.’” Int’l Shoe Co. v. Washington , 326 U.S. 310, 316 (1945) (quoting Milliken v. Mey er , 311 U.S. 457, 463 (1940)). These “minimum contacts” require that “‘the defendant’s conduct and connection with the forum State are such that [the defendant] should reasonably anticipate being haled into court there.’” Dall , 163 Vt. at 276 (quoting World-Wide Volkswagen Corp. v. Woodson , 444 U.S. 286, 297 (1980)).

Courts generally recognize that a defendant’s cond uct can satisfy minimum contacts in two ways. First, “[s]pecific jurisdicti on exists when ‘a State exercises personal jurisdiction over a defendant in a suit arising out of or related to the defendant's contacts
with the forum.’” Metro. Life Ins. Co. v. Robertson -Ceco Corp. , 84 F.3d 560, 567–68 (2d Cir. 1996) (quoting Helicopteros Nacionales de Colu mbia, S.A. v. Hall , 466 U.S. 408, 414 n.8 (1984)). Second, “a court's general jurisdi ction . . . is based on the defendant's general business contacts with the forum state and permits a court to exercise its power in a case where the subject matter of the suit is unre lated to those contacts.” Id . at 568. General jurisdiction requires “‘continuous and syst ematic general business contacts’” on the part of a defendant. Id . (quoting Helicopteros , 466 U.S. at 416). Here, the plaintiffs argue that the court has specific jurisdiction over both Crompton and Flexsys, as well as general jurisdiction over Crompton.

Turning first to specific jurisdiction, the court notes that neither Crompton or Flexsys are registered corporations in Vermont. Nei ther own property in Vermont, have employees or agents in Vermont, pay Vermont taxes, or specifically target Vermont with marketing or advertising. Obviously, therefore, nei ther have any direct contacts related to the sale of tires in Vermont. At best, Crompton and Flexsys have contacts with Vermont related to this litigation through the chemical pro ducts that third-party manufacturers unilaterally use to produce tires out of state. The se manufacturers then distribute the tires, with Crompton or Flexsys chemicals in them, to Verm ont residents. On these facts,3

Crompton and Flexsys did no more than place their p roducts into the stream of commerce
with no intentional effort to direct the flow of th is stream toward Vermont. This is not enough to establish specific jurisdiction. The plai ntiffs would need to establish that Crompton and Flexsys “purposefully direct[ed their] activity toward residents” of Vermont and that “the litigation arises out of, or relates to, that activity.” Dall , 163 Vt. 276; see also N. Aircraft v. Reed , 154 Vt. 36, 41 (1990) (“The ‘unilateral activity of those who claim some relationship with a nonresident defe ndant cannot satisfy the requirement of [minimum] contact with the forum State.’” (quoti ng Hanson v. Denckla , 357 U.S. 235, 253 (1958))).

The plaintiffs argue, however, that because of Cro mpton’s and Flexsys’s dominance in the chemical industry and their relati onship with tire manufacturers, they could reasonably anticipate that their products wou ld be distributed in Vermont. The plaintiffs liken the relationship between Crompton and Flexsys and the manufacturers as one between a defendant manufacturer and a third-pa rty distributor, where the distributor essentially acts as an agent of the defendant.

Specific jurisdiction may exist in circumstances w here a nonresident defendant maintains a relationship with a third-party distrib utor such that the defendant essentially
directs the distributor’s activities toward the for um state. See, e.g., Hedges v. W. Auto Supply Co. , 161 Vt. 614, 614–15 (1994) (mem.) (holding that d efendant “‘purposely availed’ itself of Vermont’s market by selling its heaters to a well-known national distributorship which does business in Vermont”); C harles Gendler & Co. v. Telecom Equip. Corp. , 508 A.2d 1127, 1137 (N.J. 1986) (“A foreign manuf acturer that purposefully avails itself of [state legal and econ omic benefits] should be subject to personal jurisdiction, even though its products are distributed by independent companies or by an independent, but wholly-owned, subsidiary. ”); cf . DeJames v. Magnificence Carriers, Inc. , 654 F.2d 280, 285 (3d Cir. 1981) (holding that ve ssel manufacturer did not
utilize vessel owners as distributors of vessel and thus did not “take advantage of an indirect marketing scheme” in manner that purposefu lly availed manufacturer to forum state). Here, neither Crompton or Flexsys sent thei r chemical products directly into Vermont for the manufacture of tires through third- party distributors in a manner akin
that in a manufacturer-distributor situation.

At least one court, however, has held that a compo nent manufacturer may establish a relationship with a third-party manufac turer akin to a manufacturer-distributor4

relationship such that the component manufacturer c ould be haled into a state court where its only contacts are through the third-party manuf acturer. See Ruckstahl v. Owens Corning Fiberglas Corp. , 731 So. 2d 881, 889–90 (La. 1999). In Ruckstahl , the Louisiana Supreme Court held that a cigarette filter manufact urer had purposefully availed itself to the forum state through a cigarette manufacturer’s distribution of the cigarettes in the
forum state. The filter manufacturer had an exclusi ve supply agreement with the cigarette manufacturer, and the cigarettes were heavily marke ted as having a special type of filter.
See id . The filter manufacturer had made “a single produc t for a single purpose for a single customer for a period of five years.” Id . at 890. Under these circumstances, the court held that the filter manufacturer had purpose fully availed itself of the opportunity to
conduct business activities within Louisiana and sh ould have reasonably foreseen being
haled into court there. Id

. Here, the court can readily distinguish the relati onship between Crompton and Flexsys and the tire manufacturers from the relatio nship described in Ruckstahl

. Crompton and Flexsys have never maintained an exclu sive sales agreement with the tire manufacturers. Nor are tires marketed as containing special chemical components that Crompton or Flexsys provided. The plaintiffs proffe r no facts to suggest that specific tire rubber chemical components produced by Crompton or Flexsys influence an average tire consumer making a purchase in Vermont. Ruckstahl is therefore not persuasive in this case, and the court does not view the tire manufact urers as “distributors” of chemical components that Crompton or Flexsys provide. Crompt on and Flexsys merely sell various chemical products to many different manufacturers. No facts demonstrate that they had any purposeful availment of certain forum states by influencing tire manufacturers’ marketing or distribution channels.

The plaintiffs also fail to demonstrate specific j urisdiction based on the “effects test.” The Supreme Court of the United States has r ecognized that a state may exercise personal jurisdiction over an out-of-state defendan t whose “intentional, and allegedly tortious, actions were expressly aimed” at the foru m state. Calder v. Jones , 465 U.S. 783, 789 (1984). A defendant who does not expressly aim his or her actions at the forum state, however, does not fall under the forum state’s juri sdiction under this test. See, e.g., Chaiken v. V V Publishing Corp. , 119 F.3d 1018, 1029 (1st Cir. 1997). “[M]erely asserting that a defendant knew or should have know n that his intentional acts would cause harm in the forum state is not enough to esta blish jurisdiction under the effects5

test.” Pavlovich v. Superior Court , 29 Cal. 4th 262, 270–71, 58 P.3d 2, 8, 127 Cal. R ptr. 2d 329, 336 (Cal. 2002). Here, the plaintiffs have not established that Crompton or Flexsys expressly aimed their alleged price-fixing activities at the Vermont market, even if the court were to assume that price-fixing is a tortious act. Demonstrating that Crompton and Flexsys merely placed their product in to the stream of commerce with the foreseeable result that it would wind up in tires i n Vermont does not establish sufficient
minimum contacts under the effects test.

Finally, turning to general jurisdiction, the plai ntiffs have not shown continuous and systematic contacts on Crompton’s part. The pla intiffs point to sales of chemicals (unrelated to tire production) to a Vermont manufac turer over a period of several years. As part of these sales efforts, Crompton frequently sent a sales representative to Vermont. Crompton also advertises in nationally distributed publications, several of which target the northeastern U.S. market. Presumably, some of t hese advertisements reach Vermont. Crompton also distributes some of its products thro ugh a distributor that focuses on the northeast market, thereby ensuring that some of its products (though, again, not those related to tire production) reach Vermont. Finally, Crompton has been sued in Vermont in relation to other products.

None of these allegations suffice to show adequate general business contacts. Although determining adequate contacts is a fact-sp ecific inquiry, Metro. Life Ins. Co. v. Robertson-Ceco Corp. , 84 F.3d 560, 570 (2d Cir. 1996), Crompton’s conta cts with Vermont do not amount to the continuous and systema tic contacts found in most other
cases. In Metro. Life Ins. , for example, the Second Circuit Court of Appeals found that a nonresident company’s sales volume in Vermont, its relationship with Vermont dealers, its customer support in Vermont, its direct marketi ng to Vermont firms, and its employee presence in Vermont all indicated that the company had continuous and systematic contacts with Vermont. Crompton, on the other hand, had contacts with Vermont mostly through its shipment of products to the state. 1 Its advertising and marketing efforts and the third-party distribution of its products were b y no means targeted toward Vermont.

1 Notably, Crompton sent these shipments F.O.B., mea ning that title transferred to the Vermont company outside of Vermont. See Robinson v. Int’l Indus. Ltd. , 139 Vt. 444, 446–47 (1981) (holding that Vermont lacked jurisdiction ov er nonresident defendant where title to defective goods passed to plaintiff in Tennessee).6

Therefore, general jurisdiction is not appropriate in this case. See also Burlington Indus. Inc. v. Maples Indus., Inc. , 97 F.3d 1100, 1103 (8th Cir. 1996) (“Simple comme rcial contacts, unrelated to [plaintiff’s] claims are ins ufficient to establish personal jurisdiction.”); Dalton v. R & W Marine, Inc. , 897 F.2d 1359, 1362 (5th Cir. 1990) (holding that defendant’s mere ownership of boats c hartered by operators in forum state does not demonstrate continuous and systematic pres ence in forum state).

ORDER
The motions to dismiss on behalf of Crompton Corpo ration; Uniroyal Chemical Company, Inc.; Uniroyal Chemical Company Limited; F lexsys NV; and Flexsys America
LP are GRANTED.

Dated at Burlington, Vermont, April 22, 2005.

__________/s/______________ Richard W. Norton Judge