Court Opinion

ID: 6324641
Source: CourtListenerOpinion
Date Created: 2022-03-18 14:08:03.693938+00
Date Added: 2024-06-11T09:21:53.916023
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE
                                APPROVAL OF THE APPELLATE DIVISION
        This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
     internet, this opinion is binding only on the parties in the case and its use in other cases is limited . R. 1:36-3.

                                                         SUPERIOR COURT OF NEW JERSEY
                                                         APPELLATE DIVISION
                                                         DOCKET NO. A-2044-20

IAN CRESPI,

          Plaintiff-Respondent,

v.

VAPE ZEPPY, MICHAEL
EILYUK, EDWARD VINOKUR,
CCM CUSTOMS, INC., and
TED A. BURKHALTER, JR.,

          Defendants,

and

SOCIALITE E-CIGS, LLC,
THOMAS OTTOMBRINO,
MAYVILLAGE TRADING, LLC,
and TIANGANG YU,

          Defendants-Respondents,

and

LG CHEM, LTD.,

     Defendant-Appellant.
____________________________
            Argued March 2, 2022 – Decided March 18, 2022

            Before Judges Gilson and Gummer.

            On appeal from an interlocutory order of the Superior
            Court of New Jersey, Law Division, Middlesex
            County, Docket No. L-5099-17.

            Rachel Atkin Hedley (Nelson Mullins Riley &
            Scarborough, LLP) of the South Carolina and New
            York bars, admitted pro hac vice, argued the cause for
            appellant (Lewis Brisbois Bisgaard & Smith, LLP, and
            Rachel Atkin Hedley, attorneys; James S. Rehberger,
            of counsel and on the briefs; Rachel Atkin Hedley, on
            the briefs).

            Rachel E. Holt argued the cause for respondent Ian
            Crespi (Rebenack, Aronow & Mascolo, LLP,
            attorneys; Craig M. Aronow, of counsel and on the
            brief; Rachel E. Holt, on the brief).

            Murray A. Klayman, attorney for respondents
            Socialite E-Cigs, LLC and Thomas Ottombrino, join
            in the brief of respondent Ian Crespi.

            Kennedys, LLP, attorneys for respondents Mayvillage
            Trading, LLC and Tiangang Yu, join in the brief of
            respondent Ian Crespi.

PER CURIAM

      By leave granted, defendant LG Chem, Ltd. (LG Chem), a South Korean

company headquartered in Seoul, South Korea, appeals from an order denying

LG Chem's motion to dismiss plaintiff Ian Crespi's product-liability complaint,

N.J.S.A. 2A:58C-1 to -11, for insufficient service of process and lack of

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                                      2
personal jurisdiction and an order denying its subsequent motion for

reconsideration. We reverse and remand for further proceedings.

                                        I.

      Plaintiff, a New Jersey resident, filed a complaint against LG Chem and

others alleging he was injured on December 14, 2016, when a CCM Customs,

Inc. 7.62 Mod vaporizer (vape), which he had purchased from defendant Vape

Zeppy in New Jersey in October 2016, or the lithium ion battery it contained

exploded in his face. Plaintiff identified the battery used in his vape as "Model

MXJO 18650F 3000mah 35A high drain rechargeable flat top battery, Serial

#H04312" and alleged it was manufactured by MXJO Tech, a company located

in Shenzhen, China, or by LG Chem. According to plaintiff, LG Chem is in

the   business   of   "designing,   manufacturing,   constructing,   assembling,

inspecting and selling" batteries used in vape products. Plaintiff alleges LG

Chem distributed the vape or manufactured and distributed the lithium ion

battery that injured him. Plaintiff attempted to serve process on LG Chem in

Michigan by delivering a copy of the summons and complaint to Jeremy

Hagemeyer, the human-resources director of LG Chem Michigan, Inc.

(LGCM), a Delaware corporation with its principal place of business located in

Michigan that is one of LG Chem's United States-based subsidiaries.

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                                       3
      LG Chem moved to dismiss plaintiff's complaint for insufficient service

of process and lack of personal jurisdiction pursuant to Rule 4:6-2(d) and (b).

In support of its motion, LG Chem submitted a certification by Hagemeyer,

stating he is authorized to accept service only on behalf of LGCM, and if he

had known the papers he had accepted were intended for LG Chem, he would

not have accepted them.

      LG Chem also submitted a certification by Joon Young Shin, a "Team

Leader and authorized representative" of LG Chem, averring LG Chem "is not

registered to do business" in New Jersey and does not have in New Jersey an

office, any employees, "a registered agent for service of process," any leased

or owned real property, a telephone number, a post-office box, a mailing

address, or a bank account. Further, Shin certified that although LG Chem

"manufacture[s] 18650 lithium ion cells for use in specific applications by

sophisticated companies," it "does not design, manufacture, distribute,

advertise, or sell 18650 lithium-ion battery cells for use by individual

consumers as replaceable, rechargeable batteries in electronic cigarette

devices" and "does not design or manufacture 18650 lithium ion cells for sale

to individual consumers to use as standalone, replaceable batteries."

According to Shin, LG Chem does not "design, manufacture, distribute,

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                                     4
advertise, or sell" the "MXJO" brand lithium ion battery cells identified in the

complaint and did not authorize or approve the re-wrapping of its cell in an

"MXJO" exterior wrapping. Additionally, Shin certified LGCM "is a separate

legal entity from [LG Chem] and has its own corporate offices and maintains a

separate and independent corporate existence," is not "a general agent" or an

"agent . . . for service of process" of LG Chem, and "is not authorized to

accept service of process on behalf of LG Chem."

      Plaintiff opposed the motion, asserting service on Hagemeyer was

sufficient because LGCM was acting as LG Chem's agent and alter ego and

that the court had general and specific jurisdiction over LG Chem because LG

Chem operated in New Jersey and knew its product would end up in New

Jersey.

      The judge denied the motion and set forth the following facts in a

written opinion:

                   This is a product liability action in which
            plaintiff alleges to have been injured on December 14,
            2016 when his e-cigarette/vape device malfunctioned
            while he was using it with an "MXJO" lithium ion
            battery purchased in New Jersey from co-defendant
            Vape Zeppy and manufactured by [LG Chem]. [LG
            Chem] is a South Korean company with its
            headquarters and principal place of business in Seoul,
            South Korea, and subsidiaries in sixteen different
            countries. [LG Chem] is a global supplier of a wide

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                                      5
            range of products, including "18650 lithium ion
            battery cells." Plaintiff alleges causes of action
            against [LG Chem] for violations of the New Jersey
            Products Liability Act, strict liability, negligence, and
            breach of implied and express warranty.

                  Among [LG Chem's] subsidiaries are LG Chem
            America, Inc. ("LGCA") and LG Chem Michigan, Inc.
            ("LGCM"). LGCA is a Delaware corporation with its
            principal place of business in Atlanta, Georgia, which
            was relocated from Englewood Cliffs, New Jersey in
            2015. LGCM is [LG Chem's] wholly-owned, direct
            subsidiary in North America. LGCM is a Delaware
            corporation and its principal place of business is in
            Michigan. LGCM's work is limited exclusively to
            manufacture of automotive batteries. LG Electronics
            USA, Inc. ("LGEUSA"), a subsidiary of LG
            Electronics, Inc., is a Delaware corporation with its
            principal place of business in Englewood Cliffs, New
            Jersey, where LGEUSA is currently in the process of
            constructing a new corporate Headquarters.         On
            January 23, 2020, a process server attempted to effect
            personal service of process upon Jeremy Hagemeyer,
            Director of Human Resources for LGCM.             Mr.
            Hagemeyer was met by the process server in the lobby
            of LGCM's offices in Michigan. Mr. Hagemeyer was
            handed an envelope labeled "LG Chem" and asked to
            sign a form acknowledging receipt.

Apparently based on those facts and citing Mills v. Ethicon, Inc., 406 F. Supp.

3d 363 (D.N.J. 2019), and an unpublished federal trial court case, the judge

held service on Hagemeyer was "sufficient," finding

            LGCM, a domestic subsidiary of [LG Chem], acts
            essentially as an alter ego of [LG Chem] for the
            purposes of service of process. LGCM served as a

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                                      6
            conduit for the activities of [LG Chem] and exists to
            act as an instrumentality for the production of one of
            [LG Chem's] major products within the US.

The judge also was "satisfied that plaintiff has met his burden of establishing

that [LG Chem] is subject to specific jurisdiction in New Jersey." The judge

based that holding on the following analysis:

            Despite [LG Chem's] contention that third parties have
            repackaged [LG Chem's] products for sale to New
            Jersey without authorization, this matter is not the first
            involving an LG Chem battery exploding and injuring
            a New Jersey resident. It can reasonably be concluded
            that plaintiff's injury would not have arisen had [LG
            Chem] not placed its faulty batteries into the stream of
            commerce to New Jersey.           It does not offend
            traditional notions of fair play and substantial justice
            to find [LG Chem] subject to personal jurisdiction in
            New Jersey.

      In a written opinion, the judge denied LG Chem's subsequent motion for

reconsideration, stating he was "satisfied" his "analysis" of Mills, 406 F. Supp.

3d at 393, "demonstrates that LGCM acted as an alter ego of LG Chem and

that it was not impalpably incorrect to make the determination that one of

LGCM's sole purposes of being in the United States is to act as an

instrumentality for the production of LG Chem's major products." The judge

denied the reconsideration motion as to his specific-jurisdiction decision,

holding his decision "satisfied the standard to support a finding of specific

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                                       7
jurisdiction in the state of New Jersey because [LG Chem's] product was

purposely in New Jersey and caused an injury."

                                        II.

      In this appeal, LG Chem argues the judge erred in denying its motion to

dismiss for insufficient service of process.       LG Chem acknowledges an

exception to the Hague Service Convention (HSC) rule on service – New

Jersey permits service on a wholly-owned subsidiary of a foreign corporation

if the subsidiary is an alter ego or agent of the parent – but faults the judge for

failing to support with any facts or evidence his conclusion that LGCM was

the alter ego of LG Chem. LG Chem also argues the judge erred in finding

plaintiff had established LG Chem was subject to specific jurisdiction in New

Jersey because plaintiff's claims did not arise out of or relate to contacts LG

Chem had formed with New Jersey.

                                        A.

      Proper service of process is a "prerequisite[]" to a court's "exercise of in

personam jurisdiction." Omni Cap. Int'l v. Rudolph Wolff & Co., 484 U.S. 97,

98 (1987); see also Mills, 406 F. Supp. at 391-92 ("In the absence of service of

process . . . due process will not permit a court to exercise power over a party

named as defendant in the complaint."). "It is elementary that service must be

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                                       8
accomplished in accordance with the pertinent rules in such a way as to afford

'notice reasonably calculated, under all the circumstances, to apprise interested

parties of the pendency of the action and afford them an opportunity to present

their objections.'" Jameson v. Great Atl. & Pac. Tea Co., 363 N.J. Super. 419,

425 (App. Div. 2003) (quoting Davis v. DND/Fidoreo, Inc., 317 N.J. Super.

92, 97 (App. Div. 1998)).

      For entities based in signatory countries to the Hague Convention, the

Hague Convention is generally "the supreme law of the land . . . overrid[ing]

state methods of service that are objectionable to the nation in which the

process is served." Gapanovich v. Komori Corp., 255 N.J. Super. 607, 611

(App. Div. 1992). "However, if local law permits local service obviating the

need for foreign service, the Hague Convention is inapplicable." Id. at 611-12.

Rule 4:4-4(a)(6) provides that personal jurisdiction can be obtained over a

foreign corporation by "serving a copy of the summons and complaint . . . on

any officer, director, trustee or managing or general agent, or any person

authorized by appointment or by law to receive service of process on behalf of

the corporation." Generally, "[s]ervice of a summons and complaint upon a

subsidiary is not sufficient service on a parent corporation." Charles Gendler

& Co. v. Nippon Elec. Co., 199 N.J. Super. 227, 240-41 (App. Div. 1985),

                                                                          A-2044-20
                                       9
rev'd on other grounds sub nom. Charles Gendler & Co. v. Telecom Equip.

Corp., 102 N.J. 460 (1986). However, "[u]nder New Jersey law, service on a

wholly owned subsidiary confers jurisdiction over the foreign parent . . . [if

and] only if the subsidiary is an alter ego or agent of the parent." Dewey v.

Volkswagen AG, 558 F. Supp. 2d 505, 513 (D.N.J. 2008); see also Mills, 406

F. Supp. 3d at 393.

      To determine "whether a subsidiary is acting as an agent of the parent,

the court must consider four factors":

            (1) whether the subsidiary is doing business in the
            forum that would otherwise be performed by the
            parent; . . . (2) whether there is common ownership of
            the parent and subsidiary; (3) whether there is
            financial dependency; and (4) whether the parent
            interferes with the subsidiary's personnel, disregards
            the corporate formalities, and/or controls the
            subsidiary's marketing and operational policies.

            [Mills, 406 F. Supp. 3d at 393 (quoting Dewey, 558 F.
            Supp. 2d at 513).]

That an employee, other than an officer, director, trustee or managing or

general agent, accepted service does not establish the employee was authorized

to accept service. Jameson, 363 N.J. Super. at 429.

      To determine "whether a subsidiary is an alter ego of its parent, the court

must consider whether 'the parent so dominated the subsidiary that it had no

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                                     10
separate existence but was merely a conduit for the parent.'" Mills, 406 F.

Supp. 3d at 393 (quoting Dep't of Env'l Prot. v. Ventron Corp., 94 N.J. 473,

501 (1983)). To determine if a plaintiff has demonstrated such "corporate

dominance," a court must engage "in a fact-specific inquiry considering

whether the subsidiary was grossly undercapitalized, the day-to-day

involvement of the parent's directors, officers and personnel, and whether the

subsidiary fails to observe corporate formalities, pays no dividends, is

insolvent, lacks corporate records, or is merely a facade."       Verni ex rel.

Burstein v. Harry M. Stevens, Inc., 387 N.J. Super. 160, 200 (App. Div. 2006).

The court may also consider "common ownership, financial dependency,

interference with a subsidiary's selection of personnel, . . . and control over a

subsidiary's marketing and operating policies." FDASmart, Inc. v. Dishman

Pharm. & Chems. Ltd., 448 N.J. Super. 195, 204 (App. Div. 2016) (quoting

Pfundstein v. Omnicom Grp., Inc., 285 N.J. Super. 245, 253-54 (App. Div.

1995)). That is the analysis the judge should have performed, but did not

perform, in deciding whether LGCM was an alter ego of LG Chem. 1

1
  We reject defendant's legally-unsupported argument that different standards
exist for determining whether a subsidiary is an alter ego of its parent
corporation. The status of a subsidiary as an alter ego does not change
depending on the reason for the analysis.
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                                     11
      Without engaging in that fact-specific analysis, the motion judge held

service on Hagemeyer was "sufficient" to constitute service on LG Chem

because Hagemeyer's employer, LGCM, a Delaware company based in

Michigan with no alleged ties to New Jersey, "acts essentially as an alter ego

of [LG Chem]." He found LGCM was LG Chem's alter ego because "LGCM

served as a conduit for the activities of [LG Chem] and exists to act as a n

instrumentality for the production of one of [LG Chem's] major products

within the [United States]."

      The judge's decision is devoid of any finding that LG Chem "so

dominated" LGCM that LGCM had "no separate existence" from LG Chem,

and any factual findings that would support a conclusion LG Chem "so

dominated" LGCM that LGCM had "no separate existence."           Mills, 406 F.

Supp. 3d at 393 (quoting Ventron, 94 N.J. at 501). His conclusory finding that

LGCM served as LG Chem's "conduit" and "instrumentality" with nothing

more is not enough to render service of process on LGCM the equivalent of

service of process on LG Chem. The judge's description of LGCM matches

that of practically any corporate subsidiary, but simply being a subsidiary i s

not enough to establish proper service on the parent. Cintron v. W & D Mach.

Co., 182 N.J. Super. 126, 131 (Law Div. 1981) ("[T]he mere existence of a

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                                    12
parent-subsidiary relationship does not validate service upon a subsidiary to

reach the parent under a long-arm statute or rule."). The judge failed to engage

in the "fact-specific inquiry," Verni, 387 N.J. Super. at 200, necessary to

determine whether LG Chem exercised such corporate dominance over LGCM

that renders it fair, under our notions of due process, to find LG Chem should

have expected to be haled into a New Jersey court based on service on LGCM.

      Accordingly, we reverse the judge's order denying plaintiff's motion to

dismiss for insufficient service of process.    At oral argument, LG Chem's

counsel urged us to make the factual findings necessary to decide this issue.

That we cannot do. Instead, we remand the case so that the motion judge,

guided by these principles, can perform the fact-specific inquiry required to

render a decision on this issue.

                                         B.

      We address the motion judge's decision on specific jurisdiction in the

event he reaches that issue on remand.

      "A fundamental question in every legal action is whether a given court

has jurisdiction to preside over a given case. Absent personal jurisdiction over

the parties, a judge has no authority to proceed." Dutch Run-Mays Draft, LLC

v. Wolf Block, LLP, 450 N.J. Super. 590, 595 (App. Div. 2017).             "The

                                                                         A-2044-20
                                     13
question of in personam jurisdiction is a mixed question of law and fact that

. . . must be resolved before the matter may proceed . . . ." Citibank, N.A. v.

Est. of Simpson, 290 N.J. Super. 519, 532 (App. Div. 1996); see also Rippon

v. Smigel, 449 N.J. Super. 344, 359 (App. Div. 2017).

        We will not disturb a trial court's factual findings concerning jurisdiction

if they are supported by substantial, credible evidence.         Rippon, 449 N.J.

Super. at 358. We review de novo the legal aspects of personal jurisdiction.

Ibid.    "[W]e are not bound by a trial court's interpretations of the legal

consequences that flow from established facts." State v. Dorff, 468 N.J. Super.

633, 644 (App. Div. 2021).

        "A defendant may move to dismiss a complaint on the ground of 'lack of

jurisdiction over the person.'" Rippon, 449 N.J. Super. at 358 (quoting R. 4:6-

2(b)). A plaintiff bears the burden of pleading sufficient facts to establish

jurisdiction. Dutch Run-Mays Draft, 450 N.J. Super. at 598. "Presented with

a motion to dismiss on the basis of lack of jurisdiction, a trial court must make

findings of the 'jurisdictional facts,' because disputed 'jurisdictional allegations

cannot be accepted on their face . . . .'"       Rippon, 449 N.J. Super. at 359

(quoting Citibank, 290 N.J. Super. at 532). "If the pleadings and certifications

submitted to the trial court do not permit resolution of the jurisdictional

                                                                             A-2044-20
                                        14
question, the trial court must conduct a 'preliminary evidential hearing after

affording the parties an appropriate opportunity for discovery.'" Ibid. (quoting

Citibank, 290 N.J. Super. at 532).

      "When a defendant has maintained continuous and systematic activities

in the forum state, the defendant is subject to the state's 'general' jurisdiction

on any matter, irrespective of its relation to the state." Id. at 358-59 (quoting

Lebel v. Everglades Marina, Inc., 115 N.J. 317, 323 (1989)). Here, the motion

judge did not find LG Chem is subject to general jurisdiction in New Jersey.

Moreover, the current record does not contain facts that would establish

general jurisdiction over LG Chem in New Jersey.

      "[W]hen the cause of action arises directly out of a defendant's contacts

with the forum state, the state may exercise 'specific' jurisdiction over a

defendant who has 'minimum contacts' with the state." Id. at 359 (quoting

Lebel, 115 N.J. at 322). A plaintiff must prove a defendant's contacts are

adequate to establish specific jurisdiction. Id. at 360. But "[a] court should

only expect a prima facie showing of sufficient contacts '[i]n the early stages

of a proceeding . . . .'" Ibid. (second alteration in original) (quoting Jacobs v.

Walt Disney World Co., 309 N.J. Super. 443, 454 (App. Div. 1998)).

Nonetheless, "[a] conclusion of specific jurisdiction requires that the

                                                                           A-2044-20
                                      15
'purposeful acts by the [defendant] directed toward this State' be of a kind that

'make[s] it reasonable for the [defendant] to anticipate being haled into court

here.'" Id. at 360-61 (second, third, and fourth alterations in original) (quoting

Mastondrea v. Occidental Hotels Mgmt. S.A., 391 N.J. Super. 261, 268 (App.

Div. 2007)).

      Applying these principles, we are convinced the record was not

sufficiently developed for the judge to conclude, as he did, that LG Chem was

subject to specific jurisdiction in New Jersey. LG Chem alleged several facts

that, if undisputed or established, support its claim New Jersey lacked personal

jurisdiction.   Plaintiff disputed LG Chem's facts and their import in his

submissions opposing the motion. Instead of affording jurisdictional discovery

and conducting an evidentiary hearing to resolve the disputed jurisdictional

allegations, the judge made factual findings with inferences in the light most

favorable to plaintiff, the non-moving party. See R. 4:46-2. That was error.

"The jurisdictional facts had to be found in order for the jurisdictional decision

to be made and hence defendant's right to proceed determined." Citibank, 290

N.J. Super. at 531.

      Like the motion judge in Citibank, the judge, "without an evidential

hearing or fact-finding to resolve the dispute, simply gave [plaintiff] the

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                                      16
benefit of [his] allegations."   Ibid.    The motion judge based his specific-

jurisdiction holding on his findings that "this matter is not the first involving

an LG Chem battery exploding and injuring a New Jersey resident" and

"plaintiff's injury would not have arisen had [LG Chem] not placed its faulty

batteries into the stream of commerce to New Jersey." Those findings were

not "supported by substantial, credible evidence," Rippon, 449 N.J. Super. at

358, and certainly not by evidence of "purposeful acts by the [defendant]

directed toward this State," Mastondrea, 391 N.J. Super. at 268. See also Ford

Motor Co. v. Mont. Eighth Jud. Dist. Ct., ___ U.S. ___, 141 S. Ct. 1017, 1024

(2021) (for a defendant to be subject to a state's specific jurisdiction, the

defendant must take "some act by which [it] purposefully avails itself of the

privilege of conducting activities within the forum State" (quoting Hanson v.

Denckla, 357 U.S. 235, 253 (1958))). Accordingly, we reverse the motion

judge's decision as to specific jurisdiction. If the motion judge reaches the

issue of specific jurisdiction on remand, the judge must provide a schedule for

the parties to conduct jurisdictional discovery, conduct an evidentiary hearing

after that discovery is completed, and then make findings of jurisdictional facts

to support a decision and properly adjudicate the motion.

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      Reversed and remanded for further proceedings consistent with this

opinion. We do not retain jurisdiction.

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