Emery v. Shell Oil Co., No. 80-2-09 Wncv (Crawford, J., Jan. 14, 2011)

[The text of this Vermont trial court opinion is unofficial. It has been reformatted from the original. The accuracy of the text and the
accompanying data included in the Vermont trial court opinion database is not guaranteed.]
                                                       STATE OF VERMONT

SUPERIOR COURT                                                                                         CIVIL DIVISION
Washington Unit                                                                                        Docket No. 80-2-09 Wncv

Daniel Emery and Liselle Emery
       Plaintiffs

           v.

Shell Oil Co., et al.
       Defendants

                        DECISION ON BARTON SOLVENTS’ MOTION TO DISMISS

        Plaintiff Liselle Emery alleges that Daniel Emery, recently deceased, developed a serious
illness caused by exposure to benzene in various products he used throughout his career in
Vermont’s granite industry and at other positions in Vermont. Among the numerous defendants
is Cleveland Lithichrome (Cleveland), which is alleged to have sold products into Vermont that
included benzene and which caused Mr. Emery’s fatal illness.

       Cleveland disclaims any knowledge of benzene in its products but alleges that, if there
was any, it originated in solvents purchased from Barton Solvents (Barton), which were
incorporated into its products from the 1980’s to 2000. In a third-party complaint, Cleveland
seeks implied indemnification from Barton. There is no first-party claim against Barton. Barton,
an Iowa corporation based in Iowa with no presence in Vermont, has filed a Rule 12(b)(2)
motion to dismiss for lack of specific personal jurisdiction.1

           Burden/Standard

       Barton is seeking dismissal “on the affidavits,” placing the burden on Cleveland to come
forward with a prima facie showing of personal jurisdiction. The Vermont Supreme Court has
described the burden as follows:

           A defendant asserting that the court lacks jurisdiction over the person may raise
           such a challenge by motion following service of the summons and complaint.
           The rule contemplates the determination of jurisdictional issues in advance of
           trial. In deciding a pretrial motion to dismiss for lack of jurisdiction over the
           person, a court has considerable procedural leeway, and may determine the
           motion on the basis of affidavits alone; may permit discovery concerning the
           motion; or may conduct an evidentiary hearing on the merits of the motion. The
           latter course is desirable where the written materials have raised questions of
           credibility or disputed issues of fact. If the court chooses to determine the issues
           on the basis of affidavits alone without an evidentiary hearing the plaintiff is only

1
    Cleveland concedes that there can be no basis for general personal jurisdiction over Barton in Vermont.
       required to make a prima facie showing of jurisdiction, that is, he need only
       demonstrate facts which support a finding of jurisdiction in order to avoid a
       motion to dismiss.

Roman Catholic Diocese v. Paton Insulators, Inc., 146 Vt. 294, 296 (1985) (citations omitted);
accord Godino v. Cleanthes, 163 Vt. 237, 239 (1995). Neither party has argued that the facts are
disputed or that there are any significant credibility issues requiring any evidentiary hearing.

       Facts

        Barton supported its motion to dismiss with an affidavit. Cleveland opposed dismissal
based solely on the allegations of the pleadings, and did not contest any of the allegations in
Barton’s affidavit, which are consistent with those of the pleadings. After the motion was fully
briefed, at oral argument, Cleveland requested an opportunity to conduct jurisdiction-related
discovery before a ruling. The court allowed limited discovery for this purpose. Following
discovery, Cleveland supplemented the record with the two admissions described below, which
are consistent with the pleadings and Barton’s affidavit. Cleveland has come forward with no
other evidence. Based on the allegations in the pleadings, the affidavit, and Barton’s two
admissions, the facts are as follows.

        Plaintiff alleges (and the court assumes for current purposes) that Cleveland, among
others, produced benzene-containing products that were distributed into Vermont, that Mr.
Emery came into contact with these products through his work in the stone business, and that the
products contributed to his illness. Cleveland is a Kansas corporation with a principal place of
business in Kansas. Cleveland alleges that any benzene in its products originated in solvents
supplied by Barton that were incorporated without alteration into its own products.

        Barton is an Iowa corporation with a principal place of business in Iowa. It is a “stocking
wholesale distributor of industrial chemicals, oils, surfactants, and plasticizers.” Affidavit of
Edward J. Walsh, ¶ 4 (filed Sept. 3, 2009). It has distribution facilities in Iowa, Kansas, and
Wisconsin, and serves industrial customers in the Midwestern states. It has never marketed or
conducted business in Vermont, never distributed its products into Vermont, never derived any
significant revenue from any goods sold or services rendered in Vermont, and it has no other
form of contacts with or corporate presence in Vermont. Barton admits that it was generally
aware that Cleveland incorporated Barton’s products into its own, and that Barton’s business
included the production of coatings used in the granite industry.

       Vermont’s Long-Arm Statutes

        As a general matter, Vermont’s long-arm statutes reflect “a clear policy to assert
jurisdiction over individual defendants to the full extent permitted by the Due Process Clause.”
Northern Aircraft, Inc. v. Reed, 154 Vt. 36, 40 (1990) (so ruling in the context of 12 V.S.A. §
913(b); accord Bard Bldg. Supply Co., Inc. v. United Foam Corp., 137 Vt. 125, 127 (1979) (so
ruling in the context of 12 V.S.A. § 855). “The jurisdictional issue must therefore be resolved
under federal constitutional law, as defined in International Shoe Co. v. Washington, 326 U.S.
310 (1945), and its progeny.” Northern Aircraft, 154 Vt. at 41.



                                                 2
       Federal Law

       Barton’s only alleged contact with Vermont is as the supplier of a component that was
incorporated into Cleveland’s products that were distributed into Vermont in the stream of
commerce. The two key United States Supreme Court cases in this setting are World-Wide
Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980) and Asahi Metal Industry Co., Ltd. v.
Superior Court of California, 480 U.S. 102 (1987).

         In World-Wide Volkswagen, the Robinsons had purchased an Audi from an Audi retailer
in New York and then moved to Oklahoma. An accident in Oklahoma prompted the Robinsons
to file a products liability action—in Oklahoma—against several Audi-related defendants for
defective design and positioning of the fuel tank assembly. The defendant retailer and the
regional Audi distributor for New York, separate corporations which are wholly independent of
the manufacturer, sought dismissal for lack of personal jurisdiction in Oklahoma, neither having
ever done any business there. The Oklahoma Supreme Court found jurisdiction in Oklahoma
principally because cars are so mobile that the defendants should have foreseen that their
products would cause harm there.

       The United States Supreme Court reversed. The court explained that foreseeability of
harm is not the deciding factor.

               This is not to say, of course, that foreseeability is wholly irrelevant. But
       the foreseeability that is critical to due process analysis is not the mere likelihood
       that a product will find its way into the forum State. Rather, it is that the
       defendant’s conduct and connection with the forum State are such that he should
       reasonably anticipate being haled into court there. . . .

                When a corporation “purposefully avails itself of the privilege of
       conducting activities within the forum State,” it has clear notice that it is subject
       to suit there, and can act to alleviate the risk of burdensome litigation by
       procuring insurance, passing the expected costs on to customers, or, if the risks
       are too great, severing its connection with the State. Hence if the sale of a product
       of a manufacturer or distributor such as Audi or Volkswagen is not simply an
       isolated occurrence, but arises from the efforts of the manufacturer or distributor
       to serve directly or indirectly, the market for its product in other States, it is not
       unreasonable to subject it to suit in one of those States if its allegedly defective
       merchandise has there been the source of injury to its owner or to others. The
       forum State does not exceed its powers under the Due Process Clause if it asserts
       personal jurisdiction over a corporation that delivers its products into the stream
       of commerce with the expectation that they will be purchased by consumers in the
       forum State.

             But there is no such or similar basis for Oklahoma jurisdiction over
       World-Wide [the regional distributor] or Seaway [the local retailer] in this case.



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       Seaway’s sales are made in Massena, N.Y. World-Wide’s market, although
       substantially larger, is limited to dealers in New York, New Jersey, and
       Connecticut. There is no evidence of record that any automobiles distributed by
       World-Wide are sold to retail customers outside this tristate area. It is foreseeable
       that the purchasers of automobiles sold by World-Wide and Seaway may take
       them to Oklahoma. But the mere “unilateral activity of those who claim some
       relationship with a nonresident defendant cannot satisfy the requirement of
       contact with the forum State.”

World-Wide Volkswagen, 444 U.S. at 297–98. With that, the Court concluded that any contacts
that the defendants had with Oklahoma were too remote to support personal jurisdiction there.

         The Court revisited the stream-of-commerce theory in Asahi Metal Industry Co., Ltd. v.
Superior Court of California, 480 U.S. 102 (1987), a component or supplier case. In Asahi, a
California tort plaintiff sued a Taiwanese tire tube manufacturer, claiming it was responsible for
a blowout in his motorcycle’s tire, causing his injuries. The tube manufacturer filed a third-party
claim for indemnity in California against its Japanese valve-assembly supplier, Asahi. Asahi
sold its valves in Taiwan directly to the tube manufacturer for incorporation into its products,
which were distributed worldwide. Asahi’s sales to the tube manufacturer accounted for a
relatively small percentage of its total sales (though a large number of units), and Asahi knew
that a portion of those valves was sold in California every year. The California Supreme Court
concluded that personal jurisdiction existed in California because Asahi placed its component
products in the stream of commerce and was aware that some would be sold in California.

       In a plurality decision, Justice O’Connor, and three other justices, rejected the
California’s Supreme Court’s analysis.

       The placement of a product into the stream of commerce, without more, is not an
       act of the defendant purposefully directed toward the forum State. Additional
       conduct of the defendant may indicate an intent or purpose to serve the market in
       the forum State, for example, designing the product for the market in the forum
       State, advertising in the forum State, establishing channels for providing regular
       advice to customers in the forum State, or marketing the product through a
       distributor who has agreed to serve as the sales agent in the forum State. But a
       defendant’s awareness that the stream of commerce may or will sweep the
       product into the forum State does not convert the mere act of placing the product
       into the stream into an act purposefully directed toward the forum State.

Asahi Metal Industry Co., Ltd. v. Superior Court of California, 480 U.S. 102, 112 (1987). This
has become known as the stream-of-commerce-plus theory.

        Separately, Justice O’Connor ruled that personal jurisdiction would be unreasonable in
any event, offending traditional notions of fair play and substantial justice. California has little
interest in an indemnity claim between two foreign corporations that does not affect a California
citizen, and the burden on the indemnity defendant would be high since it would have to defend
in California as opposed to Taiwan or Japan.



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       Justice Brennan wrote the principal concurring opinion. He agreed with Justice
O’Connor that jurisdiction in California would be unreasonable, and the case was resolved in
Asahi’s favor on that issue. He, and three other justices, however, disagreed with Justice
O’Connor’s stream-of-commerce analysis.

        Justice Brennan reasoned as follows:

                 The stream of commerce refers not to unpredictable currents or eddies, but
        to the regular and anticipated flow of products from manufacture to distribution to
        retail sale. As long as a participant in this process is aware that the final product
        is being marketed in the forum State, the possibility of a lawsuit there cannot
        come as a surprise. Nor will the litigation present a burden for which there is no
        corresponding benefit. A defendant who has placed goods in the stream of
        commerce benefits economically from the retail sale of the final product in the
        forum State, and indirectly benefits from the State’s laws that regulate and
        facilitate commercial activity. These benefits accrue regardless of whether that
        participant directly conducts business in the forum State, or engages in additional
        conduct directed toward that State.

Id. at 117. Justice Brennan concluded that Asahi knew that the distribution chain would sweep
its products into California, participated in that distribution chain, thus purposefully took
advantage of the California market, and therefore its contact with California was adequate to
support jurisdiction there. Id. at 121.

        Uncertainty following Asahi’s plurality treatment of the stream-of-commerce theory has
led some courts to adopt the Brennan test and some to adopt the O’Connor test. “Other courts,
including the Federal Circuit, have avoided adopting either test and instead analyze stream of
commerce questions on a case-by-case basis.” Megan M. LaBelle, Patent Litigation, Personal
Jurisdiction, and the Public Good, 18 Geo. Mason L. Rev. 43, 66 n.134 (2010); accord Lesnick v.
Hollingsworth & Vose, Co., 35 F.3d 939, 945 n.1 (4th Cir. 1994) (noting the circuit split).2

        Analysis

      This case falls squarely under World-Wide Volkswagen and Asahi. The Vermont
Supreme Court has not developed the stream-of-commerce theory as reflected in those cases.
However, the issue here is fundamentally one of federal due process.

                 Minimum contacts

        In arguing that jurisdiction is proper in this court, Cleveland’s argument with regard to

2
 Some clarity may be brought to the matter when the United States Supreme Court decides the appeal from
McIntyre Machinery, Ltd. v. Nicastro, 987 A.2d 575 (N.J. 2010); 131 S.Ct. 62 (granting cert.). The appeal was
argued on January 11, 2011. The transcript is available at http://www.supremecourt.gov/oral_arguments/
argument_transcripts/09-1343.pdf.



                                                        5
contacts substantially is this:

        Barton Solvents supplied its products to Cleveland Lithichrome, whose
        monumental products are nationally distributed. Third-Party Complaint at ¶¶ 6–8.
        Barton Solvents knew that its products are nationally distributed. Third Party
        Complaint at ¶¶ 6–8. Barton Solvents knew that its solvents would be
        incorporated into the products manufactured by Cleveland Lithichrome. See id. at
        ¶ 6. This is not a case where the defendant could not foresee that its product
        would end up in Vermont. Barton Solvents’ market here is not limited to a
        particular region, as was the case in World-Wide Volkswagen Corp. There, the
        defendant’s market was “limited to dealers in New York, New Jersey, and
        Connecticut. There [was] no evidence of record that any automobiles distributed
        by World-Wide [were] sold to retail customers outside of this tristate area.” 444
        U.S. at 298. In contrast, Barton Solvents knew that its product was being
        incorporated into Cleveland Lithichrome products that would be distributed
        nationally. See Third-Party Complaint at ¶¶ 6–8.

Cleveland Lithichrome’s Opposition to Dismissal at 4 (filed Sept. 21, 2009). In other words,
Cleveland argues that Barton should be subject to suit in Vermont because it knew that its
products were being marketed nationally and some in fact were sold in Vermont.

        This argument has several defects. First, Cleveland’s argument reflects an even broader
stream-of-commerce theory than even Justice Brennan endorsed in Asahi. Justice Brennan’s
analysis was not that Asahi should be subject to the jurisdiction of every state because it was
aware that its products were being marketed nationally. Asahi specifically knew that the stream
of commerce was taking its products to California routinely, not incidentally. Contacts thus were
sufficient in California. The United States Supreme Court has never endorsed a stream of
commerce theory as broad as that apparently advocated here by Cleveland.

        Second, even if Cleveland’s broad theory were permissible, the facts of this case do not
support it. Cleveland cites to paragraphs 6–8 of the third-party complaint in support of the
allegation that Barton knew that its products, as incorporated into Cleveland’s, were being
distributed nationally. The cited paragraphs say no such thing:

        6.     Beginning in the early 1980s and continuing through 2000, Cleveland
        Lithichrome purchased solvents used to manufacture its products from Barton
        Solvents.

        7.       Cleveland Lithichrome incorporated solvents supplied by Barton Solvents
        into its products without substantially changing the solvents in any way.

        8.     The Cleveland Lithichrome products were in turn supplied by Cleveland
        Lithichrome to its distributors without any substantial change in the solvents
        supplied by Barton Solvents and, on information and belief, reached the end users
        without any substantial change in the solvents supplied by Barton Solvents.




                                                6
Cleveland Lithichrome’s Third Party Complaint at 2 (filed July 7, 2009). There is no allegation
in the cited paragraphs, or elsewhere, relating to Barton’s knowledge that its products, as
incorporated into Cleveland’s, were being marketed nationally. Nor is there any allegation in the
third-party complaint or elsewhere to the effect that Barton knew that its products were being
marketed in Vermont. Rather, the facts are that Barton sold its products in the Midwest and
there were never any significant sales in Vermont. If there were sales in Vermont, they were
incidental, not something that Barton should have anticipated.

       Cleveland Lithichrome has not made a prima facie showing of the minimum contacts
necessary to support personal jurisdiction in Vermont.

               Reasonableness

        Even if it had, jurisdiction in Vermont would be unreasonable. As in Asahi, the dispute
at issue—third-party indemnification—is completely tangential to the underlying tort case and
has nothing to do with Vermont or its citizens. Barton would not be involved in this case but for
Cleveland’s indemnification claim. Vermont has no interest in an indemnification claim
between two out-of-state corporations that has no effect on its citizens. The burden of defending
such a claim in Vermont may not be as high as Asahi’s burden of defending in California, but it
is quite similar. Cleveland is free to bring its claim in another jurisdiction in which due process
concerns are more readily satisfied.

       Returning to Vermont Law

        In briefing, both parties have relied on O’Brien v. Comstock, 123 Vt. 461 (1963). In
O’Brien, Vermont consumers alleged that they were injured by the presence of glass in a can of
beans. They sued the out-of-state manufacturer in Vermont. There were no facts whatsoever in
the record regarding how the can had come to Vermont. The sole jurisdictionally significant
allegation was conclusory: that the can had been put into the stream of commerce and somehow
ended up in Vermont. Id. at 465. That was it. The Court ruled that the bare allegation that the
product had moved in the stream of commerce was not sufficient to establish personal
jurisdiction in Vermont.

                The vital factor in the statute is the intentional and affirmative action on
       the part of the nonresident defendant in pursuit of its corporate purposes within
       this jurisdiction. A single act, purposefully performed here, will put the actor
       within the reach of the sovereignty of this state . . . . So will active participation in
       the Vermont market, either by direct shipment, or by way of transmittal through
       regular distributors presently serving the Vermont marketing area.

               The jurisdictional power to deal personally with a nonresident defendant
       in transitory actions of this type must be generated by the defendant’s intentional
       participation here. Thus when a plaintiff seeks to reach a foreign corporate
       defendant in personam by service on our secretary of state, it is incumbent upon
       the claimant to plead sufficient facts to demonstrate that the defendant is causally
       responsible for the presence of the injuring agency within the State of Vermont.



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         Without such a presentation in the record there is no justification for the
         conclusion that the defendant has yielded to the jurisdiction of our courts by its
         own volition.

Id. at 464–65.

        O’Brien is not helpful authority in this case. At most, given the paucity of facts available
for the Court to analyze, O’Brien is fairly read as rejecting the theory that even the slightest
movement in the stream of commerce necessarily establishes personal jurisdiction. Rejection of
such a theory is consistent with World-Wide Volkswagen and Asahi.

        Even if one could locate a distinction between O’Brien and subsequent United States
Supreme Court authority, it would not matter. O’Brien long predates World-Wide Volkswagen
and Asahi, and the inquiry here is a federal constitutional one. If the relevant Vermont long-arm
statute is intended by the legislature to reach as far as federal due process permits, and federal
due process standards have changed since O’Brien, then the federal principles control. Vermont
extends personal jurisdiction as far as, but not farther than, federal due process standards permit.

        The last time the Vermont Supreme Court cited O’Brien was in Chittenden Trust Co. v.
Bianchi, 148 Vt. 140, 142 (1987), the same year that Asahi was decided. The Court reiterated
the position of O’Brien, that personal jurisdiction over a nonresident defendant must be
predicated on “intentional and affirmative action.” The Chittenden Trust Co. case was decided
one month after Asahi, included no citation to Asahi, and reflects no apparent awareness of
Asahi. The Vermont Supreme Court has not cited O’Brien since. The court finds O’Brien
unhelpful in this case.

         Cleveland has not established a prima facie showing that Barton purposefully availed
itself of the privilege of conducting business in Vermont, knew that its products would be
marketed in Vermont or purchased by Vermont consumers, and that jurisdiction here would be
reasonable and meets due process requirements.

                                               ORDER

         For these reasons, Barton’s motion to dismiss is granted.


Dated:                                                 ________________
                                                       Geoffrey Crawford,
                                                       Superior Court Judge




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