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

[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
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-fixing of certain rubber-processing
chemicals that third-party manufacturers used in producing tires. The plaintiffs seek to
form a class of all tire consumers in Vermont since 1994. Several defendants—Crompton
Corporation and its Uniroyal subsidiaries (“Crompton”) and Flexsys NV and its
subsidiary, Flexsys America LP (“Flexsys”)—have filed 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 Process Clause.” Dall v. Kaylor, 163 Vt.
274, 275 (1995). Accordingly, the court looks to federal constitutional standards in
determining personal jurisdiction. N. Aircraft v. Reed, 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 standards for personal jurisdiction.
Schwartz v. Frankenhoff, 169 Vt. 287, 295 (1999).
       Due Process standards for personal jurisdiction require that nonresident defendants
have “certain minimum contacts with [the forum state] such that the maintenance of the
suit does not offend ‘traditional notions of fair play and substantial justice.’” Int’l Shoe
Co. v. Washington, 326 U.S. 310, 316 (1945) (quoting Milliken v. Meyer, 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 conduct can satisfy minimum
contacts in two ways. First, “[s]pecific jurisdiction 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 Columbia, S.A. v. Hall, 466 U.S. 408,
414 n.8 (1984)). Second, “a court's general jurisdiction . . . 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 unrelated to those contacts.” Id. at 568.
General jurisdiction requires “‘continuous and systematic 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. Neither own property in Vermont, have
employees or agents in Vermont, pay Vermont taxes, or specifically target Vermont with
marketing or advertising. Obviously, therefore, neither 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 products that third-party manufacturers
unilaterally use to produce tires out of state. These manufacturers then distribute the tires,
with Crompton or Flexsys chemicals in them, to Vermont residents. On these facts,
Crompton and Flexsys did no more than place their products into the stream of commerce
with no intentional effort to direct the flow of this stream toward Vermont. This is not
enough to establish specific jurisdiction. The plaintiffs 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 defendant cannot satisfy the requirement
of [minimum] contact with the forum State.’” (quoting Hanson v. Denckla, 357 U.S. 235,
253 (1958))).
        The plaintiffs argue, however, that because of Crompton’s and Flexsys’s
dominance in the chemical industry and their relationship with tire manufacturers, they
could reasonably anticipate that their products would 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-party distributor, where the distributor
essentially acts as an agent of the defendant.
        Specific jurisdiction may exist in circumstances where a nonresident defendant
maintains a relationship with a third-party distributor such that the defendant essentially
directs the distributor’s activities toward the forum state. See, e.g., Hedges v. W. Auto
Supply Co., 161 Vt. 614, 614–15 (1994) (mem.) (holding that defendant “‘purposely
availed’ itself of Vermont’s market by selling its heaters to a well-known national
distributorship which does business in Vermont”); Charles Gendler & Co. v. Telecom
Equip. Corp., 508 A.2d 1127, 1137 (N.J. 1986) (“A foreign manufacturer that
purposefully avails itself of [state legal and economic 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 vessel manufacturer did not
utilize vessel owners as distributors of vessel and thus did not “take advantage of an
indirect marketing scheme” in manner that purposefully availed manufacturer to forum
state). Here, neither Crompton or Flexsys sent their 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 component manufacturer may
establish a relationship with a third-party manufacturer akin to a manufacturer-distributor


                                             3
relationship such that the component manufacturer could be haled into a state court where
its only contacts are through the third-party manufacturer. 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 manufacturer 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 exclusive supply agreement with the cigarette
manufacturer, and the cigarettes were heavily marketed as having a special type of filter.
See id. The filter manufacturer had made “a single product 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 purposefully availed itself of the opportunity to
conduct business activities within Louisiana and should have reasonably foreseen being
haled into court there. Id.
       Here, the court can readily distinguish the relationship between Crompton and
Flexsys and the tire manufacturers from the relationship described in Ruckstahl.
Crompton and Flexsys have never maintained an exclusive sales agreement with the tire
manufacturers. Nor are tires marketed as containing special chemical components that
Crompton or Flexsys provided. The plaintiffs proffer 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 manufacturers as “distributors” of chemical
components that Crompton or Flexsys provide. Crompton 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 jurisdiction based on the “effects
test.” The Supreme Court of the United States has recognized that a state may exercise
personal jurisdiction over an out-of-state defendant whose “intentional, and allegedly
tortious, actions were expressly aimed” at the forum 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 jurisdiction 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 known that his intentional acts would
cause harm in the forum state is not enough to establish jurisdiction under the effects


                                             4
test.” Pavlovich v. Superior Court, 29 Cal. 4th 262, 270–71, 58 P.3d 2, 8, 127 Cal. Rptr.
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 into the stream of commerce with the
foreseeable result that it would wind up in tires in Vermont does not establish sufficient
minimum contacts under the effects test.
        Finally, turning to general jurisdiction, the plaintiffs have not shown continuous
and systematic contacts on Crompton’s part. The plaintiffs point to sales of chemicals
(unrelated to tire production) to a Vermont manufacturer 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 these advertisements reach Vermont.
Crompton also distributes some of its products through 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-specific inquiry, Metro. Life Ins. Co. v.
Robertson-Ceco Corp., 84 F.3d 560, 570 (2d Cir. 1996), Crompton’s contacts with
Vermont do not amount to the continuous and systematic 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 marketing 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 by no means targeted toward Vermont.



          1
           Notably, Crompton sent these shipments F.O.B., meaning 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 over nonresident defendant where title to
                                             defective goods passed to plaintiff in Tennessee).


                                              5
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 commercial
contacts, unrelated to [plaintiff’s] claims are insufficient 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 chartered by operators in forum state
does not demonstrate continuous and systematic presence in forum state).
ORDER
       The motions to dismiss on behalf of Crompton Corporation; Uniroyal Chemical
Company, Inc.; Uniroyal Chemical Company Limited; Flexsys NV; and Flexsys America
LP are GRANTED.


       Dated at Burlington, Vermont, April 22, 2005.


                                                           __________/s/______________
                                                               Richard W. Norton Judge




                                             6
