Judge: Laura A. Seigle, Case: 21STCV05513, Date: 2023-08-15 Tentative Ruling

Case Number: 21STCV05513    Hearing Date: August 15, 2023    Dept: 15

[TENTATIVE] ORDER RE MOTION TO QUASH

            Defendants Janssen Pharmaceuticals, Inc., Johnson & Johnson Holdco (NA) Inc., and Kenvue Inc. filed a motion to quash for lack of personal jurisdiction.  Plaintiffs Joy Moore, Kathryn Pratt and Carol Farquharson allege Mae Moore was injured by exposure to asbestos in talc in Defendants’ products.  Plaintiffs allege she used talcum powder products from the 1930s to the current time.  (Third Amended Complaint, Ex. A.)  However, Mae Moore died on December 29, 2021 and therefore stopped using talcum powder products before that date.

A defendant may move to quash service of summons on the ground of lack of jurisdiction.  (Code Civ. Proc., § 418.10, subd. (a)(1).)  The court may dismiss without prejudice the complaint in whole, or as to that defendant, when dismissal is made pursuant to Section 418.10.  (Code Civ. Proc., § 581, subd. (h).) 

“A court of this state may exercise jurisdiction on any basis not inconsistent with the Constitution of this state or of the United States.”  (Code Civ. Proc., § 410.10.)  “The Due Process Clause protects an individual’s liberty interest in not being subject to the binding judgments of a forum with which he has established no meaningful ‘contacts, ties, or relations.’”  (Burger King Corp. v. Rudzewicz (1985) 471 U.S. 462, 471-472.)  A state court may not exercise personal jurisdiction over a party under circumstances that would offend “traditional notions of fair play and substantial justice.”  (Asahi Metal Industry Co., Ltd., v. Superior Court of California, Solano County (1987) 480 U.S. 102, 113.) 

When a defendant moves to quash service of process on jurisdictional grounds, the plaintiff has the initial burden of demonstrating facts justifying the exercise of jurisdiction.  (Jayone Foods, Inc. v. Aekyung Industrial Co. Ltd. (2019) 31 Cal.App.5th 543, 553.)  Once facts showing minimum contacts with the forum state are established, the defendant has the burden to demonstrate that the exercise of jurisdiction would be unreasonable.  (Ibid.)  “The plaintiff must provide specific evidentiary facts, through affidavits and other authenticated documents, sufficient to allow the court to independently conclude whether jurisdiction is appropriate.  [Citation.]  The plaintiff cannot rely on allegations in an unverified complaint or vague and conclusory assertions of ultimate facts.  [Citation.]”  (Strasner v. Touchstone Wireless Repair & Logistics, LP (2016) 5 Cal.App.5th 215, 222.)

A defendant is subject to a state’s general jurisdiction if its contacts “are so continuance and systematic as to render [it] essentially at home in the forum State.”  (Saimler AG v. Bauman (2014) 571 U.S. 117, 127.)  A nonresident defendant may be subject to the specific jurisdiction of the forum “if the defendant has purposefully availed himself or herself of forum benefits [citation], and the ‘controversy is related to or “arises out of” a defendant’s contacts with the forum.’  [Citations.]”  (Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 446.)  This test does not require a “causal relationship between the defendant’s in-state activity and the litigation.”  (Ford Motor Co. v. Montana Eighth Judicial District Court (2021) 141 S.Ct. 1017, 1026.)  The “arise out” of standard “asks about causation,” but “relate to” does not.  (Ibid.)  “[W]hen a corporation has ‘continuously and deliberately exploited [a State’s] market, it must reasonably anticipate being haled into [that State’s] court[s]’ to defend actions ‘based on’ products causing injury there.”  (Id. at p. 1027.) 

            Plaintiffs do not dispute that there is no general jurisdiction over Defendants.

            Defendants contend Plaintiffs cannot show California has specific jurisdiction over Defendants because they never sold talc-based powder in California or the U.S.  (Motion at p. 2.)  In other words, Defendants argue Plaintiffs’ claims do not arise out of or relate to Defendants’ contacts with California.  According to Defendants, Johnson & Johnson Holdco (NA) Inc. came into existence in October 2021 and Kenvue Inc. came into existence in 2022.  (Motion at pp. 3-4.)  Neither sold talc-based powder in California at any time.  (Motion at p. 3.)  LTL Management, LLC holds the liability for talc-related claims.  (Motion at p. 4.)  And Defendants state Janssen is a pharmaceutical company that never sold talcum powder products.  (Motion at p. 4.) 

Plaintiffs start by arguing Defendants have consented to California jurisdiction by registering to do business in California.  (Opposition at p. 8.)  This argument is meritless.  First, California courts have repeatedly held that “designation of an agent for service or process and qualification to do business in California alone are insufficient to permit general jurisdiction.  (Thomson v. Anderson (2003) 113 Cal.App.4th 258, 268.)  Plaintiffs ignore this well-established California law.  Second, Plaintiffs’ reliance on the recent case Supreme Court case Mallory v. Norfolk Southern Railway Co. skips over the key distinguishing fact – that case analyzed a Pennsylvania statute “requir[ing] out-of-state companies that register to do business in the Commonwealth to agree to appear in its courts on ‘any cause of action’ against them.  42 Pa. Cons. Stat. § 5301 (a)(2)(i), (b) (2019).”  (Mallory v. Norfolk Southern Railway Co. (2023) 143 S.Ct. 2028, 2033.)  No such statute exists in California.  Plaintiffs’ argument based on Mallory has absolutely no merit.

Next, Plaintiffs argue this court should deny this motion for the same reasons that a New Jersey court denied a motion to quash brought by Defendants.  (Opposition at pp. 10-11.)  But Plaintiffs do not disclose the fact that the New Jersey court found all three Defendants are New Jersey corporations.  (Ex. 17 at p. 3.)  All three have their principal places of business in New Jersey, so of course New Jersey has jurisdiction.  (Motion at pp. 4-5.)  If they had their principal places of business in California, then California would have jurisdiction.  But that is not the case.

Then, Plaintiffs argue the original Johnson & Johnson Consumer Inc. merged into all three Defendants, making Defendants responsible for its talc-based liabilities.  (Opposition at pp. 11-12.)  The Third Circuit in LTL Management, LLC (3rd. Cir. 2023) 64 F.4th 84 has already done most of the work in analyzing the structure of the J&J companies and the liability for talc-based claims.  It explained that Johnson & Johnson Consumer Inc. (“Old Consumer”) was a wholly owned subsidiary of Johnson & Johnson and sold baby powder.  (Id. at p. 92.)  “[S]ince 1979 only Old Consumer and its predecessors . . . have directly sold Johnson’s Baby Powder.”  (Id. at p. 93.)  In October 2021, Old Consumer was restructured into LTL Management and Johnson & Johnson Consumer, Inc. (“New Consumer”), and Old Consumer ceased to exist.  (Id. at pp. 95-96.)  In the restructuring, LTL Management took on all of the liabilities of Old Consumer for talc-related claims.  (Id. at p. 96.)  And New Consumer received all of the assets and other liabilities.  (Id. at p. 97.)  The Third Circuit determined that LTL Management “was highly solvent with access to cash to meet comfortably its liabilities as they came due for the foreseeable future,” and “has a funding backstop, not unlike an ATM disguised as a contract, that it can draw on to pay liabilities without any disruption to its business or threat to its financial viability.”  (Id. at pp. 108, 109.)  Because of that solvency, the Third Circuit dismissed the bankruptcy case.

            Plaintiffs do not explain where the Third Circuit went wrong in determining that LTL Management holds all of the talc-based liabilities.  If in fact, New Consumer actually held those liabilities and then merged with Janssen Pharmaceuticals, Inc., Johnson & Johnson Holdco (NA) Inc., and Kenvue Inc., making those three Defendants now liable, one would expect the Third Circuit to have mentioned that.  This argument has no merit.

Plaintiffs go on to argue that Defendants are product line successors under Ray v. Alad (1977) 19 Cal.3d 22 because they continue to manufacturer baby powder.  (Opposition at p. 13.)  The court in Ray analyzed the successor liability of a purchaser of the assets of a corporation.  (Ray, supra, 19 Cal.3d at p. 28.)  Generally, “the purchaser does not assume the seller’s liabilities unless:  (1) there is an express or implied agreement of assumption, (2) the transaction amounts to a consolidation or merger of the two corporations, (3) the purchasing corporation is a mere continuation of the seller, or (4) the transfer of assets to the purchaser is for the fraudulent purpose of escaping liability for the seller’s debts.”  (Ibid.)  The case also recognized strict tort liability for defective products when a party acquires a manufacturing business and continues the output of its line of products “holding itself out to potential customers as the same enterprise,” thereby exploiting the prior business’ “established reputation as a going concern manufacturing a specific product line.”  (Id. at p. 34.)  The justification for imposing strict liability on the successor rests on “(1) the virtual destruction of the plaintiff’s remedies against the original manufacturer caused by the successor’s acquisition of the business, (2) the successor’s ability to assume the original manufacturer’s risk-spreading role, and (3) the fairness of requiring the successor to assume a responsibility for defective products that was a burden necessarily attached to the original manufacturer’s good will being enjoyed by the successor in the continued operation of the business.”  (Id. at p. 31.)

            Plaintiffs cited no evidence that Janssen is holding itself out to consumers as the same enterprise as Old Consumer.  It is a pharmaceutical company.  In any event, Plaintiffs did not establish they have no remedies “against the original manufacturer caused by the successor’s acquisition of the business.”  To the contrary, the Third Circuit concluded that LTL Management has more than enough resources to cover any liability in the foreseeable future.  (LTL Management, supra, 64 F.4th at pp. 108, 109.)  Thus, Plaintiffs did not come close to showing a potential for product line liability.

            Finally, Plaintiffs contend Defendants engaged in a fraudulent transfer to avoid liability.  Plaintiffs cite no law supporting this argument, which hinges on the assertion that Plaintiffs “have been left with no remedy for [Mae Moore’s] injury.”  (Opposition at p. 14.)  That is not correct.  As the Third Circuit determined, LTL Management has the assets to cover talc-based liabilities.  If the bankruptcy is not dismissed, Plaintiffs can pursue their claims in the bankruptcy court.  If it is dismissed, Plaintiffs can sue LTL Management in this or another action.

Plaintiffs ask for jurisdictional discovery.  A plaintiff must show a basis in fact for jurisdictional discovery, some reason to conclude discovery is likely to produce evidence of California contacts sufficient for personal jurisdiction.  (In re Automobile Antitrust Cases (2005) 136 Cal.App.4th 100, 127 [“In order to prevail on a motion for a continuance for jurisdictional discovery, the plaintiff should demonstrate that discovery is likely to lead to the production of evidence of facts establishing jurisdiction”].)  When a plaintiff is not able to make an offer of proof of the existence of “additional relevant jurisdictional evidence,” a court does not abuse its discretion in denying jurisdictional discovery.  (Ibid.) 

Plaintiffs did not demonstrate that discovery is likely to lead to the production of evidence of facts establishing jurisdiction.  Plaintiffs want broad discovery into all of Defendants’ contacts with California, all talcum power sales, and the manufacturing of talcum powder.  This is extremely extensive discovery without the required explanation about how it is likely to lead to evidence showing jurisdiction.  Mae Moore stopped using talcum powder at some point before she died in 2021, before Kenvue Inc. existed and at the time Johnson & Johnson Holdco (NA) Inc. was formed.  Old Consumer stopped selling talc-based powder in 2020 in the U.S, before Johnson & Johnson Holdco (NA) Inc. and Kenvue Inc. were formed.  (Ex. C; Ex. D at pp. 107.)  Therefore, Plaintiffs’ claims cannot arise out of Johnson & Johnson Holdco (NA) Inc.’s and Kenvue Inc.’s contacts with California. 

And Plaintiffs presented no evidence that Janssen was involved in talcum powder during the period Mae Moore was using the product.  Given that J&J is a public company, if Janssen was involved with manufacturing, marketing, distributing or selling talcum powder in the years leading up to Mae Moore’s death, one would expect some mention of that in the public record, bankruptcy court filings, or Third Circuit decision.  To the contrary, the Third Circuit stated that only Old Consumer sold baby powder.  (LTL Management, supra, 64 F.4th at p. 93.) 

Plaintiffs state they want discovery into the three Defendants’ corporate formation and restructures.  A significant amount of that information is in the public record – both SEC filings and bankruptcy court filings.  Plaintiffs did not identify what additional information about the Defendants they expect to find that would establish jurisdiction in California.

In sum, the proper defendant holding liability for Plaintiffs’ claims is LTL Management.  Either the LTL Management bankruptcy case will be dismissed, in which case Plaintiffs can litigate their claims against LTL Management in this case.  Or the bankruptcy will proceed, and Plaintiffs can pursue claims in the bankruptcy court.  In both scenarios, Plaintiffs have remedies against LTL Management.

The motion is GRANTED and the complaint against Defendants Janssen Pharmaceuticals, Inc., Johnson & Johnson Holdco (NA) Inc., and Kenvue Inc. is DISMISSSED without prejudice pursuant to Code of Civil Procedure section 581, subdivision (h).

The moving parties are to give notice.