Judge: Yolanda Orozco, Case: 21STCV23784, Date: 2023-04-25 Tentative Ruling
Case Number: 21STCV23784 Hearing Date: April 25, 2023 Dept: 31
PROCEEDINGS: MOTION
TO QUASH SERVICE OF SUMMONS
MOVING PARTY: Defendant
Aquather GmbH (“Aquatherm”)
RESP. PARTY: Plaintiffs
GH Palmer, Inc.; Palmer/Flower Street Properties; GHP Management Corporation.
MOTION
TO QUASH SERVICE OF SUMMONS
TENTATIVE RULING
Defendant Aquatherm’s Motion to Quash Service of Summons for
lack of personal jurisdiction is DENIED.
Background
on June 28,
2021, Plaintiffs GH Palmer LLC; Palmer/Flower Street Properties; and GHP
Management Corporation filed a Complaint against Aquatherm, L.P (“ALP”); Aetna
NA, L.C. (“ANA”); Aquatherm GMBH (“Aquatherm”) and Does 1 to 25 for:
1)
Breach of Express Warranty;
2)
Strict Products Liability – Manufacturing Defect; and
3)
Strict Products Liability – Design Defect.
Defendants ALP and ANA each filed an answer on August 06,
2021.
On April 14, 2022, Defendant Aquatherm filed a Motion to Quash
Service of Summons based on lack of personal jurisdiction.
Plaintiffs filed opposing papers on February 21, 2023.
Defendant Aquatherm filed a reply on February 28, 2023.
Legal Standard
A defendant may move to quash service of summons on the
ground the court lacks personal jurisdiction. (Code Civ. Proc., § 418.10,
subd. (a)(1).) By statute, the courts of this state may exercise personal
jurisdiction over nonresident defendants to the extent permitted by the United
States Constitution. (Code Civ. Proc., § 410.10.)
Code of Civil Procedure, section 413.10, subdivision (c)
governs service of a summons on a resident of a foreign country and provides
that, except as otherwise provided by statute, service is to be performed “as
provided in this chapter or as directed by the court in which the action is
pending, or, if the court before or after service finds that the service is
reasonably calculated to give actual notice, as prescribed by the law of the
place where the person is served or as directed by the foreign authority in
response to a letter rogatory.” (Code Civ. Proc., § 413.10, subd.
(c).) “These rules are subject to the provisions of the Convention on the
“Service Abroad of Judicial and Extrajudicial Documents” in Civil or Commercial
Matters (Hague Service Convention).” (Id.) “Failure
to comply with the Hague Service Convention procedures voids the service even
though it was made in compliance with California
law. [Citation.] This is true even in cases where the defendant had
actual notice of the lawsuit. [Citations.]” (Kott v. Superior Court
(1996) 45 Cal.App.4th 1126, 1136.)
Evidentiary Objections
Plaintiffs filed
evidentiary objections to the Declaration of Dirk Rosenberg filed in support of
this Motion. Aquatherm filed a reply to Plaintiffs’ objections.
Objections Nos. 5, 6, 7, and
8 are SUSTAINED.
Objections No. 1, 2, 3, and
4 are OVERRULED.
Discussion
Aquatherm GMBH (“Aquatherm”) is a German manufacturer whose
pipes were used by Plaintiff in building the Lorenzo apartment complex in Los
Angeles, CA. The pipes came with a 60-year warranty, but the Plaintiffs assert
the pipes started leaking within the warranty period, forcing the Plaintiffs to
incur costs to replace them. Plaintiffs now bring suit for breach of warranty
and strict product liability against Defendants Aquatherm and Defendants Aetna
NA, L.C. (“ANA”) and Aquatherm L.P. (“ALP”), the two successors to the
exclusive U.S. distributor for Aquatherm products.
Defendant Aquatherm now moves for an order quashing the
service of summons due to lack of personal jurisdiction. Aquatherm asserts it
is a resident of Germany and has no contacts with the State of California or
the incident that is the subject of this lawsuit.
Timeliness of Motion
Plaintiffs argue that Aquatherms’ Motion to Quash is
untimely under Code of Civil Procedure section 418.10 subdivision (a).
Aquatherm is correct in asserting that the Court for good
cause may extend the time to file a motion to quash. Moreover, the Plaintiffs fail
to cite any legal authority to show that Aquatherm waived its right to have its
motion heard on the basis that it is untimely under section 418.10 subdivision
(a). Aquatherm will only waive its right to file a motion to quash and
challenge jurisdiction if it made a general appearance prior to filing a motion
to quash. (See City of Riverside v. Horspool
(2014) 223 Cal.App.4th 670, 680; In re Marriage of Obrecht (2016) 245
Cal.App.4th 1, 8.)
“Although a defendant may waive an
objection to the court's lack of personal jurisdiction, for example by making a
general appearance [Citations], a defendant's failure to appear does not
forfeit an objection the court has no personal jurisdiction over it. To the
contrary, a trial court lacks jurisdiction in a fundamental sense when it lacks
personal jurisdiction over a party. [Citation.] As such, any
ensuing judgment is void and ‘vulnerable to direct or collateral attack at any
time.’ [Citation].”
(Brue v. Shabaab (2020) 54
Cal.App.5th 578, 586 [internal quotations omitted].) Since the Plaintiffs do
not argue that Aquatherm has made a general appearance in this action, the
Court will consider Aquatherm’s motion to quash.
Motion to Quash
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. (State
of Oregon v. Superior Court (1994) 24 Cal.App.4th 1550, 1557.) If the plaintiff
meets his or her burden, the burden shifts to the defendant to demonstrate that
the exercise of jurisdiction would be unreasonable. (Buchanan v. Soto
(2015) 241 Cal.App.4th 1353, 1362.)
Aquatherm does not assert that service was improper under
the Hague Convention. Moreover, the Plaintiffs do not assert that the Court has
general jurisdiction over Aquatherm. Therefore, the issue to determine is
whether Aquatherm has sufficient contacts in California to find that Aquatherm
purposefully availed itself of the privilege of conducting business in California
sufficient to establish specific jurisdiction. (See Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 446.)
For specific jurisdiction, “courts consider the relationship
among the defendant, the forum and the litigation.” (Snowney v. Harrah’s Entertainment, Inc.
(2005) 35 Cal.4th 1054, 1062.) A court
may exercise specific jurisdiction over a nonresident defendant only if: “(1)
the defendant has purposefully availed himself or herself of forum benefits;
(2) the controversy is related to or arises out of the defendant’s contacts
with the forum, and (3) the assertion of personal jurisdiction would comport
with fair play and substantial justice.” (Id.)
i.
Purposeful
Availmet Aquatherm’s Contacts with California
Plaintiffs
have conducted discovery and the deposition transcripts and Plaintiff’s
evidence in opposition to the Defendants’ motion to quash can be found in
Plaintiff’s compendium of evidence (hereinafter “PCOE”). References to exhibit
numbers rather than a letter means the exhibit was used in a deposition
testimony, while an exhibit marked with a letter means the exhibit was not used
in depositions but was produced to oppose this motion. (See Opp. at 6, fn. 1).
Plaintiffs’ deposed the following individuals:
·
Aquatherm’s PMQ, Dirk
Rosenberg (“DR”). (PCOE Ex. A.)
·
Jordan Hardy (“JH”), the Chief
Executive Officer (“CEO”) of Aquatherm L.P. (“ALP”) since 2015 and current
owner of the Clark Family Holdings, L.C., a holding company which owns AETNA
NA, L.C. (“ANA”). (PCOE Ex. B.)
·
James Paschal (“JP”), the
PMK for Defendants ALP and ANA. (PCOE Ex. C.)
Aquatherm is the manufacturer of Aquatherm green piping
products. (Rosenberg Decl., ¶ 4.) Aquatherm was founded in
Germany in 1973 by the Rosenberg family, which is currently controlled by
co-Managing Directors Dirk, Christof, and Maik
Rosenberg. (PCOE Ex: A [Dirk Rosenberg (“DR”) Depo. 7:18-22, 9:3-13,
11:16-20, 152:9-153:19].) Plaintiffs assert that Aquatherm is owned by a parent
holding company “Besitzgesellschaft mbh & Co. KG (“Aquatherm BesGes”) whose
only operating entities are Aquatherm and ALP. (Id. [DR 50:13-151:13];
Ex. 5.)
Defendant ANA is owned by the Clark company and became the
exclusive distributor of Aquatherm products in the U.S. (PCOE Ex. 3 [“Exclusive
Distributor Agreement” at §1.1 & Att. 2]; Ex. 2 [Jordan Hardy Decl. at ¶6];
Ex. A [DR at 38:25-39:12]; Ex. B [Jordan Hardy (“JH”) Depo. at 25:5-34].) In
December 2015, Aquatherm BesGes bought the assets of ANA from the Clark family
and placed the assets in its newly-formed subsidiary ALP. (PCOE Ex. 4 at GMBH_GHPA_0000015, Preamble & §2.1, at
GMBH_GHPA_0000177-182; Ex. A [DR 104:16-106:12, 111:11-112:13]. Defendant ANA
is now a shell company without any operation owned by the Clark family. [Ex B
[JH Depo. 17:18-19:2].)
Plaintiff asserts that although ALP is a subsidiary of
Aquatherm BesGes, it functions as a subsidiary of Aquatherm because Aquatherm
BesGes owns 100% of ALP; with the same four family members owning both
Aquatherm BesGes and Aquatherm. (PCOE Ex. A [DR 7:18-22, 9:3-13, 11:16-20].)
While ANA, and then ALP, sold other products that were needed to install
Aquatherm pipes, they could not and did not, sell any competing pipes. (PCOE
Ex. 3, §6.2; Ex. C [DR 89:6-90:13].) When ALP was formed, Dirk and Christof
Rosenberg initially served as directors. (PCOE Ex. A [DR 10:2-8, 10:18-11:1].)
Jordan Hardy is CEO of ALP and the sole officer and director of ALP’s general
partner, Aquatherm Corp., and has never received operational guidance or
direction from Aquatherm BesGeS, but from Dirk Rosenberg or Philip Menke, the
head of Aquatherm’s distributions group. (PCOE Ex. A [DR 14:8-15:1]; Ex. B [JH
45:9-18, 150:7-9, 36:15-37:7.)
Furthermore, Aquatherm BesGes has never taken any profits
out of ALP, instead, profits are reinvested back to ALP. (PCOE Ex. B [JH
45:20-46:20]). Aquatherm also paid off a $1,000,000+ line of credit that ALP
had taken out, with ALP repaying Aquatherm over time. (PCOE Ex. B [JH
57:1-58:20].) When ALP was looking to convince third-party investors to
construct a new building for its operation, Aquatherm or Aquatherm BesGes (who
are both owned by the Rosenberg family) guaranteed the lease for the new
building. (Id. [JH 46:23-49:2].) Aquatherm’s insurance policies cover
ALP. (PCOE Ex. B. [JH 59:8-60:7].)
All transactions between Aquatherm and ALP are handled by
invoice, and Aquatherm unilaterally sets the transfer prices paid by ALP. (PCOE
Ex. B [JH 45:20-46:20, 198:14-199:10].) Aquatherm provides product information,
diagrams, charts, and photos to ANA and ALP to incorporate into their marketing
materials. (PCOE Ex. A [DR 95:19-96:21, 97:12-18].) Aquatherm’s testing
facilities were made available to ANA or ALP. (PCOE Ex. C [JP 56:9-57:24]; Ex.
A [DR 63:3-66:6, 126:12-127:10].) Aquatherm has hosted tours of its facilities for
ANA customers. (PCOE Ex. B [JH 28:20-33:15]; Ex. A [DR 72:2--74:5, 75:23-76:17,
79:4-80:2]; Ex. C James Paschal (“JP”) Depo [124:11-125:1].)
Plaintiffs have presented sufficient evidence to find that
Aquatherm and ALP’s ownership and financial relationship are intertwined.
Moreover, Plaintiffs present evidence that Aquatherm used ALP to purposefully
push its products into the U.S. market and California.
Jordan Hardy stated that one of the primary purposes of
Defendant ALP is to generate sales of Aquatherm’s products. (PCOE Ex. B [JH
49:3-16].) Aquatherm considers the U.S. to be a “potent growth market.” (PCOE
Ex. 33, Ex. B [JH 148:11-19]) Aquatherm’s annual revenues from sales to ANA and
ALP, which operate in the United States and Canada, more than doubled over
eight years, growing from 4.6 million Euros in 2012 up to 10.1 million Euros in
2019. (PCOE Ex. 11 at GMBH_GHPA_004630; Cf: Ex. 10 at 10:17-11:7 (identifying
data in Ex. 11); Ex. A [DR 184:19-186:17, 188:12-25, 190:18-192:2].) From 2010
to 2015, ANA’s annual revenues from California increased from nearly $4.6
million to $22.3 million. (PCOE Ex. 12 at ALP_GHPA_007787; cf: Ex. 35 at 4:8-
5:5(identifying data in Ex. 12), Ex. B [JH 157:15-160:23].)
From 2021 until the end of 2021, ANA, and later ALP had a
supply agreement with Ferguson Enterprises, with the specific goal of expanding
the distribution of Aquatherm’s pipes in California and Arizona. (PCOE Ex. B
[JH 110:15-23].) ALP ended its agreement with Ferguson so that it could have
more fixability to expand its distribution base of Aquatherm’s pipes. (Id.
[JH 11:7-14].) ALP also entered into several other supply agreements with other
California distributors to sell Aquatherm’s products. (Id. [JH
88:23-91:17; 110:10-112:4.)
ALP had representatives whose primary purpose was to market
Aquatherm’s pipes, including marketing to California engineers. (PCOE Ex: B [JH
112:5-113:25, 119:12-120:13, 122:14-123:25, 130:19-131:3].) These
representatives had exclusive rights to particular parts of California, and, in
exchange for their efforts, the representatives would receive 10% of all sales
in those geographies. (Id. [JH 111:7-24, 112:5-17, 114:1-114:22,
119:12-120:13]; Ex. 29, §1(c); Ex. 30, §1(c); Ex. 31 at §1(c).) In 2016, ALP
began hiring California-based sales managers dedicated to promoting Aquatherm
sales in California, first, Jason Shirey, and later, Dave Moore. (Id.
[JH 174:4-176:1, 176:20-177:6] Ex. 37.) Both Shirey and Moore have traveled to
Aquatherm’s headquarters in Germany for sales meetings. (Id. [JH
177:11-178:4].) Aquatherm also provides local support for its product through a
regional sales manager located in Sacrament, CA, a representative in the City
of Industry, CA, and a distributor in Fontana, CA. (PCOE Ex. 36; 37; Ex. B [JH
179:9-180:20].)
Aquatherm prefers to use ports on the west coast to deliver
products in the U.S. (Ex. A [DR 180:22-181:15]; Ex. B [132:2-11].) Aquatherm
products have been shipped to California from ANA’s and ALP’s warehouses under the
consignment model, in which Aquatherm held title to goods from manufacture
until ANA/ALP shipped the products from its Utah warehouse to a distributor
when ANA/ALP would invoice Aquatherm. (PCOE Ex. B [JH 52:22-54:6; 54:7-55:14];
Ex. A [DR 189:1-190:15].)
The above information shows that Aquatherm was well aware
that its pipes were being sold in the California marketplace. In fact, not only
did Defendants
ALP and ANA only sell Aquatherm pipes (PCOE Ex. 3, §6.2; Ex. A [DR
89:6-90:13]), the only warranty for the pipes came from Aquatherm, not from ANA
or ALP. (PCOE Ex A [DR 120:23-121:15]; Ex. 3 at GMBH_GHPA_0000317, §8 et seq.;
Ex. 4 at GMBH_GHPA_0000077.) By selling and offering a warranty on their pipes
to California customers, Aquatherm contacts were more than the result of “random,”
“fortuitous,” or “attenuated” contacts, but rather the proximate result of
Aquatherm’s business model and actions that created “continuing obligations”
between itself and the residents of California. (See Burger King Corp. v. Rudzewicz (1985) 471 U.S. 462,
476.)
First, Aquatherm pipes use a “heat fusion” process which
requires that installers be trained on how to install Aquatherm pipes. (PCOE
Ex. F.) According to ALP’s records, in California, over 1,900 plumbers have received
such training on installing Aquatherm pipes at ANA’s/ALP’s Utah office. (PCOE
Ex. C [JP 36:22-38:18]; Ex. B [JH 63:25-64:11].) After receiving training, the
person is assigned an Aquatherm-generated number, called “installer number.”
(PCOE Ex. B [JH 85:9-12, 146:2-5; 187:30,188:20-189:14].) To submit a warranty
claim, a pressure test must have been conducted by a person with an installer
number, meaning the person received Aquatherm training. (Id. [JH
145:12-146:5, 188:19- 189:10].) The only warranty
for pipes sold through ANA or ALP is from Aquatherm, not from ANA or ALP. (PCOE
Ex A [DR 120:23-121:15];
Ex. 3 at GMBH_GHPA_0000317, §8 et seq.; Ex. 4 at GMBH_GHPA_0000077.)
Second, in order to make Aquatherm’s products suitable for
sale in the U.S. Market, Aquatherm altered its pipes to conform to U.S.
standards and regulations. (PCOE Ex. A [DR 83:17-85:1-21].) In California, this
included adding a Proposition 65 warning for products sold in California. (PCOE
Ex. C [JP 41:14-19].)
Third, because certifications are tied to the product, the
manufacturers, and the specific location where the product is made—Aquatherm
itself was required to obtain the U.S. certifications needed to sell its pipes
in the U.S. (PCOE Ex. 18; Ex. C [JP 134:12-137:12].) The U.S. certifications
Aquatherm had to obtain to sell its products in the U.S., included NSF, ICC-ES,
and IAPMO, as well as other local jurisdictional approvals. (PCOE Ex. A [DR
211:14-212:3, 213:19- 214:3, 223:8-224:3, 243:23-244:13; JP 127:3-128:18,
173:22-174:4]; Ex. C [JP 97:20-98:10, 127:3-128:18, 173:22-174:4]; Exs. 14, 15,
18,19, 43; Ex. Q at 1.)
The IAPMO certification is the one that is predominately
used in the western U.S. (Ex. C [JP 96:20-21].) California bases its plumbing
code on the Uniform Plumbing Code (UPC) issued by IAPMO, which both ICC-ES and
IAPMO certify for Aquatherm. (Id. [JP 111:1-23]; Ex. 14 at 1; Ex. 43 at
1.) IAPMO is based in Ontario, California where Aquatherm GmbH was required to
direct its applications for certification and testing. (PCOE Ex. 16; Ex. C [JP
101:3-11, 103:3-14].) ICC-ES’s principal address is in Whittier, California,
while its business office and Western Regional office are in Brea, California.
(Exs. G, H.) Aquatherm’s relations with ICC-ES and IAPMO are also governed by
California law. (See e.g., PCOE Ex. 15 at ¶15d; Ex. I at ¶43.)
Any inspections by NSF, ICC-ES, and IAPMO, until last year,
have been done at Aquatherm facilities in Germany and not ANA’s or ALT’s
facilities in Utah. (PCOE Ex. C: [JP 104:8-16].) Aquatherm head of quality
management, Ulrick Hoeffer, would work directly with the agencies on testing
and production information and arrange for inspections and audits. (PCOE Ex. A
[DR 214:20-215:7, 223:8-224:6]; Ex. 16; Ex. B [122:25-124:10].) When Aquatherm GmbH
applied for certification with ICC-ES or IAMPO, it choose amongst its codes and
standards, the Los Angeles Plumbing Code and Mechanical Code so that
contractors would not need to obtain the city’s approval for the use of
Aquatherm’s pipes. (PCOE Exs. K; L at 1; C [JP 114:7-116:6]: Ex. 14 at 1.)
Jim Paschal worked as a consultant for the ANA but was paid
by Aquatherm until the formation of ALP. (PCOE Ex. 20; Ex. A [DR 255:17-258:20,
261:25- 262:7]; Ex. C [JP 23:23-25:4, 34:1-9].) Though employed by ALP, when it comes to approval and certifications, Jim Paschal
is Aquatherm “authorized agent.” (Ex. C [JP 137:14-23, 175:9-176:25].) Jim
Paschal had to travel to Los Angeles, San Francisco, Oakland, and other
California cities to obtain approval for Aquatherm. (PCOE Ex. C [JP 141:6-24,
165:24-168:12].) Aquatherm also signed and submitted to the Los Angeles
Department of Building and Safety seven applications between February 2011 and
February 2016. (PCOE Ex. 18 at 1-7; Ex. 19.)
The evidence submitted is sufficient to show that Aquatherm
was not just aware that its product were being sold in California but that it
engaged in “additional conduct” with “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.” (Asahi Metal Industry Co. Ltd. v. Superior Court of California
(1987) 480 U.S. 102, 112.)
Here, Aquatherm as the manufacturer altered its products to
serve the U.S. marketplace and applied and obtained certifications so that its
products were suitable for sale in California. It allowed ANA and ALT, to
advertise its products in the U.S. and California and had ALP representatives
in California market only Aquatherm pipes. Aquatherm through ANA and ALP
provided training for its pipes to California residents, such that the training
was a requisite to filing a warranty claim with Aquatherm. Aquatherm also provided local support for its
product in California. Lastly, Aquathrerm used ALT and ANA, who only sold
Aquatherm pipes, to serve as its sales agent in U.S. and California.
Therefore, the Plaintiffs have met their burden of showing
that Aquatherm purposefully availed itself of the privilege of conducting
business in California and invoked and invoked the benefits and protections of its law.
ii.
Aquatherm Negates Having Minimum
Contacts in California
Aquatherm challenges the Plaintiffs' assertion that
Aquatherm has minimum contacts in California. “The existence of personal
jurisdiction will often
present a mixed question of law and fact. [Citation.] To the extent that
there are factual conflicts, the trial court resolves those disputes and the
substantial evidence standard governs [the appeal court’s] review.” (Integral Development Corp. v. Weissenbach (2002) 99
Cal.App.4th 576, 585 quoting Burger King Corp., supra,
417 U.S. at 477.)
Aquatherm asserts that its contacts in California are
insufficient to assert personal jurisdiction. Aquatherm admits that it
exclusively sold products to ANA and ALP (both located in Utah). (Rosenberd
Decl. ¶ 11.) Aquatherm asserts that it did not sell, advertise, or market
products directly to the U.S. or California. (Rosenberg Decl. ¶¶ 9, 10 [italics added].) Aquatherm asserts that
Defendants ANA and ALP do not share ownership, and ANA and Aquatherm Inc. are
owned by the Clark family. (Cohen Decl. ¶ 3, Ex. E [Hardy Tr., pp. 44:25;
45:18].) However, Jordan Hardy asserts knowledge that Aquatherm BesGes owns 99
percent of ALP and “a hundred percent” of Aquatherm. (Cohen Decl. Ex. H [TR
44:25; 45:18].)
Aquatherm relies on Holland America Line Inc. v.
Wartsila North America, Inc. (9th Cir. 2007) 485 F.3d 450 for the
proposition that as a general rule, where a parent and a subsidiary are separate and distinct corporate
entities, the presence of one may not be
attributed to the other. (Id. at 459.) However, the Ninth Circuit
in Holland America Line Inc. did not find evidence of
purposeful availment because the defendant “itself has not
put any products into the stream of commerce that might have ended up in
the forum, whether through a distributorship agreement or otherwise.” (Id.
[italics original].)
Here, Defendant ANA was Aquatherm’s exclusive
distributor for the U.S. marketplace via an exclusivity contract. (PCOE Ex. 3
at 2 §1.1 & Att. 2; Ex. 2 at ¶6; Ex. A [DR 38:25-39:12], Ex. B [JH
25:5-24].) Plaintiffs have presented sufficient evidence to find that ALT was
created by Aquatherm to be the successor of ANA and exclusively sell
Aquatherm’s pipes to the U.S. marketplace. (PCOE Ex. 4 at 1, at
GMBH_GHPA_0000015, Preamble & §2.1, at GMBH_GHPA_0000177-182 ; Ex. A [DR
104:16-106:12, 111:11-112:13]; Ex. B [JH 148:6-10, 168:18-169:1]; Ex. 33 at 1.)
This supports the finding that Aquatherm used ANA and ALT to facilitate the
sale of its products in the U.S. and California.
Moreover, the mere fact that ALP and ANA are entities
that directly engaged in the sales, advertising, and training of Aquatherm’s
products, does not mean Aquatherm cannot be held liable. “A subsidiary, for
example, might be its parent's agent for claims arising in the place where the
subsidiary operates[.]” (Daimler AG v. Bauman
(2014) 571 U.S. 117, 135.) “As such, a corporation can purposefully avail
itself of a forum by directing its agents or distributors to take action
there.” (Id. fn. 13.) Here, Plaintiffs’ presented evidence that Jordan
Hardy as the CEO of ALP has never received operational guidance or direction
from Aquatherm BesGeS, but from Dirk Rosenberg or Philip Menke, the head of Aquatherm’s
distributions group. (Cf. Williams v. Yamaha Motor Co.
Ltd. (9th Cir. 2017) 851 F.3d 1015, 1025 [“Appellants neither allege
nor otherwise show that YMC had the right to control YMUS's activities in any
manner at all.”].)
In addition, the fact that ASTM, ICE-ES, NSF, and IAPMO are
international organizations, does not negate the fact that Aquatherm’s
relations with ICC-ES and IAPMO are also governed by California law. (PCOE Ex.
15 at ¶15d; Ex. I at ¶43.) It also does not negate the fact that Aquatherm
altered its products to conform to U.S. and California standards. (PCOE Ex. A
[DR 83:17-85:1-21]; Ex. C [JP 41:14-19].) Aquatherm also assured that its
ICC-EC certification complied with the Los Angeles Plumbing and Municipal Code.
(PCOE Ex. K, L at 1; Ex. C [JP 114:7-116:6].) These actions cannot be
attributed to ANA or ALD. This is evidence that Aquatherm took direct action to
promote the sale of its products in California.
Aquatherm relies on In re ZF-TRW Airbag Control
Units Products Liability Litigation (C.D. Cal. 2022) 601 F.Supp.3d
625 to assert that seeking a certification is not sufficient to establish
jurisdiction but the District Court in In re ZF-TRW Airbag Control
Units Products Liability Litigation found that the plaintiff’s
allegations, without more, were insufficient to establish jurisdiction in a
class action lawsuit over airbag defects. Unlike the vehicle manufacturer in In re ZF-TRW Airbag Control Units Products Liability Litigation, which submitted applications to the EPA, here Aquatherm
specifically applied for local approval and certifications in California in order
to sell or have its pipes approved for installation. Moreover, Plaintiffs cited
other federal cases where certifications or licenses were found to be evidence
of purposeful availment. (See CE Resource, Inc. v. Magellan Group, LLC,
(E.D. Cal., July 8, 2009, No. 2:08-CV-02999MCEKJM) 2009 WL 2031721, at *5 [“In
this case, Plaintiff has adequately shown that Magellan
purposefully availed itself of the laws of California. Magellan is licensed in California to provide continuing education programs to California
citizens.”]; Betancourt v. Endo Pharmaceuticals, Inc.
(N.D. Ga., Dec. 17, 2014, No. 1:11-CV-3805-SCJ) 2014 WL 10677480, at *7 [“It is
thus apparent that Patheon did not simply place the birth control pills at
issue in this case into the stream of commerce, with no idea of where they
would be marketed and/or sold. Instead, as evidenced by the above-cited
language from its 2011 10–K filing, Patheon actively sought and maintained the
FDA approval necessary to manufacture such pills for ultimate sale and
consumption within the United States, including the state of Georgia. This is
the type of “additional conduct” that Justice O'Connor cited as sufficient to
satisfy the ‘stream of commerce plus’ test for minimum contacts.”].)
The fact that Aquatherm itself sought approvals from
the Los Angeles Department of Building and Safety, shows that Aquatherm
specifically sought to sell its product for use in California. (See As You Sow v. Crawford Laboratories, Inc. (1996) 50
Cal.App.4th 1859, 1870.) Aquatherm fails to show that when Jim Paschal sought
authorizations and certifications, he did so on behalf of a separate entity. Moreover,
Aquatherm itself offered the warranty on its products and made assurances to
Plaintiff that the pipes were under warranty. (Missick Decl. at ¶¶ 9–10; PCOE
Ex. 22 at 4; Ex. 23 at 3.)
“One of the recognized bases for
jurisdiction in California arises when the defendant has caused an ‘effect’ in
the state by an act or omission which occurs elsewhere.” (Sibley v. Superior
Court (1976) 16 Cal.3d 442, 445.) This may be where “(a) the effects
are of a nature ‘that the State treats as exceptional and subjects to special
regulation,’ or (b) the defendant has, in connection with his causing such
effects in the forum state, invoked ‘the benefits and protections of its
laws.’” (Quattrone v. Superior Court (1975) 44 Cal.App.3d 296,
306; see also Pavlovich v. Superior Court (2002) 29 Cal.4th 262, 276.) Here,
Plaintiffs provide evidence that at Plaintiffs request, Aquatherm via Ulrich
Hoffer, provided assurances that Aquatherm’s warrant covered the piper used in
the Lorenzo project. (PCOE Ex. 23.) Hoffer outlined that the conditions for the
warranty was a successful pressure test “in accordance with the aquatherm
testing procedures and final test results provided to Aquatherm.” (Id.)
Aquatherm caused an effect in California when it represented that the pipes used
by Plaintiffs for its project in California were under Aquatherm’s warranty
provided that Plaintiffs’ complied with Aquatherm’s warranty procedures and had
the pipes tested at Aquatherm’s facility in Germany. Aquatherm fails to present
evidence to the contrary.
Moreover, Aquatherm cannot hide behind the actions of
ANA and ALT, to assert that it did not purposefully derive a direct benefit
from its activities in California when it purposefully altered its pipes and
applied for approval so that its product was suitable for sale in California.
“A manufacturer whose products pass through the hands of one or more middlemen
before reaching their ultimate users cannot disclaim responsibility for the
total distribution pattern of the products. If the manufacturer sells its products in circumstances such that it knows
or should reasonably anticipate that they will ultimately be resold in a
particular state, it should be held to have purposefully availed itself of the
market for its products in that state.” (Buckeye Boiler Co. v. Superior
Court of Los Angeles County (1969) 71 Cal.2d 893, 902.)
Aquatherm failed to rebut Plaintiffs’ evidence that
it derived a significant economic benefit from the sale of its products in
California, that Aquatherm altered its product so that they would be suitable
for sale in California, that ANA and ALP were established for the sole and
exclusive purpose of increasing the sale of Aquatherm’s products to the United
States, and that Aquatherm, and not ANA or ALT, provided the warranty on the
pipes sold.
Therefore, Aquatherm fails to show that its contacts
with California were random, fortuitous, or attenuated such that they are
insufficient to establish purposeful availment.
iii.
Nexus Between Contacts and Litigation
The second prong for specific jurisdiction requires that
Plaintiff’s claim arise from Aquatherm’s activities in California. (See Jewish Defense Organization, Inc. v. Superior Court (1999) 72
Cal.App.4th 1045, 1054.) Plaintiffs
present the declaration of Greg Messick, the Plaintiffs’ contractor, to show
that the Plaintiffs purchased Aquatherm pipes for its building project and that
Plaintiffs sought assurances from Aquatherm that its warranty for its pipes
remained in effect. (Messic Decl. ¶¶ 5-10; PCOE Ex. 22 at 4; Ex. 23; Ex. A [DR
273:17-274:9]; Ex. C [JP159:2-23].) Plaintiffs are now suing Aquatherm for
Breach of Express Warranty and Strict Products Liability. (See Complaint.)
The Court finds Plaintiffs have carried their burden of
showing a nexus between Aquatherm’s contacts and this litigation.
iv.
Fair Play and Substantial Justice
Once facts showing minimum contacts with the forum state are
established, the burden is on Defendants to demonstrate that the exercise of
jurisdiction would be unreasonable. (See
Burger King Corp., supra, 417 U.S. at 476-477; Buchanan, supra,
241 Ca.App.4th at 1362.) Here, Aquatherm bears the burden of showing that the exercise of
jurisdiction would be unreasonable.
“Courts may evaluate the burden on
the defendant of appearing in the forum, the forum state's interest in
adjudicating the claim, the plaintiff's interest in convenient and effective
relief within the forum, judicial economy, and ‘the ‘shared interest of the
several States in furthering fundamental substantive social policies.’’”¿ (Vons
Companies, Inc., supra, 14 Cal. 4th at 448 quoting Burger
King Corp., supra, 417 U.S. at 476.) “An otherwise
valid exercise of personal jurisdiction ‘is presumed to be
reasonable.’¿[Citation.] Therefore, defendant ‘must present a compelling case
that the presence of some other considerations would render jurisdiction
unreasonable. Most such considerations usually may be accommodated through
means short of finding jurisdiction unconstitutional.’” (Integral Development
Corp., supra, 99 Cal.App.4th at 591 quoting Burger
King Corp., supra, 417 U.S. at 477.)
Based on the foregoing, Aquatherm’s
Motion to Quash is DENIED.
Conclusion
Defendant Aquatherm’s Motion to Quash Service of Summons for
lack of personal jurisdiction is DENIED.
Moving party to give notice.