In re Telectronics Pacing Systems, Inc.

Decision Date03 February 1997
Docket NumberNo. 1-CV-95-087.,No. MDL-1057.,1-CV-95-087.,MDL-1057.
Citation953 F.Supp. 909
CourtU.S. District Court — Southern District of Ohio
PartiesIn re TELECTRONICS PACING SYSTEMS, INC., Accufix Atrial "J" Leads Products Liability Litigation. This Order relates to all cases.

Patrick Coffey, Gardner, Carton & Douglas, Chicago, IL, Gerald Rapien, Daniel Warncke, Taft, Stettinius & Hollister, Cincinnati, OH, for Defendants Pacific Dunlop Limited and Nucleus Limited.

Stanley Chesley, Terrence Goodman, Waite, Schneider, Bayless & Chesley, Cincinnati, OH, Richard Wayne, Matthew Kammerer, Strauss & Troy, Cincinnati, OH, David Bershad, Jerome Congress, Lori Feldman, Milberg, Weiss, Bershad, Hynes & Lerach, New York City, for Plaintiffs.

ORDER DENYING MOTION TO DISMISS

SPIEGEL, Senior District Judge.

This matter is before the Court on Defendants Pacific Dunlop Limited and Nucleus Limited's Motion to Dismiss (doc. 42), Defendants' memorandum in support of the Motion to Dismiss (doc. 119), Plaintiffs' memorandum in opposition (doc. 148) and Defendants' reply (doc. 157).

INTRODUCTION

This case involves a discussion of the limits of personal jurisdiction over out-of-state defendants who own corporations that do business in the forum. Pacific Dunlop Limited ("PDL") and Nucleus Limited ("Nucleus") (collectively the "Australian Defendants") are Australian corporations who have moved to dismiss this action against them for lack of personal jurisdiction. PDL is the beneficial owner, through Nucleus as the holding company, of TPLC, Inc., the manufacturer of an allegedly defective pacemaker. The Australian Defendants argue they are not subject to personal jurisdiction because they do not have sufficient contacts with any forum involved in this consolidated matter. The Australian Defendants further argue that they are only subject to jurisdiction if they are shown to be the alter ego of the Telectronics Companies.

In Part I, the Court will provide some background on this litigation and generally describe the facts pertinent to the question of personal jurisdiction. Part II delineates the general rule for the exercise of personal jurisdiction and Plaintiffs' arguments in favor of jurisdiction. In Part III, the Court evaluates whether this case presents a situation where it is appropriate to depart from the traditional forum based minimum contacts inquiry. The Court then determines in Part IV the proper test for personal jurisdiction in cases where jurisdiction is based upon a parent corporation's contacts with a subsidiary. Finally, in Part V, the Court analyzes whether the facts here satisfy the test of International Shoe as applied to the context of the parent-subsidiary relationship.

I.
A. BACKGROUND

This is a products liability action concerning pacemakers containing the Accufix Atrial "J" Lead. A pacemaker is a device that uses electrical impulses to reproduce or regulate the rhythms of the heart. Dorland's Illustrated Medical Dictionary, (28th ed. 1994). It is driven by a battery and connected to the heart by leads and electrodes. Id.

The heart pacing system at issue here consists of three main parts: a pulse generator, leads, and a programmer. Each pacing system usually contains one or two leads, which traverse through a person's veins, directly from the pulse generator to inside the heart. The lead utilizes a retention wire to hold the atrial lead in the "J" shape. The lead's retention wire is a filament of one of two metal alloys, Elgiloy or MP35N. Telectronics Pacing Systems, Incorporated, Letter of Duane A. Schultz, Vice President Clinical and Regulatory Affairs, Premarket Notification to FDA, December 18, 1989. Both Elgiloy and MP35N are nickel-cobalt based alloys. Id.

The retention wire is not electrically active in the pacing circuit. Consequently, it has nothing to do with the conduction of the electrical signal or the operation of the pacing system. The retention wire is encased in polyurethane insulation and bends back and forth within the system.

Plaintiffs are recipients of pacemakers containing the "J" lead and their spouses. Plaintiffs claim that their pacemakers are defective because the retention wires will occasionally break because of the bending and poke through the polyurethane. Such a fracture can cause serious injury to the heart or blood vessels.

Plaintiffs, Elise and Eugene Owens, filed the lead action in this case on February 13, 1995, alleging injury due to a defective "J" lead. The Panel on Multi-District Litigation ("MDL Panel") selected this Court as the transferee court for all claims involving the Accufix "J" lead. Presently, over 400 cases are pending before this Court for pretrial proceedings. The Court appointed Plaintiffs' Steering Committee ("PSC") to coordinate discovery and other pretrial proceedings on behalf of Plaintiffs in the cases transferred to this Court. The Court ordered the PSC to file a Master Complaint. On July 20, 1995, Plaintiffs filed an Amended and Consolidated Master Class Action Complaint asserting claims for negligence, strict liability, failure to warn, breach of warranty, fraud, medical monitoring and emotional distress.

B. JURISDICTIONAL FACTS

Defendant, TPLC, Inc., ("TPLC") is a Delaware Corporation engaged in the business of designing, manufacturing, and marketing medical devices including the Accufix atrial "J" lead pacemakers at issue in this case. Defendant, Telectronics Pacing Systems, Inc. ("TPSI"), is a corporation organized under the laws of the State of Delaware. TPSI owns 100% of the stock of TPLC. TPSI's sole business is to hold certain industrial property rights, real estate and the equity interest in TPLC.

Nucleus Limited ("Nucleus") is a corporation organized under the laws of Australia. It is a holding company involved in the medical products industry. Nucleus owns a group of companies that design, manufacture and sell pacemakers and defibrillators around the world under the trade name "Telectronics Pacing Systems" or "Telectronics" (collectively referred to as the "Telectronics Companies"). TPLC and TPSI are the two Telectronics Companies that operate in the United States.

Until 1988, Nucleus was a publicly-held Australian company. In 1988, Pacific Dunlop Limited ("PDL" or "Pacific Dunlop") purchased Nucleus and thus became beneficial owner of TPLC and TPSI.

Pacific Dunlop is organized under the laws of Victoria, Australia. It is in the business of manufacturing, marketing and distributing industrial and consumer products on a worldwide basis. PDL is organized into five core business areas (automotive, distribution, consumer products, building and construction and health care) consisting of over 225 separate corporate affiliates and subsidiaries with annual sales worldwide of approximately $5.5 billion.

Pacific Dunlop is a publicly held corporation. Its shares trade on the NASDAQ. It maintains bank accounts in the United States—New York. Pacific Dunlop also files reports with the Securities and Exchange Commission ("SEC") as the law requires of publicly traded companies. Four divisions of Pacific Dunlop conduct business in the United States, but none of which conducts business in Ohio. The four divisions have total sales in the United States of $1.1 million, none of which is in Ohio.

Nucleus, TPSI and TPLC are all subsidiaries in Pacific Dunlop's health care business. These three Defendants plus the other Telectronics Companies and other Nucleus' owned medical companies make up the "Nucleus Group" which is the medical products group of the Pacific Dunlop Family. The companies of the Nucleus Group are all separately incorporated but operate as part of a "functional organization."

Pacific Dunlop Holding Co. USA (PDH), a United States holding company which directly owns most of TPLC through TPSI, requires any subsidiary in which it owns 80% or more of the stock to file a consolidated United States income tax return. This allows for the offset of operating losses with operating profits of the various corporations. PDL's and Nucleus' performance results, however, are not included in this consolidated return.

The Telectronics Companies and other companies of the Nucleus Group "functionally cooperate" through an entity called the Nucleus Management Board ("NMB"). The NMB is an oversight committee made up of officers and directors of Nucleus and PDL. William Thomas, as Nucleus' Chief Executive Officer ("CEO"), designates the members of the NMB which includes Nucleus' Chief Financial Officer ("CFO"), PDL's managing director, and PDL's CFO. The NMB meets monthly and reviews the financial and management reports provided by TPLC's officers.

PDL is involved in establishing the budget for the companies of the Nucleus Group from the early stages of budget formulation through final approval. TPLC's annual budget is consolidated with the budgets of the other Telectronics Companies. Happ Aff. ¶ 21. This consolidated budget is submitted to Nucleus, which prepares a further consolidated budget for the Nucleus Group. The budget of the Nucleus Group is then transmitted to PDL for approval and reporting purposes. Id.

PDL and Nucleus are also involved in the approval of TPLC's capital expenditures. TPLC must submit for approval any capital expenditure for more that $100,000 to Nucleus. All expenditures between $100,000 and $500,000 must be submitted to the Nucleus Management Board. The PDL's managing director reviews and approves capital expenditures greater than $500,000 but less than $2 million. The Board of Pacific Dunlop reviews and approves any capital expenditure over $2 million.

PDL provides financial services to its subsidiaries. The subsidiaries may borrow from or invest money with PDL (all at market rates) but are not required to do so. PDL is also involved in the risk management activities of its subsidiaries. PDL manages and coordinates risk by arranging for insurance coverage for itself and its subsidiaries.

Finally, PDL has on a few...

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