Frankenfeld v. Crompton Corp.

• Decision Date: 04 May 2005
• Docket Number: No. 23265, No. 23276.
• Citation: Frankenfeld v. Crompton Corp., 697 N.W.2d 378, 2005 SD 55 (S.D. 2005)
• Parties: Don FRANKENFELD, individually and on behalf of all others similarly situated, Plaintiff and Appellee, v. CROMPTON CORPORATION, Uniroyal Chemical Company, Inc., Uniroyal Chemical Company Limited, Defendants and Appellants, Bayer Ag, Bayer Corporation, Rhein Chemie Rheinau Gbmh and Rhein Chemie Corporation, Defendants, and Flexsys NV and Flexsys America LP, Defendants and Appellants.
• Court: South Dakota Supreme Court

697 N.W.2d 378

2005 SD 55

Don FRANKENFELD, individually and on behalf of all others similarly situated, Plaintiff and Appellee, v.CROMPTON CORPORATION, Uniroyal Chemical Company, Inc., Uniroyal Chemical Company Limited, Defendants and Appellants,

Bayer Ag, Bayer Corporation, Rhein Chemie Rheinau Gbmh and Rhein Chemie Corporation, Defendants, and

Flexsys NV and Flexsys America LP, Defendants and Appellants.

Nos. 23265, 23276.

Supreme Court of South Dakota.

Argued March 23, 2005.

Decided May 4, 2005.

Timothy J. Dougherty of Dougherty & Dougherty, Sioux Falls, South Dakota, Sanford Svetcov and Susan K. Alexander of Lerach, Coughlin, Stoia, Geller, Rudman & Robbins, San Francisco, California, Attorneys for plaintiff and appellee Frankenfeld.

Ronald A. Parsons, Jr. and Scott N. Heidepriem of Johnson, Heidepriem, Miner, Marlow & Janklow, Sioux Falls, South

Dakota, Daniel G. Swanson of Gibson, Dunn & Crutcher, Los Angeles, California, D. Jarrett Arp and James D. Slear of Gibson, Dunn & Crutcher, Washington, DC, Attorneys for defendants and appellants Flexsys NV and Flexsys America LP.

Gary D. Jensen of Beardsley, Jensen & Von Wald, Rapid City, South Dakota, Ian Simmons, Benjamin G. Bradshaw, Charles E. Borden and Jonathan R. Mitchell of O'Melveny & Myers, Washington, DC, Attorneys for defendants and appellantsCrompton Corp., Uniroyal Chemical Co., Inc. and Uniroyal Chemical Co. Ltd.

KEAN, Circuit Judge.

[¶ 1.]Crompton Corporation and its subsidiaries, Uniroyal Chemical Company, Inc. and Uniroyal Chemical Company(collectively Crompton), as well as Flexsys N.V. and Flexsys America L.P.(collectively Flexsys) appeal the circuit court's denial of their motions to dismiss for lack of personal jurisdiction.Because we hold that personal jurisdiction over these defendants violates due process we reverse.

FACTUAL AND PROCEDURAL BACKGROUND

[¶ 2.]Don Frankenfeld(Frankenfeld), individually and on behalf of himself and others similarly situated, brought this action against multiple defendants including Crompton and Flexsys.¹Frankenfeld alleged that Crompton and Flexsys conspired to fix the price of rubber processing chemicals used to manufacture tires.Essentially, Frankenfeld argued that an agreement between Crompton and Flexsys inflated the price of tires purchased in South Dakota for both himself and other consumers.Frankenfeld claimed that the price fixing scheme violated South Dakota antitrust laws and sought to recover the damages that he and other consumers incurred by paying higher tire prices.²

[¶ 3.]Crompton, a Connecticut corporation with a principal place of business in Greenwich, Connecticut, globally marketed specialty chemical products and processing equipment including the chemicals used in the manufacture of rubber and tires.Its subsidiaries, the Uniroyal companies, were Delaware corporations with their principal places of business in Akron, Ohio.Flexsys, a Delaware Corporation with headquarters in Akron, Ohio, was the world's leading supplier of chemicals to the rubber industry.

[¶ 4.]Crompton and Flexsys sold their rubber processing chemicals to tire manufacturers such as Goodyear, Michelin, Firestone and Bridgestone.Those companies, principally located in Tennessee and North Carolina, then used the chemicals to manufacture tires.After those tires were made, the tires proceeded along a chain of distribution from the manufacturers to distributors, then to retailers and eventually to consumers such as Frankenfeld.This chain involved only third parties who were not subject to this action.Once Crompton and Flexsys sold their chemicals to the tire manufacturers they had no control over the rest of the chain by which the tires were distributed.

[¶ 5.]Neither Crompton nor Flexsys were incorporated, headquartered or licensed to do business in South Dakota.Neither maintained an office or employees in South Dakota.Neither owned any real property in the state nor maintained any bank accounts here.Neither engaged in any marketing of any sort in South Dakota and neither had any customers here.Neither manufactured, delivered, distributed or sold any product in South Dakota.In short, Crompton and Flexsys did not have any direct relationship with the State of South Dakota.Their only presence in South Dakota was through the tires sold here by third parties, tires which contained the chemicals they produced.

[¶ 6.]In light of the above facts, Crompton and Flexsys moved to dismiss Frankenfeld's suit for lack of personal jurisdiction.Both Crompton and Flexsys conceded that South Dakota's long arm statute established jurisdiction, but they argued that their lack of minimum contacts with South Dakota rendered personal jurisdiction inappropriate.The circuit court disagreed and found personal jurisdiction over Crompton and Flexsys to be consistent with the requirements of due process.Crompton and Flexsys appeal the circuit court's ruling.

STANDARD OF REVIEW

[¶ 7.]Upon review this Court will not distrub findings of fact "unless the court is firmly and definitely convinced a mistake has been made."Denver Truck & Trailer Sales, Inc. v. Design and Building Servs. Inc.,2002 SD 127, ¶ 7, 653 N.W.2d 88, 90(citations and internal quotation marks omitted).Conclusions of law, however, are given no deference and are reviewed de novo.Id.

ISSUE

[¶ 8.]Did the circuit court err in denying the motion to dismiss the claims against Crompton and Flexsys for lack of personal jurisdiction?

[¶ 9.]As established by this Court,

The inquiry into whether a court may assert personal jurisdiction over a nonresident defendant is two-fold.First, the court must determine whether the legislature granted the state court jurisdiction over defendants who do not meet the traditional bases for personal jurisdiction.In South Dakota, this legislative approval is found in the state's Long Arm Statute.Next, the court must determine whether the proposed assertion of jurisdiction comports with federal due process requirements.

Denver Truck,2002 SD 127, ¶ 9, 653 N.W.2d at 91.In this case, Crompton and Flexsys concede that personal jurisdiction is appropriate under South Dakota's Long Arm Statute.Thus, the only issue here is whether jurisdiction over the defendants violates federal due process requirements.Before we proceed to the analysis of this issue, we first set forth the case law of the United States Supreme Court concerning due process requirements for the exercise of personal jurisdiction and our prior decisions interpreting those requirements.

Federal Due Process Requirements

[¶ 10.]In pertinent part, the Fourteenth Amendment to the United States Constitution states that no state shall "deprive any person of life, liberty, or property, without due process of law."US Const amend XIV, § 1.Due process "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,471 U.S. 462, 471-72, 105 S.Ct. 2174, 2182, 85 L.Ed.2d 528(1985)(quotingInternational Shoe Co. v. Washington,326 U.S. 310, 319, 66 S.Ct. 154, 160, 90 L.Ed. 95(1945)).In International Shoe, the United States Supreme Court established the minimum contacts test for determining whether personal jurisdiction comports with Fourteenth Amendment due process.326 U.S. at 316,66 S.Ct. at 158,90 L.Ed. at 95.According to the Court, due process requires that a non-resident defendant"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.'"Id.(quotingMilliken v. Meyer,311 U.S. 457, 463, 61 S.Ct. 339, 343, 85 L.Ed. 278(1940)).³

[¶ 11.]Where a suit arises out of a defendant's contacts with a forum, the defendant's activities must be "purposefully directed" toward the forum for personal jurisdiction to attach.Burger King,471 U.S. at 472, 105 S.Ct. at 2182, 85 L.Ed.2d at 528.(emphasis added).It is not enough that it is foreseeable that a defendant's activities may cause injury in a forum.World-Wide Volkswagen Corp. v. Woodson,444 U.S. 286, 295, 100 S.Ct. 559, 566, 62 L.Ed.2d 490(1980).Rather, "the foreseeability that is critical to the due process analysis ... is that the defendant's conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there."Id. at 297, 100 S.Ct. 559.(citations omitted).

[¶ 12.]To satisfy due process foreseeability, a defendant's contacts with the forum must "proximately result from actions by the defendanthimself that create a `substantial connection' with the forum State."Burger King,471 U.S. at 476, 105 S.Ct. at 2184, 85 L.Ed.2d at 528.(citation omitted)(emphasis in original).Thus, the unilateral activity of a third party with some relationship to a nonresident defendant cannot suffice to establish personal jurisdiction.SeeHanson v. Denckla,357 U.S. 235, 253, 78 S.Ct. 1228, 1240, 2 L.Ed.2d 1283(1958).Instead, "it is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws."Id.

[¶ 13.]Therefore, a defendant's conduct and connection with a forum must establish "purposeful availment" such that the defendant could reasonably anticipate being haled into that forum's courts.World-Wide Volkswagen,444 U.S. at 297,100 S.Ct. at 567,62 L.Ed.2d at 490.In World-Wide Volkswagen, the United States Supreme Court stated that due process is satisfied when a forum state "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," thereby implying that placing a product in the stream of commerce establishes "purposeful...