Jahner v. Kumho Tire U.S.A., Inc., CIV. 18-5036-JLV
| Decision Date | 24 August 2020 |
| Docket Number | CIV. 18-5036-JLV |
| Parties | BRIGITTE JAHNER, as personal representative of the Estate of Robert Bear Shield, JERRY BEAR SHIELD SR., JERRY BEAR SHIELD JR., JAYDEE SPOTTED ELK, AMERICAN ZURICH INSURANCE COMPANY and HEAVY CONSTRUCTORS, INC., Plaintiffs, v. KUMHO TIRE U.S.A., INC., KUMHO TIRE MERGER SUBSIDIARY, INC., KUMHO TIRE CO. INC., and KUMHO TIRE (VIETNAM) CO., LTD., Defendants. |
| Court | U.S. District Court — District of South Dakota |
This case arises out of a fatal June 22, 2016, motor vehicle accident. Plaintiff Heavy Constructors, Inc. ("Heavy") employed Robert Bear Shield, Justin Hawk Wing and Jaydee Spotted Elk. The three were in a work truck that overturned, killing Mr. Bear Shield, seriously injuring Mr. Hawk Wing and injuring Mr. Spotted Elk. The plaintiffs allege a Kumho tire on the truck separated, causing the accident. Two complaints were filed in this court, each alleging various product liability claims related to the tire. See Docket 1; Am. Zurich Ins. Co. et al. v. Kumho Tire Co., Inc. et al., Civ. 19-5044 (Docket 12) (D.S.D. July 26, 2019) ("Zurich amended complaint"). The court consolidated the cases. (Docket 23).
The first set of plaintiffs consist of Mr. Bear Shield's family members, the representative of his estate, and Mr. Spotted Elk ("Bear Shield plaintiffs"). The Bear Shield plaintiffs originally sued only defendants Kumho Tire, U.S.A. ("KTUSA") and Kumho Tire Merger Subsidiary, Inc. ("Kumho Tire Merger"). They have repeatedly attempted to amend their complaint to add Kumho Tire Co., Inc. ("KTCI") and Kumho Tire Vietnam Co., LTD. ("KTV") as defendants. United States Magistrate Judge Veronica L. Duffy rejected the Bear Shield plaintiffs' latest attempt to amend their complaint. (Docket 59). Although the Bear Shield plaintiffs did not object to the magistrate judge's order, they later filed two motions to reconsider the order on various grounds which remain pending before the court. (Dockets 75 & 122).
The second set of plaintiffs ("Zurich plaintiffs") are Heavy Constructors and insurer American Zurich, which paid workers' compensation benefits to Mr. Hawk Wing. The Zurich plaintiffs sued KTUSA, KTCI and KTV in an amended complaint. KTV and KTCI moved to dismiss the amended complaint for lack of personal jurisdiction and because the applicable South Dakota statute of limitations had allegedly run. (Dockets 38, 39, 79 & 80). The court referred the motions to Magistrate Judge Duffy pursuant to 28 U.S.C. § 636(b)(1)(B) and its standing order of October 16, 2014. (Dockets 43 & 81). The magistrate judge concluded in two reports and recommendation ("R&R") that the court has no personal jurisdiction over KTV and KTCI. (Dockets 67 & 102). She also held KTCI's claims were barred by South Dakota's statute of limitations. (Docket 12). The Zurich plaintiffs objected to both R&Rs. (Dockets 68 & 104) KTCI also objected to the R&R on its motion to dismiss. (Docket 103).
Upon objection to a R&R on a dispositive motion, the court is required to "make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made." 28 U.S.C. § 636(b)(1). The court may "accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge." Id. The court finds the Zurich plaintiffs must have the opportunity for limited jurisdictional discovery before a conclusive finding as to personal jurisdiction over KTCI and KTV—upon which other arguments for dismissal depend—can be made.1 Accordingly, the court denies the motions to dismiss without prejudice to renewal. The court further denies the Bear Shield plaintiffs' motions for reconsideration.
This factual recitation is drawn from the Zurich plaintiffs' amended complaint and the "affidavits and exhibits" the parties submitted on the motions to dismiss. K-V Pharm. Co. v. J Uriach & CIA, S.A., 648 F.3d 588, 591-92 (8th Cir. 2011). Because the court will not hold an evidentiary hearing at this stage of the case, the court views the facts in the light most favorable to the Zurich plaintiffs. Pederson v. Frost, 951 F.3d 977, 979 (8th Cir. 2020).
The basic allegations concerning the motor vehicle accident are recited above. The Zurich plaintiffs allege the tire which caused the accident by "suddenly and unexpectedly separat[ing]" was a Kumho LT 265/17/16 tire. Zurich amended complaint at ¶¶ 19, 26. The tire was "represented and marketed" to Heavy for use on the work truck involved in the accident. Id. at ¶ 21. Heavy properly installed and maintained the tire. Id. at ¶¶ 23, 24.
KTCI is a South Korean tire company that operates in the American market. Id. at ¶¶ 3-4. It designed the tire involved in the accident. (Docket 80-5 at ¶ 31). However, it did not issue any warranty for the tire. Id. at ¶ 42. According to a November 18, 2019, article by Tire Review, which appears to be an industry publication, "North America makes up 29% of [KTCI's] global sales[.]" (Docket 50-3 at p. 6). KTCI operates a research and development center in Akron, Ohio. (Docket 80-5 at ¶ 3). However, Myeongseon Kim, KTCI's Managing Director of Quality, stated in an affidavit that KTCI has no direct links to South Dakota. Id. at ¶¶ 4-28. In particular, KTCI is not registered to conduct business in South Dakota, has no assets or employees in South Dakota, did not design any product "specifically for the South Dakota market[,]" and "does not derive any revenue directly from South Dakota." Id. at ¶¶ 5, 8, 17-19, 25.
In 2010, KTCI issued a press release heralding the beginning of a marketing campaign targeting American college football audiences. (Docket 49-6). In KTCI's 2016 annual report, it announced sponsorship deals with the National Basketball Association and its sub-league. (Docket 48-6 at p. 3). The agreements included placing KTCI's logo on "basketball stands." Id. The Zurich plaintiffs' briefs include a photograph of a basketball stand purportedly in Sioux Falls, South Dakota, that has a "KUMHO TIRE" logo. (Dockets 89 at p. 13 & 104 at p. 23). Mr. Kim states in an affidavit that KTCI has no sponsorship agreement with the NBA or any American basketball team and it does not advertise at all in South Dakota. (Docket 112-1 at ¶ 5). He asserts KTUSA sponsors the NBA and its "developmental league[,]" including the Sioux Falls basketball team. Id. at ¶ 6.
According to GyuSik Cho, KTV's Deputy General Director of Planning & Administration, KTV manufactured the tire at issue in 2012 at its factory in Vietnam's Binh Duong province.2 (Docket 39-5 at ¶ 25). Mr. Cho's affidavit states KTV would have surrendered ownership of the tire to KTUSA at a Vietnamese port, if indeed KTUSA distributed the tire. Id. at ¶ 26. KTCI "has provided guarantees for the operations of its overseas subsidiaries," including KTV.3 (Docket 48-2 at p. 3). Mr. Cho asserts KTV has no direct contacts with South Dakota of any kind. (Docket 39-5 at ¶¶ 4-24). In particular, KTV does not take orders directly from South Dakotans and has not shipped any tires directly to South Dakota. Id. at ¶¶ 13, 24.
KTUSA is an American company which maintains its principal place of business in Georgia. (Docket 26 at ¶ 10). It admitted the Zurich plaintiffs' allegation that it is wholly owned by KTCI. Id.; see also Docket 101-5 at p. 12 (). KTUSA "is in the business of selling and distributing Kumho brand tires." Id. at ¶ 11. According to an interrogatory response, KTUSA "distributed the subject model and size tire to entities within the State of South Dakota in 2012 and 2013." (Docket 101-5 at p. 10). It sells tires "through the independent tire dealer channel, which" holds "an estimated 61.5 percent share [of tire sales] in 2018[,]" according to a speech Shawn Denlein, a KTUSA executive, gave in 2018 during a conference with "key tire dealer and wholesaler customers[.]" (Docket 50-7 at pp. 3, 5). Its website allows tire retailers to obtain Kumho branded tires for sale and directs consumers to nearby retailers. (Dockets 48 at ¶ 30 & 50-9 at pp. 3-7). In 2007, according to an article by Modern Tire Dealer, which appears to be an industry publication, KTUSA named a regional sales manager with responsibility for the upper Midwest region, including South Dakota. (Docket 49-7). The Zurich plaintiffs also filed a LinkedIn profile for a person purporting to be KTUSA's regional sales manager for the Pacific Northwest region, including South Dakota, since 2006. (Docket 49-9).
The Zurich plaintiffs allege KTV and KTUSA are corporate alter egos of KTCI. Zurich amended complaint at ¶¶ 7 & 15. They generally assert KTV and KTUSA are controlled by KTCI through financing and common management to the exclusion of their own independent interests. Id. As evidence for this theory as to KTUSA, the Zurich plaintiffs proffer a Korean insurance policy certificate which names KTCI, KTUSA, Kumho Canada Inc. and Kumho Tire Georgia Inc. as insureds. (Docket 101-3). The "territory/jurisdiction" for the policy is limited to the United States and Canada. Id. at p. 1. KTCI filed a 2008 "Intercompany Agreement" in which it appointed KTUSA "as the non-exclusive distributor" of its tires in the United States.4 (Docket 112-2 at p. 2). KTCI and KTUSA agreed to determine tire prices "so as to allow [KTUSA] to achieve an arm's length profitability." Id. at p. 5. KTCI asserts KTUSA purchases its tires electronically. Docket 112 at p. 6; see also Dockets 112-3 & 112-4 (sample purchase forms). In interrogatory responses, KTUSA stated it had no documents responsive to requests for information about tire quality control or for bills of lading relating to the tire at issue. (Docket 101-5 at pp. 17, 32).
The Zurich plaintiffs also point to a tire manufacturing plant in Georgia. KTUSA owns the stock of Kumho Georgia. (Docket 101-5 at pp. 11-12). Kumho Georgia operates the plant....
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