Merriman v. Crompton Corp., No. 91,702.

• Citation: 146 P.3d 162
• Decision Date: 09 November 2006
• Docket Number: No. 91,702.
• Parties: Heath MERRIMAN, On Behalf of Himself and all Others Similarly Situated, Appellant, v. CROMPTON CORPORATION, Uniroyal Chemical Company, Inc., Uniroyal Chemical Company Limited, Flexsys NV, Flexsys America L.P., Bayer AG, and Bayer Corporation, Appellees.
• Court: Kansas Supreme Court

Page 162

146 P.3d 162

Heath MERRIMAN, On Behalf of Himself and all Others Similarly Situated, Appellant, v. CROMPTON CORPORATION, Uniroyal Chemical Company, Inc., Uniroyal Chemical Company Limited, Flexsys NV, Flexsys America L.P., Bayer AG, and Bayer Corporation, Appellees.

No. 91,702.

Supreme Court of Kansas.

November 9, 2006.

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Rex A. Sharp, of Gunderson, Sharp & Walke, L.L.P., of Prairie Village, Kansas, argued the cause, and Isaac L. Diel, of Law Offices of Isaac L. Diel, of Bonner Springs, Kansas, Michael Flannery, of The David Danis Law Firm, P.C., of St. Louis, Missouri, Alexander E. Barnett, of The David Danis Law Firm, P.C., of New York, New York, Bonny E. Sweeney and Alreen Haeggquist, of Lerach Coughlin Stoia & Robbins, LLP, of San Diego, California, and Brian J. Robbins, of Robbins Umeda & Fink, LLP, of San Diego, California, were with him on the briefs for appellant.

D. Jarrett Arp, of Gibson, Dunn & Crutcher, LLP, of Washington, D.C., argued the cause, and James D. Slear, of the same firm, Stephen E. Robison and Lyndon W. Vix, of Fleeson, Gooing, Coulson & Kitch, LLC, of Wichita, Kansas, William D. Iverson and Michael J. Fanelli, of Covington & Burling, of Washington, D.C., and Daniel G. Swanson, of Gibson, Dunn & Crutcher, LLP, of Los Angeles, California, were with him on the briefs for appellees Flexsys America L.P. and Flexsys NV.

James A. Walker, of Triplett, Woolf & Garretson, LLC, of Wichita, Kansas, Amy W. Ray, William V. O'Reilly, and J. Andrew Read, of Jones Day, of Washington, D.C., and Brian K. Grube, of Jones Day, of Cleveland, Ohio, were on the briefs for appellees Bayer AG and Bayer Corporation.

Bill V. Hampton, Jr., of Hampton & Hampton, of Pratt, Kansas, Robert R. Eisenhauer, of Johnston & Eisenhauer, of Pratt, Kansas, and Ian Simmons and Benjamin G. Bradshaw, of O'Melveny & Myers, LLP, of Washington, D.C., were on the briefs for appellees Crompton Corporation, Uniroyal Chemical Company, Inc., and Uniroyal Chemical Company Limited.

The opinion was delivered by LUCKERT, J.:

Plaintiff Heath Merriman, a Kansas resident, appeals from the trial court and Court of Appeals' determinations that Kansas courts could not exercise personal jurisdiction over foreign corporations which allegedly conspired to fix the price of chemicals used in the out-of-state manufacturing of two tires which Merriman purchased from a Kansas retailer. The plaintiff argues these rulings should be reversed because the lower courts failed to recognize general jurisdiction over the foreign corporations, erroneously applied the Kansas long arm statute, and erroneously determined that the exercise of jurisdiction over these defendants would violate due process.

We reverse and remand.

ALLEGATIONS REGARDING JURISDICTION

The plaintiff alleges he, and others similarly situated, paid an inflated price for tires purchased in Kansas because of an out-of-state price-fixing agreement entered into by the defendants. The plaintiff seeks class certification and treble damages pursuant to the Kansas Restraint of Trade Act, K.S.A. 50-101 et seq., as well as attorney fees, costs, and other relief.

The various defendants, collectively known as "The Big Three" of rubber-processing chemical producers, separate into three groups of affiliated corporations: (1) Crompton Corporation which owns Uniroyal Chemical Company, Inc., and Uniroyal Chemical Company Limited; (2) Flexsys NV which owns Flexsys America, L.P.; and (3) Bayer AG which owns Bayer Corporation.

Collectively, the defendants are the principal suppliers of most of the rubber-processing chemicals sold in the United States. During the class period (1994 to present), plaintiff alleges that the defendants' sales of rubber-processing chemicals for use in tire manufacturing in the United States totaled more than $2.7 billion. The defendants sell the chemicals to major tire manufacturers such as Pirelli, Goodyear, Michelin, and Bridgestone. After the tires are manufactured, the tires proceed through the distribution stream, eventually arriving in retail facilities such as the one in Pratt, Kansas, where the plaintiff purchased two tires. It is undisputed that the tires purchased by the plaintiff were manufactured outside of Kansas; there is no allegation that the chemicals used in those tires were sold in Kansas.

However, the plaintiff estimates that the defendants derived revenues greater than $10.8 million from Kansas sales of tires containing their chemicals. The plaintiff also alleges that a portion of the revenues earned by the defendants are derived from chemical sales to a Goodyear manufacturing facility located in Topeka. According to records as part of the limited discovery allowed by the court relating to the jurisdiction issue, Flexsys shipped approximately $23 million of chemicals to the Topeka facility from 1998 to 2002 and Crompton shipped approximately $9.85 million in chemicals between 1994 and 1998. Bayer also sold products to the Topeka Goodyear facility during a portion of the class period. The plaintiff did not purchase Goodyear tires.

The plaintiff also alleges that Bayer Corporation had other contacts with the state of Kansas through its Animal Health Division, which develops and markets veterinary pharmaceuticals and insecticides in Shawnee, Kansas, and its Crop Science Division, which conducts research on crop science products in Stillwell, Kansas. These activities are unrelated to plaintiff's claim regarding overpriced rubber-processing chemicals.

The plaintiff also alleges that the defendants consented to jurisdiction in Kansas through registering to do business or by conducting business in Kansas. None of the defendants is incorporated or headquartered in Kansas. Crompton, Uniroyal Chemical Company, Inc., Flexsys America, L.P., and Bayer Corporation are incorporated and headquartered in other states. Uniroyal Chemical Company Limited is a Delaware domesticated corporation incorporated in the Bahamas and does not have a headquarters; Bayer AG and Flexsys NV are incorporated and headquartered in other countries. Based upon plaintiff's allegations, it appears that several, but not all, of the defendants are authorized to do business in Kansas pursuant to K.S.A.2005 Supp. 17-7301 or have designated registered agents for service pursuant to K.S.A.2005 Supp. 17-6202.

Arguing that these allegations did not provide a basis for personal jurisdiction, the defendants filed motions to dismiss, alleging: (1) the tires which plaintiff purchased were not manufactured in Kansas and, therefore, there was no basis for specific jurisdiction in Kansas; (2) Kansas does not recognize general jurisdiction; and (3) due process would not allow the exercise of jurisdiction over the defendants. The motions to dismiss were granted after the district court allowed discovery regarding jurisdiction. The district court held that "[t]he nexus between Mr. Merriman's purchase of automobile tires in Pratt, Kansas, that were not manufactured in Kansas allegedly overpriced because of an alleged conspiracy made far from Kansas between foreign corporations not otherwise subject to Kansas Court jurisdiction is simply too remote to justify jurisdiction over this claim."

The Court of Appeals affirmed, holding that Kansas does not recognize the concept of general jurisdiction and that due process did not allow the exercise of specific jurisdiction under the long arm statute. Merriman v. Crompton Corporation, No. 91,702, unpublished opinion filed June 24, 2005, 113 P.3d 834, 2005 WL 1500861.

We granted the plaintiff's petition for review.

ANALYSIS

Whether jurisdiction exists is a question of law. Mid-Continent Specialists, Inc. v. Capital Homes, 279 Kan. 178, 185, 106 P.3d 483 (2005). The plaintiff bears the burden of establishing personal jurisdiction over the defendants. Where, as here, the issue of personal jurisdiction is decided pretrial on the basis of the pleadings, affidavits, and other written materials, any factual disputes must be resolved in the plaintiff's favor and the plaintiff need only make a prima facie showing of jurisdiction. An appellate court reviews a trial court's dismissal for lack of personal jurisdiction under a de novo standard. Kluin v. American Suzuki Motor Corp., 274 Kan. 888, 893, 56 P.3d 829 (2002).

In the context of this class action, only the claims of the named class representative, not absent members of a potential class, are examined to determine jurisdiction. Barry v. Mortgage Servicing Acquisition Corp., 909 F.Supp. 65, 73 (D.R.I.1995) ("It is the named class representative . . . whose claims must satisfy this test in order for the Court to have personal jurisdiction over [defendant] in this action."). See generally Calagaz v. Calhoon, 309 F.2d 248, 253 (5th Cir.1962) (under class action rule, court must have in personam jurisdiction over named individual representative of class); Selman v. Harvard Medical Sch., 494 F.Supp. 603, 613 n. 6 (S.D.N.Y.), aff'd 636 F.2d 1204 (2d Cir.1980) (named class representative must satisfy all jurisdictional prerequisites before class action can go forward). Thus, our inquiry is focused solely upon the jurisdictional allegations related to the plaintiff's purchase of tires which were not manufactured in Kansas and, therefore, do not directly involve the sale of rubber-processing chemicals in Kansas.

Generally, a two-step analysis is required to determine if a Kansas court has personal jurisdiction. First, the court must determine if Kansas statutes or case law provide a basis for the exercise of jurisdiction over a particular defendant. Second, if statutory and other requirements are satisfied, "the court inquires if the exercise of personal jurisdiction complies with the due process requirements of the Fourteenth Amendment to the United States Constitution." Kluin, 274 Kan. at 894, 56 P.3d 829; see Helicopteros Nacionales...