Patterson v. Home Depot, USA, Inc.

• Decision Date: 16 February 2010
• Docket Number: No. CV-09-992-PHX-GMS.,CV-09-992-PHX-GMS.
• Citation: 684 F. Supp.2d 1170
• Parties: Dan PATTERSON, Plaintiff, v. HOME DEPOT, USA, INC., a foreign corporation; Krause-Werk GmbH & Co. KG, a foreign (German) corporation; and Krause, Inc., an Illinois corporation, Defendants.
• Court: U.S. District Court — District of Arizona

684 F.Supp.2d 1170

Dan PATTERSON, Plaintiff, v. HOME DEPOT, USA, INC., a foreign corporation; Krause-Werk GmbH & Co. KG, a foreign (German) corporation; and Krause, Inc., an Illinois corporation, Defendants.

No. CV-09-992-PHX-GMS.

United States District Court, D. Arizona.

February 16, 2010.

Philip A. Robbins, Philip A. Robbins PC, Phoenix, AZ, for Plaintiff.

Jefferson T. Collins, Jones Skelton & Hochuli PLC, Gust Rosenfeld PLC, Phoenix, AZ, Paul V. Kaulas, McVey & Parsky LLC, Chicago, IL, James G. Speer, for Defendants.

ORDER

G. MURRAY SNOW, District Judge.

Plaintiff Dan Patterson ("Plaintiff") brings the instant negligence and products liability action against Defendants Home Depot USA, Inc. ("Home Depot"), Krause-Werk GmbH & Co. KG ("Krause-Werk"), and Krause, Inc. (Dkt. # 1.) Pursuant to Federal Rule of Civil Procedure 12(b)(2), Krause-Werk now moves to dismiss the complaint for lack of personal jurisdiction. (Dkt. # 12.) Both Plaintiff and Home Depot filed responsive memoranda opposing Krause-Werk's Motion to Dismiss. (Dkt. # # 17, 20.) Because, based on the facts as presented to date, exercising specific jurisdiction over Krause-Werk would not offend the Due Process Clause of the United States Constitution, as it pertains to at least some of Plaintiff's claims, the Court denies the Motion without prejudice.

BACKGROUND¹

On December 11, 2007, Plaintiff was using a sixteen-foot Multi-Matic ladder to install Christmas lights in Phoenix, Arizona when the ladder suddenly collapsed. (Dkt. # 1.) Plaintiff fell from the ladder, sustaining serious and permanent injuries. (Id.) The ladder, which was manufactured by Krause, Inc., was purchased sometime after December 1, 1997 from a Home Depot store in Arizona. (Dkt. # 18 at 3.) The Multi-Matic ladder has hinges and a locking bolt that allow it to be manipulated into different positions. Plaintiff alleges that the ladder collapsed because this locking mechanism malfunctioned. (Dkt. # 1.) Plaintiff further alleges that Home Depot, Krause, Inc., and Krause-Werk are liable for the defect.

Krause-Werk is a limited liability company organized under the laws of Germany, with its principle place of business in the city of Alsfeld, Germany. (Dkt. # 12, Ex. 1 at ¶ 2.) Krause-Werk manufactures ladders and scaffolding at facilities in Germany, Hungary, and Poland for sale in Europe. (Id. at ¶ 3.) Krause-Werk does not currently manufacture, market, or sell its products in Arizona or anywhere else in the United States. In the early 1980s, Krause-Werk designed, developed, and patented the hinge concepts for the Multi-Matic ladder. Around 1985, Krause-Werk began to distribute and sell its ladders in the United States through an Illinois Distributor, named Demarco. (Dkt. # 18, Ex. D at 76-79.) In 1987, however, Krause-Werk's relationship with Demarco ended due to the latter's failure to meet its financial obligations to Krause-Werk. (Id.)

Shortly after its relationship with Demarco ended, Krause-Werk founded Krause, Inc., a wholly-owned subsidiary, for the purpose of distributing ladders in the United States. (Id.) Krause, Inc. was an Illinois corporation with its principal place of business in Roscoe, Illinois. To form the subsidiary, Krause-Werk initially sold manufacturing equipment to Krause, Inc. (Dkt. # 18, Ex. D at 80-82.) And while Krause-Werk also made loans to Krause, Inc. while it was getting started, Krause, Inc. later repaid these loan in full. (Dkt. # 28 at Ex. C at 22.) Krause-Werk employees also traveled to the Illinois manufacturing facility to train their American counterparts in the parent company's manufacturing, accounting, and payroll processes. (Id.) Once Krause, Inc. was formed, Krause-Werk ceased shipping ladders or component parts to the United States. (Dkt. # 28, Ex. C at 19.) From its inception in 1987 until it became insolvent in 2000, Krause, Inc. maintained separate business operations, manufacturing facilities, and headquarters from Krause-Werk. (Dkt. # 12, Ex. 1 at ¶ 13-14.) The subsidiary also kept separate business records, books, accounts, payrolls, and benefit systems. (Id.)

At all times relevant to the instant action, Gunther Krause ("Mr. Krause") served as president of both Krause-Werk and Krause, Inc. (Dkt. # 18, Ex. E at 8, 12.) Mr. Krause is the only person who was an officer or director for both companies. When Krause, Inc. was in business, Mr. Krause traveled to the United States two or three times a year in connection with his role as president. (Dkt. # 28, Ex C at 42.) As President of Krause, Inc., Mr. Krause also received regular reports from Krause, Inc.'s Director of Operations, Ed Hansen ("Mr. Hansen"). (Dkt. # 28, Ex. C at 200-01.)

In 1995, Krause-Werk entered into a licencing agreement with Krause, Inc., which granted the subsidiary an exclusive license to manufacture and sell Multi-Matic ladders in the United States. (Dkt. # # 18, Ex. F at 47-48; Ex. J.) The licencing agreement allowed Krause, Inc. to utilize Krause-Werk's designs, patents and trademarks for its products. (Dkt. # 18, Ex. J.) Pursuant to this agreement, Krause-Werk also granted Krause, Inc. the exclusive right in the United States to utilize the "Multi-Matic" name and emblem on its ladders. (Dkt. # 18, Ex. B at 24.) This same emblem and insignia adorns ladders sold by Krause-Werk in Europe. (See id.) The licencing agreement further required Krause, Inc. both to share technical information concerning its ladders with Krause-Werk and to pay a monthly royalty to the parent. (Dkt. # 18, Ex. B at 82.) From 1995-2001, Krause, Inc. paid approximately $70,000 per year in royalties under the licensing agreement. (Dkt. # 18, Ex. D at 92.)

During the 1990s, Krause, Inc. began to change the materials used in manufacturing the Multi-Matic's locking bolt. (Dkt. 28, Ex. B at 79-80.) In 1992, without any input from Krause-Werk, the subsidiary added a Teflon-containing coating called Xylan to the locking bolt. (Dkt. # 26, Ex. D 135-36.) In May 1997, this time at the direction of Krause-Werk, Krause, Inc. began using manufacturing the locking bolt using die-cast steel rather than zinc. (See id.) Krause-Werk initiated the change from zinc to steel when it asked Krause, Inc. to investigate using a steel locking bolt to meet new European standards. (Id. at 80-81.) Aside from the change from zinc to steel and use of the Xylan coating, Krause-Werk's original design of the locking bolt remained the same throughout the time period relevant to the instant case. (Dkt. # 18, Ex. G at 16, Ex. H at 91).

In the Spring of 1998, Krause, Inc. began to receive an increasing number of complaints about the Multi-Matic. (Dkt. # 28, Ex. E at 100.) After performing additional tests, Krause, Inc. determined that the Xylan coating made it possible for the locking bolt to become disengaged and the ladder to collapse. (Dkt. # 28, Ex. D at 14; Ex. B at 114.) Due to this defect, Krause, Inc. issued a recall of Multi-Matic ladders that contained the faulty locking mechanism. (Dkt. # 18, Ex. I.) When Krause, Inc removed the Xylan coating, the problem with the hinge and locking bolt stopped. (Dkt. # 28, Ex. D at 14.) Yet, while removing the Xylan solved the problem with the locking mechanism, Krause, Inc. became inundated with personal injury lawsuits, and in 2000, Krause, Inc. filed for bankruptcy and ceased all operations. (See Dkt. # 28 at 42.) By 2001, Krause, Inc. entered into Chapter 7 liquidation bankruptcy and was dissolved. (Id.)

On March 24, 2009, Plaintiff filed suit against Home Depot, Krause, Inc., and Krause-Werk in Maricopa County Superior Court. After Defendants timely filed a notice of removal, Krause-Werk filed the instant motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction. Both Plaintiff and Home Depot oppose the Motion. Plaintiff's lawsuit is the latest in a series of cases involving the Multi-Matic ladder. See, e.g., Luc v. Krause-Werk, 289 F.Supp.2d 1282 (D.Kan.2003). In previous cases, Krause-Werk, Home Depot and multiple plaintiffs have engaged in discovery with respect to the jurisdictional dispute presented here. See id. Accordingly none of the parties have requested discovery in this case. Instead, the parties have submitted affidavits, writings, and depositions from previous cases involving Krause-Werk to support their respective arguments for and against jurisdiction.

LEGAL STANDARD

When the parties dispute whether personal jurisdiction over a foreign defendant is proper, "the plaintiff bears the burden of establishing that jurisdiction exists." Rio Props., 284 F.3d at 1019. This is so, even though the defendant is the moving party on a 12(b)(2) motion to dismiss. Id. In the absence of an evidentiary hearing, however, the plaintiff need only make "a prima facie showing of jurisdictional facts to withstand the motion to dismiss." Brayton Purcell LLP v. Recordon & Recordon, 575 F.3d 981, 985 (9th Cir.2009). In considering the motion, a court may "assume the truth of allegations in a pleading" to the extent that such allegations are not "contradicted by affidavit." See Data Disc, Inc. v. Sys. Tech. Assoc., 557 F.2d 1280, 1284 (1977) (citing Taylor v. Portland Paramount Corp., 383 F.2d 634, 639 (9th Cir.1967)); see also Rio Props., 284 F.3d at 1019 (observing that only "uncontroverted allegations in the complaint must be taken as true"). Where there are "conflicts between the facts contained in the parties' affidavits," depositions, and other discovery materials, those conflicts "must be resolved in the plaintiff's favor." Bauman v. DaimlerChrysler Corp., 579 F.3d 1088, 1094 (9th Cir.2009) (internal alterations and citation omitted). In cases where a plaintiff survives the motion to dismiss under a prima facie burden of proof, the plaintiff still must prove the jurisdictional facts by a preponderance of the evidence at a preliminary hearing or at trial. Data Disc, 557 F.2d at 1285 n. 2.

To establish that...