US Lighting Service Inc. v. Llerrad Corp.

• Decision Date: 03 August 1990
• Docket Number: No. C89-315.,C89-315.
• Citation: 745 F. Supp. 426
• Parties: UNITED STATES LIGHTING SERVICE INC., Plaintiff, v. The LLERRAD CORPORATION, dba Fluor-Tech, et al., Defendants.
• Court: U.S. District Court — Northern District of Ohio

745 F. Supp. 426

UNITED STATES LIGHTING SERVICE INC., Plaintiff, v.The LLERRAD CORPORATION, dba Fluor-Tech, et al., Defendants.

No. C89-315.

United States District Court, N.D. Ohio, E.D.

August 3, 1990.

Danny R. Williams, Schneider, Smeltz, Huston & Ranney, Cleveland, Ohio, for plaintiff.

Eugene B. Meador, Kitchen, Messner & Deery, Hugh M. Stanley, Jr., Dale F. Kainski, Arter & Hadden, Cleveland, Ohio, Michael Zazzara, Northbrook, Ill., for defendants.

MEMORANDUM AND ORDER

BATTISTI, District Judge.

Before discovery sheds more light on this alleged malfunctioning product, two pending motions must be addressed.In this diversity action, DefendantLlerrad Corporation("Llerrad") has filed, pursuant to Fed.R.Civ.P. 12(b)(2), a Motion to Dismiss for lack of personal jurisdiction.Defendant Underwriters Laboratory ("Underwriters") has separately filed a Motion to Dismiss for failure to state a claim upon which relief can be granted.Fed.R.Civ.P. 12(b)(6).PlaintiffU.S. Lighting Service, Inc.("U.S. Lighting") has opposed both motions.For the reasons that follow, both Motions must be DENIED.

U.S. Lighting, an Ohio corporation, services lighting fixtures in commercial establishments.In May, 1987, U.S. Lighting purchased, from Llerrad, 7,000 Fluor-Tech Energy Savers for Fluorescent Lighting ("Energy Savers") at a cost of over $50,000.Under U.S. Lighting's requested delivery schedule, the Energy Savers were to be shipped by Llerrad, in specified numbers and dates, directly to the premises of U.S. Lighting's customers.SeeAmended Complaint, ¶ 10; U.S. Lighting Brief in Opposition to Motion to Dismiss, Exh. D. Llerrad, a California corporation, conducts business under the name "Fluor-Tech."Llerrad published and distributed advertisements which expressly warranted and represented that the Energy Savers were:

(a) designed and intended to work with rapid start and instant start fluorescent lighting fixtures including High Output (800 milliampere) fluorescent fixtures;

(b) rigorously tested, superior in manufacture, and incorporating the highest quality components and engineering experience; and

(c) safety-tested and approved by Underwriters Laboratories, Inc., as evidenced by the "UL" mark.

Amended Complaint¶ 9.Shortly after their purchase and installation, a "significant number of the Energy Savers began to burn, melt or otherwise malfunction during operation, resulting in damage to lighting fixtures, the scorching of surrounding materials and the exposure of bare electrical wires."Id., at ¶ 11.The heat caused by the malfunction created an additional, substantial and unreasonable risk of electrical fires or serious injury to unprotected personnel.U.S. Lighting further alleges that it notified Llerrad of the serious nature of the Energy Savers malfunctions, the failure to conform of these Energy Savers to Llerrad's express warranties and representations, as well as implied warranties, and the danger the condition posed to persons and property.Llerrad offered to replace specific malfunctioning Energy Savers with identical products.Meanwhile, U.S. Lighting's customers demanded that U.S. Lighting remove the Energy Savers; at its own expense, U.S. Lighting removed all of them.Id.,¶¶ 11-13.

Underwriters, it is alleged, is in the business of testing samples of electrical equipment and appliances to determine whether the products are safe and reliable according to Underwriters.Only those products which pass Underwriter's testing procedures are authorized by Underwriters to bear the registered "UL" mark — akin to a Good Housekeeping Seal.Id.,¶¶ 22-23.In the ordinary course of business, Underwriters undertook to test samples of the Energy Savers for safety and fitness; for its services in conducting testing, U.S. Lighting believes it was paid a fee.Underwriters knew that its testing and any affirmations of safety would be used by Llerrad, and relied upon by purchasers of Energy Savers, such as U.S. Lighting.Underwriters is alleged to have negligently inspected, tested, and published inaccurate information regarding the Energy Savers.It also, inter alia, failed to discover or communicate defects, adequately test the Energy Savers or restrict the use of its "UL" approval mark, and take other reasonable precautionary steps.Id.,¶¶ 28-29.

A.Subject Matter Jurisdiction

As the party with the burden of affirmatively establishing subject matter jurisdiction — McNutt v. General Motors Acceptance Corp. of Ind.,298 U.S. 178, 189, 56 S.Ct. 780, 785, 80 L.Ed. 1135(1936), U.S. Lighting has properly pleaded and established diversity of citizenship under 28 U.S.C. § 1332: U.S. Lighting is an Ohio corporation with its principal place of business in Willoughby, Ohio; Llerrad is a California corporation with its principal place of business in Carson, California; Defendant Underwriters is a Delaware not-for-profit corporation¹ with its principal place of business in Northbrook Illinois.There is the requisite amount in controversy.²

B.Motion to Dismiss under Rule 12(b)(2)

Personal jurisdiction, unlike subject matter jurisdiction may be waived; however, once personal jurisdiction is challenged, the burden of affirmatively establishing its existence lies on the party invoking federal jurisdiction.McNutt, supra, at 189, 56 S.Ct. 780, 785, 80 L.Ed. 1135(1936);Weller v. Cromwell Oil Co.,504 F.2d 927(6th Cir.1974).Although a trial court has discretion to determine how to resolve a 12(b)(2) motion, the case law of this Circuit clearly "establishes a settled procedural scheme to guide trial courts in the exercise of this discretion."Serras v. First Tennessee Bank National Association,875 F.2d 1212, 1214(6th Cir.1989)(Merritt, J.).Since full discovery has not taken place, and this motion is decided on written submissions alone, pursuant to Local Civil Rule 3.01, the weight of Plaintiffs' burden is "merely that of making a prima facie showing that personal jurisdiction exists."Id.As Chief Judge Merritt summarized:

If the court rules on written submissions alone, the plaintiff may not rest on his pleadings to answer the movant's affidavits, but must set forth, "by affidavit or otherwise, ... specific facts showing that the court has jurisdiction."Weller v. Cromwell Oil Co.,504 F.2d at 930.When the trial court has determined that the motion to dismiss for lack of personal jurisdiction can be decided upon these written submissions, it "must consider the pleadings and affidavits in the light most favorable to the plaintiff."Welsh v. Gibbs,631 F.2d 436, 439(6th Cir.1980), cert. denied,450 U.S. 981, 101 S.Ct. 1517, 67 L.Ed.2d 816(1981)(quotingPoston v. American President Lines, Ltd.,452 F.Supp. 568, 571(S.D.Fla.1978))....If she meets the prima facie burden the motion to dismiss should be denied, "notwithstanding any controverting presentation by the moving party."Marine Midland Bankv. Miller, 664 F.2d 899 at 904 2d Cir.1981.³

Serras,875 F.2d at 1214.

In diversity cases, it is settled that the assertion of personal jurisdiction must comport with both the state long-arm statute and the Due Process Clause of the United States Constitution.Fed.R.Civ.P. 4(e);U.S. Const.Amend. 5, 14;International Shoe Co. v. Washington,326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95(1945).Plaintiff relies upon one provision of the Ohio long-arm statute, Ohio Rev.Code Ann. § 2307.382,⁴ which provides in pertinent part:

(A)A court may exercise personal jurisdiction over a person who acts directly or by an agent, as to a cause of action arising from the person's:

(1) Transacting any business in this state;⁵ * * * *

(C) When jurisdiction over a person is based solely upon this section, only a cause of action arising from acts enumerated in this section may be asserted against him.

The Sixth Circuit has repeatedly interpreted the "transacting any business" provision of the Ohio long-arm statute, as extending to the outer limits under the Due Process Clause.SeeCreech v. Roberts,908 F.2d 75, 79(6th Cir.1990);American Greetings Corp. v. Cohn,839 F.2d 1164(6th Cir.1988)R.I. Lipton Distributing Co. v. Dribeck Importers, Inc.,811 F.2d 967, 969(6th Cir.1987)In-Flight Devices Corp. v. Van Dusen Air, Inc.,466 F.2d 220, 225(6th Cir.1972).⁶Thus, "an Ohio personal jurisdictional analysis becomes an examination of constitutional limitations."American Greetings,839 F.2d at 1167(quotingLipton,811 F.2d at 969).The fundamental inquiry will be whether each Defendant has "minimum contacts" with the forum state Ohio and whether the exercise of jurisdiction offends "traditional notions of fair play and substantial justice."International Shoe Co. v. Washington,326 U.S. at 316, 66 S.Ct. at 158, 90 L.Ed. at 101(1945).

In the Sixth Circuit, there are three criteria that must be met to comport with due process:

First, the defendant must purposely avail himself of the privilege of acting in the forum state or causing a consequence in the foreign state.Second, the cause of action must arise from the defendants' activities there.Finally, the acts of the defendant or consequences must have a substantial enough connection with the forum state to make the exercise of jurisdiction over the defendant reasonable.

LAK, Inc. v. Deer Creek Enterprises,885 F.2d 1293, 1299(6th Cir.1989), cert. denied,___ U.S. ___, 110 S.Ct. 1525, 108 L.Ed.2d 764(1990)(citingSouthern Machine Co. v. Mohasco Industries,401 F.2d 374, 381(6th Cir.1968)(Celebrezze, J.)).

Llerrad argues, essentially, that it did not transact enough business in Ohio; Darrell Masters, Llerrad's President, states that Llerrad lacks presence in this state (no employees, agents, representatives, offices, property, etc.).MastersAff. ¶¶ 1-6.Although Llerrad states that on May 20, 1987, it agreed to sell "energy savers" to U.S. Lighting, these energy savers were not "sold, shipped or otherwise delivered to any locations in Ohio."Id.,¶¶ 7-8.Llerrad also argues that...