UTC Fire & Sec. Americas Corp. v. NCS Power, Inc.

• Decision Date: 10 February 2012
• Docket Number: No. 10 Civ. 6692(LTS)(THK).,10 Civ. 6692(LTS)(THK).
• Citation: 844 F.Supp.2d 366
• Court: U.S. District Court — Southern District of New York
• Parties: UTC FIRE & SECURITY AMERICAS CORP., INC., Plaintiff, v. NCS POWER, INC., Defendant. NCS Power, Inc., Third–Party Plaintiff, v. Yoku Energy Technology, Inc., Third–Party Defendant.

844 F.Supp.2d 366

UTC FIRE & SECURITY AMERICAS CORP., INC., Plaintiff,

v.NCS POWER, INC., Defendant.

NCS Power, Inc., Third–Party Plaintiff,

v.Yoku Energy Technology, Inc., Third–Party Defendant.

No. 10 Civ. 6692(LTS)(THK).

United States District Court,

S.D. New York.

Feb. 10, 2012.

Gary Alexander Stahl, Clifton Scott Elgarten, Crowell & Moring LLP, New York, NY, for Plaintiff.

Anthony F. Tagliagambe, Brian Adam Kalman, London Fischer, LLP, Gerald Grunsfeld, Biedermann, Reif, Hoenig & Ruff, New York, NY, for Defendant/Third–Party Plaintiff.

Susan Charters, Kardaras & Kelleher LLP, New York, NY, for Third–Party Defendant.

Memorandum Opinion and Order

LAURA TAYLOR SWAIN, District Judge.

In this breach of contract action, third-party Plaintiff NCS Power, Inc. (“NCS”) asserts that third-party Defendant Yoku Energy Technology Ltd. (“Yoku”) supplied nonconforming lithium-ion batteries to Plaintiff UTC Fire & Security Americas Corp., Inc. (“UTC”). Yoku now moves for summary judgment, arguing that this Court lacks personal jurisdiction over Yoku. The Court has diversity jurisdiction over the action pursuant to 28 U.S.C. § 1332 and has considered carefully all of the parties' submissions and arguments. For the following reasons, Yoku's motion for summary judgment is denied.

Background

The following facts are drawn from the parties' submissions, and are undisputed unless otherwise indicated.¹

Yoku is a corporation headquartered in Hong Kong which operates a lithium-ion battery plant in Zhangzhou, China through its subsidiary Yoku Energy (Zhangzhou) Co., Ltd. Yoku's batteries are used in consumer electronics worldwide, including in the United States. ( See Exhibit B to Affidavit of Gerald Grunsfeld (“Grunsfeld Aff.”)). NCS is a Washington-based corporation that provides batteries and power supply equipment to customers throughout North America.

At all relevant times, Yoku and NCS maintained a contractual relationship pursuant to a written agreement (“Agreement”), under which NCS agreed to serve as Yoku's “agent/sales representative” for distribution of Yoku's lithium polymer battery products in North America and to “actively and diligently solicit[ ] trade” of Yoku's products in that territory. (Agreement, Exhibit 2 to Affidavit of Lance Chandler (“Chandler Aff.”) §§ 2.1, 3.1). NCS was authorized to sell Yoku battery products in North America, but Yoku's written approval was required for each order, and approved orders could not be revised or canceled without Yoku's consent. ( Id., §§ 1.2, 2.5, 5.3). The Agreement further provided that if NCS fulfilled its commitment to sign $10 million worth of battery orders in 2008, it would retain its right to act as Yoku's agent/sales representative, ( Id. § 2.5). Battery shipments were governed by the delivery term FOB (“Free on Board”) Xiamen or Hong Kong. ( Id. § 6.4).

Pursuant to this Agreement, NCS agents solicited business on Yoku's behalf from companies throughout North America, including three located in New York. (Chandler Aff. ¶¶ 6, 12–23). NCS's New York solicitation efforts culminated in one sale, which consisted of a contract to custom-design and deliver prototype batteries to Medis Technology. ( Id. ¶¶ 15–17). NCS asserts in an affidavit appended to its opposition papers that Medis Technology ordered the prototype batteries with the intent of purchasing approximately 200,000 Yoku batteries every month if the batteries conformed to Medis Technology's specifications; however, NCS's papers are silent as to whether those further orders were ever placed. ( Id. ¶ 18). NCS also contends that Yoku batteries were incorporated into various products that were sold throughout the United States, including in New York. ( Id. ¶¶ 20–23).

Beginning in or about August 2007, UTC, a Delaware corporation with its principal place of business in Florida, began placing orders with NCS for custom-designed lithium-ion batteries.² These batteries were intended for use in “ActiveKEY,” a mobile device used by realtors to track listing information about properties and remotely unlock lock boxes. UTC provided battery specifications to NCS, which were then passed on to Yoku. (Exhibit C to Grunsfeld Aff.). More than 300,000 Yoku-manufactured batteries were delivered pursuant to the orders to UTC's premises in Salem, Oregon. (Third–Party Compl. ¶ 24). Upon receiving the battery shipments, UTC installed them into the ActiveKEY devices and distributed them to realtors, several of which were located in New York. (Declaration of Janet Kush (“Kush Decl.”) ¶¶ 5–15).

In April and May 2009, at least 21 of the ActiveKEY batteries began to malfunction and overheat during use. (Compl.¶ 21). UTC contacted Yoku for technical support and sent inspectors to the Zhangzhou factory to determine the cause of the malfunctions. ( See Exhibits 3 & 4 to Declaration of Gary Stahl (“Stahl Decl.”)). UTC alleges that its investigators observed that Yoku's factory employees were not manufacturing the batteries according to the proper specifications, and concluded that the deviations caused the malfunctions. UTC was forced to replace approximately 35,000 batteries and design and install a “firmware” solution that reduced the likelihood of overheating, but also diminished the battery life. (Stahl Decl. ¶ 6; Exh. 4 to Stahl Deck). UTC alleges that the cost of its remedial measures will total $8 million. (Compl. ¶ ¶ 28, 45). In an affidavit proffered in response to the instant motion, a principal of NCS asserts that “[it] is [his] understanding that over 4,000 YOKU batteries that are the subject of this lawsuit were used, consumed and allegedly caused damage in New York.” (Chandler Aff. ¶ 27; see also Kush Decl. ¶¶ 7–15 (cataloging thousands of ActiveKEY devices sold to New York realtors)).

On September 8, 2010, UTC filed a complaint against NCS principally for breach of contract and negligence in the design of the batteries.³ On November 9, 2010, NCS filed a third-party complaint against Yoku, asserting, inter alia, breach of contract, products liability and negligence claims. Yoku filed a motion for summary judgment, asserting that this Court lacks personal jurisdiction over it under New York State's Civil Practice Law and Rules §§ 301 and 302. Both NCS and UTC filed papers in opposition to Yoku's motion.

Discussion

The “plaintiff ultimately ‘bears the burden of establishing jurisdiction over the defendant by a preponderance of the evidence,’ ” but “ ‘need only make a prima facie showing that jurisdiction exists prior to the holding of an evidentiary hearing.’ ” Capitol Records, LLC v. VideoEgg, Inc., 611 F.Supp.2d 349, 356 (S.D.N.Y.2009) (quoting Ball v. Metallurgie Hoboken–Overpelt, S.A., 902 F.2d 194, 196 (2d Cir.1990)). “In deciding a motion to dismiss for lack of personal jurisdiction, the court has discretion to proceed either upon written submissions or through a full evidentiary hearing on the merits,” but, without a hearing or jurisdictional discovery, “the pleadings and affidavits are construed, and any ambiguity is resolved, in favor of the plaintiff.” Taylor Devices, Inc. v. Walbridge Aldinger Co., 538 F.Supp.2d 560, 575 (W.D.N.Y.2008) (internal citations omitted). As the third-party plaintiff asserting jurisdiction, NCS has the burden on this pre-discovery motion practice to proffer a prima facie showing that the Court has personal jurisdiction over Yoku.

Courts conduct a two-part inquiry to determine whether the assertion of personal jurisdiction is appropriate: “First, [the Court] must determine whether the plaintiff has shown that the defendant is amenable to service of process under the forum state's laws; and second, it must assess whether the court's assertion of jurisdiction under these laws comports with the requirements of due process.” Metro. Life Ins. Co. v. Robertson–Ceco Corp., 84 F.3d 560, 567 (2d Cir.1996).

I. General Jurisdiction

Under New York Civil Practice Laws and Rules § 301, a court may exercise general jurisdiction over a foreign corporation on any cause of action if the defendant is “engaged in such a continuous and systematic course of ‘doing business' here as to warrant a finding of its ‘presence’ in this jurisdiction.” McGowan v. Smith, 52 N.Y.2d 268, 272, 437 N.Y.S.2d 643, 419 N.E.2d 321 (1981) (quoting Simonson v. Int'l Bank, 14 N.Y.2d 281, 285, 251 N.Y.S.2d 433, 200 N.E.2d 427 (1964)); accord Hoffritz for Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 58 (2d Cir.1985). To warrant the exercise of general jurisdiction, New York law requires that the defendant be present in New York “not occasionally or casually, but with a fair measure of permanence and continuity.” Landoil Resources Corp. v. Alexander & Alexander Svcs., Inc., 918 F.2d 1039, 1043 (2d Cir.1991) (internal citations omitted).

New York courts have focused on several indicia to support a finding that a defendant was “doing business,” including “the existence of an office in New York; the solicitation of business in New York; the presence of bank accounts or other property in New York; and the presence of employees or agents in New York.” Id. at 1043. Solicitation alone will not ordinarily show that a defendant is “doing business” in New York. Schultz v. Safra Nat'l Bank, 377 Fed.Appx. 101, 102 (2d Cir.2010). However, under the so-called “solicitation-plus” test, “if the solicitation of business is substantial and continuous, then personal jurisdiction may be found to exist as long as the defendant engages in other activities of substance in the state.” Nelson v. Mass. Gen. Hosp., No. 04 Civ. 5382(CM), 2007 WL 2781241, at *14 (S.D.N.Y. Sep. 20, 2007) (citing Landoil, 918 F.2d at 1043–44). To meet that test, the direct sales into the New York market must constitute a significant portion of the defendant's business activities. See, e.g., Garcia v. Nationwide Machinery Sales, No. 08 Civ. 4167(SJF), 2009 WL 2992574, at *3 (E.D.N.Y. Sept. 16, 2009) (no general jurisdiction where defendant maintained a website, sent...