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George v. Uponor Corp.

United States District Court, D. Minnesota

December 23, 2013

Tim George, Charles and Jamie Gibbs, William and Corie Connelly, Galen and Leslie Satterlee, Gail Henrichsen, Dustin and Martha Barnett, Dave and Holly Marcus, Kelly Babb, and Gary and Elsa Overstreet, individually and on behalf of all others similarly situated, Plaintiffs,
v.
Uponor Corporation, Uponor Group, Uponor, Inc., Wirsbo Company, and Uponor Wirsbo Company, Defendants

Order Filed: April 14, 2014

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[Copyrighted Material Omitted]

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Robert K. Shelquist, Esq., Lockridge Grindal Nauen, PLLP, Minneapolis, MN; Shanon J. Carson, Esq., and Lawrence Deutsch, Esq., Berger & Montague, PC, Philadelphia, PA; J. Randall Jones, Esq., Kemp, Jones & Coulthard, LLP, Las Vegas, NV; Scott K. Canepa, Esq., and Terry W. Riedy, Esq., Canepa, Riedy & Rubino, APC, Las Vegas, NV; Shawn M. Raiter, Esq., Larson King, LLP, St. Paul, MN; Charles J. LaDuca, Esq., Cuneo Gilbert & LaDuca, LLP, Washington, DC; Charles E. Schaffer, Esq., Levin Fishbein Sedran & Berman, Philadelphia, PA; Michael A. McShane, Esq., Audet & Partners, LLP, San Francisco, CA; P. Kyle Smith, Esq., Lynch, Hopper Salzano & Smith, LLP, Las Vegas, NV; Troy L. Isaacson, Esq., Maddox, Isaacson & Cisneros, LLP, Las Vegas, NV; James D. Carraway, Esq., Carraway & Associates, LLC, Las Vegas, NV; Kenneth S. Kasdan, Esq., Kasdan Simonds Weber & Vaughan LLP, Irvine, CA; and Graham B. LippSmith, Esq., Girardi Keese, Los Angeles, CA, on behalf of Plaintiffs.

John R. Schleiter, Esq., Howard L. Lieber, Esq., and Daniel W. Berglund, Esq., Grotefeld, Hoffmann, Schleiter, Gordon & Ochoa, LLP, Chicago, IL, and Minneapolis, MN, on behalf of Defendants.

OPINION

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MEMORANDUM OPINION AND ORDER

ANN D. MONTGOMERY, U.S. DISTRICT JUDGE.

I. INTRODUCTION

On October 3, 2013, the undersigned United States District Judge heard oral argument on Defendants Uponor Corporation, Uponor Group, Uponor, Inc., Wirsbo Company, and Uponor Wirsbo Company's Motion to Dismiss [Docket No. 107] and on Uponor Corporation's Motion to Dismiss for Lack of Personal Jurisdiction [Docket No. 131] (" Jurisdiction Motion" ). Plaintiffs oppose both motions. For the reasons stated herein, Defendants' Motion to Dismiss is granted in part, and Uponor Corporation's motion to dismiss for lack of personal jurisdiction is granted in part.

II. BACKGROUND

Defendant Uponor Corporation (" Uponor Corp." ) is the Finland-based parent company of several subsidiaries in the business of designing, manufacturing, and selling plumbing systems and other plumbing products worldwide. Defendant Uponor, Inc., one of the subsidiaries, is organized under the laws of Illinois and has its principal place of business in Apple Valley, Minnesota. Uponor, Inc. is the successor to Defendants Wirsbo Company and Uponor Wirsbo Company. Am. Compl. ¶ ¶ 14-21 [Docket No. 103] (" Complaint" ).

This putative class action relates to plumbing fittings sold by Defendants for use in homes. In past decades, commercial and residential potable water systems largely used copper piping. Compl. ¶ 28. Over time, plumbing product manufacturers, including Defendants, began selling plumbing systems made with non-copper products. One copper alternative is cross-linked polyethylene, a plastic polymer known as " pex." Defendants developed and sold pex products under various trade names, advertising these products as being more durable and affordable than copper products. Id. ¶ ¶ 32-34, 37. Specifically, Defendants sell a pex-based plumbing system that uses brass fittings designed to conform to ATSM manufacturing standards F877, F1960, and F2080 (the " Components" ). [1] Id. ¶ 35. Brass is a metal alloy primarily made of copper and zinc, though its exact composition may vary. In this case, Defendants made the Components with " yellow brass," a type of brass composed of at least 15% zinc, or which is otherwise vulnerable to " dezincification." Id. ¶ ¶ 36-39. Dezincification is a form of chemical corrosion in which zinc leaches out of the alloy, resulting in a softer and more porous metal structure. Oxford English Dictionary (Online ed. 2013).

Plaintiffs are a group of homeowners living in New Mexico, Arizona, and California who own homes with plumbing systems that rely or relied on the Components sold by Defendants. Plaintiffs allege the Components installed in their homes began exhibiting dezincification upon exposure to water, the very liquid plumbing systems are designed to convey. Compl. ¶ 39. Because of this defective design, Plaintiffs allege, they have suffered, or are " reasonably certain to suffer," corrosion of their plumbing fittings, lead leaching into their potable-water delivery systems, plumbing blockages, reduced water flow or loss of pressure, loss of function, loss of structural

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integrity, and other damage to their property, appliances, and building components. Id. ¶ 91.

Plaintiffs allege Defendants knew of the Components' defective design. When Defendants marketed their pex plumbing systems, Plaintiffs allege, Defendants falsely advertised the Components' quality and falsely represented testing the Components for reliability. Similarly, Defendants falsely advertised the Components as comporting with the ASTM F877, F1960, and F2080 manufacturing standards. Thus, Plaintiffs allege Defendants knowingly misled consumers, suppliers, and contractors regarding the quality and reliability of the Components. Id. ¶ ¶ 48-66. Plaintiffs also allege Defendants withheld critical information from consumers regarding the tendency of the Components to suffer dezincification due to their yellow brass composition. Id. ¶ ¶ 67-73.

Plaintiffs have alleged eleven causes of action. As a putative national class, Plaintiffs state claims for: (1) breach of implied warranties of fitness for particular purpose, merchantability, habitability, quality, and workmanship; (2) breach of express warranties; (3) negligence, including negligent misrepresentation, failure to warn/instruct, negligent selection, and negligent installation; (4) strict products liability; (5) unjust enrichment; and (6) declaratory and injunctive relief.

Plaintiffs also state several claims on behalf of putative state subclasses, for: (7) violation of the New Mexico Unfair Practices Act; (8) violation of the Arizona Consumer Fraud Act; (9) violation of the standards for residential construction under California Civil Code § 896(a)(15); (10) violation of the California Consumer Legal Remedies Act; and (11) violation of the California Unfair Competition Law.

This action represents only one part of a series of lawsuits relating to Defendants' products. Of particular relevance, in 2009, several putative class representatives brought claims against Defendants and related entities regarding the ASTM F1807 brass fittings in Defendants' pex plumbing systems. Those claims were consolidated into a multi-district litigation (MDL) assigned to this Court. Under the supervision of Magistrate Judge Jeffrey J. Keyes, the parties reached a national settlement in 2012. See In re Uponor, Inc., F1807 Plumbing Fittings Prods. Liab. Litig., 716 F.3d 1057, 1060-62 (8th Cir. 2013).

In the meantime, various homeowners filed suit against Defendants and other parties in connection with other plumbing products, including the Components. Plaintiff Tim George filed this action on January 31, 2012, and other plaintiffs filed similar suits both before and after George. See In re: Uponor, Inc., F1960 Plumbing Fitting Prods. Liab. Litig., 895 F.Supp.2d 1346, 1347 (J.P.M.L. 2012). By June 2012, at least 19 actions had been filed against Defendants and other parties in 7 districts, and George sought to consolidate these actions into multi-district litigation. 895 F.Supp.2d at 1347, 1348. The Judicial Panel on Multi-District Litigation (the " JPML" ) held that the various actions, though sharing factual allegations related to the F1960 fittings, did not sufficiently overlap to make centralization efficient. In addition, the actions had progressed at different paces, including a group of cases in the District of Nevada that had progressed further than most of the others. 895 F.Supp.2d at 1347. Thus, the JPML denied George's request but encouraged the parties to voluntarily coordinate litigation. 895 F.Supp.2d at 1347. To that end, several plaintiffs have joined George by either transferring their actions to this district or by filing their

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action in Minnesota in the first instance. [2]

On June 24, 2013, Defendants moved to dismiss the Complaint under Rule 12(b) of the Federal Rules of Civil Procedure. On August 9, 2013, Uponor Corp., the Finland-based parent company of the other Defendants, moved separately to dismiss itself from this action due to a lack of personal jurisdiction.

III. DISCUSSION

A. Uponor Corp.'s Motion to Dismiss for Lack of Jurisdiction

When a party moves to dismiss for lack of personal jurisdiction, the district court may consider factual evidence outside of the pleadings. See, e.g., Dakota Indus., Inc. v. Dakota Sportswear, Inc., 946 F.2d 1384, 1387 (8th Cir. 1991). The plaintiff has the burden of establishing jurisdiction, but need not prove jurisdiction by a preponderance of the evidence until an evidentiary hearing or trial. Id. Instead, " [t]o survive a motion to dismiss for lack of personal jurisdiction, the plaintiff need only make a prima facie showing of personal jurisdiction over the defendant." Digi-Tel Holdings, Inc. v. Proteq Telecomms, 89 F.3d 519, 522 (8th Cir. 1996). The facts offered will be viewed in the light most favorable to the plaintiff. Dakota Indus., 946 F.2d at 1387.

1. Applicable Personal Jurisdiction Law

A court has personal jurisdiction over a party only if both the forum state's long-arm statute and the Due Process Clause fairly allow the exercise of jurisdiction. Minnesota's long-arm statute is " coextensive with constitutional limits," and does not require separate consideration so long as federal due process requirements are met. Johnson v. Woodcock, 444 F.3d 953, 955 (8th Cir. 2006).

An exercise of personal jurisdiction will satisfy due process if the defendant has had sufficient contacts with the forum state, such that it " should reasonably anticipate being haled into court there . . . and maintenance of the suit does not offend traditional notions of fair play and substantial justice." Miller v. Nippon Carbon Co., Ltd., 528 F.3d 1087, 1090-91 (8th Cir. 2008) (quotation omitted). The Eighth Circuit Court of Appeals has stated a five-part test for measuring whether these " minimum contacts" exist:

(1) the nature and quality of the contacts with the forum state; (2) the quantity of those contacts; (3) the relation of the cause of action to the contacts; (4) the interest of the forum state in providing a forum for its residents; and (5) the convenience of the parties.

Bell Paper Box, Inc. v. U.S. Kids, Inc., 22 F.3d 816, 819 (8th Cir. 1994). " The first three factors are of primary importance." Id.

Whether the exercise of personal jurisdiction is " specific" or " general" turns on the third factor. If the dispute arises from the defendant's contacts with the forum state, the court may exercise specific personal jurisdiction. If the dispute is unrelated to the defendant's contacts with the forum state, the contacts must be " continuous and systematic" to justify the application

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of general personal jurisdiction. Viasystems, Inc. v. EBM-Papst St. Georgen GmbH & Co., KG, 646 F.3d 589, 595 (8th Cir. 2011) (quotation omitted). For parent corporations, the analysis does not necessarily end there. Personal jurisdiction may apply to a nonresident corporation based on the actions of its in-state subsidiary. See Epps v. Stewart Info. Servs. Corp., 327 F.3d 642, 648-49 (8th Cir. 2003); Anderson v. Dassault Aviation, 361 F.3d 449, 452 (8th Cir. 2004).

2. Jurisdiction Over Uponor Corp.

In its motion to dismiss, Uponor Corp. argues that none of the three possible avenues to personal jurisdiction--general, specific, or parent-subsidiary--apply in this case. Uponor Corp. first argues that Plaintiffs cannot establish general jurisdiction, because Uponor Corp. has no physical presence in Minnesota, let alone such a systematic and continued presence so as to warrant being subject to jurisdiction in this forum for any claim. Next, Uponor Corp. argues Plaintiffs have also failed to demonstrate how the corporation has had the minimum contacts necessary to justify specific personal jurisdiction, as Uponor Corp. states it did not itself design, manufacture, or sell the Components in Minnesota or the United States. Finally, Uponor Corp. argues Uponor, Inc. is not an alter ego, meaning Plaintiffs may not pierce Uponor, Inc.'s corporate veil to establish jurisdiction over Uponor Corp.

In response, Plaintiffs largely blur their jurisdictional analyses. Plaintiffs argue that: Uponor Corp. " played a direct role" in the operation of Uponor, Inc.'s Apple Valley, Minnesota, facility; Uponor Corp. designed, manufactured, and sold the defective Components " through" its subsidiary Uponor, Inc.; and that Uponor Corp. itself had " continuous and systematic business contacts throughout the United States." See Pls.' Mem. Opp'n Juris. Mot. [Docket No. 140] at 14, 20-21, 28. In short, although Plaintiffs state specific and general jurisdiction are " two different sides of the same coin," they flip between the two without clear delineation. Id. at 26. Throughout their arguments, however, Plaintiffs maintain a consistent position: personal jurisdiction should exist over Uponor Corp. because of its close ties to and operation of Uponor, Inc. To that end, Plaintiffs submit various annual report excerpts and other evidence to demonstrate Uponor, Inc. operates as an extension of Uponor Corp.

Uponor Corp., standing alone, is not subject to general personal jurisdiction. Typically, for general jurisdiction to apply to a corporation, the corporation must have some degree of physical or business " presence" in the forum state. See Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 416-18, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984) (evaluating defendant's office and facility locations, licensing, and business in forum state to determine existence of general jurisdiction); Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S.Ct. 2846, 2851, 180 L.Ed.2d 796 (2011) (holding court may assert general jurisdiction when corporation has sufficient contacts to " render them essentially at home in the forum state" ). Beyond unsupported arguments, Plaintiffs have offered no evidence indicating Uponor Corp. has facilities in Minnesota, is licensed to do business in Minnesota, or otherwise has regular, continuous contacts with Minnesota. Absent such evidence, the Court declines to exercise general jurisdiction.

Similarly, Plaintiffs have not established specific personal jurisdiction over Uponor Corp. The parties both discuss the United States Supreme Court's decision in Goodyear in debating whether Uponor Corp.'s

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placing of products into the stream of commerce may establish jurisdiction. The Eighth Circuit has recognized a stream of commerce theory of jurisdiction where a corporation " pours its products into a regional distributor," expecting these products to reach a discrete trade area. Viasystems, 646 F.3d at 597 (internal quotation omitted). In such cases, the fora within the trade area may exercise jurisdiction over the foreign corporation. Id. The Eighth Circuit has been " careful to note" that stream of commerce jurisdiction is " a type of specific jurisdiction (as opposed to general jurisdiction)." Id. (quoting Barone v. Rich Bros. Interstate Display Fireworks Co., 25 F.3d 610, 613 (8th Cir. 1994)).

Plaintiffs have not demonstrated a stream of commerce sufficient to establish specific jurisdiction over Uponor Corp. Plaintiffs argue Uponor Corp. has distributed plumbing products worldwide, including in the United States and Minnesota, thereby " purposefully availing" itself of the forum's laws. But this argument focuses on Uponor Corp.'s use of Uponor, Inc. as an extension of its business. Plaintiffs are not arguing Uponor Corp. should be subject to specific jurisdiction because it is the head of a distribution network or otherwise ships or sells goods to Minnesota. Instead, Plaintiffs argue Uponor Corp. treats Uponor, Inc. as an extension of its business, and that Uponor, Inc. has used Uponor Corp.'s assets and designs to manufacture and sell the Components. See, e.g., Pls.' Mem. Opp'n Juris. Mot. at 29. The distinction is significant. See Viasystems, 646 F.3d at 596 (stream of commerce jurisdiction " should be kept conceptually separate" from jurisdiction through a subsidiary). Plaintiffs are not looking to establish specific jurisdiction over Uponor Corp. because of products it makes and ships to a Minnesota distributor; on the contrary, Plaintiffs concede Uponor, Inc. manufactures and sells the Components at issue. Instead, Plaintiffs argue because Uponor Corp. uses Uponor, Inc. as a continuation of its own business, Uponor Corp. should be subject to jurisdiction through its subsidiary. That is a separate analysis addressed immediately below. Plaintiffs have not established specific jurisdiction over Uponor Corp.

Ultimately, whether personal jurisdiction exists over Uponor Corp. depends on its relationship to Uponor, Inc., a subsidiary that does not dispute the Court's jurisdiction in this action. Uponor Corp. argues that for Plaintiffs to establish jurisdiction via this subsidiary, Plaintiffs must demonstrate Uponor Corp. " so controlled and dominated the affairs of the subsidiary that the latter's corporate existence was disregarded so as to cause the residential corporation to act as the nonresidential corporate defendant's alter ego." Viasystems, 646 F.3d at 596. But Uponor Corp. overstates Viasystems' holding. There, the Eighth Circuit held that while a degree of " control and domination" by the parent over the subsidiary was necessary, rigid satisfaction of the alter ego test was not. See id. at 596 (citing Anderson, 361 F.3d 449).

In evaluating whether a parent sufficiently controls a subsidiary to warrant exercising jurisdiction, courts have considered a number of factors. In Viasystems, the court held against finding jurisdiction in part because the parent company's ownership interest in the subsidiary was " confined to a two-steps-removed 28--percent interest." Id. at 597. In Epps, the court held the plaintiffs had failed to connect the parent to at least one of the subsidiaries at issue, and simply claiming the debts and assets of a subsidiary in SEC 10-K filings was insufficient. Epps, 327 F.3d at 650.

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Conversely, in Anderson, the parent company transported a majority of its manufactured airplanes to its subsidiary in the forum state for final modification before distributing the planes worldwide. Anderson, 361 F.3d at 452. The parent corporation had a " close, synergistic relationship" with its subsidiary that transcended " mere ownership." Id. at 453. This was reflected in the parent corporation's annual reports and website, in which the parent referred to itself interchangeably with the subsidiary and touted its presence and operations in the forum state. Id. The court held the parent's " symbiotic" relationship with its subsidiary, combined with the ...


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