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Eaves v. Pirelli Tire, LLC

United States District Court, D. Kansas

May 12, 2014

PIRELLI TIRE, LLC, a foreign limited liability company; PIRELLI NORTH AMERICA, INC., a foreign corporation; PIRELLI TYRE S.p.A, a foreign corporation; PIRELLI & C. S.p.A., a foreign corporation; PIRELLI PNEUS LTDA., a foreign corporation; and LEMANS CORPORATION, a foreign corporation, Defendants.[1]


SAM A. CROW, District Judge.

Jason and Kimberly Eaves, husband and wife, were riding a motorcycle in Jasper county, Iowa, on July 17, 2011, when the rear tire blew out causing a serious accident. Jason had purchased this rear tire, a Metzeler ME 880 Marathon MDS tire in Manhattan, Kansas, on or about September 22, 2010. This is a product liability action where it is alleged the accident was caused or contributed to by a tire manufacturing defect, tire design defect, or a failure to warn of appropriate use and application of the tire.

The defendants, Pirelli & C. S.p.A., (Dk. 30) ("Pirelli & C"); Pirelli Pneus Ltda ("Pirelli Pneus"), (Dk. 32); Pirelli Tyre S.P. A. ("Pirella Tyre"), (Dk. 34) separately move for dismissal pursuant to Fed.R.Civ.P. 12(b)(2) for lack of personal jurisdiction and pursuant to Fed.R.Civ.P. 12(b)(5) for insufficient service of process. In their complaint, the plaintiffs allege that as to the defendant Pirelli Pneus, it was incorporated in Brazil with its principal place of business in Santo Andre, Brazil, and as to the defendants, Pirelli & C and Pirelli Tyre, they are incorporated in Italy with their principal places of business in Milan, Italy. For all three defendants, the complaint alleges they are:

engaged in the business of designing, manufacturing, marketing, distributing, and selling tires which are ultimately distributed and sold throughout the United States, including the State of Kansas, and are sold for economic benefit in retail stores through the State of Kansas. By seeking a nationwide distribution of its tires, Defendant Pirelli Tyre S.p.A. [and Defendant Pirelli & C. S.p.A.] has purposefully availed itself of doing business in the State of Kansas and has sufficient minimum contacts to justify being subject to the jurisdiction of this Court. This Court has jurisdiction over Defendant Pirelli Tyre S.p.A. [and Defendant Pirelli & C. S.p.A.] in that Defendant, upon information and belief, knowingly supplies tires for sale in stores and with retailers throughout the State of Kansas and the United States, and it supplied a defective tire that was distributed under conditions establish by Defendant Pirelli Tyre S.p.A. [and Defendant Pirelli & C. S.p.A.], causing injury to the plaintiffs in the State of Iowa.

(Dk. 1, ¶¶ 9, 11).

The plaintiffs' complaint alleges the following details on the moving defendants' corporate structure. Head of a multinational Group with worldwide operations in the tire business, Pirelli & C "owns and controls all the Group's operations." (Dk. 1 ¶ 16.). Pirelli & C "manages, finances, and coordinates the operation of its subsidiaries." Id. at ¶ 17. Pirelli Tyre "engages in the design, development, production, and marketing of tires" with factories around the world. Id. at ¶ 18. Pirelli & C and Pirelli Tyre share the same address. Id. at ¶¶ 19 and 20. "Defendant Pirelli Tyre S.P.A. handles the tire business for the multinational Group of business held ultimately by Defendant Pirelli & C. S.p.A. Defendant Pirelli Pneus LTDA is a Brazilian subsidiary of Pirelli Tyre, S.p.A." Id. at ¶ 27. Pirelli & C owns 100% of Pirelli Tyre, id. at ¶ 29, and, in turn, Pirelli Tyre owns 100% of Pirelli Pneus. Id. at ¶ 26.

As for the defendants' distribution network, the plaintiffs allege that the Defendant LeMans Corporation is "the sole United States distributor of Pirelli tire products, " id. at ¶ 30, and that the moving defendants "have established through Defendant LeMans Corporation a nationwide network for distribution of their products, ... to the United States' consumer market, including the State of Kansas, " id. at ¶ 31. The complaint describes LeMans Corporation as operating a website with the name of Parts Unlimited that enables it to reach consumers across the United States, including Kansas. Id. at 32. The plaintiffs allege all defendants were aware that the "ordinary distribution channels and subsequent use" of the subject tire and other tires manufactured by Pirelli Tyre or by companies owned and/or operated by Pirelli included the State of Kansas. Id. at ¶ 34. The complaint includes, that "[a]t all times material hereto, all Defendants were actively seeking business in Kansas, including but not limited to through the internet and through a specialized sales force." Id. at ¶ 35. The complaint concludes that, "the Pirelli Defendants... use of an exclusive distributor for motorcycle tires to reach all fifty (50) states, including the State of Kansas, constitutes purposeful availment." Id. at ¶ 39.

In support of their Rule 12(b)(2) motions, the defendants submit affidavits challenging the plaintiffs' allegations for grouping the defendants for jurisdictional purposes and attributing them with Pirelli Pneus' manufacturing activities and with LeMans' business contacts and marketing activities within Kansas. Pirelli & C and Pirelli Tyre deny that they designed, manufactured, distributed or sold the tire in question. Pirelli & C is the holding company for the stock of Pirelli Tyre which is the holding company for Pirelli Pneus. Even so, Pirelli & C and Pirelli Tyre submit affidavits from knowledgeable business directors showing that they have separate management and boards from Pirelli Pneus, that they do not pay the salaries of Pirelli Pneus' employees, and that Pirelli Pneus is responsible for its own financial management and generates its own substantial revenue. All three moving defendants offer affidavits showing no contacts with Kansas in terms of business, legal, employment, physical, or marketing activities. As for LeMans, the defendants cite the deposition evidence[2] tendered by the plaintiffs and note that it does not show any affiliation between LeMans d/b/a Parts Unlimited and a Pirelli group member other than being a customer of Pirelli Tire LLC.[3] Thus, the defendants challenge the plaintiffs as having failed to make a prima facie case of connections between them and the forum state and of their involvement in an orchestrated and sophisticated global distribution system that included Kansas as a target.

On a Rule 12(b)(2) motion, the burden is with the plaintiff to establish personal jurisdiction, and the weight of this burden varies with the stage of proceeding. Dudnikov v. Chalk & Vermilion Fine Arts, Inc., 514 F.3d 1063, 1069 (10th Cir. 2008); Smalls v. Stermer, 2011 WL 1234781, at *2 (D. Kan. 2011), aff'd, 457 Fed.Appx. 715 (10th Cir. Jan. 10 , 2012). At this stage which is in advance of an evidentiary hearing, "the plaintiff must only make a prima facie showing of personal jurisdiction... by demonstrating, via affidavit or other written materials, facts that if true would support jurisdiction over'" each of the moving defendants. Melea, Ltd. v. Jawer SA, 511 F.3d 1060, 1065 (10th Cir. 2007) (quoting TH Agric. & Nutrition, LLC v. Ace European Group Ltd., 488 F.3d 1282, 1286 (10th Cir. 2007)). The court takes "as true all well-pled (that is, plausible, non-conclusory, and non-speculative) facts alleged in plaintiff's complaint." Shrader v. Biddinger, 633 F.3d 1235, 1239 (10th Cir. 2011) (internal quotation marks and citation omitted). The court, however, does not accept as true those allegations in the complaint contradicted by the defendant's affidavits, but it must "resolve any factual disputes in the plaintiff's favor." Melea, 511 F.3d at 1065.

Applying these rules to the parties' submissions, the court accepts the allegations from the plaintiffs' complaint that are not contradicted by the defendants' affidavits and the facts evidenced in the defendants' affidavits that are not disputed by competent proof from the plaintiffs. Pirelli & C is the holding company for the stock of Pirelli Tyre, and Pirelli Tyre is the holding company for the stock of Pirelli Pneus, S.A. Pirella Tyre also holds 100% of defendant Pirelli North America, Inc. which in turn holds 100% of Defendant Pirelli Tire, LLC, which has its principal place of business in Rome, Georgia, and has LeMans as its sole American customer for Metzeler motorcycle tires. Pirelli Tire, LLC processes the warranty claims on behalf of Pirelli-manufactured tires.

The tire that is the subject of this lawsuit was manufactured by Pirelli Pneus, S.A. The affidavit of Maurizio Sala, Planning and Controlling Director for Pirelli Tyre, S.p.A., the affidavit of Francesco Tanzi, Chief Financial Officer for Pirelli & C, and the affidavit of Mario Batista, Latin America Corporate Affairs Director for Pirelli Pneus[4] show that Pirelli & C and Pirelli Tyre are distinct corporate entities from Pirelli Pneus which is separately managed with its own board of directors and with all of the commercial transactions between them being the subject of lawful contracts. Pirelli Pneus, S.A. keeps its own books and financial statements and handles its own financial management and accounting. Pirelli Pneus, S.A. enjoys significant revenue from its own business activities and products, and neither Pirelli Tyre nor Pirelli & C pays the salaries of any Pirelli Pneus' employees.

From the annual financial reports of Pirelli & C, the plaintiffs excerpt several statements to build an argument that Pirelli & C sits atop all the subsidiaries, controls their relevant operations, and directs a global distribution network for its tires that extends to Kansas. They cite, "At December 31, 2012, the Non-EU Companies that were directly or indirectly controlled by Pirelli & C, S.p.A. and of material interest pursuant to Article 36 of the Market Regulation: Pirelli Pneus Ltda (Brazil); Pirelli Tire LLC (USA);...." (Dk. 38-1, p. 102). It is noted that the chairman of Pirelli & C's board is also the Chief Executive Officer of Pirelli Tyre. The financial report refers to a "Pirelli Group" and defines it as "all the companies included in the scope of consolidation of Pirella & C. S.p.A." (Dk. 38-1, p. 106). The report later outlines, "scope of consolidation" to include "subsidiaries, " that is, "[a]ll companies and entities whose financial and operating policies are subject to control by the Group are considered subsidiaries." Id. at p. 167. While the appearance of these statements is evidence of some control, the plaintiffs are seeking to allege a level of control exceeding the typical relationship between a holding or parent corporation and its subsidiary corporation. The plaintiffs do not offer the detail or evidence to sustain their conclusory allegations in this respect. As will be discussed later, alleging facts for an agency relationship or for piercing a corporate veil require more.

The tire in question was not designed, manufactured or sold by Pirelli C or by Pirelli Tyre, and they did not place this tire into the stream of commerce. As for how the subject motorcycle tires entered into the stream of United States commerce, the plaintiffs' memoranda quote and incorporate the following averments submitted by the defendants:

The process by which tires manufactured by Pirelli Pneus were distributed by LeMans was as follows: (1) LeMans places a tire order on a central ordering system to which Pirelli Tire, LLC has access (Pirelli Pneus, Ltda. does not have access to the ordering system); (2) based on multiple factors, including the type of tire requested and size of tire requested, a manufacturing facility is selected to make the order; (3) Pirelli Tire LLC is notified when the order is ready for shipment; (4) Pirelli Tire LLC then notifies LeMans or LeMans' freight forwarder, Phoenix International Freight Services Limited ("Phoenix"), that the order is ready; (5) LeMans directs Phoenix to arrange for tires manufactured by Pirelli Pneus Ltda. to be picked up in Brazil; (6) Phoenix then arranges for those tires to be shipped (in a container provided by Phoenix) from Brazil to LeMans in the United States (all charges and responsibility for such items as international carriage and Customs clearance to be born by LeMans); (7) after Phoenix picks up the tires, Pirelli Tire LLC sends LeMans an invoice for such tires; and (8) LeMans distributes the tires to various tire dealers in the United States.

(Pirelli Pneus' memorandum, Dk. 33, p. 14; Plaintiffs' memoranda Dk. 38, p. 6; Dk. 39, p. 6; Dr. 40, p. 6). From this, the plaintiffs speculate "the Pirelli Group, which includes Pirelli Pneus, was at all times aware that the subject Metzler tire[s]... were being placed into the Kansas' stream of commerce through the aforementioned distribution channels." Id. The defendant Pirilli Pneus, however, offers the balance of the affidavit of Marcelo Natalini, the Business Unit Motorcycle Latin America Director for Pirelli Pneus, who avers that Lemans "solely determines where the tires will go" and that once the tires are picked up at the Brazil plant by Phoenix, then Lemans assumes all freight charges, customs duty, marine insurance and paperwork responsibilities. (Dk. 33-2, ¶ 21). Natalini further avers that LeMans unilaterally decides where to send tires, that Pirelli Pneus does not control LeMans which is a separate entity, and that Pirelli Pneus does not direct or guide LeMans' advertising or sales efforts. Id. at ¶¶ 22-24. Both Batista and Natalini aver on behalf of Pirilli Pneus that it "does not and has never sold tires to LeMans." (Dk. 33-1, ¶ 20; 33-2, ¶ 20).

Short of attributing them with the activities of LeMans d/b/a Parts Unlimited, none of the moving defendants have any real or meaningful connections to the State of Kansas. They are not residents of the State, have no offices here, and are not licensed to do business in Kansas. They have not regularly transacted business here and do not maintain a registered agent for service of process. They have never sold goods or services in the State of Kansas and have never advertised or solicited business here. They have never contracted with a Kansas resident or entered into a contract which was to be performed in whole or in part in Kansas. They have never marketed any products through a distributor who served as a sales agent to Kansas. They do not own, lease or rent any property in Kansas and maintain no bank accounts, loans, accounting work or administrative functions here.

"Personal jurisdiction is established by the laws of the forum state and must comport with constitutional due process." Fireman's Fund Ins. Co. v. Thyssen Min. Constr. of Canada, Ltd., 703 F.3d 488, 492 (10th Cir. 2012). As liberally construed by Kansas courts, the forum's long-arm statute extends "personal jurisdiction over nonresident defendants to the full extent permitted by the due process clause of the Fourteenth Amendment of the United States Constitution." In re Hesston Corp., 254 Kan. 941, 951, 870 P.2d 17 (1994) (internal quotation marks and citation omitted). Because the forum's long-arm statute is co-extensive with limitations set by the due process clause, the court will "proceed directly to the constitutional issue." Federated Rural Elec. Ins. Corp. v. Kootenai Elec. Coop., 17 F.3d 1302, 1305 (10th Cir. 1994).

Due process analysis entails two steps: first, "whether the non-resident defendant has minimum contacts with the forum state such that he should reasonably anticipate being haled into court there, " and if that step is met, then second, "whether the court's exercise of jurisdiction over the defendant offends traditional notions of fair play and substantial justice, that is, whether the exercise of jurisdiction is reasonable under the circumstances." Melea, Ltd., 511 F.3d at 1065-66 (internal quotation marks and citations omitted). The first step requiring "minimum contacts" is cleared either by general jurisdiction, when "a defendant has continuous and systematic general business contacts with the forum state, " or by specific jurisdiction when a defendant "purposefully direct[s] its activities at the state residents" and "the cause of action arises out of those activities." Melea, Ltd., 511 F.3d at 1066 (internal quotation marks and citations omitted); see Daimler AG v. Bauman, ___ U.S. ___, 134 S.Ct. 746, 751 (2014) (for general jurisdiction, the minimum contacts are "so constant and pervasive as to render [it] essentially at home in the forum State." (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown, ___ U.S. ___, 131 S.Ct. 2846, 2851 (2011)); Fireman's Fund Ins. Co., (for specific jurisdiction, the minimum contacts must come from the defendant having "purposefully availed itself of the privilege of conducting business within the forum State" and "must make being sued there foreseeable so that the defendant could reasonably anticipate the suit." (internal quotation marks and citations omitted)). "In all events, the shared aim of purposeful direction' doctrine has been said by the Supreme Court to ensure that an out-of-state defendant is not bound to appear to account for merely random, fortuitous, or attenuated contacts' with the forum state." Dudnikov, 514 F.3d at 1071 (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985)).

Pirelli Group

In arguing for both general and personal jurisdiction, the plaintiffs bring all the defendants, including the moving defendants, under the umbrella of the "Pirelli Group." They do so based, in part, on Pirelli & C's financial statements' use of the term "Pirelli Group" defined as "all the companies included in the scope of consolidation, " (Dk. 38-1, p. 106). The "scope of consolidation" includes "subsidiaries, " that is, "[a]ll companies and entities whose financial and operating policies are subject to control by the Group... [which] is normally satisfied when the Group owns more than half of the voting rights." Id. at p. 167. The plaintiffs point to the descending chain of holding companies from Pirelli & C to Pirelli Tyre to Pirelli Pneus and Pirelli North American to Pirelli Tire and its merger with Metzeler Motorcycle Tire North America. From these circumstances, the plaintiffs leap to characterizing all of the defendants' tire business activities as a single sophisticated and orchestrated global distribution system and then to making every corporate activity attributable to each entity. The sweeping terms of these allegations resemble in character what have been regarded as conclusory allegations rather than plausible and non-speculative allegations. See Shrader v. Biddinger, 633 F.3d 1235, 1248 (10th Cir. 2011); Pro Fit Management, Inc. v. Lady of America Franchise Corporation, 2010 WL 4810227 at *3 (D. Kan. Nov. 19, 2010). More troubling to the court, is that the plaintiffs fail to argue and apply a particular legal theory for its allegations of treating all of these distinct legal entities as one. It is not this court's burden to proceed with an agency or alter ego legal theory and advocate its application here.

The Supreme Court recently noted that some federal appellate courts "have held, that a subsidiary's jurisdictional contacts can be imputed to its parent only when the former is so dominated by the latter as to be its alter ego." Daimler AG v. Bauman, ___ U.S. ___, 134 S.Ct. 746, 759 (2014). "A holding or parent company has a separate corporate existence and is treated separately from the subsidiary in the absence of circumstances justifying disregard of the corporate entity." Benton v. Cameco Corp., 375 F.3d 1070, 1081 (10th Cir. 2004) (internal quotation marks and citation omitted), cert. denied, 544 U.S. 974 (2005); see Birmingham v. Experian Information Solutions, Inc., 633 F.3d 1006, 1018 (10th Cir. 2011) ("A subsidiary corporation is presumed to be a separate and distinct entity from its parent corporation.") (internal quotation marks and citation omitted)); In re Phenylpropanolamine (PPA) Products Liability Litigation, 344 F.Supp.2d 686, 691 (W.D. Wash. 2003)[5]. The plaintiffs have not cited legal authority for an alter ego claim here and their conclusory allegations fall short of presenting a prima facie claim. The moving defendants submit business affidavits that show the relationship between the manufacturer Pirelli Pneus and either Pirelli & C or Pirelli Tyre is that they "are separate, distinct legal corporate entities, each maintaining their own corporate formalities as evidenced by... separate management;.... own financial management and accounting, ...;... separate boards of directors; and Pirelli Pneus S.A. generates substantial revenue from its own business activities and products." (Dk. 31-1, p. 5; 35-1, p. 5). The affidavits further state that "[a]ll commercial transactions" between Pirelli Pneus and either Pirelli & C or Pirelli Tyre "are set out in legally enforceable contracts." Id. "[E]ven well-pleaded jurisdictional allegations are not accepted as true once they are controverted by affidavit (here, based on personal knowledge of the party with direct access to operative facts)." Shrader v. Biddinger, 633 F.3d at 1248 (citation omitted). Without "specific averments, verified allegations, or other evidence sufficient to create a genuine issue of fact, " the defendants' affidavits "carry the issue" on the alter ego analysis. See id.

The plaintiffs similarly fail to articulate a viable agency claim and to support it with plausible factual allegations. The Supreme Court in Daimler observed:

Agencies, we note, come in many sizes and shapes: "One may be an agent for some business purposes and not others so that the fact that one may be an agent for one purpose does not make him or her an agent for every purpose." 2A C.J.S., Agency § 43, p. 367 (2013) (footnote omtted). A subsidiary, for example, might be its parent's agent for claims arising in the place where the subsidiary operates, yet not its agent regarding claims arising elsewhere.

134 S.Ct. at 759. This highlights the court's difficulty in attaching significance to the plaintiffs' sweeping allegations based on Pirelli & C's financial statements. For example, as the moving defendants point out, Pirelli & C's "financial risk management" of subsidiaries in lending money is an entirely different matter from controlling "distribution, production, or sales" of tires, in particular, motorcycle tires. (Dk. 49, p. 7); see supra n. 5. Discussing the agency relationship in the personal jurisdiction setting, the Tenth Circuit has observed that such a relationship is not presumed but "must be clearly demonstrated" and that it is a "fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act." Kuenzle v. HTM Sport-Und Freizeitgerate AG, 102 F.3d 453, 459 (10th Cir. 1996) (internal quotation marks and citation omitted). The plaintiffs' allegations and proof do not come close to making a prima facie case of alter ego or agency. See Coe v. Philips Oral Healthcare Inc., 2014 WL 585858 at *5 (W.D. Wash. Feb. 14, 2014) (one entity is involved in daily running of the other and there is overlapping management).

This agency question will be discussed again in looking at the plaintiffs' efforts to establish specific jurisdiction based on LeMans' sales in Kansas as an alleged distributor/agent. The Supreme Court certainly has indicated that agency principles will guide the analysis and weighing of distributor activity in the forum:

Agency relationships, we have recognized, may be relevant to the existence of specific jurisdiction. "[T]he corporate personality, " International Shoe Co. v. Washington, 326 U.S. 310 (1945), observed, "is a fiction, although a fiction intended to be acted upon as though it were a fact." Id. at 316. See generally 1 W. Fletcher, Cyclopedia of the Law of Corporations § 30, p. 30 (Supp. 2012-2103) (" A corporation is a distinct legal entity that can act only through its agents."). As such a corporation can purposefully avail itself of a forum by directing its agents or distributors to take action there. See, e.g., Asahi, 480 U.S. at 112 (opinion of)'Connor, J.) (defendant's act of "marketing [a] product through a distributor who has agreed to serve as the sales agent in the forum State" may amount to purposeful availment); International Shoe, 326 U.S. at 318 ("the commission of some single or occasional acts of the corporate agent in a state" may sometimes "be deemed sufficient to render the corporation liable to suit" on related claims). See also Brief for Petitioner 24 (acknowledging that "an agency relationship may be sufficient in some circumstances to give rise to specific jurisdiction").

Daimler AG v. Bauman, 134 S.Ct. at 759 n.13.

General Jurisdiction

"Because general jurisdiction is not related to the events giving rise to the suit, courts impose a more stringent minimum contacts test, requiring the plaintiff to demonstrate the defendant's continuous and systematic general business contacts." Benton v. Cameco Corp., 375 F.3d 1070, 1080 (10th Cir. 2004) (internal quotation marks and citation omitted). Factors relevant to consider include:

"In assessing contacts with a forum, courts have considered such factors as: (1) whether the corporation solicits business in the state through a local office or agents; (2) whether the corporation sends agents into the state on a regular basis to solicit business; (3) the extent to which the corporation holds itself out as doing business in the forum state, through advertisements ...

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