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Freedom Transportation, Inc. v. Navistar International Corp.

United States District Court, D. Kansas

September 26, 2019

FREEDOM TRANSPORTATION, INC., Plaintiff,
v.
NAVISTAR INTERNATIONAL CORPORATION, ET AL., Defendants.

          MEMORANDUM AND ORDER

          JULIE A. ROBINSON CHIEF UNITED STATES DISTRICT JUDGE.

         Plaintiff Freedom Transportation, Inc. brings this action alleging a variety of claims against Defendants Navistar International Corporation and Navistar, Inc. (“Navistar Defendants”), Allstate Fleet and Equipment Sales of Houston, Inc. (“Allstate”), and Penske Truck Leasing Co., L.P., Penske Truck Leasing Corporation, and Penske Logistics LLC (“Penske Defendants”) relating to Plaintiff’s purchase of six allegedly defective box trucks for commercial use.

         Plaintiff brings claims against the Navistar Defendants for breach of implied warranty of merchantability (Count I), fraudulent concealment (Count II), fraud in the inducement (Count III), negligence (Count IV), and consumer fraud and deceptive trade practices, including violations of the Illinois Consumer Fraud and Deceptive Trade Practices Act (Count V). Plaintiff’s claims against Allstate include breach of contract (Count VI), breach of express warranty (Count VII), breach of implied warranty of merchantability (Count VIII), fraudulent concealment (Count IX), fraud in the inducement (Count X), negligent misrepresentation (Count XI), negligence (Count XII), deceptive trade practices, including violations of the Texas Deceptive Trade Practices-Consumer Protection Act (Count XIII), and unjust enrichment (Count XIV). Finally, Plaintiff brings claims against the Penske Defendants for fraudulent concealment (Count XV), fraud in the inducement (Count XVI), and negligence (Count XVII).

         This matter comes before the Court on the Navistar Defendants’ Motion to Dismiss for Lack of Personal Jurisdiction Pursuant to Fed.R.Civ.P. 12(b)(2) (Doc. 13), Allstate’s Motion to Dismiss for Lack of Personal Jurisdiction Pursuant to Fed.R.Civ.P. 12(b)(2), Motion to Dismiss for Failure to State a Claim Upon Which Relief Can Be Granted Pursuant to Fed.R.Civ.P. 12(b)(6) and Motion to Dismiss Pursuant to Fed.R.Civ.P. 9(b) (Doc. 28), and the Penske Defendants’ Motion to Dismiss for Failure to State a Claim Upon Which Relief Can Be Granted (Doc. 24). The motions are fully briefed, and the Court is prepared to rule.

         For the reasons explained below, the Court denies the Navistar Defendants’ motion to dismiss for lack of personal jurisdiction. The Court denies Allstate’s motion to dismiss for lack of personal jurisdiction. The Court grants in part Allstate’s Rule 12(b)(6) motion to dismiss for failure to state a claim. Allstate’s Rule 12(b)(6) motion is granted only as to Counts IX, X and XIII for failure to plead fraud with the particularity required by Rule 9(b), and Plaintiff is granted leave to amend Counts IX, X and XIII. The Court also grants in part the Penske Defendants’ Rule 12(b)(6) motion to dismiss for failure to state a claim. The Penske Defendants’ motion is granted only as to Counts XV and XVI for failure to sufficiently plead fraud under Rule 9(b), without prejudice; Plaintiff may follow the procedure for seeking leave to amend under D. Kan. Rule 15.1.

         I. Legal Standard for Motions to Dismiss for Failure to State a Claim

         To survive a motion to dismiss brought under Fed.R.Civ.P. 12(b)(6), a complaint must contain factual allegations that, assumed to be true, “raise a right to relief above the speculative level”[1] and must include “enough facts to state a claim for relief that is plausible on its face.”[2]Under this standard, “the complaint must give the court reason to believe that this plaintiff has a reasonable likelihood of mustering factual support for these claims.”[3] The plausibility standard does not require a showing of probability that “a defendant has acted unlawfully, ” but requires more than “a sheer possibility.”[4] “[M]ere ‘labels and conclusions, ’ and ‘a formulaic recitation of the elements of a cause of action’ will not suffice; a plaintiff must offer specific factual allegations to support each claim.”[5] Finally, the court must accept the nonmoving party’s factual allegations as true and may not dismiss on the ground that it appears unlikely the allegations can be proven.[6]

         The Supreme Court has explained the analysis as a two-step process. For the purposes of a motion to dismiss, the court “must take all the factual allegations in the complaint as true, [but is] ‘not bound to accept as true a legal conclusion couched as a factual allegation.’”[7] Thus, the court must first determine if the allegations are factual and entitled to an assumption of truth, or merely legal conclusions that are not entitled to an assumption of truth.[8] Second, the court must determine whether the factual allegations, when assumed true, “plausibly give rise to an entitlement to relief.”[9] “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”[10]

         Facts Drawn from the Complaint

         Based on the above standards, the underlying facts are as follows. Plaintiff is a shipping and logistics company owned by Daniel and Natasha Shirey and based in Olathe, Kansas. The Navistar Defendants are incorporated in Delaware and have their principal place of business in Lisle, Illinois. The Navistar Defendants are registered to do business in Kansas and have a registered agent for service of process in Kansas. Allstate is incorporated in and has its principal place of business in Texas. Penske Truck Leasing Co., L.P. is a Delaware partnership; Penske Truck Leasing Corporation is a Delaware corporation; and Penske Logistics LLC is a Delaware limited liability company. The Penske Defendants’ principal place of business is in Pennsylvania; they are registered to do business and have an agent for service of process in Kansas.

         In November 2016, Plaintiff purchased six International DuraStar 4300 trucks in order to meet the needs and specifications of a contract requiring Plaintiff to perform shipping and logistics services. The trucks had been manufactured by Defendant Navistar, Inc. Plaintiff purchased the trucks from Defendant Allstate; Defendant Allstate had purchased the trucks from the Penske Defendants.

         Plaintiff communicated from Kansas with Allstate representatives numerous times during November 2016. Plaintiff told Allstate that it needed six box trucks with certain specifications for a shipping contract and that it needed the trucks to be reliable. Allstate identified the six trucks it was offering as 2010 and 2011 International DuraStar 4300s, manufactured by Navistar, Inc.

         On or around November 29, 2016, Defendant Allstate emailed to Plaintiff in Kansas a “Vehicle Buyer’s Order” offering to sell the trucks for $25, 500 each with instructions for Plaintiff to sign and return the order form. On or about November 29, 2016, Plaintiff signed and returned the order form to Defendant Allstate, accepting the offer and agreeing to pay the total price. Plaintiff picked up the trucks from various Penske locations and drove the trucks to Plaintiff’s headquarters in Kansas.

         The six trucks Plaintiff purchased in November 2016 turned out to be defective and failed well before their intended and expected useful life, causing Plaintiff lost revenue, business opportunities and other damages. Within weeks of picking up the trucks, the trucks began experiencing breakdowns, ERG emission system failures, and engine failures.

         These International DuraStar 4300 trucks were manufactured by Navistar, Inc. in 2010 and 2011 and featured the MaxxForce engine, which Navistar, Inc. designed and manufactured. The MaxxForce engine has an exhaust-gas-recirculation-only (“EGR-only”) emission system, which recirculates engine exhaust gas back into the engine to be re-combusted. In contrast, other commercial truck manufacturers in North America use a combination of EGR and selective catalytic reduction, which requires injecting a urea-based chemical after-treatment into the exhaust gas once it leaves the engine, thereby neutralizing and/or reducing harmful emissions.

         In public statements, press releases and advertising, the Navistar Defendants touted the MaxxForce engine’s unique EGR-only technology as providing superior fluid economy and represented that the engines would be certified under the EPA’s 2010 emission standards. But the engines never reached the EPA’s 2010 emission standards threshold necessary for certification. Based on the data results of extensive pre-market testing that is standard in the industry, Navistar knew that the engines were never going to meet the EPA’s standards using EGR-only technology. Navistar’s EGR-only emission system causes widespread engine damage, repeated engine failures, and decreased fuel efficiency. One of the most significant problems with the EGR-only emission system is that the continuous recirculation of exhaust gas back into the engine reduces the engine’s efficiency, causing it to overheat and producing excessive soot inside the engine. The Navistar Defendants knew about these problems and concealed this information from the public and from Plaintiff. By mid-2011, warranty claims for the engines were significantly increased, which the Navistar Defendants also concealed. The Navistar Defendants also failed to properly repair the EGR-only systems during and/or outside the warranty period.

         By February 2012, the Navistar Defendants ran out of “banked” EPA emissions credits, which they had been using to continue to sell the MaxxForce engines. The Navistar Defendants continued to manufacture and distribute the MaxxForce-powered International DuraStar 4300 trucks while making false representations to the public and to Plaintiff regarding their performance capabilities, reliability, EPA certification, and Navistar’s commitment to the MaxxForce engine that Navistar knew to be false. In July 2012, the Navistar Defendants announced that they were abandoning the EGR-only system; and beginning in March 2013, they began retiring the MaxxForce engine. By 2015, the MaxxForce engine was no longer used in International DuraStar 4300 trucks.

         To induce Plaintiff to purchase the trucks, Penske knowingly falsely represented to Allstate and Allstate in turn represented to Plaintiff that the trucks were “good, reliable” trucks that had been “fleet-maintained” by Penske. “Fleet maintained” is a well-known term of art in the shipping and logistics industry, indicating that a vehicle had received maintenance on a routine schedule to preserve the vehicle’s quality and function and extend the vehicle’s useful life. Allstate and Penske failed to disclose that the trucks’ MaxxForce engines had defective EGR emission systems and that there was a lack of proper maintenance. As a merchant of commercial trucks, Allstate knew or should have known of the trucks’ defective MaxxForce engines. None of the defendants informed Plaintiff of the defective condition of the trucks; each defendant misrepresented the quality, condition and reliability of the trucks. Had Plaintiff been told about the trucks’ defective condition, including the defective EGR system and lack of proper maintenance, Plaintiff would not have purchased the trucks.

         II. Legal Standard for Motions to Dismiss Based on Lack of Personal Jurisdiction

         Plaintiff bears the burden of establishing personal jurisdiction as to these Defendants.[11]In the absence of an evidentiary hearing, as in this case, the plaintiff must make only a prima facie showing of jurisdiction to defeat a motion to dismiss.[12] “The plaintiff may make this prima facie showing by demonstrating, via affidavit or other written materials, facts that if true would support jurisdiction over the defendant.”[13] Allegations in a complaint are accepted as true if they are plausible, non-conclusory, and non-speculative, to the extent that they are not controverted by submitted affidavits.[14] When a defendant has produced evidence to support a challenge to personal jurisdiction, a plaintiff has a duty to come forward with competent proof in support of the jurisdictional allegations of the complaint.[15] The court resolves all factual disputes in favor of the plaintiff.[16] Conflicting affidavits are also resolved in the plaintiff’s favor, and “the plaintiff’s prima facie showing is sufficient notwithstanding the contrary presentation by the moving party.”[17] “In order to defeat a plaintiff’s prima facie showing of jurisdiction, a defendant must present a compelling case demonstrating ‘that the presence of some other considerations would render jurisdiction unreasonable.’”[18]

         Additional Facts Material to Issue of Personal Jurisdiction

         Based on the above standards, in addition to the facts drawn from the Complaint, affidavits and other documents in the record establish the following facts which are material to the issue of personal jurisdiction. Based on the declarations of Daniel Shirey, Michael Caldwell, Michael Hayden (President of Defendant Allstate), and Roy Zeitlow (Navistar, Inc. manager), as well as the Motor Vehicle Bill of Sale, the following facts are either undisputed or resolved in Plaintiff’s favor.

         Defendant Navistar International Corporation is the parent company of Defendant Navistar, Inc., a wholly-owned subsidiary that designs, manufactures, assembles, and distributes vehicles and related products, including the six trucks at issue in this case. Neither company has ever been incorporated or had its principal place of business in Kansas. Neither company conducts manufacturing activities, owns real property, maintains offices, owns dealerships, or offers repair or service of vehicles in Kansas. Neither company sells directly to citizens of Kansas; but Navistar, Inc. sells its products through an exclusive network of independent dealers in Kansas and elsewhere.

         Defendant Allstate acts as a broker for wholesale sale of used commercial trucks, mostly for dealer-to-dealer transactions. Allstate has never been incorporated in Kansas and is not registered to do business in Kansas. Allstate does not own or lease any property in the Kansas, has no office or other business address in Kansas, and does not advertise its business or services in Kansas.

         When Daniel Shirey decided to purchase trucks in order to fulfill a new shipping and logistics contract, his father-in-law suggested he might be able to buy trucks on better terms than buying directly from dealers by getting help from Michael Caldwell. Caldwell was in the business of buying and selling trucks and was a friend of Shirey’s father-in-law. Shirey called Caldwell, who resided in Ukraine, and asked for his help. Caldwell agreed. On or about November 1, 2016, while Caldwell was in Kansas visiting his son, he met Shirey in Olathe, Kansas. Caldwell told Shirey that the only logical trucks for him to buy were from Penske, because Penske sold well-maintained trucks and kept complete maintenance records on the trucks it sold. Caldwell told Shirey that Penske’s trucks were good, reliable trucks that were fleet-maintained.

         During the weeks following November 1 and before Shirey decided to buy the trucks, Caldwell continued to represent to Shirey that Penske’s trucks were fleet-maintained, good and reliable trucks. Before the sale was consummated, Caldwell communicated with Shirey in Kansas numerous times, by phone and email. Caldwell contacted Defendant Allstate and asked them to prepare the documents for Allstate to sell these trucks to Plaintiff. Allstate purchased the trucks from Penske and prepared the documents to sell the trucks to Plaintiff.

         Allstate’s president, Michael Hayden, emailed the vehicle purchase order to Plaintiff in Kansas. Shirey signed the purchase order in Kansas and returned it to Allstate by email. Caldwell’s name is printed on the bill of sale and his electronic signature is on the bill of sale. Shirey believed that Caldwell was Allstate’s representative.

         The trucks were never in Allstate’s possession. Plaintiff picked the trucks up from Penske in various locations. The bill of sale indicates that these locations were in Pennsylvania, Wisconsin, Illinois, and Indiana.

         III. Motions to Dismiss for Lack of Personal Jurisdiction

         The Navistar Defendants and Allstate assert that this Court lacks personal jurisdiction over them and that Plaintiff’s claims against them must therefore be dismissed pursuant to Fed.R.Civ.P. 12(b)(2). Plaintiff contends that Allstate is subject to specific jurisdiction in this Court, and that the Navistar Defendants are subject to both specific and general jurisdiction.

         A. Legal Standards for Personal Jurisdiction

         Federal courts follow state law “in determining the bounds of their jurisdiction over persons.”[19] However, “[a] state court’s assertion of jurisdiction exposes defendants to the State’s coercive power, and is therefore subject to review for compatibility with the Fourteenth Amendment’s Due Process Clause.”[20] Thus, “[t]o obtain personal jurisdiction over a nonresident defendant in a diversity action, a plaintiff must show both that jurisdiction is proper under the laws of the forum state and that the exercise of jurisdiction would not offend due process.”[21]

         In conducting the due-process analysis, the court must consider whether the defendant has such minimum contacts with the forum state “that he should reasonably anticipate being haled into court there.”[22] As explained by the Supreme Court in its 1945 opinion introducing the minimum-contacts analysis, “due process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.’”[23] “Depending on their relationship to the plaintiff’s cause of action, an out-of-state defendant’s contacts with the forum state may give rise to either general (all-purpose) jurisdiction or specific (case-linked) jurisdiction.”[24]

         1. Specific Jurisdiction

         Specific jurisdiction exists when “the suit ‘aris[es] out of or relate[s] to the defendant’s contacts with the forum.’”[25] To establish minimum contacts for the exercise of specific jurisdiction within the bounds of due process, a plaintiff must show: (1) that the defendant purposefully directed activities at the forum state, and (2) that plaintiff’s injuries arise out of the defendant’s forum-related activities.[26] The Supreme Court elaborated upon the minimum contacts necessary to support specific jurisdiction in the 2014 case of Walden v. Fiore, [27]explaining that the defendant’s suit related conduct must create a substantial connection with the forum state that arises out of contacts between the defendant and the forum state, not contacts between the plaintiff and the forum state, nor contacts between the defendant and persons who reside in the forum state.[28]

         If the plaintiff shows that both the “purposeful-direction” and “arising-out-of” prongs of the minimum-contacts test are satisfied, the burden then shifts to the defendant to show that the exercise of specific jurisdiction would “offend[] ‘traditional notions of fair play and substantial justice.’”[29] The defendant “must present a compelling case that the presence of some other considerations would render jurisdiction unreasonable.”[30]

         2. General jurisdiction

         General personal jurisdiction permits a court to exercise power over a corporate defendant in “instances in which the continuous corporate operations within a state [are] so substantial and of such a nature as to justify suit against it on causes of action arising from dealings entirely distinct from those activities.”[31] “Because general jurisdiction is not related to the events giving rise to the suit, courts impose a more stringent minimum contacts test.”[32] In Goodyear Dunlop Tires Operations, S.A. v. Brown[33]and Daimler AG v. Bauman, [34] the Supreme Court clarified that even “substantial, continuous, and systematic” forum-related contacts are insufficient to confer general jurisdiction; rather, the defendant’s contacts with the forum must be “so ‘continuous and systematic’ as to render [it] essentially at home in the forum State.”[35]

         For a corporate defendant, paradigmatic bases for the exercise of general jurisdiction include the defendant’s place of incorporation and principal place of business.[36] General jurisdiction in a forum other than the defendant’s place of incorporation or principal place of business will exist only in “exceptional case[s]” where the defendant’s operations in the forum are “so substantial and of such a nature as to render the corporation at home in that State.”[37] In contrast with specific jurisdiction, when a court finds that it has general personal jurisdiction over the defendant, that finding concludes the due-process inquiry and the defendant is subject to suit in the forum state for claims both with and without any connection to the state.[38]

         Finally, “[b]ecause the requirement of personal jurisdiction represents first of all an individual right, it can, like other such rights, be waived.”[39] The Supreme Court has noted that “because the personal jurisdiction requirement is a waivable right, there are a ‘variety of legal arrangements’ by which a litigant may give ‘express or implied consent to the personal jurisdiction of the court.’”[40] A defendant may consent to personal jurisdiction explicitly, such as through a “forum selection clause or some other agreement, ”[41] or implicitly “through its actions, for example, by appearing in court and arguing the merits of the case.”[42] “Whether such surrender of a personal immunity be conceived negatively as a waiver or positively as a consent to be sued, is merely an expression of literary preference.”[43] In any context, the relinquishment of a constitutional right “must, at the very least, be clear.”[44]

         B. Analysis

         1. Specific Jurisdiction as to Allstate

         Plaintiff argues that specific jurisdiction is proper as to Allstate under K.S.A. § 60-308(b)(1)(A) due to Allstate’s transaction of business in Kansas, K.S.A. § 60-308(b)(1)(B) due to Allstate’s commission of tortious acts in the state, and K.S.A. § 60-308(b)(1)(E) because Allstate entered into a contract with a resident of Kansas. “Because the Kansas long-arm statute is construed liberally so as to allow jurisdiction to the full extent permitted by due process, ” the Court here may “proceed directly to the constitutional issue.”[45] “Consequently, this [C]ourt ‘need not conduct a statutory analysis apart from the due process analysis, ’”[46] and proceeds to evaluate whether Plaintiff’s allegations as to Allstate are sufficient to satisfy due process.

         a. Minimum Contacts

         In arguing that Allstate has sufficient minimum contacts, Plaintiff relies on Allstate’s president on November 29, 2016 emailing to Plaintiff in Kansas the Vehicle Buyer’s Order with instructions to sign and return the order form to Allstate; and Plaintiff’s acceptance of the offer in Kansas signified by Shirey signing the order form and returning it to Allstate per its instructions. Plaintiff further states through Shirey’s declaration that throughout November 2016, Caldwell, in phone and email communications, represented that the trucks were quality vehicles, reliable, and fleet-maintained by Penske. Plaintiff further relies on these phone and email communications with Caldwell, as well as its face-to-face meeting with Caldwell in Kansas, in alleging that Caldwell was Allstate’s representative and agent and acted with Allstate’s authority. Allstate and Caldwell deny that Caldwell was ever Allstate’s agent or ever acted with Allstate’s authority. Caldwell avers that he negotiated with Penske on behalf of Plaintiff such that Plaintiff was able to obtain the trucks at a price substantially less than the “dealer” price and that Caldwell signed the bill of sale for Allstate merely to expedite the transaction for Plaintiff’s benefit. Caldwell attests that Allstate’s only role in the transaction was to prepare the paperwork for Penske’s sale of the trucks to Plaintiff, which Allstate argues was Allstate merely being an instrumentality used to accomplish the transaction.

         “As the [Supreme] Court in International Shoe explained, a nonresident corporate entity creates contacts for personal jurisdiction purposes through its authorized representatives; its employees, directors, officers and agents.”[47] Although “[a]n agent’s contacts with the forum state may be imputed to a nonresident corporation for long-arm jurisdiction, ”[48] when the issue of whether the corporation has sufficient contacts with Kansas to support personal jurisdiction depends on the actions of the purported agent, the “plaintiff . . . must produce some evidence to support its contention of agency” and meet its burden of establishing a prima facie case of jurisdiction.[49]

         The Kansas Supreme Court has explained that a principal-agent relationship “is created ‘when one person (a “principal”) manifests assent to another person (an “agent”) that the agent shall act on the principal’s behalf and subject to the principal’s control, and the agent manifests assent or otherwise consents so to act.’”[50], [51] Kansas has recognized several types of agency based on the “actor’s or agent’s type of authority, ” including express authority, implied authority, and apparent authority.[52] Express agency may exist where “the principal has delegated authority to the agent by words which expressly authorize the agent to do a delegable act.”[53] Implied agency may exist

if it appears from the statements and conduct of the parties and other relevant circumstances that the intention was to clothe the agent with such an appearance of authority that when the agency was exercised it would normally and naturally lead others to rely on the person’s acts as being authorized by the principal.[54]

         Finally, apparent agency “may exist if a principal has intentionally or by want of ordinary care induced and permitted third persons to believe a person is his or her agent, even though no authority, either express or implied, has been actually conferred upon the agent.”[55]

         The Court finds that Plaintiff has produced sufficient evidence in support of its contention that Caldwell’s actions can be imputed to Allstate for purposes of long-arm jurisdiction. Caldwell negotiated with Penske on behalf of Plaintiff, which resulted in Penske selling the trucks to Allstate and Allstate selling the trucks to Plaintiff in Kansas, at a price substantially lower than a dealer price. Before the sale was consummated, Caldwell made representations to Plaintiff face-to-face in Kansas, as well as by phone and email to Kansas, about the quality, reliability, and maintenance of the trucks. Caldwell’s name and electronic signature were on the Motor Vehicle Bill of Sale on behalf of Allstate.[56] As Plaintiff posits, “[t]he only logical conclusion is that Allstate gave Caldwell actual authority to buy trucks for it.” Thus, the Court imputes Caldwell’s actions to Allstate in deciding whether Allstate has sufficient minimum contacts with the forum.

         Plaintiff argues that Allstate is subject to specific jurisdiction because it has purposefully availed itself of the forum through the parties’ contract-related communications and the contract itself. But the mere existence of a contract with a Kansas citizen is insufficient to establish the requisite minimum contacts in the forum state.[57] Rather, the court must “look[] to ‘prior negotiations and contemplated future consequences, along with the terms of the contract and the parties’ actual course of dealing.’”[58] In other words, “[t]he contract ‘must have a substantial connection with the forum state.’”[59] The Supreme Court has stated that “although physical presence in the forum is not a prerequisite to jurisdiction, physical entry into the state-either by the defendant in person or through an agent, goods, mail, or some other means-is certainly a relevant contact.”[60]

         The only aspect of performance specifically alleged to have taken place in Kansas is Plaintiff sending the purchase order form by email from its Kansas office. The bill of sale indicates that Plaintiff took delivery of the trucks directly from Penske, at Penske locations outside of Kansas. But the parties’ prior negotiations during November 2016 through phone and email were connected to Kansas. Moreover, Caldwell, whose actions the Court imputes to Allstate, physically entered the State of Kansas and had a face-to-face meeting with Shirey on November 1, agreeing to help Plaintiff purchase the trucks. Moreover, Plaintiff’s alleged injuries arise out of Allstate’s forum-related activities conducted by Caldwell.

         Thus, the Court finds that on balance-and largely based on the alleged conduct of Caldwell-Allstate had sufficient minimum contacts. The Court next proceeds to consider whether the exercise of specific jurisdiction would be reasonable in this case.

         b. Reasonableness

         The second part of the due-process analysis asks whether the exercise of personal jurisdiction would be reasonable or whether subjecting [the defendant] to jurisdiction in the forum state would offend traditional notions of fair play and substantial justice.[61] Once a Plaintiff has satisfied its minimum-contacts burden, the burden shifts to the defendant to demonstrate that exercising personal jurisdiction would be unreasonable.[62] This inquiry requires the examination of five factors: (1) the burden on the defendant, (2) the forum state’s interest in resolving the dispute, (3) the plaintiff’s interest in receiving convenient and effective relief, (4) the interstate judicial system’s interest in obtaining the most efficient resolution of controversies, and (5) the shared interest of the several states in furthering fundamental substantive social policies.[63]

         The minimum-contacts and reasonableness analyses are complementary, such that:

[T]he reasonableness prong of the due process inquiry evokes a sliding scale: the weaker the plaintiff’s showing on [minimum contacts], the less a defendant need show in terms of unreasonableness to defeat jurisdiction. The reverse is equally true: an especially strong showing of reasonableness may serve to fortify a borderline showing of [minimum contacts].[64]

         With this guidance in mind, the Court finds that the balance of the five factors weighs in Plaintiff’s favor.

         Because Allstate is located in Texas, litigating this action in Kansas will impose some burden. However, because “defending a suit in a foreign jurisdiction is not as burdensome as in the past, ” especially for sophisticated parties, the Court finds that this factor weighs only slightly in favor of Allstate.[65]

         The second factor weighs in Plaintiff’s favor, given that Kansas has an interest in resolving disputes involving its residents, particularly where the dispute involves the application of Kansas law.[66] Other than Plaintiff’s claim under the Texas Deceptive Trade Practices-Consumer Protection Act (“Texas DTPA”), Kansas law will likely apply to most or all of Plaintiff’s other claims against Allstate, which sound in common-law contract, quasi-contract, fraud, and negligence.[67]

         The third factor requires the Court to consider whether Plaintiff may receive convenient and effective relief in another forum. Although the Court is confident that Plaintiff could receive effective relief in another forum, litigating this action in Kansas is obviously more convenient for Plaintiff, given that it is a Kansas company. The Court finds that this factor also weighs in favor of Plaintiff.

         The fourth factor considers the interstate judicial system's interest in obtaining the most efficient resolution of controversies. The key points to consider when evaluating this factor are “the location of witnesses, where the wrong underlying the lawsuit occurred, what forum’s substantive law governs the case, and whether jurisdiction is necessary to prevent piecemeal litigation.”[68] In this case, all four points favor Plaintiff. The evidence and the majority of the witnesses are likely to be located Kansas, the wrong is alleged to have occurred in Kansas, Kansas law is likely to apply to the majority of Plaintiff’s claims, and litigating this matter in Kansas will avoid piecemeal litigation with potentially inconsistent results, given the interrelatedness of Plaintiff’s claims against the six defendants.

         Finally, as to the fifth factor-the shared interest of the several states in furthering fundamental social policies-the parties agree that this factor is either neutral or irrelevant in the instant case, and therefore the Court does not address it. A strong showing of reasonableness here fortifies Allstate’s sufficient minimum contacts with Kansas, and the Court finds that it may exercise specific personal jurisdiction over Allstate.

         2. Lack of Specific Jurisdiction as to the Navistar Defendants

         Neither Navistar International Corporation nor Navistar, Inc. sells directly to citizens of Kansas. Navistar, Inc. sells its trucks, cab and chassis products and service parts through an exclusive network of dealers both within the state of Kansas and elsewhere. But Navistar International Corporation does not manufacture or sell goods of any kind. Rather, Navistar International Corporation is a holding company for Navistar, Inc. And it is a well-settled proposition that a “holding or parent company has a separate corporate existence from its subsidiary and is thus treated separately in the absence of circumstances justifying the disregard of the corporate entity.”[69]

         Because Plaintiff has made no argument to support that Navistar International Corporation has transacted business in Kansas by virtue of its control over or relationship with Navistar, Inc., the Court has no basis upon which to analyze this issue further and declines to do so.[70] Plaintiff has failed to allege that Navistar International Corporation transacted business in Kansas in a manner that would satisfy the purposeful-direction prong of the specific jurisdiction test.

         a. Navistar, Inc.’s Transaction of Business in Kansas

         As to Navistar, Inc., Plaintiff makes two arguments in support of specific jurisdiction. The first argument depends upon a stream-of-commerce theory. Plaintiff contends that “Navistar” has transacted business in Kansas within the meaning of K.S.A. § 60-308(b)(1)(A) and purposefully directed its activities toward the forum by intentionally placing its products in the stream of commerce in the Kansas market by selling them to its exclusive network of dealers in Kansas, who in turn sell those products to Kansans.

         In this case, the Court need not analyze the factors relevant to minimum contacts under a stream-of-commerce theory. Even assuming that Navistar, Inc.’s sale of its products through distributors in Kansas indicates its intent to serve the Kansas market and is “an action of the defendant purposefully directed toward the forum State”[71] sufficient to satisfy the purposeful-direction prong of the due-process test, Plaintiff has not established that its injuries arise out of Navistar, Inc.’s forum-related activity.

         When a defendant has purposefully directed activities at the forum state, the Court must next consider whether the plaintiff’s alleged injuries “arise out of” the defendant’s forum-related contacts.[72] Courts have generally followed one of three approaches in analyzing this “nexus” requirement: (1) proximate causation, (2) but-for causation, or (3) substantial connection.[73] The Tenth Circuit has rejected the substantial-connection approach outright, [74] but has considered without choosing between the two causation-based approaches.[75] “A plaintiff satisfies the but-for standard if he shows the defendant’s forum-related activities were an ‘event in the causal chain leading to the plaintiff’s injury.’”[76] “The proximate cause standard, ‘by contrast, is considerably more restrictive and calls for courts to examine[] whether any of the defendant’s contacts with the forum are relevant to the merits of the plaintiff’s claim.’”[77] The Court need not decide here which of these approaches is more appropriate, as Plaintiff has failed to demonstrate the requisite nexus under either.

         The relevant facts alleged here are that Plaintiff purchased six trucks from Allstate, a Texas corporation, which acquired the trucks from the Penske Defendants. Plaintiff then picked up the trucks from various Penske locations outside of Kansas. There is no allegation that Navistar, Inc. played any role in these transactions, or that any of the six trucks at issue were ever sold by a Kansas distributor or even present in Kansas prior to Plaintiff’s purchase.

         Plaintiff argues that although it did not purchase its trucks from a Navistar dealer in Kansas, it would defy logic to conclude that purchasing Navistar trucks fails to “relate to” Navistar, Inc.’s activity of selling trucks. However, Plaintiff’s argument overlooks the requirement of some nexus between a defendant’s forum-related activities and the injury alleged, and Plaintiff has not established that nexus here because it has failed to show how Navistar, Inc.’s sale of trucks in Kansas was an event in the causal chain leading to Plaintiff’s injury. Plaintiff’s argument is more akin to a general jurisdiction argument. Specific jurisdiction requires a link between Navistar, Inc.’s contacts with Kansas and the instant case.[78] Because there is no evidence that Navistar, Inc.’s forum-related activities were an event in the causal chain leading to Plaintiff’s injury, Plaintiff cannot satisfy the but-for nexus standard nor the more restrictive proximate cause standard.

         b. Navistar, Inc.’s Alleged Tortious Acts

         Plaintiff also alleges that Navistar, Inc. is subject to specific jurisdiction in this Court based on its commission of tortious acts that caused injury to Plaintiff in Kansas within the meaning of K.S.A. § 60-308(b)(1)(B). Plaintiff references its claims including negligence and fraud claims, and argues that the Court has supplemental personal jurisdiction over any non-tort claims.

         Although “[a]n injury occurring in Kansas as a result of tortious activity outside the state is considered a tortious act within the state for purposes of personal jurisdiction, ”[79] Plaintiff must still allege sufficient facts to show purposeful direction. In the intentional tort context, the Court must apply the “effects test” set forth in Dudnikov v. Chalk & Vermilion Fine Arts, Inc.[80] That test, derived from the Supreme Court’s decision in Calder v. Jones, [81] allows the plaintiff to establish purposeful direction by . . . showing that the defendant took (a) an intentional action, that was (b) expressly aimed at the forum state, with (c) knowledge that the brunt of the injury would be felt in the forum state.[82]

         However, this Court agrees with the analysis of Judge Melgren that

[The Calder effects] test requires “more than simply harm suffered by a plaintiff who resides in the forum state.” Indeed, “the plaintiff cannot be the only link between the defendant and the forum state.” Rather, the defendant’s conduct must connect the defendant “to the forum in a meaningful way.” “[M]ere foreseeability of causing an injury in the forum state is . . . insufficient.”[83]

         Here, Plaintiff’s negligence claim states that “Navistar owed all consumers, including Plaintiff, the duty to design and manufacture the Engines in such a way as to ensure that the emissions systems would not fail and the defect would not occur, ” and that “Navistar breached this duty by negligently designing and/or manufacturing the engines.”[84] But in the Tenth Circuit, the effects test is satisfied only where allegations suggest that the defendant intended to cause injury, or cause consequences that the defendant knew would lead to injury, in the forum state.[85] Thus, the Calder effects test cannot support specific jurisdiction for Plaintiff’s allegations of “mere, untargeted negligence, ”[86] and under the minimum-contacts analysis set forth above, Plaintiff has failed to established that its injuries arise out of the Navistar Defendants’ forum-related activity.

         The Court also finds Plaintiff’s intentional tort allegations insufficient to establish the elements of the Calder effects test. In its fraud claims, Plaintiff alleges that Navistar, Inc. knew of the defective nature of the MaxxForce engine but concealed that information from the public, including Plaintiff, and fraudulently induced consumers, including Plaintiff, into purchasing the trucks at issue by making false and material misrepresentations regarding the quality, reliability, and performance of the trucks’ MaxxForce engines. The misrepresentations to which Plaintiff refers apparently include unspecified public statements, press releases, and advertising about certain superior attributes of the MaxxForce engine, specifically its fluid economy and expected certification under EPA emissions standards.

         Though Plaintiff’s fraud claims include allegations of intentional concealment and misrepresentation, Plaintiff alleges no facts to establish the second and third elements of the Calder effects test. As to the second element requiring an intentional act “expressly aimed” at the forum, the Tenth Circuit takes a “restrictive approach, holding that the forum state itself must be the ‘focal point of the tort.’”[87] Taking together the second element and the third element, which requires “knowledge that the brunt of the injury would be felt in the forum state, ”[88] it is not enough that injury in the forum state is foreseeable merely because a plaintiff lives there or has some relationships there.[89] Instead plaintiffs must establish “not only that defendants foresaw (or knew) that the effects of their conduct would be felt in the forum state, but also that defendants undertook intentional actions that were expressly aimed at that forum state.”[90]

         Plaintiff fails to make this showing. Instead of meaningfully addressing the elements necessary to establish purposeful direction in the tort context, Plaintiff generally relies on Navistar, Inc.’s awareness of foreseeable consequences based on its placement of products into the stream of commerce in Kansas and its alleged commission of tortious acts within the meaning of the Kansas long-arm statute. Plaintiff’s allegations of fraudulent concealment and misrepresentation are devoid of any particular link to Kansas other than the fact that Plaintiff is located in Kansas. But “[t]he plaintiff’s residence in the forum, and suffering of harm there, will not alone support jurisdiction under Calder.”[91] Nor do Plaintiff’s allegations show that Navistar, Inc. expressly aimed its representations, public statements, press releases, and advertising at Kansas residents or had knowledge that the brunt of any injury would be felt in Kansas. Further, though Plaintiff has not specified the medium Navistar, Inc. used for its alleged statements here, “evidence of mere placement of advertisements in nationally distributed papers or journals does not rise to the level of purposeful contact with a forum required by the Constitution in order to exercise personal jurisdiction over the advertiser.”[92] The Court cannot find that Kansas was the focal point of the torts alleged.

         “The inquiry whether a forum State may assert specific jurisdiction over a nonresident defendant ‘focuses on the relationship among the defendant, the forum, and the litigation.’”[93] “For a State to exercise jurisdiction consistent with due process, the defendant’s suit-related conduct must create a substantial connection with the forum State.”[94] Plaintiff’s tort allegations against the Navistar Defendants lack facts showing purposeful direction under the Calder effects test. Having found insufficient minimum contacts, the Court need not conduct the second part of the due-process analysis by asking whether the exercise of personal jurisdiction over the Navistar Defendants would be reasonable, and now turns to the question of whether it may exercise general personal jurisdiction on the basis of these Defendants having registered to do business in Kansas.

         3. General Jurisdiction as to the Navistar Defendants

         Plaintiff alleges in its Complaint that this Court has personal jurisdiction over the Navistar Defendants because Plaintiff’s claims arose in Kansas, both Navistar Defendants are registered to do business in Kansas and have a registered agent for service of process in Kansas, and further both have substantial, systematic and continuous contact with the State of Kansas.

         But Plaintiff makes no specific allegations sufficient to establish that the Navistar Defendants are subject to general personal jurisdiction in Kansas on the basis of their “substantial, systematic and continuous” business activities within the State. To find a defendant subject to the general personal jurisdiction of this Court because it sells its products through a network of independent dealers that includes dealers in Kansas, as Navistar, Inc. does, would be “unacceptably grasping” under the Supreme Court’s reasoning in Daimler AG v. Bauman.[95]

         Rather than arguing that the Navistar Defendants are subject to general personal jurisdiction in Kansas due to the nature of their business operations in Kansas, Plaintiff’s arguments hinge upon the fact that the Navistar Defendants are registered to do business in Kansas. Plaintiff contends that foreign corporations seeking to do business in Kansas are first required to register with the Kansas Secretary of State, and that such registration amounts to constitutionally valid, express consent to jurisdiction.

         K.S.A. § 17-7931 provides that “[b]efore doing business in the state of Kansas, a foreign covered entity shall register with the secretary of state.”[96] K.S.A. § 17-7931(g) provides that to register, a foreign covered entity must submit to the secretary of state

an irrevocable written consent of the foreign covered entity that actions may be commenced against it in the proper court of any county where there is proper venue by the service of process on the secretary of state as provided for in K.S.A. 60-304, and amendments thereto, and stipulating and agreeing that such service shall be taken and held, in all courts, to be as valid and binding as if due service had been made upon the governors of the foreign covered entity.[97]

         The Navistar Defendants do not dispute that they are registered to do business in Kansas, but argue that whether consent-by-registration has survived the Supreme Court’s decision in Daimler is an unsettled area of law. The Navistar Defendants urge this Court to hold that exercising general jurisdiction on the basis of consent-by-registration would be inconsistent with Daimler, which they contend changed the landscape for analysis of general jurisdiction by rejecting the notion that a defendant corporation could be subject to general jurisdiction in every state in which it is merely “doing business.”

         In Merriman v. Crompton Corp., [98] decided eight years before the Daimler decision, the Kansas Supreme Court held that the Kansas statute requiring certain foreign corporations to register required that such corporations expressly consent to general personal jurisdiction.[99] The Kansas Supreme Court noted that “[m]any courts have recognized that such consent statutes provide a basis for exercising general jurisdiction”[100] because “although parties may not waive subject matter jurisdiction, they may waive personal jurisdiction.”[101]

         Merriman is the Kansas Supreme Court’s last word on the interpretation of the business registration statute. And this interpretation, that the statute requires express consent to general personal jurisdiction, is one this Court must adopt. Binding circuit precedent directs this Court to look to Kansas law to determine whether the business registration statute at issue provides a basis for jurisdiction over registered corporations.

         While the Tenth Circuit has not addressed whether the Kansas business registration statute constitutionally confers general personal jurisdiction in Kansas over a defendant who registers to do business in the forum, [102] the Tenth Circuit has historically followed the practice of determining whether a foreign corporation’s registration to do business constitutes consent by reference to the state statute governing such issue or, in some instances, case law construing that statute.[103]

         Thus, although the Tenth Circuit has not addressed whether a state can, after Daimler, require a registering foreign corporation to consent to general personal jurisdiction without violating the Due Process Clause, binding circuit precedent directs this Court to look to Kansas law to determine whether the business registration statute at issue provides a basis for jurisdiction over registered corporations.[104]

         The Kansas Supreme Court has held that the state’s business registration statute does provide for general personal jurisdiction through consent. Although the Navistar Defendants point out that K.S.A. § 17-7931 makes no express mention of consenting to personal jurisdiction, and further argue that the Kansas statute lacks “constitutionally required clarity” necessary to “indicate that a corporation is consenting to suit in Kansas, ” the Kansas Supreme Court has definitively spoken on the meaning of this statute.[105] In registering to do business in Kansas, the Navistar Defendants bore the risk that this “interpretation may be put upon [registration] by the courts.”[106]And in maintaining their registration to do business in Kansas since Merriman was decided, the Navistar Defendants have consented to general personal jurisdiction in Kansas under K.S.A. § 17-7931.

         It is a separate question whether the state statute satisfies due process in requiring express consent. This Court is cognizant of the fact that “[a] state court’s assertion of jurisdiction exposes defendants to the State’s coercive power and is therefore subject to review for compatibility with the Fourteenth Amendment’s Due Process Clause.”[107] And, this is a question of federal law.[108]

         Again, the Tenth Circuit has not addressed, post Daimler, whether the Kansas business registration statute, K.S.A. § 17-7931(g), constitutionally confers general personal jurisdiction in Kansas over a defendant who registers to do business in the forum. Nor has it addressed any other state’s business registration statute in the context of Daimler. However, in an opinion issued seventy years ago, the Tenth Circuit upheld the District of Kansas’s exercise of jurisdiction over insurance corporations that had complied with a Kansas statute requiring-as a condition precedent to transacting business in Kansas-that such companies file an irrevocable consent that actions could be commenced against them in the proper court of any Kansas county in which the cause of action arose or in which the plaintiff resided.[109] The Tenth Circuit noted that “[t]he opinion of the Supreme Court in the Mitchell Furniture Company case . . . indicates that a statute relating to all causes of action, whether growing out of business transactions within or without the state, would be valid.”[110] Even assuming that the “the business transacted in connection with the[] policies was done in Oklahoma, ”[111] the Tenth Circuit found “[n]o sound reason . . . why the state should not have power to compel foreign corporations seeking entrance to the state to agree that while engaged in business under such license, the state court should have jurisdiction of all controversies arising between it and the citizens of the state.”[112]

         Consent jurisdiction was recognized by the Supreme Court in Pennsylvania Fire Insurance Co. v. Gold Issue Mining Co., [113] in which the Court held that jurisdiction arising from the forum’s requirement of consent to service of process did not deprive a foreign insurance company of due process even though the consent was its only apparent contact with the forum.[114]

         Although Pennsylvania Fire has not been expressly overruled, there is a split of authority as to its continued viability. As the Kansas Supreme Court noted, some courts have determined that if consent is the sole ground for the exercise of jurisdiction, this does not comport with due process, concluding that the due process holding in Pennsylvania Fire was implicitly overruled by International Shoe Co.[115]

         In Daimler, the Supreme Court has undoubtedly narrowed the scope of general personal jurisdiction such that a corporate defendant will typically only be subject to such jurisdiction in its place of incorporation and principal place of business, [116] except in the “exceptional case” where the defendant’s operations in the forum are “so substantial and of such a nature as to render the corporation at home in that State.”[117] However, the Supreme Court’s only mention of the concept of consent jurisdiction in Daimler was in the context of differentiating precedent discussing the requirements for general jurisdiction from cases in which the defendant had “consented to suit in the forum.”[118]

         The Navistar Defendants maintain that based on the Supreme Court’s substantial curtailment of the exercise of general jurisdiction in Daimler, a majority of courts to consider the issue since that decision have rejected consent-by-registration as a constitutionally-sound basis for general jurisdiction. Even before Daimler, the circuits courts were split “as to whether . . . consent-by-registration is still a viable basis for personal jurisdiction, or whether it has been subsumed by the ‘minimum-contacts’ analysis subsequently introduced in International Shoe Co. v. State of Washington, Office of Unemployment Compensation & Placement, 326 U.S. 310 (1945).”[119]

         But, as Judge John Lungstrum noted in In re: Syngenta AG MIR 162 Corn Litigation, [120]certain circuit court cases finding that “mere compliance with a registration statute does not support jurisdiction . . . are of little persuasive value because the courts did not directly address the issue of consent or the relevant Supreme Court jurisprudence.”[121] For example, the Second Circuit found that “in the absence of a clear legislative statement and a definitive interpretation by the Connecticut Supreme Court and in light of constitutional concerns, ” the Connecticut statute at issue did not require registering corporations to “submit to the general jurisdiction of Connecticut courts.”[122] Although the Second Circuit stated that a state statute requiring consent might present “a more difficult constitutional question about the validity of such consent after Daimler, ” it left open the possibility that “a carefully drawn state statute that expressly required consent to general jurisdiction as a condition on a foreign corporation’s doing business in the state . . . might well be constitutional.”[123] Similarly in AM Trust v. UBS AG, [124] Gulf Coast Bank & Trust Co. v. Designed Conveyor Systems, L.L.C., [125] and Waite v. All Acquisition Corp., [126] the Ninth, Fifth, and Eleventh Circuits found that the California, Louisiana, and Florida statutes, respectively, did not require that the foreign corporation consent to general personal jurisdiction as a condition of doing business in the state. And the Eleventh Circuit further remarked that “[t]ogether, Pennsylvania Fire and Robert Mitchell Furniture Co. . . . establish that whether appointing an agent for service of process subjects a foreign defendant to general personal jurisdiction in the forum depends upon the state statutory language and state court decisions interpreting it.”[127] In short, these post Daimler circuit court decisions are inapposite.

         Thus, although the Tenth Circuit has not addressed whether a state can, after Daimler, require a registering foreign corporation to consent to general personal jurisdiction without violating the Due Process Clause, binding circuit precedent directs this Court to look to Kansas law to determine whether the business registration statute at issue provides a basis for jurisdiction over registered corporations. Furthermore, given that the Kansas statute requires consent to general personal jurisdiction, and absent authority holding that Pennsylvania Fire or Robert Mitchell have been overruled, this Court concludes that the Kansas registration statute comports with the Due Process Clause in requiring consent to general personal jurisdiction.

         The Court agrees with the sound analysis of Judge Lungstrum in In re: Syngenta AG MIR 162 Corn Litigation, [128] in which he concluded that (1) the Supreme Court had not overruled Pennsylvania Fire and other cases sanctioning consent by registration, either explicitly or effectively by adopting International Shoe’s minimum-contacts standard;[129] (2) various federal circuit courts had endorsed the concept of consent by registration since International Shoe;[130] and (3) “the Court in Daimler distinguished its general jurisdiction jurisprudence from instances of consent ...


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