United States District Court, S.D. New York
May 5, 2014
IN RE: METHYL TERTIARY BUTYL ETHER (
Robin Greenwald, Esq., Robert Gordon, Esq., Weitz & Luxenberg, P.C., New York, NY, Liaison Counsel for Plaintiffs.
Michael Axline, Esq., Miller, Axline, & Sawyer, Sacramento, CA, Justin J. Arenas, Esq., John K. Dema, Esq., Law Offices of John Dema, P.C., Rockville, Maryland, Counsel for Commonwealth. Peter John Sacripanti, Esq., James A. Pardo, Esq, McDermott Will & Emery LLP, New York, NY, Liaison Counsel for Defendants:
Michael A. Walsh, Esq., Strasburger & Price, LLP, Dallas, TX, Counsel for Defendant Tauber Oil.
OPINION AND ORDER
SHIRA A. SCHEINDLIN, District Judge.
This is a consolidated multi-district litigation ("MDL") relating to contamination - actual or threatened - of groundwater from various defendants' use of the gasoline additive methyl tertiary butyl ether ("MTBE") and/or tertiary butyl alcohol, a product formed by the breakdown of MTBE in water. In this case, the Commonwealth of Puerto Rico ("the Commonwealth") alleges that defendants' use and handling of MTBE has contaminated, or threatened to contaminate groundwater within its jurisdiction. Familiarity with the underlying facts is presumed for the purposes of this Order.
Tauber Oil Company ("Tauber") now moves to dismiss the Commonwealth's complaints for lack of personal jurisdiction. For the following reasons, the motion is granted.
Tauber is a Texas-based marketer of energy products. From 1985 to 1997, Tauber sold MTBE to Phillips Petroleum Company ("Phillips Petroleum"), Phillips 66 Company, and Phillips Chemical Company ("Phillips entities") - all located in Bartlesville, Oklahoma - in a series of "spot sales." Tauber had no distribution or agency agreements with any Phillips entity. Because all MTBE sales were governed by Free on Board contracts, title transferred from Tauber to the Phillips entities in Texas. Tauber had no title on the vessel that transported the MTBE and no involvement in determining the MTBE's ultimate destination.
Instead, Phillips Petroleum independently arranged for the shipment of neat MTBE to Puerto Rico for gasoline blending at Phillips Chemical Puerto Rico Core facility ("Core facility"). The Core facility sold gasoline to the wholesale market both in Puerto Rico and elsewhere. However, the gasoline was not always blended with MTBE. The Core facility sometimes used other octane enhancers.
Tauber never manufactured, marketed, traded, stored, sold, solicited, advertised, or otherwise handled finished gasoline, gasoline containing MTBE, or neat MTBE in Puerto Rico. Tauber was not involved in any decision by any Phillips entity to use or ship MTBE to Puerto Rico. Nor was Tauber's price for MTBE contingent on the ultimate destination of the MTBE.
III. LEGAL STANDARD
A. Rule 12(b)(2) Motion to Dismiss
"The plaintiff bears the burden of establishing personal jurisdiction over the defendant." "[W]here... discovery has not begun, a plaintiff need only allege facts constituting a prima facie showing of personal jurisdiction to survive a Rule 12(b)(2) motion." However, "[a]fter discovery, the plaintiff's prima facie showing, necessary to defeat a jurisdiction testing motion, must include an averment of facts that, if credited by the trier, would suffice to establish jurisdiction over the defendant." Conclusory allegations are insufficient-"[a]t that point, the prima facie showing must be factually supported." When a "defendant rebuts plaintiffs' unsupported allegations with direct, highly specific, testimonial evidence regarding a fact essential to jurisdiction - and plaintiffs do not counter that evidence - the allegation may be deemed refuted."
To determine whether it has personal jurisdiction over a party, a court conducts a two-part analysis. "First, it must consider whether the state's long-arm statute confers jurisdiction, and then it must determine whether such exercise comports with the Due Process Clause of the United States Constitution."
B. Specific Jurisdiction Under Puerto Rico's Long Arm Statute
"Puerto Rico's long-arm statute allows Puerto Rico courts to exercise jurisdiction over a non-resident defendant if the action arises because that person: (1) [t]ransacted business in Puerto Rico personally or through an agent'; or (2) participated in tortious acts within Puerto Rico personally or through his agent.'" "Puerto Rico's long-arm statute is coextensive with the reach of the Due Process Clause." Thus, the present inquiry is guided by "whether the exercise of personal jurisdiction  would abide by constitutional guidelines" of Due Process.
3. Due Process
The Supreme Court set forth the requirements of Due Process in International Shoe v. Washington: that a defendant "not present within the territory of the forum" have "certain minimum contacts with it such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice." This analysis requires both a "minimum-contacts" test and a "reasonableness" inquiry.
First, to satisfy minimum contacts for due process, the plaintiff must demonstrate that "the defendant purposely availed itself of the privilege of doing business in the forum and could foresee being haled into court there" and that "the claim arises out of, or relates to, the defendant's contacts with the forum." As the Supreme Court recently explained, "the relationship [between the defendant and the forum state] must arise out of contacts that the defendant himself creates with the forum State." Though "a defendant's contacts with the forum State may be intertwined with his transactions or interactions with the plaintiff or other parties[, ] a defendant's relationship with a plaintiff or third party, standing alone, is an insufficient basis for jurisdiction." "Due process requires that a defendant be haled into court in a forum State based on his own affiliation with the State, not based on the random, fortuitous, or attenuated contacts he makes by interacting with other persons affiliated with the State." As such, the "unilateral activity of another party or a third person is not an appropriate consideration when determining whether a defendant has sufficient contacts with a forum State to justify an assertion of jurisdiction."
Second, if the defendant's contacts with the forum state satisfy this test, the defendant may defeat jurisdiction only by presenting "a compelling case that the presence of some other considerations would render jurisdiction unreasonable."
The Commonwealth mentions Tauber by name only once in each of its complaints, stating that "Tauber is a Delaware corporation headquartered at 55 Waugh Drive, Suite 700 in Houston, Texas 77007." No allegation in the pleadings links Tauber to the refining, supplying, marketing, or addition of MTBE to gasoline in Puerto Rico.
Nevertheless, the Commonwealth now contends that Tauber "knew that its MTBE was destined for Puerto Rico" where it would be "blended into gasoline [at the Core facility] and distributed throughout the island." To support its contention, the Commonwealth cites assorted documents, including: (1) faxes and emails from Phillips' entities to Tauber that identify Puerto Rico as the destination for the vessels; (2) Tauber invoices and bills of lading from the Core facility,  (3) various documents from non-party Tauber Petrochemical Company ("TPC"), Tauber's wholly owned subsidiary.
None show that Tauber "purposefully availed] itself' of Puerto Rico's laws. First, Tauber never solicited the destination information, and it was immaterial to Tauber's transactions with the Phillips entities. Although the Phillips entities occasionally volunteered the destination information, they did so only after the parties had agreed on the terms of each transaction. Even if Tauber knew that the Phillips entities were shipping the MTBE to Puerto Rico, "foreseeability' alone has never been a sufficient benchmark for personal jurisdiction under the Due Process Clause." Instead, "[d]ue process requires that a defendant be haled into court in a forum State based on his own affiliation with the State, not based on the random, fortuitous, or attenuated contacts he makes by interacting with other persons affiliated with the State." Here, Tauber never manufactured, marketed, delivered, or sold its MTBE in Puerto Rico. Nor did it solicit or advertise its MTBE in Puerto Rico. Instead, Tauber merely sold MTBE to the Oklahoma-based Phillips entities in a series of isolated "spot sales." The independent decision of the Phillips entities to ship the MTBE to Puerto Rico does not establish jurisdiction over Tauber.
Second, the Commonwealth's evidence fails to show that Tauber "knew its MTBE was blended into gasoline [at the Core facility] and then distributed" throughout Puerto Rico. The Commonwealth cites to Tauber invoices as evidence that Tauber received payments from the Core facility. In fact, these invoices indicate that the Phillips entities paid Tauber, and several months later, the Core facility paid the Phillips entities. There is no evidence that Tauber received payments from the Core facility or from any other Puerto Rico-based entity. In addition, the Commonwealth cites to bills of lading to show that the Core facility sometimes sold gasoline within Puerto Rico, and that this gasoline may have contained Tauber's MTBE. Even accepting this assumption, the Core facility's records which Tauber did not see until discovery - do not track "whether a sale of gasoline contained MTBE or not, nor do they reference or identify the batch from which a sale was derived." As such, when Tauber transacted with the Phillips entities, it had no way of knowing whether its MTBE would ultimately be distributed within Puerto Rico.
Third, the Commonwealth attempts to establish jurisdiction over Tauber based on the actions of Tauber's subsidiary, TPC. The Commonwealth argues that TPC sold neat MTBE to Puerto Rico, knowing that it would be blended with gasoline and distributed throughout Puerto Rico. However, "[t]lie mere fact that a subsidiary company does business within a state does not confer jurisdiction over its nonresident parent, even if the parent is sole owner of the subsidiary.'" Courts in the First Circuit require a "plus factor, " such as a finding of an agency relationship between the two corporations, the parent corporation exercising "greater than... normal" control over the subsidiary, or the subsidiary acting as "merely an empty shell" for the parent's operations. The Commonwealth asserts that TPC and Tauber share office space and three of the same employees. But an overlap in office space or employees is within the bounds of normal corporate structure. Because the Commonwealth has not demonstrated the existence of a "plus factor, " such as agency, extraordinary control, or shell, the Court cannot attribute TPC's actions to Tauber for jurisdictional purposes.
For the foregoing reasons, Tauber's motion is GRANTED. The Clerk of the Court is directed to close this motion (Doc. No. 364 in 07 Civ. 10470; Doc. No. 34 in 14 Civ. 1014).