United States District Court, E.D. New York
OPINION AND ORDER
SANDRA J. FEUERSTEIN, District Judge.
Defendants Cochlear Americas Corporation ("CAM") and Cochlear Limited ("CLTD") have filed motions to dismiss Jeanne Tansey's ("plaintiff') complaint pursuant to Federal Rule of Civil Procedure ("FRCP") 12(b)(6). CLTD also moves to dismiss pursuant to FRCP 12(b)(2). For the following reasons, CLTD's motion to dismiss for lack of personal jurisdiction is GRANTED. CAM's motion to dismiss for failure to state a claim is GRANTED in part and DENIED in part.
Plaintiff is a 36 year old citizen of New York who resides in Suffolk County. Compl. ¶ 11. Defendant CLTD is an Australian public company with its principal place of business in New South Wales, Australia. Id. at ¶ 12. Defendant CAM is a Delaware corporation with its principal place of business in Centennial, Colorado and is a wholly owned subsidiary of CLTD. Id. at ¶ 13. At all relevant times, defendants, individually and collectively, were engaged in the business of designing, licensing, manufacturing, distributing, selling, marketing, obtaining regulatory approval for and introducing into interstate commerce throughout the United States, including New York, either directly or indirectly, numerous cochlear implant medical devices. Id. at ¶ 14.
On or about September 14, 2011, the Australian government issued an urgent medical device recall and hazard alert in connection with the unimplanted Cochlear Nucleus CI500 range of implant devices, including the Cochlear Nucleus CI512 ("C1512"), after a recent increase in the number of failures of C1512 implants. Id. at ¶¶ 25, 27. On or about October 3, 2011, the Food and Drug Administration ("FDA") issued a Class 2 recall for unimplanted C/512 implants based on a possibility that the devices could shut down and cease to function. Id. at ¶¶ 29, 31. On or about December 16, 2011, CLTD publicly issued a letter about the voluntary recall stating that the results of its investigation showed "a loss of heremeticity from unexpected variations in the brazing process during manufacturing. Brazing is the process that joins the feed through a titanium chassis. Variations in the brazing process have resulted in a limited number of implants being more susceptible to developing microcracks in the braze joint during subsequent manufacturing steps." Id. at ¶ 33.
According to the complaint, a Cochlear CI512 device was uneventfully implanted in plaintiff's left ear in September 2010 at Long Island Jewish Medical Center in Lakeville, New York. Almost immediately thereafter, plaintiff began to complain to her doctors about experiencing intermittent failure of the device. Id. at ¶ 39. Plaintiff was examined by a CAM technician in April 2011, who failed to identify any problem. Id. at ¶ 40. Plaintiff continued to complain about her device's intermittent failures until November 11, 2011 when, during an examination, CAM's technician concluded that plaintiff's CI512 device was experiencing a hermeticity failure as per the recall, requiring immediate removal. Id. at ¶¶ 41-42. In an attempt to preserve some of her hearing ability, plaintiff required replacement surgery, which resulted in debilitating injuries and the inability to address profound deafness in her right ear. Id., at ¶ 1.
Plaintiff's complaint alleges eight (8) separate claims: (1) strict products liability-manufacturing defect; (2) strict products liability-design defect; (3) strict products liability-failure to inspect; (4) strict products liability-failure to test; and (5) four (4) negligence claims. Id. at ¶¶ 110-158.
A. Legal Standard for FRCP 12(b)(2) Motions
Federal Rule of Civil Procedure 12(b)(2) "permits a defendant to challenge a court's personal jurisdiction over it prior to the filing of an answer or the commencement of discovery." A.W.L.I. Group, Inc. v. Amber Freight Shipping Lines, 828 F.Supp.2d 557, 562 (E.D.N.Y. 2011). In considering a motion to dismiss for lack of personal jurisdiction, a court may rely on materials beyond the pleadings. Phillips v. Reed Group, Ltd, 955 F.Supp.2d 201, 225 (S.D.N.Y. 2013) (when considering a 12(b)(2) motion, "the Court may also rely on submitted affidavits and other supporting materials submitted in relation to the motion"). "When responding to a Rule 12(b)(2) motion to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of establishing that the court has jurisdiction over the defendant." Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 171 F.3d 779, 784 (2d Cir. 1999). Where a court opts to determine the jurisdictional issue without an evidentiary hearing or discovery, a plaintiff need "make only a prima facie showing of jurisdiction through its own affidavits and supporting materials." Marine Midland Rank, N.A. v. Miller, 664 F.2d 899, 904 (2d Cir. 1981). "The pleadings and affidavits are construed in the light most favorable to the plaintiff, and all doubts are resolved in its favor." Mazloum v. International Commerce Corp., 829 F.Supp.2d 223, 227 (S.D.N.Y. 2011).
To determine whether a federal court has personal jurisdiction over a foreign corporation, it first looks to the law of the state in which the district court sits. Best Van Lines, Inc. v. Walker, 490 F.3d 239, 242 (2d Cir. 2007) (citing Kronisch v. United States, 150 F.3d 112, 130 (2d Cir. 1998)); see Arrowsmith v. United Press Intern., 320 F.2d 219, 223 (2d Cir. 1963) (holding that personal jurisdiction over a defendant in a "diversity action is determined by the law of the forum in which the court sits.'). If a court determines that it can exercise personal jurisdiction over a defendant under the state law, it must then consider "whether asserting jurisdiction under that provision would be compatible with requirements of due process established under the Fourteenth Amendment to the United States Constitution." Id. See Int'l Shoe Co. v, Washington, 326 U.S. 310, 316 (1945).
B. CLTD's Motion to Dismiss for Lack of Personal Jurisdiction
1. Specific Jurisdiction Pursuant to CPLR § 302(a)
Pursuant to New York's long-arm statute, CPLR 302(a)(3), a court may exercise personal jurisdiction over any non-domiciliary who "commits a tortious act without the state causing injury to person or property within the state... if he (i) regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the state, or (ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce." (McKinney 2013.) "As New York courts have explained, Section 302(a) is a single act statute, ' and proof of one transaction in New York is sufficient to invoke jurisdiction, even though the defendant never enters New York, so long as the defendant's activities here were purposeful and there is a substantial relationship between the transaction and the claim asserted.' " Phillips, 955 F.Supp.2d at 227 (quoting Kreutter v. McFadden Oil Corp., 522 N.E.2d 40, 43 (N.Y. 1988).
Plaintiff contends that this Court has specific jurisdiction over CLTD pursuant to CPLR § 302(a)(3). With respect to the statute's tortious act requirement, plaintiff alleges that CLTD manufactured a defective medical device outside of New York causing injury to plaintiff in New York, where the defective device was implanted in her left ear.
As to sub-prong (i), which requires a showing that the non-domiciliary defendant regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used, consumed or rendered in New York, plaintiff alleges that CLTD derives substantial revenue from New York based on the thousands of implants sent to New York. Based on CLTD's website, its products are so widely used in New York that forty-three (43) separate clinics are present in the state to handle the demand and the thousands of CLTD products sent to New York on a yearly basis.
With respect to § 302(a)(3)(ii), plaintiff contends that CLTD derives substantial revenue from interstate or international commerce. In 2013, CLTD's worldwide revenue, the majority of which was derived from international commerce, was AU$752, 721, 000, which more than satisfies the substantial revenue requirement. Dec. Silverman, Exh. B at p. 39.
Based on the foregoing allegations and because there is a substantial relationship between the transaction, i.e., CLID's manufacture and distribution of a defective medical device, and plaintiff's tort claims, plaintiff states a prima facie case of personal jurisdiction over CLTD under CPLR § 302(a)(3)(i) and (ii).
2. Due Process Considerations
If a court determines that it may properly exercise personal jurisdiction over a defendant in accordance with the forum state's law, it must then consider whether the exercise of personal jurisdiction comports with due process. "A court may exercise jurisdiction over only those defendants that have minimum contacts' with the forum state such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.'" Phillips, 955 F.Supp.2d at 227 (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). "In judging minimum contacts, a court properly focuses on the relationship among the defendant, the forum, and the litigation.'" Calder v. Jones, 465 U.S. 783, 788 (1984) (quoting Shaffer v. Heitner, 433 U.S. 186, 204 (1977)). To establish the minimum contacts necessary to justify "specific" jurisdiction, the claim must arise out of or relate to the defendant's contacts with the forum state, Helicopteros Nacionales de Columbia, S.A. v. Hall, 466 U.S. 408, 414 (1984), such that defendant "purposefully availed" itself of doing business and could foresee being "haled into court" in the state. World-Wide Volkswagon Corp. v. Woodson, 444 U.S. 408, 414 (1980).
CLTD argues that its sale of a product to CAM, its Colorado-based affiliate, who happened to ship the device to a hospital in New York, which ultimately implanted the device into a local resident, is insufficient to support a finding that CLTD "purposely availed" itself of New York's laws.
CLTD is an Australian public company whose principal place of business is in New South Wales, Australia. Compl. ¶ 12. CLTD products are sold throughout the United States and in over 100 countries. Sec. Dec. York ¶ 2. CLTD has no commercial agents located in New York. Although two (2) of its researchers work from their homes in New York, neither has any connection or role with regard to the sale of CLTD products and neither researcher was involved in the manufacture, sale, distribution or marketing of the CI512 device which is the subject of this lawsuit. Dec. York at ¶ 7. CLTD has no significant connections to New York and does not manufacture, sell or distribute its products in New York. Id. at ¶ 10. Rather, CLTD products are sold and distributed exclusively by CAM, which purchases products from CLTD for independent distribution throughout the United States. Id. CLTD is not registered to do business in New York and does not have a New York mailing address, telephone number, office, manufacturing plant, bank account, no real or tangible property and does not pay income taxes in New York. Id. at ¶¶ 8, 10, 11. The foregoing facts, and the lack of any contact with New York weigh against the exercise of personal jurisdiction over CLTD.
Plaintiff argues that CLTD's relationship with its wholly owned subsidiary, defendant CAM, establishes minimum contacts that comport with due process and that CAM's actions should be imputed to CLTD.
"The presence of a wholly owned subsidiary in New York is normally an insufficient basis for establishing jurisdiction." Chichelo v. Hoffman-La Roche Inc., No. 97 Civ. 4591, 1997 WL 654637, at *2 (S.D.N.Y. Oct. 21, 1997). See Bialek v. Racal-Milgo, Inc., 545 F.Supp. 25, 31-32 (S.D.N.Y. 1982) ("It is well settled that a corporation may not be subjected to the jurisdiction of the New York courts merely because a wholly-owned subsidiary of the corporation is doing business in New York in the traditional sense.") (citing Bellomo v. Penn. Life Co., 488 F.Supp. 744, 745 (S.D.N.Y. 1982)); see also Daimler A.G. v. Bauman, 134 S.Ct. 746, 759-60 (2014) (reversing the Ninth's Circuit adoption of a "less rigorous [agency] test" for imputing a subsidiary's jurisdictional contacts to a parent and holding that it "appears to subject foreign corporations to general jurisdiction whenever they have an in-state subsidiary or affiliate, an outcome that would sweep beyond even the sprawling view of general jurisdiction' we rejected in [ Goodyear Dunlop Tires Operations, S.A. v. Brown, ...