United States District Court, S.D. New York
January 20, 2015
HOWARD GALE, Plaintiff,
SMITH & NEPHEW PLC; SMITH & NEPHEW, INC.; SMITH & NEPHEW, GmbH; SPECIALTY ORTHOPEDICS, PLLC; and STEVEN B. ZELICOF, M.D., Defendants
For Howard Gale, Plaintiff: Gary Todd. Certain, LEAD ATTORNEY, The Certain Law Firm, PLLC, New York, NY; Michael Zilberg, The Zilberg Law Firm, Pllc, New York, NY; Victor M. Serby, Victor M. Serby, Woodmere, Ny.
For Smith & Nephew, Inc., Defendant: David O'Quinn, Irwin Fritchie Urquhart & Moore LLC, New Orleans, LA; Glenn Stuart Kerner, Nilda M. Isidro, Goodwin Procter, LLP(NYC), New York, NY; James Irwin, Kim Moore, Irwin Fritchie Urquhart & Moore LLP, New Orleans, LA.
For Specialty Orthopaedics, PLLC, M.D. Steven Zelicof, Defendants: Christopher A. Terzian, Bartlett, McDonough, Bastone & Monaghan, LLP(White Plains), White Plains, NY.
For Smith & Nephew, PLC, Defendant: Kelly Albinak Kribs, PRO HAC VICE, Sidley Austin, LLP (Chicago), Chicago, IL; Samuel Sung-Ook Choi, Sidley Austin LLP(NY), New York, NY.
For The Mount Sinai Hospital, Interested Party: Bettina Barasch Plevan, Rebecca Lynne Berkebile, LEAD ATTORNEYS, Proskauer Rose LLP (NY), New York, NY.
Vincent L. Briccetti, United States District Judge.
Plaintiff Howard Gale brings this diversity action, alleging a variety of common law tort claims against Smith & Nephew, Inc. (" INC"), the manufacturer of plaintiff's hip replacement system (the " System"); Smith & Nephew PLC (" PLC") and Smith & Nephew, GmbH (" GmbH"), INC's foreign affiliates; Dr. Steven B. Zelicof, the doctor who performed plaintiff's hip replacement surgery; and Specialty Orthopedics, PLLC, Dr. Zelicof's employer.
Now pending is PLC's motion to dismiss for lack of personal jurisdiction. (Doc. #117). For the following reasons, the motion is DENIED.
The Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1332.
In his second amended complaint (" SAC") (Doc. #90), plaintiff alleges PLC " is a company engaged in the business of designing, developing, testing, manufacturing, assembling, promoting, labeling, packaging, advertising, marketing, distributing, and selling medical devices, " including the System utilized in plaintiff's hip replacement procedure. (SAC ¶ 8). Plaintiff alleges PLC expected the System would be shipped, purchased, and used in New York, and thus, PLC " transacted business, " " committed tortious acts, " " made and performed contracts, " and " registered to conduct business" in New York. (Id. ¶ ¶ 24, 32-34). PLC argues it cannot be subjected to jurisdiction in New York based upon these allegations, and moves to dismiss the claims against it under Rule 12(b)(2).
It is undisputed PLC is organized under the laws of England and Wales with its principal place of business in London, England. It is also undisputed PLC wholly owns and has oversight authority over INC. However, the parties dispute PLC's contacts with New York.
Plaintiff relies upon the allegations of jurisdiction contained in the SAC, as well as an exhibit showing Dr. Zelicof was recruited by the Smith & Nephew companies to attend a training session in Birmingham, England, at which he observed procedures involving the System. (Certain Decl. Ex. 2) (Doc. #123-2). PLC has submitted affidavits, which, if considered by the Court, would tend to show PLC is not subject to jurisdiction in New York.
I. Legal Standard
On a motion to dismiss for lack of personal jurisdiction under Rule 12(b)(2), " plaintiff bears the burden of showing that the court has jurisdiction over the defendant." In re Magnetic Audiotape Antitrust Litig., 334 F.3d 204, 206 (2d Cir. 2003). Prior to discovery, plaintiff may defeat a motion to dismiss " by pleading in good faith legally sufficient allegations of jurisdiction." Ball v. Metallurgie Hoboken--Overpelt, S.A., 902 F.2d 194, 197 (2d Cir. 1990) (internal citation omitted). Where there has been no hearing on the merits, " all pleadings and affidavits must be construed in the light most favorable to [plaintiff] and all doubts must be resolved in . . . plaintiff's favor." Landoil Res. Corp. v. Alexander & Alexander Servs. Inc., 918 F.2d 1039, 1043 (2d Cir. 1990).
In a diversity case such as this, personal jurisdiction is determined by reference to the law of the state in which the Court sits. Kernan v. Kurz--Hastings, Inc., 175 F.3d 236, 240 (2d Cir. 1999). If personal jurisdiction is found under state law, the Court must consider whether exercise of that jurisdiction " comports with the requirements of due process." Metropolitan Life Ins. Co. v. Robertson--CECO Corp., 84 F.3d 560, 567 (2d Cir. 2006).
II. Plaintiff's Burden of Proof
PLC argues plaintiff's well-pleaded allegations must be taken as true only to the extent they are uncontroverted by affidavits PLC submitted with its motion. Plaintiff argues his burden to defeat the present motion can be met by pleading sufficient allegations of jurisdiction.
The Court is unpersuaded by PLC's arguments. Plaintiff need only, through his pleadings and affidavits, make a prima facie showing of personal jurisdiction " notwithstanding any controverting presentation by" PLC.
Dorchester Fin. Secs., Inc. v. Banco BRJ, S.A., 722 F.3d 81, 86 (2d Cir. 2013) (quoting Marine Midland Bank, N.A. v. Miller, 664 F.2d 899, 904 (2d Cir. 1981)).
In Dorchester Fin. Secs., Inc. v. Banco BRJ, S.A., the Second Circuit held it was error for a district court to resolve factual disputes in defendant's favor on a Rule 12(b)(2) motion in the absence of an evidentiary hearing. 722 F.3d at 85-87; see also O'Mahoney v. Susser, 531 F.App'x 39, 41 (2d Cir. 2013). This is precisely what PLC urges this Court to do,
citing In re Methyl Tertiary Butyl Ether (" MTBE") Prods. Liab. Litig.,
959 F.Supp.2d 476, 487 (S.D.N.Y. 2013), for the principle that 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." The Second Circuit has never adopted this standard. See Dorchester Fin. Secs., Inc. v. Banco BRJ, S.A., 722 F.3d at 86. PLC's request that this Court do so is without support, and would result in error.
" If the defendant is content to challenge only the sufficiency of the plaintiff's factual allegation, in effect demurring by filing a Rule 12(b)(2) motion, the plaintiff need persuade the court only that its factual allegations constitute a prima facie showing of jurisdiction." Id. at 85. As such, the Court cannot consider PLC's affidavits in the absence of an evidentiary hearing, and plaintiff need only make a prima facie showing of jurisdiction, through his pleadings, affidavits, and accompanying exhibits, to survive PLC's Rule 12(b)(2) motion.
III. " Long-Arm" Specific Jurisdiction under C.P.L.R. § 302
C.P.L.R. § 302 provides a court with the grounds for exercising specific jurisdiction over a non-domiciliary. Under section 302(a)(1), a non-domiciliary is subject to jurisdiction when it " transacts any business within the state or contracts anywhere to supply goods or services in the state, " and the cause of action arises therefrom. To " transact business" in New York, a corporation must " 'purposefully avail [itself] of the privilege of conducting activities within [New York], thus invoking the benefits and protections of its laws.'" CutCo Indus., Inc. v. Naughton, 806 F.2d 361, 365 (2d Cir. 1986) (quoting Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958)).
Construing the allegations in the SAC in the light most favorable to plaintiff, plaintiff has made a prima facie showing PLC is subject to long-arm jurisdiction in New York. Plaintiff alleges PLC actively transacted business within the state of New York and availed itself of New York's markets by: (i) placing the System it designed, developed, tested, manufactured, assembled, promoted, labeled, packaged, advertised, marketed, distributed, and sold in the stream of commerce in New York; and (ii) recruiting Dr. Zelicof, a New York physician, to attend a training session so that he might market the System to his New York patients.
Although PLC's expectation that the System would be shipped, purchased, and used in New York, alone, may be insufficient to show PLC transacted business in New York,
see Bensusan Rest. Corp. v. King, 937 F.Supp. 295, 301 (S.D.N.Y. 1996) (" [P]lacing a product into the stream of commerce, may be felt nationwide--or even worldwide--but, without more, it is not an act purposefully directed toward the forum state."), this activity, combined with the Smith & Nephew companies' recruitment of Dr. Zelicof, is sufficient to show PLC purposefully availed itself of New York's market. See Two's Co., Inc. v. Hudson, 2014 WL 903035, at *5 (S.D.N.Y. March 6, 2014) (finding defendant's placement of its website in New York's stream of commerce, considered with defendant's shipment of products to New York, established defendant transacted business in New York within the meaning of Section 302(a)(1)).
Accordingly, at this stage in the proceedings, plaintiff has made a prima facie showing that PLC transacted business in New York and is subject to jurisdiction under Section 302(a)(1).
IV. Due Process
Any exercise of jurisdiction must comport with constitutional due process, which requires a defendant to have " certain minimum contacts" with the forum such that haling it into court there does not offend " traditional notions of fair play and substantial justice." Licci ex rel. Licci v. Lebanese Canadian Bank, SAL, 673 F.3d 50, 60 (2d Cir. 2012).
A. Minimum Contacts
To determine if a defendant has sufficient minimum contacts with the forum to justify the Court's exercise of jurisdiction, " the defendant's suit-related conduct must create a substantial connection with the forum State."
Walden v. Fiore, 134 S.Ct. 1115, 1121, 188 L.Ed.2d 12 (2014). This " substantial connection" must: (i) " arise out of contacts that the defendant himself creates with the forum State"; and (ii) arise out of the " defendant's contacts with the forum State itself, not the defendant's contacts with persons who reside there." Id. at 1122 (internal quotations and citations omitted).
PLC created a substantial connection with New York by placing the System into New York's stream of commerce and recruiting Dr. Zelicof in order that he market the System to his New York patients. Placing the System in New York's stream of commerce, without additional purposeful activity, may not be enough to establish a substantial connection with New York consistent with due process. See J. McIntyre Mach., Ltd. v. Nicastro, 131 S.Ct. 2780, 2790-91, 180 L.Ed.2d 765 (2011) (Kennedy, J., plurality opinion) (finding defendant had not " availed itself" of New Jersey's market simply because defendant directed sales and marketing efforts at the United States and four of its products had entered New Jersey's stream of commerce);  see also Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102, 112, 107 S.Ct. 1026, 94 L.Ed.2d 92 (1987) (O'Connor, J., plurality opinion) (" The placement of a product into the stream of commerce, without more, is not an act of the defendant purposefully directed toward the forum State."). However, plaintiff premises jurisdiction not only upon the System's placement in New York's stream of commerce, but also upon PLC's marketing strategy of recruiting Dr. Zelicof. See Asahi Metal Indus. Co. v. Superior Court, 480 U.S. at 112 (conduct beyond placing a product in the stream of commerce " may indicate [defendant's] intent or purpose to serve the market in the forum State, for example, . . . advertising in the forum State."). As with the analysis under Section 302, supra, this deliberate marketing strategy combined with PLC's expectation that the System would be shipped, purchased, and used in New York, shows PLC targeted New York and availed itself of the privilege of conducting business there. Moreover, these connections arise from PLC's contacts with New York, not simply with persons who reside there, as PLC affiliated with New York, not plaintiff, when it placed the System in the stream of commerce and marketed it there.
B. Fair Play and Substantial Justice
To determine if an exercise of jurisdiction comports with traditional notions of fair play and substantial justice, a court considers: (i) the burden the exercise of jurisdiction will impose on the defendant; (ii) the forum state's interest in adjudicating the case; (iii) plaintiff's interest in obtaining convenient and effective relief; (iv) interstate efficiency; and (v) interstate policy interests.
See Asahi Metal Indus. Co. v. Superior Court, 480 U.S. at 113.
" [T]he exercise of jurisdiction is favored where the plaintiff has made a threshold showing of minimum contacts at the first stage of the inquiry, " but it " may be defeated where the defendant presents 'a compelling case that the presence of some other considerations would render jurisdiction unreasonable.'"
Chloé v. Queen Bee of Beverly Hills, LLC, 616 F.3d 158, 165 (2d Cir. 2010) (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 477, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985)). PLC has not presented a compelling case that the exercise of jurisdiction over it would be unreasonable. Although PLC will be burdened if it must defend the instant action in New York, any such burden is minimal due to " 'the conveniences of modern communication and transportation ease.'" Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 305 F.3d 120, 129-30 (2d Cir. 2002) (quoting Metro. Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 574 (2d Cir. 1996)). Other than this burden, PLC has not presented compelling reasons sufficient to render exercise of jurisdiction over it unreasonable.
Therefore, PLC has substantial, purposeful contacts with New York, and haling it to New York does not offend traditional notions of fair play and substantial justice. Having satisfied both the statutory and constitutional prongs of the specific jurisdiction analysis, plaintiff has made a prima facie showing PLC is subject to jurisdiction in New York.
Smith & Nephew PLC's motion to dismiss for lack of personal jurisdiction is DENIED.
The Clerk is instructed to terminate the pending motion. (Doc. #117).