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State Farm Fire & Casualty Company v. Swizz Style, Inc.

United States District Court, S.D. New York

March 23, 2017

SWIZZ STYLE, INC., Defendant. SWIZZ STYLE, INC., Third-Party Plaintiff,

          OPINION & ORDER


         An air purifier designed overseas by a Swiss corporation caught fire and caused damage to a home located in Bedford Hills, NY. The insurance company covering the home brought suit against the U.S. distributor of the air purifier claiming design defects caused the fire. The distributer counter-sued the foreign manufacturer, The foreign third-party defendant now seeks to dismiss the third-party complaint for lack of personal jurisdiction. Despite recent Supreme Court cases restricting the exercise of personal jurisdiction over foreign defendants, the manufacturer in this case has sufficient contacts with New York to establish specific jurisdiction, For the following reasons, the motion to dismiss is DENIED.


         For the purposes of determining whether personal jurisdiction exists over the third-party defendant, the relevant facts taken from the motion papers are as follows.[1]

         I. Facts Alleged in the Underlying Action

         In mid-2012, David Hawker, a resident of Bedford Hills, New York, came to own a “Viktor” air purifier when it was “drop-shipped” to him via “the website” by Swizz Style, Inc. (Answer ¶ 8, ECF No. 11.) On June 26, 2014, the air purifier caught fire at Mr. Hawker's property in Bedford Hills causing damage to his home and personal property. (Notice of Removal, Ex. 1 (Verified Compl.) ¶¶ 10, 12.) Fortunately, Mr. Hawker had an insurance policy issued by State Farm Fire & Casualty Co. (“State Farm”) covering the property and personal items contained therein. (Id. ¶ 8.)

         After the fire, State Farm exercised its rights under the policy and, as subrogor, sued Swizz Style on behalf of Hawker, as subrogee, alleging Swizz Style's negligence led to the defective air purifier catching fire and causing property damage in the amount of $267, 141.47. (Id. ¶¶ 3, 14, 20.) State Farm alleged that Swizz Style “designed, manufactured, built, tested, distributed, delivered, sold, repaired, serviced, and/or inspected” the air purifier and “sold and distributed [the] air purifier to wholesale and retail establishments for its sale and distribution in the State of New York.” (Id. ¶¶ 10-11.)

         Swizz Style responded to the allegations by admitting that “it sold the [] air purifier [at issue] before June 26, 2014” and further explaining that “it sells the V[iktor] air purifier in the United States” but “purchased and continues to purchase the [] air purifiers it sells from Stadler Form Aktiengesellschaft” (“Stadler Form”), which is located in Switzerland. (Answer ¶ 5.) Swizz Style additionally denied that the air purifier was defective and denied responsibility for whatever acts led to Hawker's damages. (Id. ¶¶ 21-22.) Rather, Swizz Style alleged it would be entitled to indemnification from Stadler Form, the party “solely responsible for defectively designing, manufactured, building, testing, distributing, delivering, selling, repairing, servicing or inspecting the air purifier in all relevant respects[.]” (Third Party Compl. ¶¶ 14, 17.)

         II. The Relationship Between Distributor Swizz Style, Manufacturer Stadler Form, and New York

         Stadler Form was organized under the laws of Switzerland starting in 1998 and operates out of Lug, Switzerland. (Becker Aff. ¶¶ 3, 4.) Stadler Form has never been incorporated in New York, has never maintained its principal place of business or an office in New York, has never maintained any employees or bank accounts in New York, has never been registered to do business or had a registered agent for service of process in New York, has never owned or leased any property in New York or had a New York phone number, and has never paid any taxes to New York. (Id. ¶¶ 6-14, 17.) Stadler Form alleges that it maintains no assets in New York, and that no employee of Stadler Form travelled to New York on its behalf in connection to the matters at issue in this lawsuit. (Id. ¶¶ 15, 16.)

         Instead, Swizz Style, an Ohio-based corporation, purchased Viktor air purifiers from Stadler Form pursuant to a written distribution agreement. (Third Party Compl. ¶¶ 6, 7, 13.) Swizz Style has been the exclusive U.S. distributor of Stadler Form's goods since 2006. (Baenziger Decl. ¶ 5.) The purifiers are shipped “free-on-board” and title is transferred between Stadler Form and Swizz Style in China. (Becker Aff. ¶ 22.) Stadler Form thus asserts that the allegedly negligent actions connected to the manufacturing of the air purifier would have taken place in either Switzerland or China. (Id. ¶ 19.)

         Stadler Form asserts that it does not directly sell, distribute, or transfer the Viktor air purifiers to citizens of New York. (Becker Aff. ¶¶ 20-21.) Moreover, Stadler Form alleges it “did not have any input and/or control regarding where Swiss Style would ultimately sell the [] air purifiers in the United States.” (Id. ¶ 23.) Instead, it was Swizz Style that had the “responsib[ility] for selling and delivering the [] air purifiers to end users and retailers in the United States.” (Id. ¶ 24.) Swizz Style, however, alleges that Stadler Form-which “derives most of its revenue from international commerce”-chose to “target[] New York as a market for its fashionable, stylish products, and was keenly aware of the significant sales of [its products]” in New York. (Baenziger Decl. ¶¶ 2, 8.)

         In fact, Swizz Style and Stadler Form engaged in “many meetings in 2010 and 2011 in which [they] discussed [] th[ose] considerations and made New York a target because of them.” (Id. ¶ 10.) Swizz Style alleges that focusing on New York paid off, as Stadler Form knew: in 2012, “monthly meetings by Skype” took place between the two where Swizz Style “advise[d] Stadler Form's personnel, including its principal Martin Stadler, on significant sales and its significant retailer/resellers buyers, especially those in New York.” (Id. ¶ 12.) Swiss Style alleges that at the time Mr. Hawker purchased his Viktor air purifier, New York made up 34% of Swiss Style's sales of Stadler Form products. (Id. ¶ 14.) As to Swizz Style's knowledge of Stadler Form's main source of revenue, the principal of Swizz Style-based on his “long association with Stadler Form and its principals before and after December 2011”[2]-asserts that Stadler Form “derives most of its substantial revenues from international commerce.” (Id. ¶ 19; see also Stadler Reply at 6 (undisputed).)

         Regarding the fire at issue in the direct action, Swizz Style alleges that Stadler Form provided “retrofitting kits” to “correct[] a potential overheating condition in the Viktor air purifiers sold . . . into New York” after a government recall of the purifiers in Europe between 2011 and 2012. (Id. ¶ 3.) Moreover, Swizz Style alleges Stadler Form “encouraged” it to delete any records of the reworking of the units, which it contends demonstrates Stadler Form “knew or should have known that it could be called to account for a fire in New York.” (Id.) The email excerpt cited by Swizz Style indicates that Thomas Becker, Production and Quality Control Manager for Stadler Form, suggested Swizz Style could “delete the message on [its] homepage, ” presumably regarding the overheating issue, since Swizz Style was “able to contact nearly all [of its] customers, ” particularly since “it was not a require[ment] from the government that [Swizz Style] do [the] rework[.]” (Id. ¶ 17; see also Becker Aff. ¶ 2 (noting Mr. Becker's history with the company).)

         III. Procedural History

         On October 22, 2015, Plaintiff State Farm filed suit against Defendant Swizz Style in New York state court. (Notice of Removal ¶ 1, ECF No. 1.) On December 1, 2015, Swizz Style removed the state court action to this Court on the basis of diversity jurisdiction. (Notice of Removal ¶¶ 2-3, 5.)[3] Swizz Style then filed a third-party complaint against Stadler Form on January 29, 2016. (ECF No. 17.) Stadler Form has moved to dismiss that complaint on the basis that the Court cannot assert personal jurisdiction over the Swiss company. (ECF No. 42.) Swizz Style has requested the opportunity to take jurisdictional discovery in the event the Court finds Swizz Style has failed to establish jurisdiction. (See Swizz Opp'n at 6, 17; Baenziger Decl. ¶ 24 (describing areas where discovery may be needed).)


         “In order to survive a [Rule 12(b)(2)] motion to dismiss for lack of personal jurisdiction, a plaintiff must make a prima facie showing that jurisdiction exists.” Licci ex rel. Licci v. Lebanese Canadian Bank, SAL, 732 F.3d 161, 167 (2d Cir. 2013) (quoting Thomas v. Ashcroft, 470 F.3d 491, 495 (2d Cir. 2006)). “Such a showing entails making ‘legally sufficient allegations of jurisdiction, ' including ‘an averment of facts that, if credited[, ] would suffice to establish jurisdiction over the defendant.'” Penguin Grp. (USA) Inc. v. Am. Buddha, 609 F.3d 30, 35 (2d Cir. 2010) (alteration in original) (citation omitted). Although the “plaintiff bears the ultimate burden of establishing jurisdiction over the defendant by a preponderance of evidence, ” Waldman v. Palestine Liberation Org., 835 F.3d 317, 334 (2d Cir. 2016) (quoting Koehler v. Bank of Bermuda Ltd., 101 F.3d 863, 865 (2d Cir. 1996)), the Court will “construe the ...

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