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LEJA v. SCHMIDT MANUFACTURING

June 3, 2005.

KAZIMIERZ LEJA & ZOFIA LEJA, Plaintiffs,
v.
SCHMIDT MANUFACTURING, INC., SYLVAN EQUIPMENT CORP., BOBCAT OF NEW YORK, INC., L,&L PAINTING CONTRACTING CO., INC., JOHN DOE I, et al., Defendants, and SCHMIDT MANUFACTURING, INC., Defendant/Third Party Plaintiff, v. SYPRIS TECHNOLOGIES, INC. f/k/a TUBE TURNS TECHNOLOGIES, INC., SYPRIS SOLUTIONS, INC., RICHARD ROES 1-8 and JOHN DOES 1-8, et al., Third Party Defendants.



The opinion of the court was delivered by: DICKINSON DEBEVOISE, Senior District Judge

OPINION

Presently before the court is the motion of third party defendant Sypris Technologies, Inc. ("Sypris") to dismiss the Third Amended Third Party Complaint for lack of personal jurisdiction pursuant to FED. R. CIV. P. 12(b)(2), which is opposed by defendant and third party plaintiff Schmidt Manufacturing, Inc. ("Schmidt") as well as defendants Sylvan Equipment Corp. ("Sylvan"), Bobcat of New York, Inc. ("Bobcat") and L&L Painting Contracting Co., Inc. ("L&L Painting").*fn1 For the reasons set forth below, the motion to dismiss will be granted. Because Sypris's motion to dismiss will be granted, Schmidt's motion for Rule 11 sanctions against Sypris for filing this motion to dismiss will be dismissed. Sypris's motion to dismiss for lack of personal jurisdiction was not frivolous, legally unreasonable or without factual foundation. FACTS

  Plaintiffs Kazimierz and Zofia Leja ("Plaintiffs") filed this product liability action alleging serious injuries to Kazimierz Leja ("Leja") arising from a workplace accident involving a sandblasting machine manufactured by Schmidt (the "Sandblaster"). Schmidt filed a notice of removal from the Superior Court of New Jersey, where it was originally filed.

  Schmidt filed a Second Amended Third Party Complaint on June 29, 2004 against Sypris, seeking indemnification and contribution from Sypris. Schmidt alleges that Sypris negligently designed and manufactured the t-bolt top closure (the "top closure") on the Sandblaster which caused Leja's injuries. Schmidt was granted leave to file, and did file, a Third Amended Third Party Complaint naming Sypris, Sypris Solutions, and Tube Turns as third party defendants.*fn2

  Sypris, a subsidiary of Sypris Solutions, was incorporated in Delaware on May 9, 2001, with its headquarters and manufacturing facility in Kentucky. Sypris is in the business of manufacturing component parts for pressurized vessels. Sypris is the successor-in-interest to Tube Turns, which Schmidt has also identified as a third party defendant. In or about 1983, Tube Turns had closed its New Jersey offices. In 1983, Tube Turns's parent AllChem sold Tube Turns to Sumitomo, a Japanese corporation. In 1988, Tube Turns, Inc. was purchased by the Sypris companies — its present Kentucky management. In March 1991, Tube Turns, Inc. was renamed Tube Turns Technologies, Inc. and operated as a wholly-owned subsidiary of the Sypris companies. In March 1998, Tube Turns Technologies, Inc. was merged into New Tube Turns Technologies, Inc., which was an entity incorporated by the Sypris companies in December 1996 in Kentucky. The merged entity was thereafter renamed Tube Turns Technologies, Inc., which continued to operate as a wholly owned subsidiary until 2002 when it was merged into Sypris and became a division of Sypris.

  Sypris has sold at least 4,550 products to New Jersey companies from 1999 to April 2005 for over $2.4 million, and at least 6,668 products to New Jersey companies between 1995 and 2004 for over $3.7 million. Sypris has had over eighty New Jersey customers from 1995 to 2005.

  Sypris began selling top closures to Schmidt in 1983. The top closures that were sold to Schmidt were specifically designed to fit Schmidt's specifications. Schmidt purchased approximately 100 top closures a year from Sypris from 1983 through 2003. Sypris never shipped the top closures to New Jersey. In 1995 or 1996,*fn3 Sypris sold the particular top closure at issue to Schmidt from Louisville, Kentucky (FOB Louisville) and shipped to Schmidt in Texas. The following sequence of sales and returns ultimately led to the Sandblaster's resale to Leja's employer:

  Sypris (KY) → Schmidt (TX) → Sylvan (NY) → Bobcat (NY) and L&L Painting (NY) Bobcat and L&L Painting returned the Sandblaster to Sylvan, which then resold the Sandblaster to West Virginia Paint, Leja's employer.

  Since 1999, Sypris has not had any sales agents outside of Louisville, Kentucky and Houston, Texas. In 2002, Sypris sent one employee, Edgar von Minden, to New Jersey to perform service work at the request of a customer. Sypris sends updated product catalogs and Christmas cards to existing New Jersey customers. In 2002, Sypris sent notices of its name change to all customers. As evidence of Sypris's advertising and marketing in New Jersey, Schmidt offers the following exhibits:
• Sypris sent an introduction letter dated October 25, 2001 to a New Jersey customer explaining Tube Turns's business and suggesting a future business relationship. (Lorell Certification Ex. 11.)
• Sypris sent a brochure to a New Jersey customer on March 26, 2001. (Lorell Certification Ex. 14.)
• Sypris sent two sales brochures to a New Jersey customer, one in or about 1995 and the other in or about 1999. (Lorell Certification Ex. 15.)
• Sypris sent a catalog to a New Jersey customer in response to the customer's request. (Lorell Certification Ex. 16.)
  In addition, Schmidt alleges that Sypris "has sent and received thousands of pages of facsimile and wire communications concerning its business with New Jersey customers; has over one thousand engineering documents in connection with its work with New Jersey customers, and has prepared hundreds of test reports certifying that its products sold in New Jersey conform with all applicable codes." (Opp'n Br. at 10.)

  DISCUSSION

  Rule 4(e) of the Federal Rules of Civil Procedure authorizes the court to assert personal jurisdiction over a non-resident to the extent permissible under the law of the state where the court sits, in this case New Jersey. New Jersey's long-arm rule, N.J. Civ. P.R. 4:4-4, extends jurisdiction over a non-resident defendant "to the uttermost limits permitted by the United States Constitution." Charles Gendler Co. v. Telecom Equity Corp., 102 N.J. 460, 469 (N.J. 1986) (citation omitted). Constitutional due process permits the court to exercise personal jurisdiction over a non-resident defendant who has "minimum contacts" with the forum state, if maintenance of the suit does not offend "traditional notions of fair play and substantial justice." International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945).

  Personal jurisdiction comes in two varieties, at least one of which the court must have over Sypris in order to hear the third party claims against it. One variety is known as specific personal jurisdiction, which would exist if the cause of action arises out of or is related to Sypris's contacts with New Jersey. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 (1984). The court must determine whether Sypris has established sufficient minimum contacts with New Jersey. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476 (1985). Sypris's conduct and connection with New Jersey must be such that it could reasonably anticipate being haled into court here. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980). Additionally, Sypris must have "purposefully avail[ed] itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws." Rudzewicz, 471 U.S. at 475. To summarize, specific jurisdiction exists if Sypris "purposely created contacts" with New Jersey, making it reasonable for him to anticipate being haled into court there. CSR Ltd. v. Fed. Ins. Co., 141 F. Supp. 2d 484, 490 (D.N.J. 2001).

  Where the cause of action does not arise out of Sypris's forum activities, a court may exercise another variety of personal jurisdiction known as general personal jurisdiction if Sypris has engaged in "continuous and systematic" contacts with New Jersey. Helicopteros, 466 U.S. at 414-15. If "continuous and systematic" contacts exist, Sypris could reasonably anticipate being haled into court with respect to any cause of action. Therefore, general jurisdiction requires "a very high threshold of business activity." Ameripay, LLC v. Ameripay Payroll, Ltd., 334 F. Supp. 2d 629, 633 (D.N.J. 2004) (citation omitted). The facts required to establish general jurisdiction must be "extensive and persuasive." Reliance Steel Prods. v. Watson, Ess, Marshall, 675 F.2d 587, 589 (3d Cir. 1982).

  Schmidt bears the burden of establishing, by a preponderance of the evidence, that Sypris's contacts with New Jersey are sufficient to give the court personal jurisdiction over Sypris. Carteret Sav. Bank v. Shushan, 954 F.2d 141, 146 (3d Cir. 1992); Time Share Vacation Club v. Atl. Resorts, Ltd., 735 F.2d 61, 63 (3d Cir. 1984). Moreover, Schmidt must sustain its burden of proof "though sworn affidavits or other competent evidence," and not through bare pleadings alone. Id. at 67 n. 9. The court must accept Schmidt's allegations as true and construe ...


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