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In re Asbestos Litigation

Superior Court of Delaware, New Castle

January 30, 2015

IN RE: ASBESTOS LITIGATION,
v.
DANA COMPANIES, LLC, Defendant. THOMAS ANDERSON, et al., Plaintiffs,

Submitted: November 3, 2014

A. Dale Bowers, Esquire, Kenneth L. Wan, Esquire, Law Office of A. Dale Bowers, P.A., Wilmington, Delaware, Attorneys for Plaintiffs.

Joseph Naylor, Esquire, Beth Valocchi, Esquire, Swartz Campbell, LLC, Wilmington, Delaware, Attorneys for Defendant Dana Companies LLC.

Eric M. Davis Judge

I. INTRODUCTION AND PROCEDURAL HISTORY

This is a multi-case asbestos litigation involving numerous Plaintiffs and Defendant Dana Companies, LLC ("Dana Companies").[1]

On August 8, 2014, Dana Companies filed the Dana Companies LLC's Motion to Dismiss Based on Lack of Personal Jurisdiction (the "Motion"). Dana Companies moved under Delaware Superior Court Civil Rule 12(b)(2), arguing that the Plaintiffs' claims against Dana Companies must be dismissed for lack of personal jurisdiction. On August 11, 2014, Plaintiffs filed Plaintiffs' Opposition to Defendant Dana Companies LLC's Motion to Dismiss Based on Personal Jurisdiction Grounds. On August 18, 2014, Dana Companies filed a Reply in Support of its Motion to Dismiss Based on Lack of Personal Jurisdiction.

A hearing was held on October 6, 2014. At the hearing, the Court ordered Dana Companies to provide supplemental briefing, and redacted and unredacted financial statements. Dana Companies provided such briefing on October 20, 2014. On November 3, 2014, Plaintiffs filed a Supplemental Memorandum in Opposition to Defendant Dana Companies LLC's Motion to Dismiss for Lack of Personal Jurisdiction. The Court has now examined in camera the unredacted financial documents. After hearing argument, the Court reserved decision.

For the reasons set forth in this opinion, Defendant Dana Companies LLC's Motion to Dismiss Based on Lack of Personal Jurisdiction is GRANTED.

II. FACTUAL BACKGROUND

Dana Companies' predecessor was Dana Corporation, an auto-parts manufacturer incorporated under the laws of Virginia, [2] which entered Chapter 11 bankruptcy in 2006.[3] Dana Corporation was an original equipment manufacturer and supplier, which meant that their products would be sold directly to vehicle manufacturers such as Ford, Chrysler, and John Deere.[4] Dana Corporation had no facilities or employees in Delaware.[5] During a deposition of Dana Companies' corporate representative, the corporate representative stated that she was not aware of any direct sales of Dana Corporation products into the State of Delaware.[6] The corporate representative could not speculate on where the Dana Corporation products were distributed after being sold to vehicle manufacturers, or whether Dana Corporation products ended up in Delaware.[7]

Although Dana Corporation produced some automobile parts containing asbestos, the bankruptcy was not caused by pending asbestos claims or asbestos litigation in general.[8] The asbestos claims were not discharged in bankruptcy, and were instead passed through unimpaired.[9] Liabilities related to asbestos claims were not transferred or assigned to any other debtor or entity, and the reorganized debtor intended to continue to defend, settle, and/or resolve pending and future actions relating to asbestos claims in the ordinary course of their business and consistent with past practices.[10] The United States Bankruptcy Court for the Southern District of New York determined that the reorganized entity would have sufficient insurance policies and assets to cover its asbestos liabilities, [11] and that Dana Corporation had implemented a successful defense and settlement strategy which would be carried over to the new entity.[12] Under the reorganization plan, Dana Holding Corporation ("Dana Holding"), was the newly created entity, which acquired the operating assets of Dana Corporation out of bankruptcy.[13] Dana Holding was incorporated in Delaware.

Dana Companies was incorporated in Virginia, has its principal place of business in Ohio, and became a wholly owned subsidiary of Dana Holding.[14] At the October 6, 2014 hearing, Plaintiffs presented a February 1, 2008 Director's Action document which referred to Dana Companies as a Delaware corporation. In the supplemental briefing, Dana Companies filed with the Court each annual Director's Action document from 2008 to 2013. In these documents, Dana Companies is consistently referred to as a Virginia Corporation.[15]Additionally, the Delaware Secretary of State has certified that Dana Companies is not the name of a Delaware Corporation, and that no corporation or company has ever filed a certificate of formation or registered as a foreign limited liability company in Delaware.

The Court is satisfied that the statement in the February 1, 2008 Director's Action document was an error. Accordingly, the Court does not find that there is a genuine issue of fact as to whether Dana Companies is a Delaware corporation or a Virginia Corporation -- Dana Companies is indeed incorporated in Virginia.

Dana Companies commenced activities on January 31, 2008.[16] Since that date, Dana Companies has been independently managed.[17] Dana Companies' only significant activity has been to manage its assets, its liabilities associated with asbestos claims, and certain other liabilities.[18] Dana Companies has no offices or employees in Delaware, conducts no business in Delaware, and is not registered to do business in Delaware.[19] Dana Companies has never manufactured, distributed, or sold any goods, products or services.[20] At the October 6, 2014 hearing, counsel for Dana Companies stated that the sole purpose of Dana Companies is to defend claims that were passed through the bankruptcy of Dana Corporation. Dana Companies defends claims in all 50 states. Counsel thereafter submitted a breakdown of the claims involving Dana Companies. This information provides that only 1% of Dana Companies' claims are defended in Delaware, and less than 1% of the active claims are defended in Delaware.

III. PARTIES' CONTENTIONS

A. Contentions of Dana Companies

In the Motion, Dana Companies raises several arguments for dismissal. First, Dana Companies contends that Delaware does not have specific jurisdiction over it because Dana Companies is an out of state resident whose claims do not arise from or relate to any conduct in Delaware by Dana Companies.

Second, Dana Companies contends that Delaware does not have general jurisdiction over it because Dana Companies is not incorporated in Delaware, does not have its principal place of business in Delaware, does not regularly do or solicit business in the State, nor engage in any persistent course of conduct or derive substantial revenue from the State.

B. Contentions of Plaintiffs

In response, Plaintiffs first contend that Dana Companies' Motion must fail because it is based on disputed facts.

Second, Plaintiffs contend that Dana Companies has waived personal jurisdiction because it actively participated in Delaware on each one of these cases in anticipation of a potential trial.

Third, Plaintiffs contend that Dana Companies' successor status to Dana Corporation, creates jurisdiction, as Delaware allegedly had jurisdiction over Dana Corporation.

Fourth, Plaintiffs contend that any jurisdictional defense fails because Dana Companies' sole member, Dana Holding, is a Delaware corporation, which controls and dominates its wholly-owned subsidiary.

Fifth, Plaintiffs contend that Dana Companies' jurisdictional defense fails because its sole member is a Delaware entity.

IV. DISCUSSION

A. Standard of Review

When personal jurisdiction is challenged by a motion to dismiss pursuant to Rule 12(b)(2), the plaintiff bears the burden of showing a basis for the court's exercise of jurisdiction over the nonresident defendant.[21] A motion under Rule 12(b)(2), presents a factual matter, not a legal question alone.[22] That factual question will concern the connection that the defendant has had, directly or indirectly, with the forum.[23] The legal questions presented-whether that connection constitutes "doing business, " whether it satisfies some aspect of a long-arm statute, or whether the assertion of personal jurisdiction conforms to conventional notions of fair play and substantial justice-cannot be resolved until the Court determines these predicate factual matters.[24] A court cannot grant a motion under Rule 12(b)(2) simply by accepting the well pleaded allegations of the complaint as true[25] and the Court cannot restrict a Rule12(b)(2) motion to the face of the complaint.[26]

B. Applicable Law

Dana Companies is a nonresident defendant. To determine whether the Court has personal jurisdiction over a nonresident defendant, the Court must: (1) assess whether the Delaware long arm statute applies; and, if so, (2) determine whether application of the statute comports with the Due Process Clause of the Fourteenth Amendment of the United States Constitution.[27] A plaintiff bears the burden of establishing personal jurisdiction over a defendant.[28] Where there is conflicting evidence, the Court must construe such evidentiary conflicts in plaintiff's favor.[29]

Delaware's long arm statute, 10 Del. C. § 3104, sets forth in subsection (c) that a nonresident establishes legal presence within the State of Delaware when the nonresident:

(1) Transacts any business or performs any character of work or service in the State;
(2) Contracts to supply services or things in this State;
(3) Causes tortious injury in the State by an act or omission in this State;
(4) Causes tortious injury in the State or outside of the State by an act or omission outside the State if the person regularly does or solicits business, engages in any other persistent course of conduct in the State or derives substantial revenue from services, or things used or consumed in the State;
(5) Has an interest in, uses or possesses real property in the State; or
(6) Contracts to insure or act as surety for, or on, any person, property, risk, contract, obligation or agreement located, executed or to be performed within the State at the time the contract is made, unless the parties otherwise provide in writing.[30]

Subsection (c)(4) pertains to general jurisdiction in cases, like this one, where the cause of action is unrelated to the relevant Delaware contacts.[31] To exercise jurisdiction under 10 Del. C. § 3104(c), the Court must find that a defendant has "current contacts with Delaware" and that those contacts "'are so extensive and continuing that it is fair and consistent with state policy to require that [they] appear here and defend a claim even when that claim arose outside of this state and causes injury outside of this state.'"[32]

For the Court's application of the long arm statute asserting general jurisdiction to comport with due process, a defendant's activities within the State must be "continuous and systematic."[33] Contacts are typically sufficient to comport with due process if:

(a) the defendant regularly advertises his products or services in the state or (b) carries on some other continuous course of activity there or (c) derives substantial revenue from goods used or consumed or from services rendered in the state. It is not necessary that this activity amount to the doing of business.[34]

Additionally, to satisfy due process when the Court applies the long arm statute, a defendant "should reasonably anticipate being haled into" this Court.[35]

Stream of commerce theory is a source of specific jurisdiction which is available in addition to the long arm statute. Its application is analogous to application of subsection (c)(4) of the long arm statute.[36] Stream of commerce theory

requires that there be evidence of some intent or purpose on behalf of the manufacturer to serve the Delaware market. . . . Only when the manufacturer's product enters the forum state and injures a consumer therein is it acceptable to exercise jurisdiction over the manufacturer under [stream of commerce] theory.[37]

The law in this area stands for the premise that a defendant must affirmatively exhibit some intent or purpose to serve the Delaware market.[38] Like the long arm statute, application of the stream of commerce theory must also comport with the requirements of due process.[39] The timing of defendant's contacts with Delaware are of the utmost importance.[40]

In order to make a finding of general personal jurisdiction, the Court must find that a defendant engaged in sufficient activities in Delaware to establish a general presence – i.e., that the defendant is recognized to be "at home" in Delaware.[41] Only where contacts are continuous and systematic, and where the defendant is at home in the state, does exercising personal jurisdiction satisfy due process.[42] A general presence, however, is not everlasting. When a defendant only has general jurisdictional contacts with a state the defendant may subsequently withdraw from that state for jurisdictional purposes.[43] Deciding what constitutes substantial contacts requires both an absolute and a relative analysis.[44]

C. Dana Companies has not waived the personal jurisdiction defense

We first turn to the issue of whether or not Dana Companies has waived the personal jurisdiction defense. Personal jurisdiction is a right which can be waived.[45] A litigant must exercise great diligence in challenging personal jurisdiction or venue, and should do so at the time of the first defense move.[46] The personal jurisdiction defense may be lost by failure to assert it seasonably, by formal submission in a cause, or by submission through conduct.[47]

In Ross Holdings & Mgmt. Co. v. Adv. Realty, the Court held that where a party becomes an "active actor" in the case, it may waive a personal jurisdiction defense it previously raised.[48]The court then found that the personal jurisdiction defense was not waived merely because a party had filed an answer, where it raised personal jurisdiction as a defense, engaged in discovery, and had filed a motion to disqualify counsel, because neither of those actions transformed the party into an active actor for the purposes of waiver.[49]

In Hornberger Mgmt. Co. v. Haws & Tingle, this Court found that the defendant waived its personal jurisdiction defense where it was not raised until less than a month before trial, after defendant participated in an arbitration process, filed a motion for a trial de novo, and failed to file the motion before the deadline for the filing of case dispositive motions.[50] In particular, this Court noted that the agreement between the plaintiff and defendant contained a forum selection clause, naming Delaware as the litigation forum of choice.[51]

In Jones v. Peek, [52] the defendant did not assert the personal jurisdiction defense until more than seven years after the complaint was filed, and the default judgment entered. The Court predictably denied the motion to dismiss for lack of personal jurisdiction, stating that it was an understatement to say that the defendant failed to seasonably raise the defense.[53]

Dana Companies first raised the personal jurisdiction defense in its Answer to these complaints, and has only been involved in the case through serving and responding to discovery and filing motions related to the personal jurisdiction issue. None of these actions turn Dana Companies into an "active actor" in the case within the meaning of Ross Holdings. Therefore, Dana Companies has not waived its personal jurisdiction defense.

Additionally, the Court reviewed relevant documents related to the bankruptcy of Dana Corporation. Neither Dana Corporation, nor Dana Companies waived their right to assert defenses on the basis of forum in the bankruptcy order. Indeed, the order confirming the Third Amended Plan of Reorganization envisioned that there would be defenses asserted by Dana Companies as part of managing its claims.

Finally, Plaintiffs point out that despite Dana Companies' extensive litigation in Delaware it has never before sought a dismissal on personal jurisdiction grounds.[54] However, familiarity with the court system is insufficient to render a defendant at home in Delaware.[55]

D. Delaware does not have specific jurisdiction over Dana Companies

Since the U.S. Supreme Court's decision in International Shoe, [56] specific jurisdiction has become the centerpiece of modern jurisdiction theory. Specific jurisdiction depends on an affiliation between the forum and the underlying controversy, principally, that the activity or occurrence takes place in the forum state and is therefore subject to the State's regulation.[57]Specific jurisdiction is at issue when the plaintiff's claims arise out of the acts or omissions that take place in Delaware.[58] Sections 3104(c)(1), (c)(2), and (c)(3) of 10 Del. C. § 3104 have been deemed to be specific jurisdiction provisions.[59]

All Plaintiffs here reside outside Delaware, and allege that they were exposed to asbestos-containing products outside Delaware. The Plaintiffs do not allege that their injuries arose from Dana Companies' contacts with Delaware. Moreover, as the evidence developed on the record here indicates, Dana Companies is a Virginia Corporation. Under these facts, Delaware does not have specific jurisdiction over Dana Companies.

E. Delaware does not have general jurisdiction over Dana Companies

Subsection (c)(4) of 10 Del. C. § 3104, pertains to general jurisdiction in cases where the cause of action is unrelated to Delaware contacts.[60] As discussed above, general jurisdiction is premised on a defendant's forum contacts that are unrelated to the plaintiff's injury. Only where contacts are continuous and systematic, and where the defendant is at home in the state, does exercising personal jurisdiction satisfy due process.[61] Deciding what constitutes substantial contacts requires both an absolute and a relative analysis.[62]

The Court finds that Dana Companies does not have the type of continuous and systematic types of contacts necessary, and is not otherwise found "at home" in Delaware. In summary, Dana Companies is incorporated in Virginia. Dana Companies has no directors, officers or employees resident in Delaware. Moreover, Dana Companies does not currently derive any income from Delaware. There is no evidence that Dana Companies presently transacts any business in Delaware other than liquidating claims through litigation, and only 1% of Dana Companies' active litigation takes place in Delaware.[63] Dana Companies is a subsidiary of Dana Holdings, a Delaware Corporation; however, as discussed below, the parent's contacts do not have any bearing on whether exercising general jurisdiction over Dana Companies comports with due process.

Therefore, the operations of Dana Companies are not so substantial and of such a nature as to render the corporation at home in Delaware.

F. Dana Companies' successor status to Dana Corporation does not subject Dana Companies to jurisdiction in Delaware

Plaintiffs contend that Dana Companies' successor status to Dana Corporation creates jurisdiction over Dana Companies in Delaware, "due, in part, to the fact that it is undisputed that Dana Corporation, Dana Companies LLC's predecessor in interest, was a lawful Delaware Corporation until the late 2000s."[64] This is incorrect. According to the bankruptcy documents provided by Defendants, Dana Corporation was incorporated in Virginia.[65]

The Court has not been presented with any other evidence that Dana Corporation had such extensive contacts with Delaware, as to be subject to the jurisdiction – specific or general --of Delaware.[66] This Court has not seen sufficient evidence to find that Delaware would have had personal jurisdiction over Dana Corporation, and thus by extension over Dana Companies, its successor in interest.

G. Dana Holdings' interest in Dana Companies does not provide a basis for personal jurisdiction

Dana Companies is a wholly-owned subsidiary of Dana Holding, a Delaware corporation. Plaintiffs contend that Dana Companies should be subject to personal jurisdiction Delaware because its sole member is a Delaware corporation. Whether the presence of a sole member in the forum jurisdiction will, without more, subject the limited partnership or limited liability corporation to in personam jurisdiction is a question that turns on the further question of whether the law creating the entity treats it as a jural entity.[67]

In Boston Scientific Corp. v. Wall Cardiovascular Technologies, LLC, the defendant was formed under Texas law and, under Texas law, the defendant was treated as an entity having a distinct legal existence.[68] However, one of its members was subject to the personal jurisdiction of Delaware.[69] The U.S. District Court for the District of Delaware found that the Texas Limited Liability Company Act states that a "member of a limited liability company is not a proper party to proceedings by or against a limited liability company, except where the object is to enforce a member's right against or liability to the limited liability company.[70] Dana Companies, was formed under Virginia law, which expressly treats LLCs and members of LLCs as separate entities.[71]

Next, Plaintiffs contend that Dana Holding dominates and controls Dana Companies, thus defeating any jurisdictional defense. This argument fails as a threshold matter. As established in Ali v. Beachcraft Corp., this Court does not have subject matter jurisdiction to pierce the corporate veil.[72] Moreover, the Court has not been presented with any evidence that clearly shows that Dana Companies is an alter ego or a mere instrumentality of Dana Holdings.[73]

V. CONCLUSION

Based on the above, Defendant Dana Companies LLC's Motion to Dismiss Based on Lack of Personal Jurisdiction is hereby GRANTED.

IT IS SO ORDERED.

EXHIBIT A

IN RE: ASBESTOS LITIGATION

Eddie Anderson:

13C-10-168

Thomas Anderson:

13C-03-076

Ray Anderson:

13C-12-168

Patrick Archer:

13C-05-346

James Ardis:

13C-10-020

Thomas Armstrong:

12C-09-004

Vincenzo Aveni:

14C-06-037

Ronald Baker:

12C-01-114

Joseph Bearden:

12C-12-242

David Beatty:

11C-12-122

John Bello:

14C-01-289

Robert Bills:

13C-05-253

Elsie Bozell:

12C-04-194

Rollin Brandenburg:

13C-09-167

Betty Breazeale:

12C-05-234

Ernest Briggs:

12C-05-141

Gary Brohl:

12C-01-172

Norman Buseth:

13C-08-014

Raymond Butterfield:

13C-04-139

Roger Carter:

11C-12-249

James Carter:

13C-04-148

Jacqueline Caton:

11C-06-169

Grady Church:

13C-09-140

Kyles Clement:

12C-01-254

Wendell Coats:

13C-08-143

Robert Colegrove:

11C-12-210

Maurice Coltey:

12C-06-155

Willard Conklin:

13C-09-230

Michael Covine:

13C-10-181

Darrell Dahl:

13C-01-117

Gary Davidson:

13C-11-029

James Davidson:

13C-07-050

Randall Davies:

13C-05-107

Kenneth Davis:

14C-03-026

Paul Dean:

13C-12-257

Leon Delikat:

12C-03-137

Wayne Dropiewski:

14C-04-274

Arvin Duke:

13C-01-125

James Eads:

13C-10-032

Michael Eberhard:

13C-09-162

Terry Engle:

13C-09-202

John Escherich:

11C-04-023

Laron Forrister:

11C-12-211

Glenda Frederick:

11C-05-187

Charles Gates:

12C-04-037

James Gill:

13C-04-091

Roy Girten:

13C-10-098

Sarah Glammeyer:

11C-10-249

Walter Godfrey:

14C-03-079

Henry Godwin:

13C-09-075

Richard Greenwell:

13C-11-203

Stephen Gregory:

13C-10-083

Mitchell Grooms:

12C-02-017

Arthur Gutierrez:

13C-08-108

Earl Hagerty:

11C-04-060

William Hardy:

14C-01-024

Nathaniel Harris:

14C-03-220

Robert Harris:

13C-09-017

Leroy Harrison:

13C-09-042

Herbert Hatch:

11C-10-141

Richard Hayes:

12C-09-115

Hershel Haynes:

13C-12-024

Robert Henry III:

13C-09-126

Willard Higdon:

13C-12-273

Donald Hinthorn:

12C-05-191

William Hobbs:

11C-11-188

Billy Hollon:

12C-05-157

Arlyn Holstege:

14C-06-038

James Hoyt:

12C-08-134

Mary Hudson:

14C-03-247

Johnny Hunter:

13C-08-267

Ronald Hunter:

13C-05-032

Jonathan Johnson:

13C-10-085

Mitchell Jones:

11C-12-192

Lawrence Kahn:

13C-10-184

Ralph Kamsch:

11C-10-250

Theodore Kawasaki:

13C-11-314

Warren Kimber:

12C-11-047

Garland Lankford:

13C-03-197

John Leach:

11C-11-230

Charles Lilly:

12C-01-237

Frank Lolli:

13C-03-179

Jimmy Long:

13C-11-277

Theron Lorimor:

12C-03-249

Robert Malone:

13C-11-323

Luther Marlow:

14C-01-187

Ann Martin:

13C-10-290

Charles Massie:

13C-06-091

Douglas Massingale:

13C-10-208

Duane Mawdsley:

14C-01-040

David McClure:

13C-09-215

Ronald McCurley:

11C-03-117

James McCutcheon:

13C-05-080

Billy McDuffie:

11C-04-210

William McLaurin:

11C-06-294

George Moitke:

13C-09-163

Clarence Morris:

11C-12-191

James Muse:

13C-06-232

William Naugher:

13C-12-098

Dale Neumann:

13C-08-146

Doye Noles:

12C-03-222

Herbert Ostrander:

12C-03-265

Glenda Packard:

11C-06-276

James Pearson:

12C-12-152

Leo Pfeiffer:

11C-04-081

Charles Pieratt:

12C-07-354

Ray Pope:

11C-11-125

Russell Purrington:

14C-03-279

Marguerite Riley:

13C-04-100

Julius Roberts:

11C-09-204

Hipolito Rodriguez:

14C-01-112

Randy Rymal:

13C-08-036

Paul Scaramella:

14C-03-272

John Schantz:

12C-08-319

Harold Schurmann:

14C-01-154

Dennis Scott:

13C-05-324

Walter Shaffer:

13C-05-119

Raymond Sizensky:

14C-03-040

Gregory Smith:

13C-09-040

Norman Smith:

13C-01-045

Anthony Smith:

12C-06-095

Glenn Snider:

14C-01-284

Lloyd Soliday:

14C-05-017

Franklin Spencer:

13C-06-086

Nathaniel Stallings:

13C-07-320

Richard Strickland:

13C-10-156

Harry Taylor:

11C-11-187

Garnet Thacker:

11C-07-169

Donald Thornton:

14C-05-224

Sue Thornton:

12C-05-015

Allen Toothman:

13C-11-219

Allen Trimp:

14C-04-026

Ernest Vanatta:

12C-12-162

Michael Vann:

13C-03-077

William Vaughan:

13C-04-265

James Walker, Jr.:

12C-02-165

Grace Watts:

13C-12-061

William Weaver:

13C-09-166

Frank Wesson:

12C-12-021

Henry White:

13C-12-086

Richard Wildasin:

11C-06-221

Charles Williams:

11C-09-129

Raymond Wilson:

13C-11-276

Dennis Wink:

14C-02-207

Cecil Wright:

14C-01-041

Samuel Zook:

13C-12-181


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