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Ribeiro v. Baby Trend, Inc.

United States District Court, D. Nebraska

June 1, 2016

FRANCO RIBEIRO and DEANNA RIBEIRO, as individuals and as next friends and biological parents of Lucas Ribeiro, an infant; Plaintiffs,
v.
BABY TREND, INC., a corporation; MARK SEDLACK, MILLENIUM DEVELOPMENT CORP., INDIANA MILLS & MANUFACTURING, INC.; LERADO GROUP CO., LTD.; LERADO GROUP HOLDING COMPANY, LTD.; LERADO ZHONG SHAN INDUSTRIAL CO., LTD.; LERADO CHINA LIMITED; LERADO H.K. LIMITED; HOLMBERGS SAFETY SYSTEM HOLDING AB; GNOSJOGRUPPEN AB; HOLMBERGS CHILDSAFETY AB; GNOTEC REFTELE AB; MAXI MILIAAN B.V.; AND DOREL INDUSTRIES, INC., Defendants.

          MEMORANDUM AND ORDER

          Joseph F. Bataillon Senior United States District Judge

         This matter is before the court on motions to dismiss the plaintiffs' seventh amended complaint for lack of personal jurisdiction filed by defendants Gnotec Reftele AB, Filing No. 341 ("Gnotec"); and Lerado (Zhong Shan) Industrial Co., Ltd., Filing No. 347; Lerado China Limited, Filing No. 348; Lerado Group Company, Ltd., Filing No. 349; Lerado H.K. Limited, Filing No. 350; Lerado Group (Holding) Company, Ltd., Filing No. 351 (hereinafter, collectively, "the Lerado defendants").[1] This is a products liability action for damages for personal injuries. In their seventh amended complaint, the plaintiffs allege that the restraint system of a car seat manufactured and/or developed by the defendants strangled and asphyxiated their child, causing the child to suffer permanent brain and neurological injuries. They assert claims for negligence, strict liability in tort, breach of express and implied warranties and violations of the Magnuson Moss Act. Jurisdiction is based on diversity of citizenship under 28 U.S.C. § 1332.

         Defendant Gnotec, a Swedish company, and the Lerado defendants, Chinese companies, assert that they are not subject to the jurisdiction of this court because they lack sufficient minimum contacts with the State of Nebraska. Gnotec AB is a foreign corporation that is incorporated under the laws of Sweden, with its principal place of business in Sweden and defendant Gnotec Refele AB is its wholly-owned subsidiary. Filing No. 215, Memorandum in Support, Ex. A, Declaration of Bo Isaacson. In their Seventh Amended Complaint, the plaintiffs allege that Gnotec “acted jointly and in concert with Baby Trend regarding the design and manufacture of the 5-point harness system” in the car seat. Filing No. 328, Seventh Amended Complaint at 3. Specifically, the plaintiffs allege that Gnotec acted jointly and in concert with the other defendants to defectively “design, manufacture and incorporate into the Car Seat a 5-point harness system that utilized a ‘puzzle buckle, ’ that in the normal use caused a deceptive false latch click.” Id. at 6. The plaintiffs also allege that the Laredo defendants acted jointly and in concert with defendants Baby Trend, Mark Sedlacek, and Millenium Development Corporation to defectively design, manufacture, test and incorporate into the subject Car Seat a concave bottom that permitted the Car Seat to rock back and forth excessively when used in its intended manner including, but not limited to, use as an infant carrier and/or in the upright carry position and placed on a flat surface." Id. at 6.

         I. FACTS

         A. Procedural History

         On March 31, 2015, Lerado Group and Lerado China filed a Motion to Dismiss the plaintiffs' Sixth Amended Complaint based on Fed. R. Civ. P. 12(b)(5) (insufficient service of process). Filing No. 201. In the same motion, the other Lerado entities-Lerado Zhong Shan Industrial Co., Ltd., Lerado Group (Holding) Company Ltd., and Lerado H.K., asserted the defense of lack of personal jurisdiction. Id., Motion at 2.

         Plaintiffs thereafter requested and were granted leave to conduct jurisdictional discovery and an extension of time in which to respond to the motions to dismiss. See Filing Nos. 209 & 221, Motions; Filing Nos. 212 & 224, Orders. On several unopposed motions by the parties, the deadline for jurisdictional depositions was ultimately extended to Nov. 30, 2015, the deadline for responses to the motions extended to December 30, 2015, and the deadline to reply to the responses extended to January 11, 2016. See Filing No. 225, Motion; Filing No. 226, text order; Filing No. 239, Motion; Filing No. 240 text order; Filing No. 244, Motion; Filing No. 247, text order; Filing No. 254, Motion; Filing No. 271, Order; Filing No. 315, Motion; Filing No. 317, text order. On December 23, 2015, the plaintiffs moved, unopposed, to extend all deadlines, for leave to amend to add successor corporations as defendants, and to bifurcate. Filing Nos. 318, 319, and 321. The court granted the motions and the amended complaint was filed on January 7, 2016. Filing Nos. 323, 324, and 327, text orders; Filing No. 328, Seventh Amended Complaint. The Lerado defendants filed a reply brief to the plaintiffs brief opposing the earlier motions to dismiss on January 8, 2016. Filing No. 330, Reply Brief. On January 29, 2016, the court denied the then-pending motions to dismiss as moot in light of the amended pleading. Filing No. 339, Order. On February 12, 2016, all five Lerado entities filed individual Motions to Dismiss on the sole ground of lack of personal jurisdiction. Filings Nos. 347-351.

         The plaintiffs deposed Kuang-Neng (Luke) Cheng, as the designated Rule 30(b)(6) representative for Lerado Zhong Shan and Lerado Group (Holding) Company Ltd., on August 19, 2015, and November 11, 2015. See Filing No. 366-1, Index of Evid., Affidavit of Emily Wischnowski at 1-2. The record shows the Complaint and Summons were served on the registered agents for Lerado China Limited in the British Virgin Islands under Article 5 of the Hague Convention on June 5, 2015 and on the registered agents for Lerado Group Limited on June 2, 2015. See Filing Nos. 281 & 282, summonses returned executed. Gnotec was served with process under the Hague Convention on or about April 5, 2015. Filing No. 215-1, Memorandum in Support, Ex. A, Declaration of Bo Isaacson, ("Isaacson Decl.") at 2.

         B. Evidence

         In support of its motion, Gnotec submits evidence that it has no tangible or intangible property in the State of Nebraska; does not have representatives, agents, servants or employees assigned to duty in Nebraska; does not send representatives, agents, servants or employees to Nebraska for any purpose; has no agent in Nebraska upon whom service of process may be made; does not market its products in Nebraska and does not solicit business from Nebraska; is not registered to do business in Nebraska; has not entered into any contracts to provide good or services in Nebraska. Filing No. 215-1, Isaacson Decl. at 3-5. It contends has not engaged in any activities in the State of Nebraska or directed to the State of Nebraska so as to purposefully avail itself of the benefits and privileges of conducting business in Nebraska nor has it had any “continuous and systematic” contacts with the State.

         Bo Isaacson, Chief Financial Officer of Gnotec, testified that Kendrion Holmbergs AB, now known as Gnotec Reftele AB, manufactured the buckle that is represented to be the buckle involved in this litigation. Filing No. 361-1, Index of Evid., Deposition of Bo Isaacson, as the Rule 30(b)(6) designated representative of Gnotec Reftele AB, at 21. After manufacture, Gnotec sold the buckles to Lerado and shipped them to Lerado in China. Id. at 38-40, 48, 83-84, 89. Gnotec knew Baby Trend was Lerado's customer when it shipped its buckles to Lerado, but did not know that the buckles were to be delivered to that customer. Id. at 99-102.

         The Laredo defendants also contend that no Laredo defendant is licensed to do business in the State of Nebraska, has any offices or affiliated corporate entities in Nebraska, has a designated agent for service of process within the State of Nebraska, has assigned employees or representatives to conduct business in the State of Nebraska, sent representatives to Nebraska for business purposes, solicited business from consumers in Nebraska, or advertises within the State. See Filing No. 201-1, Memorandum of Law, attached Declarations of Joy Ho and George Huang.

         In opposition to the motions, the plaintiffs present evidence that Lerado Holding is a publicly traded organization on the Hong Kong Stock Exchange, and is, or was, the direct or indirect parent of the remaining Lerado defendants. See Filing Nos. 202, 203, and 204, Corporate Disclosure Statements. The record shows the defendant Lerado entities are incorporated in numerous jurisdictions, including China, Bermuda, and the British Virgin Islands. See Filing Nos. 134, 145, 178, 281, 282, Summonses Returned Executed. Lerado Holding is the 100% parent company of Lerado Group, who is the 100% parent company of Lerado China, who is the 100% parent company of Lerado Zhong Shan, who was the manufacturing plant for the subject car seat. Filing No. 368-1, Index of Evid., Ex. B, Deposition of Kuang-Neng (Luke) Cheng as the Rule 30(b)(6) designated representative of Lerado Holding ("Cheng Dep. 2") at 39-40.

         In 2006, Lerado H.K. was an indirect subsidiary of Lerado Group. See Filing No. 367-1, Index of Evid., Ex. A, Deposition of Kuang-Neng (Luke) Cheng as the Rule 30(b)(6) designated representative of Lerado Holding ("Cheng Dep. 1") at 28; Filing No. 373-7, Index of Evid., Ex. J, Organizational Chart at ECF pp. 4195-4200. The Lerado manufacturing facility that produces car seats is located in Zhong Shan, China. Filing No. 367-1, Index of Evid., Ex. A, Cheng Dep. 1 at 82; Filing No. 368-1, Index of Evid., Ex. B, Cheng Dep. 2 at 89. Lerado admits that the Zhong Shan manufacturing plant manufactured the subject infant car seat. Filing No. 367-1, Index of Evid., Ex. A, Cheng Dep. 1 at 27; Filing No. 368-1, Index of Evid., Ex. B, Cheng Dep. 2 at 105. Cheng testified that the car seats were sold through Lerado China, Lerado Zhong Shan's parent company, and that payments were made to Lerado China. Filing No. 368-1, Index of Evid., Ex. B, Cheng Dep. 2 at 44-46. He further testified that he was unsure if the Lerado companies had common operations, and wasn't sure if Lerado Zhong Shan works with Lerado H.K. Id. at 42, 45. Lerado Holding is purely an investment company, but it claims the group's list of customers as its own. Filing No. 368-1, Cheng Dep. 2 at 33, 88. Cheng, who has worked for Lerado for 20 years, also testified he did not know who paid his salary. Filing No. 367-1, Index of Evid., Ex. A, Chen Dep. 1 at 17-18, 20.

         Defendants Lerado Group and Baby Trend entered an Agreement for the manufacture of the Baby Trend Car Seats in 2004. Filing No. 373-6, Index of Evid., Ex. I, Agreement. Lerado acquired liability insurance that covered North America as required by the Agreement. Filing No. 368-1, Index of Evid., Ex. B, Cheng Dep. 2 at 51, 53. The insurance was acquired in the United States. Id.; Filing No. 377-1, Index of Evid., Ex. BB, Certificates of Insurance and Binders. Cheng testified that Laredo Holding was aware of the fact that it could be sued in the United States. Filing No. 368-1, Index of Evid., Ex. B, Cheng Dep. 2 at 54. Lerado sold thousands of car seats in the United States. Id. at 93-94. Id. at 54, 67. It states in annual reports that the car seats are distributed in the United States. Id. at 106-08. In 2006, companies in the United States were Lerado's largest customers. Id. Laredo also reported its potential for liability to its shareholders in its 2014 Annual Report. Id. at 101-02; Filing No. 375-2, Index of Evid., Ex. O, Laredo Group (Holding) Company Limited 2014 Annual Report.

         Lerado has also been actively involved in producing its own branded products for distribution nationwide under the name, "Mia Moda." Filing No. 372-1, Index of Evid., Ex. C, Deposition of Bradley Mattarocci, as Rule 30(b)(6) designate for defendant Baby Trend, ("Mattarocci Dep.") at 23. Lerado has been involved in recalls in the United States. Filing No. 376-8, Index of Evid., Ex. W, NHTSA Recall Notice; Filing No. 376-9, Index of Evid., Ex. X, Lerado Recall Spreadsheet; Filing No. 376-12, Index of Evid., Ex. AA, NHTSA Recall Information (showing 2009 nationwide recall of 5, 400 Mia Moda car seats for manufacturing defects); Filing No. 368-1, Index of Evid., Ex. B, Cheng Dep. 2 at 87. Lerado sent employees to attend trade shows in the United States. Filing No. 368-1, Ex. B, Cheng Dep. 2 at 12-14; Filing No. 372-1, Index of Evid., Ex. C, Mattarocci Dep. at 23.

         II. LAW

         A. Waiver

         "Because the requirement of personal jurisdiction represents first of all an individual right, it can, like other such rights, be waived." Insurance Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 703 (1982); see Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 n. 14 (1985) (noting that “the personal jurisdiction requirement is a waivable right”). Under the Federal Rules, "[a] party waives any defense listed in Rule 12(b)(2)-(5) [lack of personal jurisdiction, improper venue, insufficient process, and insufficient service of process] by: (A) omitting it from a motion in the circumstance described in Rule 12(g)(2)." Fed.R.Civ.P. 12(h)(1)(A). Rule 12(g)(2) provides that a party making a motion under Rule 12 “must not make another motion under this rule raising a defense or objection that was available to the party but omitted from its earlier motion.” Fed. R. Civ. P. 12(g)(2). If a party fails to raise a challenge to personal jurisdiction in a preliminary Rule 12 motion or its first responsive pleading, such challenge is forever waived. See, e.g., American Ass'n of Naturopathic Physicians v. Hayhurst, 227 F.3d 1104, 1106-07 (9th Cir. 2000) ("A fundamental tenet of the Federal Rules of Civil Procedure is that certain defenses under Fed. R. Civ. P. 12 must be raised at the first available opportunity or, if they are not, they are forever waived."); Glater v. Eli Lilly & Co., 712 F.2d 735, 738(1st Cir. 1983) ("It is clear under [Rule 12(h)(1)] that defendants wishing to raise any of these four defenses must do so in their first defensive move, be it a Rule 12 motion or a responsive pleading."); Myers v. American Dental Asso., 695 F.2d 716, 721 (3d Cir. 1982) ("The federal rules single out four defenses which must be raised by the defendant's initial responsive pleading in order to be preserved . . . [u]nless the defendant objects on those grounds at the outset, he forfeits his right later to raise them as a defense"). Moreover, the filing of an amended complaint does not revive a Rule 12(b) defense that was previously waived. State Auto Ins. Co. v. Thomas Landscaping & Constr., Inc., 494 F.App'x 550, 554 (6th Cir. 2012) (affirming lower court's ruling that defendant waived personal jurisdiction defense and could not raise it in response to amended complaint); Pruco Life Ins. Co. v. Wilmington Trust Co., 616 F.Supp.2d 210, 214 (D.R.I. 2009) (noting, however, that an exception applies, however, when the availability of a Rule 12 affirmative defense first reveals itself through what is contained in an amended complaint).

         The rule that the defense of lack of personal jurisdiction is waived if not made by motion or included in a responsive pleading "'sets only the outer limits of waiver; it does not preclude waiver by implication.'" Yeldell v. Tutt, 913 F.2d 533, 539 (8th Cir. 1990) (quoting Marquest Medical Prods. v. EMDE Corp., 496 F.Supp. 1242, 1245 n. 1 (D. Col. 1980). Asserting a jurisdictional defect in the answer does not preserve the defense in perpetuity. Id. The "defense 'may be lost by failure to assert it seasonably, by formal submission ...


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