Park-Kim v. Daikin Industries, Ltd.

          Present: The Honorable CHRISTINA A. SNYDER JUDGE

         DEFENDANT DAIKIN INDUSTRIES, LTD.’S MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION (DKT. 45, FILED MAY 16, 2016) DEFENDANTS DAIKIN NORTH AMERICA, LLC AND DAIKIN APPLIED AMERICAS INC.’S MOTION TO DISMISS PLAINTIFFS’ SECOND AMENDED COMPLAINT (DKT. 44, FILED MAY 16, 2016)

          HONORABLE CHRISTINA A. SNYDER JUDGE

         I. INTRODUCTION

         On November 6, 2015, plaintiff Joanna Park-Kim filed a putative class action in the Los Angeles County Superior Court against defendants Daikin Industries, Ltd. (“DIL”); Daikin Applied Americas Inc. (formerly known as “McQuay International”); and Daikin North America, LLC (“Daikin NA”). Dkt. 1. In brief, plaintiff alleges injury arising from defective evaporator coils in defendants’ heating, ventilation, and air conditioning units (“HVAC units”), which purportedly are susceptible to refrigerant leaks due to “formicary corrosion” of the units’ evaporator coils.

         On December 9, 2015, defendants removed this action to federal court, asserting diversity jurisdiction, as well as original jurisdiction pursuant to the Class Action Fairness Act, 28 U.S.C. § 1332(d). Id. (Notice of Removal). On December 16, 2015, defendants Daikin Applied Americas Inc. and Daikin NA filed a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6).^[1] On January 6, 2016, plaintiff Joanna Park-Kim filed a first amended complaint (“FAC, ” dkt. 24) as a matter of course, pursuant to Federal Rule of Civil Procedure 15. See Fed.R.Civ.P. 15(a)(1)(B) (“A party may amend its pleading once as a matter of course within . . . 21 days after service of a motion under Rule 12(b) . . . .”).

         On January 25, 2016, defendants Daikin Applied Americas Inc. and Daikin NA filed a Rule 12(b)(6) motion to dismiss plaintiff Park-Kim’s FAC. Dkt. 28. In an order dated March 17, 2016, the Court dismissed plaintiff’s FAC without prejudice, emphasizing that the pleadings must provide “factual enhancement[s]” in place of “generalized assertions, ‘legal conclusions, ’ and ‘threadbare recitals of a cause of action.’” Dkt. 39 (Order on Motion to Dismiss FAC), at 10 (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).

         On April 15, 2016, plaintiff Maria Cecilia Ramos was added as a party in this action and, along with plaintiff Joanna Park-Kim, filed the operative second amended complaint (“SAC”). Dkt. 40. The SAC asserts the following claims: (1) violation of the Magnuson-Moss Warranty Act, 15 U.S.C. §§ 2301, et seq. (“MMWA”); (2) strict liability - failure to warn; (3) strict liability - manufacturing defect; (4) strict liability - design defect; (5) negligence; (6) breach of express warranty; (7) breach of implied warranty of fitness; (8) breach of implied warranty of merchantability; (9) violation of California’s unfair competition law (“UCL”), California Business and Professions Code § 17200, et seq.; and (10) violations of California Civil Code § 896(g)(5). See id.

         On May 16, 2016, defendant DIL, who had not joined the previously-filed Rule 12(b)(6) motions to dismiss, filed a Rule 12(b)(2) motion to dismiss for lack of personal jurisdiction on the grounds that this Court lacks both general jurisdiction and specific jurisdiction over DIL. Dkt. 45 (“Def.’s Mot. PJ”). On May 27, 2016, plaintiffs filed an opposition to DIL’s motion, dkt. 48 (“Pls.’ Opp’n PJ”), and on June 6, 2016, DIL filed a reply, dkt. 51 (“Def.’s Reply PJ”).

         Also on May 16, 2016, defendants Daikin Applied Americas Inc. and Daikin NA filed a Rule 12(b)(6) motion to dismiss plaintiffs’ SAC for failure to state a claim. Dkt. 44 (“Defs.’ Mot.”). On May 27, 2016, plaintiffs filed an opposition to the Rule 12(b)(6) motion, dkt. 49 (“Pls’ Opp’n”), and on June 6, 2016, defendants Daikin Applied Americas Inc. and Daikin NA filed a reply, dkt. 50 (“Defs.’ Reply”).

         Having carefully considered the parties’ arguments, the Court finds and concludes as follows.

         II. BACKGROUND

         The SAC pleads the following facts:

         Defendants Daikin Industries, Ltd., Daikin Applied Americas Inc., Daikin North America, and Does 1 through 50 “design, manufacture and sell heating, ventilation, and air conditioning units (‘HVAC units’) containing a component known as an evaporation coil manufactured with copper tubing (‘Daikin Coils’).” SAC at ¶ 4. These “Daikin Coils” contain a refrigerant that absorbs heat from the surrounding air, cools the air in the process, and thereby allows defendants’ HVAC units to air condition homes, businesses, and buildings. Id. at ¶ 5. However, plaintiffs allege that Daikin Coils fail to operate properly under normal conditions. Id. at ¶ 6. Specifically, plaintiffs allege that

[i]nstead of performing their intended purpose of cooling air, Daikin Coils fail to cool air because they corrode and leak refrigerant well before the expiration of their useful life. These leaks render the HVAC units useless for an intended purpose, leading to costly repairs, and eventually, the total failure of the Daikin Coils so that they need to be replaced.

Id. Plaintiffs further aver that the failure of Daikin Coils to perform as intended is an unavoidable consequence of their design. Specifically, “[a]s a result of their manufacturing process, ” the copper tubes in the Daikin Coils are prone to “formicary corrosion, ” a process that “causes microscopic holes within the tubing that cause the Daikin Coils to leak refrigerant and ultimately fail.” Id. at ¶ 7.

         According to plaintiffs, “[t]he corrosion and failure of Daikin Coils are due to Defendants’ actions, including but not limited to, [1] selecting the wrong alloy, [2] defective manufacturing of the Daikin Coils, and [3] failing to properly ensure that the Daikin Coils will perform for their useful life and are fit for their intended purpose.” Id. Plaintiffs further aver that defendants “designed, created product materials for, designed instructions for, caused the manufacture of, and sold HVAC units containing Daikin Coils that were installed in homes throughout California, including Plaintiffs’, the Class’s and the Subclass’s homes.” Id.

         Named plaintiff Joanna Park-Kim alleges that she purchased a new condominium unit in September 2010 that included “a McQuay brand Enfinity Water Source Heat Pump, Model FCV Vertical Floor unit, ” which included Daikin Coils that have “corroded and leaked refrigerant such that her HVAC unit failed, ceasing to adequately cool air.”^[2]Id. at ¶¶ 36-37; see also id. at ¶¶ 38-39. Named plaintiff Maria Cecilia Ramos alleges that she purchased a new condominium unit in June 2009 that included “a McQuay brand Enfinity Water Source Heat Pump, Model FCV Vertical Floor unit, ” which “was manufactured with defective Daikin Coils” that have “corroded and leaked refrigerant such that her HVAC unit failed because it could no longer adequately cool air.” Id. at ¶¶ 40-41; see also id. at ¶¶ 42-43.

         Pursuant to California Code of Civil Procedure section 382, plaintiffs bring this action on behalf of the following proposed class (“the Class”) and subclass (“the Subclass”):

Class: All individual, entity and associations of owners in the State of California who own HVAC units with Daikin Coils installed in them.

Subclass: All individual, entity and associations of owners of originally constructed individual dwelling units, other than condominium conversions, in the State of California in which purchase agreements for the individual dwelling units were signed by the original seller on or after November 2, 2005 and in which the residential units had installed as part of the original construction HVAC units with Daikin Coils installed in them.

See id. at ¶¶ 14-15.

         The SAC further alleges that Daikin Coils damage the environment and expose consumers to various specific health and safety risks, which are outlined in the SAC. See id. at ¶¶ 33, 35. The operative SAC further alleges in general terms that “leaked refrigerant [from the Daikin Coils] damages surrounding property, including walls, floors, and other components of HVAC units in the vicinity of a leak.” Id. at ¶ 34.

         III. DISCUSSION

         A. DEFENDANT DIL’S MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION

         1. Legal Standard

         When a defendant moves to dismiss for lack of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2), the plaintiff bears the burden of demonstrating that the court may properly exercise personal jurisdiction over the defendant. Pebble Beach Co. v. Caddy, 453 F.3d 1151, 1154 (9th Cir. 2006). Where, as here, a court decides such a motion without an evidentiary hearing, the plaintiff need only make a prima facie showing of jurisdictional facts to withstand the motion to dismiss. Ballard v. Savage, 65 F.3d 1495, 1498 (9th Cir. 1995); Doe v. Unocal Corp., 27 F.Supp.2d 1174, 1181 (C.D. Cal. 1998), aff’d, 248 F.3d 915 (9th Cir. 2001). Plaintiff’s version of the facts is taken as true for purposes of the motion if not directly controverted, and conflicts between the parties’ affidavits must be resolved in plaintiff’s favor for purposes of deciding whether a prima facie case for personal jurisdiction exists. AT&T v. Compagnie Bruxelles Lambert, 94 F.3d 586, 588 (9th Cir. 1996); Unocal, 27 F.Supp.2d at 1181. If the defendant submits evidence controverting the allegations, however, the plaintiff may not rely on its pleadings, but must “come forward with facts, by affidavit or otherwise, supporting personal jurisdiction.” Scott v. Breeland, 792 F.2d 925, 927 (9th Cir. 1986) (quoting Amba Mktg. Servs., Inc. v. Jobar Int’l, Inc., 551 F.2d 784, 787 (9th Cir. 1977)).

         Generally, personal jurisdiction exists if (1) it is permitted by the forum state’s long-arm statute and (2) the “exercise of that jurisdiction does not violate federal due process.” Pebble Beach, 453 F.3d at 1154-55 (citing Fireman’s Fund Ins. Co. v. Nat’l Bank of Coops., 103 F.3d 888, 893 (9th Cir. 1996)). California’s long-arm jurisdictional statute is coextensive with federal due process requirements, so that the jurisdictional analysis under state and federal law are the same. Cal. Civ. Proc. Code § 410.10; Roth v. Garcia Marquez, 942 F.2d 617, 620 (9th Cir. 1991). The Fourteenth Amendment’s Due Process Clause requires that a defendant have “minimum contacts” with the forum state so that the exercise of jurisdiction “does not offend traditional notions of fair play and substantial justice.” Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). Depending on the nature of the contacts between the defendant and the forum state, personal jurisdiction is characterized as either general or specific.

         2. Analysis

         Defendant DIL argues that this Court has neither general nor specific jurisdiction over DIL, such that plaintiffs’ claims against DIL must be dismissed.

         A court has general jurisdiction over a nonresident defendant when that defendant’s activities within the forum state are “substantial” or “continuous and systematic, ” even if the cause of action is “unrelated to the defendant’s forum activities.” Perkins v. Benguet Consol. Mining Co., 342 U.S. 437, 446-47 (1952); Data Disc, Inc. v. Sys. Tech. Assocs., Inc., 557 F.2d 1280, 1287 (9th Cir. 1977). DIL avers that its place of incorporation and principal place of business are in Osaka, Japan; that it “does not have offices, staff, or other physical presence in California;” and further that it “is not licensed to do business [in California].” Def.’s Mot. PJ at 5. Based in part upon such information, plaintiffs concede that this Court cannot assert general jurisdiction over defendant DIL. However, the parties dispute whether the Court may properly exercise specific jurisdiction over DIL.

         For the reasons explained in the discussion that follows, the Court finds that it lacks specific jurisdiction over defendant DIL, and accordingly must dismiss DIL from this action for lack of personal jurisdiction.

         a. Specific Jurisdiction

         A court has specific jurisdiction over a defendant if that defendant has sufficient minimum contacts with the forum state arising from, or related to, the plaintiff’s claims. See Mavrix Photo, Inc. v. Brand Technologies, Inc., 647 F.3d 1218, 1228 (9th Cir. 2011). The test for specific personal jurisdiction has three parts:

(1) The non-resident defendant must purposefully direct his activities or consummate some transaction with the forum or resident thereof; or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws;

(2) the claim must be one which arises out of or relates to the defendant's forum-related activities; and (3) the exercise of jurisdiction must comport with fair play and substantial justice, i.e. it must be reasonable.

Id. at 1227-28 (quoting Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 802 (9th Cir. 2004); see also Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475-76 (1985).

         The plaintiff bears the burden of satisfying the first two prongs. Schwarzenegger, 374 F.3d at 802. “If [plaintiff] does so, the burden then shifts to [defendant] to set forth a ‘compelling case’ that the exercise of jurisdiction would not be reasonable.” Mavrix, 647 F.3d at 1228. If, however, either of these prongs is not satisfied, personal jurisdiction is not established. Schwarzenegger, 374 F.3d at 802.

         i. Purposeful Availment of this Forum

         DIL argues that plaintiffs cannot satisfy the first prong of the specific personal jurisdiction analysis because DIL has not purposefully availed itself of the privileges of conducting business in California. “In order to have purposefully availed oneself of conducting activities in the forum, the defendant must have performed some type of affirmative conduct which allows or promotes the transaction of business within the forum state.” Sinatra v. National Enquirer, 854 F.2d 1191, 1195 (9th Cir. 1988). “This purposeful availment requirement ensures that a defendant will not be haled into a jurisdiction solely as a result of random, fortuitous, or attenuated contacts, or of the unilateral activity of another party or third person.” Burger King, 471 U.S. at 475 (citations and internal quotations omitted).

         In the operative SAC, plaintiffs assert in general terms that “[d]efendants manufactured, designed, sold, supplied, marketed, or otherwise introduced [the relevant products] into the stream of commerce . . . .” SAC at ¶ 73. In plaintiffs’ view, because DIL purportedly “does not dispute” in the instant motion that the “products [it] designs or manufactures are sold in California . . . [t]he resultant transactions are thus sufficient to . . . satisfy[] the purposeful availment requirement.” Pls.’ Opp’n PJ at 4 (citations omitted). The operative SAC further alleges in general terms that each defendant “was the agent, joint venturer or employee of each of the remaining [d]efendants, and in doing the things . . . alleged [in the SAC], each was acting in the course and scope of said agency, employment or joint venture with advance knowledge of, acquiescence in or subsequent ratification of the acts of each and every other remaining defendant.” SAC at ¶ 10. In plaintiffs’ view, such alter ego allegations establish that all of the named defendants, including defendant DIL, are “subject to jurisdiction if there is jurisdiction over any one of them.” Pls.’ Opp’n PJ at 5 (citations omitted). Finally, plaintiffs highlight certain statements on DIL’s website relating to “Daikin Global’s” “Group Philosophy” and “synergetic effects, ” which purportedly indicate the global and interconnected nature of DIL’s business and that of its affiliated companies. Id. at 5.

         DIL, however, avers through the sworn declaration of its Legal Officer that it “did not even ‘place[] in the stream of commerce’ the products at issue here” because “DIL does not design, manufacture, or sell McQuay products” like the HVAC units at issue in this action. Def.’s Mot. PJ at 9; see Data Disc, 557 F.2d at 1284 (in ruling on a motion to dismiss for lack of personal jurisdiction, the Court “may not assume the truth of allegations in a pleading which are contradicted by affidavit.”). More importantly, as DIL rightly notes, even if DIL did place the allegedly defective products into the stream of commerce, “placement of a product into the stream of commerce, without more, is not an act purposefully directed toward a forum state. Even a defendant’s awareness that the stream of commerce may or will sweep the product into the forum state does not convert the mere act of placing the product into the stream of commerce into an act purposefully directed toward the forum state.” America Line Inc. v. Wartsila North America, Inc., 485 F.3d 450, 459 (9th Cir. 2007) (citations omitted).

         With respect to plaintiffs’ allegations regarding DIL’s marketing activities, DIL also avers that it is not involved in the marketing or promotion of any of the McQuay-branded products at issue in this action. See Def.’s Reply PJ at 3. Finally, with respect to plaintiffs’ assertion that each defendant is the agent of the other, such boilerplate legal conclusions add little weight to the scales, as they cannot be accepted as true on a motion to dismiss for lack of personal jurisdiction. See Lacano Invs., LLC v. Balash, 765 F.3d 1068, 1071 (9th Cir. 2014) (“While we do accept all of the factual allegations in the complaint as true, we do not accept legal conclusions in the complaint as true, even if ‘cast in the form of factual allegations.’ ”) (citations omitted); CollegeSource, Inc. v. AcademyOne, Inc., 653 F.3d 1066, 1073 (9th Cir. 2011) (noting that on a motion to dismiss for lack of personal jurisdiction, the plaintiff cannot “simply rest on the bare allegations of its complaint”). And even though DIL has a parent-subsidiary relationship with the other defendants in this action, such a relationship does not provide grounds for imputing the California contacts of Daikin Applied Americas Inc. or Daikin North America, LLC to defendant DIL. See Transure, Inc. v. Marsh and McLennan, Inc., 766 F.2d 1297, 1299 (9th Cir. 1985) (holding that the existence of a relationship between a parent company and its subsidiaries is not sufficient to establish personal jurisdiction over the parent based on the subsidiaries’ minimum contacts with the forum).

         Notably, DIL does concede that it sells “certain HVAC products (although not McQuay products . . . or the component evaporator coils) in Japan to distributors that sell in the United States.” Def.’s Mot. PJ at 10. However, again, “it is [DIL’s] purposeful contacts with [California], not with the United States [more generally], that alone are relevant” for purposes of the instant motion. J. McIntyre Machinery, Ltd. v. Nicastro, 564 U.S. 873, 886 (2011) (emphasis added); see also BenQ America Corp. v. Forward Elecs. Co., Ltd., 2005 WL 3445629, at *6 (N.D. Cal. Dec. 15, 2005) (“The appropriate test is not whether the [products] were designed for the U.S. market, but whether they were designed for and intended to be sold in California.”) (emphasis in original).

         Accordingly, the Court cannot conclude that DIL has “perform[ed] some act by which [its has] purposefully avail[ed] [itself] of the privilege of conducting activities” in California. Mavrix, 647 F.3d at 1228.

         ii. Whether Plaintiffs’ Claims Arise out of or Relate to DIL’s Forum-Related Activities

         DIL is also not subject to specific jurisdiction because plaintiffs’ claims do not arise out of any of DIL’s forum-related activities. In evaluating the “arise[] out of” prong of the specific jurisdiction inquiry, “the Court considers whether [the] claims would have arisen but for [the defendant]’s contacts with California.” Unocal, 248 F.3d at 924. Plaintiffs here cannot establish that but for DIL’s activities, plaintiffs would not have been harmed by the allegedly defective McQuay-branded products. Plaintiffs allege only in general terms that “Defendants” manufactured “Daikin Coils.” SAC at ¶ 4. Of course, plaintiffs cannot “simply rest on the bare allegations of [their] complaint, ” Schwarzenegger, 374 F.3d at 800, and the Court “may not assume the truth of allegations in a pleading which are contradicted by affidavit, ” Data Disc, 557 F.2d at 1284. Plaintiffs’ allegations here are wholly insufficient to establish that DIL manufactured plaintiffs’ McQuay-brand products, the only named product in the SAC. See, e.g., NuCal Foods, Inc. v. Quality Egg LLC, 887 F.Supp.2d 977, 990 (E.D. Cal. 2012) (“[E]ven if plaintiff’s allegation that the entity defendants [engaged in] every aspect of egg production was true, that is not enough to demonstrate that each separate entity was actually involved in the sale and delivery of the allegedly tainted eggs” for purposes of personal jurisdiction).

         Indeed, DIL avers through the sworn declaration of its Legal Officer that it “did not design or manufacture [p]laintiffs’ allegedly defective evaporator coils or any other component of [p]laintiffs’ McQuay-brand heat pumps, nor was DIL involved in the supply or sales chain.” Def.’s Mot. PJ at 7. Plaintiffs provide no evidence to the contrary; accordingly, much like the Court’s consideration of DIL’s alleged purposeful availment, consideration of the second factor also indicates that the Court lacks specific jurisdiction over defendant DIL. See, e.g., Rockwell Automation, Inc. v. Kontron Modular Computers, 2012 WL 5197934, at *9 (S.D. Cal. Oct. 19, 2012) (finding “no evidence to support a finding of specific jurisdiction” where declaration established that the defendant “is not even ‘involved in the engineering or development of the[] products [at issue]’”); see also Jackson v. Tanfoglio Giuseppe, S.R.L., 615 F.3d 579, 586 (5th Cir. 2010) (no specific personal jurisdiction where defendant did not manufacture either the pistol or its defective component).

         In their opposition, plaintiffs nonetheless contend that the second prong is satisfied both because their claims arise from “their ownership of defective Daikin HVAC units, ” and because DIL has purportedly marketed its products in California. Pls.’ Opp’n PJ at 6. As discussed above, however, the actions of DIL’s subsidiaries may not be imputed to a foreign company like DIL unless plaintiffs sufficiently plead alter ego status, which they have undoubtedly failed to do here. See generally Unocal, 248 F.3d 915. Furthermore, DIL has made clear in its reply and the sworn declaration submitted in support thereof that it is not involved in any fashion with the marketing or promotion of McQuay-brand products. Def.’s Reply PJ at 3.

         Accordingly, plaintiffs have failed to establish that their claims arise out of or relate to DIL’s forum-related activities.

         3. Conclusion

         As stated supra, “[t]he plaintiff bears the burden of satisfying the first two prongs of the [Ninth Circuit’s test regarding when a forum may assert specific jurisdiction].” Schwarzenegger, 374 F.3d at 802 (citation omitted). Because plaintiffs here have failed to satisfy both of these prongs, personal jurisdiction is not established in California, and defendant DIL must be dismissed from this action. Id. (noting that “[i]f the plaintiff fails to satisfy either of these prongs, personal jurisdiction is not established in the forum state”).^[3]

         In accordance with the foregoing, the Court hereby GRANTS defendant DIL’s Rule 12(b)(2) motion to dismiss for lack of personal jurisdiction.

         B. DEFENDANTS’ MOTION TO DISMISS FOR ...