United States District Court, E.D. Kentucky Central Division Lexington
MODERN HOLDINGS, LLC, GAY BOWEN, GREENLEAF PLANT FOOD WHOLESALE, INC., and BOBBIE LEMONS, Plaintiffs,
CORNING INCOPORATED, KONINKLIJKE PHILIPS, N. V. and PHILIPS ELECTRONICS NORTH AMERICA CORPORATION, Defendants. ELBERT COX, JR., CECIL WAYNE FRANKLIN, JOHN SPEARS, WANDA BEASLEY, DONALD KING, LINDSEY PENNINGTON, TERESA PRESTON, BEVERLY PRESLEY, Personal Representative of the Estate of Annabell Gordon, Plaintiffs,
KONINKLIJKE PHILIPS, N. V. and PHILIPS ELECTRONICS NORTH AMERICA CORPORATION, Defendants.
MEMORANDUM OPINION & ORDER
GREGORY F. VAN TATENHOVE, District Judge.
These sister environmental mass tort class actions allege that the operators of a glass manufacturing facility in Danville, Kentucky injured employees ( Cox, et al. v. Philips Electronics North America Corp., et al., No. 13-cv-406-GFVT) and caused personal injury and property damage to area residents and landowners ( Modern Holdings, LLC, et al. v. Corning Incorporated, et al., No. 13-cv-405-GFVT) by illegally disposing of certain hazardous substances and contaminating the workplace, as well as area groundwater, air and soil. Koninklijke Philips, N.V. (KPNV), the Dutch parent company to Philips Electronics North America Corporation, is party to both actions and has filed motions to dismiss for lack of personal jurisdiction in both cases. [ Modern Holdings, No. 13-cv-405-GFVT, R. 50; Cox, No. 13-cv-406-GFVT, R. 20]. After conducting an evidentiary hearing, the Court finds that it is without jurisdiction over KPNV, and it will GRANT its motions to dismiss in both actions.
Plaintiffs filed these sister class action lawsuits against the owner-operators of a Danville, Kentucky glass manufacturing facility - Corning Incorporated and subsequent-purchaser Philips Electronics North America Corporation - as well as Koninklijke Philips, N.V. (KPNV), parent company to Philips Electronics. In Modern Holdings, LLC, et al. v. Corning Incorporated, et al., No. 13-cv-405-GFVT, area landowners and residents allege that Corning and Philips Electronics caused personal injury and property damage by discharging hazardous substances, including asbestos, mercury, arsenic, lead, and PCB compounds (among others), from the Facility into area streams and fields. In Cox, et al. v. Philips Electronics, et al., No. 13-cv-406-GFVT, former Philips Electronics employees allege that their employer deliberately intended to cause them personal injury by exposing them to these substances and failing to warn of the risks of exposure. In both cases, Plaintiffs allege that KPNV communicated with Philips Electronics and was aware of the contamination in the area. [ Modern Holdings, Second Am. Class Action Compl., R. 108 at ¶ 67; Cox, Tendered Second Am. Class Action Compl., R. 63-1 at ¶ 65]. They also contend that KPNV was under "an independent duty to protect the Plaintiffs and prevent [the] contamination... yet failed to fulfill this duty." [ Id. ] KPNV has filed motions to dismiss the complaints in both cases for lack of personal jurisdiction, pursuant to Federal Rule of Civil Procedure 12(b)(2). [ Modern Holdings, No. 13-cv-405-GFVT, R. 50; Cox, No. 13-cv-406-GFVT, R. 20]. The parties briefed this issue, and the Court conducted an evidentiary hearing on March 9, 2015. [ Modern Holdings, R. 101; Cox, R. 66]. Though the two cases bear slightly different facts, the same jurisdictional facts apply in both cases, and the Court addresses both of KPNV's motions in this single opinion.
KPNV is a holding company incorporated in the Netherlands, where it maintains its corporate offices and principal place of business. Philips Electronics, which owned and operated the Facility between 1983 and February 2011,  is one of its many wholly-owned subsidiaries. Relevant here, KPNV also owns Philips Lighting, B.V., a distinct subsidiary based in the Netherlands, [R. 55-6 at 9; see Hr'g Tr. 103, 117, Modern Holdings, R. 105, Cox, R. 69]. KPNV has no agent for process in the United States and maintains no independent offices, operational facilities, or manufacturing plants in this country.
Despite this, Plaintiffs argue that KPNV has directly and independently availed itself of Kentucky law. They identify several sources that they contend support personal jurisdiction. For long arm jurisdiction on the basis of property ownership, they cite a 2008 Kentucky Department of Environmental Protection (DEP), Division of Waste Management form listing "Royal Philips Electronics" (KPNV's trade name) as the "legal owner of generator" and "legal landowner of generator" for the Danville plant. [ Modern Holdings, R. 55-3; Cox, R. 23-1]. They point to a document obtained through an open records request from the Kentucky DEP, which references a corporate guaranty made by KPNV on behalf of Philips Electronics for certain hazardous waste insurance coverage. [ Modern Holdings, R. 55-4; Cox, R. 23-2]. As evidence that KPNV derives substantial revenue from Kentucky, they quote KPNV's self-description in an SEC filing, which states that the company "posted sales of EUR 24.8 billion and employs approximately 116, 000 employees with sales and services in more than 100 countries." [ Modern Holdings, R. 55-6; Cox, R. 23-4]. They note that KPNV also owns subsidiaries called Project Realty, LLC and ARCADIS, which respectively handled real estate and environmental consulting matters at the Facility after its closure in February 2011. [ Modern Holdings, R. 55-5; Cox, R. 23-3].
Both parties have offered evidence relating to the extent of KPNV's oversight over Philips Electronics. Plaintiffs introduced evidence that Cees Burger, a Netherlands-based marketing and procurement manager for Philips Lighting, B.V.,  attended a meeting in Danville in late 2011. [Hr'g Tr. 103, 102-05, 134, Modern Holdings, R. 105, Cox, R. 69]. This meeting related to a bid by NeoStar Glass, LLC for the purchase of the Facility site, a proposed supply agreement between NeoStar and Philips Electronics and, as a potential term of the proposed sale, environmental remediation responsibilities on the site. [Harris Dep. at 16:3-17:14, Modern Holdings, R. 100, Cox, R. 64; see also Hr'g Tr. 102-05, Modern Holdings, R. 105, Cox, R. 69]. Plaintiffs offered testimony from Dr. Scott Harris and Keith Spencer, who attended the meeting as environmental consultants for NeoStar Glass and stated that, in their observation, it appeared that Mr. Burger was the ultimate decision-maker on the sale. [Hr'g Tr. 39, Modern Holdings, R. 105, Cox, R. 69; Harris Depo. 44:8, Modern Holdings, R. 100, Cox, R. 64].
Plaintiffs also offered testimony from former plant employees. Elbert Cox, Jr. and Ronald Bennett, former employees and union leaders at the Danville plant, testified that during negotiations for severance packages just prior to the plant's closure in 2011, human resources employees for Philips Electronics stated that they needed permission from managers "from the Netherlands" before certain pension payments could be paid to a handful of employees who would otherwise be months shy of eligibility. [ Id. at 75; see also id. at 62-63, 82]. Mr. Bennett also testified that representatives "out of the Netherlands" visited on two occasions for technical training on certain glass pressware equipment. [ Id. at 77]. Plaintiffs also submitted an affidavit from Anna Broughton, the owner of NeoStar Glass. [Broughton Aff., Modern Holdings, R. 55-8, Cox, R. 23-6]. She testified that KPNV approved budgets for Philips Electronics and visited the Facility to give "advice and assistance regarding disposal of Hazardous Substances." [ Id. at ¶ 2].
Finally, Plaintiffs rely on an affidavit from Katherine Reid, which is the subject of a motion to strike and several objections. In the affidavit, Ms. Reid, a paralegal to Plaintiffs' counsel, relays a conversation she had with Paul Walitsky, a former employee of Philips Lighting Company. [Reid Aff., Modern Holdings, R. 55-7, Cox, R. 23-5]. Reid states that Walitsky told her that he reported "to Holland, " that KPNV knew about a lead contamination incident with the Facility's roof, and that KPNV approved budgets for environmental clean-ups. [ Id. at ¶¶ 5, 7, 9]. KPNV also submitted an affidavit from Walitsky refuting these statements. [Walitsky Aff., Modern Holdings, R. 59-3; Cox, R. 26-3].
KPNV offered evidence that the bulk of Philips Electronics' activities were overseen by Philips Electronics upper management or Philips Lighting Company - not by KPNV itself. In the normal course of business, the plant manager at the Danville Facility reported to Philips Lighting Company in New Jersey. [Hr'g Tr. 95-102, 105, Modern Holdings, R. 105, Cox, R. 69; Winkler Decl. ¶¶ 2-3, Modern Holdings, R. 59-2, Cox, R. 26-2]. Dean Weeks, a former Danville Plant Manager and the current Senior Project Manager for Environmental Affairs with Philips Electronics,  testified that only significant capital expenditures (over at least $2 million) required approval from management in the Netherlands; otherwise, most capital expenditure projects were approved by Philips Lighting Company. [Hr'g Tr. 99-101, 105, Modern Holdings, R. 105, Cox, R. 69]. Mr. Weeks testified that, during his tenure as Plant Manager from 1983 to 2000, he never submitted any capital expenditure proposal to KPNV. [ Id. at 100]. Weeks testified that the environmental affairs at the Danville facility were "always handled locally, " [ id. at 97], but for certain matters beyond the capabilities of the local office, the final decision-makers regarding environmental matters for the Danville Facility, as well as the proposed NeoStar Glass sale, were the regional vice-president of environmental affairs and the regional director for real estate, both of whom are located in Philips Electronics' Andover, Massachusetts office. [ Id. at 98-99, 104].
In reviewing a 12(b)(2) motion, a court has three options in its discretion: "(1) the court can decide the motion upon the affidavits alone; (2) the court can permit discovery to decide the motion; or (3) the court can conduct an evidentiary hearing to resolve any factual disputes." Serras v. First Tennessee Bank Nat. Assn., 875 F.2d 1212, 1214 (6th Cir. 1989) (internal quotation marks and citations omitted); see also Theunissen v. Matthews, 935 F.2d 1454, 1459 (6th Cir. 1991) (noting that a court may, in its discretion, "hold an evidentiary hearing if [the party seeking dismissal] disputes the plaintiff's factual assertions"). In each scenario, "plaintiffs bear the burden of satisfying the constitutional and statutory prerequisites for the exercise of jurisdiction." Bradley v. Mayo Found., 1999 U.S. Dist. LEXIS 17505, 17-18, 1999 WL 1032806 (E.D. Ky. Aug. 10, 1999) (citing CompuServe, Inc. v. Patterson, 89 F.3d 1257, 1261 (6th Cir. 1996)).)). When the court conducts an evidentiary hearing, as here, "the plaintiff must prove jurisdiction by a preponderance of the evidence." Long John Silver's, Inc. v. Diwa III, Inc., 650 F.Supp.2d 612, 619 (E.D. Ky. 2009) (citing Dean v. Motel 6 Operating L.P., 134 F.3d 1269, 1272 (6th Cir. 1998).
Before undertaking the jurisdictional analysis, a number of evidentiary issues that arose during the briefing period and at the hearing must be addressed. In both Modern Holdings and Cox, Plaintiffs attached to their Responses affidavits and other documents in support of their argument that KPNV had "continuing and extensive contacts" in Kentucky. [ Modern Holdings, Pl.'s Resp., R. 63 at 1]. At the center of the dispute is the affidavit of Katherine Reid, which relays a phone conversation she had with former Philips Lighting Company employee Paul Walitsky regarding KPNV's oversight activities. [ Modern Holdings, R. 55-7, Cox, R. 23-5]. Plaintiff offered this affidavit as proof that KPNV maintains or engaged in continuous activity in Kentucky. KPNV moved to strike the affidavit as inadmissible hearsay, [ Modern Holdings, R. 61; Cox, R. 28], and provided an affidavit from Walitsky himself refuting the statements attributed to him in the Reid Affidavit. [ Modern Holdings, R. 59-3, R. 61-2; Cox, R. 26-3, R. 28-2].
Plaintiffs argued that the Reid Affidavit was admissible and, purporting to rehabilitate Reid's credibility, they submitted an internal office memorandum written by Reid to Plaintiffs' counsel. [ Modern Holdings, R. 65; Cox, R. 32]. This memo is nearly identical in content to the affidavit. Plaintiffs moved for leave to seal this document, claiming that it was privileged. [ Modern Holdings, R. 64; Cox, R. 31]. KPNV objected to Plaintiff's motion to seal. [ Modern Holdings, R. 69; Cox, R. 34]. It argued that Plaintiffs had waived any privilege because they had not filed the document in camera with the Court, but instead had voluntarily served the memo to opposing counsel along with their Response to the Motion to Strike.
The Federal Rules of Civil Procedure are silent regarding the use of affidavits in the context of a Rule 12(b) motion to dismiss. However, several sister courts have held that the standard expressly prescribed in Rule 56(b) applies equally to affidavits submitted in a 12(b) motion to dismiss. Pixler v. Huff, 2011 U.S. Dist. LEXIS 133185, *12, 2011 WL 5597327 (W.D. Ky. Nov. 16, 2011) ("The Court sees no reason why an affidavit or declaration submitted in connection with a motion to dismiss under Rule 12(b)(2) should be treated any differently [from one submitted in a summary judgment motion under Rule 56]."); Churchill Downs, Inc. v. NLR Entm't, LLC, 2014 U.S. Dist. LEXIS 71672, *6-7 (W.D. Ky. May 27, 2011); accord United Tech. Corp. v. Mazer, 556 F.3d 1260, 1277 (11th Cir. 2009). Rule 56, in turn, requires that "[a]n affidavit or declaration used to support or oppose a motion must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant or declarant is competent to testify on the matters stated." Fed.R.Civ.P. 56(c)(4). A party offering an affidavit for a 12(b) motion, then, must demonstrate that it complies with the Federal Rules of Evidence. Churchill Downs, 2014 U.S. Dist. LEXIS 71672 at *6-7; cf. Sperle v. Mich. Dep't of Corr., 297 F.3d 483, 495 (6th Cir. 2002). "Hearsay evidence... must be disregarded." Alpert v. United States, 481 F.3d 404, 409 (6th Cir. 2007).
Hearsay is a statement made by an out-of-court declarant, offered for the purpose of proving the truth of the matter asserted. Fed.R.Evid. 801(c). Hearsay is, of course, generally not admissible in evidence, Fed.R.Evid. 802, unless it is covered by some exception or constitutes "non-hearsay" within the meaning of Federal Rule of Evidence 801(d). Plaintiffs offer the unsworn, out-of-court statements of Mr. Walitsky contained in the Reid affidavit for proof of their contents, and they rely upon the truth of his statements in their attempt to prove that KPNV maintained continuous contacts within Kentucky. This is hearsay not within any exception. Although the Court cannot formally strike an affidavit within the meaning of Rule 12(f),  it will not consider the Reid affidavit in making its 12(b)(2) determination.
As to the internal memorandum and Plaintiffs' motion to seal, the Sixth Circuit has made clear that "[the] prevailing rule [is that] disclosure to an adversary, real or potential, forfeits work product protection." Tenn. Laborers Health & Welfare Fund v. Columbia/Hca Healthcare Corp., 293 F.3d 289, 306 n.28 (6th Cir. 2002) (citing United States v. MIT, 129 F.3d 681, 687 (1st Cir. 1997)). By serving the internal memorandum to opposing counsel along with their response, Plaintiffs waived any privilege they might have had. Accordingly, the motion for leave to seal, [ Modern Holdings, R. 61; Cox, R. 38], ...