Pension Benefit Guaranty Corporation v. Asahi Tec Corporation , 839 F. Supp. 2d 118 ( 2012 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
____________________________________
)
PENSION BENEFIT GUARANTY )
CORPORATION, )
)
Plaintiff, )
)
v. ) Civil Action No. 10-1936 (ABJ)
)
ASAHI TEC CORPORATION, )
)
Defendant. )
____________________________________)
MEMORANDUM OPINION
Plaintiff Pension Benefit Guaranty Corporation (“PBGC”) brings this action against
defendant Asahi Tec Corporation (“Asahi Tec”) under Title IV of the Employee Retirement
Income Security Act of 1974 (“ERISA”), as amended 29 U.S.C. §§ 1301–1461 (2006 and Supp.
II 2008). In 2007, defendant, a Japanese corporation, acquired a U.S.-based company,
Metaldyne Corporation (“Metaldyne”). The complaint alleges that as a result of the acquisition,
defendant became a “controlled group” member of Metaldyne and is therefore liable for the
termination of Metaldyne’s Pension Plan (“the Pension Plan”) and for termination premiums.
Defendant moved to dismiss under Fed. R. Civ. P. 12(b)(2) for lack of personal jurisdiction [Dkt.
# 11], arguing that the Court cannot exercise general or specific jurisdiction over the foreign
corporation for the acts of its U.S. subsidiary. The Court finds that plaintiff has made a prima
facie showing that defendant purposefully directed activity towards the United States in
connection with the acquisition of Metaldyne and the attendant assumption of controlled group
pension liability, and that the claims in the complaint arise directly out of that specific conduct.
Therefore, the Court can exercise specific jurisdiction over the defendant, it will deny
defendant’s motion to dismiss, and it need not reach the question of general jurisdiction.
I. BACKGROUND
A. Factual Background
1. The Metaldyne Acquisition
Defendant Asahi Tec is a corporation organized under the laws of Japan that maintains its
headquarters in Shizuoka, Japan. Compl. ¶ 5. Asahi Tec manufactures high quality cast iron and
aluminum parts for trucks and cars. Def.’s Mem. in Support of Mot. to Dismiss (“Def.’s Mem.”)
at 3. In September 2006, defendant announced its plans to acquire Metaldyne, an automotive
parts manufacturer based in Michigan that produced chassis and powertrain components and sub-
assemblies for passenger cars and light trucks. Compl. ¶ 10; Amato Decl. ¶ 11. For purposes of
the transaction, defendant established a wholly owned subsidiary in the United States and agreed
to pay Metaldyne shareholders over $200 million for their interest in Metaldyne stock.
Compl. ¶ 10. Asahi Tec approximated that the total consideration for the acquisition, including
the refinancing of Metaldyne’s debt, was $1.2 billion. Id.The complaint alleges that prior to the acquisition, “Asahi Tec performed due diligence in
connection with this $1.2 billion transaction to assess the financial impact of the Metaldyne
acquisition” and that “one aspect of that due diligence involved Asahi Tech’s obligation for
pension liabilities of Metaldyne.” Id. ¶ 11. In particular, the complaint alleges that “Asahi Tec
learned about the Pension Plan, that the Pension Plan had unfunded benefit and other pension-
related liabilities and that, as a member of Metaldyne’s controlled group, it would be jointly and
severally liable with Metaldyne and other affiliates, for the Pension Liability under the Pension
Plan.” Id.2
The acquisition of Metaldyne was completed in January 2007. Id. ¶ 13. The complaint
alleges, and defendant disputes, that following the merger, Asahi Tec “controlled and directed
Metaldyne’s operations and made Metaldyne its agent and alter ego to do business in the U.S.”
Id. Plaintiff further alleges the acquisition allowed Asahi Tec to “pursue[] its goals of gaining
access to Metaldyne’s engineering, design and manufacturing capabilities and expanding its
global reach with Metaldyne’s significant operations, presence, and customer base in the U.S.
and elsewhere.” Id. Plaintiff avers that Asahi Tec solicited customers and otherwise conducted
“continuous and systematic business activities in the U.S. using Metaldyne as its agent and alter
ego.” Id.
2. Termination of Metaldyne’s Pension Plan
On May 27, 2009, Metaldyne filed a voluntary petition for relief as debtors-in-possession
under Chapter 11 of the United States Bankruptcy Code in the U.S. Bankruptcy Court for the
Southern District of New York. Id. ¶ 15. On July 13, 2009, plaintiff PGBC 1 filed a complaint
under 29 U.S.C. § 1342 against Metaldyne in the U.S. District Court for the Eastern District of
Michigan, seeking a decree terminating the Pension Plan and requesting that plaintiff be
appointed as statutory trustee of the plan. Id. ¶ 16. Plaintiff alleges that prior to filing that
action, it discussed defendant’s controlled group liability with defendant’s counsel in the United
States and requested that Asahi Tec “assume sponsorship of the Pension Plan, given the fact that
no buyer of Metaldyne’s assets was expected to assume the Pension Plan in the Bankruptcy
Cases.” Id. Plaintiff avers that because Asahi Tec refused to assume sponsorship, the Pension
1 Plaintiff PBGC is a federal agency that administers the nation’s pension plan termination
insurance program established by Title IV of ERISA. According to plaintiff, “when a pension
plan covered by Title IV terminates without sufficient assets to pay all of its promised benefits,
PBGC typically becomes statutory trustee of the terminated plan and pays participants their
guaranteed benefits, up to the statutory limits.” Pl.’s Opp. to Mot. to Dismiss (“Pl.’s Opp.”) at 4,
citing 29 U.S.C. §§ 1321, 1322, 1361.
3
Plan was terminated effective July 31, 2009, and plaintiff became the statutory trustee pursuant
to section 4042(c) of ERISA. Id. ¶ 17. On September 18, 2009, plaintiff sent a demand letter to
Asahi Tec informing the company that it was liable for the terminated pension because it was a
controlled group member of Metaldyne. Id. ¶ 18.
B. Procedural Background
Plaintiff filed this action on November 12, 2010. [Dkt. # 1]. The complaint alleges three
claims under ERISA. Count I seeks entry of judgment against Asahi Tec for the full principal
amount of the pension liability plus accrued interest from July 31, 2009, to date of payment
under 29 U.S.C. §§ 1303(e)(1), 1362(b), and 29 C.F.R. § 4062.7. Compl. at 6–7. Count II
alleges that Asahi Tec is jointly and severally liable for termination premiums under 29 U.S.C.
§§ 1306(a)(7) and 1307(e)(2). Id. at 7–8. Count III seeks litigation costs from this action under
29 U.S.C.§ 1303(e)(5). Id. at 8.
On April 8, 2011, defendant filed a motion to dismiss for lack of personal jurisdiction
[Dkt. # 11] under Fed. R. Civ. P. 12(b)(2). Plaintiff opposed the motion, and in the alternative,
requested that it be permitted to take jurisdictional discovery. [Dkt. # 15]. On July 5, 2011, the
Court permitted both parties to submit supplemental briefs addressing the Supreme Court’s
holdings in Goodyear Dunlop Tires Operation, S.A., v. Brown, 564 U.S. ---, 131 S. Ct. 2846(2011), and J. McIntyre Machinery, Ltd. v. Nicastro, 564 U.S. ---, 131 S. Ct. 2780 (2011).
Minute Order, July 5, 2011.
A status conference was held on July 21, 2011, during which the Court ruled that no
merits discovery could be conducted until after the Court ruled on the motion to dismiss, but it
heard argument on the need for, and the potential scope of, jurisdictional discovery. [Dkt. # 29].
The Court directed plaintiff to submit a proposal outlining the narrowly tailored documentary
4
discovery it was seeking and accorded defendant an opportunity to respond to the proposal.
After consideration of the parties’ submissions, the Court permitted plaintiff to take some limited
discovery but narrowed the proposed order because it was broader than necessary to accomplish
its asserted purpose. Id. After the completion of this discovery, the Court also allowed the
parties to submit a supplemental brief addressing any evidence that was uncovered during the
jurisdictional discovery process. Minute Order, Nov. 18, 2011. A hearing on the motion to
dismiss was held on January 18, 2012.
II. STANDARD OF REVIEW
It is the plaintiff who bears the burden of establishing personal jurisdiction over each
defendant. Crane v. N.Y. Zoological Soc’y, 894 F.2d 454, 456 (D.C. Cir. 1990). In order to
survive a motion to dismiss for lack of personal jurisdiction, the “plaintiff must make a prima
facie showing of the pertinent jurisdictional facts.” First Chi. Int’l v. United Exch. Co., 836 F.2d
1375, 1378 (D.C. Cir. 1988). To establish that personal jurisdiction exists, the plaintiff must
allege specific acts connecting the defendant with the forum. In re Papst Licensing GMBH &
Co. KG Litig., 590 F. Supp. 2d 94, 97–98 (D.D.C. 2008), citing Second Amendment Found. v.
U.S. Conference of Mayors, 274 F.3d 521, 524 (D.C. Cir. 2001). Plaintiff “cannot rely on
conclusory allegations” to establish personal jurisdiction. Atlantigas Corp. v. Nisource, Inc., 290
F. Supp. 2d 34, 42 (D.D.C. 2003).
“A court may consider material outside of the pleadings in ruling on a motion to dismiss
for lack of . . . personal jurisdiction[.]” Artis v. Greenspan, 223 F. Supp. 2d 149, 152 (D.D.C.
2002). However, “the plaintiff is not required to adduce evidence that meets the standards of
admissibility reserved for summary judgment and trial; rather, [plaintiff] may rest [its] arguments
on the pleadings, ‘bolstered by such affidavits and other written materials as [it] can otherwise
5
obtain.’” Urban Inst. v. FINCON Servs., 681 F. Supp. 2d 41, 44 (D.D.C. 2010), quoting Mwani
v. bin Laden, 417 F.3d 1, 7 (D.C. Cir. 2005) (alteration in original). Any factual discrepancies
should be resolved in favor of the plaintiff. Crane, 894 F.2d at 455–56. But, the Court need not
treat all of the plaintiff’s jurisdictional allegations as true. United States v. Philip Morris Inc.,
116 F. Supp. 2d 116, 120 n.4 (D.D.C. 2000). “Instead, the court may receive and weigh
affidavits and any other relevant matter to assist it in determining the jurisdictional facts.” In re
Papst Licensing, 590 F. Supp. 2d at 98 (internal quotation marks and citation omitted).
III. ANALYSIS
A. Legal Framework
The issue presented by this motion is whether this Court’s exercise of jurisdiction over a
foreign defendant such as Asahi Tec “is consistent with the Constitution (and laws) of the United
States” as required by Fed. R. Civ. P. 4(k)(2). Mwani, 417 F.3d at 10. As the D.C. Circuit has
explained, “[w]hether the exercise of jurisdiction is consistent with the Constitution turns on
whether a defendant has sufficient contacts with the nation as a whole to satisfy due process.”
Id., citing Fed. R. Civ. P. 4(k)(2).
Courts may exercise two forms of personal jurisdiction: “general or all-purpose
jurisdiction, and specific or case-linked jurisdiction.” Goodyear, 131 S. Ct. at 2851. A court has
general jurisdiction where a nonresident defendant maintains sufficiently systematic and
continuous contacts with the forum, regardless of whether those contacts gave rise to the claim in
the particular case. Helicopteros Nacionales de Columbia, S.A. v. Hall, 466 U.S. 408, 414 & n.9
(1984). 2
2 “[B]ecause general jurisdiction is not related to the events giving rise to the suit, courts
impose a more stringent minimum contacts test than for specific jurisdiction.” Gorman v.
Ameritrade Holding Corp., 293 F.3d 506, 510 n.2 (D.C. Cir. 2002) (internal quotation marks
6
Specific jurisdiction exists where a claim arises out of the nonresident defendant’s
contacts with the forum. Helicopteros, 466 U.S. at 414 n.8. In order to comport with due
process, a defendant must have “certain minimum contacts with [the forum] such that
maintenance of the suit does not offend traditional notions of fair play and substantial justice.”
Int’l Shoe v. Washington, 326 U.S. 310, 316 (1945) (internal quotation marks omitted). Those
guarantees are satisfied “if the defendant has purposefully directed his activities at residents of
the forum, and the ligation results from alleged injuries that ‘arise out of or relate to’ those
activities.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472–73 (1984) (internal quotation
marks and citation omitted). 3
omitted). Thus, “[u]nder the Due Process Clause, such general jurisdiction over a foreign
corporation is only permissible if the defendant’s business contacts with the forum are
continuous and systematic.” FC Inv. Group LC v. IFX Markets, Ltd., 529 F.3d 1087, 1091–92
(D.C. Cir. 2008) (internal quotation marks omitted). Under some circumstances, the acts of a
local subsidiary can be attributed to the foreign parent for jurisdictional purposes. See Material
Supply Int’l, Inc. v. Sunmatch Indus. Co. 62 F. Supp. 2d 13, 20 (D.D.C. 1999) (stating that the
alter ego test analyzes “(1) whether there is such a unity of interest and ownership that the
separate personalities of [the companies] no longer exist; and (2) whether an inequitable result
will follow if the court treats [the subsidiary’s] allegedly wrongful acts as those of [the
subsidiary] alone.”) (internal citation and quotation marks omitted). But plaintiff conceded at
oral argument that the record was not sufficiently well-developed to establish that the alter ego
test for general jurisdiction had been met. Tr. at 16. In any event, since the Court will exercise
specific jurisdiction in this case, it need not address whether the defendant’s contacts with the
United States were sufficient to give rise to general jurisdiction.
3 Defendant emphasized at oral argument that plaintiff cannot show that they were injured
because of an activity that defendant directed at the forum. Tr. at 58 (“There are three elements,
we believe, for specific jurisdiction. First, purposeful direction of activities toward the forum.
Litigation resulting from alleged injuries that arise out of or relate to those activities . . . .
Activities that give rise to injuries, that give rise to litigation.”) Defendant claims that the
injuries plaintiff has alleged relate to the underfunded Pension Plan and that because defendant
had no involvement with the funding decisions for the Plan, there is no specific jurisdiction in
this case. But plaintiff’s claim is premised on the notion that liability flows directly from the
ERISA statute, and it is not necessary to show that there is an injury to analyze the potential
liability. 29 U.S.C. § 1362. Rather, the statute dictates that potential liability for plaintiff’s
claim began on the day that defendant acquired Metaldyne and subjected itself to control group
7
B. Defendant’s Status as a Controlled Group Member of Metaldyne Gives Rise to
Specific Jurisdiction for Plaintiff’s Claims under ERISA.
The Court will first address plaintiff’s contention that specific jurisdiction exists.
Plaintiff asserts that the defendant purposefully directed activities towards the forum, and that the
litigation seeks to redress injuries arising out of those activities. Defendant argues that the
complaint alleges injuries related to the underfunded Pension Plan and the termination of the
Plan, and that because defendant had no involvement with the funding decisions for the Plan or
the termination, there is no basis for specific jurisdiction in this case.
There is no question that the foreign company not only acquired a U.S. subsidiary but
that it did so with its eyes wide open. The complaint alleges and the jurisdictional discovery
revealed that defendant undertook the acquisition after probing and then being specifically
informed about the possibility of controlled group liability. Compl. ¶ 11 (alleging that prior to
the acquisition, “Asahi Tec learned about the Pension Plan, that the Pension Plan had unfunded
benefit and other pension-related liabilities and that, as a member of Metaldyne’s controlled
group, it would be jointly and severally liable with Metaldyne and other affiliates, for the
Pension Liability under the Pension Plan.”). The documents produced in discovery confirm that
defendant hired Mercer Human Resource Consulting to conduct due diligence about the nature
and scope of Metaldyne’s employee benefit and compensation program. Ex. 60 to Lubell Supp.
Decl. Mercer agreed to provide “analysis of long-term benefit plan liabilities of the company,
and development of possible strategies to mitigate the obligations assumed by the buyer.” Id.Moreover, the documents show that based on the results of the due diligence, defendant
specifically incorporated the fact that it was assuming controlled group status – and thus could
liability, regardless of whether defendant was involved in the decision to terminate the Pension
Plan.
8
ultimately be held liable for an underfunded plan – into the negotiated purchase price. Ex. 61 to
Lubell Supp. Decl. at 4–5. So, defendant’s purposeful contacts with the forum include not only
the acquisition but the knowing assumption of the risk of future controlled group liability.
Since defendant did direct some activities at the United States, the question the Court
must then resolve is whether plaintiff’s ERISA claims arise out of Metaldyne’s own actions after
the merger or whether they arise out of the particular activities the foreign company directed at
the forum, that is, its acquisition of Metaldyne and its purposeful assumption of controlled group
status. In other words, did the termination of the Pension Plan give rise to the claims, as
defendant contends, or did Asahi Tec’s status as a controlled group member of Metaldyne bring
about the claims, as plaintiff contends?
Defendant argues that the Court lacks specific jurisdiction because it had no involvement
in the termination of Metaldyne’s Pension Plan. According to defendant, there is no connection
between any activity undertaken by defendant and plaintiff’s claims. Def.’s Mem. at 35.
Defendant notes that, according to the complaint, “[t]he only entities that dealt with the [Pension]
Plan were PGBC and Metaldyne,” id. at 36, citing Compl. ¶¶ 16, 17, 25, and that plaintiff “does
not allege that Asahi Tec engaged in any wrongdoing at all before PBGC chose to terminate the
Plan,” id. at 37. Because defendant “did not commit any wrongful or tortious acts in the United
States at all – let alone any relating to the operation of Metaldyne’s pension plan itself –
[plaintiff] cannot show that this litigation results from alleged injuries that ‘arise out of or relate
to . . . activities’ that Asahi Tec ‘purposefully directed’ toward the United States[.]” Id., citing
Burger King, 471 U.S. at 473.
Plaintiff does not dispute that defendant played no role in the termination decision but it
contends that circumstance is irrelevant because the claim does not seek to impose liability for
9
the act of termination, or for something wrongful about the termination, or even the act of
funding the Pension Plan. See Pl.’s Opp. at 38–39; Tr. at 20–21. Rather, this action seeks to
enforce the controlled group members’ obligations, which attached at the time of purchase.
The answer must be sought in the complaint, and a review of its allegations leads to the
conclusion that it was defendant’s status as a controlled group member, and not the act of
termination, that is the driving force behind this lawsuit. The Court notes the following sections
of the complaint:
Paragraph seven alleges that under sections 1362(a) and (b) of ERISA, each
member of the controlled group incurs joint and several liability for underfunded
pension liabilities. Compl. ¶ 7. Similarly, paragraph nine of the complaint
alleges that under section 1306 and 1307(e) of ERISA, if an underfunded pension
plan terminates under 29 U.S.C. § 1342, “the contributing sponsor of the plan and
each member of the contributing sponsor’s controlled group is liable for a
termination premium[.]” Compl. ¶ 9. Under both of these statutory provisions
invoked in the complaint, liability does not turn on anything the controlled group
did to bring about termination – it simply flows from the fact of the termination
and status as a controlled group member.
Paragraph eleven alleges that defendant conducted due diligence prior to the
acquisition and, as a result, “learned that the Pension Plan had unfunded benefit
and other pension-related liabilities and that, as a member of Metaldyne’s
controlled group, it would be jointly and severally liable with Metaldyne and
other affiliates, for the Pension liability under the Pension Plan.” Compl. ¶ 11.
Paragraphs seventeen and eighteen set forth that plaintiff and Metaldyne entered
into an agreement that terminated the plan and that the complaint in Michigan was
dismissed. At that point, plaintiff informed defendant through a demand letter
that “PBGC’s contingent liability for unfunded benefits has matured” and that
“Asahi Tec, as a controlled group member, is liable for the Pension liability[.]”
Id. ¶ 18.
Indeed, paragraphs fifteen through eighteen fall under the heading that states:
“Asahi Tec’s joint and several pension liability matured upon termination of the
pension plan.” Compl. at 14 (emphasis added). In other words, defendant did not
have to take any action once termination occurred for potential liability to exist.4
4 The Court also notes that paragraph sixteen states that it was plaintiff that filed a
complaint in federal court in Michigan seeking a decree to terminate the plan. In other words, if
the court had issued the requested decree in that action, it would not have been Metaldyne or
10
Taken together, these allegations directly link the claims at issue in this lawsuit with the
defendant’s conduct in the United States – its knowing undertaking of the obligations arising out
of its status as a controlled group member of Metaldyne. This status pre-existed the termination
of the Pension Plan, so it is immaterial whether defendant had any involvement in the
termination of the plan. 5
Defendant’s primary argument against the existence of specific jurisdiction is that it
would “allow Congress to legislate personal jurisdiction over foreign corporations simply by
legislating parent corporation liability.” Def.’s Supp. Mem. at 13–14. Defendant contends that
“[s]imply acquiring a subsidiary does not expose the parent to personal jurisdiction for claims
based on the subsidiary’s liabilities.” Def.’s Reply in Supp. of Mot. to Dismiss at 18, citing
United States v. Bestfoods, 524 U.S. 51, 61 (1998). While that may be true as a general principle
Asahi Tec that was the entity responsible for the termination. Compl. ¶ 16. Furthermore, the
complaint alleges that plaintiff approached Asahi Tec’s counsel prior to the termination of the
plan and requested that Asahi assume sponsorship of the plan because of its controlled group
liability. Id. Thus, if, as defendant argues, the question of which party is responsible in the
termination is relevant, the complaint does ascribe a role – albeit a negative one for a failure to
stop the termination – to Asahi Tec.
5 The conclusion that plaintiff’s ERISA claims arise out of the Metaldyne acquisition and
not the termination of the Plan in particular is bolstered by the plain language of the ERISA
statute. Count I of the complaint seeks relief under sections 1362(a) and (b), which “impose
Pension Liability upon the contributing sponsor of a pension plan covered by Title IV of ERISA
and the members of the controlled group, jointly and severally, if, upon termination of the
pension plan, the plan assets are insufficient[.]” Compl. ¶ 21, citing 29 U.S.C. § 1362(a), (b).
So, the liability that forms the basis for the claim, which was contingent upon a termination, was
what defendant knowingly undertook at the moment it acquired Metaldyne. It was not necessary
for defendant to direct any further action at the forum to trigger the potential pension liability.
Likewise, Count II of the complaint alleges a claim for termination penalties under sections
1306(a)(7) and (e)(2), but even this claim is premised on the notion that the penalties became due
at the time of termination. There is no allegation in the complaint that Asahi Tec is liable due to
some wrongfulness of the decision to terminate, so defendant’s argument that it did not
participate in the termination decision is misplaced.
11
of corporate law, the claim asserted by plaintiff is a unique cause of action, which predicates
liability solely on an entity’s status as a controlled group of a company with a qualifying pension
plan; neither this action nor the applicable ERISA provisions impose vicarious liability on the
parent for the independent actions of a subsidiary. And in this case, that particular liability was a
known risk expressly factored into the transaction that defendant voluntarily crossed the Pacific
to undertake. So, the cases defendant relies upon prohibiting courts from imputing liability to
parents generally are not persuasive because they did not directly address the same type of claim
and the factual showing at issue in this case. 6
Moreover, the exercise of jurisdiction does not conflate jurisdiction with liability as
defendant maintains. The Court’s conclusion that specific jurisdiction exists for the limited
purpose of hearing these ERISA claims does not necessarily mean that defendant will ultimately
be responsible for the pension liability. Rather, specific jurisdiction is proper because defendant
is potentially liable for the pension by virtue of the acquisition. In other words, defendant’s
actions in acquiring Metaldyne and its pension obligations are enough to put defendant in the
position of being subjected to litigation on that issue. 7
6 Both parties point to the Supreme Court’s recent decisions in Goodyear and McIntyre as
supporting their respective positions on personal jurisdiction. Def.’s Notice of Supp. Authority
[Dkt. # 21]; Pl.’s Supp. Mem. Addressing the Supreme Court’s Holdings [Dkt. #22]. In both of
those cases, the Supreme Court addressed the “stream of commerce” analysis of general
jurisdiction. Because the Court does not reach the question of whether general jurisdiction exists
over Asahi Tec, these decisions do not bear on the issues presented in this case.
7 An exchange between the Court and defendant’s counsel at the motions hearing
underscores this point:
THE COURT: But under this statute does [it] matter if you were an owner?
[DEFENDANT’S COUNSEL]: I think if you assume that you have a control
group member, for liability, no it doesn’t matter, because the statute creates
liability for a control group member.
12
Defendant relies on two cases from the Seventh Circuit for the proposition that merely
being the parent and therefore subject to liability under ERISA does not necessarily confer
jurisdiction. Def.’s Supp. Mem. at 14, citing Cent. States, Se. & Sw. Areas Pension Fund v.
Reimer Express World Corp., 230 F.3d 934 (7th Cir. 2000); GCIU-Emp’r Ret. Fund v. Goldfarb
Corp., 565 F.3d 1018 (7th Cir. 2009). Defendant contends that these cases demonstrate that
“ERISA cannot trump the Constitution” because “‘[j]urisdiction and liability are two different
inquiries,’ and a plaintiff may not rely on a federal statute, such as ERISA, to ‘transmogrify
insufficient minimum contacts into a basis for personal jurisdiction by making these contacts
elements of a cause of action.’” Def.’s Mem. at 38, quoting Reimer, 230 F.3d at 944, and citing
Goldfarb, 565 F.3d at 1023–24. But those decisions are not controlling authority here, and the
circumstances that gave rise to those opinions are distinguishable from the facts presented in this
case.
In Reimer, the court affirmed the district court’s determination that “corporate ownership
generally is not a sufficient basis for personal jurisdiction.” 230 F.3d at 939. The Seventh
Circuit reasoned in part that when a parent and subsidiary are two separate entities, the acts of
the subsidiary cannot be imputed to the parent merely based on the subsidiary’s presence in the
forum. Id. at 944. Here, plaintiff is not seeking to impute presence in the forum to defendant
merely because of Metaldyne’s existence in the United States, and it is not basing jurisdiction on
the subsidiary’s acts. Rather, for purposes of plaintiff’s specific claims under ERISA, a statute
which predicates liability on the fact of ownership alone, the deliberate and knowing decision to
THE COURT: Why isn’t that the beginning and the end of it? That’s [plaintiff’s]
argument.
Tr. at 62–63.
13
acquire a company in the United States and subject itself to that regulatory scheme is a sufficient
minimum contact to confer jurisdiction for the limited purpose of an action to enforce that
liability. In the Court’s view, that conclusion comports with the notions of the due process and
fair play values that underlie personal jurisdiction analysis, while also giving proper
consideration to the forum’s interest in adjudicating the dispute.
This case is also distinguishable from Reimer because it does not present a corporate
ownership “without more” situation. Reimer, 230 F.3d at 943 (“We join other courts in finding
that stock ownership in or affiliation with a corporation, without more, is not a sufficient
minimum contact.”). The Seventh Circuit found that the parent corporation could not have
reasonably expected to be held liable for the activities of the subsidiary, id. at 944, whereas here,
Asahi Tec actually conducted due diligence on the potential liability and knowingly entered into
the transaction, building the risk into the price it paid for the Metaldyne acquisition. 8
Similarly, the question that the Seventh Circuit addressed in Goldfarb is not the same as
the one presented to this Court. Goldfarb concerned withdrawal liability under ERISA, not
termination liability. 565 F.3d at 1022. One of the elements of a claim for withdrawal liability is
that the employer “withdrew,” so the court engaged in a detailed analysis of whether the
defendant’s alleged actions in the forum were related to the withdrawal. See 29 U.S.C. § 1381(a)
(providing that “if an employer withdraws . . . the employer is liable”). Section 1362, the source
of plaintiff’s claim in this case, simply states: if a plan is terminated under section 1341 or the
8 Plaintiff also distinguishes Reimer by noting that the connection between the foreign
parent and the U.S. subsidiary was much more attenuated than the relationship between Asahi
Tec and Metaldyne. Tr. at 36–37. In Reimer, the Canadian parent purchased another Canadian
corporation that owned a different Canadian company, which operated in part in the United
States. 230 F.3d at 937. As the Seventh Circuit observed, the parent company was the “great-
grandparent” of the business entity in the United States. Id. The connection between Metaldyne
and Asahi Tec was much more direct.
14
corporation terminates it under section 1342, then the corporation and the control group incur
joint and several liability. Thus, unlike the cause of action in Goldfarb where liability had to
have been triggered by some act of the defendant, liability in this case is controlled by mere
ownership at the time of termination. 9 Moreover, in Goldfarb, the court said that an action
against a foreign defendant must “directly arise out of the specific contacts between the
defendant and the forum state.” 565 F.3d at 1024 (emphasis added) (internal quotation omitted);
cf. Burger King, 471 U.S. at 472 (stating that the action must “arise out of or relate to”). Thus,
the Seventh Circuit imposed a more stringent test than the one required by the Supreme Court,
and this Court declines to adopt that test here.
Plaintiff argues that Goldfarb is wrong as a matter of law under the Supreme Court’s
decision in Int’l Shoe Co., 326 U.S. at 319. Tr. at 31. At oral argument, plaintiff highlighted the
following language from the decision:
[T]o the extent that a corporation exercises the privilege of conducting activities
within a state, it enjoys the benefits and protection of the laws for that state. The
exercise of that privilege may give rise to obligations; and, so far as those
obligations arise out of or are connected with the activities within the state, a
procedure which requires the corporation to respond to a suit brought to enforce
them can, in most instances, hardly be said to be undue.
Id., quoting Int’l Shoe, 326 U.S. at 319 (internal citations omitted). But that language, while it
supports plaintiff’s argument, was simply dicta because the Court’s decision ultimately rested on
the fact that defendant carried on systematic and continuous activities in the state such that
jurisdiction was proper. Id. at 320; see also Goodyear, 131 S. Ct. 2846, 2853 (2011) (finding
9 The same conclusion applies to another case upon which defendant relies, AT&T v.
Compagnie Bruxelles Lambert, 94 F.3d 586 (9th Cir. 1996). In AT&T, plaintiff brought a cause
of action under the Comprehensive Environmental Response, Compensation and Liability Act,
which, as plaintiff points out, requires a showing that the parent company is responsible for the
misconduct that gave rise to the claim. Id. at 588; Tr. at 39. Here, liability for plaintiff’s claim is
entirely statutory and does not depend on the same type of showing.
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that jurisdiction exists where, “as in International Shoe itself, jurisdiction unquestionably could
be asserted where the corporation’s in-state activity is ‘continuous and systematic’ and that
activity gave rise to the episode-in-suit”) (emphasis in original). 10
Defendant warns that a finding of specific jurisdiction on these facts would be a
“revolutionary concept,” Tr. at 61, that would “ignore[] the constitutional dimensions of personal
jurisdiction.” Def.’s Supp. Mem. at 14. But the conclusion that defendant is subject to specific
jurisdiction to answer these limited claims fully comports with the values of fairness and due
process. See Burger King, 471 U.S. at 477 (“These [fair play and substantial justice]
considerations sometimes serve to establish the reasonableness of jurisdiction upon a lesser
showing of minimum contacts than would otherwise be required.”). First of all, as the Court
noted above, the defendant was well aware of the potential liability that attached to its purchase
of Metaldyne, and it factored that into its economic calculus. Second, it is notable that defendant
previously freely admitted to jurisdiction in another lawsuit in the United States. See Answer,
HLI Creditors Trust v. Asahi Tec Corp., No. 03-56960 (Bankr. D. Del. Jan. 9, 2004) (“Defendant
admits that it is a corporation incorporated in Japan that is doing business in the United States.”)
The fact that defendant has already submitted to jurisdiction in the United States in another
action – indeed, general jurisdiction – makes its claim that litigating this action would be “unjust
and unreasonable,” Def.’s Mem. at 40–42; Def.’s Reply at 21, less than compelling.
Furthermore, the facts adduced by plaintiff to support a finding of general jurisdiction
show that, in addition to the acquisition, defendant has had other contacts with the forum.
10 Defendant also contends that the choice of law and forum selection clauses in the
Metaldyne acquisition documents are irrelevant to the specific jurisdiction analysis. Def.’s
Mem. at 39–40. The Court does not base its conclusion that specific jurisdiction on these
grounds but notes that they weigh in favor of finding that the exercise of jurisdiction on the facts
presented does not offend due process.
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Defendant continued to solicit business from automakers in the United States even after the
demise of Metaldyne, in one instance by hiring a Michigan-based sales agent in the United
States. Pl.’s Supp. Mem. at 5–10 [Dkt. # 39]; Ex. 1 to Lubell Supp. Decl. [Dkt. #35]. The facts
also show that Metaldyne was not simply a passive investment for defendant, but that there were
at least some integration activities and shared management between the companies and that
defendant viewed Metaldyne – and publicly touted the merger – as an opportunity to expand its
global footprint. See, e.g., Ex. 37 to Lubell Supp. Decl. [Dkt. #35] at 6 (presentation to investors
referring to the merged companies as “The New Asahi Tech”); Ex. 35 to id. at 7 (presentation to
the shareholders that one of the merits of the Metaldyne acquisition was “access to global
markets”). In a press release announcing the acquisition, defendant proclaimed that “Metaldyne
and Asahi Tec came together to create a new, better capitalized global company that delivers
leading edge products and processes to our customers . . . . These actions . . . will allow us to
take advantage of the opportunities offered in this highly competitive global market.” Ex. 35 to
Barone Decl. at 1–2. These facts, while they may or may not be sufficient to warrant a finding of
general jurisdiction for all purposes, support the conclusion that exercising jurisdiction in this
case would not offend “traditional notions of fair play and substantial justice.” Asahi Metal
Indus. Co. v. Superior Court of Cal., 480 U.S. 102, 113 (1987) (internal quotation marks
omitted).
In sum, this case presents a unique question of jurisdiction that has not been addressed by
either the Supreme Court or the D.C. Circuit. The cause of action here is based on mere
ownership of the company at the time of termination – not on any wrongful conduct on the
defendant’s behalf – and the alleged liability is a direct, joint and several liability that is imposed
under ERISA and that comes about as a consequence of owning a U.S. company that has a tax
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qualified Pension Plan. See Tr. at 32. Since the defendant’s purposeful contacts with the forum
include becoming an owner and assuming that liability, and the litigation arises directly out of
those specific contacts, the Court finds that plaintiff has made a prima facie showing of specific
jurisdiction.
IV. CONCLUSION
The Court will deny defendant’s motion to dismiss for lack of personal jurisdiction
because it concludes that plaintiff has made a prima facie showing of specific jurisdiction. A
separate order will issue.
AMY BERMAN JACKSON
United States District Judge
DATE: March 14, 2012
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