The Dow Chemical Company v. Organik Kimya Holding A.S.

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
THE DOW CHEMICAL COMPANY, )
ROHM AND HAAS COMPANY, )
ROHM AND HAAS CHEMICAS LLC )
)
Plaintiffs, )
)
v. ) C.A. No. 12090-VCG
)
ORGANIK KIMYA HOLDING A.S., )
ORGANIK KIMYA SAN. VE TIC. A.S., )
ORGANIK KIMYA US, INC., )
ORGANIK KIMYA LUXEMBURG )
S.A., ORGANIK KIMYA )
NETHERLANDS B.V. )
)
Defendants. )
MEMORANDUM OPINION
Date Submitted: July 21, 2017
Date Decided: October 19, 2017
Rodger D. Smith II and Ryan D. Stottmann, of MORRIS, NICHOLS, ARSHT &
TUNNELL LLP, Wilmington, Delaware; OF COUNSEL: Charles K. Verhoeven,
Raymond N. Nimrod, and James E. Baker, of QUINN EMANUEL URQUHART &
SULLIVAN, LLP, New York, New York, Attorneys for Plaintiffs.
Kathleen Furey McDonough, John A. Sensing, and Ryan C. Cicoski, of POTTER
ANDERSON & CORROON LLP, Wilmington, Delaware; OF COUNSEL: J. Robert
Robertson and Benjamin Holt, of HOGAN LOVELLS US LLP, Washington, DC,
Attorneys for Defendants.
GLASSCOCK, Vice Chancellor
This action involves allegations by the Plaintiffs, well-known American
chemical companies, that the Defendants were involved in a scheme to
misappropriate trade secrets and proprietary polymer technology relating to paint
pigments. The Complaint alleges that the Defendants used the purloined technology
to create products that they sold in the United States. The Plaintiffs seek damages
and injunctive relief.
With a single exception, the Defendants are foreign entities with no
connection to this forum. The sole exception is a Defendant entity incorporated in
Delaware. The other Defendants seek dismissal on the ground that this Court lacks
personal jurisdiction over them. The Plaintiffs’ contrary theory runs thus: The
foreign Defendants caused the Delaware corporation to be chartered in this state as
an integral part of their scheme and conspiracy to monetize the theft of the Plaintiffs’
technology. Having taken advantage of the laws of this state to charter an entity in
material furtherance of their illegal scheme, all Defendants are subject to jurisdiction
under Delaware law, consonant with the due process protections of the United States
Constitution, according to the Plaintiffs.
I find that the Defendants’ Motion to Dismiss must be granted in part and
denied in part. My reasoning follows.
1
I. BACKGROUND
A. The Parties and Relevant Non-Parties
Plaintiff the Dow Chemical Company is a Delaware corporation with a
principal place of business in Midland, Michigan.1 Plaintiff Rohm and Haas
Company is a Delaware corporation with a principal place of business in
Philadelphia, Pennsylvania,2 and Plaintiff Rohm and Haas Chemicals LLC is a
Delaware limited liability company whose principal place of business is also
Philadelphia, Pennsylvania.3 In April 2009, the Dow Chemical Company acquired
Rohm and Haas.4 For ease of reference, I often call all of these entities “Dow.”
Defendant Organik Kimya Holding A.S. is a privately held Turkish chemical
company with a principal place of business in Istanbul, Turkey.5 Defendant Organik
Kimya San. ve Tic. A.S. (“Organik Kimya Turkey”) is a wholly owned subsidiary
of Organik Kimya Holding, and its principal place of business is likewise in
Istanbul.6 Defendant Organik Kimya Luxemburg S.A. is a wholly owned subsidiary
of Organik Kimya Turkey; its principal place of business is in Luxemburg.7
Defendant Organik Kimya Netherlands B.V. is a wholly owned subsidiary of
1
Compl. ¶ 14.
2
Id. ¶ 15.
3
Id. ¶ 16.
4
Id. ¶ 26.
5
Id. ¶ 17.
6
Id. ¶ 18.
7
Id. ¶ 19.
2
Organik Kimya Luxemburg, and it is located in Rotterdam, Netherlands.8 Defendant
Organik Kimya US, Inc. is a Delaware corporation whose principal place of business
is in Burlington, Massachusetts; it is a wholly owned subsidiary of Organik Kimya
Turkey.9 I refer to all of the Organik Kimya entities except Organik Kimya US as
the “Foreign Defendants,” and I often refer to the Organik Kimya entities
collectively as “Organik.”
Simone Kaslowski is the CEO of Organik Kimya Turkey and Organik Kimya
Netherlands; he also serves on the board of Organik Kimya Holding.10 Stefano
Kaslowski, Simone’s brother, is the managing director of Organik Kimya Turkey. 11
Like Simone, Stefano serves on Organik Kimya Holding’s board.12 The Kaslowski
brothers are the sole officers and directors of Organik Kimya US.13 Neither is a
party to this case.
The Defendants assert, and the Plaintiffs do not dispute, that none of the
Organik entities have conducted any business in Delaware, maintained an office in
Delaware, had any employees in Delaware, or sold any products in Delaware.14 As
discussed below, the Plaintiffs seek to establish personal jurisdiction over the
8
Id. ¶ 20.
9
Id. ¶ 21.
10
Stottmann Aff. Ex. 1 at 13:7–25.
11
Stottmann Aff. Ex. 6 at 11:12–15, 14:23.
12
Id. at 11:5–8.
13
Stottmann Aff. Ex. 33 at OKDEL00012335–37.
14
Defs.’ Supplemental Br. in Supp. of Mot. to Dismiss 2.
3
Foreign Defendants solely on the basis of a single act—the incorporation of Organik
Kimya US in Delaware—on the theory that such incorporation was integral to
Organik’s scheme to misappropriate Dow’s trade secrets.15
B. Factual Overview
This case stems from the Defendants’ alleged misappropriation of the
Plaintiffs’ trade secrets for manufacturing various polymers useful in the production
of paint pigments.16 According to the Plaintiffs, the Defendants hatched and carried
out a scheme in which they hired former Dow employees with knowledge of the
relevant technology and used the trade secrets embodied in that technology to
manufacture and sell polymers in competition with Dow.17 I recite only those facts
necessary to decide whether this Court has personal jurisdiction over the Foreign
Defendants.
1. Organik’s Initial Forays into the US Market
Organik Kimya Turkey started selling products in the United States in 1998.18
At that time, Organik did not have a US subsidiary, and Organik Kimya Turkey sold
its products in the US market primarily through third-party distributors.19 While
15
See Pls.’ Supplemental Br. in Opp’n to Defs.’ Mot. to Dismiss 4 (“Under seminal Delaware
caselaw, Organik’s formation of a Delaware subsidiary as part of its wrongful scheme and
conspiracy is sufficient to confer personal jurisdiction over Organik related to Dow’s claims
arising out of that wrongful scheme.”).
16
Compl. ¶ 1.
17
Id.
18
Stottmann Aff. Ex. 10 at OKDEL00025096.
19
Id.
4
Organik Kimya Turkey’s US sales at this time were not significant, Organik began
to consider expanding its United States presence in the mid-2000s.20 For example,
in 2006, Organik Kimya Turkey and Dow considered an arrangement in which
Organik Kimya Turkey would toll manufacture21 Dow’s products in Europe and the
Middle East and Dow would toll manufacture Organik Kimya Turkey’s products in
the United States.22 The deal never came to fruition, however.23 Also around this
time, Organik reached out to Behr,24 “one of the largest paint manufacturers in the
U.S.”25 But, according to the Plaintiffs, Organik was not yet ready to sell to Behr or
other major US customers.
The Plaintiffs contend that Organik faced two major hurdles in breaking into
the US market. First, Organik’s opaque polymers could not meet the standards of
major US customers. For example, Behr did not want to buy OPAC 101 or OPAC
103, the opaque polymers Organik was selling in Europe.26 And Simone Kaslowski,
the CEO of Organik Kimya Turkey and Netherlands,27 said it was his understanding
20
Stottmann Aff. Ex. 1 at 167:18–168:25.
21
According to the Defendants, “[t]oll manufacturing is contract manufacturing.” Defs.’
Supplemental Br. in Supp. of Mot. to Dismiss 6 n.2.
22
Cicoski Aff. Ex. 3 at 43:18–46:17.
23
Id. at 47:1–11.
24
Stottmann Aff. Ex. 1 at 167:18–168:25.
25
Pls.’ Supplemental Br. in Opp’n to Defs.’ Mot. to Dismiss 6.
26
Stottmann Aff. Ex. 1 at 245:9–14.
27
Id. at 13:7–25.
5
that Organik would not be able to penetrate the US market for opaque polymers until
it improved its existing line of such products.28
The second obstacle to Organik’s increasing its United States presence was
that it lacked a US subsidiary. To support this assertion, the Plaintiffs point to
Simone Kaslowski’s testimony that in order to enter the US market in a significant
way, it was important for Organik to have a US subsidiary that could understand US
customers.29 Simone further testified that creating a US subsidiary was necessary to
do business with “multinationals,” because multinationals wanted to buy directly
from the producer rather than from a distributor.30 The Plaintiffs also cite the
deposition testimony of Stefano Kaslowski, Organik’s managing director, who said
that the “primary reason” for forming a US entity was to “allow[] the customers to
have as a primary contact another U.S. company that was handling all the supply
details, the Customs clearance, everything to do with formalities, . . . [thereby]
enhanc[ing] the service level and the satisfaction of our customers.”31
The Defendants dispute this account of Organik’s attempts to expand its
United States presence. They argue that the primary obstacle to Organik’s
penetrating the US market was that large US paint companies would not buy from
28
Id. at 213:16–23.
29
Id. at 65:13–19.
30
Id. at 177:6–178:8.
31
Stottmann Aff. Ex. 6 at 84:7–20.
6
Organik until it had a manufacturing facility in the country. They point to testimony
from Bradley McPhee, an Organik Kimya US sales agent who, during his time at
Organik Kimya US, proposed a four-pronged approach to achieving success in the
US market: building a manufacturing plant in the United States, avoiding the
architectural market, targeting markets in which Dow and BASF, a German
chemical company, did not participate, and focusing on innovation.32 More
specifically, McPhee testified that in order “for [US customers] to do business with
us, we needed to manufacture here in the US.”33 And according to Naim Benmayor,
Organik Kimya US’s sales manager, Organik did not need to create a US subsidiary
in order to start manufacturing in the United States.34
2. Organik’s Alleged Scheme to Misappropriate Dow’s Trade Secrets
The Plaintiffs allege that in late 2007, Organik hatched a scheme to steal and
use Dow’s trade secrets by hiring Dow employees.35 As part of this scheme, Organik
reached out to Dr. Dilip Nene, a Dow employee, about working for Organik as a
consultant.36 During his time at Dow, Dr. Nene had been heavily involved in the
production processes for ROPAQUE Ultra, an opaque polymer, and he had access
32
Cicoski Aff. Ex. 2 at 70:12–73:16.
33
Id. at 73:14–16.
34
Cicoski Aff. Ex. 6 at 141:6–142:5. The Defendants also argue that when Simone Kaslowski
referred to “multinationals” during his deposition, he was not talking about Behr. Defs.’
Supplemental Br. in Supp. of Mot. to Dismiss 14 n.6.
35
Compl. ¶ 39; Pls.’ Supplemental Br. in Opp’n to Defs.’ Mot. to Dismiss 10.
36
Stottmann Aff. Ex. 7 at 99:23–101:13.
7
to the recipe for creating the “seed” employed in commercial production of
ROPAQUE Ultra.37 Dr. Nene began working as a consultant for Organik in
February 2008.38 The Plaintiffs allege that over the next four years, Dr. Nene
illegally provided Organik with Dow’s trade secrets related to the production of
certain polymers.39
Organik also allegedly stole Dow’s trade secrets by hiring Leonardo Strozzi,
a former Dow employee who had been a manager at Rohm and Haas’s emulsion
polymer plant in Italy.40 Organik interviewed Strozzi in December 2007, and
according to the Plaintiffs, “[f]orensic inspection of an Organik company issued
laptop shows that during the interview, Organik and Mr. Strozzi accessed and
reviewed at least 19 Rohm and Haas emulsion polymer recipes that Mr. Strozzi had
brought with him on portable storage devices.”41 In September 2008, Strozzi began
working for Organik as the plant manager for its Rotterdam plant.42
The Plaintiffs focus on two products—ORGAWHITE 2000 and ORGAL P
850 RR (“850 RR”)—that allegedly benefited from Dow’s trade secrets. As
discussed further below, the Plaintiffs allege that Behr’s acceptance of these
37
Id. at 21:9–32:9, 70:14–72:12; Pls.’ Supplemental Br. in Opp’n to Defs.’ Mot. to Dismiss 10–
11.
38
Stottmann Aff. Ex. 7 at 158:10–14.
39
Compl. ¶¶ 3, 72–85.
40
Id. ¶ 41.
41
Pls.’ Supplemental Br. in Opp’n to Defs.’ Mot. to Dismiss 12 (citing Compl. Ex. B at 44–54).
42
Compl. ¶ 41.
8
products led Organik to create its Delaware subsidiary in May 2010. As to 850 RR,
the Plaintiffs claim that Organik was trying to sell that product to Behr in 2009, but
that it did not meet Behr’s specifications and so Behr requested that Organik make
improvements.43 Dr. Nene assisted in making these improvements, though he
appears to have worked only on “scale-ups,”44 which Organik argues do not involve
substantive changes to the recipe.45 Nevertheless, the Plaintiffs assert that Dr. Nene
used his knowledge of Dow’s trade secrets to help improve 850 RR. Notably, by
May 2010, Behr had requested shipment from Organik of 850 RR samples from
“[a]ctual production.”46
According to the Plaintiffs, Organik created ORGAWHITE 2000, an opaque
polymer, using trade secrets related to ROPAQUE Ultra, a Dow-produced opaque
polymer whose performance was unmatched until ORGAWHITE 2000 appeared on
the market.47 As of 2008, “Dow was the exclusive opaque polymer supplier at
Behr,”48 but Behr had been interested in finding a substitute for ROPAQUE Ultra
for some time.49 Starting around 2006, Organik began working with Behr in an
attempt to create just such a substitute.50 But Organik was unable to produce a
43
Stottmann Aff. Ex. 12 at ORG883ITC00112255.
44
Stottmann Aff. Ex. 13.
45
Defs.’ Supplemental Br. in Supp. of Mot. to Dismiss 16 n.7.
46
Stottmann Aff. Ex. 17 at OKDEL00033735.
47
Compl. ¶¶ 27–38, 72; Stottmann Aff. Ex. 1 at 105:10–15.
48
Pls.’ Supplemental Br. in Opp’n to Defs.’ Mot. to Dismiss 17.
49
Stottmann Aff. Ex. 19 at ORG883ITC00014325.
50
Stottmann Aff. Ex. 1 at 241:3–17.
9
ROPAQUE Ultra substitute that met Behr’s standards.51 The Plaintiffs allege that
Organik achieved something of a breakthrough in this area when, in 2008 and 2009,
Dr. Nene incorporated Dow’s trade secrets into Organik’s recipes for opaque
polymers. The Plaintiffs cite an October 2, 2009 version of the ORGAWHITE 2000
recipe, which states that “[t]he whole method [for producing ORGAWHITE 2000]
was discussed and revised with Dilip Nene.”52 Later, in February 2010, Behr tested
the updated polymer and found that, while significant improvements had been made,
the product was not yet up to Behr’s standards.53 The necessary improvements
finally came in early 2010, when Dr. Nene allegedly shared more Dow trade secrets
with Organik. In a March 17, 2010 email, an Organik scientist sent an email with
the subject line “Good news about production of . . . Orgal Opac 204x.”54 The
scientist said that “[t]he guy provided free monomer ratios for R&H production
runs,” as a result of which Organik “will produce [a] better product than [Dow’s
ROPAQUE] Ultra E.”55 The Plaintiffs argue that “the guy” is “a clear reference to
51
Stottmann Aff. Ex. 19 at ORG883ITC00014325.
52
Stottmann Aff. Ex. 28 at ORG883ITC00016448.
53
Stottmann Aff. Ex. 19 at ORG883ITC00014325–26.
54
Stottmann Aff. Ex. 21 at ORG883ITC00120481. OPAC 204X was an “[e]arly commercial
iteration[] of ORGAWHITE 2000.” Pls.’ Supplemental Br. in Opp’n to Defs.’ Mot. to Dismiss 2
n.2.
55
Stottmann Aff. Ex. 21 at ORG883ITC00120481.
10
Dr. Nene.”56 Perhaps as a result of these efforts, by May 2010, Behr had approved
ORGAWHITE 2000 as a replacement for Dow’s ROPAQUE Ultra.57
3. Organik Incorporates a US Subsidiary in Delaware
According to the Plaintiffs, Organik decided to create a US subsidiary in May
2010 because it had recently secured Behr’s approval for ORGAWHITE 2000 and
Behr had asked for shipment of 850 RR production samples. To repeat, the Plaintiffs
allege that these two products benefited from trade secrets Organik stole from Dow.
The Plaintiffs here rely heavily on Simone Kaslowski’s deposition testimony, in
which Simone said that one reason Organik incorporated Organik Kimya US in May
2010 was that Behr had both accepted shipment of 850 RR and approved
ORGAWHITE 2000.58 While Simone suggested that other reasons drove the
decision to create the Delaware subsidiary in May 2010, the Plaintiffs argue that he
was unable to articulate those other reasons. They point to the following portion of
Simone’s deposition testimony:
Q: I said other than the reasons you’ve given regarding the potential
sales to Behr [that is, Behr’s approval of ORGAWHITE 2000 and 850
RR], you can’t think of any other reasons why you selected May of
2010 to incorporate the Organik US entity, right?
A: Well, there are -- you know, there are many reasons why we -- you
know, I explained this morning at length why we wanted to enter the
United States, right?
56
Pls.’ Supplemental Br. in Opp’n to Defs.’ Mot. to Dismiss 19.
57
Stottmann Aff. Ex. 17 at OKDEL00033736.
58
Stottmann Aff. Ex. 1 at 149:24–150:10.
11
Q: Yes. My question is: Why did you pick May of 2010?
A: There is no specific reason.
Q: No other reasons?
A: No.59
The Defendants argue that this testimony is “ambiguous,” because it is “far from
clear” that Simone “understood that the word ‘other’ meant ‘other than the reasons
you’ve previously given.’”60
Organik Kimya US was incorporated in May 2010, but Organik had been
considering forming a US subsidiary since at least 2007.61 In 2008 and 2009, as
Organik’s alleged scheme to misappropriate Dow’s trade secrets progressed,
Organik received legal advice about where, when, and how Organik Kimya US
should be incorporated.62 Organik continued to receive such advice in early- to mid-
2010; as the Plaintiffs note, “[f]rom January 2010 to May 5, 2010 (the date of
incorporation of Organik Kimya U.S.), Organik’s privilege log reflects at least 80
entries relating to the formation of Organik Kimya U.S.”63 It appears that Organik
59
Id. at 150:19–151:7.
60
Defs.’ Supplemental Br. in Supp. of Mot. to Dismiss 37.
61
Stottmann Aff. Ex. 6 at 16:25–18:6, 87:5–19.
62
Stottmann Aff. Exs. 29–30.
63
Pls.’ Supplemental Br. in Opp’n to Defs.’ Mot. to Dismiss 25–26 (citing Stottmann Aff. Exs.
29–30).
12
chose to incorporate Organik Kimya US in Delaware (as opposed to a different state)
for tax reasons and because of the ease of incorporating in Delaware.64
Organik Kimya US’s sales of emulsion polymers appear to have been driven
largely by ORGAWHITE 2000 and 850 RR. For instance, as the Plaintiffs point
out, 79% “of the emulsion polymers sold by Organik Kimya US from 2010 through
2014 w[ere] ORGAWHITE 2000.”65 Indeed, Simone Kaslowski testified that
ORGAWHITE 2000 was the only product offered by Organik Kimya US that
achieved commercially significant sales.66 The US International Trade Commission
(“ITC”) later barred Organik from importing opaque polymers such as
ORGAWHITE 2000 into the United States for a period of twenty-five years. 67 In
any event, Organik’s sales in the United States appear to be a small percentage of
sales from all Organik entities; the Defendants assert that from 2013 to 2014, “sales
in the United States constituted only 3% of Organik’s worldwide sales by volume.” 68
64
Stottmann Aff. Ex. 2 at 31:2–32:9; Stottmann Aff. Ex. 3 at 109:15–25.
65
Pls.’ Supplemental Br. in Opp’n to Defs.’ Mot. to Dismiss 28 (citing Stottmann Aff. Ex. 10).
66
Stottmann Aff. Ex. 1 at 197:10–13.
67
Compl. ¶ 9. The ITC entered this injunction after granting default judgment against Organik in
a proceeding brought by Dow alleging, among other things, misappropriation of trade secrets
related to Dow’s opaque polymers. Id. ¶¶ 2, 4, 8. The default judgment was granted after the
Administrative Law Judge concluded that Organik had “spoliated, or permitted the spoliation, of
massive amounts of evidence.” Id. ¶ 7. This ruling was later affirmed by the United States Court
of Appeals for the Federal Circuit. Organik Kimya, San. ve Tic. A.S. v. Int’l Trade Comm’n, 848
F.3d 994 (Fed. Cir. 2017).
68
Defs.’ Supplemental Br. in Supp. of Mot. to Dismiss 14 (citing Cicoski Aff. Ex. 22 at
OKDEL00002217).
13
And Organik Kimya US’s sales made up less than 1% of Organik’s global sales by
volume.69
The Defendants contest the Plaintiffs’ description of Organik’s motivations
for incorporating a Delaware subsidiary in May 2010. The Defendants point out
that, because of “significant product testing hurdles,”70 Behr did not enter a purchase
agreement with Organik for ORGAWHITE 2000 until April 2012,71 and Organik
first sold ORGAWHITE 2000 to Behr in November 2012.72 Moreover, while Behr
had requested shipment of production samples of 850 RR by May 2010, raw material
shortages prevented Organik Kimya US from selling 850 RR to Behr until 2016.73
The Defendants also argue that the Plaintiffs have failed to offer any evidence
suggesting that Behr itself would not do business with Organik until Organik formed
a US subsidiary. And, according to the Defendants, Organik’s relationship with
Behr was initiated, managed, and facilitated by Brian Turk of Turk International, a
California-based distributor.74 Turk’s role in the Behr relationship suggests to the
69
Cicoski Aff. Ex. 1; Cicoski Aff. Ex. 22 at OKDEL00002217.
70
Defs.’ Supplemental Br. in Supp. of Mot. to Dismiss 16.
71
Cicoski Aff. Ex. 29 at 72:17–20; Cicoski Aff. Ex. 30 at ORG883ITC00088776.
72
Cicoski Aff. Ex. 29 at 82:9–13.
73
Cicoski Aff. Ex. 1 at OKDEL00025103–04.
74
Cicoski Aff. Ex. 2 at 60:21–25; Cicoski Aff. Ex. 3 at 170:6–16; Cicoski Aff. Ex. 7 at 92:25–
93:8; Cicoski Aff. Ex. 24 at 59:9–25.
14
Defendants that incorporation of a Delaware subsidiary was not, in fact, necessary
to enable Organik to sell to major US customers.75
4. The Various Organik Entities’ Roles in the Alleged Scheme
The Plaintiffs assert that each Organik entity played a significant role in the
alleged scheme to misappropriate Dow’s trade secrets. Moreover, according to the
Plaintiffs, “there is no practical distinction between the various Organik corporate
entities.”76 This is demonstrated, the Plaintiffs say, by testimony from Organik
Kimya US’s sales agent to the effect that he did not distinguish between Organik
Kimya US and other Organik entities.77 The Plaintiffs also point out that the
Defendants did not make such a distinction in their interrogatory responses. 78
Turning to the various Organik entities themselves, Organik Kimya Turkey
allegedly “hosted Dr. Nene and Strozzi for their interviews in late 2007, and began
contacting customers in the United States just a few months later.”79 And Organik
Kimya Turkey allegedly manufactured products made using Dow’s trade secrets and
sold them in the United States through Organik Kimya US.80 Moreover, Organik
75
The Plaintiffs emphasize that Simone Kaslowski said he, rather than Brian Turk, initiated the
relationship with Behr. Stottmann Aff. Ex. 1 at 167:12–22.
76
Pls.’ Supplemental Br. in Opp’n to Defs.’ Mot. to Dismiss 29.
77
Stottmann Aff. Ex. 5 at 208:8–14.
78
See Stottmann Aff. Ex. 31 at 11 (describing Simone Kaslowski as “a Co-Owner and General
Manager of Organik Kimya” and stating that Stefano Kaslowski “is the Managing Director of
Organik Kimya” (emphasis added)).
79
Pls.’ Supplemental Br. in Opp’n to Defs.’ Mot. to Dismiss 30.
80
Id.; Stottmann Aff. Ex. 31 at 12–13.
15
Kimya Turkey is Organik Kimya US’s parent,81 and Simone and Stefano
Kaslowski—Organik Kimya Turkey’s CEO and managing director, respectively—
are Organik Kimya US’s sole officers and directors.82 Like Organik Kimya Turkey,
Organik Kimya Netherlands also manufactured the purportedly unlawful polymers
and sold them to the United States.83 And Organik Kimya Netherlands hired Strozzi,
the former Dow employee, to become plant manager for the Rotterdam plant.84 As
for Organik Kimya Luxemburg, that entity is Organik Kimya Netherlands’ parent,
and Organik Kimya Netherlands performed toll manufacturing for Organik Kimya
Luxemburg.85 Finally, Organik Kimya Holding allegedly “approves all strategic
decisions for the Organik entities, as well as all budgets, and has the decision making
power for the entire group of Organik entities.”86
C. This Litigation
On March 8, 2016, the Plaintiffs filed their Complaint in this action. The
Complaint contains four counts. Count I alleges misappropriation of trade secrets
related to Dow’s emulsion and opaque polymers.87 Count II alleges conversion
81
Stottmann Aff. Ex. 31 at 12.
82
Stottmann Aff. Ex. 33 at OKDEL00012335–37.
83
Stottmann Aff. Ex. 10; Stottmann Aff. Ex. 31 at 12.
84
Compl. ¶ 41.
85
Stottmann Decl. Ex. 10 at 3.
86
Pls.’ Supplemental Br. in Opp’n to Defs.’ Mot. to Dismiss 31 (citing Stottmann Aff. Ex. 1 at
30:17–23, 33:9–13; Stottmann Aff. Ex. 2 at 177:14–178:13).
87
Compl. ¶¶ 88–95.
16
resulting from Organik’s theft and use of Dow’s trade secrets.88 Count III alleges
unfair competition, Count IV alleges tortious interference with a prospective
business opportunity, and Count V alleges tortious interference with contract.89
Finally, Count VI alleges that the Defendants were unjustly enriched by their
misappropriation of Dow’s trade secrets.90
On April 8, 2016, the Defendants moved to dismiss the Complaint, arguing,
among other things, that this Court lacks personal jurisdiction over the Foreign
Defendants. The Plaintiffs opposed that motion, and in the alternative sought
jurisdictional discovery. I heard oral argument on the Motion to Dismiss on June 7,
2016, at which time I ordered that jurisdictional discovery be conducted.91 On June
1, 2017, the Plaintiffs filed a supplemental brief responding to the Defendants’
jurisdictional arguments, and on June 30, 2017, the Defendants filed their own
supplemental brief on the same issue. The parties then submitted further
supplemental briefing on the US Supreme Court’s recent decision in Bristol-Myers
Squibb Co. v. Superior Court of California, San Francisco County.92 I heard oral
argument on these supplemental submissions on July 21, 2017.
88
Id. ¶¶ 96–99.
89
Id. ¶¶ 100–14.
90
Id. ¶¶ 115–20.
91
June 7, 2016 Oral Arg. Tr. 45:7–14.
92
137 S. Ct. 1773 (2017).
17
II. ANALYSIS
When a defendant moves for dismissal under Court of Chancery Rule
12(b)(2), “the plaintiff bears the burden of showing a basis for the court’s exercise
of jurisdiction over the defendant.”93 Before any jurisdictional discovery has taken
place, the plaintiff “need only make a prima facie showing, in the allegations of the
complaint, of personal jurisdiction and the record is construed in the light most
favorable to the plaintiff.”94 Where, as here, the parties have conducted
jurisdictional discovery but the Court has not held an evidentiary hearing, the
plaintiff’s burden is heavier: she “must allege specific facts supporting [her]
position.”95 Nevertheless, the plaintiff in such a situation still gets the benefit of all
reasonable inferences drawn from the record.96
This Court engages in a two-step analysis to determine whether it has personal
jurisdiction over a nonresident defendant.97 First, the Court must evaluate “whether
‘Delaware statutory law offers a means of exercising personal jurisdiction’ over the
93
Ryan v. Gifford, 935 A.2d 258, 265 (Del. Ch. 2007).
94
Spring Nextel Corp. v. iPCS, Inc., 2008 WL 2737409, at *5 (Del. Ch. July 14, 2008).
95
Medi-Tec of Egypt Corp. v. Bausch & Lomb Surgical, 2004 WL 415251, at *2 (Del. Ch. Mar.
4, 2004) (quoting Sears, Roebuck & Co. v. Sears plc, 744 F. Supp. 1297, 1301 (D. Del. 1990)).
96
See Reid v. Siniscalchi, 2014 WL 6589342, at *5, *13 (Del. Ch. Nov. 20, 2014) (noting that
jurisdictional discovery had been taken and finding that “[a]t this stage in the proceedings, the
Court is required to draw all reasonable inferences in [the plaintiff’s] favor, even if other inferences
appear more probable”); Vichi v. Koninklijke Philips Elecs. N.V., 2009 WL 4345724, at *4 (Del.
Ch. Dec. 1, 2009) (same).
97
Werner v. Miller Tech. Mgmt., L.P., 831 A.2d 318, 326 (Del. Ch. 2003).
18
nonresident defendant.”98 Second, the Court “must determine whether exercising
personal jurisdiction over the defendant passes muster under the Due Process Clause
of the United States Constitution.”99 The Court’s exercise of personal jurisdiction
over a nonresident defendant will satisfy due process “so long as there are ‘minimum
contacts’ between the defendant and the forum.” 100
A. Long-Arm Jurisdiction
The Plaintiffs argue that this Court has long-arm jurisdiction over the Foreign
Defendants under 10 Del. C. § 3104(c)(1), which authorizes personal jurisdiction
“over any nonresident . . . who in person or through an agent . . . [t]ransacts any
business or performs any character of work or service in the State.” “Section 3104
is . . . a ‘single act’ statute that establishes jurisdiction over nonresidents on the basis
of a single act or transaction engaged in by the nonresident within the state.”101 Thus,
Section 3104(c)(1) “will only support an exercise of personal jurisdiction with
respect to those causes of action that have a nexus to the transaction of business that
took place in the State.”102
98
Ruggiero v. FuturaGene, plc., 948 A.2d 1124, 1132 (Del. Ch. 2008) (quoting Amaysing Techs.
Corp. v. Cyberair Commc’ns, Inc., 2005 WL 578972, at *3 (Del. Ch. Mar. 3, 2005)).
99
Terramar Retail Ctrs., LLC v. Marion #2-Seaport Trust U/A/D/ June 21, 2002, 2017 WL
3575712, at *5 (Del. Ch. Aug. 18, 2017).
100
In re Silver Leaf, L.L.C., 2004 WL 1517127, at *3 (Del. Ch. June 29, 2004) (quoting Int’l Shoe
Co. v. Washington, 326 U.S. 310, 316 (1945)).
101
Carlton Invs. v. TLC Beatrice Int’l Holdings, Inc., 1995 WL 694397, at *10 (Del. Ch. Nov. 21,
1995) (citing Tabas v. Crosby, 444 A.2d 250, 254 (Del. 1982); Eudaily v. Harmon, 420 A.2d 1175,
1180 (Del. 1980)).
102
Chandler v. Ciccoricco, 2003 WL 21040185, at *11 (Del. Ch. May 5, 2003).
19
1. Papendick and Its Progeny
The Plaintiffs’ theory is that the Defendants, or some of them, caused Organik
Kimya US to be chartered in Delaware in material furtherance of their unlawful
scheme to monetize their theft of the Plaintiffs’ property. This, they assert, allows
me to exercise jurisdiction over the Foreign Defendants under Section 3104(c)(1).
The Plaintiffs rely heavily on Papendick v. Bosch103 and its progeny in arguing this
theory of jurisdiction over the Foreign Defendants. In Papendick, the plaintiff and
the defendant, a German limited liability company, entered a contract in which the
defendant agreed to pay the plaintiff a finder’s fee if the defendant acquired the
Borg-Warner corporation.104 Eight days before the acquisition took place, the
defendant had incorporated a Delaware corporation to “serv[e] as a vehicle for the
acquisition of the [Borg-Warner] stock . . . involved [in the transaction].” 105 After
the acquisition occurred, the defendant refused to pay the plaintiff the agreed-upon
finder’s fee, and the plaintiff brought suit in Delaware Superior Court.106 While the
Superior Court found that it lacked personal jurisdiction over the nonresident
defendant, our Supreme Court disagreed.107 The Supreme Court stressed that the
defendant had formed a Delaware entity “as an integral component of its total
103
410 A.2d 148 (Del. 1979).
104
Id. at 149.
105
Id.106
Id. at 148–49.
107
Id.20
transaction . . . to which the plaintiff’s instant cause of action relates.”108 Through
that formation, the defendant “purposefully availed itself of the benefits and
protections of the laws of the State of Delaware for financial gain in activities related
to the cause of action,” which was enough to “sustain the jurisdiction of Delaware’s
courts over [the defendant].”109
Following Papendick, this Court has held that “a single act of incorporation,
if done as part of a wrongful scheme, will suffice to confer personal jurisdiction
under § 3104(c)(1).”110 But it is not enough to simply “participat[e] in the formation
of a Delaware entity.”111 “Instead, the formation must be ‘an integral component of
the total transaction to which plaintiff[’]s cause of action relates.’” 112 Put differently,
108
Id. at 152.
109
Id. I note that, while “Papendick was decided in the context of determining Constitutional due
process, Delaware courts have invoked the Papendick rationale to hold that the incorporation and
operation of a Delaware subsidiary constitutes the transaction of business in Delaware under §
3104(c)(1).” EBG Holdings LLC v. Vredezicht’s Gravenhage 109 B.V., 2008 WL 4057745, at *6
(Del. Ch. Sept. 2, 2008).
110
Conn. General Life Ins. Co. v. Pinkas, 2011 WL 5222796, at *2 (Del. Ch. Oct. 28, 2011).
111
Id.112
Id. (quoting Shamrock Holdings of Cal., Inc. v. Arenson, 421 F. Supp. 2d 800, 804 (D. Del.
2006)); see also Reid, 2014 WL 6589342, at *10 (“When done as an integral part of a wrongful
scheme, the formation of a Delaware entity confers personal jurisdiction under the long-arm
statute.”); Newspan, Inc. v. Hearthstone Funding Corp., 1994 WL 198721, at *8 n.16 (Del. Ch.
May 10, 1994) (“It is well-accepted that the incorporation of a company in Delaware in furtherance
of a fraudulent scheme constitutes a contact with this jurisdiction sufficient to satisfy the
requirements of the Due Process Clause, particularly where the creation of the corporation is an
integral part of the actions giving rise to suit.” (emphasis added)); Donald J. Wolfe, Jr. & Michael
A. Pittenger, Corporate and Commercial Practice in the Delaware Court of Chancery § 3.04[c][3]
(2016) (“[I]n suits in which the incorporation of a Delaware subsidiary is an integral component
of the conduct giving rise to the cause of action, the Delaware courts have consistently recognized
that a nonresident defendant’s incorporation of such subsidiary constitutes constitutionally
sufficient ‘minimum contacts’ with Delaware.”).
21
the formation of a Delaware entity must be “central to the[ plaintiff’s] claims of
wrongdoing.”113
The Plaintiffs’ theory of personal jurisdiction goes as follows. Organik had
been trying to make a splash in the US market for some time. Two obstacles stood
in its way, however. First, Organik’s polymers could not meet the exacting standards
of large US customers such as Behr. Second, Organik lacked a US subsidiary, and
without that, large US customers, again including Behr, would not be willing to buy
Organik’s products. Organik took care of the first problem by misappropriating
Dow’s trade secrets, which enabled it to manufacture polymers that met Behr’s
requirements. Organik dealt with the second obstacle by incorporating Organik
Kimya US in Delaware. Having surmounted these two obstacles, Organik was able
to sell in the US market large quantities of opaque polymers made using Dow’s trade
secrets. The incorporation of Organik Kimya US in Delaware was therefore an
essential component of Organik’s scheme to misappropriate Dow’s trade secrets.
Since that scheme forms the basis of the Plaintiffs’ Complaint, the argument goes,
this Court may exercise personal jurisdiction over the Foreign Defendants.
Based on the evidence presented, and giving the Plaintiffs the benefit of all
reasonable inferences, I conclude that personal jurisdiction extends to Organik
Kimya Turkey—Organik Kimya US’s parent. For the reasons explained below, this
113
Cairns v. Gelmon, 1998 WL 276226, at *3 (Del. Ch. May 21, 1998).
22
Court cannot exercise personal jurisdiction over the other Foreign Defendants. I
begin, however, with the evidence that persuades me personal jurisdiction is proper
over Organik Kimya Turkey.
First, the Plaintiffs have offered specific evidence supporting their allegation
that, starting in late 2007, Organik began to carry out a scheme to misappropriate
Dow’s trade secrets. Around this time, Organik hired Dr. Nene, a former Dow
employee with knowledge of trade secrets related to Dow’s opaque polymers. 114
Organik also hired Strozzi, and there is evidence that during his interview with
Organik, “Organik and Mr. Strozzi accessed and reviewed at least 19 Rohm and
Haas emulsion polymer recipes that Mr. Strozzi had brought with him on portable
storage devices.”115 Dr. Nene’s role in improving the recipe for 850 RR is murky,
but the Plaintiffs have put forth evidence suggesting that Dr. Nene used Dow’s trade
secrets to modify the recipe for ORGAWHITE 2000 in a way that seemingly
satisfied Behr’s requirements.116 The evidence of record implies that Dr. Nene
continued his work on ORGAWHITE 2000 until at least March 2010, only a few
months before Organik Kimya US was incorporated.117
114
Stottmann Aff. Ex. 7 at 21:9–32:9, 70:14–72:12, 158:10–14; Pls.’ Supplemental Br. in Opp’n
to Defs.’ Mot. to Dismiss 10–11.
115
Pls.’ Supplemental Br. in Opp’n to Defs.’ Mot. to Dismiss 12 (citing Compl. Ex. B at 44–54).
116
Stottmann Aff. Ex. 28 at ORG883ITC00016448; Stottmann Aff. Ex. 21 at
ORG883ITC00120481.
117
Stottmann Aff. Ex. 21 at ORG883ITC00120481.
23
Second, the Plaintiffs have offered evidence suggesting that Organik decided
to incorporate a US subsidiary in May 2010 in part because Behr had recently said
it would be willing to accept some of Organik’s opaque polymers. Organik had been
contemplating creating a US subsidiary for several years.118 While Simone
Kaslowski’s deposition testimony on this point is far from clear, what is clear is that,
according to Simone, one reason Organik Kimya US was formed in May 2010, as
opposed to some other time, was that Behr had recently signaled its approval of
various opaque polymers produced by Organik.119 Those polymers included
ORGAWHITE 2000, and the Plaintiffs have offered evidence that Behr’s approval
of that product came only after Dr. Nene had incorporated Dow’s trade secrets into
its recipe.120
The Plaintiffs tie these two strands of evidence together via their allegation
that Organik’s decision to incorporate a US subsidiary was driven by its belief that
such an entity was necessary to sell to large US customers, Behr included.
According to the Plaintiffs, that belief proved well founded: After overcoming
additional hurdles related to raw material shortages and product testing, Organik
Kimya US eventually started selling the allegedly unlawful polymers to Behr.121
118
Stottmann Aff. Ex. 6 at 16:25–18:6, 87:5–19.
119
Stottmann Aff. Ex. 1 at 150:19–151:7.
120
Stottmann Aff. Ex. 17 at OKDEL00033736.
121
Cicoski Aff. Ex. 29 at 82:9–13; Cicoski Aff. Ex. 1 at OKDEL00025103–04.
24
Several pieces of record evidence support this story. First, Simone Kaslowski
testified that he thought Organik would not be able to achieve a significant US
presence until it formed a US subsidiary that could assist in understanding US
customers.122 He also said that multinationals would not do business with Organik
until it formed a US subsidiary.123 Stefano Kaslowski, for his part, asserted that a
US subsidiary would enable “customers to have as a primary contact another US
company that was handling all the supply details, the Customs clearance, everything
to do with formalities, . . . [thereby] enhanc[ing] the service level and the satisfaction
of our customers.”124 I also note that 98% of ORGAWHITE 2000 sales in the United
States were placed through Organik Kimya US, the Delaware entity.125
Drawing all reasonable inferences in favor of the Plaintiffs, as I must at this
stage of the proceedings, I find that these facts plausibly suggest that the formation
of Organik Kimya US was a key component of Organik’s scheme to misappropriate
Dow’s trade secrets. True, there are lacunae in this narrative, and Organik points to
several pieces of evidence that undercut it. The gap between May 2010, when
Organik Kimya US was incorporated, and November 2012, when Organik Kimya
US first sold ORGAWHITE 2000 to Behr,126 weakens the purported causal
122
Stottmann Aff. Ex. 1 at 65:13–19.
123
Id. at 177:6–178:8.
124
Stottmann Aff. Ex. 6 at 84:13–20.
125
Stottmann Aff. Ex. 10; July 21, 2017 Oral Arg. Tr. 84:18–24.
126
Cicoski Aff. Ex. 29 at 82:9–13.
25
connection between incorporation and Organik’s ability to reach large US customers
such as Behr. But it does not eliminate the connection. And, as the Plaintiffs point
out, it appears that Behr had at least tentatively approved Organik’s opaque polymers
around the time of Organik Kimya US’s incorporation. That Organik Kimya US
later ran into impediments that delayed its sales to Behr does not establish that
incorporation of a US subsidiary had no effect on Behr’s decision to buy from
Organik.
Organik may also be correct that Organik Kimya US’s relationship with Behr
was largely managed by Brian Turk of Turk International. But the Plaintiffs have
presented evidence that, while Turk managed the relationship, it was Simone
Kaslowski who initiated contact with Behr.127 And even if Turk were solely
responsible for maintaining Organik Kimya US’s relationship with Behr, it does not
necessarily follow that the formation of a US subsidiary was not critical to Organik’s
broader misappropriation scheme. Further, while Organik cites evidence suggesting
that a lack of US manufacturing facilities was the real obstacle to Organik’s success
with large US customers,128 that evidence runs up against testimony put forward by
the Plaintiffs regarding the importance of having a US subsidiary. At this procedural
stage, I need not weigh this conflicting evidence or determine whether the Plaintiffs
127
Stottmann Aff. Ex. 1 at 167:12–22.
128
Cicoski Aff. Ex. 2 at 73:14–16.
26
have proven that Organik Kimya US was integral to Organik’s misappropriation
scheme. Instead, my task is only to decide whether the Plaintiffs have satisfied their
burden of “alleg[ing] specific facts supporting [their] position” that this Court may
exercise long-arm jurisdiction over the Foreign Defendants.129 This they have done,
at least with respect to Organik Kimya Turkey.
As noted above, Organik Kimya Turkey is Organik Kimya US’s parent.130
That, of course, suffices to show that Organik Kimya Turkey “participated in the
formation of” Organik Kimya US, a prerequisite for establishing personal
jurisdiction over a nonresident defendant under Papendick and its progeny.131 But
the Plaintiffs have failed to offer any record evidence suggesting that the other
Foreign Defendants played any role whatsoever in the decision to create Organik
Kimya US. Organik Kimya Netherlands may have hired Strozzi to run its Rotterdam
plant,132 and it may have manufactured some of the allegedly unlawful polymers that
ended up in the United States;133 but these facts say nothing about whether Organik
Kimya Netherlands had anything to do with the formation of Organik Kimya US.
Organik Kimya Luxemburg, for its part, performed toll manufacturing for Organik
129
Medi-Tec of Egypt Corp, 2004 WL 415251, at *2 (quoting Sears, Roebuck & Co., 744 F. Supp.
at 1301).
130
Stottmann Aff. Ex. 31 at 12.
131
Vichi, 2009 WL 4345724, at *5.
132
Compl. ¶ 41.
133
Stottmann Aff. Ex. 10; Stottmann Aff. Ex. 31 at 12.
27
Kimya Netherlands, its subsidiary.134 But again, that does not suggest that Organik
Kimya Luxemburg participated in the incorporation of Organik Kimya US. As for
Organik Kimya Holding, the Plaintiffs point out that it “approves all strategic
decisions for the Organik entities, as well as all budgets, and has the decision making
power for the entire group of Organik entities.”135 Yet the Plaintiffs provide no
evidence that Organik Kimya Holding exercised that decision making authority with
respect to the creation of Organik Kimya US—the sole Delaware contact alleged in
this case. In short, there is simply no evidence that Organik Kimya Netherlands,
Organik Kimya Luxemburg, or Organik Kimya Holding “meaningful[ly]
participat[ed] in the formation of the Delaware entity.” 136
B. The Conspiracy Theory of Jurisdiction
The Plaintiffs do not rely solely on Papendick and its progeny, however. They
also argue that personal jurisdiction over the Foreign Defendants is proper under the
so-called conspiracy theory of jurisdiction. That theory rests “on the legal principle
134
Stottmann Decl. Ex. 10 at 3.
135
Pls.’ Supplemental Br. in Opp’n to Defs.’ Mot. to Dismiss 31 (citing Stottmann Aff. Ex. 1 at
30:17–23, 33:9–13; Stottmann Aff. Ex. 2 at 177:14–178:13).
136
Terramar Retail Ctrs., LLC, 2017 WL 3575712, at *10. I am also not persuaded by Organik’s
argument that, because there is no “practical distinction” between the various Foreign Defendants,
I may simply ignore the separate corporate existence of these entities. Pls.’ Supplemental Br. in
Opp’n to Defs.’ Mot. to Dismiss 29. I am aware of no authority supporting such a position, and
the Plaintiffs have not pointed to any. Nor do I believe that personal jurisdiction is proper over
Organik Kimya Netherlands, Organik Kimya Luxemburg, or Organik Kimya Holding simply
because the Organik entities share common management. Again, without specific evidence tying
these nonresident entities to the formation of Organik Kimya US, Papendick and its progeny do
not permit this Court to exercise long-arm jurisdiction over them.
28
that one conspirator’s acts are attributable to the other conspirators.”137 “The
‘conspiracy theory’ is not an independent jurisdictional basis.”138 Instead, it is “a
shorthand reference to an analytical framework where a defendant’s conduct that
either occurred or had a substantial effect in Delaware is attributed to a defendant
who would not otherwise be amenable to jurisdiction in Delaware.”139 Moreover,
this Court has repeatedly stated that “the conspiracy theory of jurisdiction is
narrowly construed.”140
Our Supreme Court has established the following test for evaluating
jurisdiction premised on a conspiracy theory:
[A] conspirator who is absent from the forum state is subject to the
jurisdiction of the court, assuming he is properly served under state law,
if the plaintiff can make a factual showing that: (1) a conspiracy to
defraud existed; (2) the defendant was a member of that conspiracy; (3)
a substantial act or substantial effect in furtherance of the conspiracy
occurred in the forum state; (4) the defendant knew or had reason to
know of the act in the forum state or that acts outside the forum state
would have an effect in the forum state; and (5) the act in, or effect on,
the forum state was a direct and foreseeable result of the conduct in
furtherance of the conspiracy.141
137
Matthew v. Fläkt Woods Grp. SA, 56 A.3d 1023, 1027 (Del. 2012).
138
Crescent/Mach I Partners, L.P. v. Turner, 846 A.2d 963, 976 (Del. Ch. 2000).
139
Computer People, Inc. v. Best Int’l Grp., Inc., 1999 WL 288119, at *5 (Del. Ch. Apr. 27, 1999).
140
Benihana of Tokyo, Inc. v. Benihana, Inc., 2005 WL 583828, at *8 (Del. Ch. Feb. 4, 2005); see
also Sustainable Energy Generation Grp., LLC v. Photon Energy Projects B.V., 2014 WL
2433096, at *6 (Del. Ch. May 30, 2014) (noting “this Court’s repeated admonitions that the
conspiracy theory is a ‘strict test that should be construed narrowly’”).
141
Istituto Bancario Italiano SpA v. Hunter Eng’g Co., 449 A.2d 210, 225 (Del. 1982).
29
“Although Istituto Bancario literally speaks in terms of a ‘conspiracy to defraud,’
the principle is not limited to that particular tort.”142 The fourth and fifth elements
of the Istituto Bancario test “require allegations ‘from which one can infer that a
foreign defendant knew or should have known that the conspiracy would have a
Delaware nexus.’”143 This Court has clarified that “the five elements of the Istituto
Bancario test functionally encompass both prongs of the jurisdictional test. The first
three Istituto Bancario elements address the statutory prong of the test. The fourth
and fifth Istituto Bancario elements address the constitutional prong of the test.”144
For reasons that should be clear by now, this Court may not exercise personal
jurisdiction over Organik Kimya Netherlands, Organik Kimya Luxemburg, or
Organik Kimya Holding under the conspiracy theory. Even if I assume that these
entities were members of a conspiracy to misappropriate Dow’s trade secrets, and
that the incorporation of Organik Kimya US in Delaware advanced that conspiracy,
there is no record evidence suggesting that these nonresident defendants “knew or
should have known” about any Delaware nexus to the scheme.145 In lieu of offering
such evidence, the Plaintiffs simply assert that Simone Kaslowski’s “knowledge of
142
Carsanaro v. Bloodhound Techs., Inc., 65 A.3d 618, 636 (Del. Ch. 2013) (citing Hamilton P’rs
v. Englard, 11 A.3d 1180, 1197 (Del. Ch. 2010)).
143
Virtus Capital L.P. v. Eastman Chem. Co., 2015 WL 580553, at *15 (Del. Ch. Feb. 11, 2015)
(quoting Matthew, 56 A.3d at 1024).
144
Id. at *12.
145
Matthew, 56 A.3d at 1024.
30
the Delaware incorporation is imputed to each of” the Foreign Defendants.146
Notably, the Plaintiffs cite no authority for this proposition. Absent any indication
that these nonresident entities knew or should have known about the Delaware
incorporation, the Plaintiffs cannot satisfy the fourth and fifth elements of the Istituto
Bancario test.
The Plaintiffs’ attempt to premise jurisdiction over the Foreign Defendants on
a conspiracy theory fails for an additional, independent reason. The Plaintiffs allege
a conspiracy among various Organik entities and their wholly owned subsidiaries.
But “a corporation generally cannot be deemed to have conspired with its wholly
owned subsidiary.”147 There are exceptions to this general principle. For example,
the rule may not apply when a parent and its subsidiary do not “share common
economic interests.”148 Yet the Plaintiffs have not attempted to show that any such
exception applies here, and indeed their jurisdictional argument hinges on the
assumption that “the various Organik entities operated as ‘one Organik.’”149 That
alone defeats the Plaintiffs’ attempt to establish personal jurisdiction over the
Foreign Defendants on the basis of a conspiracy.150 Thus, this Court cannot exercise
146
Pls.’ Supplemental Br. in Opp’n to Defs.’ Mot. to Dismiss 42.
147
In re Transamerica Airlines, Inc., 2006 WL 587846, at *6 (Del. Ch. Feb. 28, 2006).
148
Allied Capital Corp. v. GC-Sun Holdings, L.P., 910 A.2d 1020, 1042 (Del. Ch. 2006).
149
Pls.’ Supplemental Br. in Opp’n to Defs.’ Mot. to Dismiss 30.
150
See Am. Capital Acquisition Partners, LLC v. LPL Holdings, Inc., 2014 WL 354496, at *12
(Del. Ch. Feb. 3, 2014) (“While the Plaintiffs aver that ‘[t]he defendants’ injurious actions were
performed for reasons outside the normal course of their businesses,’ they do not support this
general assertion with any particularized allegations; thus, the general rule that a corporation
31
personal jurisdiction over any of the Foreign Defendants except Organik Kimya
Turkey.
C. Due Process
Because I have held that this Court may exercise personal jurisdiction over
Organik Kimya Turkey, I must now determine whether doing so violates due
process. “To satisfy due process, the exercise of personal jurisdiction must comport
with traditional notions of fair play and substantial justice.”151 The question is
whether the nonresident defendant “engaged in sufficient ‘minimum contacts’ with
Delaware to require it to defend itself in the courts of this State.”152 “In order to
establish jurisdiction over a nonresident defendant, the nonresident defendant’s
contacts with the forum must rise to such a level that it should ‘reasonably anticipate’
being required to defend itself in Delaware’s courts.”153 I need not dwell on the due
process question, however. That is because Papendick itself held that the formation
of a Delaware subsidiary as an integral component of a transaction from which a
plaintiff’s claim arises is sufficient to satisfy due process.154 And this Court has
found it unnecessary to engage in a detailed due process analysis when it has found
cannot conspire with its wholly-owned subsidiaries and officers must apply.” (alteration in
original) (footnote omitted)).
151
Vichi, 2009 WL 4345724, at *10.
152
AeroGlobal Capital Mgmt., LLC v. Cirrus Indus., Inc., 871 A.2d 428, 440 (Del. 2005).
153
Id. (quoting World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980)).
154
410 A.2d at 152.
32
that Papendick applies to a nonresident defendant’s conduct.155 Looked at another
way, having incorporated a Delaware entity to further its unlawful scheme, a
defendant cannot plausibly maintain that an exercise of jurisdiction over it in this
forum in regard to that scheme was unforeseeable. Accordingly, because I have
already concluded that Papendick and its progeny permit personal jurisdiction over
Organik Kimya Turkey, I also find that such an exercise of jurisdiction would not
offend due process.156
D. Remaining Issues
In addition to arguing that this Court lacks personal jurisdiction over the
Foreign Defendants, Organik asserts that the Complaint fails to state a claim for
relief under Court of Chancery Rule 12(b)(6). Specifically, Organik argues that the
155
See Microsoft Corp. v. Vadem, Ltd., 2012 WL 1564155, at *7 n.35 (Del. Ch. Apr. 27, 2012)
(“Because the incorporation of a Delaware corporation as an integral component of a total
transaction to which a plaintiff’s cause of action relates is sufficient to satisfy § 3104 and
constitutional due process, I need not discuss separately the second prong of the personal
jurisdiction analysis.”).
156
The US Supreme Court’s recent decision in Bristol-Myers Squibb Co. does not affect my
analysis here. In that case, the plaintiffs, most of whom were not California residents, sued Bristol-
Myers Squibb Company (“BMS”) in California state court, “asserting a variety of state-law claims
based on injuries allegedly caused by a BMS drug called Plavix.” Bristol-Myers Squibb Co., 137
S. Ct. at 1777. While BMS sold Plavix in California, it “did not develop Plavix in California, did
not create a marketing strategy for Plavix in California, and did not manufacture, label, package,
or work on the regulatory approval of the product in California.” Id. at 1778. Moreover, “[t]he
nonresident plaintiffs did not allege that they obtained Plavix through California physicians or
from any other California source; nor did they claim that they were injured by Plavix or were
treated for their injuries in California.” Id. The Supreme Court understandably held that personal
jurisdiction was not proper over these nonresident plaintiffs: “What is needed—and what is
missing here—is a connection between the forum and the specific claims at issue.” Id. at 1781.
But in the present case, there is a connection between Delaware and the claims alleged in the
Complaint: Organik’s decision to incorporate a US subsidiary in Delaware, which allegedly was a
key component of its misappropriation scheme.
33
Delaware Uniform Trade Secrets Act (“DUTSA”) displaces the Plaintiffs’ common
law claims, and that the DUTSA does not apply extraterritorially. In light of my
decision on personal jurisdiction, I find it appropriate to defer ruling on these issues.
The parties should confer on how they wish to proceed as to the Defendants’ Rule
12(b)(6) arguments in consideration of the holding here.
III. CONCLUSION
For the foregoing reasons, the Defendants’ Motion to Dismiss for lack of
personal jurisdiction is granted in part and denied in part. Consideration of the
Defendants’ Rule 12(b)(6) arguments for dismissal is deferred. The parties should
submit an appropriate form of order.
34