Ali v. Beechcraft Corp.

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
SHAREIF ALI, as personal representative )
of the Estate of Ameer Ali, and JOY ANN )
MERRIFIELD, as personal representative )
of the Estate of Emily Lewis, )
)
Plaintiffs, )
)
v. ) C.A. No.: N11C-12-253 FSS
)
BEECHCRAFT CORPORATION, et al, )
)
Defendants. )
Submitted: March 7, 2014
Decided: June 30, 2014
ORDER
Upon Defendant Beechcraft Corporation’s Motion to Dismiss
for Lack of Personal Jurisdiction –
GRANTED
This personal injury case stems from an airplane crash on January 21,
2010 in Alaska. Shortly after takeoff, engine failure caused Decedents’ airplane to
roll left fatally. Plaintiffs are Decedents’ representatives. Defendants manufactured
the airplane and its components. Now, Beechcraft Corporation claims its minimal
Delaware contacts are not enough to subject it to general personal jurisdiction here.
Hence, this motion to dismiss.
I.
Plaintiffs filed suit on December 30, 2011. On November 26, 2013,
Beechcraft moved to dismiss for lack of personal jurisdiction. The court held oral
argument March 7, 2014.
II.
As mentioned, Beechcraft argues it does not have minimum contacts
with Delaware and defending here is unreasonable. As this case involves a crash in
Alaska, involving Alaskans, and Defendant is a Kansas corporation, this is not a
specific jurisdiction case. Rather, under Delaware’s long-arm statute, Plaintiff must
prove Defendant “engages in [a] persistent course of conduct in the State or derives
substantial revenue from ... the State.”1 Specifically, Beechcraft argues:
BC has no agents, distributors, dealers, employees,
officers, or directors in Delaware. At no time has BC
maintained real estate, bank accounts, or other interest in
property in Delaware. BC does not maintain company
records in Delaware, and does not hold meetings of
shareholders, directors or officers in Delaware. From
2003-present, BC’s sales of goods to Delaware customers
have accounted for less than one percent of BC’s total
sales.... Nor has BC paid, or incurred any obligation to
pay, taxes in Delaware since at least March 2007.
Because Defendant does not have continuous and systematic contacts with Delaware,
requiring it to defend itself here is unreasonable.
1
10 Del.C. § 3104(c)(4).
2
Predictably, Plaintiffs counter Defendant’s contacts are significant,
establishing general jurisdiction. Specifically, Plaintiffs allege Defendant delivered
five aircraft to Delaware customers since 2007, for $46,425,833.00. Federal Aviation
Administration public records show that 1,436 Beechcraft aircraft are registered in
Delaware. Further, Beechcraft has made 34,549 direct mailings to Delaware
addresses from 2003-2013. Most persuasively, Plaintiff alleges Defendant, not its
subsidiary, Hawker Beechcraft Services, maintains a 60,000-foot facility for goods,
services, and customer support in Wilmington, Delaware. Each invoice from the
Wilmington facility showed payment was made to Defendant, not the subsidiary.
These invoices total $8,809,053.94 in Delaware revenue from May 2012 to December
2013. Further, the Wilmington facility’s general manager was hired by Defendant.
Essentially, Plaintiffs argue the subsidiary is, at least, an alter ego of Defendant. As
the subsidiary is subject to general jurisdiction, Defendant should be also.
III.
Before discussing the core dispute, some procedural background is
important. This case was originally filed against, among others, Hawker Beechcraft,
Inc., a Delaware corporation, and Raytheon Company. In May 2012, Hawker
Beechcraft Inc. filed for bankruptcy. Plaintiff alleges it emerged as Beechcraft
Corporation. Defendants, however, disagree. Regardless, the parties later stipulated
3
to substitute Beechcraft Corporation for those Defendants, stating “Beechcraft
Corporation covenants ... it is the successor in interest and continuation of Beech
Aircraft Company and Raytheon Aircraft Company.”
In pertinent part, the stipulation also provides “there will be no statute
of limitation defense asserted ... [but] [a]ll other defenses are preserved.” Plaintiffs
never argued in their briefs or at oral argument that the stipulation’s defenses
preservation applies to personal jurisdiction, nor that jurisdiction over Beechcraft was
created by agreement. So, there is no reason not to apply traditional personal
jurisdiction.
IV.
Plaintiffs bear the burden of establishing personal jurisdiction on a
motion to dismiss.2 As discussed, the parties agree specific jurisdiction is not
applicable. General jurisdiction requires a two-step inquiry.3 First, is jurisdiction
appropriate under Delaware’s long-arm statute?4 Second, would asserting jurisdiction
violate due process?
A.
Long-arm jurisdiction applies to one who “regularly does or solicits
business, engages in any other persistent course of conduct in the State or derives
2
Boone v. Oy Partek, 724 A.2d 1150 (Del. Super. 1997).
3
Id.4
10 Del.C. § 3104.
4
substantial revenue from services, or things used or consumed in the State.” 5 Further,
a defendant’s contacts with Delaware must be current.6
Section 3104(c)(4) is derived almost completely from § 1.03(a)(4) of the
Uniform Interstate and International Procedure Act.7 The comment to this subsection
provides, “A sufficient nexus exists if (a) the defendant regularly advertises his
products or services in the state or (b) carries on some other continuous course of
activity there or (c) derives substantial revenue from goods used or consumed or from
services rendered in the state. It is not necessary that this activity amount to the doing
of business.”8 Further, the statute should be construed broadly to confer jurisdiction
to the maximum extent possible.9
Defendant admittedly has made sales to Delaware customers averaging
$6.6 million a year, which may be considered “substantial revenue.” Defendant also
regularly mails technical publications and safety manuals to Delaware addresses. “It
is the pattern of regular solicitation which makes [Defendant] susceptible to assertion
of jurisdiction.”10 Where a company solicits business to the country as a whole, has
5
10 Del.C. § 3104(c)(4).
6
Boone, 724 A.2d at 1156.
7
Waters v. Deutz Corp., 479 A.2d 273, 275 (Del. 1984).
8
Id. citing 13 U.L.A. § 1.03 (1980).
9
LaNuova D & B, S.p.A. v. Bowe Co., Inc., 513 A.2d 764, 768 (Del. 1986).
10
Gerber v. Young, 1987 WL 9670 (Del. Super. 1987).
5
made sales in Delaware deriving substantial revenue, and conducted this activity for
over a decade, section 3104(c)(4) is satisfied.11
B.
Having found Delaware’s long-arm statute covers Beechcraft’s Delaware
business, the court turns to due process. Federal due process is a check on a state’s
long-arm jurisdiction. But for due process constraints, by advertising nationally a
business would subject itself to suit almost anywhere even if, as it is here, none of the
parties or facts has a real tie to the litigation forum. Due process permits personal
jurisdiction if an out-of-state defendant has “certain minimum contacts with [the
state] such that the maintenance of the suit does not offend ‘traditional notions of fair
play and substantial justice.’” 12 Essentially, the court may only exercise general
jurisdiction when a defendant’s contacts with Delaware are “so continuous and
systematic as to render [defendant] essentially at home in the forum state.”13 To
underscore its point, Beechcraft emphasized at oral argument that general jurisdiction
here means it is subject to suit in Delaware for any future case. The standard,
accordingly, is a high one.
11
Boone, 724 A.2d at 1158.
12
Int'l Shoe Co. v. State of Wash., Office of Unemployment Comp. & Placement, 326 U.S. 310,
316 (1945) citing Milliken v. Meyer, 311 U.S. 457, 463 (1940).
13
Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S.Ct. 2846 (2011).
6
Plaintiffs’ strongest argument, as mentioned, is that Beechcraft’s
subsidiary, Hawker Beechcraft Services, which indisputably does business in
Delaware, is Defendant’s alter ego. Plaintiff asserts Delaware customers paid
Defendant directly for the subsidiary’s goods. Plaintiff also argues an employee of
the subsidiary employee testified both Defendant and its subsidiary use the trade
name “Beechcraft” and his initial employment paperwork suggested he was hired by
Defendant. Best of all is that funds passed directly to the parent. Individually and
collectively those random facts do not suffice. But, assuming they did, this court
simply does not have subject-matter jurisdiction to pierce the corporate veil.14
Plaintiffs next argue the subsidiary’s Delaware contacts should be
imputed to Defendant. The United States Supreme Court, addressing a similar
situation in Daimler AG v. Bauman,15 held even assuming the subsidiary was subject
to general jurisdiction in the forum state and the subsidiary’s contacts were imputable
to the parent, that alone is not enough to subject the parent to general jurisdiction.16
Further, in Daimler, the subsidiary and parent’s contacts to the forum were
significantly higher than the subsidiary and Defendant’s contacts are to Delaware
14
Sonne v. Sacks, 314 A.2d 194 (Del. 1973).
15
134 S.Ct. 746 (2014).
16
Id. at 760 (“Even if we were to assume that MBUSA is at home in California, and further to
assume MBUSA's contacts are imputable to Daimler, there would still be no basis to subject
Daimler to general jurisdiction in California, for Daimler's slim contacts with the State hardly
render it at home there.”)
7
here. Accordingly, Plaintiffs must establish personal jurisdiction over Defendant in
its own right, without regard to the subsidiary’s contacts.
Daimler was no sea change.17 Daimler, affirming Goodyear Dunlop
Tires Operations, S.A. v. Brown,18 held general jurisdiction satisfied due process only
where an entity is incorporated or has a principal place of business within the forum
state.19 Neither criterion is satisfied here.
Defendant, as a national enterprise, has contacts with every state. As
discussed, only where contacts are continuous and systematic, and where the
defendant is at home in the state, does exercising personal jurisdiction satisfy due
process. As Daimler pointed out, if Defendant’s Delaware activities sufficed to allow
general jurisdiction, “the same global reach would presumably be available in every
other State in which [the subsidiary’s] sales are sizeable.”20
Accordingly, deciding what constitutes substantial contacts requires both
an absolute and a relative analysis.21 Defendant’s contacts to Delaware are minimal,
especially when viewed relative to its national network. The five airplanes Defendant
sold in Delaware total less than one percent of Defendant’s total sales. Less than one
17
E.g. Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. —, 131 S.Ct. 2846 (2011);
Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408 (1984).
18
564 U.S. —, 131 S.Ct. 2846 (2011).
19
Id. at 761 (“The paradigm all-purpose forums for general jurisdiction are a corporation's place
of incorporation and principal place of business.)”
20
Id.
21
E.g. Ball v. Metallurgie Hoboken-Overpelt, S.A., 902 F.2d 194, 199 (2d Cir. 1990); Stewart v.
Bus & Car Co., 293 F. Supp. 577, 583 (N.D. Ohio 1968);.
8
percent of total revenue is insubstantial as a matter of law.22 Similarly, as to the
established Delaware contacts’ triviality, airplanes are built to move beyond the point
of sale. Accordingly, FAA registration records and mailings are similarly unavailing.
In summary, the only connections between Beechcraft Corporation and
Delaware are a handful of sales to Delaware customers and legally required mailings
to airplane owners with Delaware mailing addresses. While Defendant owns a
subsidiary with a substantial Delaware facility, neither the facility nor the subsidiary
had anything to do with the crash. Nor do the subsidiary’s contacts have any bearing
on whether exercising general jurisdiction over Beechcraft comports with due
process. Even viewing the record in Plaintiff’s favor, it simply cannot be said that
Beechcraft is “at home” in Delaware.
For the above reasons, Defendant Beechcraft Corporation’s Motion to
Dismiss is GRANTED.
IT IS SO ORDERED.
/s/ Fred S. Silverman
Judge
cc: Prothonotary (Civil) Justin P. Callaway, Esquire
Katherine L. Mayer, Esquire George Thomas Lees, III, Esquire
Matthew Rifino, Esquire James C. Shroud, Esquire
Sally Jean Daugherty, Esquire Gary W. Aber, Esquire
22
Bell Helicopter v. C&C Helicopter, 295 F. Supp. 2d 400 (D. Del. 2002).
9
10