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Recaro North America, Inc. v. Holmbergs Childsafety Co.

April 23, 2010

RECARO NORTH AMERICA, INC., A MICHIGAN CORPORATION, PLAINTIFF,
v.
HOLMBERGS CHILDSAFETY CO., LTD., F/K/A KENDRION SAFETY FUNCTIONS, LTD., A HONG KONG CORPORATION, AND GNOSJÖ-GRUPPEN AB, F/K/A KENDRION AUTOMOTIVE METALS, AB, A SWEDISH CORPORATION, DEFENDANTS.



The opinion of the court was delivered by: Hon. Marianne O. Battani

OPINION AND ORDER DENYING DEFENDANTS' MOTION TO DISMISS PURSUANT TO FED. R. CIV. P. 12(b)(2) FOR LACK OF PERSONAL JURISDICTION, OR IN THE ALTERNATIVE, PURSUANT TO FED. R. CIV. P. 12(b)(3) FOR LACK OF PROPER VENUE, OR IN THE ALTERNATIVE, BASED ON FORUM NON CONVENIENS GROUNDS

Before the Court is Defendants' Motion to Dismiss Pursuant to FED. R. CIV. P. 12(b)(2) for Lack of Personal Jurisdiction, or in the Alternative, Pursuant to FED. R. CIV. P. 12(b)(3) for Lack of Proper Venue, or In the Alternative Based on Forum Non Conveniens Grounds (Doc. No. 11). The Court heard oral argument on January 6, 2010, and at the conclusion of the hearing, took this matter under advisement. Counsel for Defendants subsequently provided the Court with a chart of the corporate structure of Gnosjö-Gruppen AB. The Court upon consideration of the pleadings, DENIES the motion.

I. STATEMENT OF FACTS

Recaro North America Inc. (Recaro) brings this action for damages relating to the recall and replacement of a metal, spring-loaded adjuster, commonly called an A-lock. Pl.'s Ex. A, ¶ 3. A-locks, which are used in child safety seats, keep the harness straps tight, and a failure of the A-lock results in an inability to secure a child properly in the safety seat. Id. at ¶ 4. Defendant Gnosjö-Gruppen AB, formerly known as Kendrion Automotive Metals AB, a Swedish corporation, includes an automotive supplier division and a child safety division. Two corporations comprise the child safety division: Holmbergs Childsafety AB, formerly known as Kendrion Holmbergs AB, and Defendant Holmbergs Childsafety Co., LTD (hereinafter Holmbergs Hong Kong), formerly known as Kendrion Safety Functions, LTD., a Hong Kong corporation. See Defs.' Suppl. Exhibit.

According to Recaro, prior to contracting with Defendants, it used an A-lock designed and manufactured by Indiana Mills and Manufacturing Incorporated (IMMI), a U.S. company. Am. Compl. at ¶ 14. When Recaro began development of its Como and Signo brand convertible child safety seats, it was approached by Global Products Inc., to purchase A-locks designed by Gnosjö-Gruppen AB, and manufactured by Holmbergs Hong Kong. Pl.'s Ex. A at ¶ 5.

According to Plaintiff, Global Products, Inc. (Global Products) has represented Gnosjö-Gruppen AB since 2001 and Holmbergs since 2003. Pl.'s Ex. B, Dec. 5, 2006 email; Pl.'s Ex. C1. After October 2006, when Brad Shearer, a principal of Global Products, approached Recaro about using Defendants' A-locks, id. at ¶¶ 5, 7, Global Products initiated many subsequent communications with Recaro. Id. at ¶ 8. A Global Products representative personally visited Recaro's headquarters to discuss Defendants' involvement in the supply chain for Recaro's child safety seats. Pl.'s Ex. A, ¶ 19. In these interactions, Global Products represented Gnosjö-Gruppen AB and Holmbergs Hong Kong as one company, portraying Gnosjö-Gruppen AB as in control and Holmbergs Hong Kong as a production facility opened in China to take advantage of low production costs. Id. at ¶¶ 12, 13.

Eventually, Recaro agreed to purchase 18,000 A-locks directly from Gnosjö-Gruppen AB for the Cosmo brand. Pl.'s Ex. A at ¶ 15. After Holmbergs Hong Kong established production capability, it manufactured the A-locks and shipped them to International Marketing Systems("IMS")/Safety Plus, which was also in China. Id. at ¶ 16. IMS/SafetyPlus inserted the safety belt through the A-lock and sewed the harness straps. These "finished" components were sent to Lerado, another Chinese company with whom Recaro had a contractual relationship. Lerado assembled all of the components and shipped the final seat to Recaro. Recaro purchased approximately 16,000 A-locks from Holmbergs Hong Kong. Id. at ¶ 15.

According to Plaintiff, Global Products represented and agreed that Holmbergs Hong Kong and IMS/Safety Plus would remain directly liable to Recaro for any defects in the respective components. Id. at ¶ 17. Shearer issued two quotations from Holmbergs Hong Kong to IMS/SafetyPlus and from IMS/SafetyPlus to Lerado, which are offered in support of Plaintiff's position. See Pl.'s Exs. E and F. The first, dated August 14, 2007, is written on Holmbergs Hong Kong letterhead, and includes a "Note:

[Holmbergs Hong Kong] is responsible for the [A-locks] as noted. . . .and Recaro specifications as agreed upon. IMS/Safety Plus only responsible for a visual inspection fo the mechanism during sewing operation. Any defects discovered in this inspection should be noted immediately to [Holmbergs Hong Kong].

Pl.'s Ex. E. The second quotation is on IMS letterhead and addresses a quotation for sewn straps sold to Lerado for use only on seats as "designed and approved by Recaro." Pl.'s Ex. F. The Note section states that Holmbergs Hong Kong will be "responsibly directly to Recaro for QA matters." Id.

In January 2009, Recaro received a customer complaint about the A-lock. Recaro's engineering and quality department reviewed the issue, and on February 2, 2009, it informed Lerado, IMS, and Holmbergs Hong Kong of the problem. Recaro sent several of the defective A-locks to Holmbergs Hong Kong, which confirmed that Gnosjö-Gruppen AB designed the A-lock. Id. at ¶ 21, 22.

Recaro reported the defect to the National Highway Traffic Safety Administration ("NHTSA"), id. at ¶ 26, and Recaro subsequently announced a recall affecting 5,444 child safety seats assembled between February 2008 and September 2008. Pursuant to the recall, Recaro agreed to replace all defective child safety seats. Id. at ¶ 27, Pl.'s Ex G, H. It replaced 1,540 seats and reworked 7,000. Pl.'s Ex. A at ¶ 29.

On June 29, 2009, Plaintiff filed suit against Defendants Holmbergs Hong Kong and Gnosjö-Gruppen AB, alleging claims of breach of contract and breach of warranty. Plaintiff also seeks to pierce the corporate veil as to Gnosjö-Gruppen AB. Plaintiff alleges that Defendants are liable for damages Plaintiff incurred in connection with a recall of its child safety seats by NHTSA.

Defendants move for dismissal for lack of personal jurisdiction, improper venue, and on the basis of forum non conveniens.

II. STANDARD OF REVIEW

A. Personal Jurisdiction

Before its answer is filed, a defendant may move to dismiss for lack of personal jurisdiction over the defendant. FED. R. CIV. P. 12(b)(2). "Where personal jurisdiction is challenged in a 12(b)(2) motion, the plaintiff has the burden of establishing that jurisdiction exists." Am. Greetings Corp. v. Cohn, 839 F. 2d 1164, 1168 (6th Cir. 1988); see also McNutt v. Gen. Motors Acceptance Corp., 298 U.S. 178, 189 (1936) (the plaintiff "must allege in his pleading the facts essential to show jurisdiction"). If a district court rules on such a motion before trial, the court, in its discretion, "may determine the motion on the basis of affidavits alone; or it may permit discovery in aid of the motion; or it may conduct an evidentiary hearing on the merits of the motion." Serras v. First Tenn. Bank Nat'l Ass'n, 875 F.2d 1212, 1214 (6th Cir. 1989) (quoting Marine Midland Bank, N.A. v. Miller, 664 F.2d 899, 904 (2d Cir. 1981)). The district court is granted considerable discretion in rendering its decision. Theunissen v. Matthews, 935 F.2d 1454, 1458 (6th Cir. 1991); Mich. Nat'l Bank v. Quality Dinette, Inc., 888 F.2d 462, 466 (6th Cir. 1989). The method the court selects will affect the magnitude of the burden on the plaintiff to avoid dismissal. Serras, 875 F.2d at 1214. Where the court relies solely on the parties' affidavits to reach its decision on the motion, the burden rests on the plaintiff to establish a prima facie showing of jurisdiction in order to avoid dismissal, Intera Corp. v. Henderson, 428 F.3d 605, 615 (6th Cir. 2005), and the court must consider the pleadings and affidavits in the light most favorable to the plaintiff. CompuServe, Inc. v. Patterson, 89 F.3d 1257, 1261-62 (6th Cir. 1996).

In considering 12(b)(2) motions, the court does not weigh the controverting assertions of the moving party due to its interest in "prevent[ing] nonresident defendants from regularly avoiding personal jurisdiction simply by filing an affidavit denying all jurisdictional facts." CompuServe, Inc., 89 F.3d at 1262 (quoting Theunissen, 935 F.2d at 1459).

B. Venue

Pursuant to 28 U.S.C. § 1391(a):

A civil action wherein jurisdiction is founded only on diversity of citizenship may, except as otherwise provided by law, be brought only in (1) a judicial district where any defendant resides, if all defendants reside in the same State, (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated, or (3) a judicial district in which any defendant is subject to ...


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