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Knight Capital Partners Corp v. Henkel Ag & Company

United States District Court, E.D. Michigan, Southern Division

June 23, 2017



          DAVID M. LAWSON United States District Judge

         The question presented by the defendant's motion to dismiss is whether the conduct of Cedric Berthold, the defendant's European Senior Vice President and General Manager, was connected enough to this District to establish specific personal jurisdiction over the defendant for the plaintiff's claims of tortious interference with its business expectancy and a breach of a non-disclosure agreement. According to the facts pleaded in the complaint, it was. Plaintiff Knight Capital Partners Corporation (KCP) was brokering a three-way deal with the defendant's American subsidiary (Henkel Corporation [Henkel US]), and another company that held a patent on technology useful to Henkel US. KCP alleges that Berthold, acting on behalf of defendant Henkel AG & Company, KGaA (Henkel US's parent), torpedoed the deal so that Henkel U.S. could deal directly with the technology holder, thereby cutting KCP out of the deal. Berthold did that, says KCP, by directing his communications to Henkel U.S. in Michigan, so that the tortious conduct and its effects were intimately entwined in this District. Because the allegations in the complaint support that theory, the Court will deny Henkel AG & Company, KGaA's (Henkel Germany) motion to dismiss, which challenges personal jurisdiction.

         I. Facts

         The scuttled negotiations concerned a proposed three-way agreement between KCP, as a broker and technology license holder, AI Sealing, LLC (AIS), a Texas company and the holder of the patent rights for a “revolutionary” series of citrus-based compounds developed for cleaning dirty equipment at oil rigs and refineries (which had licensed its technology to KCP), and Henkel US, which under the contemplated partnership would have been responsible for marketing and distributing the products under the Henkel brand. KCP is located in Farmington Hills, Michigan. AIS has its facility in Harris County, Texas. Henkel U.S. maintains a technical research and development center in Madison Heights, Michigan and a manufacturing plant in Warren, Michigan, both in the Eastern District of Michigan.

         KCP alleges that Henkel US's German parent corporation, defendant Henkel Germany, undermined the negotiations between KCP and Henkel US, after Henkel Germany's principals who were involved in the negotiations concluded that Henkel U.S. could secure a more lucrative deal by cutting out the middleman (KCP) and striking a deal directly with AIS instead. KCP contends that the end-run constituted tortious interference with its business expectancy and a breach of a nondisclosure agreement executed by KCP and Henkel U.S. at the outset of the negotiations.

         According to the complaint, defendant Henkel Germany used its influence over its U.S. affiliate, Henkel US, “to hijack hundreds of millions of dollars in potential profits from an extraordinarily lucrative business venture brought to [the] U.S. affiliate” by plaintiff KCP. KCP alleges that Henkel Germany tortiously interfered with its prospective deal with Henkel US, and breached a non-disclosure agreement that was executed by Henkel U.S. and KCP. The non-disclosure agreement covered information disclosed during the negotiations, and prohibited the use of any confidential information disclosed by KCP for any purpose beyond evaluating the viability of the proposed joint venture.

         A. Non-disclosure Agreement

         In February 2014, KCP held a global license granted to it by AIS, covering a “unique cleaning technology” that was designed to be incorporated into cleaning products for use in oil and gas extraction and refinery maintenance operations. KCP approached Henkel U.S. to explore the possibility of a deal for marketing and distribution of products based on the new technology. In an attempt to reach a deal, the parties engaged in lengthy negotiations, which persisted over several months. Beforehand, however, Henkel U.S. and KCP entered into a non-disclosure agreement. That agreement governed the parties' handling of confidential information.

         The non-disclosure agreement purportedly bound Henkel U.S. and all of its affiliates, which are defined as follows:

As used in this Agreement, “Affiliate” shall mean, with respect to a Party, any individual, corporation or other business entity which, either directly or indirectly, controls a Party, is controlled by a Party, or is under common control with a Party. As used herein, “control” means possession of the power to direct, or cause the direction of the management and policies of a corporation, or other entity, whether through the ownership of voting securities, by contract or otherwise.

NDA ¶ A.1. (Pg ID 50). The agreement defined “Receiving Party” as “Henkel [US] or its Affiliates receiving Confidential Information hereunder.” NDA ¶ A.5. The Receiving Party was prohibited from “us[ing] the Confidential Information of the Disclosing Party except” for the purpose of investigating the feasibility of a future business relationship between the parties. The agreement was effective for a one-year term starting on April 23, 2014. It controlled all disclosures made during that term, with a “period of protection” extending for three years after the expiration or termination of the agreement, during which the restrictions continued on use or disclosure of any confidential materials disclosed during the one-year term. The agreement allowed for early termination by either party at any time upon 30 days written notice to the other.

         B. Negotiations

         As the negotiations progressed, executives from Henkel US's German parent corporation, Henkel Germany, became involved. A main player was Cedric Berthold, Henkel Germany's Senior Vice President and General Manager in Europe.

         KCP now believes that, as the negotiations proceeded, Berthold “developed a different agenda - i.e., to eliminate KCP from the business equation altogether and assume exclusive control over the Technology and the profits generated from its sales.” Compl. ¶6. KCP asserts that “Henkel [Germany] and Henkel U.S. are separate economic units and separate legal entities with independent business operations, ” Compl. ¶ 98-99, but it contends, nevertheless, that Berthold used his influence over the U.S. affiliate to pursue his goal of sabotaging the deal by stalling and complicating the negotiations, and eventually by simply disregarding the NDA and inducing Henkel U.S. to strike a deal directly with AIS.

         On August 2, 2014, after some progress in the negotiations, Henkel U.S. informed KCP that the proposed “Technology Distribution Deal” was approved for a pilot project in North America. Around that same time, another senior executive at Henkel Germany, Grant Kupko, became involved in the negotiations. From August through October 2014, KCP's principals consulted at least weekly meetings by phone with Kupko as they worked out details of the deal, identified departments and personnel within Henkel U.S. that would be involved, and addressed “action items” identified by Henkel that needed to be addressed to ensure further progress. KCP and Henkel U.S. also began framing the details of pricing and marketing plans, including setting proposed price schedules and identifying potential customers.

         On November 5, 2014, KCP executed a “Technology License Agreement” with AIS that granted to KCP a global exclusive license to use and commercialize the subject technology. However, that license was conditioned on KCP's success in closing the proposed distribution deal with Henkel US. The term of the AIS license was for five years, unless terminated according to its terms, but it would terminate if the deal between Henkel U.S. and KCP did not close within 60 days, that is, by February 5, 2015.

         On November 14, 2014, Henkel U.S. presented the first draft of the proposed distribution agreement to KCP, and within days representatives from KCP, Henkel US, and Henkel Germany discussed and reviewed the draft agreement.

         On November 21, 2014, KCP and Henkel U.S. had a meeting in Bridgewater, Connecticut to discuss the deal and present it to senior executives of Henkel Germany, including Berthold, who attended the Connecticut meeting in person. Berthold told KCP's principals at the meeting that the deal was “attractive” to Henkel and fit with its strategy, and that Henkel agreed “to pursue the development of a formal agreement.” ...

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