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PAWS Holdings, LLC v. Daikin Industries, Ltd.

United States District Court, S.D. Georgia, Augusta Division

February 22, 2017

PAWS HOLDINGS, LLC, on behalf of itself and all others similarly situated, Plaintiff,
v.
DAIKIN INDUSTRIES, LTD.; DAIKIN APPLIED AMERICAS INC.; and DAIKIN NORTH AMERICA, LLC, Defendants.

          ORDER

          HONORABLE J. RANDAL HALL DITRICT JUDGE

         Before the Court is Defendant Daikin Industries, Ltd.'s ("DIL") Motion to Dismiss for Lack of Personal Jurisdiction as well as Defendants Daikin Applied Americas Inc. (XXDAA") and Daikin North Americas, LLC's ("DNA") Motion to Dismiss the Amended Complaint. (Docs. 32, 33.) Plaintiff filed responses in opposition to both motions (docs. 35, 36), and Defendants filed replies in support of their respective motions (docs. 44, 45)[1] Accordingly, Defendants' respective motions have been fully briefed and are ripe for the Court's review. For the reasons stated herein, Defendants' motions are GRANTED.

         I. BACKGROUND[2]

         Plaintiff[3] alleges in its amended complaint that Defendants DIL, [4] DAA, [5] and DNA[6] "design, manufacture and sell heating, ventilation, and air conditioning units ("HVAC Units') containing a component known as an evaporator coil manufactured with copper tubing ("Daikin Coils')."[7] (Amended Complaint, Doc. 5, ¶ 3.) These Daikin Coils consist of copper tubing affixed with aluminum fins secured thereon by aluminum bands that wrap around the tubing. The Daikin Coils contain "a refrigerant that absorbs heat from surrounding air, cooling the air in the process." (Id. ¶ 4.) The trapped heat is then expelled from the exterior of the building to the outside. (Id. ¶ 10.)

         Plaintiff alleges, however, that the Daikin Coils fail to perform "their intended purpose of cooling air . . . because they corrode and leak refrigerant well before the expiration of their useful life." (Id. ¶ 5.) Plaintiff further alleges that:

The failure of Daikin Coils to perform as intended is an unavoidable consequence of their design. As a result of their manufacturing process, the copper tubes in the Daikin Coils are prone to "formicary corrosion." This process causes microscopic holes within the tubing that cause the Daikin Coils to leak refrigerant and ultimately fail. The corrosion and failure of Daikin Coils are due to Defendants' actions, including but not limited to, selecting the wrong alloy, defective manufacturing of the Daikin Coils, and failing to properly ensure that the Daikin Coils will perform for their useful life and are fit for their intended purpose. Defendants designed, created product materials for, designed instructions for, caused the manufacture of, and sold HVAC units containing Daikin Coils that were installed in homes throughout Georgia, including Plaintiff's and the Class's homes.[8]

(Id. ¶ 6.) In a properly-functioning HVAC unit, refrigerant rarely needs to be replaced, because "refrigerant does not deplete from use" and "evaporator coils are designed to be sealed systems such that the refrigerant cannot escape." (Id. ¶ 11.) In contrast, Daikin Coils begin to corrode "as soon as the Daikin Coils are put to use under normal environmental conditions, " which in turn causes the Daikin Coils to "leak refrigerant at an ever increasing rate within months of installation, dramatically diminishing the useful life of the product." (Id. ¶ 12.) Indeed, "at the time Defendants manufactured, sold and distributed the Daikin Coils, " it was widely known that copper evaporator coils were "particularly susceptible to formicary corrosion" and that "[a]lternative designs for the [Daikin Coils] were available and feasible at the time of [their] manufacture."[9] (Id. ¶¶ 13, 119.) Plaintiff alleges that the Daikin Coils "expose consumers to health and safety risks" because "[l]eaked refrigerant can cause severe injury if inhaled or if it comes in contact with skin or eyes." (Id. ¶ 15.) Plaintiff also alleges that "leaked refrigerant can cause damage to surrounding property." (Id. ¶ 16.) Plaintiff further alleges that the Daikin Coils "also damage[] the environment" by "emitting a greenhouse gas [i.e., the leaked refrigerant] that is thousands of times more potent than CO2." (Id. ¶ 17.)

         In March 2010, Plaintiff purchased and installed an HVAC system in its medical offices building located in Evans, Georgia. (Id. ¶ 19.) This HVAC system was comprised of nineteen HVAC units which were allegedly "manufactured, sold and distributed by Defendants" and ''installed by a Daikin-certified installer."[10] (Id.) Plaintiff alleges that it has suffered -and will continue to suffer - harm "as a result of the defective Daikin Coils" (and their alleged corrosion and resulting leaking of refrigerant) which have caused Plaintiff's HVAC units to "no longer adequately cool air, " which in turn have caused Plaintiff to incur "out-of-pocket repair and service costs, " have devalued the HVAC units for which Plaintiff bargained, and have “diminish[ed] Plaintiff's property value unless replaced."[11](Id. ¶¶ 20-23.)

         On December 11, 2015, Plaintiff "mailed a letter" to Mr. Takayuki Inoue, the senior vice president of the SVP, VRV and Light Commercial division of DNA, in which Plaintiff allegedly: (a) identified himself; (b) described the nature of the defect in its Daikin HVAC units; (c) described the damages incurred as a result of the Daikin Coils; and (d) "requested adequate relief from Defendants."[12] (Id. ¶ 76.) When it did not receive a response to its December 11, 2015 letter, Plaintiff's co-owner, Dr. Sanders R. Callaway, sent a follow-up email to Mr. Inoue on January 4, 2016. (Id.) On January 6, 2016, Mr. Inoue sent a reply email to Dr. Callaway confirming that he had received Plaintiff's December 11, 2015 letter. (Id.)

         On May 10, 2016, Plaintiff instituted the instant case. (Doc. 1.) On May 16, 2016, Plaintiff filed its operative Amended Complaint. (Doc. 5.) Plaintiff's Amended Complaint asserts the following claims for relief: (1) violation of the Magnuson-Moss Warranty Act, 15 U.S.C. § 2301, et seq. (“MMWA"); (2) breach of express warranties; (3) breach of implied warranty of merchantability; (4) breach of implied warranty of fitness for a particular purpose; (5) strict liability - failure to warn; (6) strict liability - manufacturing defect; (7) strict liability - design defect; (8) negligence; and (9) expenses of litigation, including attorney's fees, costs, and expenses, pursuant to O.C.G.A. § 13-6-11. (See id.) On August 12, 2016, . DIL filed its Motion to Dismiss for Lack of Personal Jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2). (Doc. 32.) That same day, DAA and DNA filed their motion to dismiss, alleging lack of standing (i.e., lack of subject matter jurisdiction), lack of personal jurisdiction, and failure to state a claim upon which relief can be granted, pursuant to Federal Rules of Civil Procedure 12(b)(1), 12(b)(2), and 12(b)(6), respectively.[13] (Doc. 33.)

         II, LEGAL STANDARD

         Federal Rule of Civil Procedure 8(a) requires that a plaintiff's complaint contain both "a short and plain statement of the grounds for the court's jurisdiction" and "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(1) -(2). A responding party thus may move to dismiss the complaint based on, inter alia, a lack of subject-matter jurisdiction, Fed.R.Civ.P. 12(b)(1), lack of personal jurisdiction, Fed.R.Civ.P. 12(b)(2), or a failure to state a claim upon which relief can be granted, Fed.R.Civ.P. 12 (b) (6) .

         A. MOTION TO DISMISS FOR LACK OF STANDING

         "Because a motion to dismiss for lack of standing is one attacking the district court's subject matter jurisdiction, it is brought pursuant to Rule 12(b) (1)." Region 8 Forest Serv. Timber Purchasers Council v. Alcock, 993 F.2d 800, 807 n.8 (11th Cir. 1993) (citations omitted); see also Bochese v. Town of Ponce Inlet, 405 F.3d 964, 974 (11th Cir. 2005) ("Standing is a threshold jurisdictional question which must be addressed prior to and independent of the merits of a party's claims.")- In assessing standing on a motion to dismiss, a district court must "presume the plaintiff's general allegations embrace those specific facts that are necessary to support the claim." Kawa Orthodontics, LLP v. Sec'y, U.S. Dep't of the Treasury, 773 F.3d 243, 245 (11th Cir. 2014) (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992)). Further, the court "must accept as true all material allegations of the complaint, and must construe the complaint in favor of the complaining party." Id. (citing Warth v. Seldin, 422 U.S. 490, 501 (1975) ("For purposes of ruling on a motion to dismiss for want of standing, both the trial and reviewing courts must accept as true all material allegations of the complaint, and must construe the complaint in favor of the complaining party.")).

         B. MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION

         "In the context of a motion to dismiss for lack of personal jurisdiction in which no evidentiary hearing is held, the plaintiff bears the burden of establishing a prima facie case of jurisdiction over the movant, nonresident defendant." Morris v. SSE, Inc., 843 F.2d 489, 492 (11th Cir. 1988). The plaintiff establishes a prima facie case by presenting "enough evidence to withstand a motion for directed verdict." Madera v. Hall, 916 F.2d 1510, 1514 (11th Cir. 1990). A party presents enough evidence to withstand a motion or directed verdict by putting forth "substantial evidence ... of such quality and weight that reasonable and fair-minded persons in the exercise of impartial judgment might reach different conclusions." Walker v. Nations Bank of Florida, 53 F.3d 1548, 1554 (11th Cir. 1995).

         In assessing a motion to dismiss for lack of personal jurisdiction, the facts presented in the plaintiff's complaint are taken as true to the extent they are uncontroverted. Cable/Home Commc'n Corp. v. Network Prods., Inc., 902 F.2d 829, 855 (11th Cir. 1990) (citations omitted). If the defendant submits affidavits challenging the allegations in the complaint, however, the burden shifts back to the plaintiff to produce evidence supporting jurisdiction. Diamond Crystal Brands, Inc. v. Food Movers Intern., Inc., 593 F.3d 1249, 1257 (11th Cir. 2010) . If the plaintiff's complaint and supporting evidence conflict with the defendant's affidavits, the court must construe all reasonable inferences in favor of the plaintiff. Id. (citing Meier v. Sun Int'l Hotels, Ltd., 288 F.3d 1264, 1269 (11th Cir. 2002)) .

         C. MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM UPON WHICH RELIEF CAN BE GRANTED

         To survive a Rule 12(b)(6) motion to dismiss, a complaint must include enough” factual allegations to raise a right to relief above the speculative level, " and those facts must "state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 545, 570 (2007). Although a complaint attacked by a Rule 12(b)(6) motion need not be buttressed by detailed factual allegations, the plaintiff's pleading “requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. at 555. The Rule 8 pleading standard "demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 555) .

         A complaint should not be dismissed for failure to state a claim, however, "unless it appears beyond a doubt that the plaintiff can prove no set of circumstances that would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957); see also Robinson v. United States, 484 F.App'x 421, 423 (11th Cir. 2012) (quoting Lopez v. First Union Nat'1 Bank of Fla., 129 F.3d 1186, 1189 (11th Cir. 1997)). At this stage, courts must accept as true all facts alleged in the complaint and construe all reasonable inferences in the light most favorable to the plaintiff. Belanger v. Salvation Army, 556 F.3d 1153, 1155 (11th Cir. 2009) (citing Jackson v. BellSouth Telecomm., 372 F.3d 1250-, 1262 (11th Cir. 2004)).

         III. DISCUSSION

         A. DIL'S MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION

         DIL contends that this Court lacks personal jurisdiction over it because Plaintiff cannot satisfy either the Due Process Clause of the Fourteenth Amendment or Georgia's long-arm statute - both of which are required for the Court to exercise jurisdiction over DIL. As well, while conceding that its subsidiary, non-party Daikin Applied Georgia ("DAG"), may transact business in Georgia, DIL maintains that its ownership of DAG alone is insufficient to confer jurisdiction over DIL, and that the separate and independent nature of the companies precludes imputing DAG's contacts with Georgia to DIL. In support of its motion to dismiss, DIL has submitted the Declaration of Takatoshi Kondo, DIL's Legal Officer, who states, inter alia:

• DIL's design and manufacturing activities for its HVAC products take place exclusively in Japan or outside the United States.
• DIL does not design, manufacture, advertise, or sell products in Georgia or the United States.
• DIL does not control sales or distribution of its products within the United States, including how many products are sold in Georgia.
• DIL does not design products specifically for the Georgia market or sell its products to a distributor specific to the Georgia market.
• DIL does not perform services in Georgia or derive revenue from any services performed in Georgia.
• DIL is not the warrantor for any warranty offered to consumers in Georgia or the United States.

(Kondo Decl., Doc. 32-2, ¶¶ 3-6, 12, 14.) Mr. Kondo further attests that DIL does not maintain - nor does it have employees who maintain - an office in Georgia, is not registered to do business in Georgia, does not have a registered agent in Georgia, does not pay taxes in Georgia, and does not own real property in Georgia. (Id. ¶¶ 7-11, 13.)

         In opposition, Plaintiff argues that personal jurisdiction over DIL is proper because: (1) Georgia's long-arm statute is satisfied as DIL has either transacted business within Georgia (either directly or through DAG) or has derived substantial revenue from goods used or consumed in Georgia; and (2) due process is satisfied as DIL has purposefully availed itself of the benefits of transacting business in Georgia by distributing and deriving substantial profits from its products purchased and used in Georgia (either directly or through DAG), Plaintiff's claims arise out of DIL's forum-related activities, and the exercise of jurisdiction would otherwise comport with fair play and substantial justice. In support of its allegations, Plaintiff has attached the Declaration of Graham B. Lippsmith, Plaintiff's counsel, who attaches thereto copies of screenshots or printouts of DAG's website as well as news articles related to DNA's manufacturing activities and DIL's 2 006 acquisition of DAA (f/k/a McQuay International). (Lippsmith Decl., Doc. 36-1.) Plaintiff explicitly concedes, however, that this Court would not have general jurisdiction over DIL. (Doc. 36, at 5.)

         To determine whether a nonresident defendant is subject to personal jurisdiction, the Court must perform a two-part analysis. United Techs. Corp. v. Mazer, 556 F.3d 1260, 1274 (11th Cir. 2 009) . First, the Court must determine whether the exercise of personal jurisdiction is proper under the forum state's long-arm statute as that statute would be interpreted by the state's Supreme Court.[14] Id. Next, the Court must determine whether there are sufficient "minimum contacts" with the forum state to satisfy the Due Process Clause of the Fourteenth Amendment. Id.; lnt'1 Shoe Co. v. Washington Office of Unemployment Comp. & Placement, 326 U.S. 310 (1945).

         Here, Plaintiff argues that subsections (1) and (3) of Georgia's long-arm statute, O.C.G.A. § 9-10-91, are satisfied. ...


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