NH Insur. Comm’r v . OM Group CV-05-257-PB 02/13/06

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Roger A . Sevigny, Insuance Commissioner, as Liquidator of The Home Insurance Company

v. Case N o . 05-cv-257-PB Opinion N o .

OM Group, Inc. and OMG Americas, Inc.

MEMORANDUM AND ORDER

Roger A . Sevigny, Insurance Commissioner of the State of New

Hampshire (“the Commissioner”), brings this action against OM

Group, Inc. (“OMG”) and OMG Americas, Inc. (“OMG Americas”)

(collectively, “defendants”), seeking the return of defense costs

that The Home Insurance Company (“Home”) paid to defendants under

a reservation of rights. Defendants move to dismiss for lack of

personal jurisdiction pursuant to Federal Rule of Civil Procedure

12(b)(2). I grant defendants’ motion for the reasons that

follow. I. BACKGROUND

A. Underlying Dispute

OMG, a Delaware corporation, has its principal place of

business in Cleveland, Ohio. OMG Americas, a wholly-owned

subsidiary of OMG, is an Ohio corporation that also has its

principal place of business in Cleveland.1 Defendants

manufacture and distribute cobalt, nickel and other metal

products used in various industries. According to OMG’s Annual

Report filed with the United States Securities and Exchange

Commission, it served approximately 3,300 customers in 2004 and

had net sales in excess of $1.3 billion, 22% of which occurred in

the Americas. P l . Prelim. Mem. of Law Ex. C .

Home is an insurance company incorporated under the laws of

the State of New Hampshire with its principal place of business

in New York, New York. Home’s subsidiary, The Home Insurance

Company of Illinois (which merged with Home in 1995), issued a

series of general liability insurance policies to OMG between

1 OMG and OMG Americas were formerly known as Mooney Chemicals, Inc.

-2- 1992 and 1995. 2

In June 1996, defendants demanded that Home defend and

indemnify them against various claimants who alleged that OMG

manufactured and distributed a defective wood preservative (known

as M-GARD) that caused treated utility poles to rot prematurely.

In August 1996, Home accepted defendants’ tender of defense costs

and expenses pursuant to a reservation of rights. Home then

filed a declaratory judgment action in the state courts of Ohio,

in which it asserted that it had no duty to defend or indemnify

defendants for these claims. Ultimately, the Ohio courts

determined that Home had no duty to defend or indemnify

defendants with respect to the M-GARD claims. That decision

became final in November 2003 when the Ohio Supreme Court

declined to hear any further appeal by defendants.

Home unsuccessfully sought to collect over $1,418,000 in

costs and expenses from defendants after the Ohio declaratory

judgment action became final.

2 All of the transactions between Home and OMG concerning the insurance policies took place in Ohio. Aff. of R. Louis Schneeberger (“Schneeberger Aff.”) ¶ 1 9 .

-3- B. Liquidation Action

On March 6, 2003, the Merrimack County Superior Court

declared Home insolvent and ordered it into rehabilitation under

the Insurers Rehabilitation and Liquidation Act, N.H. Rev. Stat.

Ann. (“RSA”) ch. 402-C. The Superior Court issued an Order of

Liquidation on June 1 1 , 2003, pursuant to which the Commissioner

has the authority to marshal Home’s assets and distribute them to

creditors. Under this authority, the Commissioner commenced the

current action in Superior Court in June 2005 to recover the

defense costs owed by defendants. Defendants, asserting

diversity jurisdiction, removed the action to this court and

filed a motion to dismiss for lack of personal jurisdiction.

C. Facts Relevant to Personal Jurisdiction

The Commissioner has proffered evidence that defendants

employed three independent agents to sell their products in the

New England area, including New Hampshire. P l . Supplemental Mem.

of Law Ex. D, E , F (G. E . Chaplin, Inc., TMC Materials Co., The

Truesdale C o . agency agreements). Between 1996 and 2005, OMG

Americas3 entered into approximately 300 separate sales

3 Defendants maintain that OMG is merely a “holding company” and that its subsidiary, OMG Americas, was the “seller of record”

-4- transactions with fifteen New Hampshire-based customers. The

resulting gross sales totaled approximately $380,500, with annual

sales peaking at $54,144.83 in 1998. P l . Supplemental Mem. of

Law Ex. B , Resp. to Interrog. N o . 2 . In addition, the

Commissioner alleges that defendants advertised in specialty

publications and through direct mail marketing on a world-wide

basis and “may have” received telephone calls from New Hampshire

customers seeking advice regarding the use of their products.

P l . Supplemental Mem. of Law at 3 ; see Resp. to Interrog. N o . 8 ;

Resp. to Doc. Req. N o . 9.

Defendants counter that they do not have any offices,

assets, real property or tangible personal property in New

Hampshire. Schneeberger Aff. ¶¶ 1 2 , 1 3 . They also do not have a

registered agent for service of process or any bank accounts in

New Hampshire, and they have never paid any taxes in New

Hampshire.

¶¶ 8 , 1 4 , 1 5 . Furthermore, they argue that there

for any products sold in New Hampshire. P l . Supplemental Mem. of Law Ex. B , Resp. to Interrog. N o . 5 . I need not decide whether OMG Americas’ activities should be attributed to OMG because I conclude that their collective contacts with New Hampshire are insufficient for general jurisdiction. See generally Donatelli v . Nat’l Hockey League,

(1st Cir. 1990) (discussing personal jurisdiction over parent corporation and its subsidiary).

-5- is no evidence that any of defendants’ advertising materials

actually reached New Hampshire or that defendants ever received

any telephone calls from New Hampshire customers. Def. Reply

Mem. of Law in Supp. of Mot. to Dismiss at 2-3.

II. STANDARD OF REVIEW

When a defendant contests personal jurisdiction under Rule

12(b)(2), the plaintiff bears the burden of showing that a basis

for asserting jurisdiction exists. Mass. Sch. of Law at Andover,

Inc. v . Am. Bar Ass’n.,

6 , 34 (1st Cir. 1998). Because

I have not held an evidentiary hearing, the Commissioner need

only make a prima facie showing that the court has personal

jurisdiction over the defendants. See Sawtelle v . Farrell,

, 1386 n.1 (1st Cir. 1995).

To make a prima facie showing of jurisdiction, the

Commissioner may not rest upon the pleadings. Rather, he must

“adduce evidence of specific facts” that support his

jurisdictional claim. See Foster-Miller, Inc. v . Babcock &

Wilcox Can.,

3 8 , 145 (1st Cir. 1995). I take the facts

offered by the plaintiff as true and construe them in the light

most favorable to the plaintiff’s claim. Mass. Sch. of Law, 142

-6- F.3d at 3 4 . I do not act as a fact-finder; instead, I determine

“whether the facts duly proffered, [when] fully credited, support

the exercise of personal jurisdiction.” Rodriguez v . Fullerton

Tires Corp.,

1 , 84 (1st Cir. 1997). While the prima

facie standard is liberal, I need not “credit conclusory

allegations or draw farfetched inferences.” Mass. Sch. of Law,

(quotation omitted). I also consider facts

offered by the defendants, but only to the extent that they are

uncontradicted. See

III. ANALYSIS

When assessing personal jurisdiction over a non-resident

defendant in a diversity of citizenship case, “a federal court

exercising diversity jurisdiction ‘is the functional equivalent

of a state court sitting in the forum state.’” Sawtelle,

(quoting Ticketmaster-New York, Inc. v . Alioto,

(1st Cir. 1994)). Accordingly, I must determine whether

the exercise of jurisdiction is proper under both the relevant

New Hampshire long-arm statute and the due process requirements

of the federal Constitution. See

-7- A. New Hampshire Long-Arm Statute

The Commissioner argues that New Hampshire’s Insurers

Rehabilitation and Liquidation Act gives this court personal

jurisdiction over the defendants. See RSA § 402-C:4, V . The New

Hampshire Supreme Court has not addressed whether this statute

grants personal jurisdiction over non-resident corporations. I

need not decide this issue, however, because New Hampshire’s

corporate long-arm statute, RSA § 293-A:15.10, authorizes

jurisdiction over unregistered foreign corporations to the full

extent permitted by the federal Constitution. Sawtelle,

; McClary v . Erie Engine & Mfg. Co.,

2 , 55

(D.N.H. 1994). Accordingly, I proceed directly to the

constitutional analysis.

B. Due Process Requirements

The Due Process Clause precludes a court from asserting

jurisdiction over a defendant unless “the defendant’s conduct and

connection with the forum State are such that [it] should

reasonably anticipate being haled into court there.” World-Wide

Volkswagen Corp. v . Woodson,

(1980). The

“constitutional touchstone” for personal jurisdiction is “whether

-8- the defendant purposefully established ‘minimum contacts’ in the

forum State.” Burger King Corp. v . Rudzewicz,

6 2 , 474

(1985) (quoting Int’l Shoe C o . v . Washington,

1 0 , 316

(1945)). The inquiry into “minimum contacts” is necessarily

fact-specific, “involving an individualized assessment and

factual analysis of the precise mix of contacts that characterize

each case.” Pritzker v . Yari,

3 , 60 (1st Cir. 1994). A

defendant cannot be subjected to a forum state’s jurisdiction

based solely on “random,” “fortuitous,” or “attenuated” contacts.

Burger King, 471 U.S. at 475 (quotations omitted). Rather, “‘it

is essential in each case that there be some act by which the

defendant purposefully avails itself of the privilege of

conducting activities within the forum State, thus invoking the

benefits and protections of its laws.’” Id. (quoting Hanson v .

Denckla,

(1958)).

A court may assert authority over a defendant by means of

either general or specific jurisdiction. Mass. Sch. of Law,

4 . A defendant who has engaged in continuous and

systematic activity in a forum is subject to general jurisdiction

in that forum with respect to all causes of action, even those

unrelated to the defendant’s forum-based activities. Phillips

-9- Exeter Acad. v . Howard Phillips Fund, Inc.,

8 4 , 288

(1st Cir. 1999). A court may exercise specific jurisdiction, by

contrast, only when the cause of action arises from, or relates

t o , the defendant’s contacts with the forum.

The

Commissioner concedes that the current action is not directly

related to the defendants’ contacts with New Hampshire. Thus, I

must determine whether this court has general personal

jurisdiction.

Two criteria must be met to establish general jurisdiction:

(1) “‘continuous and systematic general business contacts’” must

exist between the defendant and the forum; and (2) the exercise

of jurisdiction must be reasonable as demonstrated by certain

“gestalt factors.” United States v . Swiss Am. Bank, Ltd.,

1 0 , 619 (1st Cir. 2001) (quoting Helicopteros Nacionales de

Colombia, S.A. v . Hall,

0 8 , 416 (1984)). The standard

for such a showing is high; “although minimum contacts suffice in

and of themselves for specific jurisdiction . . . the standard

for general jurisdiction is considerably more stringent.”

Donatelli,

(quotation and brackets omitted).

As described in detail above, the Commissioner’s claim of

general jurisdiction is based primarily upon the defendants’

-10- sales to New Hampshire-based customers, which totaled

approximately $380,500 between 1996 and 2005. Although

defendants claim that they did not make any “direct” sales in New

Hampshire, they admit that three of their agents sold defendants’

products in the New England region.

To determine whether defendants’ contacts with New Hampshire

are sufficient for general jurisdiction, I look to “the types of

contacts deemed sufficiently continuous and systematic in other

cases.” Noonan v . Winston Co.,

5 , 93 (1st Cir. 1998). 4

The First Circuit has held that “where ‘defendant’s only

activities consist of advertising and employing salesmen to

solicit orders, we think that fairness will not permit a state to

assume jurisdiction.’” Glater v . Eli Lilly & Co.,

(1st Cir. 1984) (quoting Seymour v . Parke, Davis & Co.,

8 4 , 586-87 (1st Cir. 1970)); accord Harlow v . Children’s

Hosp.,

0 , 66 (1st Cir. 2005).

4 The Commissioner relies upon two patent infringement cases in which this court, applying the law of the Federal Circuit, found that specific jurisdiction existed under a “stream of commerce” theory. See Braley v . Sportec Prods. Co.,

,

, at *5 (D.N.H. July 1 6 , 2002); R & J Tool, Inc. v . Manchester Tool Co.,

7 ,

, at *4 (D.N.H. April 2 1 , 2001). Those cases are not instructive here.

-11- In Glater, the contacts supporting general jurisdiction

included: (1) defendant’s nationwide marketing of its products;

(2) advertisements in professional trade journals that circulated

in the forum state; (3) wholesale distributors of the defendant’s

products that were located in the forum state; and (4) eight

sales representatives who provided information about the

defendant’s products to potential customers in the forum state.

Id. at 214-15. The First Circuit concluded that, in the absence

of a “substantial showing based on considerations of fairness and

convenience,” due process considerations would not permit the

exercise of general jurisdiction under these circumstances. Id.

at 217; see also Noonan,

(finding general

jurisdiction lacking where defendant’s employees visited the

forum state and defendant regularly solicited business from

forum-state companies, resulting in $585,000 of in-state orders);

Seymour,

(finding general jurisdiction lacking

based on advertising and solicitation of orders by a half dozen

salesmen in forum state); Elliott v . Armor Holdings, Inc.,

1 2 ,

, at *10 (D.N.H. Jan. 1 2 , 2000) (finding

general jurisdiction lacking based on sales by two regional

agents in forum state and acquisition of subsidiary that sold

-12- products in forum state).

Here, the defendants’ contacts with the forum state are even

less extensive than those present in the cases discussed above.

Defendants have employed only three sales agents to sell their

products in the New England area, resulting in relatively

insignificant revenue from sales to New Hampshire-based

customers. Although the Commissioner admittedly has a strong

interest in marshaling Home’s assets to distribute to its

creditors, defendants’ contacts with New Hampshire are less

continuous and systematic than those found to be insufficient for

general jurisdiction in other cases. Thus, I conclude that the

Commissioner has failed to make a prima facie showing for an

exercise of general jurisdiction over the defendants.

Having determined that defendants’ New Hampshire contacts

are insufficient to authorize general jurisdiction, I need not

address whether asserting jurisdiction would be reasonable under

the gestalt factors. See Noonan,

4 .

IV. CONCLUSION

For the foregoing reasons, I grant defendants’ motion to

dismiss for lack of personal jurisdiction under Fed. R. Civ. P.

-13- 12(b)(2) (Doc. N o . 1 1 ) .

SO ORDERED.

/s/Paul Barbadoro Paul Barbadoro United States District Judge

February 1 3 , 2006

cc: J. Christopher Marshall, Esq. Russell G. Bogin, Esq. James P. Bassett, Esq. Keith A . Vanderburg, Esq.

-14-