McDonough v. Cycling Sports Grp., Inc.
McDonough v. Cycling Sports Grp., Inc.
Opinion of the Court
INTRODUCTION
Plaintiffs Jon McDonough and Tracy A. McDonough (collectively "Plaintiffs") commenced the instant action in state court on March 14, 2018, alleging causes of action sounding in products liability, breach of warranty, negligence, and loss of consortium relating to injuries allegedly sustained in a biking accident on May 2, 2015. (Dkt. 1-2). The matter was removed to this Court on April 30, 2018. (Dkt. 1).
Four motions are currently pending before the Court: (1) Defendant Advanced International Multitech Co. LTD's ("AIM") motion for summary judgment based on lack of personal jurisdiction (Dkt. 24); (2) Plaintiffs' cross-motion for jurisdictional discovery (Dkt. 32); (3) Defendant Cycling Sports Group, Inc.'s ("CSG") motion for leave to file an amended answer with a cross-claim against AIM (Dkt. 39); and (4) CSG's unopposed motion for leave to file a third-party complaint (Dkt. 47).
*323For the reasons that follow, the Court grants Plaintiffs' cross-motion for jurisdictional discovery and denies without prejudice to renewal AIM's motion for summary judgment. The Court grants CSG's request to withdraw its motion for leave to file an amended answer and for leave to file a third-party complaint (see Dkt. 53), and accordingly terminates those motions.
BACKGROUND
I. Factual Background
Plaintiffs allege that on May 2, 2015, at approximately 8:30 a.m., Plaintiff Jon McDonough was riding a Cannondale bicycle on Palmer Road in the Town of Riga, New York, when a component known as the "cycling fork" failed, causing the front wheel to separate from the rest of the bicycle, and resulting in Mr. McDonough being violently thrown to the pavement and injured. (Dkt. 1-2 at 21-22). According to the Complaint, AIM manufactured the defective cycling fork, which Cannondale/CSG incorporated into the bicycle. (Id. at 16-20).
The Complaint alleges that AIM is a "foreign business entity organized and existing under and by virtue of the laws of a nation or a territory other than a state of the United States." (Id. at 11). The Complaint further alleges that AIM is "in the business of designing, manufacturing, advertising, marketing and selling bicycle components for use by consumers," and that in furtherance of that business, AIM "did transact business within the State of New York, and contracted to supply goods and services in the State of New York." (Id. at 14-15). In addition, the Complaint alleges that Plaintiffs' claims arise out of AIM having committed "a tortious act without the State of New York that caused injury within the State of New York," and that AIM should have reasonably expected those tortious acts to have consequences in the State of New York. (Id. at 15-16). Plaintiffs further claim that AIM "regularly does or solicits business or engages in a persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the State of New York," and that AIM "derive[s] substantial revenue from interstate or international commerce." (Id. ).
In support of its motion for summary judgment, AIM has submitted a declaration from Sunny Cheng, its general manager. (Dkt. 24-4). Mr. Cheng states, under penalty of perjury, that AIM is a manufacturer of, among other things, bicycle components. (Id. at 1). He further states that AIM is "a Taiwanese entity that was created in Taiwan and which maintains its principal place of business in Kaohsiung City, Taiwan." (Id. at 2). Mr. Cheng indicates that the cycling fork at issue in this litigation was sold by AIM to a "third-party trading company," and that while AIM was "aware that the third-party trading company was distributing the subject cycling fork to the United States for use as a bicycle component," it was not aware that the cycling fork would be sold to a customer in the State of New York. (Id. at 2-3). According to Mr. Cheng, AIM has never commenced any lawsuits in New York, has no bank accounts, phone listings, or assets in New York, owns no real or personal property in New York, has no subsidiaries or offices in New York, and has never been required to pay taxes in New York. (Id. at 3). Further, Mr. Cheng states that AIM does not directly distribute its products to retail customers in New York, has no contracts with any companies in New York for the purchase of its products, does not generate any revenue "from any sale of its products to retail customers" in New York, does not have employees in New York or send representatives to New York to engage in business transactions, does not *324advertise in New York, and does not sell its products over the internet. (Id. at 3-4).
In opposition to AIM's motion for summary judgment, Plaintiffs and CSG submitted evidence related to Mr. Cheng's statements. Plaintiffs submitted evidence tending to show that CSG has a network of 80 dealers in New York, that AIM itself (and not a third-party trading company) directly shipped components to CSG on numerous occasions, and that AIM's website describes AIM as a "worldwide corporation" and "one of the top manufacturers worldwide" of various products. (Dkt. 29-5; Dkt. 29-7; Dkt. 29-8; Dkt. 29-9; Dkt. 29-10).
CSG submitted a declaration from David Campbell, its Director of Technical Services. (Dkt. 28 at 7-9). Mr. Campbell states, under penalty of perjury, that CSG is one of the largest bicycle companies in the world and that New York State is currently the largest market in the United States for its bicycles. (Id. at 7-8). Mr. Campbell explains that CSG has incorporated cycling forks manufactured by and purchased from AIM into its bicycles since at least 1997, "including some forks AIM modified specifically for CSG bicycles," and that during the relevant time period, "AIM became CSG's primary fork vendor for road bicycles." (Id. at 8). Mr. Campbell further indicates that while CSG did often use a trading company called Cash Crest to facilitate its purchases from AIM, Cash Crest "told AIM that they were working as CSG's agent in Taiwan to purchase a variety of its forks to incorporate into CSG bicycles." (Id. ). According to Mr. Campbell, CSG advertised its use of AIM cycling forks in its catalogues, and "AIM insured CSG for the use of its products for well over a decade." (Id. at 9).
Christopher Peck, CSG's former Vice President of Research and Development, has also submitted a declaration. (Id. at 32-33). Mr. Peck states, under penalty of perjury, that CSG employees worked directly with AIM employees in designing and testing cycling forks for CSG bicycles, and that AIM employees travelled to CSG's facility in Bedford, Pennsylvania, to facilitate this collaboration. (Id. at 33).
II. Procedural Background
Plaintiffs commenced this action on March 14, 2018, in New York State Supreme Court, Monroe County. (Dkt. 1-2). On April 30, 2018, AIM, with CSG's consent, removed the matter to this Court based on diversity of citizenship. (Dkt. 1).
AIM filed an Answer to the Complaint on May 10, 2018 (Dkt. 6), and CSG/Cannondale filed an Answer on May 16, 2018 (Dkt. 10). The Court referred the matter to United States Magistrate Judge Marian W. Payson for supervision of all pretrial matters excluding dispositive motions (Dkt. 8), and Judge Payson entered a case management order on June 13, 2018 (Dkt. 21).
However, before factual discovery began, AIM filed a motion for summary judgment (Dkt. 24), arguing that the undisputed facts demonstrate the Court lacks personal jurisdiction over it. Plaintiffs and CSG both opposed AIM's motion (Dkt. 28; Dkt. 29), and Plaintiffs filed a cross-motion for jurisdictional discovery (Dkt. 32), in which CSG later joined (Dkt. 35).
AIM filed reply papers in further support of its motion for summary judgment on October 10, 2018. (Dkt. 36; Dkt. 37). Among other arguments, AIM contended *325that CSG lacks standing to oppose its motion for summary judgment because CSG has not asserted a cross-claim against AIM. (Dkt. 36 at 5-6).
On November 5, 2018, CSG filed a motion for leave to amend its Answer to include three cross-claims against AIM. (Dkt. 39). AIM filed opposition papers on November 27, 2018 (Dkt. 45), and CSG filed its reply on December 4, 2018 (Dkt. 46). Plaintiffs have indicated they do not oppose CSG's motion for leave to amend. (Dkt. 42).
On February 8, 2019, CSG filed a motion for leave to file a third-party complaint against MSIG Mingtai Insurance Co., LTD, MSIG Holdings (Americas), and Mitsui Sumitomo Marine Management (USA). (Dkt. 47). On February 13, 2019, Plaintiffs filed a response indicating that they do not oppose CSG's motion for leave to file a third-party complaint. (Dkt. 49). AIM did not file any response to CSG's motion for leave to file a third-party complaint.
On July 22, 2019, CSG filed a letter indicating that it wishes to withdraw: (1) its opposition to AIM's motion for summary judgment; (2) its papers joining in Plaintiffs' cross-motion for jurisdictional discovery; (3) its motion for leave to file an amended answer with cross-claims; and (4) its motion for leave to file a third-party complaint. (Dkt. 53).
DISCUSSION
I. CSG's Request to Withdraw its Motions and Other Submissions
The Court considers as an initial matter CSG's request to withdraw its pending motions, as well as its opposition to AIM's motion for summary judgment. With respect to CSG's request to withdraw its motions for leave to file an amended answer and for leave to file an amended complaint, the Court finds that no prejudice to any party will result from the withdrawal of these motions, and accordingly grants the request. See Adams v. Loreman , No. 8:07-CV-00452 LEK,
Turning to CSG's request to withdraw its opposition to AIM's motion for summary judgment and its joinder in Plaintiffs' cross-motion for jurisdictional discovery, to the extent CSG no longer wishes to seek affirmative relief from the Court in these regards, it is permitted to withdraw its requests. However, the Court will not permit CSG to withdraw the declarations and accompanying exhibits it submitted in opposition to AIM's motion for summary judgment. (See Dkt. 28). Those declarations were sworn under penalty of perjury and constitute important, relevant evidence that this Court is free to consider in deciding AIM's motion to dismiss for lack of personal jurisdiction. See, e.g., Everlast World's Boxing Headquarters Corp. v. Ringside, Inc. ,
"A corollary to the principle that a party is expected to submit, at the time a motion is filed, all the materials that it wishes the Court to consider is the notion that a party obviously [should] not submit materials that it did not wish the Court to consider." In re Repetitive Stress Injury Litig. ,
II. AIM's Motion for Summary Judgment and Plaintiffs' Cross-Motion for Jurisdictional Discovery
A. Legal Standard
1. Motion for Summary Judgment
Rule 56 of the Federal Rules of Civil Procedure provides that summary judgment should be granted if the moving party establishes "that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The Court should grant summary judgment if, after considering the evidence in the light most favorable to the nonmoving party, the court finds that no rational jury could find in favor of that party. Scott v. Harris ,
"The moving party bears the burden of showing the absence of a genuine dispute as to any material fact...." Crawford v. Franklin Credit Mgmt. Corp. ,
2. Personal Jurisdiction
In federal court, upon challenge by the defendant, the plaintiff bears the burden of demonstrating that personal jurisdiction exists. See Ball v. Metallurgie Hoboken-Overpelt, S.A. ,
[T]he nature of the plaintiff's obligation varies depending on the procedural posture of the litigation. Prior to discovery, a plaintiff challenged by a jurisdiction *327testing motion may defeat the motion by pleading in good faith ... legally sufficient allegations of jurisdiction. At that preliminary stage, the plaintiff's prima facie showing may be established solely by allegations. After discovery, the plaintiff's prima facie showing, necessary to defeat a jurisdiction testing motion, must include an averment of facts that, if credited by the trier, would suffice to establish jurisdiction over the defendant.
"In general, a 'district court's personal jurisdiction is determined by the law of the state in which the court is located.' " Mrs. U.S. Nat'l Pageant, Inc. v. Miss U.S. Org., LLC ,
B. Jurisdictional Discovery is Warranted in this Case
In opposing AIM's motion for summary judgment, Plaintiffs have argued that, at a minimum, additional discovery is required to assess whether this Court has personal jurisdiction over AIM pursuant to CPLR 302(a)(3). The Court agrees.
CPLR 302(a)(3) provides that a court may exercise personal jurisdiction over a non-domiciliary who:
commits a tortious act without the state causing injury to person or property within the state ... if he (i) regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the state, or (ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenues from interstate or international commerce.
Moreover, Plaintiffs and CSG have submitted evidence to the Court tending to *328support these allegations. In particular, the evidence submitted by Plaintiffs and CSG, read in the light most favorable to Plaintiffs, indicates that AIM worked closely with CSG to design and manufacture cycling forks, knowing that those cycling forks would be incorporated into bicycles that would be sold by CSG within the state of New York. In addition, the evidence submitted by Plaintiffs and CSG demonstrates that AIM's products are sold worldwide, rendering it likely that AIM in fact has substantial revenues from international commerce. Significantly, in moving for summary judgment prior to any discovery having been taken, AIM has not presented any evidence regarding its revenues from which the Court could conclude that it does not derive substantial revenue from interstate or international commerce. Under these circumstances, the Court cannot find as a matter of law that the requirements of CPLR 302(a)(3)(ii) are not met.
The Court further finds that there are unresolved factual questions regarding whether AIM has contacts with the State of New York sufficient to satisfy the requirements of due process. "In order for jurisdiction to comport with due process, the defendant must have sufficient minimum contacts with the forum state, such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice." RegenLab USA LLC v. Estar Techs. Ltd. ,
AIM contends that the plurality opinion in J. McIntyre Mach., Ltd. v. Nicastro ,
The Court further finds that there are factual questions related to the fairness of requiring AIM to litigate this matter in New York. Once a court is satisfied that minimum contacts exist in a given case, it must "also consider[ ] whether the assertion of jurisdiction comports with traditional notions of fair play and substantial *329justice-that is, whether it is reasonable under the circumstances of a particular case." Kernan v. Kurz-Hastings, Inc. ,
In this Circuit, jurisdictional discovery is permitted where a plaintiff has "made a sufficient start toward establishing personal jurisdiction," such that it appears there may be a colorable jurisdictional claim. Hollins v. U.S. Tennis Ass'n ,
Because this matter has been referred to Judge Payson for supervision of discovery, the Court will not set forth specific parameters regarding the conduct of jurisdictional discovery at this time. Judge Payson has entered a case management order setting forth deadlines for the completion of the various stages of discovery. (See Dkt. 21). If the parties believe that any adjustments to these deadlines are needed in light of this Decision and Order, they are instructed to seek such an adjustment from Judge Payson in accordance with her practices and procedures.
CONCLUSION
For the foregoing reasons, the Court grants Plaintiffs' cross-motion for jurisdictional discovery (Dkt. 32) and denies without prejudice to renewal AIM's motion for summary judgment (Dkt. 24). The Court grants CSG's request to withdraw its motion for leave to file an amended answer (Dkt. 39) and its motion for leave to file a third-party complaint (Dkt. 47), and will terminate those motions.
SO ORDERED.
On July 18, 2019, the Court issued an Order to Show Cause, explaining that AIM had failed to adequately allege diversity of citizenship in its Notice of Removal. (Dkt. 52). In response, AIM filed an Amended Notice of Removal that clarifies its corporate status and citizenship, and adequately pleads subject matter jurisdiction. (Dkt. 56).
CSG has not specified whether it seeks to withdraw its submissions with or without prejudice. The Court has treated the request as one for withdrawal without prejudice, rather than presume that CSG intended to foreclose the possibility of seeking leave to amend or to file a third-party complaint in the future.
Reference
- Full Case Name
- Jon MCDONOUGH and Tracy A. McDonough v. CYCLING SPORTS GROUP, INC., Cannondale Corporation, and Advanced International Multitech Co. Ltd.
- Cited By
- 3 cases
- Status
- Published