Morgan v. Trokamed GMBH, & Market-Tiers, Inc.
Morgan v. Trokamed GMBH, & Market-Tiers, Inc.
Opinion of the Court
This is a products liability case. Plaintiff Constance Morgan's claim focuses on devices called "laparoscopic power morcellators," which are defined by the Food and Drug Administration (FDA) as "Class II medical devices used during laparoscopic (minimally invasive) surgeries to cut tissue into smaller pieces so the tissue can be removed through a small incision site (typically 2 cm long or less)."
Morgan is suing defendant Trokamed GmbH (a German company that manufactures the device at issue) and defendant Market-Tiers, Inc., which the parties call Blue Endo (the North American distributor of the device). The question before the court is whether Trokamed has sufficient contacts with Wisconsin to allow this court to exercise personal jurisdiction over that party. Both Morgan and Blue Endo oppose Trokamed's motion to dismiss, so the court will refer to them collectively as "the opposing parties."
The court will grant Trokamed's motion to dismiss for lack of personal jurisdiction. Although the court sees merit to the opposing parties' view that foreign manufacturers can be sued in Wisconsin if they *956have distribution agreements that cover all of the United States (as Trokamed does), the Supreme Court rejected that view in J. McIntyre Mach., Ltd. v. Nicastro ,
ANALYSIS
A. Legal background
Generally, a federal district court must consider the requirements of both the Due Process Clause and state law when deciding whether the court may exercise personal jurisdiction over a defendant. Ricoh Co. v. Asustek Computer, Inc. ,
Federal courts recognize two types of personal jurisdiction: general and specific. Daimler AG v. Bauman ,
Morgan does not contend that the court can exercise general jurisdiction over Trokamed, so the court will limit its analysis to specific jurisdiction. The court of appeals has synthesized the Supreme Court's opinions on specific jurisdiction into three elements: (1) the defendant must have purposefully availed himself of the privilege of conducting business in the forum state or purposefully directed his activities at the state; (2) the alleged injury must have arisen from the defendant's forum-related activities, and (3) the exercise of jurisdiction must comport with traditional notions of fair play and substantial justice. Felland v. Clifton ,
At this stage of the case, Morgan must "make a prima facie showing of jurisdictional facts."
B. Trokamed's alleged contacts with Wisconsin
Most of the parties' debate focuses on the question whether Trokamed purposefully availed itself of the privilege of conducting business in Wisconsin or purposefully directed activities here. It is undisputed that Trokamed does not have an office, employees, or sales representatives in Wisconsin. The opposing parties do not allege that any representative *957from Trokamed has visited the state or solicited business here. And there is no evidence or allegations that Trokamed has shipped products to Wisconsin. Instead, the opposing parties rely on the following evidence and allegations:
• the exclusive distribution agreement between Trokamed and Blue Endo;
• statements from Blue Endo's president regarding collaboration between Trokamed and Blue Endo;
• documents showing that morcellators were sent to Wisconsin and allegations that replacement parts were sent here as well;
• a guarantee included in the "instructions for use" that accompanied the morcellator;
• the application that Trokamed submitted to the FDA and the agency's approval of that application;
• documents related to a November 2014 safety communication from the FDA about morcellators;
• testimony that a high-ranking officer at Trokamed came to Florida to meet with Blue Endo representatives.
The court will consider each alleged contact in turn.
C. Exclusive distribution agreement
Morgan's primary argument relies on Trokamed's distribution agreement with Blue Endo, which gave Blue Endo the exclusive right to sell Trokamed's morcellators throughout the United States, Canada, and Mexico. Dkt. 9-2, § 1.5. By entering into that agreement, Morgan says, Trokamed demonstrated its intent sell its products in all 50 states, including Wisconsin. And because it could reasonably expect that its products would be sold in Wisconsin, it "could reasonably anticipate being haled into court" here as well. World-Wide Volkswagen Corp. v. Woodson ,
It is difficult to deny the logic of Morgan's argument, which is called the "stream of commerce" theory in the case law. And Justice Ginsburg has defended the theory forcefully in a similar case, J. McIntyre Mach., Ltd. v. Nicastro ,
Is it not fair and reasonable, given the mode of trading of which this case is an example, to require the international seller to defend at the place its products cause injury? Do not litigational convenience and choice-of-law considerations point in that direction? On what measure of reason and fairness can it be considered undue to require [the manufacturer] to defend in New Jersey as an incident of its efforts to develop a market for its industrial machines anywhere and everywhere in the United States? Is not the burden on [the manufacturer] to defend in New Jersey fair, i.e., a reasonable cost of transacting business internationally, in comparison to the burden on [the plaintiff] to go to Nottingham, England to gain recompense for an injury he sustained using [the manufacturer's] product at his workplace in Saddle Brook, New Jersey?
...
[The manufacturer], by engaging [its distributor] to promote and sell its machines in the United States, purposefully *958availed itself of the United States market nationwide, not a market in a single State or a discrete collection of States. [The manufacturer] thereby availed itself of the market of all States in which its products were sold by its exclusive distributor. The purposeful availment requirement ... simply ensures that a defendant will not be haled into a jurisdiction solely as a result of random, fortuitous, or attenuated contacts.
J. McIntyre ,
The holding of the Court in J. McIntyre is not as easily stated as it is in most cases because no single opinion garnered at least five votes. But Justice Kennedy's plurality opinion and Justice Breyer's concurrence both rejected the lower court's holding that a foreign manufacturer can be sued in any state if it "knows or reasonably should know that its products are distributed through a nationwide distribution system that might lead to those products being sold in any of the fifty states." Nicastro v. McIntyre Machinery America, Ltd. ,
In attempting to distinguish the distribution agreement in this case from that in J. McIntyre , the opposing parties say that Trokamed exercised more control over Blue Endo than the manufacturer in J. McIntyre exercised over its distributor.
The opposing parties cite two other provisions in the agreement as evidence of Trokamed's control. The first provision requires Blue Endo to use "commercially *959reasonable efforts to assign adequately trained and reasonably sufficient sales staff to market and sell Exclusive Products(s) and Product(s)."
Neither provision shows that Trokamed exercised control over Blue Endo that would distinguish it from the manufacturer in J. McIntyre . Both provisions are directed at increasing sales in the territory as a whole, but neither provision directs Blue Endo to market or sell products in Wisconsin or otherwise purports to control where Blue Endo will sell the product within the United States, Canada, or Mexico. Because that is the type of control that matters under a personal jurisdiction analysis, the court concludes that the Trokamed's and Blue Endo's distribution agreement does not provide a basis for suing Trokamed in Wisconsin. J. McIntyre ,
In sum, because Trokamed's distribution agreement with Blue Endo does not target Wisconsin in any way, the agreement by itself does not provide a basis for this court to exercise jurisdiction over Trokamed in this case.
D. Sales in Wisconsin
Morgan (but not Blue Endo) says that sales of Trokamed's morcellators in Wisconsin provide another ground for distinguishing J. McIntyre . Morgan relies on Justice Breyer's concurrence, in which he observed that "the relevant facts found by the New Jersey Supreme Court show no regular flow or regular course of sales in New Jersey."
In this case, Morgan has identified only two sales of Trokamed's morcellators in Wisconsin, including the one at issue in this case. Dkt. 21, at 12. That is no different from the one to four sales at issue in J. McIntyre .
Morgan resists this conclusion on the ground that the morcellators include disposable components such as blades and valves. Morgan alleges (without citing evidence) that Blue Endo "regularly" sent *960those components into Wisconsin. Dkt. 1, ¶ 12.
There are several problems with Morgan's reliance on the possibility that Blue Endo regularly shipped disposable components to Wisconsin. First, Blue Endo itself did not make this claim in its opposition brief. Because Blue Endo would be in the best position to know what products it shipped to Wisconsin, its silence on this issue undermines the plausibility of Morgan's allegation.
Second, even if the court accepts the allegation as true, Morgan does not say where Blue Endo obtained disposable parts, so it is not clear whether the parts came from Trokamed. Again, Blue Endo is silent on this point.
Third, Trokamed denies that it knew that it had customers in Wisconsin at the relevant time and Morgan does not contradict that view. Even under the more permissive view of the stream of commerce theory that the Supreme Court rejected in J. McIntyre , Morgan would have to show that Trokamed knew or should have known that its products were being sold in Wisconsin. J. McIntyre ,
Morgan alleges that Trokamed became aware of its Wisconsin customers in 2015, after the FDA asked Trokamed to update its "instructions for use." Dkt. 1, ¶ 31. But even if that were true, that was after the relevant events in this case (Morgan's surgery was in 2014). Morgan does not explain how knowledge that Trokamed had in 2015 could serve as the basis for an exercise of jurisdiction for a claim arising out of a 2014 injury and a morcellator sale made years earlier. 16 James William Moore, Moore's Federal Practice § 108.42[2][a] (3d ed. 2018) ("The proper focus in the specific jurisdiction analysis is on those contacts leading up to and surrounding the accrual of the cause of action. Later events are not considered.").
Fourth, Morgan cites no authority for the view that sending minor replacement parts for two devices would qualify as a "regular flow" of sales in Wisconsin. Tile Unlimited, Inc. v. Blanke Corp. ,
The opposing parties have failed to make a prima facie showing that Trokamed has a regular flow of sales in Wisconsin as to products that are related to Morgan's claims.
*961E. Instructions for use
In Asahi Metal Industry Co. v. Superior Court of Cal., Solano Cty. , four justices concluded that a court may exercise specific jurisdiction over a foreign defendant that places a product into the "stream of commerce" if the defendant also "establish[es] channels for providing regular advice to customers in the forum State."
In this case, the opposing parties say that the court may exercise personal jurisdiction because Trokamed established channels of advice by offering a warranty to customers. The opposing parties cite "Instructions for Use," or IFUs, that accompanied each of Trokamed's morcellators sold in the United States. The IFUs included the following language:
Scope of guarantee
The manufacturer guarantees that the product is shipped in perfect order with regard to function, safety, and reliability. This guarantee becomes null and void in case of:
• Unauthorized repairs
• Product alterations
• Disregard of the applicable laws and regulations for electrical installations
• Improper use
• Opening of the grip module, control unit or foot pedal housings.
Dkt. 10-1, at 47.
The parties debate the meaning and significance of this language. According to Trokamed, it did not provide a warranty to its American customers.
Trokamed ignores the fact that the guarantee refers to the "manufacturer," not the distributor. Trokamed also fails to address the testimony of its president that "the guarantee is from the producer of the product, and it doesn't stop if you sell it through a dealer, it always goes with the product." Dkt. 21-4 (Trondle Dep. 143:4-7). But even if the court assumes that the guarantee came from Trokamed, the reasoning in Asahi on which the opposing parties rely relates not to "guarantees" but to established channels of communication between the manufacturer and the customer.
This is where the opposing parties' argument fails: the opposing parties have not a made a prima facie showing that Trokamed *962established a channel of communication with any Wisconsin customer. The language cited by the opposing parties is part of a section in the IFUs called "Guarantee Repair." Dkt. 10-1, at 47. In that section, the IFUs direct the customer to send the device to Blue Endo for repairs and they provide Blue Endo's address, telephone number, and email address.
No one reading the IFUs would know that he or she should contact Trokamed for any reason. And the opposing parties do not allege that either of the two customers in Wisconsin ever had any communication with Trokamed. Under these circumstances, the court concludes that the opposing parties have not made a prima facie showing that Trokamed established channels of communication with Wisconsin customers.
F. FDA documents
The opposing parties rely on two sets of documents related to the FDA: (1) Trokamed's application and the FDA's approval of Trokamed's request to sell its morcellator in the United States; and (2) documents related to the FDA's November 2014 request to Trokamed to update its IFUs. The first set of documents is not helpful because, like the distribution agreement, it relates to Trokamed's contacts with the United States generally rather than Wisconsin specifically. J. McIntyre ,
*963As for the second set of documents, the parties debate the extent of Trokamed's involvement in complying with the FDA's November 2014 request. But the court will accept as true the opposing parties' version of events: (1) after receiving the request from the FDA, Trokamed directed Blue Endo to update the IFUs and deliver them to all customers, which Blue Endo did; (2) Trokamed directed Blue Endo to prepare a spreadsheet that contained the contact information of its American customers; and (3) Trokamed used the spreadsheet in communications with the FDA.
Even if true, these allegations do little to support the opposing parties' position. The allegations again relate to Trokamed's contacts with the United States generally rather than Wisconsin specifically and they arise out of conduct that occurred after Morgan was injured. Morgan does not contend that her claims arose out of the updated IFUs. Felland ,
Blue Endo suggests that Trokamed established a channel of communication by updating the IFUs, but it fails to explain how. The opposing parties do not allege that Trokamed had any direct communication with any Wisconsin customer during the updating process or that Trokamed invited communication from customers. And neither Morgan nor Blue Endo cites any authority in which a court found that similar conduct was sufficient to justify an exercise of personal jurisdiction. For these reasons, the court concludes that Trokamed's contacts with the FDA do not provide a basis for exercising jurisdiction over Trokamed in this case.
G. Trondle visit
Morgan cites testimony from Blue Endo's president that in 2012 in Florida he met with Karlheinz Trondle, who the parties refer to alternatively as the "manager," "general manager," and "president" of Trokamed. Dkt. 21, at 2; Dkt. 30, at 17; Dkt. 26, at 5. Because this meeting occurred in Florida and the opposing parties do not allege that the meeting had anything to do with Wisconsin in particular, it does not provide a basis for exercising personal jurisdiction over Trokamed in this case. J. McIntyre ,
H. Other cases
For the sake of completeness, the court will briefly address four cases that the parties rely on, three of which also involved a products liability claim against Trokamed related to its morcellators. Of the three cases filed against Trokamed, two were dismissed for lack of personal jurisdiction and one was allowed to proceed. But two of the cases provide little guidance to other courts. In Schmidt v. Trokamed , No. 15-1-2347 (Haw. Cir. Ct. Jan. 12, 2018), the court concluded that it could not exercise jurisdiction over Trokamed, and in Johnson v. Market-Tiers Inc., No. 15C2984 (Tenn. Cir. Ct. Feb. 28, 2018), the court concluded that the plaintiff had made a prima facie case of personal jurisdiction over Trokamed. But Schmidt was a one-page order that did not provide reasoning for the court's decision. Dkt. 10-3. The court in Johnson concluded that Trokamed "controlled" the distribution of its morcellators in the United States by imposing quotas, but the court did not explain how the quotas were relevant to the jurisdictional analysis. Dkt. 21-10.
*964The third case is consistent with this court's analysis. In Trokamed GmbH v. Vieira , No. 01-17-485-cv,
• the exclusive distribution agreement is "not specific to Texas but covers the U.S., Canada, and Mexico," and "Trokamed has not participated in the delivery of its products to Texas,"id. at *6 ;
• the IFUs "are the intellectual property of Blue Endo" and "bear Blue Endo's logo and contact information,"id. at *7 ;
• Trokamed's contacts with the FDA were not state specific,id. ;
• Blue Endo was not acting as Trokamed's "agent," id. at *8.
Because Vieira reached the same conclusions as this court, it is not necessary to discuss the case further.
In the fourth case, the Court of Appeals for the Sixth Circuit concluded that a court in Kentucky could exercise jurisdiction over a foreign pharmaceutical company, relying on the following contacts:
• the defendant's efforts to obtain FDA approval allowed the defendant to exploit the markets of each state in the United States;
• the defendant had a distribution agreement that included all of the United States;
• the defendant conducted clinical studies in the United States.
Tobin v. Astra Pharm. Prod., Inc.,
I. Conclusion
"With the free flow of commerce within the United States today, it may seem counterintuitive that a foreign manufacturer ... who sells goods to a distributor in the United States should not be assumed to have the expectation that its goods may end up for sale in any one of the fifty states." Jennings v. AC Hydraulic A/S ,
The bottom line is that the opposing parties have failed to make a prima facie showing that Trokamed purposefully availed itself of the privilege of conducting business in Wisconsin, or if it did, that Morgan's injury arose out of Trokamed's relevant conduct directed at this state. The facts alleged by Morgan "may reveal an intent to serve the U.S. market, but they do not show that [Trokamed] purposefully availed itself of the [Wisconsin] market." J. McIntyre ,
This conclusion makes it unnecessary to consider whether the exercise of jurisdiction over Trokamed would comport with traditional notions of fair play and substantial justice. Felland ,
ORDER
IT IS ORDERED that the motion filed by defendant Trokamed GmbH for lack of personal jurisdiction, Dkt. 7, is GRANTED and Trokamed is DISMISSED from the case. The stay on discovery is LIFTED.
"Laparoscopic Power Morcellators," U.S. Food and Drug Administration, https://www.fda.gov/medicaldevices/productsandmedicalprocedures/surgeryandlifesupport/ucm584463.htm (last visited September 12, 2018).
There is an alternative test for specific jurisdiction that the Supreme Court has applied in the context of intentional torts. Calder v. Jones ,
Several courts have concluded that Justice Breyer's concurrence is the controlling opinion because it represents the narrowest ground supported by a majority of the Court. E.g., Williams v. Romarm, SA ,
A quota might be relevant to a personal jurisdiction analysis if the quota were so large that the distributor would need to sell the product in nearly every state to meet the quota. But the opposing parties do not identify what the quota was or otherwise allege that meeting the quota required such a sales effort.
For the same reason, the court is not persuaded by testimony from Blue Endo's president that Blue Endo and Trokamed discussed "how to market and sell the product." Dkt. 21-2 (Dep. of Theodore Sullivan 48:17-20). The opposing parties do not cite any testimony in which Trokamed directed Blue Endo to sell or market products in Wisconsin. And the Supreme Court was not persuaded by similar evidence in J. McIntyre ,
In fact, Trokamed says that it disclaimed any warranties, citing the following language in its distribution agreement with Blue Endo:
EXCEPT FOR THE EXPRESS WARRANTIES MADE HEREIN, NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, AS TO THE MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE CONCERNING THE PRODUCTS, AND EACH PARTY SPECIFICALLY DISCLAIMS ANY OTHER WARRANTY, EXPRESS OR IMPLIED, OTHER THAN THAT CONTAINED HEREIN.
Dkt. 9-2, § 8.3. Trokamed does not explain why a disclaimer directed at Blue Endo would affect any warranties made to the buyer. Because the disclaimer is not dispositive, the court will assume that it did not apply to any statements in the IFUs.
In J. McIntyre ,
Trokamed provided the IFUs with its motion to dismiss and the opposing parties did not challenge the authenticity of the document or otherwise allege that Trokamed provided the wrong version. But Morgan attached a different version of the IFUs to her opposition brief. Dkt. 21-5. That version is written in both English and German. It replaces all references to Blue Endo with Trokamed and provides Trokamed's contact information in the "Guarantee Repair" section. Id. at 49. Trokamed says that the version Morgan attached was not circulated in the United States. Dkt. 30, at 21 n.16. Neither Morgan nor Blue Endo alleges that the version Morgan submitted was ever sent to Wisconsin and they do not allege that Wisconsin customers received Trokamed's contact information or any other information about Trokamed. Accordingly, the court concludes that the alternative version of the IFUs does not create a factual dispute.
See also Sarver v. Johnson & Johnson, No. 14-cv-19968,
Reference
- Full Case Name
- Constance MORGAN v. TROKAMED GMBH, and Market-Tiers, Inc. d/b/a Wisap America d/b/a Blue Endo
- Status
- Published