King County v. Viracon Inc

• Court: District Court, W.D. Washington
• Decided: October 29, 2019
• Docket: 2:19-cv-00508
• Status: Unknown

Opinion

1 The Honorable Barbara J. Rothstein

5 IN THE UNITED STATES DISTRICT COURT 6 FOR THE WESTERN DISTRICT OF WASHINGTON AT SEATTLE 7

8 KING COUNTY, Civil Action No. 2:19-cv-508-BJR

9 Plaintiff, ORDER GRANTING QUANEX IG v. SYSTEMS, INC. AND TRUSEAL 10 TECHNOLOGIES, INC.’S MOTION TO 11 VIRACON, INC., QUANEX IG SYSTEMS, DISMISS FIRST AMENDED INC., and TRUSEAL TECHNOLOGIES, INC., COMPLAINT 12 Defendants. 13

14 I. INTRODUCTION 15 Plaintiff King County (“King County”) instituted this action against Defendants Viracon, 16 17 Inc. (“Viracon”), Quanex IG Systems, Inc. (“Quanex IG Systems”), and Truseal Technologies, 18 Inc. (“Truseal”), alleging fraud, strict liability, and violations of Washington State’s Consumer 19 Protection Act based on the construction of a building own by King County. See Dkt. No. 12. 20 Currently before the Court is a motion to dismiss filed by Defendants Quanex IG Systems and 21 Truseal (collectively “Defendants”).1 Dkt. No. 32. Defendants move to dismiss the claims against 22 them pursuant to Federal Rules of Civil Procedure 12(b)(2) and (6), arguing that: (1) they are not 23 24

25 1 Defendant Viracon is not a subject of the instant motion; Viracon filed its own motion to dismiss 26 on June 16, 2019, an order on which is forthcoming. See Dkt. No. 29. For the sake of clarity, any reference in this order to “Defendants” is a reference to both Quanex IG Systems and Truseal, but 27 not Viracon. 1 subject to personal jurisdiction in Washington State and (2) the First Amended Complaint does 2 not state a cognizable claim for relief. King County opposes the motion. Dkt. No. 37. Having 3 reviewed the motion, the opposition thereto, the record of the case, and the relevant legal 4 authority, the Court will grant the motion. The reasoning for the Court’s decision follows. 5 II. BACKGROUND 6 7 King County is a government entity and political subdivision of the State of Washington. 8 Dkt. No. 12 at ¶ 1.1. Viracon is incorporated and headquartered in Minnesota and in the business 9 of manufacturing insulating glass units (“IGUs”) for distribution and sale throughout the United 10 States, including Washington State. Id. at ¶ 1.2. Quanex IG Systems is an Ohio corporation 11 headquartered in Texas; Truseal is a Delaware corporation also headquartered in Texas. Id. at ¶¶ 12 1.3-1.4. King County alleges that both Quanex IG Systems and Truseal manufacture building 13 products for distribution and sale in the United States, including Washington State. Id. 14 15 At the center of this lawsuit is an office building—“the Chinook Building”—located in 16 Seattle, Washington that is owned by King County. Id. at ¶ 5.1. The Chinook Building was built 17 in 2007 and has what the parties refer to as a “curtainwall” exterior—an exterior comprised of 18 IGUs that are framed by metal joinery and set within openings clad in granite. Id. at 5.2. The 19 IGUs consist of double paned windows with a hermetically sealed air space between the panes of 20 glass that provides thermal and acoustical insulation. Id. at 5.3. Polyisobutylene-based sealant 21 (“PIB-based sealant”) is used to seal the window panes. Id. at ¶ 5.4. The Chinook Building’s 22 23 exterior has nearly 3,000 IGUs. Id. at 5.3. 24 King County alleges that Viracon manufactured and supplied the IGUs installed on the 25 Chinook Building, while Defendants manufactured the PIB-based sealant used by Viracon to seal 26 the IGUs. Id. at 5.4. King County further alleges that the PIB-based sealant used to create the 27 1 IGUs’ hermetic seal is failing, causing a film to migrate “into the sightlines and glass of the 2 [IGUs].” Id. at 5.10. The County alleges that the film impairs visibility and affects the overall 3 appearance of the Chinook Building. Id. According to King County, the film “is present with 4 varying degrees of severity on all of the Building’s nearly 3,000 [IGUs].” Id. at 5.9. 5 King County asserts that the industry standard is to use black PIB-based sealant in IGUs 6 7 because the black sealant “include[s] an ingredient called carbon black that protect[s] the PIB 8 from degrading in sunlight.” Id. at 5.12. However, King County alleges, instead of using black 9 PIB-based sealant in the IGUs for the Chinook Building, Viracon sealed the IGUs with gray PIB- 10 based sealant that was manufactured by Defendants. According to King County, Viracon and 11 Defendants knew that the gray PIB-based sealant was “defective and its performance [] inferior to 12 that of [b]lack PIB” and, as such, the use of gray PIB-based sealant would render the IGUs 13 “[un]suitable for their intended purpose[]” on the Chinook Building. Id. at 5.13. 14 15 Indeed, King County claims, at the time that the IGUs with the gray PIB-based sealant 16 were installed on the Chinook Building, Viracon and Defendants each knew of other buildings 17 that had Viracon-manufactured IGUs with gray PIB-based sealant that were experiencing the 18 same issues that the Chinook Building is now experiencing. Id. at 5.14. Therefore, King County 19 charges, Viracon and Defendants “understood and knew that the types of damages King County 20 complains of [in this lawsuit] were likely to occur, more likely to occur than if standard [b]lack 21 PIB were [sic] used in the [IGUs], and did nothing to prevent the [g]ray PIB from reaching the 22 23 24 25 26 27 1 marketplace, or prevent the installation on the Building of [IGUs] using the [g]ray PIB.” Id. at 2 5.15. 3 III. DISCUSSION 4 As stated above, Defendants Quanex IG Systems and Truseal move this Court to dismiss 5 the claims stated against them on two grounds. First, Defendants argue that this Court lacks 6 7 personal jurisdiction over them and therefore the claims must be dismissed pursuant to Federal 8 Rule of Civil Procedure 12(b)(2). Alternatively, Defendants argue that the First Amended 9 Complaint fails to state a claim on which relief can be granted and therefore the claims must be 10 dismissed pursuant to Federal Rule of Civil Procedure 12(b)(6). 11 A. Standard of Review on a Rule 12(b)(2) Motion 12 In a Rule 12(b)(2) motion to dismiss for lack of personal jurisdiction, the plaintiff bears 13 the burden to show that the court has jurisdiction over the defendant, but “in the absence of an 14 15 evidentiary hearing, the plaintiff need only make a ‘prima facie showing of jurisdictional facts to 16 withstand the motion to dismiss.’” Washington Shoe Co. v. A–Z Sporting Goods Inc., 704 F.3d 17 668, 671–72 (9th Cir. 2012) (quoting Pebble Beach Co. v. Caddy, 453 F.3d 1151, 1154 (9th Cir. 18 2006)). “[F]or the purpose of [the prima facie] demonstration, the court resolves all disputed facts 19 in favor of the plaintiff.” Pebble Beach Co., 453 F.3d at 1154 (citing Doe v. Unocal, 248 F.3d 20 915, 922 (9th Cir. 2001)). However, the plaintiff “cannot simply rest on bare allegations of the 21 Complaint, but rather is obligated to come forward with facts, by affidavit or otherwise, 22 23 supporting personal jurisdiction.” Microsoft Corp. v. Communications & Data Sys. Consultants, 24 127 F. Supp. 3d 1107, 1113 (W.D. Wash. 2015). 25 “Federal courts ordinarily follow state law in determining the bounds of their 26 jurisdiction[.]” Picot v. Weston, 780 F.3d 1206, 1211 (9th Cir. 2015) (quoting Daimler AG v. 27 1 Bauman, 571 U.S. 117, 125 (2014)). As Washington State’s long-arm statute allows the exercise 2 of personal jurisdiction to the full extent permissible under the constitution, Shute v. Carnival 3 Cruise Lines, 783 P.2d 78, 79 (Wash. 1989), the court’s “inquiry centers on whether exercising 4 jurisdiction comports with due process,” Picot, 780 F.3d at 1211. Due process, in turn, “requires 5 that the defendant ‘have certain minimum contacts’ with the forum state ‘such that the 6 7 maintenance of the suit does not offend traditional notions of fair play and substantial justice.’” 8 Id. (quoting Int’l Shoe Co. v. Wash., 326 U.S. 310, 316 (1945)); see also Mavrix Photo, Inc. v. 9 Brand Techs., Inc., 647 F.3d 1218, 1223 (9th Cir. 2011). 10 Personal jurisdiction exists in two forms: general and specific. Picot, 780 F.3d at 1211. In 11 this case, King County alleges that personal jurisdiction exists in the form of specific jurisdiction, 12 thus the Court’s analysis focuses on specific jurisdiction. For a court to have specific jurisdiction 13 over a corporation, the defendant’s suit-related conduct must create a substantial connection with 14 15 the forum State. The Ninth Circuit employs a three-part test to assess whether a party has 16 sufficient contacts with the forum state to subject it to specific personal jurisdiction: 17 (1) The non-resident defendant must purposefully direct his activities or consummate some transaction with the forum or resident thereof; or perform some 18 act by which he purposefully avails himself of the privilege of conducting activities 19 in the forum, thereby invoking the benefits and protections of its laws; (2) the claim must be one which arises out of or relates to the defendant's forum-related activities; 20 and (3) the exercise of jurisdiction must comport with fair play and substantial justice, i.e. it must be reasonable. 21 Picot, 780 at 1211 (quoting Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 802 (9th 22 23 Cir. 2004)). 24 Under the first prong of the foregoing test, the plaintiff must establish that the defendant 25 either “purposefully direct[ed]” its activities toward the forum state or “purposefully avail[ed] 26 itself of the privilege of conducting activities in the forum state. The Ninth Circuit has clarified 27 1 that these are two distinct concepts and that the “purposefully direct[ed]” analysis is most often 2 employed in lawsuits sounding in torts, while “purposefully avail[ed]” analysis “is most often 3 used in suits sounding in contract.” Scwarzenegger, 374 F.3d at 802. Because the instant case 4 sounds in tort, this Court will employ the “purposefully direct[ed]” analysis. Under this analysis, 5 “[a] showing that a defendant purposefully directed [its] conduct toward a forum state [] usually 6 7 consists of evidence of the defendant’s actions outside the forum state that are directed at the 8 forum, such as the distribution in the forum state of goods originating elsewhere.” Id. (citing 9 Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 774-75 (1984)). 10 B. Whether this Court Has Personal Jurisdiction Over Quanex IG Systems and 11 Truseal

12 King County claims that Defendants Quanex IG Systems and Truseal are subject to 13 specific personal jurisdiction in the State of Washington because: (1) they delivered their 14 products into Washington’s stream of commerce with the expectation that the products would be 15 purchased by consumers in Washington, and (2) their parent company—Quanex Building 16 Products Corporation (“Quanex Corporation”)—has contacts with Washington State that are 17 sufficient to confer specific personal jurisdiction over its subsidiaries (i.e., Quanex IG Systems 18 19 and Truseal). The Court will address each argument in turn. 20 1. Stream of Commerce 21 With respect to its “stream of commerce” theory, King County alleges that Defendants 22 each “derived substantial revenue from material and products” that they “supplied” and “placed” 23 in “the stream of commerce within Washington” that in turn “caused injury and damages” in the 24 State. Dkt. No. 12 at ¶ 3.1. King County also asserts that Defendants have “more than 800 25 customers in North America, including some headquartered in WA and some purchasing their 26 27 products here.” Dkt. No. 37 at 6 (citing Declaration of Thomas McCune in Support of King 1 County’s Opposition to Defendants’ Motion to Dismiss First Amended Complaint (“McCune 2 Declaration”), Dkt. No. 38 at ¶ 15). King County claims—without citation to the record—that 3 “Viracon was exclusively using [Defendants’] PIB in its IGUs from 2002 to 2009”. Dkt. No. 37 at 4 6. Lastly, the County alleges that Viracon’s IGUs are installed in “at least 10 premier buildings in 5 Seattle”. Dkt. No. 37 at 6 (citing McCune Declaration, Dkt. No. 38 at ¶¶ 3-13). 6 7 Defendants counter that King County’s “stream of commerce” theory of jurisdiction fails 8 because it is “undisputed” that Defendants “did not, themselves, sell gray PIB-based sealant to 9 any customer in Washington.” Dkt. No. 46 at 2. Rather, Defendants point out, they sold the 10 sealant to Viracon—a Minnesota-based corporation—who used the sealant to manufacture IGUs 11 that it then sold to its own customers, some of whom happened to be in Washington State. 12 Defendants claim that specific personal jurisdiction does not exist under this scenario because 13 their “relationship” with Washington State did not arise out of contacts that they initiated with the 14 15 State. According to Defendants, for this Court to have specific jurisdiction over them, their 16 relationship with Washington “must arise out of contacts that” they themselves “create[d] with the 17 forum State.” Id. (quoting Walden v. Fiore, 571 U.S. 277, 284 (2014)). 18 The Court concludes that King County has not alleged sufficient facts that would 19 establish Quanex IG Systems and Truseal purposefully directed activities to Washington State 20 sufficient to subject them to specific personal jurisdiction in the State. King County argues that 21 Defendants’ sale of their product to Viracon with the knowledge that the product would be used 22 23 in Viracon’s IGUs is sufficient contact for specific jurisdiction. The Court rejects this argument 24 because it ignores the well-established rule that a defendant’s mere awareness that its product will 25 be placed into the stream of commerce and, therefore, may reach the forum state is insufficient for 26 the exercise of specific jurisdiction. Starbucks Corp. v. Wellshire Farms, Inc. 2013 WL 6640124, 27 1 *3 (W.D. Wash. Dec. 17, 2013) (citing Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102, 2 110 (1987) (“The ‘substantial connection’ between the defendant and the forum State necessary 3 for a finding of minimum contacts must come about by an action of the defendant purposefully 4 directed toward the forum State.”)) (emphasis in original); see also Death v. Mabry, 2018 WL 5 6571148, at *11 (W.D. Wash. December 13, 2018) (rejecting argument that foreseeability that 6 7 product may end up in forum state is sufficient to establish specific personal jurisdiction). 8 Although the majority of the Supreme Court has yet to agree on the exact requirements for the 9 application of stream of commerce, at a minimum, the defendant must have purposefully directed 10 some action toward the forum state. Starbucks, 2013 WL 6640124, at * 3 (citing J. McIntyre, Ltd. 11 v. Nicastro, 564 U.S. 873, 883 (2011) (“The placement of a product into the stream of commerce, 12 without more, is not an act of the defendant purposefully directed toward the forum State.”). 13 Here, King County attempts to demonstrate that Defendants “purposefully direct[ed] some 14 15 action” toward Washington State, but a close review of the evidence cited by the County reveals 16 that it does not support its claim. For instance, King County claims that Defendants have “more 17 than 800 customers in North America, including some headquartered in WA and some purchasing 18 their products here.” Dkt. No. 37 at 6 (emphasis added) (citing Declaration of Thomas McCune 19 in Support of King County’s Opposition to Defendants’ Motion to Dismiss First Amended 20 Complaint (“McCune Declaration”), Dkt. No. 38 at ¶ 15). King County refers the Court to 21 paragraph 15 of the declaration of Thomas McCune, a licensed architect who practices in 22 23 Washington State, as evidence of this claim. However, while Mr. McCune states that Truseal has 24 “approximately 800 customers in North America”, he does not specify that any of the customers 25 are located in Washington State or that any Washington resident has purchased Truseal’s 26 27 1 products. Mr. McCune does not even mention Quanex IG Systems in paragraph 15 of his 2 declaration. 3 King County further alleges that Viracon “was exclusively using [Defendants’] PIB in its 4 IGUs from 2002 to 2009” and that Viracon’s IGUs are “installed on at least 10 premier buildings 5 in Seattle.” Dkt. No. 37 at 6. Presumably, King County wants this Court to infer that because 6 7 Viracon was exclusively using Defendants PIB-based sealant in its IGUs and Viracon’s IGUs 8 have been installed on buildings in Seattle, Defendants must have known that by selling their 9 PIB-based sealant to Viracon, their product would end up in Washington. However, King County 10 cites no evidence for its claim that Viracon exclusively used Defendants’ PIB-based sealant in its 11 IGUs. See Dkt. No. 37 at 6. Lastly, King County alleges that Viracon and Defendants “jointly and 12 secretly surveilled” buildings that were allegedly experiencing problems with their IGUs, 13 including one in the Seattle area. Once again, the evidence to which the County cites in support of 14 15 this allegation is silent on the issue. Id. at fn. 6. 16 It is black-letter law that King County cannot rest on unsupported allegations to defeat 17 Defendants’ motion to dismiss for lack of personal jurisdiction. Microsoft, 127 F. Supp. 3d at 18 1113; see also Amba Marketing Systems, Inc. v. Jobar International, Inc., 551 F.2d 784, 787 (9th 19 Cir. 1977) (noting that a plaintiff cannot simply rest on the bare allegations of its complaint, but 20 rather is obligated to come forward with facts, by affidavit or otherwise, supporting personal 21 jurisdiction). Accordingly, the County has failed to establish that this Court may exercise personal 22 23 jurisdiction over Defendants based on the “stream of commerce” theory of jurisdiction. 24 2. Quanex Corporation’s Contacts with Washington State 25 With respect King County’s second basis for jurisdiction, that Quanex Corporation’s (i.e. 26 Defendants’ parent company) contacts with Washington State are sufficient to confer jurisdiction 27 1 on Defendants, King County alleges that: (1) Quanex Corporation owns a Washington subsidiary 2 located in Kent, Washington as well as a manufacturing plant located in Yakima, Washington 3 (Dkt. No. 37 at 5-6 (citing McCune Declaration, Dkt. No. 38, ¶ 2)); (2) Quanex Corporation 4 handles all the marketing and product cross-marketing for its entire buildings product group, 5 which includes Defendants (id. at ¶¶ 2 and 15); and (3) Quanex Corporation “lobbied politically 6 7 in WA” (id. at 6 (citing McCune Declaration, Dkt. No. 38, ¶¶ 2, 15, 19-21, 23)). 8 Defendants counter that King County’s attempt to use Quanex Corporation’s contacts 9 with Washington to establish specific personal jurisdiction over them is unavailing. Defendants 10 assert that in the Ninth Circuit, the existence of a parent-subsidiary relationship alone is 11 insufficient to attribute the contacts of the parent to the subsidiary for jurisdictional purposes. 12 Instead, Defendants argue, King County must establish that Quanex Corporation is the alter ego 13 for Quanex IG Systems and Truseal, something King County has not even “attempted to establish 14 15 here.” Dkt. No. 46 at 3. 16 Defendants are correct; this Court does not have personal jurisdiction over Defendants 17 based on their parent company’s contacts with Washington State. “It is well-established that a 18 parent-subsidiary relationship alone is insufficient to attribute the contacts of the subsidiary to the 19 parent [or vice versa] for jurisdictional purposes.” Harris Rursky & Co. Ins. Servs., Inc. v. Bell & 20 Clements Ltd., 328 F.3d 1122, 1134 (9th Cir. 2003) (citation omitted). An exception to this 21 general rule exists where the parent is the subsidiary’s alter ego. Id. However, in order to satisfy 22 23 the alter ego exception to the general rule that a subsidiary and the parent are separate entities, the 24 plaintiff must make out a prima facie case “(1) that there is such unity of interest and ownership 25 that the separate personalities [of the two entities] no longer exist and (2) that failure to disregard 26 27 1 [their separate identities] would result in fraud or injustice.” Id. at 1134-35 (quoting Doe, I, v. 2 Unocal Corp, 248 F. 3d 915, 926 (9th Cir. 2001). 3 King County does not attempt to make this showing. At most, the County simply alleges 4 that the Quanex Corporation handles “the marketing and product cross-marketing for its entire 5 buildings product group,” of which Truseal is a part. Dkt. No. 37 at 5-6 (citing McCune 6 7 Declaration, Dkt. No. 38, ¶ 2). However, despite citing to Paragraph 2 of the McCune Declaration 8 as support for this allegation, Paragraph 2 does not state that Quanex Corporation handles the 9 marketing for “its entire buildings product group”, let alone the marketing for Truseal or 10 Quanex.2 Moreover, even if the cited evidence did support the allegation, it would not be 11 sufficient to establish that Quanex Corporation is Defendants’ alter ego. King County’s 12 perfunctory allegations fail to meet the Ninth Circuit’s criteria for disregarding the separation 13 between a parent and its subsidiary. See Harris Rursky, 328 F.3d at 1134. 14 15 16 17 18

21 22

23 2 King County makes the same allegation a second time two paragraphs later in its brief, only this time citing to paragraphs 15, 19-21, and 23 in addition to paragraph 2 of the McCune Declaration 24 as support. Dkt. No. 37 at 6. Once again, the cited paragraphs do not support the allegation. The closest King County comes to support for this allegation is a 2010 article attached to the McCune 25 Declaration, which states that Quanex Building Products Corporation (formerly Quanex Corporation) had created something called “Project Nexus” that “calls for the integration of” 26 Quanex Building Productions Corporation’s Engineered Products Group’s “sales, marketing, and 27 product development teams.” Dkt. No. 38, Ex. O. King County alleges that this includes the “product development team[]” for Truseal, but the article says nothing of the sort. 1 IV. CONCLUSION 2 For the foregoing reasons, the Court cannot exercise personal jurisdiction over 3 Defendants. The motion to dismiss is HEREBY GRANTED and this case is DISMISSED.3 4 Dated this 29th day of October 2019. 5

6 A 7 8 B arbara Jacobs Rothstein U.S. District Court Judge 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

27 3 Because this Court lacks jurisdiction over Defendants, the Court will not address the remaining issues in the motion to dismiss.