Former Emeryville Redevelopment Agency v. Swagelok

364 F.Supp.3d 1061

The SUCCESSOR AGENCY TO the FORMER EMERYVILLE REDEVELOPMENT AGENCY and the City of Emeryville, Plaintiff,

v.SWAGELOK COMPANY, et al., Defendants.

Case No. 17-cv-00308-WHO

United States District Court, N.D. California.

Signed January 30, 2019

Ali Pasha Hamidi, Peter Mahoney Morrisette, Robert P. Doty, Cox, Castle & Nicholson LLP, Christopher William Gribble, Farella Braun and Martel LLP, San Francisco, CA, for Plaintiff.

Joelle Adrienne Berle, John Daniel Parker, Pro Hac Vice, Ryan D. Fischbach, Baker & Hostetler LLP, John Frank Cermak, Jr., Sonja Ann Inglin, Cermak & Inglin, LLP, Belynda S. Reck, Kevin Sami Asfour, K & L Gates LLP, Los Angeles, CA, Anthony J. Coyne, Pro Hac Vice, Jeffrey Mark Embleton, Pro Hac Vice, Samuel Reed Martillotta, Pro Hac Vice, Cleveland, OH, Christine Kiyomi Noma, Wendel, Rosen, Black & Dean LLP, Oakland, CA, for Defendants.

ORDER DENYING HANSON BUILDING MATERIALS LIMITIED'S MOTION TO DISMISS SECOND AMENDED COMPLAINT FOR LACK OF PERSONAL JURISDICTION

Re: Dkt. No. 82

William H. Orrick, United States District Judge

INTRODUCTION

In this case concerning environmental contamination on a property in Emeryville, California, defendant Hanson Building Materials Limited ("HBML"), which is located in the United Kingdom, moves to dismiss the second amended complaint ("SAC") pursuant to Federal Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction. However, plaintiffs have made a prima facie showing that HBML has had contacts with the state of California, plaintiffs' CERCLA claim arises out of HBML's successor liability, and it is not unreasonable to exercise jurisdiction over HBML. Swagelok and Whitney, as cross-claimants, have alternatively made a prima facie showing of alter ego liability. Accordingly, HBML's motion to dismiss is DENIED.

BACKGROUND

I. CONTAMINATION OF THE PROPERTY

The plaintiffs, Successor Agency to the former Emeryville Redevelopment Agency ("Successor Agency") and the City of Emeryville ("City"), bring ten claims under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), the Resource Conservation and Recovery Act ("RCRA"), and various California laws, to recover environmental cleanup costs and related relief from plaintiffs' investigation of contamination on a property in Emeryville, California. Defendants HBML, Swagelok Company ("Swagelok"), Whitney Research and Tool Co. ("Whitney"), and Catherine Lennon Lozick ("Lozick"), are allegedly responsible for the contamination caused by industrial activities that began approximately in 1910 on 5679 Horton Street in the City of Emeryville, California ("the Property"). See Second Amended Complaint ("SAC") ¶ 2.

From approximately 1910 to 1959, the Property was owned by the Marchant Calculating Machine Company ("Marchant"), a California company that manufactured mechanical calculating machines. SAC ¶ 3. Marchant's operations used various oils, chlorinated solvents, and other chemicals that have been found in the soil at the Property, in groundwater on and down gradient from the Property, and in vapors inside large buildings located on the Property. SAC ¶¶ 5, 21.

In 1958, Marchant was consolidated via merger with Smith-Corona Inc., a New York corporation and Marchant was renamed Smith-Corona Marchant Inc. ("SCM"). SAC ¶ 3; Bookspan Decl. ¶ 9. The following year, SCM moved operations to a different location along the border of the cities of Oakland and Berkeley. Id. SCM regularly conducted business in California and continued operating the Marchant business as a division within SCM. Id. By 1963, SCM renamed itself SCM Corporation. It continued to operate in California until it closed the Marchant division in approximately 1972. Id. ¶ 9.

Affiliates of defendant Swagelok purchased the Property in the mid-1960s and owned it until the late-1990s. SAC ¶¶ 4, 11. Swagelok is an Ohio corporation with its principal place of business in Solon, Ohio. Id. The Property was technically operated by defendant Whitney, which was controlled and dominated by Swagelok. Id. Whitney was founded in 1959 as a California corporation and is now dissolved. SAC ¶ 53. Whitney produced machine valves and associated valve parts on the Property. Id. It also allegedly contaminated the Property through its operations, including in the grease room, hazardous waste area, solvent recovery area, and drum storage areas. SAC ¶ 52.

The Property changed hands once again in 1999 when the former Redevelopment Agency, a public entity formed under California law and authorized to undertake environmental cleanup projects, purchased most of it from a Swagelok controlled entity. SAC ¶ 11. The proceeds of that sale, assets worth in excess of $ 1.5 billion, and approximately 65% ownership interest in Swagelok, all went to defendant Catherine Lozick as the sole beneficiary of the CLL Trust, in 2003. SAC ¶ 60. Since that time, the former Redevelopment Agency's rights, powers, and obligations have vested by statute in plaintiff Successor Agency, a separate public entity located and operating in Alameda County, California. Id.

II. INVESTIGATION INTO SUBSEQUENT MERGERS AND OWNERSHIP

The Successor Agency investigated the contamination when it acquired the Property. SAC ¶ 20. Successor Agency identified a series of mergers that also linked Marchant and SCM's alleged contamination on the Property to defendant HBML via a series of transactions in the mid-1980s. SAC ¶ 22.

HBML was incorporated in 1950 under the name C. Wiles Limited, as a limited company organized and existing under the laws of England and Wales. See Rogers Decl. ¶ 2. Its sole current office and headquarters, which is its registered principal place of business, is in Berkshire, England. Id. HBML has operated under several different names, including Wiles Group Limited, Hanson Limited, Hanson PLC, and Hanson Trust PLC. HBML is the same entity originally formed in 1950 though it has gone by different names since its incorporation.¹

HBML first acquired control over SCM through hostile takeover tactics, including tender offers to shareholders. SAC ¶ 23. Then, intent on liquidating the SCM conglomerate for profits, HBML formed several new Delaware corporations in 1985 as indirect subsidiaries with names beginning with "HSCM," (i.e., HSCM-1 to -20), referred to as "fan companies." SAC ¶ 24; Hempstead Decl. ¶ 7. One of those fan companies, HSCM-20, eventually was merged into SCM in 1986, with HSCM-20 as the surviving entity with residual assets and legacy liabilities. SAC ¶¶ 27, 28; Hempstead Decl. ¶ 12. HBML then caused HSCM-20 to merge into another subsidiary, HSCM Holdings Inc., which then merged again into HBML subsidiary HM holdings, Inc. ("HM Holdings"). SAC ¶ 29; Hempstead Decl. ¶¶ 13-15. Plaintiffs' theory of the case is that these mergers ultimately caused Marchant's contamination liability for the Property, and its jurisdictional contacts with California, to flow into HSCM-20, which was controlled by HBML. SAC ¶¶ 27-28. HBML's theory in defense is that the relevant transactional activities occurred under the control of its United States counterparts, particularly Hanson Industries, which was distinct from HBML in the United Kingdom.

Plaintiffs nonetheless allege that HBML's control over these mergers and the liquidation of SCM is demonstrated by a 1989 initial public offering for a typewriter business that was marketed in California and other places. SAC ¶ 32; Hamidi Decl. ¶ 8, Ex. D. During the IPO, HBML changed the name of HSCM-10 to Smith Corona Corporation and then dominated and controlled the transactions. SAC ¶¶ 32-34; Hamidi Decl. ¶ 8, Ex. D at 5 (HBML 2968). Smith Corona Corporation, HM Holdings, and other entities that HBML controlled entered transactions referred to in the 1989 IPO prospectus as the "Reorganization." SAC ¶ 35. In the Reorganization, Smith Corona Corporation and HM Holdings entered a Cross Indemnity Agreement in which HBML assured prospective buyers that the company was protected from all "Hanson Liabilities," defined as SCM non-typewriter businesses, past use of property, release of hazardous substances, and nuisances from non-typewriter operations or properties. SAC ¶ 36.

Following the investigation, plaintiffs plead that the presence of contaminants on the Property can be traced to the operations of Marchant, SCM's Marchant division, and Swagelok and Whitney. SAC ¶ 5.

III. PROCEDURAL HISTORY

Successor Agency and the City filed this lawsuit on January 20, 2017 and amended the complaint on June 30, 2017. Dkt. Nos. 1, 42. Swagelok and Lozick separately answered and filed crossclaims against HBML and counterclaims against plaintiffs. Dkt. Nos. 46, 50.

In October 2017, I issued an Order granting the parties' proposed stipulation to amend the pleading to properly identify HBML as the named party, for Whitney to bring crossclaims against HBML, and for the parties to conduct jurisdictional discovery. Dkt. No. 66. That discovery led to the production of thousands of pages of documents, hundreds of emails between counsel, several 30(b)(6) depositions, and four written discovery disputes brought to the court's attention. Noma Decl. ¶¶ 6-10. Stopping short of raising additional disputes, Lozick maintains that HBML engaged in certain jurisdictional discovery abuses and seeks to reserve the right to extend jurisdictional discovery if needed.

Plaintiffs filed the operative second amended complaint on October 5, 2017. Dkt. No. 67. On December 4, 2017, HBML moved to dismiss for lack of personal jurisdiction. Dkt. No. 82.

LEGAL STANDARD

A court's jurisdiction to render judgment against a person depends on the court's having personal jurisdiction against that person. See Int'l Shoe Co. v. State of Wash., Office of Unemployment Comp. & Placement , 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945). "For a court to exercise personal jurisdiction over a nonresident defendant, that defendant must have at least ‘minimum contacts’ with the relevant forum such that the exercise...