LG Chem, Ltd. v. Superior Court of San Diego Cnty.

80 Cal.App.5th 348

295 Cal.Rptr.3d 661

LG CHEM, LTD., Petitioner,

v.The SUPERIOR COURT OF SAN DIEGO COUNTY, Respondent;

Ryan Lawhon, Real Party in Interest.

D079718

Court of Appeal, Fourth District, Division 1, California.

Filed June 27, 2022

Lewis Brisbois Bisgaard & Smith, Jeffry A. Miller, San Diego, and Wendy S. Dowse, Los Angeles, for Petitioner.

No appearance for Respondent.

Singleton Schreiber McKenzie & Scott, Singleton Schreiber, J. Domenic Martini, Benjamin I. Siminou and Harini P. Raghupathi for Real Party in Interest.

DO, J.

INTRODUCTION

Ryan Lawhon, a California resident, alleged he was severely injured when an 18650 lithium-ion battery he bought from a San Diego vape shop suddenly exploded in his pants pocket. In addition to the vape shop and vape distributor, he sued LG Chem Ltd. (LG Chem), the South Korean manufacturer of 18650 lithium-ion batteries (18650 batteries), for negligence and product liability. The trial court denied LG Chem's motion to quash service of summons for lack of personal jurisdiction, finding the court's exercise of specific jurisdiction over LG Chem comported with federal due process. LG Chem petitioned this court for writ of mandate directing the trial court to vacate its order denying the motion to quash. We issued an order directing real party-in-interest Lawhon to show cause why the relief sought should not be granted. We now grant the petition and direct the trial court to vacate its order denying the motion to quash and enter a new order granting the motion.

The jurisdictional facts are not disputed: LG Chem sold 18650 batteries as industrial component products to original equipment manufacturers and battery packers who sell to original equipment manufacturers. It did not design, manufacture, distribute, advertise or sell the batteries for sale to or use by individual consumers as standalone, replaceable batteries. It had no connection to the vape shop or the vape distributor responsible for selling the defective battery that injured Lawhon. Its activities in California consisted of sales of 18650 batteries to three California companies in the electric vehicle industry for use in electric vehicles. The question presented is whether Lawhon's personal injury claims arise out of or relate to those sales. We conclude they do not. Thus, the exercise of jurisdiction over LG Chem in this California lawsuit is not consistent with due process.

FACTUAL AND PROCEDURAL BACKGROUND

I.Lawhon's Claims

Lawhon alleged he purchased an 18650 battery¹ at a San Diego vape shop called Vapin' the 619. The battery did not come in a package. The vape shop "simply placed it in a plastic bag." On February 7, 2019, Lawhon put the battery in his pants pocket, along with another identical battery he previously purchased from the same vape shop and his car keys. One of the batteries "suddenly exploded" in his pocket, severely burning his leg and hand. Lawhon spent "nearly a week" in the hospital, and missed "multiple weeks of work" as a result of his injuries.

On September 9, 2019, Lawhon filed an unverified complaint for damages against four named defendants: Vapin America LLC (Vapin America), a Nevada limited liability corporation with its principal place of business in San Diego County; and It Is What It Is-II, LLC, Morija, LLC, and Flame LLC, three California limited liability corporations with their principal places of business in San Diego County that were in "some combination" doing business as Vapin' the 619. He alleged, on information and belief, that Vapin America sold the battery that injured him to the vape shop.

Lawhon also alleged, on information and belief, there were unknown defendants, Does 1 through 50, who were "in some manner responsible" and legally liable to him because they "design[ed], manufactur[ed], or distribut[ed] the defective product." On December 17, 2020, Lawhon substituted LG Chem for Doe 3 with a form amendment to the complaint. Against all defendants, Lawhon asserted a cause of action for negligence and strict liability causes of action for design defect, manufacturing defect, and failure to warn.

II.LG Chem's Motion to Quash Service of Summons

On June 9, 2021, LG Chem specially appeared and moved to quash service of summons for lack of personal jurisdiction. Lawhon was granted leave to conduct jurisdictional discovery. On October 29, Lawhon filed his opposition to the motion to quash. He conceded the trial court could not assert general jurisdiction over LG Chem but argued LG Chem's contacts with California were sufficient to support specific jurisdiction. The trial court agreed with Lawhon and denied LG Chem's motion to quash on November 12. LG Chem filed its petition for writ of mandate on November 22.

We summarize the jurisdictional evidence produced by LG Chem, on which both sides relied, and the relevant proceedings.

A. Jurisdictional Evidence

In support of its motion to quash, LG Chem submitted a declaration from Kiwon Choi, a former LG Chem sales professional responsible for sales of the type of battery that allegedly injured Lawhon. During jurisdictional discovery, LG Chem responded to written discovery and produced Choi to be deposed as its designated representative.² The following jurisdictional facts are derived from these sources.

LG Chem is a South Korean company with headquarters and principal offices in Seoul, South Korea.³ It had no office or employees in California, nor was it registered to do business in California. It did not own or lease real property in this state. It did not have a registered agent for service of process in California.

LG Chem did not conduct business with Vapin America, the entity alleged to have sold the defective battery to Vapin' the 619. It also did not conduct business with Vapin' the 619, the vape shop that allegedly sold the defective battery to Lawhon, or with the three entities doing business as the vape shop. LG Chem did not authorize any of these entities to advertise, distribute, or sell LG Chem's 18650 batteries for use by individual consumers as standalone, replaceable batteries for any purpose. Indeed, LG Chem did not have any licensed dealers or retailers of 18650 batteries in California, nor did it authorize or advertise consumer repair or replacement services for 18650 batteries in this state.

If the 18650 battery that injured Lawhon was, in fact, an LG Chem battery,⁴ it was not designed or manufactured in California. LG Chem manufactured 18650 batteries "for use by sophisticated companies in specific applications, such as power tools, where the cells are encased in a battery pack with protective circuitry."⁵ The batteries are sold as "industrial component products" and only to original equipment manufacturers or battery packers. ⁶

LG Chem never sold 18650 batteries to vape shops or vape distributors. And it did not advertise, market or solicit buyers for its 18650 batteries in California; instead, "the customers seek [LG Chem] out."

LG Chem did not design, manufacture, distribute, advertise, or sell 18650 batteries to be sold to, or used by, individual consumers as standalone, replaceable batteries. Nor did LG Chem authorize any wholesaler, distributor, retailer, or other individual or entity to do so.

In the two-year period leading up to Lawhon's injury on February 7, 2019, LG Chem's sales of 18650 batteries in California were to three companies in the electric vehicle industry, and the 18650 batteries sold to these customers were for use in electric vehicles. LG Chem's records pertaining to these sales showed the batteries were shipped directly from LG Chem in South Korea to the three companies in California. The number of shipments was fewer than 100, although the number of batteries sold, and the dollars generated from these sales, were in the millions.

When a potential customer contacted LG Chem about 18650 batteries, LG Chem would first verify the customer was an original equipment manufacturer or battery packer "because LG Chem only does business with these kinds of companies." LG Chem and the customer would then "discuss the specifications of the battery cell that the potential customer would need and then ... look at the appropriate model that would be the best fit for the application that the customer wants to put the battery cells in[.]"

LG Chem would only sell batteries to customers that signed a declaration of commitment stating the customer "will not sell the battery cells as loose individual cells and [will] always make sure that the cells are placed in a battery pack or battery module together with the relevant safety devices or the battery cells are put into finished products and sold as such." LG Chem started doing that in 2016, after a person "alleged that a battery cell that he put in his E-cigarette caused him harm and because [LG Chem] wanted to prevent anything like that from ever happening again[.]" LG Chem also added warning labels to the outside of its 18650 batteries.

B. Parties' Arguments

LG Chem argued, as a South Korean company headquartered in Seoul, it is not subject to the general jurisdiction of the California courts because it has no continuous and systematic contacts with California such that it may be considered " ‘at home’ " there. LG Chem further argued it was not subject to the specific jurisdiction of the California courts because it did not purposefully exploit the California consumer market for standalone batteries. Rather, it only sold 18650 batteries to three California companies in the electric vehicle industry as components for use in electric vehicles. Because it never sold to vape shops or vape distributors, LG Chem asserted that Vapin America could only have acquired an LG Chem 18650 battery through the unilateral actions of third parties. Thus, it argued, Lawhon's claims arise not out of LG Chem's contacts but out of the actions of third parties, with no connection to LG Chem, who sold the standalone batteries to Lawhon.

Lawhon conceded the trial court could not assert...