Miller v. LG Chem, Ltd.

868 S.E.2d 896

Eric MILLER, Plaintiff,

v.LG CHEM, LTD., LG Chem America, Inc., Foggy Bottom Vapes LLC, Chad & Jaclynn Dabbs d/b/a Sweet Tea's Vape Lounge, Doe Defendants 1-10, Defendants.

No. COA20-687

Court of Appeals of North Carolina.

Filed February 1, 2022

The Paynter Law Firm, PLLC, by Stuart M. Paynter, Celeste H.G. Boyd, Hillsborough, David D. Larson, Jr., and Sara Willingham, for plaintiff-appellant.

Lewis Brisbois Bisgaard & Smith LLP, Raleigh, by Christopher J. Derrenbacher, for defendants-appellants LG Chem, Ltd., and LG Chem America, Inc.

Schwaba Law Firm, by Andrew J. Schwaba, and Cohen, Milstein, Sellers & Toll, PLLC, Raleigh, by Adam Langino, for amicus curiae North Carolina Advocates for Justice.

No briefs filed by defendants Foggy Bottom Vapes LLC, Chad & Jaclynn Dabbs d/b/a Sweet Tea's Vape Lounge, and Doe Defendants 1-10.

TYSON, Judge.

¶ 1 Eric Miller ("Plaintiff") appeals the trial court's decision granting LG Chem, Ltd.’s ("LG Chem") and LG Chem America, Inc.’s ("LG America") (together, "Defendants") motion to dismiss for lack of personal jurisdiction. We affirm.

I. Background

¶ 2 Defendant LG Chem is a South Korean company, which manufactures and markets lithium-ion batteries. LG Chem alleges it has no meaningful contacts or connections to North Carolina.

¶ 3 Defendant LG America is a Delaware corporation, which sells and distributes petrochemical products and materials in the United States. Its direct sales and distribution to North Carolina are limited to petrochemical products.

¶ 4 LG Chem became aware in early 2016 that single 18650 lithium-ion cells it had manufactured were being used as unauthorized standalone rechargeable batteries in e-cigarette "vape" pens. LG Chem learned an 18650 battery had caused a fire inside a vape pen user's bag.

¶ 5 LG Chem redesigned the 18650 battery cells to reduce their risk of fire, added warning labels to the batteries in September 2016. It also added a warning to its website cautioning against the unauthorized use of standalone 18650 cells in vape pens. LG Chem then took steps to limit its distributors and corporate customers from selling its manufactured 18650 lithium cells for standalone use in e-cigarette vape devices.

¶ 6 Plaintiff purchased a vape pen and LG Chem 18650 battery cell from Defendant, Foggy Bottom Vapes, LLC, ("Foggy Bottom") in Bahama, North Carolina in late 2016 or early 2017. On 23 October 2017, Plaintiff purchased a second LG Chem 18650 battery cell for use in his vape pen from Defendants Chad and Jaclynn Dabbs, d/b/a Sweet Tea's Vape Lounge ("Sweet Tea") in Creedmoor, North Carolina. One of the 18650 battery cells allegedly exploded in Plaintiff's pocket, causing severe burns along his left leg on 4 March 2018.

¶ 7 Plaintiff filed suit in January 2019, seeking damages from both LG Defendants under various theories of products liability, ordinary negligence, and breach of the implied warranty of merchantability. The complaint asserts jurisdiction over the LG Defendants based upon the following allegations:

10. ... At all times relevant to this Complaint, LG Chem ... designed and manufactured 18650-sized cylindrical lithium-ion batteries and caused those batteries to be distributed and sold throughout the United States, including within the State of North Carolina.

11. ... At all times relevant to this Complaint, LG [America] did substantial and continuous business in the State of North Carolina by marketing, distributing, and selling or causing to be sold lithium-ion batteries in the State.

....

17. ... [O]n information and belief, [LG Chem] engages in substantial activity within this State by placing its lithium-ion batteries into the stream of commerce with the knowledge, understanding, and/or expectation that they will be purchased by consumers in the State. According to LG Chem.... the company "built a network for production, sales and R&D not only within Korea but also in major locations around the globe, conducting business all over the world," with approximately 6% of LG Chem[’s] ... worldwide business in 2015 taking place in the United States. The U.S. District Court for the Western District of North Carolina has found that LG Chem ... "has knowingly and intentionally used nationwide distribution channels for its products, with the expectation that its products will be sold throughout the country, including in the state of North Carolina."

18. ... [O]n information and belief, [LG America] engages in substantial activity with this State by causing its lithium-ion batteries to be distributed and sold in the State, and by placing its lithium-ion batteries into the stream of commerce with the knowledge, understanding, and/or expectation that they will be purchased by consumers in the State. The U.S. District Court for the Western District of North Carolina has found that:

[LG America] has a physical presence in the state of NC in the form of being registered to do business here, having a registered process agent here, using property in this state for storage, and paying state taxes at least once. Additionally, [LG America] has participated in the economic markets of this state through its sales to NC customers.

¶ 8 LG Defendants moved to dismiss Plaintiff's complaint for lack of personal jurisdiction pursuant to Rule 12(b)(2) of the North Carolina Rules of Civil Procedure. Plaintiff pursued discovery against LG Defendants, serving both with interrogatories and requests for production of documents. LG Defendants gave limited responses to Plaintiff's interrogatories, but only LG Chem responded to Plaintiff's requests for production.

¶ 9 Plaintiff filed and served motions to compel LG Defendants to provide more comprehensive responses to his interrogatories and requests for production, and asked the trial court to order additional jurisdictional discovery rather than allow LG Defendants’ pending motions to dismiss. Plaintiff then noticed his motions to compel and LG Defendants’ motions to dismiss for hearing on 11 March 2020.

¶ 10 The parties submitted evidence to the trial court in advance of the hearing. LG Defendants filed affidavits attesting their 18650 cells were "never designed, manufactured, distributed, advertised, or sold for use by individual consumers as standalone, replaceable, rechargeable batteries in electronic cigarette or vaping devices," nor did they ever "authorize [any distributor, retailer, or re-seller] to sell or distribute any lithium-ion cells for use by individual consumers as standalone, replaceable, rechargeable batteries in electronic cigarette or vaping devices."

¶ 11 Plaintiff filed affidavits tending to show LG Defendants’ contacts with North Carolina. The alleged contacts include: (1) the widespread availability of 18650 batteries in vape shops across the State; (2) LG America authorized shipments of 18650 batteries to or through North Carolina; (3) LG Chem marketing materials available online in the State and advertising 18650 batteries; (4) a press release from a North Carolina lithium hydroxide company announcing a deal to supply LG Chem with materials for battery applications; and (5) decisions from other courts rejecting LG Defendants’ personal jurisdiction arguments or compelling additional jurisdictional discovery.

¶ 12 The trial court took the matter under advisement and allowed the parties to submit supplemental affidavits pending resolution of the parties’ motions. LG Chem filed a supplemental affidavit concerning its efforts to limit the unauthorized use of 18650 batteries in vaping devices.

¶ 13 The trial court considered the arguments of counsel, the pleadings, briefs, and filings of the parties, including all affidavits and submissions, and entered an order allowing LG Defendants’ motions to dismiss on 20 April 2020. The order contains ten findings of fact that LG Chem never designed, manufactured, distributed, advertised, or sold lithium-ion cells "for use by individual consumers as standalone, replaceable, rechargeable batteries in electronic cigarette or vaping devices[.]" The trial court granted LG Defendants’ motion to dismiss for lack of personal jurisdiction. Plaintiff appeals.

II. Jurisdiction

¶ 14 Appellate jurisdiction is proper pursuant to N.C. Gen. Stat. § 1-277(b) (2021).

III. Issues

¶ 15 Plaintiff argues the trial court erred in holding it lacked personal jurisdiction over the LG Defendants and the trial court abused its discretion in dismissing the case for lack of personal jurisdiction without compelling the LG Defendants to further respond to discovery requests.

IV. Argument

A. Jurisdiction

¶ 16 The Supreme Court of the United States recently addressed a similar jurisdictional issue. Plaintiff's claims against a non-resident defendant "must arise out of or relate to the defendant's contacts’ with the forum." Ford Motor Co. v. Mont. Eighth Judicial Dist. Ct, ––– U.S. ––––, ––––, 141 S.Ct. 1017, 1019, 209 L. Ed. 2d 225, 234 (2021) (citations omitted).

¶ 17 A defendant's conduct to establish personal jurisdiction is relevant only if it establishes "a connection between the forum and the specific claims at issue." Id. at ––––, 141 S.Ct. at 1031, 209 L. Ed. 2d at 241 (citation and parentheses omitted). Under the "arise out of or relate to" standard, "some relationships will support jurisdiction without a causal showing," but "[t]hat does not mean anything goes. " Ford Motor Co. , ––– U.S. at ––––, 141 S.Ct. at 1026, 209 L. Ed. 2d at 236 (emphasis supplied). "In the sphere of specific jurisdiction, the phrase ‘relate to’ incorporates real limits, as it must to adequately protect defendants foreign to a forum." Id.

¶ 18 To establish personal jurisdiction over a non-resident defendant in a product-liability action, the defendant's contact with the forum State must involve the precise product at issue. Id. at ––––, 141 S.Ct. at ––––, 209 L. Ed. 2d at 238. The trial court correctly ruled Plaintiff had failed to make the required showing to establish personal jurisdiction over these non-resident D...