Sullivan v. LG Chem, Ltd.

79 F.4th 651

Michael SULLIVAN, Plaintiff-Appellant, v. LG CHEM, LTD., Defendant-Appellee.

No. 22-1203

United States Court of Appeals, Sixth Circuit

Argued: May 3, 2023

Decided and Filed: August 17, 2023

Appeal from the United States District Court for the Eastern District of Michigan at Detroit. No. 2:21-cv-11137—Laurie J. Michelson, District Judge.

ARGUED: Mark Granzotto, MARK GRANZOTTO, PC, Berkley, Michigan, for Appellant. Rachel Atkin Hedley, NELSON, MULLINS, RILEY & SCARBOROUGH LLP, Columbia, South Carolina, for Appellee. ON BRIEF: Mark Granzotto, MARK GRANZOTTO, PC, Berkley, Michigan, Wolfgang Mueller, MUELLER LAW FIRM, Novi, Michigan, for Appellant. Rachel Atkin Hedley, NELSON, MULLINS, RILEY & SCARBOROUGH LLP, Columbia, South Carolina, Cynthia M. Filipovich, CLARK HILL PLC, Detroit, Michigan, for Appellee.

Before: MOORE, CLAY, and GIBBONS, Circuit Judges.

OPINION

KAREN NELSON MOORE, Circuit Judge.

Defendant LG Chem, Ltd. ("LG Chem") manufactured the LG HG2 18650 lithium-ion batteries that exploded in Plaintiff Michael Sullivan's pocket and caused him severe second- and third-degree burns. Sullivan seeks to hold LG Chem liable for his injuries. Sullivan obtained these batteries from a vape store in Michigan to use for his e-cigarette device. But LG Chem, a South Korean company, vigorously opposes personal jurisdiction. It argues that exercising personal jurisdiction over it in Michigan would be improper under both Michigan's long-arm statute and the Due Process Clause because, not only has LG Chem never sold the 18650 batteries to this Michigan vape store, but also it has never sold its 18650 batteries for individual consumer use in Michigan. We conclude that LG Chem urges too narrow a view of personal jurisdiction. The district court sitting in Michigan may properly exercise personal jurisdiction over LG Chem because it directly shipped its 18650 batteries into the State of Michigan and entered into two supplier contracts with Michigan companies for 18650 batteries. Accordingly, we REVERSE the judgment of the district court and REMAND for further proceedings.

I. BACKGROUND

A. FACTUAL BACKGROUND

We begin with the parties. Defendant LG Chem, Ltd. ("LG Chem") is a South Korean company, headquartered in Seoul, South Korea. R. 3 (Mem. in Supp. Mot. to Dismiss at 1) (Page ID #240). It manufactures the LG HG2 18650 lithium-ion battery as "industrial component products." Id. at 2 (Page ID #241). LG Chem asserts that it has "never designed, manufactured, distributed, advertised, or sold any HG2 (or any 18650 lithium ion cells) for use by individual consumers as standalone, replaceable batteries with e-cigarette or vaping devices." Id.; see also R. 21 (LG Chem's Suppl. Br. at 3) (Page ID #718) ("LG Chem did not serve a consumer market in Michigan for standalone, replaceable lithium-ion batteries."). LG Chem states that its product is "not [a] standalone, replaceable consumer batter[y], and [it was] not designed to be handled by consumers." R. 3 (Mem. in Supp. Mot. to Dismiss at 2) (Page ID #241).

LG Chem has a subsidiary in Michigan—LG Energy Solution Michigan, Inc. f/k/a LG Chem Michigan, Inc. ("LG Energy" or "LGESMI" or "LGCMI"). Id. According to LG Chem, LG Energy does not have any role "in the design, manufacture, marketing, distribution, or sale of any model of LG 18650 lithium ion cells to anyone." Id. at 2-3 (Page ID #241-42). LG Energy is not a party to this appeal.

Sandra Sullivan, Plaintiff's spouse, visited Montrose Smokers Palace in Montrose, Michigan¹ to purchase a vaping product for Plaintiff on March 28, 2018. R. 1-1 (Compl. ¶ 15) (Page ID #22); R. 1-1 (Def.'s Initial Disclosures at 1) (Page ID #84). She purchased "a regulated mod manufactured by SMOK, a NITECORE battery charger, [and, relevant here,] four brown LG HG2 18650, 3000 mAh, 3.7V batteries," which are allegedly manufactured by LG Chem. Id. ¶ 16 (Page ID #22); R. 10 (Pl.'s Opp'n at 1-2) (Page ID #337-38).

A few months later, in October 2018, Plaintiff had two of LG Chem's "18650 batteries in his left front pocket," which made a loud sound and exploded in his pocket. R. 1-1 (Compl. ¶ 18) (Page ID #22); see also id ¶ 19 (Page ID #22). Plaintiff's pants caught fire resulting in, among other things, "[s]evere second and third-degree burns to his left hand and left upper thigh," id. ¶ 27 (Page ID #23-24). He required hospitalization, skin-graft surgery, and debridement treatments. R. 10 (Pl.'s Opp'n at 2) (Page ID #338). Plaintiff alleges that he suffered severe scarring, pain and suffering, emotional distress, wage loss, and other economic and non-economic injuries. R. 1-1 (Compl. ¶ 27) (Page ID .#23-24). Sullivan's Complaint, filed in the Circuit Court of Genesee County, Michigan, includes one count of negligence, id. ¶¶ 28-31 (Page ID #24-26), and one count of gross negligence, id. ¶¶ 32-38 (Page ID #26-27).

B. PROCEEDINGS BEFORE THE DISTRICT COURT AND LIMITED DISCOVERY

Upon removing the lawsuit to federal court, on May 18, 2021, LG Chem moved to dismiss the lawsuit for lack of personal jurisdiction. R. 3 (Mem. in Supp. Mot. to Dismiss) (Page ID #235-64). Defendant argued that the district court sitting in Michigan lacked both general and specific jurisdiction over it. Id. ¶¶ 2-3 (Page ID #236). The district court held a hearing on Defendant's motion to dismiss. R. 20 (Hr'g Tr.) (Page ID #645-712). The hearing largely focused on whether Defendant had sufficient contacts with Michigan to satisfy due process. See generally id.

During the hearing, Defendant's counsel acknowledged that, unlike in most other states, LG Chem likely had at least some small amount of "sales of [ ] 18650's into the State of Michigan." R. 20 (Hr'g Tr. at 16) (Page ID #660); see also id. at 15 (Page ID #659) ("My general understanding and recollection is that there were some [sales] to Michigan."), 32 (Page ID #676) (stating counsel believed "that there were" a few customers in Michigan to whom LG Chem shipped 18650 batteries). LG Chem argued that, to the extent these contacts existed, they were nevertheless irrelevant and of no consequence in establishing personal jurisdiction because LG Chem never distributed 18650 batteries for the purpose of individual consumer use and those possible customers were "not serving a market for consumers to go buy one of these 18650 cells and put it in their pocket and walk around and use it to power their devices." Id. at 20 (Page ID #664). At the end of the hearing, the district court ordered "some limited written jurisdictional discovery on the issue of LG Chem's contacts with Michigan related to the 18650 batteries," id. at 64 (Page ID #708), and supplemental briefing, id. at 66 (Page ID #710).

Limited discovery revealed that LG Chem sent at least two shipments of 18650 batteries directly into the State of Michigan. First, LG Chem shipped one hundred 18650 batteries to a vacuum-cleaner manufacturer in Michigan. R. 24-2 (Ex. 1, Def.'s Response to Pl.'s Req. for Produc. at 2) (Page ID #873); R. 24-5 (Ex. 4, Invoice to Vacuum-cleaner Manufacturer) (Page ID #897); R. 21-4 (Ex. B, Def.'s Response to Pl.'s Req. for Interrogs. at 5-6) (Page ID #807-08); R. 21 (LG Chem's Suppl. Br. at 3-4) (Page ID #718-19) (characterizing the shipment as "a sample shipment of 100 lithium-ion cells" for which it received no revenue). Second, LG Chem shipped battery packs that contained 50,277 pounds of 18650 batteries to its subsidiary into Michigan.² R. 10-6 (Ex. 5, LG Chem's Import Data at 2) (Page ID #473); R. 17-2 (Ex. A, K. Choi Suppl. Decl. ¶¶ 4-6) (Page ID #544-45). The district court therefore determined that there were at least "two undisputed shipments of 18650s to Michigan." Sullivan v. LG Chem, Ltd., 585 F. Supp. 3d 992, 1003 (E.D. Mich. 2022). On appeal, LG Chem acknowledges this. See Appellee Br. at 7 (acknowledging shipment of 18650 batteries to vacuum-cleaner manufacturer in Michigan); id. at 8 (acknowledging shipment of 18650 batteries to its subsidiary in Michigan). Neither party puts forth evidence or addresses whether any of the 18650 batteries that LG Chem shipped into Michigan was ultimately one of the batteries that injured Plaintiff.

Limited discovery further revealed that LG Chem executed "two supplier agreements . . . with Michigan companies relating to 18650 batteries." Sullivan, 585 F. Supp. 3d at 1003; see also R. 21 (LG Chem's Suppl. Br. at 5) (Page ID #720) (describing agreements as "agreements with manufacturers in Michigan for the purchase of 18650 lithium-ion cells or battery packs containing 18650 lithium-ion cells for 2016-2020"). First, LG Chem executed an agreement with that same vacuum-manufacturing company, with headquarters in Michigan, to purchase LG Chem's 18650 batteries. See R. 24-6 (Ex. 5, Vacuum-manufacturing Co. Contract) (Page ID #917-20); R. 24-2 (Ex. 1, Def.'s Response to Pl.'s Req. for Produc. at 5) (Page ID #876); R. 21 (LG Chem's Suppl. Br. at 5) (Page ID #720). Under this contract, LG Chem shipped 18650 batteries directly into Michigan. See R. 21-4 (Ex. B, Def.'s Response to Pl.'s Req. for Interrogs. at 5-6) (Page ID #807-08); R. 24-2 (Ex. 1, Def.'s Response to Pl.'s Req. for Produc. at 2) (Page ID #873); R. 24-5 (Ex. 4, Invoice to Vacuum-cleaner Manufacturer) (Page ID #897). Second, LG Chem contracted with a Michigan-based automaker-product manufacturer. R. 24-7 (Ex. 6, Automaker-product Manufacturer Contract) (Page ID #922-46); R. 24-2 (Ex. 1, Def.'s Response to Pl.'s Req. for Produc. at 5-6) (Page ID #876-77); R. 21 (LG Chem's Suppl. Br. at 5) (Page ID #720). This contract was originally entered into in 2016 and then supplemented in 2019 for the purchase of battery packs. R. 24-7 (Ex. 6, Automaker-product Manufacturer Contract) (Page ID #922-46). LG Chem never shipped 18650 batteries into Michigan under this contract (and instead shipped the batteries to a different state) but the contract "shall be considered as a contract made and to be performed in the State of Michigan" and contains a Michigan...