LG Chem Secures a Second Look at Jurisdictional Issues in NJ Vape Battery Suit

Faegre Drinker Biddle & Reath LLP

Faegre Drinker Biddle & Reath LLP

The New Jersey Appellate Division has held that Korean company LG Chem Ltd. (“LG Chem”)will have another opportunity to dispute New Jersey’s jurisdiction over it in a product liability lawsuit concerning a vaping device battery.  The decision is based, in part, on the trial court’s failure to order jurisdictional discovery and convene an evidentiary hearing to resolve the disputed jurisdictional allegations before deciding LG Chem’s pre-answer motion to dismiss.  This case underscores that in New Jersey, the standard governing motions to dismiss for lack of jurisdiction, unlike other bases, requires the court to look outside the disputed pleadings alone.

The New Jersey plaintiff alleged he was injured when a lithium-ion battery manufactured by LG Chem exploded in his pocket.  Plaintiff attempted to serve process on LG Chem through two of its U.S.-based subsidiaries, LG Chem America, Inc. (LGCAI) and LG Chem Michigan, Inc. (LGCMI).  The agents of both refused to accept service.

LG Chem filed a pre-answer motion to dismiss for insufficient service of process and lack of personal jurisdiction under Rule 4:6-2 supported by three certifications.  Two of the certifications were from the subsidiary agents confirming they were not authorized to accept service.  The third was from an LG Chem representative averring that LG Chem is not registered to do business in New Jersey, does not have a New Jersey office or employees in the state, and does not have an agent for service of process in New Jersey.  Plaintiff opposed, asserting that the court had personal jurisdiction over LG Chem because LGCAI was 100% owned and controlled by LG Chem and was an alter ego of LG Chem.  The plaintiff produced a webpage downloaded from the “Internet Archive Wayback Machine” listing LGCAI’s address in Englewood Cliffs, New Jersey, along with LG Chem annual reports noting that LGCAI was a wholly owned subsidiary of LG Chem.

The trial court, under both the standard for dismissal under Rule 4:6-2 and the summary judgment standard of Rule 4:46-1, denied LG Chem’s motion finding that, based on the webpage document, there were sufficient contacts with New Jersey to establish specific jurisdiction.  The trial court denied a reconsideration motion by LG Chem, and LG Chem moved for leave to appeal.

In reversing the trial court, the Appellate Division stressed that, unlike with motions to dismiss based on other grounds, when “[p]resented with a motion to dismiss on the basis of lack of jurisdiction, a trial court must make findings of the ‘jurisdictional facts,’ because disputed ‘jurisdictional allegations cannot be accepted on their face.’”  If the pleadings and certifications submitted to the trial court do not permit resolution of a jurisdictional question, the trial court “must conduct a ‘preliminary evidential hearing after affording the parties an appropriate opportunity for discovery.’”

The Appellate Division ultimately held that the record was “not sufficiently developed for the judge to conclude” that LG Chem was subject to New Jersey’s jurisdiction.  In the absence of jurisdictional discovery or an evidentiary hearing, “the judge applied the summary judgment standard and viewed the facts and the reasonable inferences in the light most favorable to plaintiff,” which was “error.”  The matter was reversed and remanded for jurisdictional discovery and an evidentiary hearing.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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