Foreign Parent Company Not Subject to Personal Jurisdiction Based Solely on Actions of Subsidiary, and Expert Testimony Properly Excluded as Unreliable in Products-Liability Case

In the absence of facts supporting piercing the corporate veil or rendering affiliated companies alter egos, the actions of a subsidiary alone cannot subject a foreign parent company to personal jurisdiction in Florida, the Eleventh Circuit recently confirmed. The court’s decision in Knepfle v. J-Tech Corp., 2022 U.S. App. LEXIS 25781 (11th Cir. Sept. 14, 2022), also reviewed the standard for admissibility of expert testimony, affirming the exclusion of the testimony at issue as unreliable. 

Knepfle involved products-liability claims brought by a woman who suffered a head injury during a motorcycle crash. The driver, who was wearing a Z1R model half-shell motorcycle helmet, hit a car with her motorcycle and then hit the pavement. She claimed that the helmet came off when her head hit the car, resulting in her unprotected skull hitting the pavement and causing permanent injuries. She filed a products-liability action in Florida state court against several defendants, alleging that the helmet flew off due to a design defect. After the case was removed to the Middle District of Florida, she then filed an amended complaint adding another defendant, HJC Corp., a Korean corporation that allegedly manufactured the helmet.

Once added as a defendant, HJC moved to dismiss for lack of personal jurisdiction, averring that it conducted business only overseas and not in Florida or elsewhere in the United States. The district court denied the motion, concluding that the plaintiff’s allegations were sufficient to meet the long-arm statute and due process. Neither those allegations nor the district court, however, distinguished between HJC and its U.S. subsidiary, HJC America, Inc.

As discovery proceeded, the evidence showed that the helmet was manufactured by HJC in China and sold to a distributor overseas, who then sold the helmet in the U.S. under its private-label brand. HJC’s subsidiary, HJC America (“HJCA”), is based in California and operates a website providing marketing and warranty info on HJC-branded helmets (but not helmets that sold through private labels, like the Z1R the plaintiff wore). HJC, however, submitted evidence that it did not conduct business, or advertise its helmets, in Florida, Rather, it sells to wholesale distributors, none of which are in Florida.

The parties submitted competing expert reports in support of their theories. The plaintiff’s expert opined that (1) the plaintiff’s helmet had come off before the impact with the pavement; and (2) this was due to a design defect in the straps holding the helmet on her head. The defendants jointly moved to exclude this testimony as unreliable, arguing that the witness had performed no independent testing and no tests to confirm his hypothesis.

The district court agreed and excluded the testimony, finding that the expert was qualified but did not present testimony based on any reliable methodology. The district court also granted the defendants’ motion for summary judgment, on the basis that the plaintiff’s claims depended on the now-excluded expert testimony. The Korean defendant, HJC, also filed a separate summary-judgment motion for lack of personal jurisdiction. The district court denied this motion as moot.

The Eleventh Circuit reversed the denial of HJC’s personal-jurisdiction motion but affirmed the district court’s Daubert and merits decisions. As to personal jurisdiction, that issue should have been decided before the court considered the merits as to that defendant, because a federal court has a duty to first assure itself of its jurisdiction.

The court concluded that Florida courts did not have personal jurisdiction over HJC. In determining otherwise, the district court had improperly “attributed HJCA’s marketing efforts to its foreign parent, HJC.” Under Florida’s long-arm statute and due process, specific personal jurisdiction over a nonresident parent corporation may be established in one of three ways: (1) the parent independently satisfies the test under the long-arm statute; (2) the plaintiff establishes facts that justify piercing the corporate veil; or (3) the plaintiff shows that the parent exerts a “high and very significant” amount of control over the subsidiary sufficient to render the subsidiary an agent or alter ego of the parent. The district court, however, relied solely on HJCA’s efforts to market HJC helmets. It did not perform a veil-piercing or alter-ego analysis, and the plaintiff did not establish facts sufficient to pierce the corporate veil or show that HJC exercises sufficient control to render HJCA its alter ego. The district court therefore lacked specific personal jurisdiction over HJC and erred in denying its motion for summary judgment.

As to the merits, the Eleventh Circuit concluded that the district court did not abuse its discretion in excluding the expert testimony as unreliable. The court reviewed the standard for admissibility under Rule 702 and Daubert, including the four considerations to determine whether testimony is reliable.

Here, both opinions of the plaintiff’s expert lacked a reliable methodology. First, his method of “eyeballing” the helmet to determine whether there has been a second impact went against his own testimony on accepted methodologies in the field, as well as his method of measuring compression at the site of the first impact. The proffered testimony “distills to the contentions that Lloyd is an expert, he looked at the available evidence, and deduced what happened.” The court is not required to accept testimony that is based only on the expert’s ipse dixit.

As to the expert’s design-defect opinion, the plaintiff argued that the testimony should have been admitted because the defendants’ expert could not point to any peer-reviewed studies disproving the plaintiff’s expert’s theory. The court rejected this argument, explaining that the burden is on the party introducing expert opinion testimony to establish its reliability, not the other way around.

Finally, without the expert testimony, there was no evidence in the record supporting the plaintiff’s claim that the helmet was defective, and the claims failed as a matter of law.

Posted by Stacey Mohr.

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