United States District Court, E.D. Missouri, Eastern Division
MEMORANDUM AND ORDER
SHIRLEY PADMORE MENSAH, Magistrate Judge.
This matter is before the court on (1) the Motion to Strike Declarations of Hong Chen filed by Plaintiff Emerson Electric Co. ("Emerson") (Doc. 134); (2) the Renewed Motion to Dismiss filed by Suzhou Cleva Electric Appliance Co., Ltd. ("Suzhou Cleva") and Cleva Hong Kong Limited ("Cleva Hong Kong") (collectively, the "Cleva Defendants" or "Defendants") (Doc. 131); and (3) the Motion to Amend Case Management Order filed by Emerson. (Doc. 120). For the following reasons, I will grant Emerson's Motion to Strike, deny the Cleva Defendants' Motion to Dismiss, and grant Emerson's Motion to Amend Case Management Order.
A. Procedural Background and Background Regarding Motion to Strike
Emerson is the owner of several patents related to wet/dry vacuum cleaners. It has brought claims of patent infringement against Suzhou Cleva, Cleva Hong Kong, Cleva North America, Inc., and Sears, Roebuck & Co., alleging that they manufacture, use, import, sell, and/or offer for sale in the United States one or more vacuum cleaners that infringe Emerson's patents. The allegedly infringing vacuum cleaners (the "Accused Products") include various vacuum cleaners sold under the Craftsman, Armor All, and Vacmaster trademarks.
On August 26, 2013, the Cleva Defendants filed a motion to dismiss under Rule 12(b)(2), arguing that this court cannot exercise personal jurisdiction over them because they are both Chinese companies that have not made, shipped, or sold the Accused Products in the United States and because they have no contacts with Missouri. (Doc. 19). They relied primarily on declarations of Hong Chen, the president and CEO of both companies. The court denied the motion to dismiss without prejudice and ordered the parties to conduct jurisdictional discovery. (Doc. 45).
On December 16, 2013, Emerson's counsel asked Defendants' counsel to propose some dates in early January for a deposition of Mr. Chen, and the parties agreed on a date of January 9, 2014. Emerson repeatedly asked for a location for the deposition that would work, but counsel for Defendants did not provide one. On January 2, 2014, Emerson's counsel stated that given the short time frame, it would pick a location for the deposition in Hong Kong unless Emerson heard from Defendants' counsel. On the same day, Defendants' counsel responded that it would let Emerson know about availability and that it was unreasonable for Emerson to "complain about a compressed timetable when Emerson waited until the week between Christmas and New Year's to request deposition dates and interpreter details."
On January 17, 2014, Emerson filed a motion to compel jurisdictional discovery, requesting, inter alia, that the court compel Mr. Chen to appear for a deposition in Missouri if he would not appear voluntarily in Hong Kong. Emerson indicated that Defendants had refused to produce Mr. Chen for deposition anywhere other than in Suzhou, China, despite the fact that discovery in mainland China is prohibited under the Hague Evidence Convention and despite the fact that Emerson had offered to conduct the deposition in Hong Kong or to conduct the deposition by videoconference. (Doc. 58, at pp. 9-10). On January 22, after a hearing, the court entered an order deferring ruling on the question of Mr. Chen's deposition but cautioning Defendants that if they, in bad faith, failed to produce evidence requested in jurisdictional discovery, they risked the sanction of having such evidence excluded from consideration in a renewed motion to dismiss.
On January 23, 2014, Emerson's counsel emailed Defendants' counsel, stating, "Emerson requests that Suzhou Cleva and Cleva Hong Kong make Hong Chen available for deposition" and indicating that the deposition should occur either in Hong Kong or in the United States. On January 27, counsel for Defendants emailed Emerson's counsel and said that scheduling a deposition would be premature. In a telephone conference, Emerson's counsel informed Defendants' counsel that in light of the court's order, if Defendants did not produce Mr. Chen for deposition prior to renewing their motion to dismiss, Emerson would move to strike any evidence from Mr. Chen that Defendants might rely on in that motion. Defendants' counsel did not agree to schedule a deposition. On February 5, 2014, Emerson withdrew its motion to compel. (Doc. 82).
On April 1, 2014, the Cleva Defendants filed the instant renewed motion to dismiss the case against them for lack of personal jurisdiction, again relying on the declarations of Mr. Chen. In its response, Emerson submitted several exhibits obtained in jurisdictional discovery that it claims refute Mr. Chen's statements and support the exercise of personal jurisdiction over the Cleva Defendants. In addition, on April 11, 2014, Emerson filed the instant motion to strike the declarations of Hong Chen on the ground that Defendants have not acted in good faith to make him available for deposition, in violation of the court's order of January 22, 2014.
B. Background Facts Relevant to Jurisdiction
The Accused Products are manufactured at a factory in Suzhou, China called Skybest Electric Appliance Co. Ltd. ("Skybest"). Skybest shares an address with Suzhou Cleva. In his deposition, Robert Davis, the president of Cleva North America, described Skybest as "the manufacturing arm" of Suzhou Cleva. Mr. Davis did not know the precise legal relationship between Skybest and Suzhou Cleva but testified that Hong Chen, Suzhou Cleva's president, would know. Documents produced by Sears reflect that, in the past, Mr. Davis described Suzhou Cleva and Cleva North America as having a "vertically integrated manufacturing facility" located in Suzhou, China, with no mention of Skybest.
The Accused Products are eventually sold or offered for sale at Sears retail stores in Missouri. They generally follow one of two paths to reach retailers in the United States (including Sears): the "domestic sales" path and the "direct import" path. Accused Products that reach U.S. retailers like Sears via the "domestic sales" path are sold by Cleva North America, a South Carolina-based company. Cleva North America's president, Mr. Davis, testified that Cleva North America was formed for the purpose of selling, in North America, wet/dry vacuum cleaners manufactured in Suzhou. Cleva North America purchases products at the Port of Shanghai in China,  ships them to a third-party warehouse in Alabama, and sells them to customers, including Sears and Wal-Mart. Documentary evidence of the relationship of these transactions to Missouri includes a purchase order from Wal-Mart to Cleva North America for wet/dry vacuums with a billing address for Wal-Mart in St. Louis, Missouri.
Accused Products that reach U.S. retailers like Sears via the "direct import" sales path are marketed in the United States by Cleva North America and sold by Cleva Hong Kong. According to deposition testimony, Cleva North America "fronts" marketing and advertising expenses related to these sales, and Cleva Hong Kong reimburses Cleva North America for those expenses. Cleva Hong Kong sells the products to customers such as Target, Sears, and Kmart,  with delivery "FOB CN[China]." At least one of the invoices in the record indicates that the "Destination" of the products was "USA." In addition, although the direct import sales are for delivery FOB China, Cleva Hong Kong pays sales commissions to Cleva North America employees for those sales. Mr. Davis also testified that a Cleva North America employee coordinates the direct import orders.
In addition to the direct import and domestic sales paths, there is evidence in the record that suggests Accused Products reach retailers like Sears via a Supply Agreement between the retailer and Suzhou Cleva. Emerson submitted a Supply Agreement in which Suzhou Cleva and Cleva North America, listed jointly as "Seller, " agreed to sell various wet/dry vacuum cleaners bearing the Craftsman and Vacmaster trademarks to Sears and Kmart.
There is also other evidence of direct contact between Suzhou Cleva and Missouri. Suzhou Cleva is named as the "Insured" on several certificates of liability insurance that insure Missouri vendors with respect to product liability damages for "Vacuum Cleaners sold to USA/Canada." The Missouri vendors insured by these policies are O'Reilly Automotive, Inc., in Springfield, Missouri; Toronado Industries, LLC, in Fenton, Missouri; and Sutherland Lumber and/or Cimarron Lumber, in Kansas City, Missouri. Mr. Davis, the president of Cleva North America, testified that almost all major customers require a product liability insurance policy. He stated that he did not know who paid the premiums for the policies but that it was "basically done through the China office." Cleva Hong Kong and Cleva North America are listed as additional insureds on the certificates.
The evidence discussed above suggests that that Suzhou Cleva, Cleva Hong Kong, and Cleva North America are closely related and work together in the process by which the products reach Sears and other U.S. retailers. Other evidence is consistent with this. Hong Chen is the president and CEO of both Cleva Hong Kong and Suzhou Cleva, and he is one of two members of the board of directors of Cleva North America. According to testimony of Sears employees, he has attended meetings at the Sears office in Illinois and has attended trade shows in Las Vegas and a dinner hosted there by "Cleva." Mr. Chen has also worked with Mr. Davis on pricing proposals for Sears with respect to the Accused Products. Sears employees who met Mr. Chen testified that he "worked for Cleva, " "was the owner of Cleva, " or was "the representative from China" who came from Cleva; they did not distinguish between the different Cleva entities.
In addition, in presentations given to Sears employees, Cleva North America president Robert Davis stated that Cleva North America "[c]oordinates all operations with [the] Suzhou office daily." He described Suzhou Cleva as the "Head Office" and Cleva North America as the "Sales Office." Mr. Davis also testified that there are no written agreements that govern the relationship between Cleva North America and Suzhou Cleva or between Cleva North America and Cleva Hong Kong. Indeed, Cleva North America uses the Vacmaster trademark (owned by Suzhou Cleva) without a formal license agreement and without paying royalties. Mr. Davis testified that the nature of the relationship between Cleva North America and Suzhou Cleva is such that he does not regard it as necessary to have a formal license in place.
The documentary evidence and deposition testimony produced during jurisdictional discovery are not entirely consistent with statements contained in the declarations of Hong Chen, the president of Suzhou Cleva and Cleva Hong Kong. In his declaration, Mr. Chen stated that Suzhou Cleva "has never sold or offered to sell anything in the U.S., directly, through retailers, or over the Internet." He also stated that Suzhou Cleva has never manufactured any vacuums anywhere, but he did not discuss the legal relationship between Suzhou Cleva and Skybest. He further stated that Suzhou Cleva has ...