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Fugal v. Wright Medical Group, Inc.

United States District Court, D. Utah

March 28, 2019

CAROLYN FUGAL, Plaintiff,
v.
WRIGHT MEDICAL GROUP, INC., a Delaware corporation, and WRIGHT MEDICAL TECHNOLOGY, INC., a Delaware corporation, Defendants.

          MEMORANDUM DECISION AND ORDER (1) GRANTING WRIGHT MEDICAL GROUP'S MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION; (2) GRANTING IN PART WRIGHT MEDICAL TECHNOLOGY'S PARTIAL MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM; AND (3) DENYING MOTION TO STRIKE

          Jill N. Parrish, United States District Court Judge.

         This matter is before the court on the Motion to Dismiss for Lack of Personal Jurisdiction filed by Defendant Wright Medical Group, Inc. (“WMG”) (ECF No. 7) and the Partial Motion to Dismiss Plaintiff's Complaint and Motion to Strike filed by Defendant Wright Medical Technology (“WMT”) (ECF No. 5).

         BACKGROUND

         Plaintiff Carolyn Fugal (“Plaintiff”) brings this action against WMG and WMT (collectively “Defendants”) for injuries arising out of the Wright Medical Total Hip System (“Wright Hip System” or “Hip System”).[1] Plaintiff asserts claims for strict products liability, negligence, breach of express and implied warranties, fraudulent misrepresentation, fraudulent concealment, negligent misrepresentation, and punitive damages.

         WMT is a Delaware corporation with its principal place of business in Memphis Tennessee. WMT manufactured, marketed, and sold the Wright Hip System throughout the United States, including in Utah.

         WMG was incorporated to act as a parent and holding company for various entities, including WMT. It is a Delaware corporation with its principal place of business in Memphis, Tennessee. Debby Daurer, Legal Senior Manager at WMT, testified by affidavit that WMG and WMT are separate entities that maintain separate accounting and banking records. See WMG Mot. Dismiss, Exhibit 1 (“Daurer Affidavit”). Daurer testified that WMG has no contacts with Utah and that WMG did not manufacture, market, or sell the Hip System. Rather, WMG is WMT's sole shareholder and has no employees. WMG is also the holding company for Wright Medical Europe, Wright Medical Australia PTY Limited, Wright Medical Deutschland GmbH, Wright Medical Italy, and Wright Medical Technology Canada.

         On April 23, 2007, Plaintiff underwent a right total hip replacement surgery at TOSH, in Murray, Utah. In a hip replacement surgery, the natural hip joint is replaced with an artificial hip joint consisting of artificial components including a new acetabular cup (the socket), liner (replacing the cartilage), femoral head (ball), and femoral stem. Plaintiff was implanted with the Wright Hip System consisting of four Wright modular components: 1) PROFEMUR® RAZ STEM, 2) PROFEMUR® NECK - Neutral short, 3) CONSERVE® TOTAL A CLASS® Head, and CONSERVE® PLUS CUP.

         The Wright Hip System differs from most other hip implants in that the metal femoral head is in direct contact with a metal acetabular cup. Although other “metal-on-metal” prosthetics exist, Plaintiff alleges that Wright did not properly test the Wright Hip System for safety, efficacy, and durability, and that Wright “aggressively marketed” the product without “screening, selecting, or training the surgeons” who would be implanting it. Plaintiff alleges the Hip System failed when the prosthetic joint detached, disconnected, created metallic debris, and/or loosened from Plaintiff's acetabulum. Plaintiff alleges that the failure was due to the defective design and manufacture of the Wright Hip System, and that Defendants knew or should have known of the design defects at the time her Hip System was implanted. Plaintiff further alleges that, despite this knowledge, Defendants concealed the flaws with the Hip System and continued to market it. Because of the failure of the Hip System, Plaintiff was required to undergo revision surgery to remove and replace the allegedly defective product on September 12, 2017.

         Plaintiff filed this action on May 4, 2018. Defendants filed the pending motions on July 25, 2018. The court first addresses WMG's Motion to Dismiss for lack of personal jurisdiction under Fed.R.Civ.P. 12(b)(2) and then turns to WMT's Motion to Dismiss for failure to state a claim under Fed.R.Civ.P. 12(b)(6) and finally WMT's Motion to Strike.

         I. WMG'S MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION

         WMG seeks dismissal from the suit on the grounds that the court lacks personal jurisdiction over it. See Fed. R. Civ. P. 12(b)(2). WMG argues that it is not subject to this court's personal jurisdiction because 1) WMG is a holding company that did not design, market, or sell the Wright Hip System and thus WMG lacks minimum contacts with Utah; and 2) WMT's contacts with Utah cannot be imputed to WMG because Plaintiff has not successfully alleged an agency or alter ego theory of liability. Plaintiff responds that WMG's filings with the Security and Exchange Commission (SEC) and certain press releases issued by WMG establish that WMG was involved in the design, marketing, and sale of the Wright Hip System and that it therefore has the requisite minimum contacts with Utah to subject it to personal jurisdiction in this court.

         A. Burden of Proof

         At the motion to dismiss stage, “the plaintiff's burden is light.” Wenz v. Memery Crystal, 55 F.3d 1503, 1505 (10th Cir. 1995). “[T]he plaintiff need only make a prima facie showing that jurisdiction exists.” Id. “[O]nly the well pled facts of plaintiff's complaint, as distinguished from mere conclusory allegations, must be accepted as true.” Id. However, “[t]he allegations in the complaint must be taken as true [only] to the extent they are uncontroverted by the defendant's affidavits.” Id. (quoting Behagen v. Amateur Basketball Ass'n of U.S.A., 744 F.2d 731, 733 (10th Cir. 1984)).

         Both parties rely on evidence outside of the pleadings to support their arguments on the motion to dismiss. While “[g]enerally, a district court must convert a motion to dismiss into a motion for summary judgment when matters outside the pleadings are relied upon, ” Utah Gospel Mission v. Salt Lake City Corp., 425 F.3d 1249, 1253-54 (10th Cir. 2005), the court may consider “affidavit[s] or other written materials” on a motion to dismiss for lack of personal jurisdiction, OMI Holdings, Inc. v. Royal Ins. Co. of Canada, 149 F.3d 1086, 1091 (10th Cir. 1998). WMG has submitted the affidavit of Debby Daurer, Legal Senior Manager at WMT to controvert Plaintiff's conclusory allegation that WMG is subject to the court's jurisdiction. In response, Plaintiff challenges Daurer's affidavit with publically available documents, including “WMG's public statements to the [SEC], WMG's press releases, and various marketing material created by WMG.” Opp'n WMG Mot. Dismiss at 9. Plaintiff argues that these documents are “competent evidence” that controvert the Daurer Affidavit and firmly establish WMG's role in the marketing and selling of the Hip System. Id. The court reviews the testimonial and documentary evidence submitted by the parties in evaluating the jurisdictional issue.[2]

         B. Legal Standard

         “The law of the forum state and constitutional due process limitations govern personal jurisdiction in federal court.” Old Republic Ins. Co. v. Cont'l Motors, Inc., 877 F.3d 895, 903 (10th Cir. 2017). Consequently, Utah law governs personal jurisdiction in this case. Utah's long-arm statute extends jurisdiction over defendants “to the fullest extent permitted by the due process clause of the Fourteenth Amendment.” Utah Code § 78B-3-201(3). Accordingly, the personal jurisdiction analysis in this case involves a single inquiry: whether the exercise of personal jurisdiction over WMG comports with due process. See Old Republic, 877 F.3d at 903 (holding that personal jurisdiction analysis required a single due process inquiry because Colorado's long-arm statute extends jurisdiction to the Constitution's full extent).

         Under the due process clause, a court may exercise jurisdiction over a defendant so long as: (1) “the defendant purposefully established minimum contacts within the forum [s]tate, ” and (2) “the assertion of personal jurisdiction would comport with ‘fair play and substantial justice.'” Id. (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476 (1985)). A defendant's contacts, depending on their quality and quantity, may give rise to either general or specific jurisdiction. Id. Because Plaintiff has not asserted that WMG is subject to the court's general jurisdiction, the court turns to the specific jurisdiction analysis of 1) “whether the plaintiff has shown that defendant has minimum contacts with the forum” and 2) “whether the defendant has presented a ‘compelling case'” that the exercise of jurisdiction does not comport with fair play and substantial justice. Id. at 904 (quoting Shrader v. Biddinger, 633 F.3d 1235, 1240 (10th Cir. 2011)). Because the court finds that WMG does not have minimum contacts with the forum, the court does not reach the second question.

         C. Minimum Contacts

         A defendant has minimum contacts with the state if (1) the defendant “purposefully directed its activities at residents of the forum state, ” and (2) the plaintiff's injuries “arise out of [the] defendant's forum-related activities.” Id. (quoting Shrader, 633 F.3d at 1239). Plaintiff alleges that WMG and WMT are each subject to personal jurisdiction individually in the state of Utah because they “conducted regular and sustained business in Utah by selling and distributing [their] products in Utah, and engaged in substantial commerce and business activity in the County of Salt Lake.” Compl. at ¶¶ 8-9. Alternatively, Plaintiff asserts that WMG is subject to personal jurisdiction due to WMT's contacts with the forum based on either an alter ego or agency theory. Id. at ¶ 12. The court first addresses WMG's individual contacts with the forum before turning to whether WMG may be subject to personal jurisdiction based on its relationship with WMT.

         1. WMG's Contacts with the Forum

         Plaintiff alleges that both WMG and WMT designed the Wright Hip System and marketed and sold the Hip System in Utah, thereby purposefully directing their activities at the forum. But the Daurer Affidavit states that WMT, not WMG, designed, marketed, and sold the Hip System in the state of Utah. Thus, while WMT has minimum contacts with the forum, WMG does not. Plaintiff responds with excerpts from WMG's public SEC filings and press releases. Plaintiff argues these documents contradict the Daurer Affidavit because they demonstrate that “WMG has for many years publicly identified itself as the company that specializes in the design, manufacture and marketing of reconstructive joint devices” and WMG “has claimed the Wright products- including the Conserve® products at issue here-as its own.” See Opp'n WMG Mot. Dismiss at 10. But the court has reviewed the documentary evidence submitted by Plaintiff, including the statements identified in WMG's 200110-K filings and 2013 10-K filings and the press releases, and finds that they do not controvert the facts contained in the Daurer Affidavit.

         Plaintiff first identifies selected statements from WMG's SEC filings, which she argues demonstrate WMG's involvement in the design, manufacture, and marketing of the Hip System. For example, in its 200110-K Filing, WMG states, “Wright Medical Group, Inc. (the ‘Company') is a global orthopaedic device company specializing in the design, manufacture and marketing of reconstructive joint devices . . .” that “offers a comprehensive line of products for hip joint reconstruction[.]” Id. at 11. Plaintiff argues that this establishes WMG's individual role in the production of the hip products. The court disagrees. As a number of courts have noted in granting nearly identical motions to dismiss WMG for lack of personal jurisdiction, these statements are insufficient to establish WMG's role in the design of the Hip System.[3] First, the filings “are outdated and plaintiff[ ] [has] cherry-picked phrases out of them to support [her] position.” Dumler v. Wright Med. Tech., Inc., No. C17-2033-LTS, 2018 WL 576848, at *6 (N.D. Iowa Jan. 26, 2018). “Second, it is common practice for annual reports to describe the business of a parent and its subsidiaries.” Id. In fact, “consolidating the activities of a subsidiary into the parent's annual reports . . . . is allowed by both the Internal Revenue Service and the Securities and Exchange Commission, and it is recommended by generally accepted accounting principles.” Calvert v. Huckins, 875 F.Supp. 674, 679-80 (E.D. Cal. 1995). Because there is no evidence that the filings were discussing WMG's activities and not the activities of its subsidiary, WMT, the court finds the SEC statements insufficient to controvert the testimony in the Daurer Affidavit that WMT, not WMG, designed, manufactured, and sold the Hip System.

         Likewise, the statements made by WMG in press releases are insufficient to subject WMG to personal jurisdiction in the forum. Plaintiff offers press releases made by WMG in 2006 and 2014 as evidence of WMG's involvement with the Hip System activities. But statements such as “Wright will focus on advances” and Wright “selected the Profemur ® Modular Neck” for “Tennis Legend Jimmy Connors['] [surgery]” are insufficient to establish that WMG was involved directly with the marketing and sale of the Hip System. See Opp'n WMG Mot. Dismiss at 15-16. “At most, these statements show a parent company discussing the activities of its subsidiary.” US Magnesium, LLC v. ATI Titanium, LLC, No. 2:16-CV-1158 TS, 2017 WL 913596, at *8 (D. Utah Mar. 7, 2017). As with SEC disclosures, “it is common and, in fact, expected for a parent entity to report upon events that materially impact a consolidated subsidiary.” Id. None of the statements in the press releases contradict the testimony in the Daurer Affidavit.[4] In short, Plaintiff has not come forward with any evidence suggesting that WMG has minimum contacts with the forum. Thus, there is no basis on which to subject WMG to personal jurisdiction in Utah.

         2. WMT's Contacts May Not Be Imputed to WMG

         Plaintiff also asserts that WMG is subject to personal jurisdiction based on its relationship with WMT. Plaintiff asserts that “[a]t all times relevant hereto, each of the Defendants was the representative, agent, employee, joint venture, or alter ego of each of the other Defendants and was acting within the scope of its authority.” Compl. at ¶ 12. But these conclusory allegations are insufficient to meet Plaintiff's burden of pleading that WMG should be subject to personal jurisdiction based on its relationship with WMT. A parent corporation is not subject to personal jurisdiction in a forum solely based on the subsidiary's contacts with the forum absent an allegation that either 1) the subsidiary was an agent of the parent or 2) that the two companies are so intertwined as to be the other's alter ego. See Daimler AG v. Bauman, 571 U.S. 117, 134-35 (2014); see also Associated Elec. & Gas Ins. Serv. Ltd. v. Am. Int'l Grp., Inc., No. 2:11CV368 DAK, 2012 WL 256146, at *3 (D. Utah Jan. 27, 2012).

         Plaintiff's conclusory statement that each of the Defendants was the “representative, agent, . . . or alter ego of . . . the other” is not sufficient to establish personal jurisdiction under either an agency theory or an alter ego theory. To successfully plead an agency relationship, Plaintiff must allege facts suggesting that WMT is acting on behalf of and under the control of WMG. See Gleason v. Salt Lake City, 74 P.2d 1225, 1230 (1937). To assert that WMT and WMG are alter egos, Plaintiff must allege facts suggesting that WMT “is so dominated by [WMG] as to be its alter ego.” Daimler, 571 U.S. at 134-35. But even if both of these allegations were well-pled, which they are not, WMG has controverted these allegations with the Daurer Affidavit, which establishes that WMT and WMG are not so intertwined as to be indistinguishable. The testimony further establishes that the corporations are separate legal entities that maintain separate bank accounts and act independently of each other. Plaintiff has not offered any evidence to controvert this testimony. The court will therefore not impute WMT's contacts to WMG. Because the court finds that WMG does not have minimum contacts with the forum, the court does not reach the second prong of the due process analysis.

         D. Conclusion

         WMT marketed and sold the Hip System in Utah. Plaintiff's alleged injuries arise out of the failure of the Hip System, which Plaintiff received in Utah. While WMT has minimum contacts with the forum, WMG does not. WMG did not design the Hip System, market the Hip System, or offer any services related to the Hip System in Utah. See Daurer Affidavit at ¶¶ 15-17. WMG does not have minimum contacts with Utah. The court therefore grants WMG's motion to dismiss for lack of personal jurisdiction. WMG is dismissed without prejudice.

         II. WMT'S PARTIAL MOTION TO DISMISS PLAINTIFF'S COMPLAINT

         WMT moves under Fed.R.Civ.P. 12(b)(6) to dismiss Plaintiff's claims for strict liability manufacturing defect, negligent failure to recall/retrofit, breach of express warranty, fraudulent misrepresentation, fraudulent concealment, and negligent misrepresentation. A claim is properly dismissed under Fed.R.Civ.P. 12(b)(6) if it fails to meet either the general pleading requirements of Fed.R.Civ.P. 8 or, if applicable, the more particularized pleading requirements of Fed.R.Civ.P. 9. Seattle-First Nat. Bank v. Carlstedt, 800 F.2d 1008, 1011 (10th Cir. 1986).

         A. Legal Standard

         1. Pleading Standard

         Under the general pleading standard of Fed.R.Civ.P. 8, “[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “The burden is on the plaintiff to frame a complaint with enough factual matter (taken as true) to suggest that he or she is entitled to relief.” Robbins v. Oklahoma ex rel. Dep't of Human Servs., 519 F.3d 1242, 1247 (10th Cir. 2008) (internal quotation marks omitted). The “mere metaphysical possibility that some plaintiff could prove some set of facts in support of the pleaded claims is insufficient; the complaint must give the court reason to believe that this plaintiff has a reasonable likelihood of mustering factual support for these claims.” Ridge at Red Hawk, L.L.C. v. Schneider, 493 F.3d 1174, 1177 (10th Cir. 2007). “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal, 556 U.S. at 678.

         Some of IHC's claims for relief are governed by Fed.R.Civ.P. 9(b). Fed.R.Civ.P. 9(b) requires that, “[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.” However, “[m]alice, intent, knowledge, and other conditions of a person's mind may be alleged generally.” Id.

         When applying either standard to the factual allegations levied against the defendant “[a]t the motion-to-dismiss stage, we must accept all the well-pleaded allegations of the complaint as true and must construe them in the light most favorable to the plaintiff.” Albers v. Bd. of Cty. Comm'rs, 771 F.3d 697, 700 (10th Cir. 2014) (quoting Cressman v. Thompson, 719 F.3d 1139, 1152 (10th Cir. 2013)). In evaluating a complaint on a motion to dismiss, “a court should disregard all conclusory statements of law and consider whether the remaining specific factual ...


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