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SAFT America, Inc. v. Jabil Circuit (Guangzhou), Ltd.

United States District Court, M.D. Florida, Jacksonville Division

September 23, 2019

SAFT AMERICA, INC., etc., Plaintiff,
v.
JABIL CIRCUIT (GUANGZHOU), LTD., etc., and BOURNS, INC., etc., Defendants.

          ORDER

          TIMOTHY J. CORRIGAN UNITED STATES DISTRICT JUDGE.

         The motions before the Court present complex issues involving the economic loss rule and personal jurisdiction. The Court's review has been enhanced by the superior briefing of all parties and was further aided by the oral argument on August 30, 2019, the record of which is incorporated by reference.

         I. Background

         Plaintiff Saft America, Inc., (“Saft”), a subsidiary of Saft Groupe, S.A., of France, manufactures batteries in Jacksonville, Florida, for industrial and commercial use in the United States and abroad. Saft purchased component parts-busbar cards and power boards-for its EV-1 and EV-2 batteries from defendant Jabil Circuit (Guangzhou), Ltd., a Chinese enterprise. For the busbar cards, Jabil purchased certain subcomponent parts manufactured by Bourns, Inc., a California corporation. Saft alleges the EV-2 components it bought from Jabil (over 40, 000 of them) were defective and ruined Saft's EV-2 batteries. Saft filed a complaint in state court on February 13, 2018, bringing claims against Jabil only for UCC breach of express warranty (Count I), breach of implied warranty of merchantability (Count II), breach of implied warranty of fitness for particular purpose (Count III), and negligence/damage to other property (Count IV). Jabil removed the case to federal court on diversity grounds on April 3, 2018.[1] Thereafter, Saft amended its complaint to add Bourns as a defendant, naming it in a negligence count (Count V) and in a joint and several negligence count against both Bourns and Jabil (Count VI) (Doc. 40), supported by allegations that the power resistor subcomponents Bourns sold to Jabil were defective, and that either the power resistors or the busbar cards or both caused damage to Saft's EV-2 batteries.

         Jabil filed an answer and a counterclaim (Doc. 44) (which Saft answered (Doc. 46)) and Bourns filed a motion to dismiss under Rule 12(b)(2) and (6) (Doc. 57), contending that personal jurisdiction is lacking and the complaint fails to state a claim against Bourns. Saft responded (Doc. 61), Bourns replied (Doc. 65), and Saft filed a sur-reply (Doc. 73). The Court referred the motion to the assigned Magistrate Judge for a Report and Recommendation. The Magistrate Judge recommended that the motion to dismiss be granted, determining that the economic loss rule barred the negligence claims against Bourns (Doc. 85). Saft objected to the Magistrate Judge's Report and Recommendation (Doc. 86) and requested argument (Doc. 87). Bourns responded (Docs. 88, 89). In light of the Magistrate Judge's Report and Recommendation, Jabil moved to dismiss the negligence counts against it based on the economic loss rule (Doc. 91).[2] Saft responded (Doc. 101). The Court heard argument on August 30, 2019 and now issues its ruling.

         II. Analysis[3]

         Bourns moves to dismiss for lack of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2), and both Bourns and Jabil move to dismiss for failure to state a claim under Rule 12(b)(6). “In Florida, before a court addresses the question of whether specific jurisdiction exists under the long-arm statute, the court must determine ‘whether the allegations of the complaint state a cause of action.'” PVC Windoors, Inc. v. Babbitbay Beach Const., N.V., 598 F.3d 802, 808 (11th Cir. 2010) (quoting Wendt v. Horowitz, 822 So.2d 1252, 1260 (Fla. 2002)). Thus, the Court first addresses whether the negligence allegations state a claim.

         A. The Economic Loss Rule

         Florida's economic loss rule is designed “to prohibit a party from suing in tort for purely economic losses to a product or object provided to another for consideration, the rationale being that in those cases, contract principles are more appropriate than tort principles for resolving economic loss without an accompanying physical injury or property damage.” Tiara Condo. Ass'n, Inc. v. Marsh & McLennan Cos., Inc., 110 So.3d 399, 405 (Fla. 2013) (quotation and citations omitted). While a party cannot sue in tort if the only damage is to the product itself, it can maintain a cause of action if there is damage to “other property.” Id. at 405-06.

         The issue here is whether Saft's battery is “other property.” The answer is not so clear. Some of the cases apply the “integration” or “component part” analysis, finding that if a defective component is integrated into a product, the product is not considered “other property.” See, e.g., Turbomeca, S.A. v. French Aircraft Agency, Inc., 913 So.2d 714, 717 (Fla. 3d DCA 2005) (“Courts have refused to bifurcate products into parts where a component part harms or destroys the final product.”); Pycsa Panama, S.A. v. Tensar Earth Techs., Inc., No. 06-20624-CIV, 2006 WL 8432715, at *5 (S.D. Fla. Dec. 20, 2006) (“Florida law has long held that when a component part harms or destroys a finished product, the finished product does not satisfy the ‘other property' exception.”) (citing Casa Clara Condo. Ass'n, Inc. v. Charley Toppino & Sons, Inc., 620 So.2d 1244 (Fla. 1993) (building not separate from its defective concrete), Turbomeca, 913 So.2d 714 (helicopter not separate from its defective engine), Jarmco, Inc. v Polygard, Inc., 668 So.2d 300 (Fla. 4th DCA 1996) (boat not separate from defective boat resin), and Am. Univ. Ins. Grp. v. Gen. Motors Corp., 578 So.2d 451 (Fla. 1st DCA 1991) (engine not separate from its defective oil pump)). See also Tyco Safety Prods. Can., Ltd. v. Abracon Corp., No. 08-80604-CIV, 2008 WL 4753728, at *1-4 (S.D. Fla. Oct. 28, 2008) (holding claim for damage to plaintiff's smoke detectors into which defendant's allegedly defective component parts were integrated was not damage to other property).

         But still other cases focus on the product purchased, finding that if a defective component is placed into the plaintiff's own product, the plaintiff can show damage to “other property.” See, e.g., Blackhawk Yachting, LLC v. Tognum Am., Inc., No. 12-14208-CIV-MARTINEZ, 2013 WL 12199875, at *5 (S.D. Fla. Apr. 23, 2013) (holding plaintiff alleged damage to other property when defective engine damaged plaintiff's yacht's hull); Boracayan del Sur, S.A. v. Vidco Indus. Inc., No. 05-21948-CIV-JORDAN, 2007 WL 9700684, at *3 (S.D. Mar. 22, 2007) (holding plaintiff alleged damage to other property when defective glass panels caused damage to other parts of house); Ins. Co. of N. Am. v. Man Engines & Components, Inc., No. 05-60699-CIV-ZLOCH, 2006 WL 8432178, at *2-5 (S.D. Fla. Jun. 27, 2006) (explaining in admiralty case that parties' contract must be viewed to determine whether the product damaged was part of their bargain); Ice Fern Shipping Co., Ltd. v. Golten Serv. Co., Inc., No. 1:04-cv-20741, 2005 WL 3692840, at *3 (S.D. Fla. Mar. 22, 2005) (holding under admiralty law that where parties' contract was for repair to engine's speed regulator, damage to engine itself was damage to other property).

         While these federal district court decisions are not binding here, there is some support for this analysis from two key Florida Supreme Court decisions. See Tiara, 110 So.3d at 405 (explaining that the economic loss rule “prohibit[s] a party from suing in tort for purely economic losses to a product or object provided to another for consideration . . . .”) (emphasis added); Casa Clara, 620 So.2d at 1247 (“The character of a loss determines the appropriate remedies, and, to determine the character of a loss, one must look to the product purchased by the plaintiff, not the product sold by the defendant.”) (emphasis added).[4] See also Salzedo Office, LLC v. Facchina Constr. of Fla., LLC, No. 18-cv-21374-UU, 2019 WL 2105924, at *1-2 (S.D. Fla Feb. 28, 2019) (citing Casa Clara for the “product purchased” language, and finding plaintiff alleged damage to other property where defective windows caused damage to the rest of the building plaintiff already owned (as distinguished from Casa Clara, where the plaintiffs purchased a whole house into which defective drywall was integrated)).

         The Court evaluates a 12(b)(6) motion to dismiss construing the complaint in the light most favorable to the plaintiff, assuming the truth of the well-pled allegations. Dusek v. JPMorgan Chase & Co., 832 F.3d 1243, 1246 (11th Cir. 2016). Saft alleges that Jabil's busbar cards and Bourns' resistors caused damage to Saft's other property-its EV-2 batteries-rendering them unusable. Doc. 40 at ¶¶ 7, 13. Saft's EV-2 battery is a custom designed and engineered item manufactured for commercial and industrial use, not an everyday common product whose workings are familiar. While Jabil and Bourns contend that their products were fully integrated into Saft's batteries, Saft maintains (borrowing from caselaw) that its battery is more akin to the hull of a ship into which a defective engine has been placed, and further suggests that engineering detail regarding the construction of Saft's battery will clarify how it operates.[5] As Florida's Fifth District Court of Appeal noted, “What constitutes damage to ‘other property' is sometimes a puzzling circumstance to determine in resolution of economic loss cases.” Southland Const., Inc. v. Richeson Corp., 642 So.2d 5, 9 (Fla. 5th DCA 1994); see also Pycsa Panama, 2006 WL 8432715, at *5 (quoting Southland's “puzzling circumstance” language and denying motion to dismiss based on economic loss rule because “[t]he pleadings are not entirely clear as to the nature and extent of damage to any property other than the [defective property] itself” so “it is possible that the ‘other property' exception may apply”); Boracayan, 2007 WL 9700684, at *3 (finding that at motion to dismiss stage, where the facts are not developed, an allegation of damage to other property is enough to survive an economic loss rule challenge, which could resurface at summary judgment). Likewise here: Saft's allegations of damage to other property are sufficient to avoid application of the economic loss rule at the pleadings stage.[6]

         For this reason, Jabil's motion to dismiss (Doc. 91) will be denied without prejudice to raising the economic loss rule later in the case. Because the Court concludes that the counts against Bourns are sufficient to satisfy Rule 8, the Court next turns to Bourns' argument that it is nonetheless due to be dismissed for lack of personal jurisdiction.[7]

         B. Personal Jurisdiction[8]

         “In a motion to dismiss for lack of personal jurisdiction, a court must accept the facts alleged in plaintiff's complaint as true, to the extent they are not contradicted by defendant's affidavits.” Kim v. Keenan, 71 F.Supp.2d 1228, 1231 (M.D. Fla. 1999) (citing Cable/Home Comm. Corp. v. Network Prods., Inc., 902 F.2d 829, 855 (11th Cir. 1990)). “Once the plaintiff pleads sufficient material facts to form a basis for in personam jurisdiction, the burden shifts to the defendant to challenge plaintiff's allegations by affidavits or other pleadings.” Carmouche v. Carnival Corp., 36 F.Supp.3d 1335, 1338 (S.D. Fla. 2014), aff'd sub nom., Carmouche v. Tamborlee Mgmt., Inc., 789 F.3d 1201 (11th Cir. 2015). “If the defendant provides sufficient evidence, ‘the burden shifts to the plaintiff to prove jurisdiction by affidavits, testimony or documents.'” Thomas v. Brown, 504 Fed.Appx. 845, 847 (11th Cir. 2013) (quoting Sculptchair, Inc. v. Century Arts, Ltd., 94 F.3d 623, 627 (11th Cir. 1996)). If the evidence conflicts, the “court must construe all reasonable inferences in favor of the plaintiff.”[9] Madara v. Hall, 916 F.2d 1510, 1514 (11th Cir. 1990).

         “A federal court sitting in diversity jurisdiction undertakes a two-step inquiry in determining whether personal jurisdiction exists: the exercise of jurisdiction must (1) be appropriate under the state long-arm statute and (2) not violate the Due Process Clause of the Fourteenth Amendment to the United States Constitution.” United Techs. Corp. v. Mazer, 556 F.3d 1260, 1274 (11th Cir. 2009) (citations omitted). Because the due process issue invokes constitutional concerns, the Court must first determine whether the state's long-arm statute is satisfied. PVC Windoors, 598 F.3d at 807 (noting the district court should have analyzed the long-arm statute before addressing due process).

         “A defendant can be subject to personal jurisdiction under the Florida long-arm statute in two ways[.]” Schulman v. Inst. for Shipboard ...


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