Plaintiff M-I Drilling Fluids UK Ltd.’s years-long effort to prove the Court’s personal jurisdiction over Defendant Dynamic Air Ltda. will continue to move forward after Magistrate Judge Bowbeer issued an order on November 6 granting, in part, M-I Drilling’s motion for jurisdictional discovery.
For those not following the procedural saga of Case No. 13-cv-2385, a brief recap: M-I Drilling first filed its complaint against Brazilian company Dynamic Air Limitada, and its U.S. parent, Dynamic Air Inc. in August 2013. In lieu of answering, the Dynamic Air entities moved to dismiss. In February, 2014, the Court granted the Dynamic entities’ motion to dismiss without prejudice, holding that the Court lacked jurisdiction over Dynamic Air Ltda. (who, as a foreign entity, had also not yet been served) and that the complaint failed to state a claim against Dynamic Air Inc. M-I Drilling filed a motion to amend the Court’s judgment arguing that it was improper for the Court to dismiss the claim against Dynamic Air Ltda. when the company had not yet been formally served with process. The Court granted that motion in March 2014, reopening the case “out of an abundance of caution and in the interest of fairness, to allow M-I Drilling the opportunity to continue its … efforts to serve” Dynamic Air Ltda.--after which the Brazilian company could fight or concede the personal jurisdiction issue. Serving Dynamic Air Ltda. would take M-I Drilling another 16 months. Finally, in August, 2015, Dynamic Air Ltda. answered M-I Drilling’s complaint. A month later, the Brazilian company, predictably, moved the Court to dismiss M-I Drilling’s case for lack of jurisdiction. M-I Drilling offered two theories of jurisdiction: (1) through purposeful availment under Rule 4(k)(2), or (2) through the personal jurisdiction of Dynamic Air’s alleged alter-ego/partner, and moved for jurisdictional discovery concerning both.
M-I Drilling’s purposeful availment theory centers on the allegation that Dynamic Air Ltda. installed pneumatic conveyance systems that infringe M-I Drilling’s U.S. patents on two third-party U.S.-flagged ships. Dynamic Air argues, however, that the installation took place in Brazilian waters and pursuant to a contract that was entered without Dynamic Air’s awareness of the ships’ flagging. M-I Drilling contends that putting the systems on U.S. ships is, alone, sufficient to establish personal jurisdiction. But, in the event the Court were to conclude that something more is required under a purposeful availment test, M-I Drilling requested jurisdictional discovery to adduce evidence that the Brazilian entity knew before entering the installation agreement that the systems would be put on U.S. ships.
M-I Drilling’s alter-ego /partnership jurisdictional theory essentially argues that Dynamic Air Ltda. should be subject to personal jurisdiction because of its close affiliation with its U.S. parent, Dynamic Air Inc. Dynamic Air Ltda. denies that it is the alter-ego of its parent. M-I Drilling requested discovery to explore the true nature of the relationship between the companies.
The Court’s November 6 order granted only a very limited portion of the jurisdictional discovery M-I Drilling sought. As to the alter-ego/partnership theory, the Court did not grant any jurisdictional discovery. Magistrate Judge Bowbeer noted that M-I Drilling bore the burden of showing “documentary evidence, and not merely speculations of conclusory allegations to support a motion for jurisdictional discovery.” She held, however, that the evidence offered by both parties suggested “nothing more than a typical parent/subsidiary relationship.” Thus, M-I Drilling’s request for jurisdictional discovery into the corporate relationship between the Dynamic Air entities was denied. The Court was slightly more receptive to M-I Drilling’s purposeful availment argument, determining that M-I Drilling “should be permitted limited discovery into whether … employees who were involved in the negotiation of the contract … had knowledge before entering into the contract that performance … was likely to involve deployment … on board U.S.-flagged ships.” However, the Court placed significant limitations of the discovery M-I Drilling can take to explore that issue, rejecting M-I Drilling’s request to take depositions and permitting only five interrogatories and five requests for production. Magistrate Judge Bowbeer also expressly noted that she was not deciding “which party’s position on personal jurisdiction with regard to this issue is correct.” Presumably, the answer to that question won’t be learned for at least a few months – the hearing on Dynamic Air’s motion to dismiss for lack of personal jurisdiction is scheduled for January 28, 2016.