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Zevoli 243 (PTY) Ltd. v. Dow Chemical Co.

United States District Court, S.D. Indiana, Indianapolis Division

April 4, 2018

ZEVOLI 243 (PTY) LTD., Plaintiff,


          Hon. Jane Magnus-Stinson, Chief Judge

         This matter is before the Court on Defendants Dow Chemical Company (“Dow Chemical”) and Dow Agrosciences LLC's (“Dow Agro”) (collectively, “Defendants”) Motion to Dismiss. [Filing No. 20.] Plaintiff Zevoli 243 (PTY) Ltd.'s (“Zevoli”) Complaint for Damages and Declaratory Judgment (“Complaint”) seeks relief for alleged environmental contamination of real property owned by Zevoli in South Africa by Defendants' subsidiary Dow AgroSciences Southern Africa (Proprietary) Limited (“Dow South Africa”). [Filing No. 1]. Defendants move to dismiss the Complaint pursuant to Federal Rules of Civil Procedure 12(b)(2), 12(b)(6), and the common law doctrine of forum non conveniens. For the reasons stated below, the Court DENIES IN PART and GRANTS IN PART Defendants' Motion to Dismiss.


         Dow Chemical's Motion to Dismiss for Lack of Personal Jurisdiction

         A. Standard of Review

         When a defendant moves to dismiss a complaint under Rule 12(b)(2), “[t]he plaintiff bears the burden of showing that personal jurisdiction over the defendant exists.” Claus v. Mize, 317 F.3d 725, 727 (7th Cir. 2003). When, as here, the Court “rules on a defendant's motion to dismiss based on the submission of written materials, without the benefit of an evidentiary hearing . . . the plaintiff ‘need only make out a prima facie case of personal jurisdiction.'” Purdue Research Found. v. Sanofi-Synthelabo, S.A., 338 F.3d 773, 782 (7th Cir. 2003) (quoting Hyatt Int'l Corp. v. Coco, 302 F.3d 707, 713 (7th Cir. 2002)). Any factual disputes are resolved in the plaintiff's favor. Id.

         “A federal district court's personal jurisdiction over a defendant is established in a diversity-jurisdiction case . . . only so long as the defendant is subject to the jurisdiction of a court of general jurisdiction in the state where the district court is located.” N. Grain Mktg., LLC v. Greving, 743 F.3d 487, 491 (7th Cir. 2014). Indiana Trial Rule 4.4(A) serves as Indiana's long-arm provision and expands personal jurisdiction to the full extent permitted by the Due Process Clause. See LinkAmerica Corp. v. Cox, 857 N.E.2d 961, 965-66 (Ind. 2006). “Thus, the statutory question merges with the constitutional one-if [Indiana] constitutionally may exercise personal jurisdiction over a defendant, its long-arm statute will enable it to do so.” N. Grain, 743 F.3d at 492.

         “The federal constitutional limits of a court's personal jurisdiction in a diversity case are found in the Fourteenth Amendment's due-process clause.” Id.“[F]ederal constitutional law draws a sharp and vital distinction between two types of personal jurisdiction: specific or case-linked jurisdiction, and general or all-purpose jurisdiction.” Abelesz v. OTP Bank, 692 F.3d 638, 654 (7th Cir.2012). “If the defendant's contacts are so extensive that it is subject to general personal jurisdiction, then it can be sued in the forum state for any cause of action arising in any place.” uBID, Inc. v. GoDaddy Group, Inc., 623 F.3d 421, 425 (7th Cir. 2010). “More limited contacts may subject the defendant only to specific personal jurisdiction, in which case the plaintiff must show that its claims against the defendant arise out of the defendant's constitutionally sufficient contacts with the state.” Id. Zevoli only asserts that the Court has specific, not general, jurisdiction over Dow Chemical. [Filing No. 27 at 22-24.]

         B. Background

         The following allegations are taken from Zevoli's Complaint, and are accepted as true for purposes of deciding the pending jurisdictional motion, consistent with the applicable standard of review. [Filing No. 1.]

         1. The Canelands Site

         Zevoli is a South African private company with its principal offices in South Africa. [Filing No. 1 at 1.] Dow Chemical is a corporation organized under the laws of Delaware with its headquarters and principal place of business in Midland, Michigan. [Filing No. 1 at 1.] Dow Agro, a wholly-owned subsidiary of Dow Chemical, has its headquarters and principal place of business in Indianapolis, Indiana. [Filing No. 1 at 2.] Dow South Africa is a wholly-owned subsidiary of Dow Agro. [Filing No. 1 at 2.]

         This dispute relates to contamination to real property in South Africa known as the Canelands Site. [Filing No. 1 at 3.] Dow South Africa acquired the Canelands Site in 1997. [Filing No. 1 at 3.] Dow South Africa continuously manufactured agricultural chemicals on the Canelands Site until the decommissioning of Dow South Africa's facilities at the site. [Filing No. 1 at 3.]

         In 2007, Dow South Africa sold the Canelands Site to Chemical Specialties (Proprietary) Limited (“ChemSpec”). [Filing No. 1 at 3.] In the Property Sale Agreement (“2007 PSA”), Dow South Africa warranted that it had disclosed all material information to ChemSpec, including information relating to environmental risks. [Filing No. 1 at 3.] In connection with the 2007 PSA, Defendants' representatives[1] informed ChemSpec representatives of a discrete area of buried arsenic waste in a sump adjacent to a mono sodium methyl arsenate plant, known as the Peskor Plant, which was located on the Canelands Site. [Filing No. 1 at 3.] Defendants' representatives assured ChemSpec that the arsenic contamination near the Peskor Plant was a contained problem capable of total remediation, which would be completed and paid for by Dow South Africa at its own expense. [Filing No. 1 at 4.] Defendants and Dow South Africa did not, however, disclose the full extent of the arsenic contamination around the Peskor Plant. [Filing No. 1 at 4.]

         On June 22, 2007, ChemSpec and Dow South Africa executed a lease agreement (the “ChemSpec Lease”), by which Dow South Africa leased back a portion of the Canelands Site. [Filing No. 1 at 5.] The ChemSpec Lease provided that Dow South Africa was to: (1) keep the premises in good order and condition; (2) comply with all applicable laws relating to the premises, including environmental authorizations and laws; (3) ensure that no nuisances emanated from the premises; and (4) remediate any contamination caused during the lease period as a result of Dow South Africa's conduct. [Filing No. 1 at 5.] Section 15.6 states that Dow South Africa agreed to remain bound by the terms of the ChemSpec Lease regardless of any sale or assignment by ChemSpec, and to cooperate fully with the same. [Filing No. 1 at 5-6.]

         In 2009, ChemSpec sold the Canelands Site to Zevoli. [Filing No. 1 at 6.] In the Agreement of Sale (“2009 PSA”), ChemSpec warranted that no bases existed for third-party claims relating to the Canelands Site and that both ChemSpec and Dow South Africa had complied with all environmental laws. [Filing No. 1 at 6.] ChemSpec guaranteed that it had disclosed to Zevoli “all information relating to the [Canelands Site] which is, or which is reasonably likely to be material to the purchaser, ” and agreed to indemnify Zevoli for any claims, loss, or damages that “[Zevoli] may suffer arising from any breach of any of the warranties.” [Filing No. 20-1 at 86-89.] In exchange, Zevoli agreed to assume “the risk, benefit, rights and obligations” with respect to the Canelands Site. [Filing No. 20-1 at 85-86.]

         In early 2015, ChemSpec entered business rescue proceedings.[2] [Filing No. 1 at 8.] In January 2016, pursuant to the business rescue proceedings, ChemSpec liquidators gave notice to Zevoli that ChemSpec would no longer abide by the 2009 lease agreement and would vacate the premises. [Filing No. 1 at 8-9.] Following the lease's cancellation, ChemSpec relinquished all rights with respect to the Canelands Site and the Dow South Africa leased premises. [Filing No. 1 at 9.] Zevoli, which had purchased the Canelands Site subject to the preexisting lease between Dow South Africa and ChemSpec, stepped in as the Lessor under that agreement. [Filing No. 1 at 9.]

         Shortly after ChemSpec entered business rescue proceedings, Dow South Africa notified Zevoli that it had reported contamination of the Canelands Site to South Africa's Department of Environmental Affairs (“DEA”), pursuant to the National Environmental Management: Waste Act of 2008. [Filing No. 1 at 9.] The DEA notification included environmental reports from 2005, 2007, and April 2015 generated by South African environmental consulting firm Jones & Wagener (“J&W”) on behalf of Dow South Africa. [Filing No. 1 at 10.] J&W also disclosed water testing results from 2011 and 2012. [Filing No. 1 at 10.] None of these reports had been previously disclosed to Zevoli or ChemSpec. [Filing No. 1 at 10.]

         The reports revealed that the contamination at the Canelands Site was not decreasing as a result of the remediation activities conducted pursuant to the 2007 PSA; rather, the contamination was spreading and worsening. [Filing No. 1 at 10.]

         The 2005 report made known many other types of contamination around the Canelands Site in addition to the buried arsenic in the sump at the Peskor Plan that Dow South Africa actually disclosed in 2007. [Filing No. 1 at 10.]

         The 2007 J&W report was issued in February 2007, shortly before the execution of the 2007 PSA, and revealed worsening arsenic contamination and highly contaminated water flowing in and out of the basement sump in the main building. [Filing No. 1 at 11.] J&W recommended that any party purchasing or operating the Canelands Site be fully informed of the human health risks present and noted that the contamination could spread off-site in the future. [Filing No. 1 at 11.]

         In 2016, “Defendants demolished the water treatment plant constructed in 2012, a manufacturing plant and associated labs, a steam generation room, and a process control area.” [Filing No. 1 at 15.] Zevoli owned these buildings and did not authorize their demolition. [Filing No. 1 at 15.]

         2. Allegations Against Dow Chemical and Dow Agro

         Zevoli has lodged several allegations against the Defendants for the acts of their subsidiary, Dow South Africa. [Filing No. 1 at 16-17.] Zevoli alleges that the “Defendants are fully responsible for the misconduct of [Dow South Africa]. Upon information and belief, [Dow South Africa] is undercapitalized, and appropriate corporate formalities have not been observed between [Dow South Africa] and its corporate parents.” [Filing No. 1 at 16.] Zevoli also alleges that “it appears” that the Defendants used Dow South Africa “as a shield to avoid liability arising out of their misconduct with respect to the Canelands Site.” [Filing No. 1 at 16.]

         Zevoli alleges that “[a] director of Zevoli was also told by an attorney for [Dow South Africa] that Dow [Chemical] has total control and responsibility over the actions of [Dow South Africa].” [Filing No. 1 at 16.] Zevoli further claims that most of the employees with whom ChemSpec and Zevoli interacted regarding the purchase and lease of the Canelands Site, and who made representations about the environmental status of the site, were in fact employees of Defendants and not Dow South Africa. [Filing No. 1 at 16.] Moreover, Defendants' employees visited the Canelands Site to assess the contamination and “communicated with Zevoli regarding the events at issue.” [Filing No. 1 at 16-17.]

         Dow Chemical carries a $45, 000, 000 umbrella policy on the Canelands Site in its own name. [Filing No. 1 at 16.]

         C. ...

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