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Caradori v. Karl Storz Endoscopy-America, Inc.

United States District Court, D. Maryland

September 18, 2017

BRIDGET CARADOR, et al., Individually and as Personal Representative of Patricia Daley, Deceased, and ROBERT L. DALEY, Plaintiffs,
v.
KARL STORZ ENDOSCOPY-AMERICA, INC. and KARL STORZ GMBH & CO., KG, Organized in Germany, Defendants.

          MEMORANDUM OPINION

          THEODORE D. CHUANG UNITED STATES DISTRICT JUDGE.

         In February 2011, Patricia Daley underwent a robot-assisted hysterectomy for the treatment of uterine fibroids at Holy Cross Hospital in Silver Spring, Maryland. The surgeon used two power morcellatoss to remove her uterus and fibroids, one of which was a Karl Storz Rotocut G1 Morcellato,, manufactured by Defendant Karl Storz GMBH & Co., KG ("KST") and sold to the hospital by Defendant Karl Storz Endoscopy-America, Inc. ("KSEA".. Use of the morcellatoss allegedly resulted in the dissemination of a leiomyosarcoma cancer throughout Daley's abdominal cavity. That cancer ultimately led to her death. Plaintiffs Bridget Caradori, Daley's sister, and Robert L. Daley, Daley's father, then filed this negligence, products liability, and wrongful death action against Defendants KST; KSEA; and Ethicon Endo-Surgery, Inc., d/b/a Ethicon Womenss Health and Urology ("Ethicon".. At issue is whether this Court has personal jurisdiction over KST. For the reasons set forth below, KST's Motion to Dismiss for Lack of Personal Jurisdiction is GRANTED.

         BACKGROUND

         I. Procedural History

         This case was originally filed in the Circuit Court for Montgomery County, Maryland in July 2014. After Ethicon removed the case to this Court, KST moved to dismiss Plaintiffs' claims for lack of personal jurisdiction. Plaintiffs' opposed the motion or, in the alternative, requested jurisdictional discovery. On June 24, 2015, the Court denied KST's motion without prejudice and granted Plaintiffs' request for jurisdictional discovery. Based on that discovery, Plaintiffs' amended their Complaint. On October 19, 2015, this case was transferred to the United States District Court for the District of Kansas as part of multi-district litigation relating to the claims against Ethicon. After those claims were resolved, the case was returned to this Court for resolution of the claims against KST and KSEA. While Plaintiffs' claims against KSEA have proceeded to discovery, KST has renewed its Motion to Dismiss for Lack of Personal Jurisdiction.

         II. Jurisdictional Facts

         Defendant KST manufactures Karl Storz morcellators. KST is a privately-held company organized in Germany with its principal place of business in Tuttlingen, Germany. KST does not have employees, offices, real estate, or bank accounts in Maryland. KST is not registered to do business in Maryland, does not advertise or solicit business in Maryland, does not design products for the Maryland market, and does not issue warranties to consumers in Maryland or the United States. During the period of time relevant to this lawsuit, KST did not directly sell any Karl Storz morcellatoss to any purchasers in Maryland or earn any revenue from any such sales.

         KSEA is a wholly-owned subsidiary of KST and the exclusive marketer and distributor in the United States for KST medical products, including Karl Storz morcellators. KSEA is incorporated in and has its principal place of business in California, where it has over 500 employees, and it has a distribution facility in Massachusetts. KSEA has no offices in Maryland, but it has three sales representatives assigned to the state. KSEA sold the morcellator used in Daley's surgery to Holy Cross Hospital. Based on these facts, KSEA has conceded that this Court has personal jurisdiction over it in this action.

         KSEA was created for the purpose of distributing Karl Storz products to the United States market. KST sought to have KSEA distribute its morcellators in the entire United States, without specifically targeting or excluding any particular states. Although there is no written distribution or exclusivity agreement between the two companies, KST generates an invoice for each morcellator or other KST product sold to KSEA for resale, which KSEA pays. KST sets the price that KSEA pays, but KSEA sets the prices paid by end users. KSEA also sells ancillary products that work in tandem with the Karl Storz equipment but does not distribute any products that cannot be combined with KST products.

         At the time of the events in this case, KSEA's Board of Directors consisted of Dr. Sybill Storz, who was at the same time KST's Managing Director, and Karl-Christian Storz, Dr. Storz's son. Although Dr. Storz would have input in the selection of the President of KSEA, she is not consulted on KSEA hiring or promotion decisions. Some employees have transferred between KST and KSEA, including KSEAss Vice President of Marketing, who formerly worked for KST.

         KSEAss day-to-day affairs are managed by its Executive Committee. At the time of the events at issue in this case, neither Dr. Storz nor any KST employee was on KSEAss Executive Committee. Members of the Executive Committee typically meet with KST executives during annual and mid-year business planning meetings to discuss product pipelines, product focus, and revenue objectives.

         KSEA maintains its own internal corporate departments, including for accounting, finance, human resources, marketing, sales, taxation, and regulatory affairs. KSEA has its own standard operating procedures for its day-to-day operations. KSEA does, however, provide KST with its annual budget, monthly financial performance reports, and its revenue and cash flow projections.

         KSEA, not KST, conducts all advertising and distribution of KST products in the United States. KSEA and KST do not share advertising expenses. However, KST provides marketing materials for its products and, as with all of its subsidiaries, requires KSEA to adhere to Brand Identity Guidelines, which dictate the look of various advertising and promotional materials. KST also prepares labels, technical specification,, and use instructions for all of its products, which are then modified as necessary by KSEA to bring them into compliance with United States Food and Drug Administration ("FDA") requirements. In the event of a complaint about a KST product, both KST and KSEA are made aware, and KST may investigate the root cause of the complaint while KSEA works with the FDA to ensure the products remain in regulatory compliance. KSEA issues the warranty on KST products sold in the United States and would thus reimburse a customer for a defective product, then seek reimbursement from KST if appropriate under KST's manufacturer's warranty. KSEA also services or repairs KST products sold in the United States, and if KSEA is unable to repair a product without sending it to KST in Germany, it typically sends the customer a replacement product. Although there is no formal servicing agreement, KSEA may then send the original product ...


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