Products Liability Law Reporter

A New Jersey appellate court held that a trial court had erred in failing to conduct a fact-specific inquiry on a defendant’s motion to dismiss a products liability suit where service of process was made on the defendant’s purported subsidiary.

Ian Crespi, a New Jersey resident, was allegedly injured when a CCM Customs, Inc., 7.62 Mod vaping device purchased in the state or the device’s lithium-ion battery, which was purportedly manufactured by LG Chem, exploded in his face. Crespi sued LG Chem, alleging that the company had distributed the device or manufactured the lithium-ion battery that injured him. The plaintiff attempted to serve process on LG Chem in Michigan by delivering a copy of the summons and complaint to Jeremy Hagemeyer, the human resources director of LG Chem Michigan, Inc. (LGCM), which is one of LG Chem’s U.S.-based subsidiaries.

LG Chem moved to dismiss for insufficient service of process. The trial court denied the motion, holding that LGCM had essentially acted as LG Chem’s alter ego for purposes of service of process and existed to act as an instrumentality for the production of one of LG Chem’s major products in the United States. The court also denied LG Chem’s subsequent motion for reconsideration.

Reversing, the appellate court found that New Jersey permits service on a wholly owned subsidiary of a foreign corporation if the subsidiary is the parent’s alter ego or agent. To determine whether a subsidiary is an agent of the parent, courts must consider whether the subsidiary is doing business in the forum that would otherwise be performed by the parent; whether there is common ownership of the parent and subsidiary; whether there is financial dependency; and whether the parent interferes with the subsidiary’s personnel, disregards corporate formalities, or controls the subsidiary’s marketing and operational policies. Citing case law, the court added that to determine alter ego status, a court must consider whether the parent so dominated the subsidiary that it had no separate existence but was merely the parent’s conduit.

The court found that the trial court’s decision lacks any finding that LG Chem had so dominated LGCM that LGCM had no separate existence from LG Chem. The trial court’s conclusory statements, absent specific factual findings, are not enough to render service of process on LGCM the equivalent of service on LG Chem, the court said. Existence of a parent-subsidiary relationship, the court added, does not validate service on a subsidiary to reach the parent under a state long-arm statute.

Consequently, the court remanded for the trial court to perform a fact-specific inquiry on the service of process issue.

Citation: Crespi v. Vape Zeppy, 2022 WL 815429 (N.J. Super. Ct. App. Div. Mar. 18, 2022).