Antitrust Law Daily Wrap Up, ANTITRUST—D.N.J. : Claims against fragrance maker foreign defendants survive jurisdictional challenge — for now, (Feb 25, 2025)

By Martin A. Steinberg, J.D.

Though the Plaintiffs failed to state a prima facie claim of personal jurisdiction over the foreign defendants, their assertion of jurisdiction was not clearly frivolous.

The federal court in New Jersey denied without prejudice the motion of four Defendants DSM-Firmenich; Firmenich International SA; Givaudan SA; and Symrise AG (collectively, the "Foreign Defendants"), each of whom is the foreign parent company of a U.S. subsidiary also named as a defendant in the consolidated antitrust litigation against fragrance manufacturers, to dismiss three consolidated putative class action complaints for lack of personal jurisdiction under Rule 12(b)(2). Though the Plaintiffs failed to sufficiently show that the court had jurisdiction over the Foreign Defendants, the court noted that the corporate relationship between the Foreign Defendants and their U.S. subsidiaries is sufficiently opaque to warrant jurisdictional discovery to proceed before the court would reconsider Defendants motion (In Re Fragrance Direct Purchaser Antitrust Litigation, No. 2:23-cv-02174-WJM-JSA (D.N.J. Feb. 21, 2025)).

Background. On March 7, 2023, European investigators conducted unannounced inspections of facilities operated by the four largest businesses in the fragrance industry and subsequently announced antitrust investigations against each of them. The investigations targeted businesses familiarly known as Firmenich, Givaudan, International Fragrances & Flavors (IFF), and Symrise (collectively, the "Defendant Businesses"). After the investigations were announced, various plaintiffs filed complaints against the Defendant Businesses. The court consolidated the lawsuits into three separate putative class actions: (1) the Direct Purchaser Action brought by companies who buy products directly from the defendants, In re: Fragrance Direct Purchaser Antitrust Litigation, 2:23-cv-2174; (2) the Indirect Purchaser Action brought by individuals and companies that purchased products produced by the defendants from other sellers, In re: Fragrance Indirect Purchaser Antitrust Litigation, 2:23-cv-3249; and (3) the End-User Action brought by individuals who purchase consumer goods containing the products produced by the defendants, In re: Fragrance End-User Plaintiff Antitrust Litigation, 2:23-16127.

The Plaintiffs, in all three actions, filed consolidated complaints. The complaints alleged a mix of causes of action, but all alleged violations of (1) Sections 1 and 3 of the Sherman Antitrust Act with relief under the Clayton Act for treble damages and equitable relief; (2) state antitrust and consumer protection laws of 33 states and the District of Columbia; and (3) common law unjust enrichment. Multiple entities within the corporate families of Firmenich, Givaudan, and Symrise are named as defendants in each lawsuit.

Traditional test for specific personal jurisdiction. To the extent the Plaintiffs alleged any U.S. contacts by the Foreign Defendants, none of these contacts arose from or related to the price-fixing allegations. The traditional test is satisfied when a defendant purposefully directed activities at residents of the forum and litigation results from alleged injuries that arose from those activities. Suppose these purposeful availment and relationship requirements are met. In that case, a court may exercise personal jurisdiction over a defendant so long as the exercise of that jurisdiction comports with fair play and substantial justice.

Plaintiffs' jurisdictional allegations against Firmenich International SA and DSM-Firmenich were limited in their Complaints to conclusory allegations that each entity manufactured or sold Fragrance Products to purchasers in the U.S. and elsewhere, directly or through predecessors, affiliates, or subsidiaries, that each entity controlled its subsidiaries generally and concerning the conduct of the subsidiaries in furtherance of the unlawful acts alleged, and that one or both entities acquired U.S.-based companies during the class period. Plaintiffs' allegations against Givaudan SA and Symrise were similar to those against the Firmenich Foreign Defendants.

Plaintiffs alleged that all of the Foreign Defendants are members of the Fragrance Science & Advocacy Council (FSAC), a North American trade association through which they allegedly colluded to fix prices in the U.S. market. Plaintiffs alleged that Symrise, Givaudan, and Firmenich are members of the FSAC but failed to allege the membership of the foreign parent company subject to the instant motions to dismiss, three of whom expressly deny membership in FSAC. Thus, these conclusory allegations were insufficient to establish jurisdiction.

Calder Effects Test. Plaintiffs' conclusory assertions that the Foreign Defendants conspired "through conduct that was calculated to have effects throughout the U.S." were insufficient to survive a Rule 12(b)(2) motion, and their argument that evidence of Defendant's worldwide price-fixing conduct suggested a conspiracy to fix prices in the U.S. ran contrary to the effects test.

The effects test permits a court to exercise jurisdiction over an intentional tortfeasor whose contacts with the forum otherwise do not satisfy due process requirements if the forum is the focus of the defendant's tortious conduct. Hasson v. Fullstory, Inc., 114 F.4th 181, 187 (3d Cir. 2024); see also Calder v. Jones, 465 U.S. 783, 789-90, 104 S. Ct. 1482, 79 L. Ed. 2d 804 (1984). The Calder effects test requires a plaintiff to plead facts to establish that (1) the defendant committed an intentional tort; (2) the plaintiff felt the brunt of the harm in the forum; and (3) the defendant expressly aimed his tortious conduct at the forum. As the Third Circuit's recent ruling in Hasson v. Fullstory, Inc. made clear, the effects test is not satisfied where the effects of globally targeted conduct are felt in the forum.

Agency theory of personal jurisdiction. Plaintiffs failed to plead sufficient facts demonstrating financial dependency or that the foreign parent companies disregarded corporate formalities or interfered with their respective U.S. subsidiaries. Plaintiffs alleged that (1) the Defendants' parental control over their subsidiaries pervaded their dealings with the forum, (2) that there are no Defendant-made products sold in the U.S. other than those that they make available through their respective subsidiary relationships, and (3) that the establishment of U.S. subsidiaries entailed a deliberate choice to enter the U.S. and New Jersey markets. None of these allegations, taken as true, however, would rebut the Foreign Defendants' attestations that their subsidiaries are financially independent and that they observe the formal distinctions between the parent and subsidiary corporations, including by keeping separate books and records, maintaining separate boards of directors, and avoiding interference with the subsidiaries' business.

Conspiracy jurisdiction. Finally, Plaintiffs claimed that the court has jurisdiction over the foreign defendants on the conspiracy jurisdiction theory. However, no Third Circuit court has adopted this theory. Moreover, federal due process does not square with the conspiracy jurisdiction theory. The court held that purposeful availment must be analyzed individually to ensure that each defendant deliberately targeted this state. See Rickman v. BMW of North America LLC, 538 F. Supp. 3d 429, 440 (D.N.J. 2021).

Jurisdictional discovery. Plaintiffs' jurisdictional claims were not "clearly frivolous." The corporate relationship between the Foreign Defendants and their U.S. subsidiaries is sufficiently opaque that, were Plaintiff's allegations concerning the Foreign Defendants' U.S. presence and the degree of control exercised by the Foreign Defendants over their U.S. subsidiaries true, it would not be easy to prove as much without the opportunity to conduct discovery. This is why "jurisdictional discovery is particularly appropriate where the defendant is a corporation," as it is here.

Though Plaintiffs failed to state a prima facie claim of personal jurisdiction over the Foreign Defendants, their assertion of jurisdiction was not clearly frivolous. Thus, the court denied without prejudice the Foreign Defendants' motions to dismiss under Rule 12(b)(2), and the motion may be renewed, as appropriate, after jurisdictional discovery concludes.

Plaintiffs' request for leave to amend their Complaints to cure jurisdictional defects was denied. In a footnote, Plaintiffs requested leave to amend their Complaints to the extent the court was inclined to dismiss for lack of jurisdiction. But because Plaintiffs had the opportunity to present any evidence they have in support of personal jurisdiction and have not done so, there was no reason to believe an amendment would be anything less than futile.

The Case is No. 2:23-cv-02174-WJM-JSA.

Judge: Martini, W.

Attorneys: James E. Cecchi (Carella, Byrne, Cecchi, Brody & Agnello, P.C.) for Mirlinda Elmazi. Sean Patrick McConnell (Duane Morris LLP) for DSM-Firmenich AG. Sarah O'Laughlin Kulik (Duane Morris LLP) for Firmenich Inc. Kevin Reed Reich (Gibbons PC) for Givaudan SA.

Companies: DSM-Firmenich AG; Firmenich Inc.; Givaudan SA

Cases: Antitrust StateUnfairTradePractices NewJerseyNews