Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—E.D.N.Y.: Claims for injuries arising at Georgia franchise could not be brought in New York, (Mar 11, 2015)

By Greg Hammond, J.D.

Tyson Foods, Inc. and Wendy’s International, LLC were dismissed from state law claims arising from injuries a consumer allegedly sustained while consuming chicken nuggets at a Wendy’s franchise restaurant located in Georgia. The federal district court in Brooklyn granted the defendants’ motion to dismiss, finding that it lacked personal jurisdiction over the companies, in light of the U.S. Supreme Court’s recent decision in Daimler AG v. Bauman, 134 S. Ct. 746 (2014) (Stroud v. Tyson Foods, Inc., March 10, 2015, Irizarry, D.).

Background. Plaintiff Janesia Danielle Stroud alleged that she swallowed “masticated chicken nuggets” and “felt a sharp pain from something sharply pointed and rough in her throat or pharynx.” She claimed that, although she immediately sought medical attention, she continued to suffer from persistent throat pain. Stroud filed suit against Tyson and Wendy’s under several state laws, but her complaint was void of any allegations regarding her domicile. The New York court noted that Stroud is a resident of Georgia; Tyson is incorporated in Delaware and its principal place of business is in Arkansas; and Wendy’s is incorporated in Ohio and its principal place of business is in Ohio. Tyson operates a manufacturing plant in Buffalo, New York, under its alter ego, Zemco Industries, Inc. Wendy’s also operates numerous franchised restaurants in New York, through its subsidiary, Wendy’s Old Fashioned Hamburgers of New York. Tyson and Wendy’s moved to dismiss for lack of personal jurisdiction.

General jurisdiction. The Supreme Court—in Daimler—for the first time, addressed the specific issue of whether a foreign corporation may be subjected to a court’s general jurisdiction based on the contacts of its in-state subsidiary as a matter of constitutional due process, the district court noted. The High Court held that general jurisdiction exists only where a corporation is “essentially at home.” Consequently, the district court was uncertain of whether New York’s “doing business” jurisprudence remained viable as a statutory means of exercising general jurisdiction over a foreign corporate defendant.

Nevertheless, the court determined that exercise of general jurisdiction over the defendants in this case would be inconsistent with constitutional due process as articulated in Daimler. Neither Tyson nor Wendy’s were “at home” in New York, so the only ground for asserting general jurisdiction was whether their contacts with New York were significant enough to qualify as an “exceptional case.” The court, however, concluded that neither the activities of Tyson nor its alter ego Zemco, viewed together or separately, were sufficient to deem Tyson “at home” in New York. Similarly, neither the activities of Wendy’s nor its subsidiary, Wendy’s New York—which is incorporated and headquartered in Ohio—were sufficient to deem Wendy’s “at home” in New York. “The notion that Wendy’s can be considered ‘at home’ in every forum in which it operates restaurants was specifically rejected in Daimler,” the court stated.

Specific jurisdiction. Stroud also argued that Tyson and Wendy’s are subject to specific jurisdiction under New York’s long arm statute. The court rejected this argument however, finding: (1) Stroud failed to allege that any of her claims concerning the “masticated chicken nuggets” arose from the defendants’ New York activities; and (2) Stroud’s allegations failed to address any relationship between the defendants’ properties in New York and Stroud’s consumption of the “masticated chicken nuggets” in Georgia. There was consequently no authority for the exercise of personal jurisdiction over Tyson and Wendy’s under New York’s long arm statute, and the motion to dismiss was therefore granted.

The case number is 14-CV-3281 (DLI).

Attorneys: Brian L. Ponder (Brian Ponder LLP) for Janesia Danielle Stroud. Jeffrey A. Segal (Weber Gallagher Simpson Stapleton Fires & Newby LLP) for Tyson Foods, Inc. and Wendy's International, LLC.

Companies: Tyson Foods, Inc.; Wendy's International, LLC

Cases: FranchisingDistribution NewYorkNews