The Delaware Court of Chancery on Thursday ruled it lacked jurisdiction over foreign companies accused of stealing Dow Chemical s trade secrets for manufacturing paint polymers, but allowed claims to proceed against a Delaware subsidiary and its parent.
In a 34-page memorandum opinion, Vice Chancellor Sam Glasscock III said that Organik Kimya s businesses in Turkey, Luxembourg and the Netherlands were not connected to the alleged scheme and to the Delaware-based subsidiary Dow Chemical Co. said Organik had formed to allow it to happen.
However, Glasscock wrote, Organik Kimya US Inc. and its Istanbul-based parent, Organik Kimya San. ve Tic. A.S., would still have to defend the suit.
The ruling came after almost a year of jurisdictional discovery related to allegations from Midland, Michigan-based Dow that the Turkish chemical company used its network of businesses to acquire secret technology from Dow and then started a Delaware corporation to break into the U.S. polymers market.
Organik argued that Dow had not established a connection between the formation of the U.S. subsidiary in 2010 and the alleged theft of trade secrets. And its foreign companies, Organik said, lacked a statutory link with the state and the minimum contacts necessary to comport with due process protections.
In his ruling, Glasscock sided with Organik, saying that Dow had not presented any evidence to support its assertion that most of Organik s foreign firms had played any role in creating the U.S. company. However, Glasscock said, Dow had established an initial case that the Delaware subsidiary was central to the supposed scheme.
Drawing all reasonable inferences in favor of the plaintiffs, as I must at this stage of the proceedings, I find that these facts plausibly suggest that the formation of Organik Kimya US was a key component of Organik s scheme to misappropriate Dow s trade secrets, he wrote.
That connection, he continued, was enough to justify jurisdiction over the parent: Having incorporated a Delaware entity to further its unlawful scheme, a defendant cannot plausibly maintain that an exercise of jurisdiction over it in this forum in regard to that scheme was unforeseeable.
Dow s complaint, filed in March 2016, accuses Organik of hiring away top talent from Dow and Rohm and Haas, the Philadelphia-based chemical company it acquired through a merger in 2009. According to Dow, the two experts, Dilip Nene and Leonardo Strozzi shared Dow s proprietary information with Organik, leading the company to develop two new polymer-based products.
Organik, which had struggled to make inroads in the U.S. market, finally garnered interest in its products and set up its American subsidiary in 2010 so that it could conduct business with Behr and other potential U.S. buyers.
Organik has disputed Organik s account, saying that large U.S. paint companies would not buy its products until it had a manufacturing facility in the country. The company has denied that it lifted any proprietary information from Dow.
Attorneys for the parties did not immediately respond Friday to calls seeking comment on Glasscock s ruling.
Dow is represented by Charles K. Verhoeven, Raymond N. Nimrod and James E. Baker of Quinn Emanuel Urquhart & Sullivan and Rodger D. Smith II and Ryan D. Stottmann of Morris, Nichols, Arsht & Tunnell.
The Organik firms are represented by J. Robert Robertson and Benjamin Holt of Hogan Lovells and Kathleen Furey McDonough, John A. Sensing and Ryan C. Cicoski of Potter Anderson & Corroon.
The case is captioned Dow Chemical v. Organik Kimya Holding.