Philmo, Inc. v. Checker Food Holding Company et al

Filing 20

MEMORANDUM OPINION AND ORDER by Chief Judge Joseph H. McKinley, Jr. For the reasons set forth, IT IS HEREBY ORDERED that Defendants' Motion to Dismiss or Transfer is GRANTED. cc: Counsel (CDR)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
BOWLING GREEN DIVISION
CIVIL ACTION NO. 1:15-cv-00098-JHM
PHILMO, INC.

PLAINTIFF

V.
CHECKER FOOD HOLDING COMPANY
d/b/a CHECKER BAG COMPANY and
CHECKER FOOD PRODUCTS COMPANY

DEFENDANTS

MEMORANDUM OPINION AND ORDER
This matter is before the Court on Defendants’ Motion to Dismiss or Transfer [DN 17].
Fully briefed, this matter is ripe for decision. For the following reasons, Defendants’ Motion to
Dismiss is GRANTED.
I. BACKGROUND
Plaintiff is in the business of manufacturing adhesive tape, including duct tape, with
specialty printed designs. (Pl.’s Compl. [DN 1] ¶ 2.) Plaintiff is a Kentucky corporation, with
its principal place of business in Kentucky as well. (Id. ¶ 1.) Defendants specialize in printing
and is a Missouri company with its principal place of business also in Missouri. (Id. ¶ 3.) In
2010, Plaintiff needed to find a company that could produce a sufficient amount of film for
Plaintiff to use in order to create specially printed tape with the designs requested by Plaintiff’s
customer, 3M Company. (Pl.’s Resp. [DN 18] at 1.) Plaintiff then contacted Brentwood Plastics
(hereinafter “Brentwood”), a Missouri corporation, with whom Plaintiff had a longstanding
contractual relationship. (Id.; Def.’s Mem. Supp. Mot. Summ. J. [DN 17-1] at 2.) Brentwood
then put Plaintiff in contact with Defendant. (Def.’s Mem. Supp. Mot. Summ. J. [DN 17-1] at
2.) Plaintiff negotiated a contract with Defendants, in which Defendants would receive film from
Brentwood in Missouri and print designs on the Brentwood film. (Pl.’s Resp. [DN 18] at 1.)

Once printing was complete, Defendants would ship the printed film via a third-party carrier
from Missouri to Kentucky or Plaintiff would pick up the film in Missouri and transport it to
Kentucky. (Def.’s Mem. Supp. Mot. Summ. J. [DN 17-1] at 3.) Upon arrival, Plaintiff would
use it to manufacture the adhesive tape for Plaintiff’s customers, namely 3M Company. (Id.)
Throughout the course of the contractual relationship, Defendants shipped samples to
Plaintiff’s customers, mostly 3M Company of Minneapolis, and received large sums of money
from Plaintiffs—over $1,500,000 in payment for the printing. (Id. at 2.) However, Plaintiff
purportedly began receiving “defective and/or nonconforming film that was missing color in
places, was faded, had areas of shadowing, or had black, orange or yellow spots running through
the designs.” (Id. at 2.) The defectively printed film is currently being held at Plaintiff’s plant in
Kentucky and is unusable.

(Id.)

When Plaintiff discovered the defects, Plaintiff and

Defendants attempted to resolve their disagreements without resorting to litigation; but, when
those negotiations broke down, Plaintiff filed suit to recover for breach of express warranty,
nonconformity of goods, breach of implied warranty, and negligence. (Id.)
Defendants now ask this Court to dismiss the action based on lack of proper venue or,
alternatively, to transfer the matter to Missouri. Plaintiff argues that the Western District of
Kentucky is a proper venue under Kentucky’s long-arm statute and that Kentucky is just as a
good of a venue as Missouri, rendering transfer inappropriate.
II. STANDARD OF REVIEW
Under 28 U.S.C. § 1391(b)(1), venue is proper in “a judicial district in which any
defendant resides, if all defendants are residents of the State in which the district is located.”1
An entity “shall be deemed to reside, if a defendant, in any judicial district in which such
defendant is subject to the court’s personal jurisdiction with respect to the civil action in
1

The parties do not argue that 28 U.S.C. § 1391(b)(2) or 28 U.S.C.§ 1391(b)(3) could give rise to proper venue.

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question.” 28 U.S.C. § 1391(c)(2). Therefore, this Court must have personal jurisdiction over an
entity in order for venue to be proper in Kentucky.

“In a diversity case, a federal court

determines whether personal jurisdiction exists over a nonresident defendant by applying the law
of the state in which it sits.” Third Nat. Bank in Nashville v. WEDGE Grp. Inc., 882 F.2d 1087,
1089 (6th Cir. 1989) (citing American Greetings Corp. v. Cohn, 839 F.2d 1164, 1167 (6th
Cir.1988); see also First Nat. Bank of Louisville v. J. W. Brewer Tire Co., 680 F.2d 1123, 1125
(6th Cir. 1982).
Kentucky’s long-arm statute permits Kentucky courts to exercise personal jurisdiction
over certain nonresident defendants. Churchill Downs, Inc. v. NLR Entm’t, LLC, No. 3:14-CV166-H, 2014 WL 2200674, at *5 (W.D. Ky. May 27, 2014) (citing KRS § 454.210). However,
“the Kentucky Supreme Court [has] clarified that this statute is not co-extensive with federal due
process.” Id. (citing Caesars Riverboat Casino, LLC v. Beach, 336 S.W.3d 51, 56 (Ky. 2011)).
A plaintiff’s claims must instead “meet one of the nine explicit categories of the long-arm
statute, even if federal due process would otherwise permit personal jurisdiction.” Id. In order
to assert personal jurisdiction over a defendant under the Kentucky long-arm statute, a plaintiff
must show: “(1) [the defendant’s] conduct falls under a statutory category identified in KRS §
454.210(2)(a), and (2) [the plaintiff’s] claim ‘arises from’ that statutory provision.” Id. (citing
Caesars, 336 S.W.3d at 58). Under the second prong, “[a] claim ‘arises from’ certain conduct
when there is a ‘reasonable and direct nexus’ between the conduct causing injury and the
defendant’s activities in the state.” Id. (citing Caesars, 336 S.W.3d at 59).
III. DISCUSSION
Here, Plaintiff asserts that Defendants were “transacting business” in the Commonwealth
of Kentucky under KRS § 454.210(2)(a)(1) and that Plaintiff’s claim arises from Defendants’

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business transactions. Defendants argue that the Court does not have personal jurisdiction under
Kentucky’s long-arm statute and request that Plaintiff’s Complaint be dismissed.
“[T]he key inquiry in personal jurisdiction cases concerns the activities of the defendant,
not the plaintiff.” Spectrum Scan, LLC v. AGM CA, No. 3:07 CV 72 H, 2007 WL 2258860, at
*3 (W.D. Ky. Aug. 2, 2007) (emphasis in original).

“The process of analyzing personal

jurisdiction is not a mechanical one and each case must be analyzed on its individual merits.” Id.
(citing In-Flight Devices Corp. v. Van Dusen Air, Inc., 466 F.2d 220, 225–26 (6th Cir. 1972));
see Caesars, 336 S.W.3d at 59 (“[N]o general rule can be expressed to take into account the
unlimited factual possibilities that can arise, and the analysis must necessarily be undertaken on a
case by case basis.”). The Court must keep in mind that, “a contract with a Kentucky company
[does] not alone support the exercise of jurisdiction over a nonresident [d]efendant under KRS
454.210(2)(a)(1).” Churchill Downs, 2014 WL 2200674, at *6 (citing Spectrum Scan, 2007 WL
2258860, at *2–3); see also Calphalon Corp. v. Rowlette, 228 F .3d 718, 722 (6th Cir. 2000)
(“[T]he mere existence of a contract . . . is insufficient to confer personal jurisdiction over [a
non-resident defendant]”).
Because the Kentucky long-arm statute is not coterminous with federal due process,
many courts interpreting the statute have declined to find that certain defendants with attenuated
contacts with Kentucky were “transacting business” in the Commonwealth. For example, in
Spectrum Scan, a Kentucky corporation entered into a contract to perform services for a
partnership located in California. Spectrum Scan, 2007 WL 2258860, at *1. The Court declined
to exercise personal jurisdiction over the California defendant, as the defendant did not initiate
contact with the plaintiff, neither the contract’s negotiations nor its execution took place in
Kentucky, the subject matter of the contract was outside Kentucky, and the contract did not

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waive personal jurisdiction. Id. at *2. Similarly, in Envirometric Process Controls, a Kentucky
corporation subcontracted with a Tennessee corporation for the Tennessee corporation to provide
services in Tennessee. Envirometric Process Controls, Inc. v. Adman Electric, Inc., 3:12CV-62S, 2012 WL 4023789, at *2 (W.D. Ky. Sept. 12, 2012). The court found that the Tennessee
defendant did not establish sufficient contacts because the defendant was not licensed to do
business in Kentucky, had no physical presence in Kentucky, and its performance of its contract
obligations did not occur in Kentucky. Id. Even though the defendant contacted the plaintiff and
negotiated the contract over the phone and via email, the court found these activities insufficient
for “transacting business” under KRS § 454.210. Id. at *2–3. Additionally, in Churchill Downs,
the plaintiff, a Delaware corporation with a principal place of business in Kentucky, entered into
a contract with the defendant, a Delaware corporation with a principal place of business in New
Jersey. 2014 WL 2200674, at *1. The plaintiff was to develop an online gaming system for the
defendant’s casino boat. Id. Even though performance took place over a number of years and
for a substantial sum, the court found that the defendant was not “transacting business” in
Kentucky, as the defendant did not solicit business from plaintiff, plaintiff’s in-house counsel led
contract negotiations, and performance of the contract took place in Kentucky. Id. at *6.
On the other hand, in Caesars, the seminal decision defining “transacting business” under
Kentucky’s long-arm statute, the plaintiff fell on the defendant’s casino boat docked in Indiana.
336 S.W.3d at 53. Though the injury occurred outside the state and the defendant maintained no
physical presence in Kentucky, the defendant engaged in mass media and billboard advertising in
Kentucky, sent direct mail advertising to Kentucky residents, offered preferred customer
incentives directed to Kentucky residents, derived substantial revenue from Kentucky citizens,
and was involved in extensive civic and charitable activities in the Commonwealth. Id. at 53,

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57–58. The Court found that these extensive activities were sufficient to constitute “transacting
business” in Kentucky. Id. at 58.
Here, Defendants’ connection to Kentucky is more akin to the defendants’ contacts in
Spectrum Scan, Envirometric Process Controls, and Churchill Downs than the defendant’s in
Caesars. Plaintiff originally contacted Brentwood, a film supplier located in the St. Louis area,
inquiring as to whether Brentwood knew of anyone able to print custom designs on the film that
Brentwood supplies to Plaintiff. (Pl.’s Resp. [DN 18] at 1.) Brentwood then put Plaintiff in
contact with Defendant. (Def.’s Mem. Supp. Mot. Summ. J. [DN 17-1] at 2.) Plaintiff and
Defendants came to an oral agreement whereby Defendants would print the images in Missouri
on film provided by Brentwood and either send the printed film to Plaintiff in Kentucky via a
third-party carrier or allow Plaintiff to pick up the printed film in Missouri. (Id. at 2–3.)
Defendants received film from Brentwood located in Missouri, printed on the film in Missouri,
and held meetings with Plaintiff at its facility in Missouri regarding any relevant printing issues.
(Id. at 3.) Defendants sent quality control samples to Plaintiff’s end customer (3M Company) in
the Minneapolis area and 3M Company representatives would visit Defendants’ plant to review
the printing process in Missouri. (Id.) Defendants’ agents never sent representatives to, held
meetings in, or stepped foot in Kentucky during the course of the contractual relationship. (Id.)
Further, Defendants have no other contracts with Kentucky corporations and have no physical
operations in Kentucky. (Id.)
Taking these facts into account, the only contacts that Defendants had with the
Commonwealth were: 1) entering into an oral contract with Plaintiff, 2) shipping printed film via
a third-party carrier to Kentucky or allowing Plaintiff to pick up printed film from Missouri and
transport it into Kentucky, and 3) receiving large sums of money from Plaintiff as payment for

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printing. Defendants neither sought out business in Kentucky, nor did they perform any part of
the contract in Kentucky. It is worth repeating that “the key inquiry in personal jurisdiction
cases concerns the activities of the defendant, not the plaintiff.” Spectrum Scan, 2007 WL
2258860, at *3 (emphasis in original).

And, here, Defendants’ actions do not amount to

“transacting business” in Kentucky; therefore, this Court cannot exercise personal jurisdiction
over Defendants. Accordingly, the venue is improper and the Court must grant Defendants’
Motion to Dismiss for lack of proper venue.2
IV. CONCLUSION
For the reasons set forth above, IT IS HEREBY ORDERED that Defendants’ Motion to
Dismiss or Transfer is GRANTED.

March 21, 2016

cc: counsel of record

2

The Court will not consider Defendants’ alternative Motion to Transfer first because their principal Motion to
Dismiss has been granted, but also because “a transfer based on convenience under [28 U.S.C.] § 1404(a) applies
only where the transferor court holds both proper venue and personal jurisdiction,” which this Court has determined
it does not have.” Sechel Holdings, Inc. v. Clapp, No. 3:12-CV-00108-H, 2012 WL 3150087, at *2 (W.D. Ky. Aug.
2, 2012) (citing Martin v. Stokes, 623 F.2d 469, 474 (6th Cir. 1980)).

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