Mechanical Equipment Company, Inc. v. GMP Systems, Inc.

Filing 34

ORDER & REASONS denying 26 Motion to Dismiss for Lack of Jurisdiction. Signed by Judge Eldon E. Fallon on 8/1/11. (ala, )

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA

MECHANICAL EQUIPMENT COMPANY, INC.

CIVIL ACTION

VERSUS

NO. 10-2452

GMP SYSTEMS, INC.

SECTION “L” (1)

ORDER AND REASONS
Currently pending before the Court is Defendant GMP Systems Inc. (“GMP”)’s motion
to dismiss for lack of personal jurisdiction (Rec. Doc. 26). The Court has reviewed the briefs
and the applicable law and heard oral argument and now issues this Order and Reasons.
I.

BACKGROUND
This case arises out of a contract between GMP and Mechanical Equipment Company,

Inc. (“MECO”) for construction of a water purification system. GMP is a contractor based in
Fairfield, New Jersey, that performs design and construction work for pharmaceutical
companies. GMP’s owner and president is Mr. Joseph Manfredi. MECO is a Louisiana
corporation that manufactures and sells water purification systems and has offices outside of
Louisiana. There is complete diversity of citizenship between the parties.
In 2008, GMP and MECO began discussing terms under which MECO would build a
water purification system for eventual installation in a New Jersey pharmaceutical plant for
Helvoet Pharma, which is not a party to this suit. Mr. Manfredi states that “a sales representative
of MECO, based in Connecticut, called upon GMP” to discuss the contract. GMP states that
prior to performance of the contract it had no contact with MECO in Louisiana.
After the initial meeting, the parties exchanged several documents. First, MECO
submitted a bid proposal dated October 11, 2008, describing the system to be built, quoting price

and other terms, and stating that Louisiana law would apply and the parties would submit to
jurisdiction of Louisiana courts:
1.

2.

The terms of contract stated herein constitutes the entire terms of sale
between the buyer and seller, Mechanical Equipment Co., Inc. (MECO)
hereto relating to the equipment offered and supersedes any prior
agreements, and there are not terms, obligation, covenants,
representations, statements, or conditions other than those contained
herein. No variation or modification, or waiver of these terms shall be
deemed valid unless in writing and signed by both parties.
The terms of contract entered into between the buyer and seller shall be
governed by and interpreted under the laws of Louisiana, USA, and the
parties submit to the jurisdiction of the Louisiana courts for any dispute or
controversy, renouncing any other forum to which either of them might
legally have access.

(Rec. Doc. 1-1). The front of the bid proposal listed a MECO address in Sugar Land, Texas; a
“field service rate schedule” listed addresses in Sugar Land, Texas and Covington, Louisiana;
and a “proprietary and confidential information” page listed an address in New Orleans,
Louisiana. (Rec. Doc. 1-1 at 1, 8, 12). The bid proposal also stated that “This quote constitutes
only solicitations for offer to purchase; further, budgetary quotations and estimates are for
preliminary information only and shall neither constitute offers, nor impose any obligation or
liability upon Seller.” (Rec. Doc. 1-1 at 13).
In response to the bid proposal, GMP sent MECO a purchase order dated October 14,
2008, to the Sugar Land, Texas address. The purchase order consisted of a front page
specifically referring to the MECO bid proposal, quoting a price for the system to be built listed
certain “Terms and Conditions” including a New Jersey choice-of-law provision:
1. ENTIRE AGREEMENT: By accepting or filling this order Seller agrees to its
terms and conditions, which shall prevail over any inconsistent provisions in any
form or other paper submitted by Seller. This order shall constitute the entire
agreement between the parties unless modified in writing by both parties;
provided, however that where express provisions on front of this Purchase Order
or in any other written agreement between Buyer and Seller expressly referenced
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on the front of this Purchase Order are inconsistent with any terms of paragraphs
1 through 25 hereof, then said express provisions shall prevail. This contract may
not be assigned without Buyer’s prior written consent.
In accepting this order, Seller agrees that this contract is made in the state in
which this Purchase Order is issued by Buyer and that the laws of the state apply
hereto. Seller also agrees that title to all goods and materials passes when Buyer
accepts delivery from carrier.
(Rec. Doc. 10-1.)
MECO responded to that purchase order with a letter to Manfredi dated October 28,
2008, on letterhead from MECO’s office in Sugar Land, Texas. The letter stated “We have
completed our review of your purchase order and associated terms and conditions” and “The
following changes are requested to the purchase order’s T&C’s.” (Rec. Doc. 8-2 at 6). Those
changes related to cancellation terms, warranties, and indemnity, and did not address choice of
law or forum selection. (Rec. Doc. 8-2). In response to the October 28, 2008 letter, GMP sent a
letter dated November 7, 2008 to MECO’s Sugar Land, Texas, office, which stated as follows:
We are in receipt of your October 28, 2008 letter. We do accept your suggested
changes however it is not our intention to modify our written existing terms and
conditions.
This letter will serve as acknowledgment and acceptance of your suggested
changes and will serve as a change order to our purchase order.
(Rec. Doc. 8-2). None of these communications were sent to or from Louisiana.
MECO subsequently began manufacturing the water purification system at a facility in
Covington, Louisiana. The parties have submitted factually consistent affidavits regarding
GMP’s contacts with Louisiana during the performance of the contract. A representative of
GMP physically traveled to Louisiana to inspect the water purification equipment during the
construction. GMP sent three change orders addressed to the Covington, Louisiana facility.
MECO sent invoices from its Covington facility to GMP, which were paid at least in part.

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MECO alleges that the equipment was eventually installed in New Jersey and is still in use.
On June 22, 2010, MECO filed suit against GMP for breach of contract in the 22nd
Judicial District Court for the Parish of St. Tammany. MECO alleges that GMP has failed to pay
amounts due under the contract for construction of the purification system. MECO prays for the
full amount owed under the contract, costs, fees, and all other damage and legal and equitable
relief the Court deems just. On August 4, 2010, GMP removed the case to this Court on the
basis of diversity jurisdiction.
On February 7, 2011, the Court issued an Order and Reasons (Rec. Doc. 18) denying
MECO’s motion to remand to state court based on an insufficient amount in controversy and
denying GMP’s motion to dismiss for lack of personal jursidiction, with leave to re-file the latter
motion after jurisdictional discovery. The Court stated that “there are meaningful Louisiana
connections to the negotiations and agreement between the parties and the course of
performance,” although “the record is less clear regarding the extent to which GMP was aware
of those Louisiana connections at the time the agreement was formed, or the intent of the parties
regarding choice of law and forum selection terms in their agreement.” Accordingly, the Court
ordered limited jurisdictional discovery relating to “among other things, the knowledge of the
parties regarding the nature and extent of MECO’s manufacturing activities in Louisiana and
other foreseeable contacts between Louisiana and the contract at issues, and the intent of the
parties with respect to the choice of law and jurisdictional terms of the contract.”
The parties had some difficulty with the discovery. The Court denied a motion for
default judgment and ordered that the discovery be completed by May 20, 2011, and ordered
GMP to file an answer or a renewed motion to dismiss for lack of personal jurisdiction.
II.

PRESENT MOTION
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Defendant GMP now renews its motion to dismiss for lack of personal jurisdiction. It
argues that after having had an opportunity for jurisdictional discovery, MECO still has yet to
produce or cite any evidence or testimony suggesting that GMP knew at the time it entered into
the contract that there were any Louisiana connections to the contract. GMP contends that its
contacts with Louisiana only occurred much later when the contract was being performed, and
therefore it was not foreseeable to GMP at the time it entered into the contract that it could be
sued in Louisiana.
Plaintiff MECO argues in response that its initial bid proposal contained a Louisiana
choice-of-law and forum-selection clause, and that during the performance of the contract GMP
had numerous contacts with Louisiana relating to the contract. Therefore, MECO argues that
there are sufficient contacts to establish a prima facie case of personal jurisdiction over GMP in
Louisiana.
III.

LAW AND ANALYSIS

A.

Personal Jurisdiction
To exercise personal jurisdiction over a non-resident defendant in a diversity case, the

Court must establish that the particular facts of the case fall within the forum state’s long-arm
statute and that the assertion of personal jurisdiction is consistent with the Due Process Clause of
the Fourteenth Amendment. See Latshaw v. Johnson, 167 F.3d 208, 211 (5th Cir. 1999). The
Louisiana long-arm statute extends personal jurisdiction to the constitutional limits. See La.
Rev. Stat. Ann. § 13:3201(B); Nuovo Pignone, SPA v. Stroman Asia M/V, 310 F.3d 374, 378
(5th Cir. 2002); Walk Haydel & Associates, Inc. v. Coastal Power Prod. Co., 517 F.3d 235, 242243 (5th Cir. 2008). Due process requires that “(1) the defendant has purposefully availed
himself of the benefits and protections of the forum state by establishing minimum contacts with
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the forum state, and (2) exercise of jurisdiction over that defendant does not offend traditional
notions of fair play and substantial justice.” Walk Haydel, 517 F.3d at 243.
“Where a defendant challenges personal jurisdiction, the party seeking to invoke the
power of the court bears the burden of proving that jurisdiction exists.” Luv N’ care, Ltd. v.
Insta-Mix, Inc., 438 F.3d 465, 469 (5th Cir. 2006). In the absence of an evidentiary hearing, the
court must “accept as true the uncontroverted allegations in the complaint and resolve in favor of
the plaintiff any factual conflicts posed by the affidavits.” Latshaw, 167 F.3d at 211.
“Therefore, in a no-hearing situation, a plaintiff satisfies his burden by presenting a prima facie
case for personal jurisdiction.” Id. Denying a motion to dismiss for lack of personal jurisdiction
does not relieve a plaintiff of “its ultimate burden at trial of establishing contested jurisdictional
facts by a preponderance of the evidence.” See Mullins v. TestAmerica, Inc., 564 F.3d 386, 399
(5th Cir. 2009).
A determination that a defendant purposefully established minimum contacts in the
forum state remains the “constitutional touchstone” of whether a court’s assertion of personal
jurisdiction over the defendants complies with the Due Process Clause of the Fourteenth
Amendment. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474 (1985). When a court makes
the minimum contacts determination, it focuses on the defendant’s actions. In order to establish
minimum contacts, the defendant must commit “some act by which the defendant purposefully
avails itself of the privilege of conducting activities within the forum State, thus invoking the
benefits and protections of its laws.” Id. at 475 (quoting Hanson v. Denckla, 357 U.S. 235, 253
(1958)). A defendant purposefully avails itself to a forum state when it engages in actions that
make it reasonable for it to anticipate being haled into court there. See World-Wide Volkswagen
Corp. v. Woodson, 444 U.S. 286, 297 (1980).
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“Minimum contacts” may be established through acts giving rise to general or specific
jurisdiction. Specific jurisdiction “exists when the defendant has ‘purposefully directed’ his
activities at residents of the forum ... and the litigation results from alleged injuries that arise out
of or relate to those activities.” Clemens v. McNamee, 615 F.3d 374, 378 (5th Cir. 2010)
(quotation omitted; alteration in original). General jurisdiction may be established when a
defendant’s contacts with the forum state are unrelated to the cause of action but are continuous
and systematic. Mink v. AAAA Dev. LLC, 190 F.3d 333, 336 (5th Cir. 1999). It is uncontested
that the Court does not have general personal jurisdiction over GMP.
“An alleged contractual relationship between a plaintiff and a non-resident defendant
confers specific jurisdiction when the plaintiff's cause of action ‘arises out of or is related to’ the
contract at issue.” Ochsner Clinic Found. v. Nicholas, No. 06-10542, 2007 WL 2088383, at *2
(E.D. La. July 20, 2007) (quotation omitted). But, “[a] contract with an out-of-state party alone,
although relevant, does not automatically establish sufficient minimum contacts.”
Electrosource, Inc. v. Horizon Battery Techs., Ltd., 176 F.3d 867, 872 (5th Cir. 1999). “A
‘highly realistic’ approach is called for, recognizing that a contract is ordinarily but an
intermediate step serving to tie up prior negotiations and future consequences which themselves
are the real object of the business transaction.” Id. The Court must consider “the following
factors surrounding the contract and its formation: (1) prior negotiations between the parties, (2)
contemplated future consequences of the contract, (3) the terms of the contract, and (4) the
parties’ actual course of dealing.” Burger King, 471 U.S. at 479; see also ICEE Distribs., Inc. v.
J&J Snack Foods Corp., 325 F.3d 586, 592 (5th Cir. 2003); Electrosource, 176 F.3d at 872.
The second prong deals with the fairness of asserting jurisdiction over the defendant.
Once the plaintiff establishes that the defendant has minimum contacts with Louisiana, “the
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burden shifts to the defendant to defeat jurisdiction by showing that its exercise would be unfair
or unreasonable.” Seiferth v. Helicopteros Atuneros, Inc., 472 F.3d 266, 271 (5th Cir. 2006)
(citing Nuovo, 310 F.3d at 382). “The defendant must make a ‘compelling case.’” Id. (citing
Burger King, 471 U.S. at 477). The court must “consider the burden upon the nonresident
defendant, the forum state's interest in the litigation, the plaintiff's interest in securing relief in
that forum, ‘the interstate judicial system’s interest in obtaining the most efficient resolution of
controversies,’ and ‘the shared interest of the several States in furthering fundamental
substantive social policies.’” ICEE Distribs., 325 F.3d at 593-94 (quoting Felch v. Transportes
Lar-Mex SA de CV, 92 F.3d 320, 324 n.9 (5th Cir. 1996)).
B.

Analysis
1.

Minimum Contacts

In this breach of contract suit, the court must consider “prior negotiations and
contemplated future consequences, along with the terms of the contract and the parties’ actual
course of dealing ... in determining whether the defendant purposefully established minimum
contacts within the forum.” Burger King, 471 U.S. at 479.
i.

Prior Negotiations Between the Parties

There does not appear to be a factual dispute regarding the negotiations and pre-contract
communications between the parties. GMP, a New Jersey entity, communicated with a MECO
representative based in Connecticut and with MECO’s office in Sugar Land, Texas. The MECO
bid proposal stated that Louisiana law would apply and disputes would be heard exclusively in
Louisiana courts, and contained two references to contact addresses for MECO in Covington,
Louisiana, and New Orleans, Louisiana.
The prior negotiations between the parties raised the specter of contact with Louisiana.
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MECO attempted to bind GMP to a Louisiana forum-selection clause (although, as discussed
below, that term is not part of the parties’ contract). The bid proposal also contained just as
many references to Louisiana addresses for MECO as it did to Texas addresses. Thus, the
negotiations were not devoid of implicit contacts with the State of Louisiana. Although GMP
may not have inquired further about those Louisiana connections, they were flagged during the
negotiations.
ii.

Contemplated Future Consequences of the Contract

MECO contracted to build a water purification system for GMP, for installation in New
Jersey. After initial discussions, MECO submitted a bid proposal, contemplating that the
construction will occur at MECO’s factory and allowing for inspection at MECO’s factory. The
shipping terms are FOB MECO’s factory. Although MECO’s factory was apparently not
disclosed to be in Louisiana, it is clear that GMP did not believe the machinery would be built in
New Jersey. Thus, the contract contemplated a substantial portion of performance to be done
somewhere other than New Jersey.
Additionally, GMP’s purchase order contemplates some degree of future communication
with MECO. “[W]hen a nonresident defendant voluntarily enters into a contract which
contemplates business activity by a forum-state entity foreseeable to the nonresident defendant”
the contract supports the exercise of jurisdiction. Cent. Progressive Bank v. Harvey, No. 084035, 2009 WL 901770, at *4 (E.D. La. Mar. 27, 2009) (quotation omitted). The record
suggests that GMP first learned in February, 2009 that the water purification system factory was
being built in Covington, Louisiana. However, the future consequences as contemplated did not
rule out Louisiana as the building site. Thus, this factor does not constitute a strong contact with
Louisiana, but it also does not weigh against exercise of jurisdiction.
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iii.

Terms of the Contract

The parties dispute whether the contract between them included consent to jurisdiction in
Louisiana. As set forth above, MECO submitted a bid proposal dated October 11, 2008 which
contained a purported Louisiana choice-of-law and forum-selection provision. However, by its
terms the bid proposal “constitute[d] only solicitations for offer to purchase” and the “budgetary
quotations and estimates are for preliminary information only and shall neither constitute offers,
nor impose any obligation or liability upon Seller.” Thus, the bid proposal was not an offer and
the Louisiana choice-of-law and forum-selection provisions could have been accepted by GMP
and could not have become any part of the eventual agreement between MECO and GMP.
Furthermore, GMP’s responsive purchase order expressly stated that “By accepting or
filling this order Seller agrees to its terms and conditions,” and that it was “the entire agreement
between the parties.” Although it did contain a provision which would incorporate inconsistent
terms found in a prior written agreement expressly referenced in the purchase order, MECO’s
bid proposal alone does not constitute an “other written agreement between” the parties. Thus,
MECO’s purported Louisiana provisions were not incorporated by reference. Indeed, in
responding to GMP’s purchase order, MECO stated that “changes are requested to the purchase
order’s T&C’s.” (Rec. Doc. 8-2 at 6) (emphasis added). Thus, GMP’s terms and conditions
formed the basis of the agreement between the parties. Accordingly, it is GMP’s New Jersey
choice-of-law provision, not MECO’s Louisiana choice-of-law and forum-selection terms, that
control.
However, GMP’s terms and conditions addressed only the law that governs the
contractual relationship and where the contract was made, not where the contract may be
enforced through suit. Although GMP may not have consented to suit in Louisiana, the contract
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does not forbid it or require jurisdiction in some other forum. Thus, this factor does not weigh
for or against exercise of personal jurisdiction over GMP in Louisiana.
iv.

Actual Course of Dealing

Finally, the facts regarding the course of performance of the contract as established by
the parties through affidavits are undisputed, although the parties dispute the legal effect of those
facts. MECO constructed the water purification equipment at its facility in Covington,
Louisiana. A representative of GMP physically traveled to Louisiana to inspect the water
purification equipment during the construction. GMP sent three change orders addressed to the
Covington, Louisiana facility. MECO sent invoices from its Covington facility to GMP.
Because the water purification system was built in Louisiana, MECO argues that
personal jurisdiction over GMP is warranted. “The place where the contract is performed is a
‘weighty consideration’ in ascertaining whether or not specific jurisdiction is properly
exercised.” Polythane Sys., Inc. v. Marina Ventures Int’l, Ltd., 993 F.2d 1201, 1205 (5th Cir.
1993) (quoting Command-Aire Corp. v. Ontario Mech. Sales & Serv. Inc., 963 F.2d 90, 94 (5th
Cir. 1992)). The parties both agree that MECO constructed the water purification system at its
factory located in Covington, Louisiana. (Rec. Doc. 8-1). Thus, construction of the system,
which is a large part of the contract, occurred in Louisiana and that “weighty consideration”
supports the exercise of personal jurisdiction. Id.
Although MECO may not have expressly declared that the system would be built in
Louisiana, GMP’s communications with Louisiana and physical visit through a representative
are also relevant contacts that support assertion of personal jurisdiction over GMP. See
Lionheart Development, LLC v. Apex Bldg. Sys., LLC, No. 08-4070, 2009 WL 35348, at *3 (E.D.
La. Jan. 5, 2009). A defendant’s physical presence within a forum enhances the defendant’s
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contacts with the forum state, though communications are themselves significant. See Burger
King, 471 U.S. at 476 (1985).
Here, although the scope of the role Louisiana would play in the contractual performance
may not have been fully apparent at the outset, GMP was made aware relatively early in the
course of performance. Having been made aware, it purposefully and directly communicated
with MECO in Louisiana, paid invoices sent from Louisiana, sent a representative to Covington
in connection with the contract, and purposefully availed itself of the privilege of conducting
business in Louisiana. These were deliberate contacts with the forum, and they weigh heavily in
favor of finding personal jurisdiction.
v.

Summary

On the whole, the evidence relevant to these factors supports the conclusion that MECO
has established a prima facie case for the exercise of personal jurisdiction over GMP. From the
outset of negotiations, there were references to MECO’s connections with Louisiana, including
addresses on the paperwork and an attempt to make a Louisiana forum-selection clause a part of
the contract between the parties. Although that term did not become part of the agreement, there
was enough to put GMP on notice that it could be entering into a contract that would cause
performance to be made in Louisiana. Indeed, during the course of performance GMP
discovered those substantial contacts with Louisiana. GMP purposefully directed
communications and personnel to Louisiana in connection with the contract. Although the
extent of Louisiana’s involvement may not have been clear at first, resolving factual disputes and
inferences in favor of MECO at this stage as the Court must, there were enough contacts with
Louisiana that GMP cannot be surprised to have been sued in Louisiana on the contract.
Accordingly, the Court concludes that MECO has established a prima facie case for exercise of
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personal jurisdiction over GMP.
2.

Traditional Notions of Fair Play and Substantial Justice

Next, the Court must consider the fairness of asserting jurisdiction over GMP. MECO
has made a prima facie showing, and accordingly the burden shifts to the defendant to defeat
jurisdiction by showing that its exercise would be unfair or unreasonable.” Seiferth, 472 F.3d at
271. “The defendant must make a ‘compelling case.’” Id. (citing Burger King, 471 U.S. at 477).
The court must “consider the burden upon the nonresident defendant, the forum state's interest in
the litigation, the plaintiff's interest in securing relief in that forum, the interstate judicial
system’s interest in obtaining the most efficient resolution of controversies, and the shared
interest of the several States in furthering fundamental substantive social policies.” ICEE
Distribs., 325 F.3d at 593-94 (5th Cir. 2003) (quotations omitted).
Exercising personal jurisdiction over GMP is not unfair or unreasonable. The contract
was performed in Louisiana by a Louisiana entity, and accordingly the forum state has an
interest in the litigation. Although litigating in Louisiana may be some burden on GMP, an New
Jersey entity, the Court cannot conclude on this record that GMP’s burden significantly
outweighs MECO’s interest in securing relief in this forum.
IV.

CONCLUSION

For the foregoing reasons,
IT IS ORDERED that GMP’s Motion to Dismiss is DENIED.
New Orleans, Louisiana, this 1st day of August , 2011.

UNITED STATES DISTRICT JUDGE

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