GENEVA WOOD FUELS LLC v. EARTH CARE PRODUCTS INC

Filing 19

ORDER denying 11 Motion to Dismiss or in the Alternative to Transfer; denying 16 Motion to Stay; granting without objection 18 Motion to Extend Time Discovery Deadlines. By JUDGE JOHN A. WOODCOCK, JR. (MFS)

UNITED STATES DISTRICT COURT
DISTRICT OF MAINE
GENEVA WOOD FUELS, LLC,
Plaintiff,
v.
EARTH CARE PRODUCTS, INC.,
Defendant.

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1:12-cv-00191-JAW

ORDER ON DEFENDANT EARTH CARE’S MOTION TO DISMISS OR TO
TRANSFER AND TO STAY DISCOVERY AND ON PLAINTIFF GENEVA’S
UNOPPOSED MOTION TO EXTEND DISCOVERY DEADILNES
Concluding that a forum selection clause that governs “legal actions brought
to enforce or construe any of the provisions” of an equipment supply contract does
not apply to tort claims arising out of an explosion allegedly caused by the
defendant’s design and construction of a wood pellet plant, the Court denies the
defendant’s motion to dismiss or transfer. Having retained jurisdiction, the Court
denies the defendant’s motion to stay discovery and grants the plaintiff’s unopposed
motion to extend discovery deadlines.
I.

STATEMENT OF FACTS
A.

Procedural History

On April 18, 2012, Geneva Wood Fuels, LLC, (Geneva) filed suit in state of
Maine Superior Court for Franklin County against Earth Care Products, Inc. (Earth
Care), alleging that Earth Care was negligent and strictly liable for physical
damage to a Geneva wood pellet plant caused by an August 8, 2009 explosion. State

Ct. Record Attach. 1, Compl. (ECF No. 3-1) (Compl.). On June 15, 2012, Earth Care
removed the case to this Court based on diversity jurisdiction. Notice of Removal ¶¶
4-5 (ECF No. 1). On July 24, 2012, Earth Care filed a motion to dismiss or transfer.
Def.’s Mot. to Dismiss Pursuant to Rule 12(b)(3) or in the Alternative to Trans. This
Matter to the U.S. Dist. Ct. for the Dist. of Kansas (ECF No. 11) (Def.’s Mot.).
Geneva responded on August 14, 2012. Pl.’s Opp’n to Def.’s Mot. to Dismiss or in the
Alternative to Transfer (ECF No. 12) (Pl.’s Opp’n). Earth Care replied on August 28,
2012. Def. Earth Care’s Reply Mem. to Pl.’s Opp’n to Mot. to Dismiss or Transfer
(ECF No. 15). On October 19, 2012, Earth Care moved to stay discovery pending a
decision on the motion to transfer or dismiss. Def.’s Mot. to Stay Disc. Pending
Decision on Mot. to Transfer or Dismiss (ECF No. 16).

Geneva responded in

opposition on October 24, 2012. Pl.’s Opp’n to Def.’s Mot. to Stay Disc. (ECF No. 17).
B.

The Contracts

There are four agreements at issue in this case. The first is a hold harmless
agreement among Earth Care, Geneva1, and Pellet Systems International, Inc.
(PSI). Def.’s Mot. Attach 5, Hold Harmless Agreement (ECF No. 11-5).

It was

signed by all three parties on February 20, 2008. Id. It recited that Geneva had
entered into contractual agreements with PSI “to engineer, procure, and construct a
wood pelleting plant in Strong, Maine,”2 that PSI had “requested quotations for
equipment supply from [Earth Care] for wood drying and wood burning for the
The Hold Harmless Agreement refers to “Geneva Energy” (after which is handwritten
“Maine LLC”) rather than “Geneva Wood Fuels, LLC.”
2
Although the Hold Harmless Agreement states that Geneva had already entered into an
agreement with PSI for the wood pelleting plant by February 20, 2008, the Turnkey Agreement
described below was not signed until May 31, 2008.
1

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pellet plant,” and that Geneva had “requested an overview meeting among the three
parties asking [Earth Care] to offer its best solutions addressing issues in previous
design and equipment proposed for drying.” Id. The parties agreed in the Hold
Harmless Agreement that Earth Care “will not be named or brought into any legal
action caused by [Geneva] or PSI.” Id.
On May 13, 2008, PSI entered into a thirty-four page contract with Geneva
entitled “Turnkey Equipment Supply and Installation Agreement.”

Def.’s Mot.

Attach. 4, Turnkey Equipment Supply and Installation Agreement, 1 (Turnkey
Agreement). The contract price was $7,500,000.00. Id. at 5. The contract describes
the project: “A nominal guaranteed, 15 Tonne Per Hour Pellet Manufacturing Plant,
located in the town of Strong, Maine, USA.” Id. at 1. PSI agreed to provide services
including “Project Management, Engineering, Procurement and Installation” of the
plant. Id. at 1. The Turnkey Agreement contained the following clause:
The laws of the State of Maine, USA will be choice of laws for
interpretation and/or remedy of disputes resulting from this
contract. In the event of a commercial or legal dispute, the
parties covenant to submit the dispute to binding arbitration
which shall be final, without recourse of appeal.
Id. at 7 (bold print and underline in contract).
On May 30, 2008, Earth Care entered into a contract with PSI under which
Earth Care agreed to furnish PSI “[m]achinery and equipment covered by this
Agreement in accordance with the specifications, terms and conditions outlined
herein for the project referenced as Wood Pellet Plant, Geneva.”

Def.’s Mot.

Attach. 2, Agreement No. MDI-06-0299-08, 1 (ECF No. 11-2) (Earth Care―PSI

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Contract). The contract price was $3,750,000.00 for forty-four itemized pieces of
equipment or services. Id. at 1-8. Among the clauses in this contract is a forum
selection clause:
CONSTRUCTION. This Agreement constitutes the entire agreement
between the parties and shall be construed and enforced in accordance
with the laws of the State of Kansas. Seller shall not be bound by any
agent’s, employees or dealer’s representation, promise or inducement
not set forth herein. No course of prior dealings between the parties
shall be relevant or admissible to supplement, explain or vary any of
the terms of Agreement. The parties agree that the proper and
exclusive forum and venue in all legal actions brought to enforce or
construe any of the provisions of the Agreement shall be in the Federal
District Court for southeast Kansas or, if federal jurisdiction is lacking
in such legal action, in the District Court of Kansas. Each of the
parties hereto irrevocably waives any claim that any such action, suit
or proceeding brought in any such court has been brought in an
inconvenient forum and further irrevocably waives the right to object,
with respect to such suit, action or proceeding brought in any such
court, that such court does not have jurisdiction over such party.
Id. at 10.
In August 2008, Geneva, Earth Care and PSI entered into an “Assignment
Agreement.” Def.’s Mot. Attach. 3, Assignment Agreement, 1 (ECF No. 11-3). The
assignment is prefaced by a statement confirming that PSI “is contracted to Geneva
. . . for a turn-key wood pelleting system on [Geneva’s] site and building in Strong,
Maine” and Earth Care “is subcontracted by PSI to provide [Earth Care’s] turn-key
and drying system for $3,750,000.” Id. It notes that Geneva requested that PSI
assign Earth Care’s agreement directly to Geneva. Id. The Assignment Agreement
states that Geneva paid Earth Care directly in the amount of $1,875,000 and that
the balance due Earth Care was $1,875,000. Id. The Agreement provided that
Earth Care’s “first shipment of equipment payment is due in the amount of
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$798,900 and will be wired to [Earth Care]’s bank from [Geneva] upon all parties
signing and dating this assignment.” Id.
C.

Geneva’s Complaint

In its April 18, 2012 Complaint, Geneva alleges that on August 8, 2008 an
explosion occurred at the Geneva plant, causing its insurer to pay over Seven
Million Dollars in insurance coverage. Compl. ¶ 4. The Complaint alleges that
“Geneva hired Earth Care to design, specify and supply equipment for the Geneva
plant.” Id. ¶ 7. Geneva claims that Earth Care turned the plant over to it in
February 2009. Id. ¶ 13. It says that Earth Care designed the system “so that dry
fines would be returned downstream from the Wood Dryer.” Id. ¶ 10. However,
after the turnover, “there continued to be problems with wood fines and dust
emitting from the plant.” Id. ¶ 14. Earth Care determined that dust was being
emitted from a “horn air intake port” and “came to the Geneva plant to address the
dust problem.” Id. ¶¶ 15, 19. It recommended a solution, which Geneva adopted.
Id. ¶¶ 20, 23. Geneva claims that the August 8, 2009 explosion occurred “in the
dryer due to the build-up of dry fines and the ignition of those fines by a spark from
the furnace” and alleges that the “lack of any spark detection, suppression or
immersion systems up-stream from the Dryer allowed the ignition of the dry fines
by a spark from the Burner.” Id. ¶¶ 25, 27.
Geneva is proceeding against Earth Care under three theories: (1) negligence;
(2) negligent failure to warn; and (3) strict liability. Id. ¶¶ 28-44. Each of these

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theories blames the explosion on Earth Care’s “design, specification, modification
and construction of the wood pellet plant.” Id. ¶¶ 30-32, 36-37, 40-42.
II.

THE PARTIES’ POSITIONS
A.

Earth Care’s Motions

In its motion, Earth Care says that there is a forum selection clause in its
contract with Geneva that requires any legal actions between Geneva and Earth
Care to be initiated in the United States District Court for southeastern Kansas.
Def.’s Mot. at 2. Contending that such clauses are routinely enforced, Earth Care
seeks either to have the matter dismissed or transferred to Kansas. Id. at 2-4.
B.

Geneva’s Response

In its response, Geneva contends that the contract that contains the forum
selection clause upon which Earth Care has based its motion is not at issue in this
case. Pl.’s Opp’n at 4-5. Furthermore, Geneva maintains that by its terms, the
forum selection clause does not apply because the forum selection clause addresses
only contractual disputes and Geneva’s claims against Earth Care are noncontractual. Id. at 5-7. Finally, Geneva asserts that if the forum selection clause
applies, the Court should refuse to enforce it based on an analysis of the four factors
set forth in The Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972). Pl.’s Opp’n at 78.
C.

Earth Care’s Reply

In reply, Earth Care argues that because its contract with Geneva is a key
fact underlying each of Geneva’s theories of recovery, the forum selection clause

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should be honored.

Def.’s Reply at 1-2.

Earth Care maintains that to resolve

Geneva’s claims, the Court will “have to first look to the content of the contract
between Geneva and Earth Care to determine the obligation assumed by each of the
parties.” Id. at 2. Earth Care disputes Geneva’s reading of the forum selection
clause and contends that by its terms the clause applies to “all legal actions.” Id. at
3. Earth Care points to the First Circuit case of Huffington v. T.C. Group LLC, 637
F.3d 18 (1st Cir. 2011) as resolving a similar clause in favor of transfer. Def.’s Reply
at 2-4. Finally, Earth Care rejects Geneva’s claims of contractual overreaching and
unenforceability. Id. at 4-5.
III.

DISCUSSION
A.

Legal Standards

Although Earth Care brought its motion to dismiss under Federal Rule of
Civil Procedure 12(b)(3) (improper venue), the First Circuit “treat[s] a motion to
dismiss based on a forum selection clause as a motion alleging the failure to state a
claim for which relief can be granted under Rule 12(b)(6).” Rivera v. Centro Medico
de Turabo, Inc., 575 F.3d 10, 15 (1st Cir. 2009) (citing Silva v. Encyclopedia
Britannica, Inc., 239 F.3d 385, 387 & n.3 (1st Cir. 2001)). In ruling on a motion to
dismiss, a court is required to “accept as true all the factual allegations in the
complaint and construe all reasonable inferences in favor of the plaintiff.” Sanchez
v. Pereira-Castillo, 590 F.3d 31, 41 (1st Cir. 2009) (quoting Alt. Energy, Inc. v. St.
Paul Fire & Marine Ins. Co., 267 F.3d 30, 33 (1st Cir. 2001)).

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To decide a motion to dismiss under Rule 12(b)(6), the court “may properly
consider only facts and documents that are part of or incorporated into the
complaint; if matters outside the pleadings are considered, the motion must be
decided under the more stringent standards applicable to a Rule 56 motion for
summary judgment.” Trans-Spec Truck Serv., Inc. v. Caterpillar Inc., 524 F.3d 315,
321 (1st Cir. 2008).

However, a court may review certain documents, the

authenticity of which is not challenged, when “a complaint’s factual allegations are
expressly linked to—and admittedly dependent upon—[those] document[s]”; when
that happens, the documents “effectively merge[ ] into the pleadings and the trial
court can review [them] in deciding a motion to dismiss under Rule 12(b)(6).” Id.
(quoting Beddall v. State St. Bank & Trust Co., 137 F.3d 12, 16-17 (1st Cir. 1998))
(internal punctuation omitted).

Specifically, a court may consider documents

central to a plaintiff’s claims and documents referred to in the complaint without
deciding the motion under the summary judgment standard. Alt. Energy, 267 F.3d
at 34. In resolving a forum selection clause issue on a motion to dismiss, the First
Circuit typically examines the contract containing the clause to determine its
applicability and effectiveness. See, e.g., Huffington, 637 F.3d at 21-23.
Under 28 U.S.C. § 1404(a), a district court is authorized “[f]or the
convenience of parties and witnesses, in the interest of justice,” to transfer any civil
action to any other district or division where it might have been brought.

The

burden of proving the propriety of a transfer lies with the party seeking it, and
“there is a strong presumption in favor of the plaintiff’s choice of forum.” Coady v.

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Ashcraft & Gerel, 223 F.3d 1, 11 (1st Cir. 2000) (citing Gulf Oil Corp. v. Gilbert, 330
U.S. 501, 508 (1947)). At the same time, the First Circuit has held that a forum
selection clause is prima facie valid and enforceable “absent a strong showing that it
should be set aside.” Huffington, 637 F.3d at 23 (quoting The Bremen v. Zapata OffShore Co., 407 U.S. 1, 15 (1972)). “The Supreme Court has listed four grounds for
finding a forum clause unenforceable:
(1) the clause was the product of fraud or overreaching;
(2) enforcement would be unreasonable and unjust;
(3) proceedings in the contractual forum will be so gravely difficult and
inconvenient that the party challenging the clause will for all practical
purposes be deprived of his day in court; or
(4) enforcement would contravene a strong public policy of the forum in
which suit is brought, whether declared by statute or by judicial decision.”
Huffington, 637 F.3d at 23 (internal citations and punctuation omitted).
B.

Jurisdiction and Venue

There is no claim that this Court is without jurisdiction over the controversy
between Geneva and Earth Care. The two parties are citizens of different states
and the amount in controversy exceeds Seventy-Five Thousand Dollars, thereby
meeting the jurisdictional requirements of 28 U.S.C. § 1332(a)(1). Furthermore,
based on the allegations in the Complaint, the District of Maine is an appropriate
venue for the initiation of the claim because it is “a judicial district in which a
substantial part of the events or omissions giving rise to the claim occurred, or a
substantial part of the property that is the subject of the action is situated.” 28
U.S.C. § 1391(b)(2).
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C.

The Forum Selection Clause

In Huffington, the First Circuit was careful to distinguish among types of
forum selection clauses. Id. The Huffington Court points out that contracts with
forum selection clauses with “embracing language”—like “with respect to,” “with
reference to,” “relating to,” “in connection with,” and “associated with”–“have
usually been construed broadly.” Id. at 22-23. Id. By contrast, forum selection
clauses with language like “to enforce” or “to construe” intend a “narrower focus.”
Id. at 23.
Here, the forum selection clause by its terms governs only “legal actions
brought to enforce or construe any of the provisions” of the equipment supply
contract, calling for a narrow view of its enforceability. Geneva has limited its
theories of recovery to negligence and strict liability. As Geneva is not seeking to
“enforce or construe any of the provisions” of the equipment supply contract, the
forum selection clause has no application to this case.
D.

The Contracts and the Complaint

Moreover, even if the Court were to conclude that the forum selection clause
embraced non-contractual claims, the clause is found in an equipment supply
contract, whereas Geneva attributes the explosion primarily to Earth Care’s alleged
failures in designing and constructing the plant.
There is an obvious difference between an engineering and construction
contract and an equipment supply contract. Reviewing the contracts in this case,
the Court views the turnkey contract between PSI and Geneva for the “project

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management, engineering, procurement and installation” of the Geneva pellet
manufacturing plant as markedly distinct from the equipment supply contract
between PSI (later Geneva) and Earth Care. PSI, Geneva, and Earth Care carefully
assigned the equipment supply contract. Yet, oddly, once PSI faltered and Geneva
brought in Earth Care in place of PSI as the designer, engineer, and installer of the
plant itself, it appears there was no written agreement as to the terms of this
decidedly new arrangement between Geneva and Earth Care. Indeed, if the parties
had assigned the turnkey contract, not only would Maine law likely apply, but the
dispute would likely be subject to arbitration.
One possibility is that the August 2008 Assignment Agreement constituted
the parties’ agreement that the turnkey contract would be assigned; however, the
Court does not agree with that interpretation of the language of the Assignment
Agreement.

The Assignment Agreement expressly mentions the subcontract

between PSI and Earth Care for $3,750,000, an initial payment of $1,875,000
directly from Geneva, and a balance due Earth Care of $1,875,000. Assignment
Agreement at 1. The Assignment Agreement also specifically mentions Earth Care’s
“first shipment of equipment payment” as being due and Geneva’s agreement to
wire $798,900 to Earth Care.

Id.

In the Court’s view, the language of this

assignment is directed to the subcontract between PSI and Earth Care and does not
extend to the turnkey contract between PSI and Geneva.
Another possibility, which is the one Earth Care presses in its reply, is that
the contract between Geneva and Earth Care that resulted from the Assignment

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Agreement was an equipment supply contract only and that “Geneva eliminated
PSI’s role and stepped into PSI’s shoes.” Def.’s Reply at 2. Under this view, the
forum selection clause in the equipment supply contract must apply to disputes
between Geneva and Earth Care. The flaw in Earth Care’s argument is that as its
motion is a motion to dismiss, the Court must accept the allegations in Geneva’s
Complaint and in that Complaint, Geneva alleges that it hired Earth Care “to
design, specify and supply equipment for the Geneva plant.” Compl. ¶ 7.
With these conclusions, the question narrows to whether a forum selection
provision in an equipment supply contract could control the forum for a lawsuit
challenging Earth Care’s “design, specification and supply of materials for the
plant.”

The Court concludes that the forum selection clause in the equipment

supply contract, even if it contained more embracing language, would not govern a
dispute about the design and construction of the plant. Here, Geneva’s dispute with
Earth Care—as alleged in the Complaint—is not about the equipment that Earth
Care supplied under the equipment supply contract. Rather, it is about alleged
design failures and equipment that Geneva says Earth Care should have, but did
not supply.3
E.

Motion to Stay

This Order eclipses the need for Earth Care’s motion to stay discovery (ECF
No. 16) and the Court DENIES that motion.
In the Complaint, Geneva alleges that “materials supplied by Earth Care” were a cause of
the explosion. Compl. ¶ 32(i). However, the gravamen of the Complaint focuses on Earth Care’s
overall design of the plant and its failure to provide a dust control system. To the extent that one of
many allegations in the Complaint may call into play the equipment supply contract, the Court is
not convinced that this subsidiary allegation would control the remainder of Geneva’s claim.
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F.

CONCLUSION

The Court DENIES Earth Care Products, Inc.,’s Defendant’s Motion to
Dismiss Pursuant to Rule 12(b)(3) or in the Alternative to Transfer This Matter to
the U.S. District Court for the District of Kansas (ECF No. 11) and its Defendant’s
Motion to Stay Discovery Pending Decision on Motion to Transfer or Dismiss (ECF
No. 16). The Court GRANTS Geneva Wood Fuels, LLC,’s Plaintiff’s Unopposed
Motion to Extend Discovery Deadlines (ECF No. 18).
SO ORDERED.
/s/ John A. Woodcock, Jr.
JOHN A. WOODCOCK, JR.
CHIEF UNITED STATES DISTRICT JUDGE
Dated this 6th day of December, 2012

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