LTA, Inc. et al v. Breeck
Filing
17
MEMORANDUM OPINION AND ORDER granting in part and denying in part Defendant's motion 5 to dismiss. Defendant's motion to dismiss the claims of Plaintiff LTA is granted, and LTA is dismissed without prejudice; Defendant's motion to di smiss the claims of Plaintiff Innovative is stayed pending further discovery; Plaintiff's request for additional discovery is granted; Defendant and Plaintiff Innovative shall submit discovery outlined by the Court in its Memorandum Opinion and Order by no later than September 26, 2011. See Memorandum Opinion and Order for complete text. Signed by District Judge Walter J. Gex III on August 26, 2011. (Gex, Kathleen)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
SOUTHERN DIVISION
LTA, INC.; AND INNOVATIVE
BUILDERS, INC.
VERSUS
PLAINTIFFS
CIVIL ACTION NO. 1:11cv213WJG-RHW
JOSEPH E. BREECK d/b/a
J & J BOATWORKS, INC.
DEFENDANT
MEMORANDUM OPINION AND ORDER
THIS MATTER is before the Court on the motion [5] of the Defendant, Joseph Breeck
d/b/a J & J Boatworks, Inc.’s [J&J], to dismiss for lack of personal jurisdiction. The motion was
filed in connection with a contract dispute between the Plaintiffs, LTA, Inc. [LTA], and
Innovative Builders, Inc. [Innovative] ,and the Defendant. The Plaintiffs,, maintain that this
Court may assert its jurisdiction over the Defendant. (Ct. R., Doc. 14). Upon consideration of
the Defendant’s motion, the Plaintiffs’ response and memorandum, (Ct. R., Docs. 14, 15), and
the Defendant’s rebuttal, (Ct. R., Doc. 16), the Court is of the opinion that the motion should be
granted in part and denied in part.
Factual Summary
J&J is incorporated in the state of Indiana, and maintains its principle place of business in
Indiana. (Ct. R., Doc. 5-1, p. 1). It primarily operates as a boat manufacturer. (Ct. R., Doc.
14-1, p. 1). Joseph Breeck, who at some point did business as J&J, is a resident of Indiana. (Ct.
R., Doc. 15). The Defendant does not own any real property in Mississippi, nor has he/it leased
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or rented any property in this state. (Ct. R., Doc. 5-1, pp. 1-2). Moreover, the Defendant does
not have any employees in, is not registered to do business in, has not incurred or paid taxes in,
has no office in, has not locally advertised in, and has never sent representatives to Mississippi.
(Ct. R., Doc. 5-1, p. 2).
LTA is a Louisiana corporation, and Innovative is a Mississippi corporation. (Ct. R.,
Doc. 15, p. 1). LTA and Innovative perform various types of construction work. (Id.) After the
Deep Water Horizon oil spill, they began participating in clean-up efforts. (Id.)
The explosion on the Deep Water Horizon occurred on April 20, 2010, and clean-up
efforts began shortly thereafter. The Plaintiffs chose to participate in these efforts, and needed to
purchase oil skimmer boats and barges to do so. (Ct. R., Doc. 15, p. 2). After seeing the
Defendant’s advertisement in Boats and Harbors, a widely distributed publication, the Plaintiffs
contacted the Defendant in an effort to acquire the needed vessels. (Id.) Negotiations were
conducted via telephone, and the Plaintiffs ultimately entered into an Agreement to purchase ten
barges and six skimmer boats. (Id.) Defendant never visited Mississippi in connection with its
Agreement with the Plaintiffs, and all in-person meetings regarding the Agreement were
conducted in Indiana. (Ct. R., Doc. 5-1, p. 2).
The Agreement is memorialized in two documents dated June 26, 2010. (Ct. R., Doc. 15,
p. 2). The first, the “Purchase Agreement,” summarized the Agreement. ( Id.) The second, the
“Invoice for Payment,” indicates the amount Plaintiffs were charged by Defendant for the first
delivery of boats. (Id.) By August 2010, however, the parties began disputing the terms of the
Agreement. (Id., at 3.) On or about March 10, 2011, the Plaintiffs filed this suit against the
Defendant. (Id.) The case was then removed to this Court on May 18, 2011. (Id.)
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Legal Standard
The Plaintiffs bear the burden of establishing the district court’s jurisdiction over the
Defendant. Thompson v. Chrysler Motors Corp., 755 F.2d 1162, 1165 (5th Cir. 1985) (citing
DeMelo v. Toche Marine, Inc., 711 F.2d 1260, 1270-71 (5th Cir. 1983)).
When the district court decides a defendant’s motion without an evidentiary hearing, the
plaintiff’s burden is met by presenting a prima facie case for personal jurisdiction. The
allegations of the complaint, except insofar as controverted by opposing affidavits, must be taken
as true, and all conflicts in the facts must be resolved in favor of the plaintiffs for purposes of
determining whether a prima facie case for personal jurisdiction has been established. (Id.)
“Personal jurisdiction over an out-of-state defendant involves two inquiries: (1) whether
a forum state’s long-arm statute permits service of process; and (2) whether the assertion of
personal jurisdiction would violate due process.” Seitz v. Envirotech Sys. Worldwide, Inc., 513
F.Supp. 2d 855, 859 (S.D. Tex. 2007) (citing Genetic Implant Sys., Inc. v. Core-Vent Corp., 123
F.3d 1455, 1458 (Fed. Cir. 1997)). The Mississippi long-arm statute1applies to three types of
nonresident defendants: “(1) nonresidents who make a contract with a resident to be performed
in whole or in part within the state; (2) nonresidents who commit a tort in whole or in part within
the state against a resident or a nonresident; (3) and nonresidents who are ‘doing business’
within the state.” Cycles, Ltd. v. W.J. Digby, Inc., 889 F.2d 612, 617 (5th Cir. 1989); see
McMahan Jets, L.L.C. v. X-Air Flight Support, L.L.C., 2011 WL 52557 at *3 (S.D. Miss. Jan. 7,
2011). Here, the Plaintiffs assert that the Defendant falls under the “contract prong” of the
Mississippi long-arm statute. (Ct. R., Doc. 14, p. 4). Under the contract prong a “nonresident
1
Miss. Code Ann. § 13-3-57.
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defendant must ‘make a contract with a resident of [Mississippi]’ to be amenable to process.”
Cycles, 889 F.2d at 617.
The next inquiry is whether exercising personal jurisdiction over the Defendant would
violate due process. Seitz, 513 F. Supp. 2d at 859.
The exercise of personal jurisdiction comports with due process where: (1) the
defendant has purposefully availed itself of the benefits and protections of the
forum state by establishing “minimum contacts” with that state; and (2) the
exercise of personal jurisdiction does not offend “traditional notions of fair play
and substantial justice.”
Choice Healthcare, Inc. v. Kaiser Found. Health Plan of Colo., 615 F.3d 364, 367 (5th Cir.
2010); ITL Int’l, Inc. v. Constenla, 2010 WL 4537931 at *4 (S.D. Miss. Nov. 2, 2010). “The
‘minimum contacts’ prong of the two-part test may be further subdivided into contacts that give
rise to ‘general’ personal jurisdiction and ‘specific’ personal jurisdiction.” Choice Healthcare,
615 F.3d at 368. Here, the Plaintiffs argue that the Court has specific jurisdiction. (Ct. R., Doc.
14, p. 5). A court may “exercise ‘specific’ jurisdiction where a ‘nonresident defendant has
purposefully directed his activities at the forum state and the litigation results from alleged
injuries that arise out of or relate to those activities.’” Choice Healthcare, 615 F.3d at 368
(quoting Walk Haydel & Assocs., Inc. v. Coastal Power Prod. Co., 517 F.3d 235, 243 (5th Cir.
2008)); see Burger King v. Rudzewicz, 471 U.S. 462, 472 (1985). “The non-resident’s
purposefully directed activities in the forum must be such that he could reasonably anticipate
being haled into court in the forum state. In the Fifth Circuit, specific jurisdiction also requires
that the exercise of personal jurisdiction be fair and reasonable.” Constenla, 2010 WL 4537931
at *5 (citing Burger King, 471 U.S. at 473, and McFadin v. Gerber, 587 F.3d 753, 759 (5th Cir.
2009)).
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Mississippi Long-Arm Statute
Under the contract prong of the Mississippi long-arm statute, a nonresident defendant
must make a contract with a resident of Mississippi to be amenable to process. Cycles, 889 F.2d
at 617. Because LTA is a Louisiana corporation, the Court lacks jurisdiction with respect to
LTA’s claim against the Defendant. See Moore Video Distrib., Inc. v. Quest Entm’t, Inc., 823 F.
Supp. 1332 (S.D. Miss. 1993). “Having established that service of process under the Mississippi
long-arm statute was not appropriate, the Court need not necessarily consider whether the
exercise of jurisdiction by this Court comports with the due process clause of the 14th
Amendment and the traditional notions of substantial justice and fair play.” (Id., citing
Thompson, 755 F.2d 1162 (5th Cir. 1985). Accordingly, the Court finds that Defendant’s
motion to dismiss LTA’s claim should be granted.
Although LTA’s claim fails under the Mississippi long-arm statute, the Court will
consider whether Innovative meets its burden of establishing a prima facie case for personal
jurisdiction. McMahan Jets, 2011 WL 52557 at *2. The contract prong will be satisfied where
the contract is performed in part or in whole in Mississippi. (Id. at *3.) As some of the vessels
were delivered to a location in Pass Christian, Mississippi, part of the contract was performed in
Mississippi. See also Constenla, 2010 WL 4537931 at *4 (holding that the parties’ F.O.B. term
directing delivery to Mississippi constituted partial performance of a contract in Mississippi).
Due Process – Minimum Contacts
After establishing that the long-arm statute applies, the next inquiry is whether exercising
personal jurisdiction over J&J violates due process. Seitz, 513 F. Supp. 2d at 859. To comport
with due process, a nonresident defendant must have sufficient minimum contacts with the
forum state. Choice Healthcare, 615 F.3d at 367. When a defendant “purposefully directs” his
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activities to the forum state, and the litigation “arises out of” or “relates to” those activities,
minimum contacts and specific jurisdiction are established. (Id. at 368.)
The factual setting of the present case closely mirrors cases where courts have found the
nonresident defendant’s contacts with the forum state to be insufficient to extend jurisdiction.
See Charia v. Cigarette Racing Team, Inc., 583 F.2d 184 (5th Cir. 1978); see Benjamin v.
Western Boat Building Corp., 472 F.2d 723 (5th Cir.), cert. denied, 414 U.S. 830 (1973); see
NTE Aviation, Ltd. v. LIAT (1974) Ltd., 561 F. Supp. 2d 687 (E.D. Tex. 2007). In Charia, the
Court compared that factual setting with the setting in Benjamin. Charia, 583 F.2d at 187. The
Court explained that Benjamin was a “Louisiana diversity contract case brought by a Louisiana
resident (Benjamin) against an out-of-state shipbuilder (Western Boat, a Washington
corporation).” (Id.) In its analysis, the Court outlined Western Boat’s only contacts with
Louisiana:
It is necessary to understand that these factors constitute the entire sum of
Western Boat’s contacts with Louisiana. Western Boat (1) is a corporation
organized under the laws of Washington, (2) is not qualified to do business in
Louisiana, (3) has neither incurred nor paid taxes in Louisiana, (4) has not
appointed an agent for service of process in Louisiana, (5) has no office, no place
of business, no officers, no agents, no employees, no salesmen, no licensees, no
franchisees, and distributors in Louisiana, (6) has no independent dealers in
Louisiana, (7) has no assets in Louisiana, (8) has never advertised in local
Louisiana media and is not listed in any Louisiana telephone directories, (9) has
never delivered, or arranged to be delivered, a vessel of any kind in Louisiana,
(10) has never made a sale to a resident of Louisiana, other than the sale to
Benjamin, and (11) has never sent representatives, inspectors, or repair or service
personnel to Louisiana. Therefore, Western Boat’s Louisiana contacts are limited
solely to those contacts generated in the course of the transaction with Benjamin.
(Id., quoting Benjamin, 472 F.2d at 729).
The Court in Charia then proceeded to describe the similarities between its situation and
the one presented in Benjamin. (Id.) at 186. It stated:
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Plaintiff Steven Charia, a resident of New Orleans, Louisiana, saw
advertisements which defendant, Cigarette Racing Team, Inc., a Florida
boatbuilding corporation, had placed in several national boating magazines.
After speaking to other Louisiana residents who had purchased Cigarette boats,
plaintiff wrote from Louisiana to Cigarette in Florida, seeking further
information. Cigarette replied that the boat could be delivered six weeks after an
order was placed, and that a deposit of $3,000 was required, with “the balance
due upon completion of the boat F.O.B. factory here in Miami.” Along with the
reply, Cigarette sent Charia literature about its boats. Subsequently, several
telephone conversations took place, some of which were initiated by Cigarette,
others by Charia.
(Id.)
Important similarities between the cases included: (1) the resident plaintiff initiated
contact with the nonresident defendant; (2) the defendant was identified by the plaintiff via
national advertisement; (3) negotiations were conducted via mail and long distance telephone
calls; (4) the defendant initiated some communications with the plaintiff during the negotiation
process; (5) the contract was completed in the nonresident’s state; and (6) no face-to-face
conversations took place in the plaintiff’s state. (Id.) at 187-8.
The Charia Court also highlighted the differences between the two cases. (Id.) at 188.
The Court explained:
The outcome of this case then depends upon whether three factual differences
between Benjamin and the case sub judice call for a different result. Two
differences arise in the ninth and tenth factors on the Benjamin list. In the present
case, (9) Cigarette did “arrange” for the boat to be delivered to Louisiana by a
private contractor, FOB Florida, and (10) Cigarette made three additional sales to
Louisiana residents. The third difference is found in the fact that Charia has
raised a tort claim subsidiary to his contract claim.
(Id.)
After analyzing these differences, the Court concluded that it did not have personal
jurisdiction over the nonresident defendant. (Id., at 190.)
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Although Benjamin2 and Charia3 were decided before the Supreme Court’s decisions in
World-Wide Volkswagen4 and Burger King5, they have nonetheless been used recently as
measures for determining the sufficiency of minimum contacts. NTE Aviation, 561 F. Supp. 2d
at 690-91. In NTE Aviation, the plaintiff, NTE Aviation (a Texas corporation), filed a breach of
contract suit against the defendant, LIAT (a West Indies corporation). (Id. at 688.) The contract
in-dispute was a lease agreement between the parties, whereby NTE Aviation, as lessor, would
lease to LIAT, as lessee, a jet engine. (Id.) After NTE Aviation filed suit in Texas, LIAT filed a
motion to dismiss for lack of personal jurisdiction. (Id.) In analyzing whether LIAT had
sufficient minimum contacts with Texas, the court stated:
In Charia, the defendant’s sole contact with the state was the one contract made
with the plaintiff. Additionally, just as in the instant case, there were telephone
calls and mailings between the parties and there was more contact including the
fact that the finished product was delivered to the forum state and the defendant
had other customers in the forum state. In Benjamin, as in the instant case, the
defendant and plaintiff communicated about the contract, but the defendant never
sent a representative to the forum state and had no other customers in the forum
state.
(Id., at 690 (citations omitted)).
The court concluded that LIAT’s contacts with Texas were insufficient to establish
personal jurisdiction. (Id., at 691.)
Comparison of Minimum Contacts
In its effort to demonstrate the existence of specific jurisdiction, Innovative cites several
2
472 F.2d 723.
3
583 F.2d 184.
4
World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980).
5
471 U.S. 462.
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facts addressing J&J’s minimum contacts with Mississippi. Innovative first points to J&J’s
advertisement in Boats and Harbors. (Ct. R., Doc. 15, p. 2). Roger Caplinger, the president of
Innovative, wrote in his affidavit: “I learned of J&J Boatworks, Inc. (“J&J”) through Boats &
Harbors magazine, where J&J advertised. I also spoke to several people about J&J and their
ability to perform the desired work. Several individuals in Mississippi and Louisiana indicated
that they had engaged in business with J&J and had boats constructed by J&J. Further, J&J was
advertising on the internet.” (Ct. R., Doc. 14-1, p. 1). Innovative also points to J&J’s phone
calls to Mississippi made in connection with the Agreement; a purchase agreement and invoices
sent to Mississippi; vessels delivered to Mississippi; emails sent to Mississippi; and statements
indicating that J&J intended to make more shipments to Mississippi and receive corresponding
payments from Innovative. (Ct. R., Doc. 15, pp. 2-3).
In terms of minimum contacts, the only potentially material differences between
Innovative’s case and Charia6 are: (1) the quantity of materials delivered, (2) the nonresident
defendant’s indications of future performance, and (3) the number of the nonresident defendant’s
other customers in the state. Again, “[s]pecific 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.” Constenla at *4.
The quantity of materials delivered, in and of itself, does not suggest that J&J
purposefully directed its activities toward Mississippi – that quantity was merely an incident of
its sole contract with Innovative. Likewise, J&J’s indications that it would seek complete
performance, i.e., making delivery of and receiving payment for the remainder of the vessels,
6
583 F.2d 184.
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does not support the notion that it purposefully directed its activities at Mississippi. Those
statements were made in connection with the Agreement with Innovative, and J&J did not
indicate that it would seek subsequent contracts with Innovative or any other Mississippi
resident.
Lastly, Innovative claims that J&J had “several” customers in Mississippi. (Ct. R., Doc.
14-1, p. 1). In Charia, the nonresident defendant made three additional sales to residents of the
forum state. Charia, 583 F.2d at 189. The Court concluded, “Cigarette sold four boats in
Louisiana in a 5-year period, sales which we consider, in the circumstances of this case, to be
isolated and sporadic. Cigarette’s isolated sales did not involve purposeful conduct within
Louisiana so as to avail itself of the benefits and protections of Louisiana laws.” (Id.) Here,
however, it is unclear how many additional customers J&J has in Mississippi, and how many
contracts J&J has entered into with Mississippi residents. Due to this factual uncertainty, the
Court will stay J&J’s motion to dismiss Innovative’s claim.
Jurisdictional Discovery
The Plaintiffs request that, in the event they fail to establish a prima facie case, the Court
conduct jurisdictional discovery. (Ct. R., Doc. 14, pp. 5-6). “On a motion to dismiss for lack of
personal jurisdiction, the plaintiff rather than the movant has the burden of proof. The plaintiff
need not, however, establish personal jurisdiction by a preponderance of the evidence; prima
facie evidence of personal jurisdiction is sufficient.” Wyatt v. Kaplan, 686 F.2d 276, 280 (5th
Cir. 1982) (citations omitted). With respect to the Plaintiffs’ request for discovery, “[d]iscovery
on matters of personal jurisdiction, therefore, need not be permitted unless the motion to dismiss
raises issues of fact. When the lack of personal jurisdiction is clear, discovery would serve no
purpose and should not be permitted.” Wyatt, 686 F.2d at 284 (citations omitted). Innovative’s
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claim, that “[s]everal individuals in Mississippi and Louisiana indicated that they had engaged in
business with J&J and had boats constructed by J&J,” raises an issue of fact. (Ct. R., Doc. 14-1,
p. 1). The Court therefore finds jurisdictional discovery is required to resolve the issue. “When
a defendant challenges personal jurisdiction, courts generally permit depositions confined to the
issues raised in the motion to dismiss.” Wyatt, 686 F.2d at 283. “[T]he judge may determine
these issues by receiving affidavits, interrogatories, depositions, oral testimony, or any
combination of the recognized methods of discovery.” Washington v. Norton Mfg., Inc., 588
F.2d 441, 443 (5th Cir. 1979). In the case at hand, J&J’s contacts with Mississippi should be
addressed through affidavits detailing the number and the nature of its contacts with the state.
This discovery is limited to establishing: (1) how many Mississippi residents have engaged in
business with J&J, and (2) and the nature of those interactions.
Conclusion
Because LTA cannot assert jurisdiction under the contract prong of the Mississippi
long-arm statute, the Court finds that J&J’s motion to dismiss for lack of personal jurisdiction
with respect to LTA’s claim should be granted. With respect to Innovative’s claim, however, the
Court finds that the factual uncertainty concerning J&J’s contacts with Mississippi precludes
dismissal. Accordingly, the Court will stay the motion to dismiss Innovative’s claim pending the
resolution of jurisdictional discovery. To facilitate jurisdictional discovery, Innovative and J&J
should submit affidavits in accordance with this Order. The parties should also produce the
much-referenced J&J advertisement that appeared in Boats and Harbors magazine. It is,
therefore,
ORDERED that the Defendant’s motion [5] to dismiss be, and is hereby, granted in part
and stayed in part. It is further,
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ORDERED that the Defendant’s motion to dismiss LTA’s claim be, and is hereby,
granted. It is further,
ORDERED that Plaintiff LTA’s claims are dismissed without prejudice. It is further,
ORDERED that the Defendant’s motion to dismiss Innovative’s claim is stayed pending
further discovery. It is further,
ORDERED that the Plaintiffs’ request for jurisdictional discovery is granted. It is
further,
ORDERED that Innovative and J&J submit the advertisement and affidavits, in
accordance with this Order within 30 days, or by no later than September 26, 2011.
SO ORDERED, this the 26th day of August, 2011.
UNITED STATES SENIOR DISTRICT JUDGE
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