CSX Transportation, Inc. v. Apex Directional Drilling, LLC

Filing 32

Opinion and ORDER Signed on 11/18/2014 by Judge Ancer L. Haggerty. Third Party Defendant's Motion to Dismiss or Stay Third Party Complaint 15 is GRANTED. Defendant's Motion to Change or Transfer Venue 22 is GRANTED. Defendant's Motion to Compel Mediation and for Abatement 30 is DENIED. (sp)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
PORTLAND DIVISION

CSX TRANSPORTATION, INC.,
a Virginia corporation,
Plaintiff,

Case No. 3:14-cv-00470-HA
OPINION AND ORDER

v.
APEX DIRECTIONAL DRILLING, LLC,
an Oregon limited liability company,
Defendant.

APEX DIRECTIONAL DRILLING, LLC,
an Oregon limited liability company
Third-Pmiy Plaintiff,

v.
CONTINENTAL CONSTRUCTION, INC.,
a Pennsylvania corporation,
Third-Pmiy Defendant.

HAGGERTY, District Judge:

1 - OPINION AND ORDER

On March 21, 2014, plaintiff CSX Transpo1iation, Inc. (CSX), filed a complaint against
defendant Apex Directional Drilling, LLC (Apex), alleging negligence related to damage caused
by the overflow of excavation material during the construction of a gravity sewer system in
Pennsylvania. On May 2, 2014, Apex fifed a Third-Paiiy Complaint [8] against third-party
defendant, Continental Construction, Inc. (Continental). The Third-Party Complaint alleges that
it was actually Continental's negligence that caused the overflow. On June 3, 2014, Continental
filed a Motion to Dismiss or Stay Third-Pmiy Complaint [15], asserting lack of personal
jurisdiction. Because the parties indicated that a request to transfer venue was imminent, the
court defeTI'ed ruling on the Motion to Dismiss until it received briefing on the transfer issue. On
August 1, 2014, Apex field a Motion to Change or Transfer Venue [22]. On August 8, 2014, the
action was stayed pending mediation. On October 20, 2014, the stay lifted, and on November 11,
2014, Apex filed a Motion to Compel Mediation and for Abatement [30]. For the following
reasons, Continental's Motion to Dismiss [15] is granted; Apex's Motion to Change or Transfer
Venue [22] is granted; and Apex's Motion to Compel Mediation and for Abatement [30] is
denied.

FACTUAL BACKGROUND
Apex is an Oregon limited liability company with its principal place of business in
Portland, Oregon. Continental is a Pennsylvania corporation with its registered office and
principal place of business in Ridgeway, Pennsylvania. During 2011, both companies were
involved in a construction project in Pennsylvania.
Greenland Construction, Inc. (Greenland), a Pennsylvania corporation, was awarded a
contract by the Mon Valley Sewage Authority to construct a gravity sewer system in or near the

2 - OPINION AND ORDER

City of Monessen, Pennsylvania. Greenland entered into a subcontract agreement with Apex to
provide directional drilling services. In 2011, Apex contacted Continental to discuss whether
Continental could provide equipment and labor for the project. Apex and Continental entered
into an oral agreement in which Continental would assist with portions of Apex's work on the
project in exchange for payment.
During Continental's perfo1mance under the agreement, it transpmied materials excavated
from the project site at the direction of Apex. Continental dumped the excavated material at a
site in the City of Monessen. On September 1, 2011, the excavated material overflowed its
embankments resulting in damages to the sunounding prope1iies and fines for both Apex and
Continental.
On October 19, 2012, Continental filed a lawsuit in the Court of Common Pleas for
Westmoreland County, Pennsylvania against Apex, Greenland, and their respective sureties.
The complaint demands payment of unpaid invoices for the work completed on the project as
well as the fines incmTed by Continental while working on Apex's behalf. Apex's Answer to
Continental's Amended Complaint included a counterclaim against Continental for breach of
contract, negligence, and indemnification and contribution. Each counterclaim count is related to
the overflow incident in Pennsylvania.
On March 21, 2014, CSX, a Virginia corporation, filed this lawsuit against Apex. The
Complaint [I] alleges that, during the drilling project in Pennsylvania, Apex's negligence caused
excavation debris to flow on CSX's property resulting in damage. On May 2, 2014, Apex filed a
Third- Paiiy Complaint [8] against Continental, asserting that Apex is entitled to full and
complete indemnity based on Continental's negligence.

3 - OPINION AND ORDER

ANALYSIS
A.

Third-Party Defendant's Motion to Dismiss

Continental asserts that Apex's Third-Party Complaint must be dismissed because this
comt lacks personal jurisdiction. Apex bears the burden of establishing that this court has
personal jurisdiction over Continental. Fireman's Fund Ins. Co. v. Nat'! Bank of Coops., 103
F.3d 888, 893 (9th Cir. 1996). However, a plaintiff need only make a prima facie showing of
facts that suppo1t the exercise of jurisdiction over a defendant. Tuazon v. R.J. Reynolds Tobacco

Co., 433 F.3d 1163, 1168 (9th Cir. 2006).
Personal jurisdiction over a non-resident defendant is tested under a two-prong analysis.
The exercise of jurisdiction must: (1) satisfy the requirements of the long-arm statute of the state
in which the district co1nt sits; and (2) comport with the principles of federal due process.

Ziegler v. Indian River County, 64 F.3d 470, 473 (9th Cir. 1995). Oregon Rule of Civil
Procedure (ORCP) 4(B)-(K) provides specific bases for personal jurisdiction and subsection (L)
extends jurisdiction to the limits of due process under the United States Constitution. Nike, Inc.

v. Spencer, 707 P.2d 589, 591 (Or. App. 1985); see ORCP 4. Therefore, Apex need only satisfy
the second prong of the personal jurisdiction test.
The Due Process Clause of the U.S. Constitution protects persons from being subject to
the binding judgments of a forum with which they have "established no meaningful 'contacts,
ties, or relations."' Burger King Corp. v. Rudzewicz, 471 U.S. 462, 471-72 (1985) (quoting Int'/

Shoe Co. v. Washington, 326 U.S. 310, 319 (1945)). Due process requires that a defendant have
"minimum contacts with the forum state such that the exercise of personal jurisdiction does not
offend traditional notions of fair play and substantial justice." Decker Coal Co. v.

4 - OPINION AND ORDER

Commonwealth Edison Co., 805 F.2d 834, 839 (9th Cir. 1986) (citing Int'/ Shoe Co., 326 U.S. at

316). A court may exercise either (1) general jurisdiction or (2) specific jurisdiction over a
nonresident defendant. Sher v. Johnson, 911F.2d1357, 1361 (9th Cir. 1990) (citation omitted).
1.

General Jurisdiction

For a defendant to be subject to general personal jurisdiction, the defendant must have
such "continuous and systematic contacts with the forum that the exercise of jurisdiction does not
offend traditional notions of fair play and substantial justice." Reebok Int'l Ltd v. lvlcLaughlin,
49 F.3d 1387, 1391 (9th Cir. 1995) (citation omitted). The standard for general jurisdiction is
high, requiring that contacts in the forum "approximate physical presence." Tuazon, 433 F.3d at
1169 (citation omitted). Unless the defendant can be deemed "present" within the forum for all
purposes, general jurisdiction is not appropriate. iV!enken v. Emm, 503 F.3d 1050, 1057 (9th Cir.
2007).
In this case, Continental's contacts with the State of Oregon arise solely from the matter at
issue. The negotiations and oral agreement between Apex and Continental were initiated by
Apex over the phone. Continental agreed to perform work in Pennsylvania and the contracted
work was completed in Pennsylvania. Continental has no other business contacts in Oregon; is
not registered to do business in Oregon; has no agent for service of process in Oregon; has never
advertised, solicited, recruited, or performed work in Oregon; and has not had an office,
employees, shareholders, or property in Oregon. Marzella Deel. [16]

at~

4. Therefore,

Continental's sole contact with the State of Oregon is the oral contract with Apex. Because this
single contract does not approximate physical presence in the State, it is clear that general
jurisdiction is inappropriate.
5 - OPINION AND ORDER

2.

Specific Jurisdiction

Even in instances when a nomesident pm1y is not subject to general jurisdiction in the
fornm state, it may be subject to specific jurisdiction. Specific jurisdiction exists where:

(1) The non-resident defendant must purposefully direct his activities or
consummate some transaction with the forum or resident thereof; or perfonn some
act by which he purposefully avails himself of the privilege of conducting
activities in the forum, thereby invoking the benefits and protections of its laws;
(2) the claim must be one which arises out of or relates to the defendant's
fornm-related activities; and
(3) the exercise of jurisdiction must comport with fair play and substantial justice,
i.e. it must be reasonable.

Schwarzenegger v. Fred lvfartin lvfotor Co., 374 F.3d 797, 802 (9th Cir. 2004) (citation omitted).

If the plaintiff meets the first and second elements, the burden shifts to the defendant to present a
compelling case that the exercise of jurisdiction would be umeasonable. Id (citations omitted).
However, if the plaintiff fails at the first or second step, then the jurisdictional inquiry ends and
the defendant must be dismissed from the case. Boschetto v. Hansing, 53 9 F .3d 1011, 1016 (9th
Cir. 2008).
To establish the first prong for specific jurisdiction, Apex must demonstrate that
Continental either purposefully availed itself of the privilege of conducting activities in the
forum, or purposefully directed its activities at the forum. Washington Shoe Co., 704 F.3d at
672. The purposeful availment analysis is generally used in contract suits, while the purposeful
direction analysis is generally used in tort cases. Id. at 672-73. However, the purposeful
direction analysis applies only to intentional to11s - not to negligence claims such as those alleged
here. Holland America Line Inc. v. Wartsila North America, Inc., 485 F.3d 450, 460 (9th Cir.

6 - OPINION AND ORDER

2007). Therefore, this court finds that purposeful availment is the proper analytical lense through
which to view personal jurisdiction in this case.
Jurisdiction under the purposeful availment analysis requires that "there be some act by
which the defendant purposefully avails itself to the privilege of conducting activities within the
forum State, thus invoking the benefits and protections of its laws." Burger King Corp., 471
U.S. at 475. In other words, personal jurisdiction over nomesidents is a quid pro quo in which
the state provides services to the defendant. Purposeful availment is generally demonstrated
tlu·ough evidence of defendant's actions in the forum state, such as executing or perfo1ming a
contract there, which thereby invoke the benefits and protections of the forum's laws. Hanson v.

Denckla, 357 U.S. 235, 253 (1958).
In this case, Continental entered into an oral agreement with an Oregon company. One
may argue that by contracting with an Oregon company, Continental took advantage of Oregon's
legal protections. However, the existence of such a contract is not enough to demonstrate
purposeful availment. Burger King Corp., 471 U.S. at 478 (one contract alone does not establish
that a defendant has purposefully availed himself to the privileges in the forum state); Doe v.

Unocal Corp., 248 F.3d 915, 924 (9th Cir. 2001) ("an individual's contract with an out-of-state
party alone [cannot] automatically establish sufficient minimum contacts to support personal
jurisdiction." (internal quotations omitted)). In Burger King, the Supreme Court explained:
[W]e have emphasized the need for a "highly realistic" approach that recognizes
that "contract" is "ordinarily but an intermediate step serving to tie up prior
business negotiations with future consequences which themselves are the real
object of the business transaction." It is these factors-prior negotiations and
contemplated future consequences, along with the te1ms of the contract and the
parties' actual course of dealing-that must be evaluated in determining whether the
defendant purposefully established minimum contacts with the forum.

7 - OPINION AND ORDER

Burger King, 471 U.S. at 478-79 (citations omitted). Under this standard, Continental's
contractual relations with Apex do not constitute purposeful availment of the benefits and
protections of Oregon law. Evidence has been presented that Apex was the party that initially
reached out to Continental and that the contract was negotiated entirely over the phone. The
contemplated future consequences of that contract were solely that Continental would assist
Apex in a single construction project in Pennsylvania. The actual course of dealing confo1med
with that contract, as Continental performed work for Apex in Pennsylvania only. Such minimal
contacts with the forum state fail to satisfy the Ninth Circuit's purposeful availment standards.
HK China Group, Inc v. Beijing United Auto. & lvlotorcycle 1v!fg. Corp., 417 Fed. Appx. 664,

-

666 (9th Cir. 2011) (holding that Chinese corporation did not purposefully avail itself to
California despite enteling contract with California corporation, because contract did not
contemplate future consequences in California and did not contain a choice oflaw provision for
California law).
Given that Apex cannot establish that Continental purposefully availed itself of the
Oregon forum, this comi need not proceed to the remaining inquiries under the Ninth Circuit's
specific jurisdiction test. Boschetto, 539 F.3d at 1016 ("if the plaintiff fails at the first step, the
jurisdictional inquiiy ends and the case must be dismissed"). Third-pmiy plaintiffs have thus
failed to demonstrate that either general or specific personal jurisdiction exists over Continental.
3.

Jurisdictional Discovery

Apex requests that the court allow limited jurisdictional discove1y to dete1mine whether
Continental is subject to personal jurisdiction in this court. "'Where a plaintiff's claim of
personal jurisdiction appears to be both attenuated and based on bare allegations in the face of

8 - OPINION AND ORDER

specific denials made by the defendants, the Court need not permit even limited discovery.'"

Pebble Beach Co. v. Caddy, 453 F.3d 1151, 1160 (9th Cir. 2006) (quoting Terracom v. Valley
Nat. Bank, 49 F.3d 555, 562 (9th Cir.1995)) (internal alterations omitted). In the Third-Party
Complaint [8], Apex fails to even allege that Continental is subject to personal jurisdiction in
Oregon. Similarly, in Apex's Response to Continental's Motion to Dismiss or Stay Third-Party
Complaint [17], it does not offer any argument or evidence that addresses Continental's contacts
with Oregon. Instead, Apex merely argues that Continental knew that Apex was an Oregon
company earlier than Continental suggested in its briefing. Apex based this argument on the
invoices that Continental mailed to Apex in Oregon. Regardless of when Continental knew that
it was contracting with an Oregon company, a single contract cannot alone support personal
jurisdiction in this comi. Burger King Corp., 471 U.S. at 478. Apex presents no facts that
suggest that Continental has sufficient contacts with the State of Oregon, such that it is subject to
jurisdiction in this comi. Moreover, the action will be transfened to the Western District of
Pennsylvania, making any discove1y in this district inelevant. Therefore, Apex's request for
jurisdictional discove1y is denied.

B.

Defendant's Motion to Transfer

The pmiies agree that a motion to transfer is governed by 28 U.S.C. § 1404(a), which
provides, "For the convenience of the parties and witnesses, in the interest of justice, a district
court may transfer any civil action to any other district or division where it might have been
brought or to a!lY district or division to which all parties have consented." Under this statute,
"the district comi has discretion to adjudicate motions for transfer according to an individualized,
case-by-case consideration of convenience and fairness." Jones v. GNC Franchising, Inc., 211

9 - OPINION AND ORDER

F.3d 495, 498 (9th Cir. 2000) (quotations omitted). The comi is permitted to consider several
factors, including:
(1) the location where the relevant agreements were negotiated and executed, (2)
the state that is most familiar with the governing law, (3) the plaintiff's choice of
forum, (4) the respective pmiies' contacts with the forum, (5) the contacts relating
to the plaintiffs cause of action in the chosen forum, (6) the differences in the
costs of litigation in the two forums, (7) the availability of compulsory process to
compel attendance of unwilling non-party witnesses, and (8) the ease of access to
sources of proof.

Id at 498-99 (citation omitted). The court also considers factors related to public interest,
including court congestion and local interest in a dispute. Gulf Oil Corp. v. Gilbert, 330 U.S.
501, 509 (1947).
The factors in Jones, as applied to the facts of this case, indicate that a transfer is fair and
convenient. This action is related to a construction project that was conducted exclusively in
Pennsylvania. Many of the contracts that designated work for the project were signed in
Pennsylvania. Both Greenland Construction and Continental, the other entities performing work
on the project, are Pennsylvania businesses. Therefore, many of the witnesses for this litigation
are located in Pennsylvania, and they could likely be compelled to testify in Pennsylvania. The
prope1iy that was allegedly damaged, the focus of this lawsuit, is located in Pennsylvania.
Additionally, Pennsylvania is the location of the investigation and remediation that followed the
overflow. Therefore, access to sources of proof would be more convenient in Pennsylvania.
Also, because the overflow happened in Pennsylvania, there is likely more local interest in this
case there than in Oregon.
CSX argues that Oregon is its choice of forum, and the plaintiff's choice of forum should

10- OPINION AND ORDER

rarely be disturbed. However, plaintiffs choice of forum carries less weight when the chosen
forum is not plaintiffs home." Home Inde111. Co. v. Stimson Lumber Co., 229 F. Supp. 2d 1075,
1085 (D. Or. 2001) (citation omitted). In this case, CSX is a Virginia corporation with minimal,
if any, contacts in Oregon. The court finds that both parties share contacts in Pennsylvania and
all of the operative facts occmTed in Pennsylvania. Accordingly, the other Jones factors
outweigh plaintiffs choice of forum in this case, and Apex's Motion to Change or Transfer
Venue [22] is granted.

C.

Defendant's J\'Iotion to Compel Mediation and Stay

The pmiies are free and encouraged to participate in mediation if they choose, but this
court, in its discretion, will not enter an order to do so. Therefore, Apex's Motion to Compel
Mediation and for Abatement [30] is denied.

CONCLUSION
Based on the foregoing reasons, third-party defendant's Motion to Dismiss or Stay ThirdParty Complaint [15] is GRANTED. Defendant's Motion to Change or Transfer Venue [22] is
GRANTED. Defendant's Motion to Compel Mediation and for Abatement [30] is DENIED.
IT IS SO ORDERED.
DATED this

J...2- day ofNovember, 2014.

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Ancer L. Haggerty \
United States District Judge

11 - OPINION AND ORDER

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