Pease Construction, Inc. v. Crowder-Gulf Joint Venture, LLP

Filing 12

ORDER GRANTING 5 DEFENDANT'S MOTION TO DISMISS. Signed by Judge Samuel H. Mays, Jr., on 05/27/2011. (Mays, Samuel)

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IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TENNESSEE WESTERN DIVISION ) ) ) No. 10-2780 ) ) ) ) ) ) ) PEASE CONSTRUCTION, INC., Plaintiff, v. CROWDER-GULF JOINT VENTURE, LLP, Defendant. ORDER GRANTING DEFENDANT’S MOTION TO DISMISS Plaintiff Pease Construction, Inc. (“Pease Construction”) brings claims against Gulf”). for Defendant breach of Crowder-Gulf contract Joint and unjust Venture, (See Compl. ¶¶ 9-16, ECF No. 1.) LLP enrichment (“Crowder- Before the Court is Crowder-Gulf’s December 3, 2010 Motion to Dismiss (“Motion”) for want of personal jurisdiction. 5.) (“Mot.”) Pease Construction responded in opposition on January 26, 2011. (See Def.’s [sic] Resp. to Pl.’s [sic] Mot. to Dismiss, ECF No. 9.) on February 1, 2011. Resp. in Reply”). I. Opp’n (See Mot. to Dismiss, ECF No. to (“Pl.’s Resp.”) Crowder-Gulf replied (See Reply to Pease Construction, Inc.’s Mot. to Dismiss, ECF No. 10.) (“Def.’s For the following reasons, the Motion is GRANTED. Background Pease Construction alleges that, on or about September 29, 2008, it entered into a contract to work as a subcontractor for Crowder-Gulf on a debris hauling project in Montgomery County, (Compl. ¶¶ 1, 5; see Ex. A, ECF No. 1- Texas (the “Project”). 1.) According to the complaint, Pease Construction furnished the labor, services, and materials required under the contract and, based on a verbal agreement, performed additional work for Crowder-Gulf on or about November 7, 2008. (Compl. ¶¶ 7, 10; see Ex. B, ECF No. 1-2.) Pease Construction alleges that Crowder-Gulf defaulted on its obligations Specifically, under Pease the contract. Construction (See alleges Compl. that ¶ 8.) Crowder-Gulf failed and refused to pay it at least $114,368.96; failed and refused to pay it in a timely manner, preventing it from paying its subcontractors; interfered with its work and that of its subcontractors; refused to allow it or its subcontractors to perform work as scheduled; and failed and refused to pay it for (Id. ¶ 11.) additional work on the Project. Pease Construction asserts that those acts constitute breach of contract and unjust enrichment. (Id. ¶¶ 9-16.) Crowder-Gulf has moved to dismiss Pease Construction’s claims for want of personal jurisdiction. (See Mot.) According to affidavits in the record, the parties began their business relationship in late September 2008. 2 (See Pease Aff., ECF No. 9-1; Hall Aff., ECF No. 5-1.) In his affidavit, Eric Hall (“Hall”), Debris Reduction Manager for Crowder-Gulf, states that, on September 27, 2008, while he was in Montgomery County, Texas, Larry Pease (“Pease”), Construction, contacted him by telephone. owner of Pease (Hall Aff. ¶¶ 4, 6.) Hall states that Pease told him that Pease Construction had numerous trucks that could assist Crowder-Gulf with the Project. (Id. ¶ 4.) According to Hall, because Pease told Hall that the trucks would come from Austin, Texas, Hall assumed that Pease (Id. ¶ 5.) Construction was based in Texas. In Pease’s affidavit, he states that, on September 27, 2008, one of his business associates, Don Childers, told him about an opportunity for Pease Construction to work for CrowderGulf on the Project in Texas. (Pease Aff. ¶ 3.) According to Pease, he was “contacted by Hall by telephone at [his] office in Collierville, Tennessee to discuss delivery of 26 trucks and necessary loaders at [Crowder-Gulf’s] storage yard in Montgomery County[,] Texas on Monday[,] September 29, 2008.” (Id. ¶ 4.) Pease does not state when that telephone call took place. (See id.) According to Hall, Pease travelled to Texas to review a potential contract between Pease Construction and Crowder-Gulf for work on the Project. when that visit occurred. (Hall Aff. ¶ 7.) (See id.) 3 Hall does not state Hall states that, while in Texas, Pease received a copy of a contract for “load-in work” that Pease Construction might perform if it had the necessary equipment. received (Id. the Construction ¶¶ 7-8.) contract, had the (Id. ¶ 8.) Project. According Pease did necessary to not Hall, know equipment when Pease whether Pease available for the Hall states that, although Pease received a copy of the contract in Texas and was instructed to return it to Crowder-Gulf’s agents in Texas, Pease did not do so. (Id. ¶ 9.) In Pease’s affidavit, he states that Crowder-Gulf sent contracts to his office in Collierville, Tennessee; that he was instructed to return those contracts to Theodore, Alabama; and that he signed the contract on which he bases his claims in his office in Collierville, Tennnessee. (Pease Aff. ¶¶ 8-9.) contract appears to have been drafted by Crowder-Gulf. A.) However, no one from Crowder-Gulf executed it. The (See Ex. (See Hall Aff. ¶ 9; Ex. A.) Pease Construction states that, delivered the on September trucks and 29, loaders 2008, that Pease Hall had requested by telephone to the Project site, but that they sat idle until October 1, 2008. (See Pease Aff. ¶¶ 5-6.) According to Hall, on October 2 and October 3, 2008, Pease Construction performed some “load-out work” on the Project, but that work was not covered by the contract. (See Hall Aff. ¶ 9.) 4 The “load- out work” on October 2 and 3 was the only work Pease Construction Performed on the Project, and that work occurred in Montgomery County, Texas. Hall states that (Id. ¶ 11.) all of his communications with Pease Construction occurred in Texas and related exclusively to the (See id. ¶¶ 10-11.) Project. According to Hall, he and Pease did not discuss any other potential contracts or projects. id. ¶ 11.) (See Pease states that “[a]ll of [his] conversations by phone or email with Eric Hall occurred from [his] office in Collierville, Tennessee” and that Pease Construction’s telephone number has a Memphis, Tennessee area code. (Id. ¶ 7.) Although Pease states that he “performed all of the negotiations and billing from [his] office in Collierville, Tennessee,” he does not state whether he and Hall had any in-person conversations. (Cf. id.) II. Subject Matter Jurisdiction Pease Construction asserts that subject matter jurisdiction is proper under 28 U.S.C. § 1332(a). (Id. ¶ 3.) Pease Construction is a Tennessee corporation with its principal place of business in Collierville, Tennessee. Gulf is an Alabama corporation business in Theodore, Alabama. diversity exists. with (Id. ¶ 1.) its (Id. ¶ 2.) principal Crowderplace of Therefore, complete See V & M Star, LP v. Centimark Corp., 596 F.3d 354, 355 (6th Cir. 2010) (citation omitted). 5 Because Pease Construction seeks compensatory damages of at least $144,368.96 and an unnamed amount of punitive damages, more than $75,000 is in controversy. (See Compl. requirement is satisfied. 4.) The amount-in-controversy See 28 U.S.C. § 1332(a). This Court has subject matter jurisdiction. III. Personal Jurisdiction A. Standard of Review A plaintiff bears the burden of establishing a court’s See Neogen Corp. v. Neo personal jurisdiction over a defendant. Gen Screening, Inc., 282 F.3d 883, 887 (6th Cir. 2002) (citation omitted). Where the court does not conduct an evidentiary hearing, the plaintiff “need only make a prima facie showing of jurisdiction” to jurisdiction. omitted). survive Id. A court a motion (internal reviews to dismiss for want marks and citation quotation pleadings and affidavits in of the record, but does “not consider facts proffered by the defendant that conflict “construe[s] with the nonmoving party.” Inc. v. Paragon those facts in offered the by light the most plaintiff” favorable and to the Id. (citations omitted); see Kerry Steel, Indus., 106 F.3d 147, 149 (6th (reviewing the parties’ pleadings and affidavits). Cir. 1997) “Dismissal in this procedural posture is proper only if all the specific facts which the plaintiff . . . alleges collectively fail to state a prima facie case for jurisdiction.” 6 Bridgeport Music, Inc. v. Still N the Water Publ’g, 327 F.3d 472, 477 (6th Cir. 2003) (quoting Kerry Steel, 106 F.3d at 149). B. Analysis “In a diversity action, the law of the forum state dictates whether personal jurisdiction exists, subject to constitutional Intera Corp. v. Henderson, 428 F.3d 605, 615 (6th limitations.” Cir. 2005) (citations omitted). “Where the state long-arm statute extends to the limits of the due process clause, the two inquiries are merged and the court need only determine whether exercising personal process.” Bridgeport Music, Inc., 327 F.3d at 477 (citations omitted). Because interpreted as jurisdiction “the violates Tennessee coterminous constitutional long-arm with the statute limits on has due been personal jurisdiction imposed by the due process clause,” federal courts in Tennessee may exercise personal jurisdiction over an out-ofstate defendant if doing so comports with federal due process requirements. Id. (citation omitted). “Personal jurisdiction over an out-of-state defendant arises from ‘certain minimum contacts with [the forum] such that maintenance of the suit does not offend traditional notions of fair play and substantial justice.’” Air Prods. & Controls, Inc. v. Safetech Int’l, Inc., 503 F.3d 544, 550 (6th Cir. 2007) (quoting (1945)). Int’l Shoe Personal Co. v. Washington, jurisdiction 7 may be 326 U.S. specific or 310, 316 general, depending on the type of minimum contacts maintained by the outof-state defendant. jurisdiction continuous “depends and Id. on a systematic (citation showing omitted). that contacts the with General defendant the forum has state sufficient to justify the state’s exercise of judicial power with respect to any and against the defendant.” omitted). all claims the plaintiff may have Kerry Steel, 106 F.3d at 149 (citations Specific jurisdiction “exposes the defendant to suit in the forum state only on claims that arise out of or relate to a defendant’s contacts with the forum.” (citations and internal quotation marks omitted). Id. Pease Construction contends that this Court has specific personal jurisdiction over Crowder-Gulf. (See Pl.’s Resp. 3-6.) In Southern Machine Company v. Mohasco Industries, Inc., the Court of Appeals promulgated a three-part test to decide whether specific personal jurisdiction exists and to protect a defendant’s due process rights. Indus., Inc., omitted). 401 F.2d 374, 381 See S. Mach. Co. v. Mohasco (6th Cir. 1968) (citations That test states: First, the defendant must purposefully avail [it]self of the privilege of acting in the forum state or causing a consequence in the forum state. Second, the cause of action must arise from the defendant’s activities there. Finally, the acts of the defendant or consequences caused by the defendant must have a substantial enough connection with the forum state to make the exercise of jurisdiction over the defendant reasonable. 8 Id. The Mohasco test remains the starting point for analyzing Kerry Steel, 106 F.3d at questions of personal jurisdiction. 149; see Citizens Bank v. Parnes, 376 F. App’x 496, 502-03 (6th Cir. 2010) (applying the Mohasco test) (citation omitted). The essence of Crowder-Gulf’s argument is that it has not purposefully causing a availed itself consequence Specifically, in Crowder-Gulf of the privilege Tennessee. argues of acting (See through that, Mot. its or ¶ 3.) agents, Pease Construction contacted Crowder-Gulf in Texas, discussed a contract with and received a contract from Crowder-Gulf in Texas, and performed the work due under that contract in Texas. (See id.; see also Def.’s Reply 2-3.) The essence of Pease Construction’s argument is that, through its agents, CrowderGulf purposefully availed itself of the privilege of acting in Tennessee because Crowder-Gulf contacted Pease Construction at its Tennessee Construction telephone at its number, Tennessee sent a address, contract and to received Pease invoices from Pease Construction with a Tennessee payment address. (See Pl.’s Resp. 1-2, 4.) To satisfy jurisdiction, [it]self of the ‘the the first defendant privilege requirement “must of of have acting in purposefully the causing a consequence in the forum state.’” 9 specific forum personal availed state or Air Prods., 503 F.3d at 551. Where a defendant’s contacts with the forum state result from actions the defendant itself undertakes, the defendant has purposefully availed itself of the privilege of acting in the state. Id. (quoting Rudzewicz, 471 U.S. 462, 475 (1985)). Burger King Corp. v. Physical presence in the forum state is not required, but a defendant’s connection to the forum state must be “substantial,” rather than a result “random,” “fortuitous,” or “attenuated” circumstances. “The Supreme Court has emphasized, with of Id. respect to interstate contractual obligations, that parties who reach out beyond one state obligations with regulation and and create citizens of sanctions continuing another in the consequences of their activities.” relationships state other are subject [s]tate for and to the Lak, Inc. v. Deer Creek Enters., 885 F.2d 1293, 1300 (6th Cir. 1989) (quoting Burger King, 471 U.S. at 473) (internal quotation marks omitted). out-of-state defendant’s entering into a contract with An a plaintiff in the forum state does not automatically subject the defendant to personal jurisdiction in the forum state. See Air Prods., 503 F.3d at 551 (citation omitted); Lak, Inc., 885 F.2d at 1301 (citation omitted). “Factors to consider are ‘prior negotiations and contemplated future consequences, along with the terms of the contract and the parties’ actual course of 10 Air Prods., 503 F.3d at 551 (quoting Burger King, dealing.’” 471 U.S. at 479). In Cole v. Mileti, the Court of Appeals suggested that the formation of a contract by telephone and mail supports a finding that a defendant has personally availed itself of the privilege of acting in the state where its communications are directed. See 133 F.3d nonresident 433, 436 defendant (6th Cir. transacts 1998) business (“If, by as here, negotiating a and executing a contract via telephone calls and letters to an Ohio resident, then the defendant has purposefully availed himself of the forum (citations by creating omitted)). a continuing Other obligation authority in suggests Ohio.” that a defendant’s use of the telephone and mail to form a contractual relationship or to conduct business with an out-of-state party does not by itself constitute personal availment. See Reynolds v. Int’l Amateur Athletic Fed’n, 23 F.3d 1110, 1119 (6th Cir. 1994) (“Moreover, [t]he use of interstate facilities such as the telephone and mail is a secondary or ancillary factor and cannot alone provide the minimum contacts required by due process.” (citation and internal quotation marks omitted)); Lak, Inc., 885 F.2d at 1301 (“The telephone calls and letters on which the plaintiff’s claim of jurisdiction primarily depends strike us as precisely the sort of ‘random,’ ‘fortuitous’ and ‘attenuated’ contacts that the Burger King Court rejected as a basis for 11 haling non-resident (citation omitted)). than the parties’ quantity defendants foreign jurisdictions.” Courts are to consider the “quality rather of the relationship, relationship.” into contacts” rather and than “the the quality duration of of the the Calphalon Corp. v. Rowlette, 228 F.3d 718, 722 (6th Cir. 2000) (citation omitted). In Calphalon, the Court of Appeals considered a Minnesota defendant that had served as an Ohio plaintiff’s exclusive sales representative in certain states other than Ohio for seventeen years. See id. at 720-21. Over the course of that contractual relationship, the defendant had visited the plaintiff in Ohio twice and telephone, had corresponded mail, and fax. regularly See id. with The the plaintiff Court of by Appeals concluded that the defendant had not purposefully availed itself of the privilege of acting or causing a consequence in Ohio because its contacts there “occurred solely because Calphalon chose to be headquartered in Ohio, not because Rowlette sought to further its business and create ‘continuous and substantial’ consequences there.” Id. at 723. “Following Calphalon, courts analyzing personal jurisdiction in the context of a contractual relationship have often distinguished Cole, or cautioned that its holding should not be read outside of the factual context in which it was written.” McMunigal v. Bloch, No. 1:09CV01674, 12 2010 WL 2106186, at *9 (N.D. Ohio May 25, 2010) (collecting cases) (citations omitted). Where a defendant responds to an out-of-state plaintiff’s business proposition “without leaving home,” it does not “reach out beyond one state and create continuing relationships and obligations with citizens of” the plaintiff’s state. See Kerry Steel, 106 F.3d at 151 (citation and internal quotation marks omitted). In Kerry Steel, an Oklahoma defendant’s responding to an unsolicited sales call from a Michigan plaintiff, negotiating an order from the plaintiff by telephone and fax, and receiving an order from availment. the id. See plaintiff at did 152. not The constitute court stated, personal “To hold otherwise would be to offend against the traditional notions of fair play and substantial justice of which the Supreme Court spoke in International Shoe.” Id. (citation omitted). There is some ambiguity about the origin of the contractual relationship between Pease Construction and Crowder-Gulf. Hall states in his affidavit that Pease contacted him on September 27, 2008, offer Pease Construction’s (See Hall Aff. ¶ 4.) Project. called to him delivery” of at his the he with the Although Pease states that Hall Tennessee trucks, assistance telephone does not number state to when “discuss that call occurred or dispute that he initially called Hall to pitch Pease Construction as a possible subcontractor for the project. 13 (See Pease Aff. ¶ 4.) that point, Because the two affidavits do not conflict on Hall’s statement that the parties’ relationship began when he received a call from Pease on September 27, 2008, offering Pease Construction’s uncontroverted. Construction services on the Project stands Therefore, as in Kerry Steel, because Pease originally contacted Crowder-Gulf with the proposition of hauling debris for the Project, Crowder-Gulf did not reach out to Tennessee. See McMunigal, 2010 WL 2106186, at *8; (Hall Aff. ¶ 4). Even if Crowder-Gulf had initially contacted Pease Construction to solicit assistance with the Project, that would not necessarily mean that it personally availed itself of the privilege Nothing of acting suggests continuing or that relationships causing a Crowder-Gulf and consequence in Tennessee. “intended to establish obligations” in Tennessee. Kerry Steel, 106 F.3d at 151 (citation omitted). See Courts in this circuit have concluded that defendants do not purposefully avail themselves of the privilege of acting or causing a consequence in a forum state based on one-time, project-based contractual relationships. See, e.g., McMunigal, 2010 WL 2106186, at *7-10; Shook, Inc. Heavy & Envtl. Div. v. City of Moundsville Water Bd., No. 3:09CV00210, 2010 WL 761947, at *5-9 (S.D. Ohio Mar. 2, 2010); cf. Air Prods., 503 F.3d at 551 (noting that “the parties did not engage in a one-time transaction, but in a continuing 14 business relationship that lasted a period of many years” in concluding that satisfied). the In purposeful a McMunigal, availment district requirement court was considered a Delaware defendant that had contracted with an Ohio plaintiff to write a casebook for the corporation. 2106186, at *1. Although the See McMunigal, 2010 WL defendant had approached the plaintiff about writing the book and communicated with him by telephone, mail and email, the court concluded that the defendant had not purposefully availed itself of the privilege of acting or causing a consequence in Ohio in part because the defendant did not “intend to create an ‘ongoing relationship’ beyond the agreement to co-author the casebook.” 8 (adopting a magistrate judge’s report and See id. at *1, recommendation) (citation omitted). In Shook, Inc., a district court considered a West Virginia defendant that had contracted with an Ohio plaintiff to install a water treatment facility in a West Virginia municipality. 2010 WL 761947, at *1-2. judge’s report and See The court adopted in full a magistrate recommendation, which concluded that the defendant had not purposefully availed itself of the privilege of acting or causing a consequence in Ohio, despite its using a database Virginia; that solicited negotiating bids and from executing states a other contract than with West the plaintiff by telephone, mail, and email; and sending payments to 15 the plaintiff in Ohio. Id. at *6-9. The court reached that conclusion in part because “[t]he contract itself show[ed] that at most Defendant Moundsville engaged in a single and isolated transaction with Plaintiff Shook, . . . nearly all the performance of which occurred in West Virginia, not Ohio.” Id. at *7. Just as the “main purpose and effect” of the contract in Shook, Inc. “was the construction of [a] new water treatment facility in West Virginia,” the main purpose and effect of Pease Construction’s contractual relationship the hauling of debris in Texas. Ex. A). with Crowder-Gulf was See id. at *7; (Compl. ¶¶ 5-8; Aside from billing and paperwork, Pease Construction performed its work on the Project in Texas. See Shook, Inc., 2010 WL 761947, at *7; (Pease Aff. ¶¶ 5-6; Hall Aff. ¶ 10; Ex. A; Compl. ¶¶ 5-8). does not The contract is limited to the Project and contemplate any Construction and Crowder-Gulf. at *7; (Ex. A). future dealings between Pease See Shook, Inc., 2010 WL 761947, The parties did not discuss any other potential contracts or projects, and nothing suggests that they intended to create a business relationship lasting beyond the Project. See Air Prods., 503 F.3d at 551; (Hall Aff. ¶ 11). For those reasons, Crowder-Gulf has not purposefully availed itself of the privilege of acting or causing a consequence in Tennessee. 16 See Air Prods., 503 F.3d at 551; McMunigal, 2010 WL 2106186, at *89; Shook, Inc., 2010 WL 761947, at *7-8. Pease Construction argues that, because Pease “signed the contract while at his office in Collierville, Tennessee” and “performed all of his correspondence, billing, and negotiation with Defendant Crowder-Gulf from his office purposefully in availed Collierville, itself of the That Pease may have conducted privilege of (See Pl.’s Resp. acting or causing a consequence in Tennessee. 1-2.) Tennessee,” those activities in Tennessee on behalf of Pease Construction does not mean CrowderGulf is subject to personal jurisdiction in Tennessee. See Shook, Inc., 2010 WL 761947, at *8 (considering similar contacts and noting that, although the utility had sent payments to contractor “amounting to more than 14 million dollars, the vast bulk of the effects the parties’ contract caused occurred in West Virginia”). Construction in Crowder-Gulf’s Tennessee Construction happened to Crowder-Gulf “sought to be limited occurred dealings solely headquartered further its with because Pease Pease there, not because business and create continuous and substantial consequences there.” See Calphalon, 228 F.3d at 723 (citation and internal quotation marks omitted). Crowder-Gulf’s contacts with Tennessee are “the sort of ‘random,’ ‘fortuitous’ and ‘attenuated’ contacts” that do not 17 provide a basis for exercising personal jurisdiction. See Lak, Inc., 885 F.2d at 1301 (citation omitted). Pease Construction has not made a prima facie showing that Crowder-Gulf reached out to Tennessee to create a continuing relationship there. See Lak, Inc., 885 F.3d at 1300. Crowder- Gulf has not purposefully availed itself of the privilege of See Mohasco, 401 acting or causing a consequence in Tennessee. F.2d at 381. Therefore, the Court does personal jurisdiction over Crowder-Gulf. IV. not have specific See id. Conclusion Crowder-Gulf Tennessee, and is this not subject Court’s to personal exercise of jurisdiction specific in personal jurisdiction over Crowder-Gulf would not comport with federal due process. Therefore, Crowder-Gulf’s Motion is GRANTED. Pease Construction’s claims are DISMISSED for want of personal jurisdiction. So ordered this 27th day of May, 2011. s/ Samuel H. Mays, Jr. SAMUEL H. MAYS, JR. UNITED STATES DISTRICT JUDGE 18

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