James River Insurance Company v. All Resort Coach, Inc.

Filing 30

MEMORANDUM OPINION. Signed by District Judge Henry E. Hudson on 01/27/2017. (tjoh, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
Richmond Division

JAMES RIVER INSURANCE COMPANY,

Plaintiff,
Civil Action No. 3:16-cv-886-HEH

V.

ALL RESORT COACH, INC. d/b/a
LEWIS STAGES,
Defendant.
MEMORANDUM OPINION

(Granting Defendant's Motion to Dismiss for Lack of Personal Jurisdiction)
This matter involves an alleged breach of contract by Defendant All Resort Coach,

Inc. d/b/a Lewis Stages ("Defendant"), a Utah corporation. The dispute arose from a

commercial general liability insurance policy Defendant purchased from Plaintiff James
River Insurance Company ("Plaintiff). Presently before the Court is Defendant's
Motion to Dismiss for Lack of Personal Jurisdiction pursuant to Federal Rule of Civil
Procedure 12(b)(2), or alternatively for a Transfer of Venue to the United States District

Court for the District of Utah pursuant to 28 U.S.C. § 1404. (ECF No. 16.) The parties
have briefed the issues and submitted exhibits addressing the pertinent underlying facts,
and the matter is now ripe for decision. Because Defendant lacks the necessary contacts

with Virginia, the Court will grant Defendant's Motion to Dismiss for Lack of Personal
Jurisdiction.

I. BACKGROUND

"In considering a defendant's challenge to personal jurisdiction, a court must

construe all relevant allegations in the light most favorable to the plaintiff and draw the
most favorable inferences for the existence ofjurisdiction." Am. Online, Inc. v. Huang,

106 F. Supp. 2d 848, 853 (E.D. Va. 2000). See also Mylan Labs., Inc. v. Akzo, N.V.,2
F.3d 56, 60 (4th Cir. 1993). Viewed through this lens, the facts are as follows.
Plaintiff is an Ohio corporation with its principal place of business in Richmond,

Virginia (Compl. H1.) Defendant is a Utah corporation with its principal place of
business in Salt Lake City, Utah. (Id. at U2.) On November 14, 2014, Defendant

submitted an application for general commercial liability coverage through its insurance
broker, Sam Lambert, of Lambert Insurance Services/Insurance Solutions Group of Utah,

Inc. ("Retail Broker"). (Id. at H5; Def's Reply Br. Supp. Mot. Dismiss Ex. B, at 4, ECF
No. 27-2.) In turn, the Retail Broker requested quotes from its wholesale broker. Bums &
Wilcox of Utah ("Wholesale Broker"). (Am. Answer 2, ECF No. 28.)

In response, Plaintiff sent the Wholesale Broker an insurance quote requiring an

advance premium of $89,955, subject to the payment of additional premium of $119.94
per each $1,000 of Defendant's gross receipts in excess of $750,000 as determined by
semi-annual audits. (Compl. f 8; Budisin Decl. 6, ECF No. 27-1.) The Wholesale
Broker then submitted the quote to the Retail Broker, who conveyed it to Defendant for

acceptance. (Budisin Decl. 4-5.) On December 12, 2014, Defendant accepted the offer
and Plaintiff issued a commercial general liability policy numbered 00064994-0
("Policy"). (Compl. at 19-11.)

In July, 2015, Plaintiff conducted an audit of Defendant's gross receipts as

required by the Policy. {Id. at ^ 16.) The Retail Broker served as intermediary during the
audit, requesting information from Defendant and transmitting it to Plaintiff. (Budisin
Decl. 31.) Thereafter, on September 9,2015, the parties agreed to amend the Policy,

requiring Defendantto pay an additional premium in the amount of $427,706.00 and

reducing the $119.94 composite rate in the original Policy to $99.55 per each $1,000 of
Defendant's gross receipts in excess of $5,200,000. (PL's Br. Opp'n Summ. J. 3, ECF

No. 22.) On September 11, 2015, Defendant received confirmation of the Policy
modifications and an invoice from the Retail Broker. (Budisin Decl. 34-38.)

In 2016, Plaintiff sent two letters to Defendant stating Plaintiff had "not received

payment from [Defendant's] broker ...These letters, dated February 5 and June 2,

requested payments for $342,164.80 and $80,929.00, respectively. (Compl. Ex. B, at 1,
ECF No. 1-5; Compl. Ex. C, at 1, ECF No. 1-6.)
Plaintiff filed this breach of contract action on November 3, 2016, alleging that
Defendant owes it $ 423,093.80 in unpaid premiums. (Compl. ^ 38.)
II. STANDARD OF REVIEW

A motion made pursuant to Federal Rule of Civil Procedure 12(b)(2) challenges
the court's exercise of personal jurisdiction over a defendant. "When a court's personal
jurisdiction is properly challenged ... the jurisdictional question thereby raised is one for
the judge, with the burden on the plaintiff ultimately to prove grounds for jurisdiction by
a preponderance of the evidence." Mylan Labs., 2 F.3d at 59-60; see also Grayson v.
Anderson, 816 F.3d 262, 267 (4th Cir. 2016). When, as here, "the court addresses the

personal jurisdiction question by reviewing only theparties' motion papers, affidavits
attached to the motion, supporting legal memoranda, and the allegations in the complaint,

a plaintiffneed only make a prima facie showing of personal jurisdiction to survive the
jurisdictional challenge." Grayson, 816 F.3rd at 268.

"When determining whether a plaintiff has made the requisiteprima facie

showing, the court must take the allegations and available evidence relating to personal
jurisdiction in the lightmost favorable to the plaintiff." Id. "Ultimately, however, a
plaintiffmust establish facts supporting jurisdiction over the defendant by a

preponderance of the evidence." Id; see also People Express Airlines, Inc. v. 200Kelsey
Assocs., LLC, 922 F. Supp. 2d 536, 541 (E.D. Va. 2013).

Federal courts may exercise personal jurisdiction over a defendant who is "subject

to thejurisdiction of a court of general jurisdiction in the state where the district court is
located." Fed. R, Civ. P. 4(k)(l)(A). Virginia extends the grant ofpersonaljurisdiction
as far as the Due Process Clause allows. Tire Eng'g & Distrib., LLC v. Shandong

Linglong Rubber Co., 682 F.3d 292, 301 (4th Cir. 2012). Therefore, the statutory and
constitutional inquiries merge, and the reviewing court "has jurisdiction over a
nonresident defendant if the exercise of such jurisdiction is consonant with the strictures
of due process." Id.; DeCusati v. Reiss Eng'g, Inc., No. 3:15-CV-204,2015 WL
4622494, at *1 (E.D. Va. 2015). Accordingly, the Court will employ the well-established

Due Process analysis.^

' The Court notes that even though Virginia's long-arm statute intends to extend personal
jurisdiction as far as the Due Process Clause allows, it remains "possible that a non-resident

III. DISCUSSION

Under the Due Process Clause of the Fourteenth Amendment, a court may

exercise personal jurisdiction over a non-resident defendant only if the defendant has
"certain minimum contacts" with the forum state "such that the maintenance of the suit

does not offend 'traditional notions of fair play and substantial justice.'" Int'l Shoe Co. v.

Washington, 326 U.S. 310, 316 (1945). "Fairness is the touchstone of the jurisdictional
inquiry." Tire Eng'g, 682 F.3d at 301.

There are two types of personaljurisdiction: general and specific. "General

personal jurisdiction ... requires 'continuous and systematic' contact with the forum
state, such that a defendant may be sued in that state for any reason, regardless of where
the relevant conduct occurred." People Express Airlines, 922 F. Supp. 2d at 542 (quoting

CPA Inst. V. Inst. ofChartered Fin. Analysts ofIndia, 551 F.3d 285, 292 n.l5 (4th

Cir.2009)). "Specific jurisdiction 'requires only that the relevant conduct have such a
connection with the forum state that it is fair for the defendant to defend itself in that

state.'" Id. Generaljurisdiction requires "a 'more demanding showing' of minimum
contacts than is required to establish specific jurisdiction." English Boiler & Tube, Inc. v.
Glexinc., No. 3:12-CV-88, 2012 WL 2131895, at *3 (E.D. Va. 2012) (quoting Tire

defendant's contacts with Virginia could fulfill the dictates of due process, yet escape the literal
grasp of Virginia's long-arm statute." DeSantis v. Hafner Creations, Inc., 949 F. Supp. 419, 423
(E.D. Va, 1996) ("Put another way, Virginia's long-arm statute provides a ceiling of procedural
protections above the federal floor of constitutional due process."). Here, however, because the
Court finds that Plaintiff has not met the constitutional due process requirements, it "need not
reach the issue of whether Virginia's arguably more stringent long-arm statute would have also
denied the court personal jurisdiction." Consulting Eng'rs Corp. v. Geometric Ltd., 561 F.3d
273,277 n.4(4thCir. 2009).

Eng'g, 682 F.3d at 301). Here, Plaintiff argues only that the Court has specific
jurisdiction overDefendant, so this analysis is confined to that criterion.
The Fourth Circuit has established a three-part test for assessing specific personal

jurisdiction. Courts consider: "(1) the extent to which the defendant purposefully availed
itselfof the privilege of conducting activities in the State; (2) whether the plaintiffs'
claims arise out of those activities directed at the State; and (3) whether the exercise of

personal jurisdiction would be constitutionally reasonable." Consulting Eng'rs Corp.,
561 F.3d at 278 {p^oiing ALSScan, Inc. v. DigitalServ. Consultants, Inc., 293 F.3d 707,

712 (4th Cir.2002)). Only when Plaintiff satisfies the first prong of the analysis will the
Court need to consider the second and third prongs. ConsultingEng'rs, 561 F.3d at 278;

see alsoLiberty Mut. Fire Ins. Co. v. KB Home, No. 4:13CV98, 2013 WL 6185882, at *4
(E.D. Va. Nov. 25,2013).

The first prongof the inquiry embodies the "requirement of constitutional due

process that the defendant purposefully availed [itself] of the privilege of conducting
business under the laws of the forum state." Consulting Eng'rs, 561 F.3d at 278. "[T]he
defendant's conduct and connection with the forum State must be such that it should

reasonably anticipate being haled into court there." Anita's New Mexico Style Mexican
Food, Inc. V. Anita's Mexican Foods Corp., 201 F.3d 314, 318 (4th Cir. 2000) (citation

and quotation marks omitted). "A defendant's actions that are directed at the forum state
in only a random, fortuitous, or attenuated way are insufficient to support jurisdiction."
ESAB Grp., Inc., v. Zurich Ins. PLC, 685 F.3d 376, 392 (4th Cir. 2012) (citation and
quotation marks omitted).

Courts may "consider[] various nonexclusive factors in seeking to resolve whether
a defendant has engaged in such purposeful availment." Consulting Eng'rs, 561 F.3d at
278. In the context of contractual disputes, courts often consider: "(1) where any drafting
of the contract occurred, and where the negotiations took place; (2) who initiated the

contact; (3) the extent of the communications, both telephonic and written, between the

parties; and (4) where the contract said the parties' performance would occur." Indep.
Printers Worldwide, Inc. v. Cole, No. 3:15-CV-185, 2015 WL 4705507, at *7 (E.D. Va.

2015); see also Diamond Healthcare ofOhio, Inc. v. Humility ofMary Health Partners,
229 F.3d 448, 451 (4th Cir. 2000); Chungv. NANA Dev. Corp., 783 F.2d 1124, 1128 (4th
Cir. 1986)

"Although it is true that a single contractual relationship may furnish a basis for
jurisdiction,... the [United States Supreme] Court has expressly denied that an
individual's contract with an out-of-state party can alone automatically establish" the
requisite purposefiil availment. Chung, 783 F.2d at 1127-28 (citation and quotation
marks omitted); see also Diamond Healthcare ofOhio, Inc., 229 F.3d at 451; Cole, 2015

WL 4705507, at *7. No single factor is determinative, and courts must "[e]xamin[e] with
care all of the facts and circumstances ... presented." Chung, 783 F.2d at 1129.

These principles, applied to this case, suggest that jurisdiction is constitutionally
doubtftil. There are no facts here that allow the Court to conclude that Defendant

purposefully directed its activities toward Virginia. The first factor weighs heavily

against the exercise ofjurisdiction. While the policy in question was drafted by Plaintiff
in Virginia, all pertinent negotiations took place through third-party intermediaries

located in Utah. Negotiations were apparently minimal, giventhat Plaintiff issued the

Policy only one month after Defendant submitted its application. There is no evidence in
the record suggesting Defendant ever negotiated directly with Plaintiff, northat either of
the brokers negotiated on Defendant's behalfin Virginia. This clearly falls short of the
substantial connection required to establish minimum contacts based on a singlecontract.
The second factor in the analysis also weighs against the exercise of jurisdiction.
Plaintiff asserts, and Defendant does not deny, that Defendant initiated contact by

submitting an application for insurance. However, the record shows thatDefendant

submitted its application to the Retail Broker, located in Utah, who in turn transmitted the

application to the Wholesale Broker, also located inUtah. The application was routed to
Virginia by a third party and not at Defendant's direction. The mere fact that its ultimate
destination was Virginia is insufficient to support personal jurisdiction. See ESAB Grp.,
685 F.3d at 392.

The third factor is similarly unavailing. Plaintiff has offered no evidence of any

direct communications concerning Policy negotiations with Defendant. The record

includes only two instances of direct communication between the parties, consisting of
two collection letters sent by Plaintiff in 2016, well after the parties had negotiated the

policy at issue. (Compl. Ex. B, at 1; Compl. Ex. C, at 1.) Moreover, there is no record of
Defendant ever responding to Plaintiffs letters. "The unilateral activity of those who

claim some relationship with a nonresident defendant cannot satisfy the requirement of
contact with the forum State." Hanson v. Denckla, 357 U.S. 235, 253 (1958).

Similarly, the fourth factor adds little support to Plaintiffsjurisdictional argument.

The Policy itself offers little guidance regarding the place of performance, even covering
activities on foreign soil. (Compl. Ex. A, at 17, ECF No. 1-4.) The parties did not agree

to settle future disputes in any particular forum, agreeing only that Defendant "will
submit to the jurisdiction of any court of competent jurisdiction within the United States
of America." {Id. at 25.) Such broad language falls far short of the jurisdictional mark.

Despite Defendant's scant contacts with Virginia, Plaintiff argues that Defendant
"should reasonably have expected to be haled into a Virginia court" for "negotiate[ing],

purchas[ing], partially perform[ing] under, and renegotiate[ing]" the Policy with a

Virginia insurer. (PL's Br. Opp'n Mot. Dismiss 1.) This conclusory statement is of no
moment. Likewise, contrary to Plaintiffs assertions, the fact that Plaintiffs personnel

processed Defendant's Policy documents from Plaintiffs offices in Richmond, Virginia,
is inconsequential. "In undertaking the minimum contacts analysis, it must be borne in
mind that 'unilateral activity of another party or a third person is not an appropriate

consideration.'" Chung, 783 F.2d at 1128 (citing Helicopteros Nacionales de Colombia,
S.A. V. Hall 466 U.S. 408,417 (1984)).

In light of all four factors, the Court finds that the Policy is insufficient to establish
that Defendant purposefully availed itself of the privilege of conducting business under
the laws Virginia. As such, Plaintiff fails to meet the first prong of the specific
jurisdiction test set forth in ALSScan and its progeny. Consequently, the Court need not
extend its analysis to the other two factors. Consulting Eng'rs, 561F.3dat278 ("If, and
only if, we find that the plaintiff has satisfied this first prong of the test for specific

jurisdiction need we move on to a consideration of prongs two and three."). Asserting
personal jurisdiction over Defendant would violatethe Due Process Clause of the
Fourteenth Amendment.
IV. CONCLUSION

For the foregoing reasons, the Court finds that Plaintiffhas failed to make the

"prima facie showing of personal jurisdiction [required] to survive thejurisdictional
challenge." Grayson, 816 F.3rd at 268. Accordingly, the Court will grantDefendant's
Motion to Dismiss and need not reach its alternative request for transfer of venue.

An appropriate Order will accompany this Memorandum Opinion.

Henry E. Hudson
United States District Judge
Date:

aoiQ

Richmond, Virginia

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