Eagle Mining, LLC v. Elkland Holdings, LLC
Filing
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MEMORANDUM OPINION & ORDER: Defendant's motion to transfer venue 15 is GRANTED. Defendant's motion to dismiss for lack of jurisdiction 15 is DENIED AS MOOT. Defendant's motion to vacate the arbitration award 20 shall be TRANSFERRED to the United States District Court for the Southern District of West Virginia. Signed by Judge Amul R. Thapar on 7/14/2014.(STC)cc: COR [Transferred from Kentucky Eastern on 7/14/2014.]
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
CENTRAL DIVISION
LEXINGTON
EAGLE MINING, LLC,
Plaintiff,
v.
ELKLAND HOLDINGS, LLC,
Defendant.
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Civil No. 14-105-ART
MEMORANDUM OPINION
AND ORDER
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A company rescheduled an arbitration proceeding in Kentucky on short notice as a
result of an unexpected environmental disaster. The company did not completely arbitrate its
claims in Kentucky, and abruptly left the state without leaving behind any business related to
the arbitration. Can a federal court in Kentucky review the ultimate arbitration award?
Should the court do so? The peculiar circumstances giving rise to this case compel the Court
to refrain from deciding the first question and to answer the second question in the negative.
BACKGROUND
On January 9, 2014, a chemical leak from a storage tank contaminated the drinking
water supply for over 300,000 people in Charleston, West Virginia.1 But the damage did not
stop there. The toxic release sickened residents of the city, and the resulting financial fallout
pushed Freedom Industries, the tank owner, into bankruptcy proceedings.2 The spill also had
1
See Alexandra Berzon & Kris Maher, West Va. Chem. Spill Site Avoided Broad Regulatory Scrutiny, Wall St. J.,
Jan. 13, 2014, http://online.wsj.com/news/articles/SB10001424052702303819704579317062273564766.
2
Kate White, Freedom Industries Files for Bankruptcy, CHARLESTON GAZETTE, Jan. 18, 2014,
http://www.wvgazette.com/News/201401170030.
unexpected consequences for at least two other parties: Eagle Mining, LLC (“Eagle”) and
Elkland Holdings, LLC (“Elkland”).
Eagle and Elkland had scheduled a multi-day arbitration to begin on January 13,
2014, in Charleston, pursuant to the dispute resolution provision of their Contract Mining
Agreement (“CMA”).
R. 1-1 at 31–32.
After learning that the spill might deprive
Charleston of potable water for several days, the parties scrambled to reschedule the
arbitration elsewhere. R. 15-4 ¶ 12. After calling venues in nearby cities, the parties agreed
to transfer their arbitration to a hotel in Lexington, Kentucky. Id. ¶ 14. Although the CMA
required the parties to conduct their arbitration in Charleston, Eagle and Elkland proceeded
with their new plan. R. 1-1 at 31.
On January 16, 2014, the parties started the arbitration proceeding. However, during
the middle of the arbitration, Eagle and Elkland packed up and flew to Denver, Colorado, at
the arbitrator’s request. R. 15-4 ¶¶ 16–19. On January 29, 2014, the parties concluded the
arbitration in Denver. Id. ¶ 19. On March 18, 2014, the arbitrator issued his award there. R.
1-3. The award required Elkland to pay damages to Eagle, and ordered Eagle to transfer
certain mining permits to Elkland. R. 1-3 at 32–33. The very next day, Eagle filed a
complaint in the Eastern District of Kentucky, asking this Court to enforce the award by
issuing a judgment against Elkland. R. 1. Elkland moved to dismiss the complaint for lack
of personal jurisdiction and improper venue or, in the alternative, to transfer the case to the
Southern District of West Virginia pursuant to either 28 U.S.C. § 1404(a) or 28 U.S.C.
§ 1406(a).3 R. 15 at 1.
3
Elkland makes a passing reference to Fed. R. Civ. P. 12(b)(6) in its motion to dismiss. See R. 15-1 at 1. A
defendant may dismiss a complaint under this provision if the plaintiff fails to state a claim upon which relief can be
2
DISCUSSION
A party must confirm or challenge an arbitration award in a court where venue is
proper under either the Federal Arbitration Act (“FAA”) or the general venue statute. See 9
U.S.C. § 9; 28 U.S.C. § 1391; see also Cortez Byrd Chips, Inc. v. Bill Harbert Constr. Co.,
529 U.S. 193, 195, 198 (2000).
Eagle and Elkland disagree about whether venue is proper in the Eastern District of
Kentucky. But the Court need not resolve this issue to decide the case. Why? Because
district courts may transfer a case to another court where the case could have been brought.
See 28 U.S.C. § 1404(a); 28 U.S.C. § 1406(a). This is true whether or not venue or personal
jurisdiction is appropriate in the original court. If the original court has personal jurisdiction
and venue, the court may still transfer the case to another district court under § 1404(a); if the
court has no personal jurisdiction or venue, it may transfer the case under § 1406(a). Martin
v. Stokes, 623 F.2d 469, 474 (6th Cir. 1989); see also Flynn v. Greg Anthony Constr. Co.,
Inc., 95 F. App’x 726, 738 (6th Cir. 2003) (finding that a court may transfer a case under
either § 1404(a) or § 1406(a)). Either way—whether the Court has personal jurisdiction and
venue over Elkland or not—transfer is proper under both statutes. Because the Court can
transfer or dismiss this case without deciding whether it has personal jurisdiction over
Elkland, it will only evaluate whether transfer is proper under Elkland’s alternative grounds
for transfer. Carson v. U.S. Office of Special Counsel, 633 F.3d 487, 494 (6th Cir. 2011)
(holding that federal courts are without power to decide questions that cannot affect the
rights of litigants in the case before them).
granted. See Fed. R. Civ. P. 12(b)(6). But a party must develop its argument “in a non-perfunctory manner” at the
risk of waiving the argument entirely. United States v. Catalan, 499 F.3d 604, 606 (6th Cir. 2007). Nowhere in its
pleadings does Elkland discuss dismissal under Fed. R. Civ. P. 12(b)(6). Accordingly, Elkland waived that claim.
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I.
The Case Should Be Transferred Under Either 28 U.S.C. § 1404(a) or 28 U.S.C.
§ 1406(a).
Whether transfer under § 1404(a) is appropriate depends on balancing several
considerations. A court should evaluate whether transfer will be convenient for the parties
and witnesses and in the “interest of justice.” 28 U.S.C. § 1404(a). A transfer furthers the
“interest of justice” where it promotes the “systemic integrity” and fairness of the judicial
system and where the relevant activities and contacts appear predominantly in the target
forum. Moses v. Bus. Card Exp. Inc., 929 F.2d 1131, 1137 (6th Cir. 1991); Flynn, 95 F.
App’x at 741 (finding transfer to be appropriate when the “relevant activities and contacts”
appeared in the target forum). A court considering a transfer under § 1404(a) should also
weigh the convenience of a proposed forum in light of the parties’ expressed preference for
that venue. Stewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22, 29 (1988); Kerobo v.
Sw. Clean Fuels Corp., 285 F.3d 531, 538–39 (6th Cir. 2002) (concluding that a district court
should consider the parties’ forum-selection clause when determining whether to transfer a
case). Finally, a court may also consider the target forum’s familiarity with the substantive
law governing the matter. See In re Peregoy, 885 F.2d 349, 351–52 (6th Cir. 1989).
A court must balance similar considerations when deciding whether to transfer a case
pursuant to § 1406(a), and has broad discretion when doing so. Stanifer v. Brannan, 564
F.3d 455, 456–57 (6th Cir. 2009). Courts must examine the hardships and prejudice to the
parties from dismissing the case when evaluating whether the “interest of justice” requires a
transfer under § 1406(a). See Wallace v. Whitt, 935 F.2d 271 (6th Cir. 1991). Hardship
exists where a defendant will have to incur the expense and inconvenience of refiling the
same pleading in another forum. Roman v. Ashcroft, 340 F.3d 314, 328–29 (6th Cir. 2003)
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(interpreting the term “interest of justice” in 28 U.S.C. § 1631); see also 14D Charles Alan
Wright et al., Federal Practice and Procedure § 3827 (4th ed. 2014) (explaining that transfer
rather than dismissal is appropriate when it would be more efficient).
The facts of this case support transfer under both of these balancing tests. First, the
CMA reflects the parties’ intent to conduct arbitration in West Virginia. R. 1-1 at 31. This
indicates that Eagle would not be inconvenienced by litigation in a West Virginia forum,
since it was apparently willing to participate in an arbitration in that state. Although the
CMA does not contain a forum-selection clause, the arbitration clause indicates the parties
are comfortable with holding proceedings in West Virginia. R. 1-1 at 31. Moreover, the
“relevant activities and contacts” in the litigation do not support retaining the case in a
Kentucky court. Flynn, 95 F. App’x at 741. After all, the mine that is the subject of the
CMA is located in West Virginia, and the arbitration proceedings simply pit-stopped in
Kentucky on their way to Colorado. Indeed, but for a freakish industrial disaster, the
arbitration would not have had any connection to Kentucky. Finally, the parties agreed that
West Virginia law would govern the interpretation of the CMA. R. 1-1 at 33. As such, a
West Virginia court would be more familiar with the substantive state law governing the
underlying contract dispute. In re Peregoy, 885 F.2d at 351–52 (finding a transfer to a Texas
court appropriate where Texas law governed the case).
Elkland will suffer hardship if the Court retains or dismisses the case because it has
limited connections to the state. Elkland does not reside in or regularly conduct business in
Kentucky. R. 15-5 ¶¶ 13–22 (Declaration of Keith I. Davis, Vice President of Elkland). A
transfer will eliminate the hassle and expense that Elkland would incur to refile the case in
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the desired forum. Roman, 340 F.3d at 328–29. The facts thus tip in favor of transferring the
case to the United States District Court for the Southern District of West Virginia.
II.
Venue is Proper in the Southern District of West Virginia.
In order for a transfer to be proper, the Southern District of West Virginia should have
been able to hear the case originally. 28 U.S.C. §§ 1404(a), 1406(a). The Southern District
of West Virginia could have heard the challenge to the arbitration award if venue was proper
under 28 U.S.C. § 1391(b). Under this statute, venue is appropriate in the district where “any
defendant resides.” Id. § 1391(b)(1). Residence exists where a court can exercise personal
jurisdiction over a defendant. Id. § (c)(2). A district court can exercise personal jurisdiction
over a defendant subject to the state’s long-arm statute. See Handley v. Ind. & Mich. Elec.
Co., 732 F.2d 1265, 1268–69 (6th Cir. 1984); CFA Inst. v. Inst. Chartered Fin. Analysis of
India, 551 F.3d 285, 287–88 (4th Cir. 2009). The West Virginia long-arm statute reaches
defendants who transact business in the state or own an interest in real property in the state.
W. Va. Code R. § 56-3-33(a)(1), (a)(6) (2014). Elkland states that it is licensed to do
business and owns property in West Virginia. R. 15-5 ¶¶ 8, 10 (Declaration of Keith I.
Davis, Vice President of Elkland). Accordingly, the Southern District of West Virginia had
personal jurisdiction over Elkland and was a proper venue to hear the challenge to the
arbitration award.
CONCLUSION
In light of the foregoing, this Court concludes that the interests of justice are best
served by transferring this matter to the United States District Court for the Southern District
of West Virginia.
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Accordingly, it is ORDERED that the defendant’s motion to transfer venue, R. 15, is
GRANTED. The defendant’s motion to dismiss for lack of jurisdiction, R. 15, is DENIED
AS MOOT.
The defendant’s motion to vacate the arbitration award, R. 20, shall be
TRANSFERRED to the United States District Court for the Southern District of West
Virginia.
This the 14th day of July, 2014.
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