Opinion
Civil Action 20-cv-02193-CMA-MEH
11-23-2020
SWIFT DISTRIBUTION, LLC, Plaintiff, v. RELIANCE INTERNATIONAL CORP., Defendant.
RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
Michael E. Hegarty, United States Magistrate Judge.
Defendant has filed a Motion to Dismiss Complaint and/or Transfer Pursuant to 28 U.S.C. § 1404(a). ECF 27. This lawsuit concerns a contract dispute between Plaintiff, a Delaware corporation with its principal place of business in Colorado, and Defendant, a Taiwanese corporation. The parties have had disputes for several years, but in July 2020, Defendant threatened litigation. The record shows the parties negotiated their most recent dispute until July 24, 2020, when, under Defendant's threat of litigation, Plaintiff filed this breach of contract/promissory estoppel action without prior notice to Defendant. On August 5, 2020, Defendant filed its threatened lawsuit against Plaintiff in the United States District Court for the District of Delaware in an action styled Reliance International Corp. v. Swift Distribution, LLC d/b/a Ultimate Support Systems, C. A. No. 20-cv-01045 MN (“Delaware Action”). Defendant now argues that (1) it is not amenable to specific personal jurisdiction in Colorado; (2) the lawsuit should be dismissed on grounds of insufficient services of process; or, alternatively, (3) the lawsuit should be transferred to the District of Delaware. For the reasons stated below, I respectfully recommend to United States District Judge Christine M. Arguello that the Motion be denied.
I. Transfer to the District of Delaware
Regarding the transfer of this case to Delaware, Plaintiff responds by invoking the federal courts' deference to a first-filed case (the so-called “first to file” principle). In a decision involving this very Plaintiff opposing the application of that principle, a judge in this District discussed the parameters of “first to file.” Swift Distribution, LLC v. Starin Mktg., Inc., No. 16-cv-00893-MSK-STV, 2016 WL 9344072, at *2 (D. Colo. Nov. 4, 2016). In short, federal courts give some deference to parties resolving their disputes in the action that is filed first. That court stated that “the first-to-file principle is not mandated; it yields to the interests of justice and should not be applied if a court finds compelling circumstances support its abrogation.” Id. I do not believe the “compelling circumstances” standard exists in any Tenth Circuit precedent but rather was borrowed from other circuits. However, I believe it is premature for this Court to engage in a detailed analysis of the merits of the first-to-file principle, because this issue should be decided first by the District of Delaware.
In the Delaware action, the defendant (Plaintiff here) moved to dismiss on August 26, 2020 based on this first-to-file principle, arguing that the two cases were essentially mirror images. Delaware Action, Docket ## 8-9. That motion was fully briefed on October 5, 2020. The current motion was filed on October 1, 2020 and fully briefed as of November 5, 2020. In a factually similar case, now-Chief Judge Brimmer found, after a survey of cases, that “the proper course is for the second filed court to make the initial determination of whether the two actions substantially overlap.” Crocs, Inc. v. Cheng's Enterprises, Inc., No. 06-cv-00605-PAB-KMT, 2015 WL 5547389, at *3 (D. Colo. Sept. 21, 2015) (citation omitted). “If a second filed court decides that question in the affirmative, it may stay the case, transfer it to the first filed court, or, in rare cases, dismiss the case entirely; it then falls to the first filed court ‘to determine whether subsequently filed cases involving substantially similar issues should proceed.'” Id. Judge Brimmer found this course of action promoted comity and proper judicial administration. Id. (citing cases).
Therefore, because the District of Delaware should be given the opportunity to first address this issue, I recommend that the request to transfer be denied without prejudice pending a decision on the motion to dismiss in the second filed case. Regardless whether United States District Judge Maryellen Noreika stays, transfers, or dismisses the Delaware case, the issue of personal jurisdiction and service will need to be decided in this action. Consequently, I must address Defendant's remaining arguments.
II. Specific Jurisdiction
Plaintiff relies solely on specific jurisdiction under Fed.R.Civ.P. 12(b)(2) and, thus, I will not address whether Defendant would be subject to general jurisdiction in Colorado. “Jurisdiction to resolve cases on the merits requires . . . authority over the parties (personal jurisdiction), so that the court's decision will bind them.” Gadlin v. Sybron Int'l Corp., 222 F.3d 797, 799 (10th Cir. 2000) (quoting Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 577 (1999)). When no evidentiary hearing is held “the plaintiff need only make a prima facie showing that jurisdiction exists.” Wenz v. Memery Crystal, 55 F.3d 1503, 1505 (10th Cir. 1995); see also Old Republic Ins. Co. v. Cont'l Motors, Inc., 877 F.3d 895, 900 (10th Cir. 2017). “The plaintiff may make this prima facie showing by demonstrating, via affidavit or other written materials, facts that if true would support jurisdiction over the defendant.” OMI Holdings, Inc. v. Royal Ins. Co. of Canada, 149 F.3d 1086, 1091 (10th Cir. 1998); see also Old Republic Ins. Co., 877 F.3d at 900.
The allegations in the complaint must be taken as true to the extent they are uncontroverted by the defendant's affidavits. If the parties present conflicting affidavits, all factual disputes must be resolved in the plaintiff's favor, and the plaintiff's prima facie showing is sufficient notwithstanding the contrary presentation by the moving party. However, only the well ple[a]d[ed] facts of plaintiff's complaint, as distinguished from mere conclusory allegations, must be accepted as true.Wenz, 55 F.3d at 1505 (citations and internal quotation marks omitted). “[T]o defeat a plaintiff's prima facie showing of jurisdiction, a defendant must present a compelling case demonstrating that the presence of some other considerations would render jurisdiction unreasonable.” OMI Holdings, Inc., 149 F.3d at 1091 (citation and internal quotations omitted). “If the parties present conflicting affidavits, all factual disputes are resolved in the plaintiff's favor, and the plaintiff's prima facie showing is sufficient notwithstanding the contrary presentation by the moving party.” Behagen v. Amateur Basketball Ass'n of U.S.A., 744 F.2d 731, 733 (10th Cir. 1984).
“The Due Process Clause of the Fourteenth Amendment constrains a State's authority to bind a nonresident defendant to a judgment of its courts.” Walden v. Fiore, 571 U.S. 277, 283 (2014). The law of the forum state and constitutional due process limitations govern personal jurisdiction in federal court. Intercon, Inc. v. Bell Atl. Internet Solutions, Inc., 205 F.3d 1244, 1247 (10th Cir. 2000); see Fed.R.Civ.P. 4(k)(1)(A). Colorado's long-arm statute, Colo. Rev. Stat. § 13-1-124, extends jurisdiction to the Constitution's full extent. Benton v. Cameco Corp., 375 F.3d 1070, 1075 (10th Cir. 2004); Mr. Steak, Inc. v. District Court, 574 P.2d 95, 96 (1978) (en banc). Thus, the specific personal jurisdiction analysis here is a single due process inquiry. See Benton, 375 F.3d at 1075.
When evaluating personal jurisdiction under the due process clause, the Tenth Circuit conducts a two-step analysis. At the first step, the court examines “whether the non-resident defendant has ‘minimum contacts' with the forum state such ‘that he should reasonably anticipate being haled into court there.'” TH Agric. & Nutrition, LLC v. Ace European Grp., Ltd., 488 F.3d 1282, 1287 (10th Cir. 2007) (citations omitted). If the defendant has sufficient contacts, the court then asks whether “exercise of jurisdiction over the defendant offends ‘traditional notions of fair play and substantial justice, '” that is, whether the exercise of jurisdiction is “reasonable” under the circumstances of a given case. Id. (citations omitted). “This analysis is fact specific.” ClearOne Commc'ns, Inc. v. Bowers, 643 F.3d 735, 763 (10th Cir. 2011) (quoting Emp'rs Mut. Cas. Co. v. Bartile Roofs, Inc., 618 F.3d 1153, 1159 (10th Cir. 2010)).
A. Minimum Contacts
“[S]pecific jurisdiction is confined to adjudication of ‘issues deriving from, or connected with, the very controversy that establishes jurisdiction.'” Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 919, 919 (2011) (citation omitted). The Supreme Court recently re-articulated the criteria for establishing specific jurisdiction. Walden v. Fiore, 571 U.S. 277 (2014). “The inquiry whether a forum State may assert specific jurisdiction over a nonresident defendant ‘focuses on the relationship among the defendant, the forum, and the litigation.'” Id. at 283-84 (citation omitted). The “defendant's suit-related conduct must create a substantial connection with the forum state, ” and “the relationship must arise out of contacts that the ‘defendant himself' creates with the forum State[, ]”with the “minimum contacts analysis look[ing] to the defendant's contacts with the forum State itself, not the defendant's contacts with persons who reside there.” Id. at 285 (citation omitted) (emphasis in original). The “plaintiff cannot be the only link between the defendant and the forum. Rather, it is the defendant's conduct that must form the necessary connections with the forum State” to support the basis for specific jurisdiction. Id. (citation omitted). Thus, “[i]f the question is whether an individual's contract with an out-of-state party alone can automatically establish sufficient minimum contacts in the other party's home forum, we believe the answer clearly is that it cannot.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 478 (1985).
Accordingly, even in the absence of “continuous and systematic” contacts, a state's courts may exercise specific jurisdiction over a defendant who “purposefully directed” activities at the state's residents if the cause of action arises out of those activities. Burger King Corp., 471 U.S. at 472-73. Thus, “[u]nder the specific-jurisdiction requirement, a plaintiff satisfies the minimumcontacts standard by showing that (1) the defendant has purposefully availed itself of the privilege of conducting activities or consummating a transaction in the forum state, and (2) the litigation results from the alleged injuries that arise out of or relate to those activities.” Bartile Roofs, Inc., 618 F.3d at 1160; see also Benton, 375 F.3d at 1076 (“A defendant's contacts are sufficient if the defendant purposefully directed its activities at residents of the forum, and the plaintiff's claim arises out of or results from actions by the defendant himself that create a substantial connection with the forum state.”) (internal quotation marks and citation omitted).
1. Did Defendant Purposefully Direct Activities at a Colorado Resident?
To establish purposeful direction, a plaintiff must demonstrate more than mere foreseeability of causing injury in another state. Old Republic Ins. Co., 877 F.3d at 905 (citing Burger King Corp., 471 U.S. at 474). The plaintiff's demonstration will succeed “where the defendant deliberately has engaged in significant activities within a State, . . . [such that] he manifestly has availed himself of the privilege of conducting business there.” Id. Supreme Court Associate Justice Neil Gorsuch, in an opinion reviewing an order by this Court, stated: “In this arena, the Supreme Court has instructed that the ‘minimum contacts' standard requires, first, that the out-of-state defendant must have ‘purposefully directed' its activities at residents of the forum state, and second, that the plaintiff's injuries must ‘arise out of' defendant's forum-related activities. Dudnikov v. Chalk & Vermilion Fine Arts, Inc., 514 F.3d 1063, 1071 (10th Cir. 2008). Defendant conduct has met this requirement in light of the well-pleaded allegations of the Complaint and by the course of the parties' contractual relationship as outlined below.
Plaintiff alleges Defendant marketed, sold, and distributed products throughout the State of Colorado, and Plaintiff's causes of action arise out of that activity. Compl. at ¶ 5. The parties have done business with one another since 2008. ECF 28 at ¶ 4; ECF 34 at ¶ 5. Plaintiff provides evidence of 130 purchase orders originating in Colorado that Plaintiff executed with Defendant during that time. Although Defendant provides evidence that the sales were always FOB at an overseas location, there is no dispute Defendant knew products would go to Colorado. Some shipments were not sent FOB elsewhere but went directly into Colorado. Rep. at 3, ECF 33. Plaintiff also establishes that most correspondence concerning these sales was sent into and out of Colorado (probably most by email). Resp., Ex. B at ¶ 12, ECF 32-3; Rep. at 3, ECF 33. Payments for the products originated from Colorado. Id. at ¶ 14. Plaintiff also alleges that at least four representatives of Defendant have visited Plaintiff at its principal place of business in Colorado on five different occasions occurring in 2009-10, 2010, 2016, 2017, and 2019. Id. at ¶ 17. The business conducted between the parties involved various aspects of the parties' relationship. Id. at ¶ 17; ECF 34 at ¶¶ 28-34.
The interactions noted above establish a “‘defendant[] who [has] purposefully ‘reached out beyond' [its residence] and into another by, for example, entering a contractual relationship that ‘envisioned continuing and wide-reaching contacts' in the forum State.'” Old Republic Ins. Co., 877 F.3d at 905 (citation omitted). Further, Defendant's communications with Plaintiff are evidence suggesting purposeful direction. Id. (citation omitted). Moreover, the sales here were not “random, isolated, or fortuitous, ” Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 774 (1984).
A company that “continuously and deliberately exploit[s]” a market “must reasonably anticipate being haled into court there.” Id. at 781. Thus, under the minimum contacts analysis, Defendant's actions here show purposeful direction. Equifax Servs., Inc. v. Hitz, 905 F.2d 1355, 1359 (10th Cir. 1990) (“[W]hen forum contacts are a natural result of a contractual relationship, it indicates purposeful affiliation with the forum through an interstate contractual relationship.”).
2. “Arising out of' Requirement
If a plaintiff shows purposeful direction, the minimum contacts test next requires that the plaintiff's alleged injury “arise out of” the defendant's forum-related activities. Old Republic Ins. Co., 877 F.3d at 908. Here, the current dispute arises directly out of the parties' decade-long business relationship.
B. Fair Play and Substantial Justice
If a plaintiff meets its burden of showing minimum contacts, this Court “must still inquire whether the exercise of personal jurisdiction would offend traditional notions of fair play and substantial justice.” Dudnikov, 514 F.3d at 1080. At this point, the defendant must “present a compelling case that the presence of some other considerations would render jurisdiction unreasonable.” Id. Defendant has not made an argument in that regard, and I find no such considerations here.
Therefore, I recommend that Defendant's Motion to Dismiss on the grounds of personal jurisdiction be denied.
III. Service of Process
Defendant argues that service of process on it should be quashed and this action dismissed pursuant to Fed.R.Civ.P. 12(b)(5). The basis for this argument is that prior to obtaining substituted service, Plaintiff did not make a reasonable effort to serve Defendant. Defendant does not address whether a reasonable effort to serve Defendant conventionally preceded its Motion for Substituted Service (ECF 12). Rather, Defendant argues that the Federal Rules of Civil Procedure contain no such requirement.
Even the authority cited by Defendant acknowledges that substituted service, whether or not preceded by an attempt to conventionally service, “‘is a matter of discretion' for the Court.” Blumedia Inc. v. Sordid Ones BV, No. 10-cv-01158-MSK-KLM, 2011 WL 42296, at *4 (D. Colo. Jan. 6, 2011). For the reasons stated in my Order granting Defendant's Motion for Substituted Service (ECF 13), and because Defendant's request was made in the midst of the worldwide COVID-19 pandemic, making most attempts at service of process extremely difficult and on occasion insurmountable, I do not find circumstances here to require any effort beyond that expressly authorized by the Federal Rules.
Therefore, I recommend that Defendant's Motion to Dismiss on the grounds of service of process be denied.
IV. Conclusion
Accordingly, I respectfully RECOMMEND that Judge Arguello DENY the Motion to Dismiss [filed October 1, 2020; ECF 27] as stated above.
Be advised that all parties shall have fourteen (14) days after service hereof to serve and file any written objections in order to obtain reconsideration by the District Judge to whom this case is assigned. Fed.R.Civ.P. 72. The party filing objections must specifically identify those findings or recommendations to which the objections are being made. The District Court need not consider frivolous, conclusive or general objections. A party's failure to file such written objections to proposed findings and recommendations contained in this report may bar the party from a de novo determination by the District Judge of the proposed findings and recommendations. United States v. Raddatz, 447 U.S. 667, 676-83 (1980); 28 U.S.C. § 636(b)(1). Additionally, the failure to file written objections to the proposed findings and recommendations within fourteen (14) days after being served with a copy may bar the aggrieved party from appealing the factual findings and legal conclusions of the Magistrate Judge that are accepted or adopted by the District Court. Duffield v. Jackson, 545 F.3d 1234, 1237 (10th Cir. 2008) (quoting Moore v. United States, 950 F.2d 656, 659 (10th Cir. 1991)).