Opinion
CIVIL NO. 4:22-CV-422-SDJ
2022-11-22
BLUESTONE PARTNERS, LLC v. LIFECYCLE CONSTRUCTION SERVICES, LLC
Anna Rebecca Skupin, Scheef & Stone, LLP, Sherman, TX, Mark Leo Hill, Scheef & Stone, LLP, Frisco, TX, for Bluestone Partners, LLC. James Michael Young, Sanders, Motley, Young & Gallardo, PLLC, Sherman, TX, for Lifecycle Construction Services, LLC.
Anna Rebecca Skupin, Scheef & Stone, LLP, Sherman, TX, Mark Leo Hill, Scheef & Stone, LLP, Frisco, TX, for Bluestone Partners, LLC. James Michael Young, Sanders, Motley, Young & Gallardo, PLLC, Sherman, TX, for Lifecycle Construction Services, LLC. ORDER SEAN D. JORDAN, UNITED STATES DISTRICT JUDGE
Plaintiff Bluestone Partners, LLC ("Bluestone") filed this action against Defendant Lifecycle Construction Services, LLC ("Lifecycle"), alleging causes of action for breach of contract and tortious interference with a contract. (Dkt. #1). As described in Bluestone's current, Second Amended Complaint, the gravamen of Bluestone's claims is that Lifecycle "abruptly[ ] and improperly" terminated a construction services contract with Bluestone and proceeded to hire Bluestone's subcontractor, EHS Maryland, LLC ("EHS"), to continue the work. (Dkt. #10 at 1).
Bluestone filed a separate cause in the Eastern District of Texas against EHS, the referenced subcontractor. Bluestone's separate action against EHS was resolved through mediation and dismissed. See Bluestone Partners LLC v. EHS Maryland LLC, No. 4:21-CV-286-SDJ-CAN.
In response, Lifecycle moved to dismiss Bluestone's claims for lack of personal jurisdiction. (Dkt. #11). After engaging in jurisdictional discovery, the parties have filed a joint motion to transfer. (Dkt. #13). In the joint motion, Bluestone concedes that this Court lacks jurisdiction and the parties jointly request that the Court transfer this case to the Richmond Division of the Eastern District of Virginia under 28 U.S.C. § 1631. Alternatively, invoking 28 U.S.C. § 1404, the parties jointly request that the Court find that the convenience of the parties and the interest of justice favor transfer of this matter to the Eastern District of Virginia. The joint motion will be granted.
LEGAL STANDARD
Under 28 U.S.C. § 1631, when a court "finds there is a want of jurisdiction, the court shall, if it is in the interest of justice, transfer such action or appeal to any other such court . . . in which the action or appeal could have been brought at the time it was filed." 28 U.S.C. § 1631. The Fifth Circuit has recently confirmed that Section 1631 "encompasses both subject-matter and personal jurisdiction" and "therefore requires a transfer when a district court lacks either type of jurisdiction and the other statutory prerequisites are met." Franco v. Mabe Trucking Co., 3 F.4th 788, 795 (5th Cir. 2021).
Section 1631 confers authority for the Court "to make a single decision upon concluding that it lacks jurisdiction—whether to dismiss the case or, 'in the interest of justice,' to transfer it." Sanders v. ExxonMobil Corp., No. SA-08-CA-590-OG, 2008 WL 11417386, at *5 (W.D. Tex. 2008) (quoting Christianson v. Colt Indus. Operating Corp., 486 U.S. 800, 818, 108 S.Ct. 2166, 100 L.Ed.2d 811 (1988)).
When a court determines that it lacks jurisdiction, Section 1631 empowers the court to decide " 'whether to dismiss the case or, 'in the interest of justice,' to transfer it to a court . . . that has jurisdiction." Christianson v. Colt Indus. Operating Corp., 486 U.S. 800, 818, 108 S.Ct. 2166, 100 L.Ed.2d 811 (1988) (quoting 28 U.S.C. § 1631). Transferring a case under Section 1631 is proper when: "(1) the transferee court would have been able to exercise jurisdiction on the date the action was misfiled; (2) the transferor court lacks jurisdiction; and (3) the transfer serves the interests of justice." Turner v. Harvard MedTech of Nev., LLC, No. 1:22-CV-83-DAE, 620 F.Supp.3d 569, 576 (W.D. Tex. Aug. 8, 2022) (quoting Harutyuanyan v. Love, No. CV 19-41, 2019 WL 5551901, at *4 (E.D. La. Oct. 28, 2019)); see also, e.g., Scoggins v. Dubrow, No. CV H-20-3487, 2021 WL 4228609, at *4 (S.D. Tex. May 28, 2021) (quoting the same); Arias v. Mercedes-Benz USA, LLC, No. CV 20-00546-BAJ-SDJ, 2021 WL 1206600, at *5 (M.D. La. Mar. 30, 2021) (same).
DISCUSSION
I. Requirements for Personal Jurisdiction
Personal jurisdiction exists over a non-resident defendant if "the state's long-arm statute extends to the defendant and exercise of such jurisdiction is consistent with due process." Johnston v. Multidata Sys. Int'l Corp.,523 F.3d 602, 609 (5th Cir. 2008). "Because the Texas long-arm statute extends to the limits of federal due process, the two-step inquiry collapses into one federal due process analysis." Id.; see also TEX. CIV. PRAC. & REM. CODE § 17.042. Due process requires that the defendant have "minimum contacts" with the forum state, such that the defendant has "purposefully availed himself of the privilege of conducting activities within the forum state." Id. (quoting Wilson v. Belin, 20 F.3d 644, 647 (5th Cir. 1994)). The exercise of personal jurisdiction must be consistent with "traditional notions of fair play and substantial justice." Id.
Personal jurisdiction may be either specific or general. "A court may assert general jurisdiction over foreign corporations to hear any and all claims against them when their affiliations with the State are so 'continuous and systematic' as to render them essentially at home in the forum State." Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919, 131 S.Ct. 2846, 180 L.Ed.2d 796 (2011). "General jurisdiction . . . will attach[ ] even if the nonresident defendant's contacts with the forum state are not directly related to the cause of action." Wilson v. Belin, 20 F.3d 644, 647 (5th Cir. 1994). Given the broad reach of general jurisdiction, the Fifth Circuit has held that the "continuous and systematic contacts test is a difficult one to meet, requiring extensive contacts between a defendant and a forum." Johnston, 523 F.3d at 609 (quoting Submersible Sys., Inc. v. Perforadora Cent., S.A., 249 F.3d 413, 419 (5th Cir. 2001)(citation omitted)).
Specific jurisdiction exists over a nonresident defendant "whose contacts with the forum state are singular or sporadic only if the cause of action asserted arises out of or is related to those contacts." Int'l Energy Ventures Mgmt., L.L.C. v. United Energy Grp., Ltd., 818 F.3d 193, 212 (5th Cir. 2016) (emphasis in original). Thus, specific jurisdiction exists when "a nonresident defendant has purposefully directed its activities at the forum state and the litigation results from alleged injuries that arise out of or relate to those activities." Walk Haydel & Assocs., Inc. v. Coastal Power Prod. Co., 517 F.3d 235, 243(5th Cir. 2008) (internal quotations omitted).
II. The Court Lacks Personal Jurisdiction Over Lifecycle.
Only specific jurisdiction is at issue in this case. Courts apply a "three-step" test to determine specific jurisdiction. Admar Int'l, Inc. v. Eastrock, L.L.C., 18 F.4th 783, 786 (5th Cir. 2021). Specifically, courts consider: (1) "whether the defendant has minimum contacts with the forum state, i.e., whether it purposely directed its activities toward the forum state or purposefully availed itself of the privileges of conducting activities there"; (2) "whether the plaintiff's cause of action arises out of or results from the defendant's forum-related contacts"; and (3) "whether the exercise of personal jurisdiction is fair and reasonable." Carmona v. Leo Ship Mgmt., Inc., 924 F.3d 190, 193 (5th Cir. 2019) (citing Seiferth v. Helicopteros Atuneros, Inc., 472 F.3d 266, 271 (5th Cir. 2006)). For there to be minimum contacts, a defendant must have "purposefully availed" itself of the "benefits and protections of the forum state" such that it "should reasonably anticipate being haled into court there." Id. (quoting Moncrief Oil Int'l Inc. v. OAO Gazprom, 481 F.3d 309, 311 (5th Cir. 2007) and Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985)).
It is undisputed that Lifecycle is a Virginia limited liability company, that none of its members are Texas citizens, and that it has no offices in Texas. In the parties' joint motion to transfer, Bluestone notes that it previously asserted that this Court has personal jurisdiction over Lifecycle based on its good faith belief that Lifecycle "regularly conduct[s] business in Texas," and because Bluestone alleges that Lifecycle knowingly interfered with Bluestone's contract with EHS, a contract that included a forum-selection clause for the State of Texas. (Dkt. #13 at 1-2).
Bluestone now concedes, however, that neither of these proffered reasons support the exercise of personal jurisdiction over Lifecycle. Further, Bluestone does not contest the factual contentions or legal arguments made in Lifecycle's motion to dismiss for lack of personal jurisdiction. Based on Bluestone's concessions, the Court concludes that there is no support for a finding of specific jurisdiction over Lifecycle in this District.
To begin, there are no facts showing that Lifecycle has any connection with Texas beyond contracting with Bluestone, which is not sufficient to allege minimum contacts with the forum. See Danziger & De Llano, L.L.P. v. Morgan Verkamp, L.L.C., 24 F.4th 491, 500 (5th Cir. 2022) (quoting Moncrief Oil, 481 F.3d at 311) ("Importantly, 'merely contracting with a resident of the forum state does not establish minimum contacts.' "). Lifecycle did not perform any of its obligations in Texas (nor did the contract require performance in Texas), and the subject matter of the contract is centered outside of Texas—a construction project in Hawaii. See id. at 502 (citing Moncrief Oil, 481 F.3d at 312) ("a plaintiff's unilateral activities in Texas do not constitute minimum contacts where the defendant did not perform any of its obligations in Texas, the contract did not require performance in Texas, and the contract is centered outside of Texas."); see also Holt Oil & Gas Corp. v. Harvey, 801 F.2d 773, 778 (5th Cir. 1986).
Lifecycle has performed only four projects in Texas between 2018 and 2020, all on military bases owned by the federal government. (Dkt. #11-1 at 1-2).
Moreover, as to Bluestone's tortious-interference claim, the Fifth Circuit "has repeatedly held that 'mere allegations of tortious interference with a forum resident's contractual rights are not sufficient to establish specific personal jurisdiction.' " See Elevacity U.S., LLC v. Schweda, No. 4:22-CV-00042, 2022 WL 3704537, at *5 (E.D. Tex. Aug. 26, 2022) (quoting Cent. Freight Lines v. APA Transp. Corp., 322 F.3d 376, 383 (5th Cir. 2003)); see Panda Brandywine Corp. v. Potomac Elec. Power Co., 253 F.3d 865 (5th Cir. 2001). Every action of which Bluestone complains occurred in a State other than Texas, save and except Lifecycle's entry into the contract with Bluestone. See Danziger, 24 F.4th at 497 (finding no jurisdiction where the "allegedly tortious conduct may have affected [a party] in Texas" but "none of this conduct occurred in Texas").
Specific jurisdiction over Lifecycle also cannot be grounded in the forum selection clause found in the contract between Bluestone and EHS, to which Lifecycle is not a party. Although Bluestone has now abandoned this argument, in its amended complaint Bluestone alleged that the forum selection clause in its agreement with EHS, which specifies that suits arising from the contract must be brought in Grayson County, Texas, binds Lifecycle as a non-signatory because Lifecycle's alleged tortious interference "is closely related to Bluestone's contractual relationship with EHS." (Dkt. #10 at 2).
The Court notes that the Fifth Circuit only recently adopted the theory advanced by Bluestone, known as the "closely-related doctrine." See Franlink Inc. v. BACE Servs., Inc., No. 21-20316, 50 F.Supp.3d 432, 439-40 (5th Cir. Sept. 28, 2022). For the doctrine to "bind a non-signatory to a forum selection clause," the non-signatory party "must be 'closely related' to the dispute such that it becomes 'foreseeable' that it will be bound.' " Id. at 441 (quoting Hugel v. Corp. of Lloyd's, 999 F.2d 206, 209 (7th Cir. 1993)). Looking to other circuits, the Fifth Circuit "extract[s] a few fundamental factors" courts should consider to determine whether a non-signatory is "closely related" to, and thus bound by, a forum selection clause: "(1) common ownership between the signatory and the non-signatory, (2) direct benefits obtained from the contract at issue, (3) knowledge of the agreement generally and (4) awareness of the forum selection clause particularly." Id. (citing Adams v. Raintree Vacation Exch., LLC, 702 F.3d 436, 439-42 (7th Cir. 2012) and In re McGraw-Hill Glob. Educ. Holdings LLC, 909 F.3d 48, 63 (3d Cir. 2018)).
Here, aside from Lifecycle's general knowledge of the existence of the agreement between Bluestone and EHS, no other "closely-related doctrine" factor has been alleged in this case. (Dkt. #10 at 4). And in Franlink, the Fifth Circuit made clear that general knowledge of an agreement, standing alone, is insufficient to establish personal jurisdiction. Id. at 442-44 (concluding that a party could not be bound by a forum selection clause in a franchise agreement when it was only aware of the existence of the agreement and none of the other "closely related" factors were applicable).
Put simply, the "closely-related doctrine" only permits enforcement of a forum selection clause against a non-signatory in "rare circumstances." Id. at 442 n.8. The doctrine is plainly inapplicable here.
III. Transfer to the Eastern District of Virginia is Appropriate
Once a court determines that it lacks jurisdiction, Section 1631 empowers the court to decide " 'whether to dismiss the case or, 'in the interest of justice,' to transfer it to a court . . . that has jurisdiction." Christianson, 486 U.S. at 818, 108 S.Ct. 2166 (quoting 28 U.S.C. § 1631). A case may be transferred under Section 1631 when: "(1) the transferee court would have been able to exercise jurisdiction on the date the action was misfiled; (2) the transferor court lacks jurisdiction; and (3) the transfer serves the interests of justice." Turner, 620 F.Supp.3d at 576 (quoting Harutyuanyan, 2019 WL 5551901, at *4). The Court has determined that is lacks personal jurisdiction over Lifecycle, establishing the second requirement for a Section 1631 transfer. See supra Part II.
As to the first requirement, Lifecycle is subject to personal jurisdiction before the transferee court proposed by the joint motion, and this action could have been brought there at the time it was filed. It is undisputed that Lifecycle is "at home" in the Commonwealth of Virginia and subject to general jurisdiction there, where it is organized and has its principal place of business. Additionally, Lifecycle has submitted, and Bluestone does not contest, the affidavit of Sean Haynes, Chair and CEO of Lifecycle, which confirms that the contract between Lifecycle and Bluestone is governed by the laws of Virginia and contains a forum selection clause fixing presuit mediation in Virginia. (Dkt. #11-1 at 2).
As to the third requirement, the interests of justice favor transfer of this action under Section 1631 rather than dismissal. The Court has wide discretion to consider whether transfer serves the interests of justice. "Dismissal would 'require a plaintiff to incur new filing fees and other costs, and a dismissal could raise issues regarding limitations.' " Mr Showers, LLC v. Mr. Shower Door, Inc., 2021 WL 5918921, at *6 (E.D.Tex. Dec. 15, 2021). Lifecycle would not be unduly burdened by, and in fact agrees to, trying this case in its home venue. See, e.g., id.; Turner, 620 F.Supp.3d at 576 ("Defendants would not be unduly burdened, as the case would be tried in a state where they conduct business and reside"). The interests of justice warrant transferring this case to the Eastern District of Virginia, Richmond Division—a court that, on the pleadings, has personal jurisdiction over Lifecycle and where this action could have been originally filed—rather than to dismiss for lack of jurisdiction.
"The decision to transfer a case lies within the discretion of the district court." Orix Pub. Fin., LLC v. Lake Cnty. Hous. & Redevelopment Auth., No. 3:11-CV-0678-D, 2011 WL 3628958, at *8 (N.D. Tex. Aug. 16, 2011) (citing Caldwell v. Palmetto St. Sav. Bank of S.C., 811 F.2d 916, 919 (5th Cir. 1987) (per curiam)); see Mr Showers, 2021 WL 5918921, at *5. The plain text of Section 1631 permits a district court to transfer an action for want of personal jurisdiction, and indeed, the statute "establishes a mandatory duty when it is triggered." See Franco, 3 F.4th at 795-96.
CONCLUSION
For the foregoing reasons, it is ORDERED that the Parties' Joint Motion to Transfer in Response to Defendant's Motion to Dismiss for Lack of Personal Jurisdiction, (Dkt. #13), is GRANTED. This civil action is hereby TRANSFERRED to the United States District Court for the Eastern District of Virginia, Richmond Division, for further disposition.
So ORDERED and SIGNED this 22nd day of November, 2022.