Opinion
Civil Action No. 04-2096-CM.
November 9, 2004
MEMORANDUM AND ORDER
This matter comes before the court on defendant Adkins Energy LLC's Motion to Dismiss (Doc. 5).
I. Background Facts
Plaintiff Ronning Engineering Company, Inc. (Ronning) is a Kansas corporation with its principal place of business in Overland Park, Kansas. Ronning designs, manufactures, sells, and installs commercial dryer systems. Defendant Adkins Energy, LLC (Adkins) is a Delaware corporation that is authorized to do business in Illinois. Adkins is 85% owned by farmer-led cooperatives and was created for the purpose of developing and constructing an ethanol plant in Lena, Illinois (the Lena plant).
Part of Adkins's business plan for the Lena plant was to produce and sell wet and dry animal feed. Adkins's plans for the Lena plant thus called for the construction and installation of a large commercial dryer that would dry large quantities of wet cake produced during the ethanol manufacturing process.
On August 31, 2001, Adkins entered into a contract with Lurgi PSI, Inc. (Lurgi) to design and construct the Lena plant. Lurgi specializes in the design and construction of industrial facilities, including corn and corn product manufacturing facilities. Lurgi began constructing the Lena plant in September 2001. Lurgi's general contract with Adkins required it to furnish all the materials, supplies, and equipment necessary for a fully operational ethanol plant.
On January 24, 2002, Lurgi entered into a contract with Ronning to provide design, fabrication, transportation to and installation of a Rotary Dryer System (the dryer) at the Lena plant. Adkins is not a party to the contract between Lurgi and Ronning.
After Ronning installed the dryer, Adkins reported to Ronning by telephone call to Ronning representatives in Kansas that, on December 14, 2002, a fire occurred in the dryer and that the dryer was inoperable. Per Adkins' request, Ronning assessed the fire damage to the dryer. The dryer remained at the Lena plant in Illinois at all times.
On January 17, 2003, Adkins' plant manager e-mailed Ronning officials in Kansas and offered to provide purchase order numbers to Ronning for parts and labor associated with the repair of fire damaged areas of the dryer. The same day, Adkins' plant manager sent two additional e-mails to Ronning representatives in Kansas and requested that Ronning provide Adkins with a cost estimate from Par Piping and Fabrication, Inc., a Minnesota corporation with which Ronning subcontracted for replacement of the cap on the dryer's west collector. Adkins also offered to provide Ronning with a purchase order number for said work upon receipt of the estimate.
On January 23, 2003, Adkins' plant manager sent an e-mail to Ronning representatives in Kansas, advising that any documents that Ronning sent to Adkins should be forwarded to Adkins' General Manager. During a telephone call on or about the last week of January 2003, a member of Adkins' management told Ronning representatives in Kansas that he had approved two separate proposals submitted to Adkins by Ronning for the repairs. The proposals stated that Ronning would design, supply and install fire-damaged equipment according to verbal agreements made with Adkins and the written terms and conditions of the proposals. The proposals also contained estimates of the costs of the repairs. The proposals did not specify in which state the work would be completed.
During a telephone call with a Ronning representative in Kansas on January 29, 2003, Adkins' Finance Manager confirmed Adkins' acceptance of Ronning's proposal to repair the dryers, and promised to mail the 50% down payments required by the proposals to Ronning's office in Kansas the following week. The same day, Ronning received by fax, at its office in Kansas, both proposals executed by Adkins' General Manager, showing that payment would be made "through insurance proceeds from claims."
Ronning claims that it has performed repairs on components of the dryer as required by its verbal and written agreements with Adkins. Ronning also claims that it engineered and drafted all designs for the repairs in its Kansas office, and originated and received numerous telephone, e-mail, and facsimile communications in its Kansas office to negotiate agreements with Adkins regarding the repairs. Ronning claims it never agreed that all its repair work would occur in Illinois. Ronning has demanded payment from Adkins in the amount of $131,959.82 for the repair work, which Adkins has failed to pay.
Adkins claims that Ronning failed to repair the dryer, that the dryer caught fire twice again in 2003, and that it took the dryer out of service on March 20, 2003.
Ronning originally filed suit on February 3, 2004, in the District Court of Johnson County, Kansas. Ronning's Petition alleged breach of contract, promissory estoppel, quantum meruit, tortious interference, fraud, negligent misrepresentation, and conversion claims against Adkins. On March 4, 2004, Adkins removed the action to federal court.
In support of its Motion to Dismiss, Adkins claims that (1) this court does not have personal jurisdiction over Adkins; (2) Kansas is the wrong venue for the case; and (3) it was not properly served with the summons and petition. Adkins specifically claims that it does not conduct business in Kansas, that it did not perform any part of its contract with Ronning in Kansas, and that, to the best of its knowledge, all of Ronning's repair work took place in Illinois.
II. Legal Standards
A. Dismissal for Lack of Personal Jurisdiction
A plaintiff opposing a motion to dismiss for lack of personal jurisdiction bears the burden of establishing that the exercise of personal jurisdiction over the defendant is proper. Kuenzle v. HTM Sport-Und Freizeitgerate AG, 102 F.3d 453, 456 (10th Cir. 1996). If the motion to dismiss is submitted prior to trial on the basis of affidavits and other written materials, the plaintiff need only make a prima facie showing to avoid dismissal for lack of personal jurisdiction. Id. Although the plaintiff will be required to prove the factual basis for jurisdiction by a preponderance of the evidence at trial, on a pre-trial motion to dismiss, all factual disputes are resolved in favor of the plaintiff. Id. If the plaintiff makes the required prima facie showing that personal jurisdiction exists, "a defendant must present a compelling case demonstrating `that the presence of some other considerations would render jurisdiction unreasonable.'" OMI Holdings, Inc. v. Royal Ins. Co. of Canada, 149 F.3d 1086, 1091 (10th Cir. 1998) (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 477 (1985)).
In the instant case, the court must determine that the exercise of jurisdiction comports with due process and that an applicable statute potentially confers jurisdiction by authorizing service of process. Peay v. BellSouth Med. Assistance Plan, 205 F.3d 1206, 1209 (10th Cir. 2000). The Kansas long-arm statute is construed liberally to allow jurisdiction to the full extent permitted by due process; therefore, the court proceeds directly to the constitutional analysis. Federated Rural Elec. Ins. Corp. v. Kootenai Elec. Coop., 17 F.3d 1302, 1305 (10th Cir. 1994).
Under the due process analysis, the "constitutional touchstone" is "whether the defendant purposely established `minimum contacts' in the forum state." Burger King, 471 U.S. at 474 (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). There must be some act by which the nonresident party purposefully avails itself of the privilege of conducting activities in the forum state. Hanson v. Denckla, 357 U.S. 235, 253 (1958). The purposeful availment requirement ensures that a defendant will not be sued in a foreign jurisdiction solely as a result of the unilateral activity of another party. Burger King, 471 U.S. at 475.
Adkins argues that, because Ronning cannot show that Adkins had continuous and systematic contacts with Kansas, the court must evaluate only whether it has specific jurisdiction over Akdins. The court agrees, and thus focuses on the specific jurisdiction issue.
Consistent with due process, specific jurisdiction may be conferred over a nonresident defendant where the court's exercise of jurisdiction directly arises from a defendant's forum related activities. To determine whether specific jurisdiction is appropriate, the court must first decide whether the defendant has such minimum contacts within the forum state "that he should reasonably anticipate being haled into court there." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1979). Second, the court must then consider whether the exercise of personal jurisdiction offends "traditional notions of fair play and substantial justice." Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102, 113 (1987). This inquiry requires a determination of whether a district court's exercise of personal jurisdiction over a defendant with minimum contacts is "reasonable" in light of the circumstances surrounding the case. Id.
B. Dismissal for Improper Venue
Once venue is challenged, the burden rests with the plaintiff to prove venue is proper. McCracken v. Automobile Club of S. Calif., Inc., 1995 WL 405791, at *1 (D. Kan. June 2, 1995). Discretion resides with the district court to choose the appropriate procedure for deciding a motion to dismiss for improper venue. Id. A court may decide this jurisdictional issue by reference to affidavits, after a pretrial evidentiary hearing, or at trial if the issue is intertwined with the merits of the case. Federal Deposit Ins. Corp. v. Oaklawn Apartments, 959 F.2d 170, 174 (10th Cir. 1992). When opposing a motion to dismiss supported by affidavits and other written materials, the plaintiff need only make a prima facie showing and may rely on the "well pleaded facts" of the complaint if uncontroverted by the movant's affidavits. McCracken, 1995 WL 405791 at *1. At this initial stage, factual disputes are resolved in the plaintiff's favor. Id.
Because this case is brought in federal court based on diversity jurisdiction, 28 U.S.C. § 1391(a) controls where venue is proper for this case. Section 1391(a) lists the following three options: "(1) a judicial district where any defendant resides, if all defendants reside in the same state, (2) a judicial district in which a substantial part of the events or omissions giving rise to claim occurred, or a substantial part of property that is the subject of the action is situated, or (3) a judicial district in which the defendants are subject to personal jurisdiction at the time the action is commenced, if there is no district in which the action may other wise be brought."
A corporate defendant, like the defendant in this case, is deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced. 28 U.S.C. § 1391(c) (1995).
III. Discussion
A. Personal Jurisdiction
1. Minimum Contacts
To determine whether minimum contacts exists in a contract case, the court must evaluate "prior negotiations and contemplated future consequences, along with the terms of the contract and the parties' actual course of dealing." Burger King, 471 U.S. at 478-79; Rainbow Travel Serv., Inc. v. Hilton Hotels Corp., 896 F.2d 1233, 1237 (10th Cir. 1990). A contract with an out-of-state resident is insufficient, standing alone, to establish minimum contacts in that out-of-state forum. Id.
Telephone calls and letters may provide sufficient contacts for the exercise of personal jurisdiction. Cont'l Am. Corp. v. Camera Controls Corp., 692 F.2d 1309, 1313-14 (10th Cir. 1982). In some circumstances, even a single letter or phone call to the forum state may meet due process standards so long as such contact creates a "substantial connection" with the forum. Burger King, 471 U.S. at 475 n. 18. The key issue is whether the defendant's contacts are attributable to his own actions and generally requires affirmative conduct by the defendant which allows or promotes the transaction of business within the forum state. Rambo v. Am. S. Ins. Co., 839 F.2d 1415, 1420 (10th Cir. 1988) (quoting Decker Coal Co. v. Commonwealth Edison Co., 805 F.2d 834, 840 (9th Cir. 1986)).
In this case, all of Adkins' relevant contacts with Kansas relate to the formation and execution of the parties' agreement for repairs to the dryer. Adkins contends that the repair agreement with Ronning is its only connection to Kansas, that it did not perform any business activities in Kansas, and that there is no evidence to support any inference that Adkins knew or agreed that any part of the contract was to be performed in Kansas. The court disagrees.
The record is clear that, although Adkins did not initially contract with Ronning to design and install the dryer, Adkins affirmatively solicited Ronning in Kansas and entered into a separate agreement with Ronning to perform repairs on the dryer. Adkins called, faxed and e-mailed Ronning representatives in Kansas regarding the terms of the repair contract. Further, although Adkins contracted with Ronning to repair equipment located in Illinois, the record demonstrates that Ronning performed all design and engineering work for the dryer repair at its office in Kansas. Resolving all fact disputes in favor of Ronning, and based on the design and engineering work that Ronning was required to perform in order to complete the repairs to the dryer, Adkins should have anticipated that Ronning would perform the design and engineering work at its Kansas office before it actually repaired the dryer in Illinois. See Mktg. Group, Inc. v. Success Dev. Int'l, Inc., 41 F. Supp. 2d 1241, 1244 (D. Kan. 1999) (finding specific jurisdiction appropriate where defendant purposely solicited Kansas corporation and entered into contract that was to be partly performed in Kansas). Moreover, when Adkins failed to make the required payments to Ronning for the work done pursuant to the repair agreement, it caused foreseeable injuries to a Kansas corporation. Accordingly, the court finds that it is reasonable for Adkins to be haled into a Kansas court to respond to Ronning's claimed injuries. The court finds that Ronning has made a prima facie showing sufficient to establish personal jurisdiction over Adkins.
2. Reasonableness
Once a plaintiff makes a prima facie showing that minimum contacts exist, defendant can defeat the exercise of personal jurisdiction by demonstrating that it is incompatible with "traditional notions of fair play and substantial justice," which is a reasonableness inquiry conducted in light of the circumstances surrounding the case. OMI Holdings, Inc., 149 F.3d at 1090. Factors relevant to the inquiry include: (1) the burden on defendant; (2) the forum state's interest in resolving the dispute; (3) plaintiff's interest in receiving convenient and effective relief; (4) the interstate judicial system's interest in obtaining the most efficient resolution of controversies; and (5) the shared interest of the several states in furthering fundamental substantive social policies. Id. at 1095.
Adkins contends that the exercise of jurisdiction over it would violate the traditional notions of fair play and substantial justice. Adkins points to the fact that Ronning contemplated filing an action against Adkins in Illinois, and drafted a complaint for filing in Illinois prior to filing this lawsuit in Kansas. Adkins also contends that resolution of the case in Illinois would be most efficient, that the parties recognize that key witnesses to the case are located in both Illinois and Kansas, and that there is not a conflict between Illinois and Kansas law on the claims, making Illinois the more appropriate place for the case to be heard. Finally, Adkins argues that the burden of litigating the case in Kansas would be onerous on it because the weight of its contacts are with Illinois.
The court's examination of the factors shows that the exercise of jurisdiction in this case is not constitutionally unreasonable. With regard to the burden on defendant, the court finds that it will be inconvenient for Adkins to litigate this case in Kansas. However, it is undisputed that key witnesses are in both Kansas and Illinois. Illinois is not that distant a forum from Kansas. Moreover, unless the inconvenience is so great as to constitute a deprivation of due process, this burden would not overcome the exercise of jurisdiction. The court finds that Adkins has failed to make such a showing with regard to inconvenience.
The court notes that a trial in Illinois would be equally inconvenient to plaintiff. Moreover, while Adkins states that a trial on Ronning's claims would be more efficient and convenient in Illinois, there is no motion to transfer this case to a district court in Illinois. Adkins has simply moved for dismissal of Ronning's Kansas case.
The court also finds that the forum state's interest in resolving the dispute weighs in favor of the exercise of jurisdiction. Ronning is a Kansas resident that is claiming injury, and the agreement was partially performed in Kansas. Kansas has a strong interest in adjudicating a dispute that involves a Kansas resident and Kansas law. Slawson v. Hair, 716 F. Supp. 1373, 1378 (D. Kan. 1989).
The court also finds that Ronning's interest in receiving convenient and effective relief weighs in favor of exercising jurisdiction. Ronning is a Kansas corporation, and its offices are located in Kansas. Trial in Kansas undoubtedly would be more convenient for plaintiff.
Considering the factors as a whole, the court concludes that its exercise of specific jurisdiction over Adkins comports with the requirements of due process and would not violate fair play and substantial justice. As a result, the court denies Adkins' Motion to Dismiss for lack of jurisdiction.
B. Venue
As the court noted above, Adkins, as a corporate defendant, is deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced. 28 U.S.C. § 1391(c) (1995). Because the court has determined that it has personal jurisdiction over Adkins and that litigation of the case in Kansas is appropriate, the court denies Adkins' Motion to Dismiss on this basis.
C. Service of Process
Adkins originally moved to dismiss Ronning's claims for failure to serve process on the correct registered agent. Ronning noted in its briefing of this issue that it has since served Adkins' registered agent for service of process in Illinois and Delaware, thereby correcting any defect in the service of process. The court notes that the docket sheet reflects that Ronning served Adkins with process on March 12, 2004. Adkins did not further address this issue in its reply briefing, and the court considers the issue moot.
IT IS THEREFORE ORDERED that defendant Adkins Energy LLC's Motion to Dismiss (Doc. 5) is denied.