ROBERT F. KELLY, Sr., District Judge.
Presently before this Court is the Motion to Dismiss Plaintiff's First Amended Complaint for Lack of Subject-Matter Jurisdiction Pursuant to Fed. R. Civ. P. 12(b)(1) filed by all of the Defendants, Plaintiff Eddystone Rail Company, LLC's ("Eddystone") Opposition to Defendants' Motion to Dismiss, Defendants' Reply and Eddystone's Sur-Reply. For the reasons set forth below, the Motion to Dismiss will be denied.
Since the parties and the Court are all familiar with the facts of this matter, we will not state the underlying facts at length. In February 2013, Bridger Transfer Services, LLC ("BTS") entered into a Rail Services Agreement ("RSA") with Eddystone under which Eddystone agreed to construct and operate a facility on the Delaware River in Eddystone, Pennsylvania (the "Transloading Facility") for the purpose of transloading (transferring) crude oil from railcars to barges that
In June 2015, BTS's parent, Bridger Logistics, was purchased by Defendants Ferrellgas Partners, L.P. and Ferrellgas, L.P. (collectively, "Ferrellgas"). At that time, BTS owed to Eddystone a remaining minimum volume obligation of approximately $150 million. Eddystone alleges that Ferrellgas promptly caused Eddystone to abandon more than $10 million of net accounts receivables with its affiliates, the Defendants in this litigation. In addition, Ferrellgas allegedly began crediting the revenue associated with BTS's transloading capacity to its affiliate Defendant Bridger Rail Shipping, LLC ("Bridger Rail Shipping") and causing Bridger Rail Shipping to cover the RSA payments as they came due, while leaving the long-term obligation in BTS. According to Eddystone, as it became clear that a halt to shipping was imminent, Ferrellgas caused BTS to transfer the remainder of its assets to the affiliates who are now Defendants in this litigation. Eddystone asserts that BTS then defaulted on the RSA. Eddystone alleges that Jamex Marketing paid $10.00 for the now valueless BTS, which twelve months earlier had $98.1 million in assets, and renamed BTS as Jamex Transfer Services, LLC ("JTS").
On April 19, 2016, pursuant to the RSA's dispute resolution provision, Eddystone initiated an arbitration against the newly-purchased and renamed JTS before the Society of Maritime Arbitrators ("SMA") in New York. The arbitration was litigated through 2016 until January 5, 2017, when, after a month of negotiations, a settlement was reached. Under the terms of the settlement, JTS agreed not to oppose entry of an Arbitration Award against it for a discounted present value of $139,050,406.77.
On January 24, 2017, the SMA panel issued its Arbitration Award holding JTS liable for its obligations under the RSA. On February 17, 2017, Eddystone filed its Petition to Confirm the Arbitration Award in the amount of $139,050,406.77 against
On February 2, 2017, Eddystone filed this lawsuit, and filed its First Amended Complaint ("FAC") on September 7, 2018. (Doc. Nos. 1, 183.) Regarding subject-matter jurisdiction, Eddystone alleged:
FAC ¶ 31. Eddystone asserts claims for alter ego based on a breach of the RSA, intentional and constructive fraudulent transfer under the Pennsylvania Uniform Fraudulent Transfer Act, 12 Pa. C.S. §§ 5104(a), 5105, and breach of fiduciary duties of care and loyalty to creditors. (See id. ¶¶ 76-103.)
Defendants, Bridger Logistics and Ferrellgas (collectively, "BL/FG Defendants") asserted various defenses, as well as the following amended counterclaims against Eddystone: Counterclaim I — Tortious Interference with Contract; Counterclaim II — Fraudulent Inducement; Counterclaim III — Negligent Misrepresentation; Counterclaim IV — Breach of Contract; Counterclaim V — Breach of Implied Covenant of Good Faith and Fair Dealing; and Counterclaim VI — Rescission. Most of the BL/FG Defendants' defenses, as well as Counterclaims II-VI are premised entirely upon the RSA.
There has been extensive motion practice in this case since its inception. Discovery, which is on-going, is a massive endeavor and involves a production of approximately 3 million pages. Defendants filed their Motion to Dismiss for Lack of Subject-Matter Jurisdiction on January 25, 2019, and Eddystone's Opposition was filed on February 22, 2019. (See Doc. Nos. 283, 294.) Defendants filed their Reply on March 11, 2019. (Doc. No. 301.) Eddystone filed its Sur-Reply on March 18, 2019. (Doc. No. 304.)
A party may challenge a court's subject-matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1). "At issue in a Rule 12(b)(1) motion is the court's `very power to hear the case.'" Petruska v. Gannon
When a party files a Rule 12(b)(1) motion that mounts a facial attack to subject-matter jurisdiction, a court may consider only "the allegations of the complaint and documents referenced therein and attached thereto, in the light most favorable to the plaintiff." Gould Elecs. Inc. v. United States, 220 F.3d 169, 176 (3d Cir. 2000) (citations omitted). In reviewing a factual attack, on the other hand, a court "may consider evidence outside the pleadings," id., but there is "no presumptive truthfulness attache[d] to plaintiff's allegations," Mortensen, 549 F.2d at 891. "When subject-matter jurisdiction is challenged under Rule 12(b)(1), the plaintiff must bear the burden of persuasion." Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1409 (3d Cir. 1991) (citing Mortensen, 549 F.2d at 891).
Defendants initially move to dismiss Eddystone's First Amended Complaint for lack of subject-matter jurisdiction on the ground that maritime jurisdiction under 28 U.S.C. § 1333 does not exist because the RSA is not a maritime contract.
Id. at 23, 125 S.Ct. 385 (citations omitted). Whether a contract lies within admiralty jurisdiction depends on "whether the principal objective of a contract is maritime commerce." Id. at 25, 125 S.Ct. 385; see also Exxon Corp. v. Cent. Gulf Lines, Inc., 500 U.S. 603, 608, 111 S.Ct. 2071, 114 L.Ed.2d 649 (1991) (stating that the purpose of the grant of admiralty jurisdiction is to protect maritime commerce); Hargus v. Ferocious & Impetuous, LLC, 840 F.3d 133, 136 (3d Cir. 2016) ("The fundamental interest giving rise to maritime jurisdiction is the protection of maritime commerce."). "When a contract is a maritime one, and the dispute is not inherently local, federal law controls the contract's interpretation."
It appears that determining whether a contract is maritime or non-maritime would be quite simple; however, it is not simple due to the fact that there is no "clean line[]" of delineation "between maritime and nonmaritime contracts." Kirby, 543 U.S. at 23, 125 S.Ct. 385 ("The boundaries of admiralty jurisdiction over contracts... have always been difficult to draw."); see also Kossick v. United Fruit Co., 365 U.S. 731, 735, 81 S.Ct. 886, 6 L.Ed.2d 56 (1961) (stating "[t]he boundaries of admiralty jurisdiction over contracts — as opposed to torts or crimes — being conceptual rather than spatial, have always been difficult to draw"); d'Amico Dry Ltd. v. Primera Maritime (Hellas) Ltd., 886 F.3d 216, 218 (2d Cir. 2018) ("The question is clear, but the law is murky.").
Eddystone's First Amended Complaint alleges that certain Defendants, as alter egos of BTS, are liable for the breach of BTS's obligations under a maritime contract (the RSA) for the transloading of crude oil from railcars onto barges for shipment to refining facilities located elsewhere
Defendants argue that the RSA is a non-maritime contract because its primary objective was to permit BTS and other shippers of crude oil petroleum to offload their cargo from railcars after a 1,500-mile journey from the Bakken oilfields in North Dakota.
To be clear, the primary objective of the RSA is to transload oil from railcars onto barges. Necessarily, the nature of the RSA is to facilitate maritime commerce through the shipment of oil by barge down the Delaware River. As previously explained, the RSA required Eddystone to construct and operate the Transloading Facility, on the banks of the Delaware River, for the purpose of transloading shipments of crude oil from train cars to barges that would carry the oil down the Delaware River to Philadelphia-area refineries. See RSA at 1. The RSA includes "Section 3.3.
Under the RSA's Terms and Conditions, BTS agreed to contract with barge operators directly, and arrange for barges to arrive at the Transloading Facility during certain pre-determined windows so that the barges could be loaded by Eddystone with shipments of crude oil that had arrived by rail, which was also arranged by BTS. See id., T&C at 5-8, §§ 6-8. The parties also agreed to procedures for berthing and loading oil onto barges and for responding to discharges, spills, or leaks of transloaded oil from barges. See id., T&C at 8-9, 11-12, §§ 9, 11. Further, the parties to the RSA recognized its maritime nature stating that "[Eddystone] shall have all remedies available to it at law, in equity or under maritime law to enforce the Agreement, these terms and conditions...." Id., T&C at 12, § 12. Likewise, by electing ex ante to submit their disputes to the Society of Maritime Arbitrators for resolution. See id., T&C at 18, § 16(b).
In order to induce Eddystone to commit millions of dollars to building and providing transloading services at the Transloading Facility, Defendants agreed that BTS would pay Eddystone $2.25 per transloaded barrel and committed BTS to transloading at least 64,750 barrels of crude per day at the Transloading Facility for a period of five years.
According to Eddystone, Defendants Bridger Logistics, Ferrellgas, Rios, and Gamboa, took advantage of Eddystone's transloading services as part of its performance of a contract to deliver crude oil that was sourced in North Dakota to the Monroe Refinery. FAC ¶ 4. From May 2014 through January 2016, Eddystone transloaded every trainload of crude oil that BTS and the Defendants brought to the Transloading Facility onto barges for shipment to Monroe Refinery. Id. ¶¶ 5-6. Eddystone alleges that, once the price of North Dakota oil began to fall, Defendants decided that they could no longer profit from shipping oil from North Dakota to Pennsylvania, and they terminated their agreement with the Monroe Refinery.
Under the specific facts of our case, we find that the RSA's direct connection with the traditional maritime activity of loading a barge makes it akin to a stevedoring contract. The definition of stevedore is "to handle (cargo) as a stevedore" and "to load or unload the cargo of (a ship) in port." The Merriam-Webster Dictionary, https://www.merriam-webster.com/dictionary/stevedore (March 25, 2019); see also Ne. Marine Terminal Co., Inc. v. Caputo, 432 U.S. 249, 254 n.4, 97 S.Ct. 2348, 53 L.Ed.2d 320 (1977) ("A stevedore or stevedore contractor is responsible for loading or unloading a ship in port by contract with a shipowner, agent, or charter operator.") (citation omitted). While the RSA involved the construction of the Transloading Facility and the unloading of oil from railcars, which are land-based, the primary objective of the agreement was to transload the oil onto barges for the express purpose of the barges travelling down river to deliver the oil to refineries on the Delaware River for a five-year period.
"A `stevedoring contract is a maritime contract' and a federal district court has jurisdiction over a claim for breach of such a contract under Section 1333." Cooper v. Loper, 923 F.2d 1045, 1048 (3d Cir. 1991) (quoting A & G Stevedores v. Ellerman Lines, 369 U.S. 355, 359, 82 S.Ct. 780, 7 L.Ed.2d 798 (1962)). While we are acutely aware that the RSA is not a stevedoring contract per se, we conclude that it is analogous enough to tip the RSA into a maritime contract. Additionally, pursuant to the RSA, Eddystone actually transloaded every trainload of crude oil that BTS and the Defendants brought to the Transloading Facility onto barges for shipment to the Monroe Refinery for a period from May 2014 through January 2016. See FAC ¶ 5. The RSA does not merely reference barges, but it includes a direct and substantial link to the loading of crude oil onto a barge that was specifically chartered for the purposes of the RSA. See Atl. Transp. Co. of W. Va. v. Imbrovek, 234 U.S. 52, 61, 34 S.Ct. 733, 58 S.Ct. 1208 (1914) (tort case) ("The libellant was injured on a ship, lying in navigable waters, and while he was engaged in the performance of a maritime service. We entertain no doubt that the service in loading and stowing a ship's cargo is of this character."); Peter v. Hess Oil Virgin Islands Corp., 903 F.2d 935, 947 (3d Cir. 1990) (tort case) (stating that "loading and unloading vessels is historically a task of the ship's crew"); Moser v. Texas Trailer Corp., 623 F.2d 1006, 1009 (5th Cir. 1980) (tort case) (stating that "the loading of cargo [is] a traditional maritime activity. The vehicle involved was a barge, whose function was transportation across navigable waters, a traditional role of watercraft"); Lightering LLC v. Teichman Grp., LLC, 328 F.Supp.3d 625, 642 (S.D. Tex. 2018) (contract case) ("The court concludes that in this Agreement, neither wharfage nor equipment storage is a maritime commerce activity, but vessel loading and unloading is. The only part of the Agreement that involves `work from a vessel' is the equipment loading and unloading."), appeal dismissed sub nom. Lightering, L.L.C. v. T & T Offshore, Inc., No. 18-20574, 2019 WL 718972 (5th Cir. Jan. 24, 2019); Fed. Marine Terminals, Inc. v. Dimond Rigging Co., LLC, No. 13-1329, 2014 WL 4809427, at *3 (N.D. Ohio Sept. 26, 2014) (contract case) ("The physical loading of a vessel is governed by maritime law."); Orgulf Trans. Co. v. Hill's Marine Enters., 188 F.Supp.2d 1056, 1061 (S.D. Ill. 2002) (contract and tort case) ("[A]ssuming that contracts existed between the parties for either the unloading or loading of the barges, those contracts were in reference to maritime services. It is appropriate for this Court to assert admiralty jurisdiction over disputes arising from such contracts.").
The RSA's connection with the traditional maritime activity of transloading (loading) oil (i.e, cargo) onto a barge over the course of a guaranteed five-year period is not only a maritime activity, but effectuates maritime commerce by transloading the oil onto barges to travel down river to refineries. See Barrios v. Centaur, LLC, 345 F.Supp.3d 742, 748 (E.D. La. 2018) (noting that the loading and unloading of vessels is "a traditional maritime commerce activity"). Not only does Eddystone's First Amended Complaint specifically invoke the Court's admiralty jurisdiction, but the underlying contract in this case, the RSA, also clearly implicates admiralty jurisdiction. Since the RSA is maritime
Alternatively, even if the RSA is a maritime contract, Defendants argue that we lack jurisdiction because none of Eddystone's claims arise under the RSA; instead, it seeks equitable remedies, including relief against BTS's alter egos and the recovery of fraudulently transferred assets that could be used to pay an eventual judgment. (Defs.' Mot. to Dismiss at 14-17.) They contend that the Court cannot exercise subject-matter jurisdiction over a mere subsidiary claim because Courts are loath to extend admiralty jurisdiction beyond traditional admiralty claims. (See id.) They assert that "[t]he existence of a maritime contract somewhere in the background... is not a sufficient basis to justify the existence of admiralty jurisdiction over non-contractual claims against non-contracting parties." (Id. at 14.)
Eddystone points out that it has done far more than merely allege the existence of a maritime contract somewhere in the background by stating:
(Pl.'s Opp'n at 20-21.) It also argues that its "express claims that BTS and Defendants are liable for damages on a maritime contract are more than sufficient to confer maritime jurisdiction over this dispute." (Id. at 21.) It further states that, "because Eddystone has established the basis to exercise jurisdiction over a dispute arising out of a maritime contract, this Court may exercise admiralty jurisdiction over Eddystone's claims to reverse fraudulent transfers in order to protect any future admiralty judgment." (Id.)
Regarding Count I — Alter Ego, it is clear that Eddystone asserts that certain Defendants; namely, BL/FG Defendants, Rios, Gamboa, and Bridger Rail Shipping, can be held liable for the damages arising from BTS's breach of the RSA by virtue of the fact that they are BTS's alter egos and, in that capacity, engineered BTS's breach of the RSA. Eddystone has predicated this lawsuit on a breach of the RSA since it will need to establish that BTS breached its maritime contract with Eddystone, and that the aforementioned Defendants are liable for that breach as alter egos of BTS. The RSA lies at the heart of Eddystone's Alter Ego claim, which is essentially a "contractual claim," albeit against BTS's alter egos.
Under the unique set of facts before us, Eddystone explains that it was unfeasible to pursue contractual claims against BTS as signatory to the RSA and BTS's alter egos in the same action. (Pl.'s Sur-Reply at 13.) It explains:
(Id. at 13-14.) In further support of the fact that Eddystone's Alter Ego claim is premised on a breach of contract, we point out that certain of Defendants' defenses and BL/FG Defendants' conditional counterclaims arise from Eddystone's performance under the RSA. For instance, BL/FG Defendants' Counterclaims II-VI against Eddystone for fraudulent inducement, negligent representation, breach of contract, breach of implied covenant of good faith and fair dealing, and rescission, are premised entirely upon the RSA.
There is no doubt that the alleged breach of the RSA is at the center of Eddystone's Alter Ego claim since it alleges that certain Defendants engineered BTS's breach of the RSA and seeks damages that clearly arose as a result of the breach. Eddystone's inability to assert a breach of contract claim under the facts before us does not automatically foreclose its quasi-contractual claim from admiralty jurisdiction. In fact, we find that admiralty jurisdiction exists over Eddystone's quasi-contractual claim for alter ego premised on a breach of contract because it directly arises out of a maritime contract, the RSA.
"Admiralty courts have jurisdiction over quasi-contractual claims that `arise out of maritime contracts or other inherently maritime transactions.'" See Barna Conshipping, S.L. v. 2,000 Metric Tons, More or Less, of Abandoned Steel, 410 F. App'x 716, 722-23 (4th Cir. 2011) (citing Peninsular & Oriental Steam Navigation Co. v. Overseas Oil Carriers, Inc., 553 F.2d 830, 835 (2d Cir. 1977); Archawski v. Hanioti, 350 U.S. 532, 536, 76 S.Ct. 617, 100 S.Ct. 676 (1956) ("Rights which admiralty recognizes as serving the ends of justice are often indistinguishable from ordinary quasi-contractual rights created to prevent unjust enrichment. How far the concept of quasi-contracts may be applied in admiralty it is unnecessary to decide. It is sufficient this day to hold that admiralty has jurisdiction ... provided that the unjust enrichment arose as a result of the breach of a maritime contract.")). "[S]o long as the claim asserted arises out of a maritime contract, the admiralty court has jurisdiction over it." Archawski, 350 U.S. at 535, 76 S.Ct. 617; see also Barna, 410 F. App'x at 722 ("We think it clear, however, that admiralty jurisdiction can exist over Barna's quasi-contract claims notwithstanding the absence of admiralty jurisdiction over Barna's other claims."); Hadjipateras v. Pacifica, S.A., 290 F.2d 697, 705 (5th Cir. 1961) ("Neither resort to equitable principles in adjudicating performance or non-performance [of a maritime contract], nor the arithmetical process of treating evidentiary items in the determination of the amount of such decree, destroys in any way the admiralty jurisdiction."); Sword Line v. United States, 230 F.2d 75, 77 (2d Cir. 1956) ("We think it sounder, and more in accordance with the nature of admiralty, to rest upon the inherent maritime character of the underlying transaction, rather than upon an attempt to force this claim into the mold of a breach of contract."); Clipper Wonsild Tankers Holding A/S v.
Thus, pursuant to the facts before us, we find that we have maritime jurisdiction over Eddystone's Amended Complaint under the quasi-contract theory of its Alter Ego claim. By seeking alter ego liability on certain Defendants for their engineering and direct involvement in BTS's alleged breach of the RSA, it is clear that Eddystone's Alter Ego claim clearly arose as a result of the breach of the RSA. Since Eddystone's additional claims of fraudulent transfers and breach of fiduciary duties arise out of the same common nucleus of operative fact as its Alter Ego claim, we may exercise supplemental jurisdiction over those claims. See Sinclair v. Soniform, Inc., 935 F.2d 599, 603 (3d Cir. 1991) (determining that the court had admiralty jurisdiction and extending supplemental jurisdiction over related claims pursuant to 28 U.S.C. § 1367(a)).
We find that the RSA is a maritime contract. Since the RSA is maritime in nature, we conclude that admiralty jurisdiction is properly invoked. Consequently, this Court has admiralty jurisdiction over Eddystone's First Amended Complaint. The Court exercises admiralty jurisdiction on a quasi-contract basis due to the fact that Eddystone brings an Alter-Ego claim based on an alleged breach of the RSA and alleges damages that arose as a result of that breach. Also, supplemental jurisdiction over Eddystone's remaining claims is proper. Both the nature of the RSA and the nature of the dispute squarely implicate the Court's admiralty jurisdiction; therefore, federal subject-matter jurisdiction exists here under 28 U.S.C. § 1333(1). Consequently, Defendants' Motion to Dismiss for Lack of Subject-Matter Jurisdiction is denied.
An appropriate Order follows.