KATHRYN H. VRATIL, District Judge.
Plaintiff brings this diversity action alleging breach of contract against Haes Contracting, Inc. ("Haes") and breach of performance bond against Developers Surety and Indemnity Company ("Developers"). Plaintiff alleges that Haes entered into a subcontract to perform dredging and other work on a construction project, that Developers executed a performance bond on the Haes subcontract, and that neither defendant performed its respective obligations. This matter is before the Court on
Because Developers challenges personal jurisdiction, the Court addresses its motion to dismiss before considering Haes's transfer request.
Rule 12(b)(2), Fed. R. Civ. P., governs motions to dismiss for lack of personal jurisdiction. Plaintiff bears the burden of establishing personal jurisdiction and at this stage of the litigation need only make a prima facie showing.
Viewed in the light most favorable to plaintiff, the complaint and record evidence are summarized as follows:
This case involves a dispute regarding a construction project in Iowa. Plaintiff is a Kansas corporation with its principal place of business in Garnett, Kansas. Haes is a Nebraska corporation with its principal place of business in Nebraska. Developers is an Iowa corporation with its principal place of business in California.
In 2009, the U.S. Army Corps of Engineers (the "Corps") awarded plaintiff the general contract for a construction project located in Iowa along the Missouri River. In October of 2009, plaintiff subcontracted with Haes to provide dredging and other work for the project. The subcontract identifies plaintiff's place of business as Garnett, Kansas. Developers executed a performance bond on the subcontract, naming Haes the principal and plaintiff the obligee. The performance bond identifies plaintiff's principal place of business as Garnett, Kansas and incorporates the terms of the subcontract between plaintiff and Haes.
Haes began performing work under the subcontract. Plaintiff quickly became dissatisfied with its performance, finding that Haes did not comply with the construction schedule or provide adequate equipment or workers with sufficient experience. At least three times, plaintiff provided written notice of purported performance failures under the subcontract and in May of 2010, terminated the subcontract. It then made a demand to Developers under the surety bond to remedy the default or arrange for Haes's performance obligation. Developers denied the demand, disputing the grounds upon which plaintiff terminated the subcontract. Plaintiff performed the work itself and now seeks reimbursement from Haes and Developers.
While investigating the demand on the performance bond, a representative of Developers who lives and works in Kansas visited the office of TL Enterprises in Garnett, Kansas, and traveled to the project site in Iowa. Developers also sent letters, faxes and emails to, and participated in telephone conferences with, individuals in the Garnett, Kansas office of TL Enterprises.
Developers contends that this court lacks both general and specific personal jurisdiction and it must therefore be dismissed.
In a federal diversity case, the law of the forum state — here, Kansas — determines the court's jurisdiction over Developers. Fed. R. Civ. P. 4(e);
The due process analysis is two-fold. First, plaintiff must show that Developers has "minimum contacts" with Kansas by demonstrating that it "purposefully availed" itself of the protections or benefits of the state's laws and "should reasonably anticipate being haled into court []here."
Then, if Developers has the requisite minimum contacts with Kansas, the Court proceeds to the second step in the due process analysis: ensuring that the exercise of jurisdiction does not offend traditional notions of fair play and substantial justice.
Plaintiff claims that Developers is subject to personal jurisdiction under the Kansas long-arm statute because it: (A) transacted business in this state; (D) contracted to insure a person, property or risk located in this state at the time of contracting; (G) caused to persons or property within this state an injury arising out of an act or omission outside this state because at the time of the injury: (i) defendant was engaged in solicitation or service activities in this state; or (ii) products, materials or things processed serviced or manufactured by defendant anywhere were used or consumed in this state in the ordinary course of trade or use; or (L) had contact with this state which would support jurisdiction consistent with the constitutions of the United States and of this state.
Developers argues that it is not subject to specific personal jurisdiction because (1) the surety bond which it issued does not relate to any activities in Kansas and (2) this cause of action does not arise out of any purposeful activities of Developers in Kansas. Specifically, Developers argues that Haes (a Nebraska corporation) purchased the bond to insure its performance of a subcontract in Iowa and plaintiff demanded that Developers perform under the bond in Iowa.
First, to the extent plaintiff claims that Developers is subject to specific jurisdiction because it investigated plaintiff's performance bond and thus "transacted business" here,
Plaintiff makes no attempt to explain how Developers' actions involve contracting to insure any person, property or risk located in Kansas at the time of contracting (K.S.A. § 60-308(b)(1)(D)), tortiously injuring a person or property within Kansas (K.S.A. § 60-308(b)(1)(G)) or having contact with this state which would support jurisdiction consistent with the constitutions of the United States and of this state ((K.S.A. § 60-308(b)(1)(L)). Given plaintiff's prima facie burden, the Court will not presume to construct arguments for it. Thus the Court cannot conclude that Developers is subject to specific personal jurisdiction.
Developers argues that the Court lacks general jurisdiction because it is not incorporated in Kansas and has no principal place of business in Kansas. Plaintiff counters that Developers conducts regular extensive business in Kansas because (1) three surety agents in Johnson County, Kansas have sold surety bonds for either Developers or an entity called "Insco-Dico;"
In
In this case, while plaintiff has shown that agents in Kansas are authorized to sell surety bonds for Developers, they have not provided any evidence of the number or volume of Kansas transactions which have specifically involved Developers. Developers has no exclusive agents in Kansas, and plaintiff has not shown whether — or the extent to which — Developers regularly solicits business in Kansas. Plaintiff has provided no evidence that Developers holds itself out as doing business in Kansas through advertising, listings or bank accounts. Finally, the volume of business in Kansas — 0.002 per cent of Developers' annual premium sales — is not significant. Thus, the Court concludes that plaintiff has not met its prima facie burden to show that Developers maintains continuous and systematic business contacts with Kansas.
In short, plaintiff has not shown that Developers has "minimum contacts" with Kansas by demonstrating that it "purposefully availed" itself of the protections or benefits of the state's laws and "should reasonably anticipate being haled into court []here."
Under 28 U.S.C. § 1404(a), Haes asks the Court to transfer this case to the United States District Court for the Southern District of Iowa, Western Division. Plaintiff opposes Haes's motion but does not dispute that the Southern District of Iowa would be a legally proper venue for this action.
Under 14 U.S.C. § 1404(a), the Court may transfer a case to any district or division where it might have been brought for "the convenience of the parties and witnesses" and "in the interest of justice." The decision whether to grant a motion to transfer is within the sound discretion of the district court.
Haes acknowledges that plaintiff's choice of forum is afforded "great weight" and that it thus bears the burden to prove that the facts weigh heavily in favor of transfer.
Plaintiff does not have an absolute right to litigate in its home district; rather, plaintiff's choice of forum is simply one factor for the Court to balance.
Haes argues that this factor heavily favors transfer to the Southern District of Iowa because many potential witnesses who reside outside the subpoena power of this Court are subject to compulsory process in the Southern District of Iowa. Specifically, Haes notes that potentially hostile witnesses are located in or near the project site in Iowa, Omaha, Nebraska and Lincoln, Nebraska, and are thus not within the 100 mile radius of this Court's subpoena power under Fed. R. Civ. P. 45 (b)(2)(B). Haes also notes that the Iowa project site is the "locus of the activity" concerning plaintiff's allegations because the job site is located in Iowa, other evidence under the control of the Corps of Engineers is located in Omaha, and other witnesses are located closer to the Iowa project site.
Plaintiff counters that the key witnesses which it expects to call all live and work in Kansas, except one who lives in Colorado. It also "strongly disagrees" with the way Scott Haes describes key witnesses in his affidavit. Finally, plaintiff dismisses Haes's arguments about witnesses from the Corps of Engineers, arguing that the location of such witnesses is of little consequence since regulatory and legal restrictions often prevent Army Corps witnesses from testifying in private civil lawsuits.
This factor favors transfer. In particular, the Court is persuaded that various non-party witnesses are located in Iowa and Nebraska. Moreover, plaintiff points to no non-party witnesses in Kansas who would be subject to subpoena in this forum but not in Iowa.
On this factor, Haes argues that the cost of litigating the cases will likely be greater in Kansas than Iowa because the locus of activity was in Iowa. Haes argues that for both parties, the cost of bringing witnesses to Kansas will be greater than bringing them to Iowa. Plaintiff disagrees, arguing that the "vast majority" of witnesses reside and live in Kansas.
The cost of bringing non-party witnesses to Kansas City appears greater than the cost of bringing party and non-party witnesses to Iowa. This factor thus favors transfer.
Haes acknowledges that both courts will afford a fair trial to both parties, but argues that because this Court lacks subpoena power over potential witnesses, this factor weighs in favor of the Southern District of Iowa. Plaintiff counters that this is not a high profile case which involves extensive Kansas media coverage, inflammatory material or possible prejudice of a local jury, and that the parties can therefore obtain a fair trial in the District of Kansas. While the Court believes that either venue would afford a fair trial to both parties, this Court's lack of subpoena power over potential witnesses tips this factor in favor of transfer.
On this factor, Haes presents evidence that in 2008, 2009 and 2010, the Southern District of Iowa (with six district judges), handled an average of 544 cases per year which took an average of 11 months to reach final disposition. During that same time period, the District of Kansas (with 10 district judges) handled an average of 1118 cases per year which took an average of 9 months to reach final disposition. Haes suggests that given the relative speed of disposition, this factor is neutral or slightly favors the District of Kansas, but acknowledges that the Court is in the best position to assess its docket. Plaintiff agrees that this factor is neutral or favors the District of Kansas, and the Court finds that this factor is neutral.
Haes argues that this factor weighs in favor of the Southern District of Iowa because the contract contains no choice of law provision. Thus, Haes argues that under Kansas choice of law principles, the District of Kansas would apply Nebraska law while under Iowa choice of law principles, the Southern District of Iowa would apply Iowa law. Plaintiff correctly notes that under 28 U.S.C. § 1404(a), the transferee court must apply the law of the transferor court, including the choice-of-law rules of the transferor state.
Haes argues that this factor weighs in favor of the Southern District of Iowa because it would apply Iowa law while this Court would apply Nebraska law. As noted, however, Kansas choice of law rules apply whether the case remains here or is transferred to the Southern District of Iowa. Under Kansas choice of law rules, it appears that Nebraska law probably applies to the dispute. The Court thus finds that this factor is neutral.
Haes argues that this factor, which requires the Court to consider matters which make a trial easy, expeditious and economical, weighs in favor of the Southern District of Iowa, and the Court agrees. Haes has commenced a lawsuit in the United States District Court for the Southern District of Iowa which arises out of the same facts and involves the same issues and parties as this case. The interests of judicial economy would be served by having all the issues tried in the same court or perhaps even the same case.
On balance, the Court finds that the relevant factors weigh in favor of transfer.
K.S.A. § 60-308(b).