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Sun Coke v. MAN Ferrostaal Do Brasil Commércio E Indústria Ltda

February 11, 2008


The opinion of the court was delivered by: Thomas A. Varlan United States District Judge



This is a breach of contract action brought upon the basis of diversity of citizenship, 28 U.S.C. § 1332. Sun Coke Company (Sun Coke), a Tennessee corporation, has sued a German corporation, MAN Ferrostaal Aktiengesellschaft (Ferrostaal Germany), and a Brazilian corporation, MAN Ferrostaal Do Brasil Commércio E Indústria Ltda (Ferrostaal Brazil). The German corporation has been served with process, but the Brazilian corporation has not. Currently pending is Ferrostaal Germany's motion to dismiss the complaint for lack of in personam jurisdiction pursuant to Rule 12(b)(2), Federal Rules of Civil Procedure, or, in the alternative, to dismiss or stay the action under the Federal Arbitration Act, 9 U.S.C. § 16(a)(3). Because the Court concludes that the Court lacks in personam jurisdiction over Ferrostaal Germany, its motion to dismiss [Doc. 11] will be granted.

I. Factual Background

Ferrostaal Germany is based in Essen, Germany, and is organized under the laws of the Republic of Germany. It provides services such as engineering, supply, assembly, project management, and systems logistics in connection with industrial construction projects. [Doc. 14.] It is not licensed to do business in Tennessee, has no offices, employees, bank accounts, or property in Tennessee and has never done business in Tennessee. [Doc. 13.] Nor has it provided services in Tennessee to Sun Coke or any other customer. Id. Ferrostaal Germany did not regularly send employees or representatives into Tennessee in connection with the instant relationship with Sun Coke. Id.

On April 2, 2001, Sun Coke entered into a Memorandum of Understanding (MOU) with Ferrostaal Germany and Ferrostaal Brazil (collectively "Ferrostaal") pursuant to which Ferrostaal would provide engineering services in connection with the development and construction of coke plants and related co-generation facilities in Brazil. Id. This MOU was negotiated primarily in Miami, Florida. Id. Ferrostaal Germany signed the MOU in Essen, Germany. Id. No work or services under the project was to be performed in Tennessee.

In the MOU, Sun Coke and its affiliates agreed to provide certain designs, drawings, specifications, and other documents and information to Ferrostaal for the development and installation of heat recovery coke plants. [Doc. 13 at Ex. 1.] The MOU did not require either Ferrostaal Germany or Ferrostaal Brazil to pay any monetary consideration in exchange for the disclosure of information by Sun Coke. Id. The parties executed a confidentiality agreement pertaining to the information that Sun Coke and its affiliates planned to provide to Ferrostaal in connection with the contemplated project, which was incorporated by reference into the MOU. [Docs. 1 at Ex. 1; 13 at Ex. 1.]

The MOU contains a choice of law and arbitration provision which states: Governing Law; Arbitration of Disputes. This MOU shall be governed by an construed in accordance wit the laws of England (United Kingdom) applicable to agreements made and performed therein. Other than a claim for equitable relief, which may be brought to any court of competent jurisdiction, all disputes arising out of this MOU shall be settled by arbitration in accordance with the rules of the International Chamber of Commerce, Paris. Any such arbitration shall be take [sic] place in Paris, France. [Doc. 13 at Ex. 1.] The confidentiality agreement contains a nearly identical provision. [Doc. 1 at Ex. 1.]

A Sun Coke representative, Alison Grant, reports that Ferrostaal employees visited Tennessee on several occasions. [Doc. 19-2.] Specifically, Marco Antonio Marcial, Villian Oliverira, Renata Souza, and Marcos Dare' visited Tennessee in July 2001; Joern Walter and Jan Krull visited Tennessee in November 2001; and Howard Barnes, Helmut Kucken, Marco Antonio Marcial, and Jan Krull visited Tennessee in September 2002. Id. Ms. Grant does not know which of these Ferrostaal representatives were from Ferrostaal Germany. Id. Ferrostaal Germany asserts that representatives from Ferrostaal Germany were only present in Tennessee during the September 2002 visit. [Doc. 12.] Additionally, Ms. Grant states that there were multiple phone conversations and email messages from Ferrostaal Germany to Sun Coke employees in Knoxville to arrange meetings. [Doc. 19-2.]

The first project contemplated by the MOU was to be owned and operated by Sun Coke in Vitória, Brazil (the Vitória Project). [Doc. 13.] Later, in the course of project development, around mid-2004, the concept changed so that a local company was created, Sol Coquieria Tubarao, Ltda (Sol), to own, develop and operate the coke plant and related co-generation facilities. Id. Sun Coke held, and still holds, an interest in Sol. Id. Sun Coke licensed its technical information to its affiliate Sol for use in connection with the development and subsequent operation of the Vitória Project. [Doc. 1.] Sun Coke recognized that Sol "must have access to Sun Coke's proprietary information to facilitate the start up and operation of the plant." [Doc. 1, ¶ 18.] Ferrostaal Germany and Ferrostaal Brazil entered into an engineering, procurement, construction and test management contract (EPCM contract) with Sol on February 28, 2005, in connection with the Vitória Project. [Doc. 13.] This EPCM contract was negotiated and signed in Vitória, Brazil. Id.

In connection with the Vitória Project, Ferrostaal Germany received Sun Coke information concerning heat recovery coke oven technology in Essen, directly from Sun Coke employees, via Ferrostaal Germany's computers through remote access to a website set up in Knoxville, but with the host server in Houston, Texas, and at Sun Coke's direction, from Ferrostaal Brazil which had previously been given the information by Sun Coke. [Doc. 13.] Neither Sun Coke nor its affiliates physically provided information to Ferrostaal Germany in Tennessee. Id.

Prior to October 2005, Ferrostaal attempted to prepare a turnkey proposal with a third party not authorized to receive Sun Coke confidential information. [Doc. 1.] This proposal was for the development of a proposed heat recovery coke plant for the Atlantic Steel project located at Sepetiba, Brazil (the "Sepetiba Project"). Id. Sun Coke believed that Ferrostaal had disclosed or would disclose confidential information to enable the third party to build a heat recovery coke plant for the Sepetiba Project. Id. In October 2005, Sun Coke filed a Request for Arbitration with the International Chamber of Commerce in Paris on the assertion that Ferrostaal Germany may have improperly used or disclosed "confidential information" in connection with the Sepetiba Project. Id.

A representative of Ferrostaal Germany visited Sun Coke in Knoxville in late 2005 in an attempt to resolve the Paris arbitration. [Doc. 13 at ¶ 11.] No written contract resulted from this meeting, however, after the representative returned to Germany, Ferrostaal sent a letter dated November 24, 2005 to Sun Coke summarizing the terms discussed in Tennessee. Id. The terms listed in Ferrostaal's letter included: (1) Ferrostaal inviting representatives of Sun Coke to visit Ferrostaal's offices in Essen and Brazil to insure that the alleged breach of confidentiality had not occurred; (2) Ferrostaal withdrawing from participation in the Sepetiba Project, and (3) Sun Coke withdrawing the pending arbitration proceedings. [Doc. 1, Ex. B.] Ferrostaal subsequently backed out of its commitment to allow Sun Coke to visit its offices confirm that it had taken appropriate steps to protect the proprietary information. [Doc. 1.]

Sol independently elected to terminate Ferrostaal's participation in the Vitória Project, and under Article 4 of the Confidentiality Agreement, Ferrostaal became obligated to return all confidential information. Id. Sun Coke demanded that all such information be returned, but Ferrostaal initially failed to comply. Id. Sun Coke also discovered that Ferrostaal had included on its ...

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