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American Water Heater Co. v. Taylor-Winfield Technologies, Inc.

United States District Court, E.D. Tennessee, Greenville

September 27, 2017





         Before the Court is Defendant Taylor-Winfield Technology's (“Seller”) motion to dismiss Plaintiff American Water Heater's (“Buyer”) breach-of-contract and breach-of-warranty claims for lack of personal jurisdiction or, in the alternative, to transfer for improper venue. (Doc. 8.) Buyer filed a response (Doc. 13), and Seller filed a reply (Doc. 15). For the following reasons, the Court will DENY Seller's motion.

         I. BACKGROUND

         Buyer is a Nevada corporation headquartered in Johnson City, Tennessee. (Doc. 6.) In 2013, Buyer invited vendors to bid for the design and manufacture of two long seam welding machines (the “Welders”). (Doc. 14.) The Welders were to be custom-designed according to Buyer's specifications for use in Buyer's manufacturing plant in Johnson City, Tennessee.

         Buyer first inquired about Seller's interest in manufacturing the Welders in late May 2013. Seller is an Ohio corporation with its principal place of business in Youngstown, Ohio. (Doc. 8-1.) A lengthy period of negotiations followed.

         On June 11, 2013, Seller responded to Buyer's inquiry with a presentation regarding its ability to manufacture the Welders. After a visit to Buyer's Johnson City facility, Seller sent Buyer its first proposal and concept drawing for one of the Welders on June 14, 2013. (Doc. 14.) The proposal quoted a price of $2, 998, 489.00 for one of the Welders and noted delivery would be made to Buyer's Johnson City facility at an additional cost of $8, 787.00.

         On June 21, 2013, Seller submitted a revised proposal (“Revision A”) to Buyer. (Id.) It quoted a price for the second Welder at $2, 748, 249.00. It further noted delivery would be made to Buyer's Johnson City facility at the same additional cost as the first Welder.

         Over the next few months, Buyer and Seller remained in frequent contact. On October 28 and 29, 2013, Seller representatives visited Buyer's Johnson City facility to view the area in which the Welders would be installed. Following this visit, Seller submitted another revised proposal (“Revision B”). (Id.) The proposal increased the price for the Welders to $3, 261, 906.00 and $3, 011, 089.00, respectively.

         On December 17, 2013, Seller submitted additional revised proposals (“Revisions C and D”) to Buyer. Each noted Seller would provide a service engineer at Buyer's Johnson City facility during the Welders' installation who would participate in the system de-bug, start-up, and run-off. Two days later, Seller submitted yet another revised proposal (“Revision E”). This revision again provided for Seller personnel to participate in installation and start-up, and it estimated shipment at twelve months for the first system and fourteen months for the second system. On December 20, 2013, Buyer emailed to Seller a “letter of intent” instructing Seller to proceed with the project.

         On January 27, 2014, Buyer issued separate purchase orders for each of the Welders (the “Purchase Orders”). (Docs. 6-1, 6-2.) The purchase orders bore the logo of Buyer's parent company, “A.O. Smith”-a Delaware corporation based in Milwaukee, Wisconsin. Under the logo, the purchase orders directed invoices to Buyer's headquarters in Johnson City. (Id.) Seller issued its invoices to the Johnson City address.

         Over the course of negotiations, the parties never signed a document purporting to be the final written contract. Numerous proposed terms were exchanged, however. Significantly, on December 17, 2013, Buyer emailed its draft of the terms and conditions (the “Initial Terms”) to Seller, which contained both a choice of law provision and a forum selection clause. (Doc. 15-1.) This provision mandated application of Wisconsin law and submission to exclusive jurisdiction in Milwaukee County, Wisconsin.[1] That same day, Seller returned a revised version of the Initial Terms (the “Counteroffer”) but left the choice of law and forum selection clauses intact. (Id.) Buyer offers testimony that 1) neither Buyer nor Seller signed either the Initial Terms or the Counteroffer; 2) Seller never otherwise communicated acceptance of the Initial Terms; and 3) the parties negotiated the Counteroffer no further before Buyer later submitted its Purchase Orders on January 27, 2014. (Doc. 14.) Buyer further avers the Purchase Orders bore “general terms and conditions” on the back of the documents that retained the Wisconsin choice of law provision but made no mention of the forum selection clause.[2] (Doc. 13.) Nonetheless, Buyer emailed to Seller its “letter of intent” on December 20, 2013 instructing Seller to proceed without having memorialized the terms of the agreement. (Doc. 8-1.)

         Construction of the Welders did not go as planned. The Welders could not consistently meet the quality requirements in Buyer's specifications. From January 2015 to April 2016, the parties remained in close contact in an attempt to resolve the performance issues. Seller twice visited Buyer's sister company in Ashland City, Tennessee to inspect welders in operation there. (Doc. 14.) The parties made more than thirty conference calls during this time period, and Buyer representatives made twenty additional visits to Seller's Youngstown facility. Id. Despite these efforts, the Welders' performance issues could not be resolved, and the Welders were never delivered.

         On May 12, 2016, Buyer sued Seller for breach of contract and breach of warranty for failure to construct and deliver Welders meeting Buyer's specifications. (Doc. 1.) Seller moves to dismiss the action for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2) and for improper venue under Rule 12(b)(3) and 28 U.S.C. § 1391(b). (Doc. 8.) In the alternative, Seller asks the Court to transfer the case to the United States District Court in either the Northern District of Ohio or the Eastern District of Wisconsin pursuant to 28 U.S.C. § 1404 and § 1406(a). Id.


         The procedure through which district courts are to dispose of Rule 12(b)(2) motions to dismiss is well settled. Theunissen v. Matthews, 935 F.2d 1454, 1458 (6th Cir. 1991). The plaintiff bears the burden of establishing personal jurisdiction. Id. To do so, the plaintiff may not rely solely on the pleadings. Id. Rather, it must, by affidavit or otherwise, set forth specific facts demonstrating the court's jurisdiction. Id. Where, as here, the court considers a motion to dismiss under Rule 12(b)(2) without the aid of an evidentiary hearing, the plaintiff need only make a prima facie case the court has personal jurisdiction. Conn v. Zakharov, 667 F.3d 705, 711 (6th Cir. 2012). In ruling, the court construes the pleadings and affidavits in the light most favorable to the plaintiff and may also consider the defendant's undisputed factual assertions. Id. The court does not, however, weigh the controverting assertions of the party seeking dismissal, so as “to prevent non-resident defendants from regularly avoiding personal jurisdiction simply by filing an affidavit denying all jurisdictional facts.” Theunissen, 935 F.2d at 1459.

         On a Rule 12(b)(3) motion to dismiss for improper venue, “the plaintiff bears the burden of proving that venue is proper.” Gone To The Beach, LLC v. Choicepoint Services, Inc., 434 F.Supp.2d 534, 536-37 (W.D. Tenn. 2006). “The Court may examine facts outside the complaint but must draw all reasonable inferences and resolve factual conflicts in favor of the plaintiff.” Id. at 537.

         Finally, the district court has broad discretion in considering a motion to transfer under 28 U.S.C. § 1404(a). KANL, LLC v. Savage Sports Corp., No. 3:13-CV-265-TAV-CCS, 2014 WL 1745443, at *2 (E.D. Tenn. Apr. 30, 2014). Under such a motion, “[t]he defendant bears the burden of proving that there is an alternative venue that is proper and that the convenience of the parties and witnesses, and the interest of justice, warrant transfer.” Id. ‚ÄúThese burdens are significant. Courts ...

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