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CapitalPlus Equity, LLC v. Tutor Perini Building Corp.

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

November 20, 2017



         CapitalPlus Equity, LLC, has brought this action against Tutor Perini Building Corp. alleging breach of contract, misrepresentation, and fraud. Before the court is a motion filed by Tutor to dismiss or transfer this action [R. 12]. Because the allegations of the complaint contain sufficient factual matter to establish personal jurisdiction over Tutor in the Eastern District of Tennessee, defendant's motion is denied.

         I. Factual Background

         CapitalPlus is a Nevada limited liability company with its principal place of business in Knoxville, Tennessee. Tutor is an Arizona corporation with its principal place of business in Phoenix, Arizona.

         CapitalPlus is a financial services company specializing in lending funds to construction companies. CapitalPlus entered into a lending agreement whereby CapitalPlus agreed to lend The Espinosa Group funds in connection with various construction projects. Tutor is the general contractor for a project located in Philadelphia, Pennsylvania. Espinosa had a subcontract with Tutor for work on the Pennsylvania project.

         In connection with the project, Tutor required Espinosa to provide a bond to guarantee the performance and payment of its obligations under the subcontract. Tutor informed Espinosa and CapitalPlus that Tutor would not make any payments to Espinosa for its work until Espinosa provided a Letter of Credit (LOC) that guaranteed Espinosa's ability to perform its work. Tutor and CapitalPlus engaged in extensive discussions and negotiations over a period of several months with respect to the LOC and associated escrow agreement. CapitalPlus alleges the discussions and negotiations, multiple phone calls, and emails were exchanged between CapitalPlus and Tutor from their offices in Tennessee and Pennsylvania, respectively. As a result of the discussions and negotiations, Tutor and CapitalPlus agreed that CapitalPlus would post $500, 000 collateral to an escrow account to be established with Zions First National Bank. The LOC states that any demand must be presented at CapitalPlus' office in Knoxville, Tennessee, and that the LOC would be “governed by and construed in accordance with the laws of the State of Tennessee.”

         CapitalPlus agreed to provide the LOC only if Tutor certified that Espinosa was in compliance with the terms of its subcontract. Tutor provided CapitalPlus with the requested letter of compliance stating there was no uncured breach of contract and all completed work and material provided was acceptable to Tutor. Based on this letter of compliance, CapitalPlus issued the LOC. CapitalPlus states it would not have issued the LOC without the letter of compliance from Tutor. CapitalPlus alleges that Tutor was aware at the time of the issuance of the LOC that Espinosa was not in compliance with the terms of the subcontract. Rather, Tutor issued the certification of compliance in order to receive the LOC from CapitalPlus.

         After receiving the LOC, Tutor issued a letter stating that Espinosa was in material breach of its subcontract. Tutor also sent a letter to CapitalPlus' office in Knoxville, demanding disbursement of $500, 000 from the escrow account because of Espinosa's alleged default on the subcontract. CapitalPlus states that Tutor misrepresented Espinosa's compliance with the subcontract to CapitalPlus' detriment and that CapitalPlus, rather than Tutor, is entitled to the funds deposited in the escrow account.

         Tutor moves to dismiss the complaint on the grounds that this court lacks both general and specific personal jurisdiction over Tutor; the complaint fails to state a claim for fraudulent inducement; failure to join indispensable parties; and alternatively, venue is more proper in the Eastern District of Pennsylvania on the basis of forum non conveniens.

         III. Analysis

         A. Personal Jurisdiction

         Tutor argues the complaint should be dismissed because of a lack of personal jurisdiction. CapitalPlus bears the burden of demonstrating that personal jurisdiction exists. Youn v. Track, Inc., 324 F.3d 409, 417 (6th Cir. 2003). A district court may decide to rule on the jurisdictional issue upon a full trial record, after an evidentiary hearing, or merely on the basis of a written record. Welsh v. Gibbs, 631 F.2d 436, 438 (6th Cir. 1980). This matter has been fully briefed by the parties and affidavits and exhibits have been filed. There is no need for an evidentiary hearing in this matter and the motion will be decided on the record.

         When a court decides the issue on the basis of the written record alone, plaintiff needs only to make a prima facie case of jurisdiction. To survive a motion to dismiss, plaintiff needs only to “demonstrate facts which support a finding of jurisdiction.” Id. The burden on plaintiff is relatively slight. The court considers the pleadings and affidavits in the light most favorable to the plaintiff. Any conflicts between facts contained in the parties' affidavits must be resolved in the plaintiff's favor. See Neogen Corp. v. Neo Gen Screening, Inc., 282 F.3d 883, 887 (6th Cir. 2002) (the court does not consider facts proffered by the defendant that conflict with those proffered by the plaintiff); Air Prods. & Controls, Inc. v. Safetech Int'l, Inc., 503 F.3d 544, 549 (6th Cir. 2007) (a court disposing of a Rule 12(b)(2) motion does not weigh the controverting assertions of the party seeking dismissal). Dismissal under Rule 12(b)(2) is proper only if the specific facts alleged by plaintiff, taken as a whole, fail to state a prima facie case for personal jurisdiction. Bridgeport Music, Inc. v. Still N The Water Pub., 327 F.3d 472, 478 (6th Cir. 2003). Thus, as long as the plaintiff is able to “demonstrate facts which support a finding of jurisdiction, ” the motion to dismiss will be denied, even in the face of controverting evidence presented by the moving party. Serras v. First Tenn. Bank Nat'l Ass'n, 875 F.2d 1212, 1214 (6th Cir. 1989).

         CapitalPlus alleges federal jurisdiction pursuant to 28 U.S.C. § 1332, diversity of citizenship. In diversity cases, federal courts apply the substantive law of the forum state to determine whether personal jurisdiction exists over a defendant, subject to constitutional limitations. Aristech Chem. Int'l Ltd. V. Acrylic Fabricators Ltd., 138 F.3d 624, 627 (6thCir. 1998). The court must determine that a defendant comes within the boundaries of the state's long-arm statute as well as the requirements of constitutional due process. Id. Under the Tennessee long-arm statute, a federal court is permitted to exercise jurisdiction over a defendant if such jurisdiction is within the boundaries of constitutional due process. Chenault v. Walker, 36 S.W.3d 45, 52 (Tenn. 2001). Where a state long-arm statute extends to the limits of constitutional due process, the court need only determine whether exercising personal jurisdiction over the defendant would violate constitutional due process. Artistech, 138 F.3d at 627.

         In order for a non-resident defendant to be subject to the jurisdiction of a court, the defendant must have “certain minimum contacts . . . such that the maintenance of a suit does not offend traditional notions of fair play and substantial justice.” Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). A defendant's minimum contacts with the forum state may create two types of personal jurisdiction, general or specific. Daimler AG v. Bauman, 134 S.Ct. 746, 748 (2014).

         General jurisdiction over a defendant exists where the defendant's contacts with the forum state are “continuous and systematic” such that a defendant should “reasonably anticipate being haled into court there.” Helicopteros Nacionales de Columbia, S.A., 466 U.S. 408 U.S. 408, 416 (1984). General jurisdiction allows a defendant to be sued in the forum state even where the cause of action has no relation to the contacts that the defendant has made in that state because the defendant is essentially “at home” in the forum state. Id. Here, CapitalPlus does not argue that Tutor is subject to general personal jurisdiction in the Eastern District of Tennessee. Therefore, the court will analyze whether specific jurisdiction exists over Tutor in this court.

         Specific jurisdiction allows a defendant to be sued in the forum state only where the issues of the suit derive from or are connected to the contacts that establish jurisdiction. Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S.Ct. 2846, 2851 (2011). The existence of specific jurisdiction is determined by looking at the relationship among the defendant, the forum, and the litigation. Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 775 (1984). For a court to exercise specific jurisdiction that is consistent with constitutional due process, the defendant's “suit-related conduct must create a substantial connection with the forum state.” Walden v. Fiore, 134 S.Ct. 115, 1121 (2014).

         The Sixth Circuit has established a three-part test to determine whether the court may exercise specific jurisdiction over a particular defendant. First, the defendant must purposefully avail himself of the privilege of acting in the forum state or causing a consequence in the forum state. Second, the cause of action must arise from the defendant's activities there. Finally, the acts of the defendant or consequences caused by the defendant must have a substantial enough connection with the forum state to make the exercise of jurisdiction over defendant reasonable. Southern Machine Co. v. Mohasco Indus. Inc., 401 F.2d 374, 381 (6th Cir. 1968).

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