Opinion
Civil Action No. 3:02-CV-0081-N
September 29, 2003
MEMORANDUM OPINION AND ORDER
Before the Court is Defendant Danieli Corporation's ("Danieli USA") Motion to Dismiss for Lack of Personal Jurisdiction. Because Danieli USA lacks sufficient contacts with Texas for this Court to exercise personal jurisdiction over it and because doing so would offend traditional notions of fair play and substantial justice, that motion is GRANTED.
I. BACKGROUND
This cases arises after two companies, Plaintiff Delta Brands, Inc. ("Delta") and Defendant Danieli C SpA ("Danieli C") competed to be the contractor on a project to supply certain steel processing equipment for SSAB Tunnplat AB's ("SSAB") facility. During the contract negotiations, Delta allegedly provided confidential and proprietary information pertaining to its equipment to the Defendants. Delta entered into a confidentiality agreement ("Confidentiality Agreement" or "Agreement") pertaining to some of its confidential information with Danieli C, and Delta claims that both Danieli C and Danieli USA are in breach of this agreement by using Delta's confidential information to manufacture Delta's equipment.
Delta further claims that the Defendants have misappropriated Delta's trade secrets and that Danieli C and Danieli USA have breached the confidential relationship established by the execution of the confidentiality agreement. Delta alleges that all the Defendants have conspired together to acquire Delta's proprietary and confidential information, including its trade secrets. As part of this conspiracy, Delta claims that the Defendants made material misrepresentations to Delta regarding the Defendants' intentions in obtaining Delta's confidential information.
This Court previously granted SSAB's motion to dismiss for lack of personal jurisdiction and Danieli C's motion to dismiss under the doctrine of Forum Non Conveniens. Defendant Danieli USA now asks the Court to grant its motion to dismiss for lack of personal jurisdiction.
A. The Parties
SSAB is a manufacturer of sheet steel. SSAB is a corporation organized and existing under the laws of Sweden with its principal place of business in Borlange, Sweden. SSAB has no subsidiaries or offices in the United States. Delta specializes in the design and manufacture of flat rolled metal processing equipment. Delta is a Texas corporation having its principal place of business in Irving, Texas. Danieli C designs and manufactures all forms of rolling mill equipment, including levelers and shears. Danieli C is a corporation organized and existing under the laws of Italy, with its principal place of business in Buttrio, Italy.
Danieli USA acts as a sales representative in North America on occasion for several Danieli entities, including Danieli C, but has its own President and Chief Financial Officer, separate bylaws, separate customers, separate bank accounts, and separate employees who are paid on a separate pay roll. Danieli USA is a corporation organized and existing under the laws of Delaware, having its principal place of business in Cranberry Township, Pennsylvania. Danieli USA is a wholly owned subsidiary of Danieli Holdings, Inc., which is a wholly owned subsidiary of Industrielle Betelligung SA ("Industrielle"), a Luxembourg corporation. Industrielle is 90% owned by Danieli C.
B. Delta's Bid to SSAB
In February of 2001, SSAB issued a request for bids ("RFB") for equipment to establish two new cut to length lines for processing heavy gauge steel at its plant in Borlange, Sweden. Cut to length lines, generally, involve uncoiling coils of steel, leveling the steel, cutting the steel to a specific length using a blade or shear, and then stacking the cut pieces. SSAB initially sent the RFB out to several companies, including Danieli C. Delta did not receive the RPB from SSAB, but instead contacted SSAB and requested to be included in the bid process. In response, SSAB sent the RPB to Delta.
SSAB eventually narrowed the possible contractors to three finalists, including Delta and Danieli C. The finalists traveled to Borlange, Sweden to participate in the final bidding and negotiation process. These meetings occurred from August 28th to September 1st of 2001. Danieli C emerged as the successful contractor.
C. Delta's Bid to Danieli C
After SSAB rejected Delta's bid for the complete project, Delta sought to be a subcontractor for Danieli C on a portion of the project. During the period between June 20, 2001 and December 19, 2001, Danieli USA placed three phone calls to Delta. Two of the three were simply returning the calls of Delta representatives. The only phone call to Delta ever initiated by Danieli USA lasted 1.3 minutes. In September of 2001, just after SSAB rejected Delta's bid for the complete project, Delta sent drawings, a price sheet, and a product mix table to Danieli C and Danieli USA, without a confidentiality agreement. Danieli USA never received any information from Delta after September 10, 2001.
More than two months later, in November of 2001, Delta traveled to Buttrio, Italy to make a presentation to Danieli C regarding its partial bid. No representatives of Danieli USA knew about or attended the meeting. While in Italy, Delta and Danieli C executed a Confidentiality Agreement, signed only by Delta and Danieli C. The Agreement contained no forum selection clause or choice of law clause favoring Texas. Danieli USA was never asked by Delta or anyone else to sign the Agreement and was not aware that Danieli C had executed the Agreement until Delta filed the suit in this case. Once Delta and Danieli C signed the Agreement, Delta showed documents to Danieli C regarding its rotary shear and electromagnetic stacker. After the meeting, Delta submitted a bid to Danieli C to supply the shear and roll stacker. The two companies ultimately could not reach an agreement on price, and Danieli C decided to manufacture the equipment itself. No Danieli USA employee ever traveled to Texas, Italy, or Sweden for any of the events giving rise to this litigation.
II. APPLICABLE STANDARD FOR PERSONAL JURISDICTION
When a nonresident defendant moves to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of establishing the district court's jurisdiction over the nonresident. Wilson v. Belin, 20 F.3d 644, 648 (5th Cir.), cert. denied, 513 U.S. 930 (1994); Stuart v. Spademan, 112 F.2d 1185, 1192 (5th Cir. 1985). If the district court chooses to decide the motion to dismiss without an evidentiary hearing, the plaintiff may satisfy this burden by presenting a prima facie case for personal jurisdiction. Wilson, 20 F.3d at 648 (citing Thompson v. Chrysler Motors Corporation, 755 F.2d 1162, 1165 (5th Cir. 1985)). The court will take allegations of the complaint as true, except those allegations "controverted by opposing affidavits," and the court will resolve all conflicts in the facts in favor of the plaintiff. Thompson, 755 F.2d at 1165 (citing DeMelo v. Toche Marine, Inc., 711 F.2d 1260, 1270-71 (5th Cir. 1983)). In making its determination, the court may consider "affidavits, interrogatories, depositions, oral testimony, or any combination of . . . recognized [discovery] methods." Id. (citing Washington v. Norton Manufacturing, Inc., 588 F.2d 441, 443 (5th Cir.), cert. denied, 442 U.S. 942 (1979)).
"A federal district court sitting in diversity may exercise personal jurisdiction over a nonresident defendant if (1) the long-arm statute of the forum state confers personal jurisdiction over that defendant; and (2) exercise of such jurisdiction by the forum state is consistent with due process under the United States Constitution." Ruston Gas Turbines, Inc. v. Donaldson Company, Inc., 9 F.3d 415, 418 (5th Cir. 1993). A nonresident defendant is subject to the personal jurisdiction of a federal court sitting in diversity to the same extent that the defendant would be amenable to the jurisdiction of a state court in the same forum. Trinity Indus., Inc. v. Myers Assocs., Ltd., 41 F.3d 229, 230 (5th Cir.), cert. denied, 516 U.S. 807 (1995). This Court, therefore, must apply Texas law to ascertain if Texas, the forum state, could assert long-arm jurisdiction over the Danieli USA.
The Texas long-arm statute confers jurisdiction to the limits of the federal constitution. Hall v. Helicopteros Nacionales de Colombia, S.A., 638 S.W.2d 870, 872 (Tex. 1982), rev'don other grounds, 466 U.S. 408 (1984). The court, therefore, need only concern itself with the federal due process inquiry. Aviles v. Kunkle, 978 F.2d 201, 204 (5th Cir. 1992) (citations omitted).
Due process requires the satisfaction of two elements to exercise personal jurisdiction over a nonresident defendant: (1) the nonresident must have some minimum contact with the forum which results from an affirmative act on its part such that the nonresident defendant could anticipate being haled into the courts of the forum state; and (2) it must be fair or reasonable to require the nonresident to defend the suit in the forum state. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474-77 (1985). The due process clause ensures that persons have "fair warning that a particular activity may subject [them] to the jurisdiction of a foreign sovereign." Id. at 472.
To establish minimum contacts, a nonresident defendant must do some act by which it "purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." Hanson v. Denckla, 357 U.S. 235, 253 (1958) (citing Int'l Shoe Co. v. Washington, 326 U.S. 310, 319 (1945)). The unilateral activity of one asserting a relationship with the nonresident defendant does not satisfy this requirement. World-Wide Volkswagen Corporation v. Woodson, 444 U.S. 286, 298 (1980) (quoting Hanson, 357 U.S. at 253). In determining whether the exercise of jurisdiction is appropriate, the Supreme Court has focused less on presence in the forum state as a means to establish jurisdiction and looked increasingly to whether a defendant's contacts with the forum make it reasonable to require the defendant to defend the particular suit in that forum. Shaffer v. Heitner, 433 U.S. 186, 203 (1977).
Two types of in personam jurisdiction may be exercised over a nonresident defendant: specific and general. Specific jurisdiction exists if the cause of action is related to, or arises out of, the defendant's contacts with the forum, and those contacts meet the due process standard. Holt Oil Gas Corp. v. Harvey, 801 F.2d 773, 777 (5th Cir. 1986), cert. denied, 481 U.S. 1015 (1987). "When a court exercises personal jurisdiction over a defendant based on contacts with the forum related to the particular controversy, the court is exercising ` specific jurisdiction.'" Id. General jurisdiction, on the other hand, may be found when the claim is unrelated to the nonresident's contacts with the forum but where those contacts are "continuous and systematic." Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408 (1984).
Under either a general or specific jurisdiction analysis, however, "[t]he constitutional touchstone remains whether the defendant purposefully established `minimum contacts' in the forum State." Stuart v. Spademan, 772 F.2d at 1185, 1190 (5th Cir. 1985) (quoting Burger King, 471 U.S. at 474). The purposeful availment requirement of the minimum contacts inquiry "ensures that a defendant will not be haled into a jurisdiction solely as a result of `random,' `fortuitous,' or `attenuated' contacts . . . or of the `unilateral activity of another party or a third person.'" Stuart, 112 F.2d at 1191 (quoting Burger King, 471 U.S. at 475). A plaintiff must establish a substantial connection between the nonresident defendant and the forum state. Jones v. Petty-Ray Geophysical, Geosource, Inc., 954 F.2d 1061, 1068 n. 9 (5th Cir.), cert. denied, 506 U.S. 867 (1992).
A court must consider all factors when making the purposeful availment inquiry — "no single factor, particularly the number of contacts, is determinative." Stuart, 772 F.2d at 1192. "[W]hether the minimum contacts are sufficient to justify subjection of the non-resident to suit in the forum is determined not on a mechanical and quantitative test, but rather under the particular facts upon the quality and nature of the activity with relation to the forum state." Mississippi Interstate Express, Inc. v. Transpo, Inc., 681 F.2d 1003, 1006 (5th Cir. 1982).
III. THIS COURT LACKS SPECIFIC PERSONAL JURISDICTION OVER DANIELI USA A. Delta Failed to Allege Contacts Sufficient to Exercise Specific Jurisdiction Over Danieli USA Based on its Contract Claim Delta first claims there is a contractual ground for this Court to assert specific jurisdiction over Danieli USA in Texas. It is well established that merely contracting with a resident of the forum state is insufficient to subject the nonresident to the Court's jurisdiction. See, e.g., Colwell Realty Investments, Inc. v. Triple Inns of Arizona, Inc., 785 F.2d 1330, 1334 (5th Cir. 1986); Stuart, 772 F.2d at 1192-93; see also Burger King, 411 U.S. at 478. The sole basis of Delta's contractual ground for asserting personal jurisdiction over Danieli USA is a Confidentiality Agreement signed in Italy that is, by its own terms, "by and between Delta Brands, Inc. and Danieli C." Although Danieli USA is not a signatory to the Agreement and no representative from Danieli USA knew about or was present at the signing, Delta argues that (i) Danielli C's signature to the Confidentiality Agreement made Danieli USA a party, and (ii) by becoming a party, Danieli USA purposely availed itself of the privilege of conducting business in Texas. This Court is unpersuaded by both premises.The first question is whether Danieli USA is a party to the Confidentiality Agreement at all. Delta contends the "plain wording" of the following clause of the Confidentiality Agreement makes Danieli USA a party to it: "Danieli (i.e. Danieli C), for itself, its successors, assigns, officers, directors, employees, representatives, agents, servants, attorneys and any other party affiliated with it hereby agrees that it shall in all respects maintain the strict confidentiality . . ." of information specified in the agreement. Because Danieli USA is a "representative" and "affiliate" of Danieli C, Delta contends it is a party to the Confidentiality Agreement. But as Danieli USA points out, "[a] plain reading of the Confidentiality Agreement shows that although Danieli C could potentially be liable for a disclosure of confidential information by one of its affiliates, no affiliates, including [Dameli USA] are parties to the agreement." The clause cited by Delta only defines the conduct for which Danieli C may be liable. Another clause of the Confidentiality Agreement defines the scope of the persons bound by the agreement: "This Confidentiality Agreement shall extend to and be binding upon the parties hereto, and their respective heirs, personal representatives, successors and assigns." This language excludes any reference to affiliates or subsidiaries like Danieli USA. The structure and plain language of the Agreement and the fact that Danieli USA was not a signatory nor even present at the signing all suggest that Danieli USA is not a party to this Agreement.
Parenthetical quoted from plaintiffs brief.
The second question is whether by virtue of Danieli C's signature on the Agreement, Danieli USA "purposely directed" its activities at the Texas forum. Burger King, 471 U.S. at 472. Personal jurisdiction over an out-of-state defendant is proper only where the defendant's contacts proximately result from "actions by the defendant himself that create a `substantial connection' with the forum State." Id. at 475 (emphasis in original). This Court finds that even if Danieli USA were a party to the Agreement, its connection to Texas is far too attenuated to subject it to the jurisdiction of this Court. To have sufficient contacts to confer personal jurisdiction, the nonresident defendant must "purposefully" avail itself of the privileges and benefits of conducting business in a state. Burger King, 471 U.S. at 475. Random, fortuitous, or attenuated contacts do not suffice. Id. It is the quality and nature of the contacts, rather than their number, that is important. Guardian Royal Exch. Assurance, Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 230 n. 11 (Tex. 1991). Plaintiff relies on McCaskey v. Continental Airlines, Inc., 133 F. Supp.2d 514, 520 (S.D. Tex. 2001) for four factors this Court should consider in determining whether Danieli USA "purposefully" availed itself of the benefits of conducting business in Texas when Danieli C signed the Confidentiality Agreement. Those factors are "prior negotiations, contemplated future consequences, terms of the contract, and the parties' actual course of dealing." Id.
The McCaskey factors clearly weigh against asserting personal jurisdiction over Danieli USA on the basis of the Confidentiality Agreement. First, Danieli USA denies and Plaintiff nowhere alleges any prior negotiations between Danieli USA and Plaintiff concerning the Confidentiality Agreement, much less any negotiations in Texas.
Second, the Plaintiff fails to allege specific facts in its Second Amended Complaint ("Complaint") that would show that Danieli USA contemplated consequences flowing from the Confidentiality Agreement that constitute "fair warning that they might be subject to the jurisdiction" of a Texas sovereign. Burger King, 471 U.S. at 472. Plaintiff argues that Danieli USA purposefully availed itself of the privilege of doing business in Texas when it entered into a Confidentiality Agreement that created continuing obligations with Delta not to disclose confidential information for a period of 7 years. Although the Agreement created incentives for Danieli C to prevent its affiliates, including Danieli USA, its third generation subsidiary, from disclosing confidential information, the primary effect of the Agreement was to facilitate a future business relationship with Danieli C in Italy servicing a Swedish Client. Based on the Plaintiffs allegations in the Complaint, the contemplated consequences of the Confidentiality Agreement are related more to Danieli C and Europe than Danieli USA and Texas. Plaintiff acknowledges that Danieli USA and Danieli C are "separate and distinct legal entities," (Pl's 2d Am. Compl., ¶ 11.) but nowhere alleges contemplation of a contractual relationship with Danieli USA. Rather, Plaintiff alleges that Danieli USA introduced Delta to representatives of Danieli C purportedly to facilitate a "contractual relationship between Delta and Danieli C." (Pl.'s Am. Compl., ¶ 8.) Plaintiff does not dispute that after Danieli USA introduced it to Danieli C and more than two months before the Confidentiality Agreement was signed, the Plaintiff stopped sending any information to Danieli USA. Affidavit of Mark Brandon at ¶ 16. Moreover, to assert jurisdiction over an out of state defendant, that defendant must "deliberately" engage in "significant activities" within the forum state. Burger King, 471 U.S. 475. Here, Danieli USA could not "contemplate" future consequences in Texas by virtue of an Agreement it never signed or even knew about until the Plaintiff filed the complaint in this case. Affidavit of Mark Brandon at ¶ 16. Because Plaintiff fails to allege specific facts denying Danieli USA's sworn statements that it did not know about the Agreement until after Plaintiff filed the original complaint, and because the consequences of the Agreement were largely directed at potential business relationship with Danieli C in Europe rather than Danieli USA in Texas, the "contemplated consequences" factor also weighs against finding that Danieli USA purposefully availed itself of the benefits of the Texas forum.
Danieli USA is a wholly owned subsidiary of Danieli C Holdings, which is a wholly owned subsidiary of Industrielle. Danieli C owns 90% of Industrielle.
Third, the terms of the contract bear little or no relationship to Danieli USA. Danieli USA is not named in the contract nor is it a signatory thereto. Nor do the terms of the Agreement bear a relationship to Texas. There is no forum selection clause or choice of law clause favoring Texas. See Hydrokinetics, Inc. v. Alaska Mechanical, Inc., 700 F.2d 1026, 1029 (5th Cir. 1983); see also Burger King, 105 S.Ct. at 2187 (discussing relevance of choice of law provision to minimum contacts analysis). In fact, Texas is not even mentioned.
Fourth, the parties' actual course of dealing, as alleged in the Complaint, reveals that the contacts Danieli USA actually initiated with Delta are remarkably slim, and none of Danieli USA's contacts with Delta even referenced the Confidentiality Agreement. Personal jurisdiction over an out-of-state defendant is proper only where the defendant's contacts proximately result from "actions by the defendant himself that create a `substantial connection' with the forum State." Burger King, 471 U.S. at 463 (emphasis in original). The Plaintiff does not allege and Danieli USA denies that any Danieli USA employee ever traveled to Texas, Italy, or Sweden for any of the events giving rise to this litigation. Affidavit of Mark Brandon at ¶ 14. In fact, no Danieli USA employee ever met with or discussed the project with any representative of Delta except for a few limited phone calls. Id. Three phone calls were made from Danieli USA to Delta between June 20, 2001 and December, 19, 2001, and two were simply returning the calls of Delta representatives. Id. at ¶ 12, 14. The only phone call to Delta ever initiated by Danieli USA lasted 1.3 minutes. Id. at ¶ 14. Danieli USA never received any information from Delta after September 10, 2001, more than two months before the Confidentiality Agreement was made. Id. at ¶ 16. Danieli USA was never asked by Delta or anyone else to sign a Confidentiality Agreement and was not even aware that Danieli C had executed the Confidentiality Agreement until the complaint filed by Delta in this case. Id. at ¶ 17. Before Delta filed this lawsuit, it never made any demand to Danieli USA regarding the Confidentiality Agreement, nor any notice that it believed Danieli USA was a party to the Agreement. Id. at ¶ 18. Because each of the McCaskey factors weighs against a finding that Danieli USA purposefully availed itself of the benefits of the Texas forum, this Court declines to assert personal jurisdiction on contractual grounds.
B. Delta Fails to Allege Contacts Sufficient to Exercise Specific Jurisdiction Over Danieli USA Based on its Tort Claims
Delta also asks this Court to assert personal jurisdiction over Danieli USA on the basis of its fraud claim and its civil conspiracy claim. Delta first argues that its fraud claim alleges misrepresentations made by Danieli USA to Delta in Texas and that allegation alone is a sufficient basis for subjecting Danieli USA to this Court's jurisdiction. Plaintiff relies on Wien Air Alaska Inc. v. Brandt, 195 F.3d 208, 213 (5th Cir. 1999) for the proposition that "[w]hen the actual content of communications with a forum gives rise to intentional tort causes of action, this alone constitutes purposeful availment." The trouble is fraud does not appear as one of the Plaintiffs two enumerated counts, nor does the Plaintiff allege any specific material misrepresentations by Danieli USA in its Complaint. Rather, Plaintiff alleges only that Danieli USA "opened a dialog with [Delta] about [Delta] acting as a subcontractor for [Danieli C]. In this regard, [Danieli USA] sought and obtained technical information from [Delta] related to the Rotary Sheer and forwarded that information to [Danieli C]. [Danieli USA] then introduced [Delta] to representatives of [Danieli C] purportedly to facilitate a contractual relationship between [Delta] and [Danieli C]." (PL 2d Am. Compl., ¶ 8.) "Opening a dialog" about acting as a subcontractor is, at best, "soliciting business" or "negotiating a contract," both of which are expressly distinguished by Wien Air and excluded from its holding. Wien Air, 195 F.3d at 213. Because the Plaintiff failed to allege any material misrepresentations giving rise to a fraud claim, this Court cannot subject Danieli USA to its jurisdiction on that basis.
Delta's second argument is that specific jurisdiction can be exercised over Danieli USA due to its status as a co-conspirator with Danieli C and SSAB in the fraudulent misappropriation of trade secrets. This view has been squarely rejected by the Fifth Circuit. See, e.g., Thomas v. Kadish, 748 F.2d 276, 282 (1984), cert. denied, 473 U.S. 907 (1985) (holding that the effects of an alleged conspiracy in the forum state are insufficient to grant the Court personal jurisdiction over non-resident co-conspirators); see also National Indus. Sand Ass'n v. Gibson, 897 S.W.2d 769, 773 (Tex. 1995) ("[W]e decline to recognize the assertion of personal jurisdiction over a nonresident defendant based solely upon the effects or consequences of an alleged conspiracy with a resident in the forum state.") ("[D]ue process will not permit the plaintiff to use insignificant acts in the forum to assert jurisdiction over all co-conspirators."); Hawkins v. Upjohn Co., 890 F. Supp. 601, 608-609 (S.D. Tex. 1994). Furthermore, to establish a prima facie case for personal jurisdiction over Danieli USA, Delta must provide a factual basis for each element of the conspiracy claim. See Bullion v. Gillespie, 895 F.2d 213, 216-17 (5th Cir. 1990); Thomas, 748 F.2d at 282 (affirming dismissal of claims against California defendants for lack of personal jurisdiction when the plaintiff stated only conclusory allegations of conspiracy based upon the defendants' acts in California and the alleged effects of the conspiracy in Texas). Here, Plaintiff failed to allege specific material misrepresentations by the alleged conspirators. Rather, Plaintiff made conclusory allegations left unsupported by factual allegations in the Complaint. For example, Plaintiff alleges that Danieli USA and Danieli C "agreed with each other to engage in unlawful course of conduct" against Delta, but nowhere alleges any specific facts supporting the agreement. Similarly, Plaintiff alleges that the "unlawful means employed was the misrepresentation to DBI with respect to [Danieli C's] intent to utilize [Delta] as a subcontractor," but never alleges a specific instance when one of the alleged conspirators promised to use Delta as a subcontractor. As a matter of law, these conclusory allegations are insufficient. See Jefferson v. Lead Indus. Ass'n, Inc., 106 F.3d 1245, 1250 (5th Cir. 1997) ("conclusory allegations or legal conclusions masquerading as factual conclusions will not suffice to prevent a motion to dismiss"); Guidry v. United States Tobacco Co., 188 F.3d 619, 631-32 (5th Cir. 1999) ("a general allegation of conspiracy without a statement of the facts constituting that conspiracy is only an allegation of a legal conclusion"). Because the Plaintiff failed to allege any significant acts by Danieli USA in the Texas forum, this Court cannot assert jurisdiction over Danieli USA on the conspiracy allegation.
CONCLUSION
Delta has failed to show that Danieli USA has purposefully availed itself of the privilege of doing business in the State of Texas. Accordingly, Danieli USA does not have sufficient contacts with the forum state for this Court to exercise personal jurisdiction over it. Danieli USA's motion to dismiss for lack of personal jurisdiction is, therefore, granted.
All other pending motions are therefore denied.