Bnsf Railway Company v. Firstenergy Generation, Llc

Brief/Memorandum in Support

N.D. Tex.April 27, 2017

06254-00001/9230003.1 IN UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS FORT WORTH DIVISION BNSF RAILWAY COMPANY, Plaintiff, -against- FIRSTENERGY GENERATION, LLC f/k/a FIRSTENERGY GENERATION CORPORATION., Defendant. § § § § § § § § § § § § Civil Action No. 4:17-cv-00229-O MEMORANDUM OF LAW IN SUPPORT OF DEFENDANT FIRSTENERGY’S MOTION TO DISMISS THE COMPLAINT, OR, IN THE ALTERNATIVE, TO TRANSFER VENUE, OR, IN THE ALTERNATIVE, TO STAY PENDING ARBITRATION Case 4:17-cv-00229-O Document 35 Filed 04/27/17 Page 1 of 27 PageID 147 06254-00001/9230003.1 i TABLE OF CONTENTS Page PRELIMINARY STATEMENT .....................................................................................................1 STATEMENT OF ALLEGATIONS ...............................................................................................3 I. The Complaint Must Be Dismissed For Lack of Personal Jurisdiction ...............................5 II. In The Alternative, This Action Should Be Transferred To The Northern District Of Ohio ..............................................................................................................................12 III. In The Alternative, At A Minimum, This Action Should Be Stayed Pending The Arbitration Of Related Claims ...........................................................................................16 CONCLUSION ..............................................................................................................................19 Case 4:17-cv-00229-O Document 35 Filed 04/27/17 Page 2 of 27 PageID 148 06254-00001/9230003.1 ii TABLE OF AUTHORITIES Page Cases Adams v. Bell, 711 F.2d 161 (D.C. Cir. 1983) .................................................................................................15 Berry v. Pilgrim's Pride Corp., No. 2:16-CV-409-JRG, 2016 WL 6092701 (E.D. Tex. Oct. 19, 2016) ...................................15 Carolei v. Texas Mesquite Connection, No. 3:11-CV-2811-L BH, 2012 WL 3599460 (N.D. Tex. Aug. 6, 2012), report and recommendation adopted, No. 3:11-CV-281 1- L BH, 2012 WL 3613971 (N.D. Tex. Aug. 22, 2012) .............................................................16 Choice Healthcare, Inc. v. Kaiser Found. Health Plan of Colo., 615 F.3d 364 (5th Cir. 2010) .....................................................................................................7 Citgo Petroleum Corp. v. M/T Bow Fighter, No. CIV.A. H-07-2950, 2009 WL 960080 (S.D. Tex. Apr. 7, 2009) .................................................................16, 17, 18 Daimler AG v. Bauman, 134 S. Ct. 746 (2014) ...........................................................................................................6, 13 Essex Crane Rental Corp. v. Vic Kirsch Const. Co., Inc., 486 F. Supp. 529 (S.D.N.Y. 1980)...........................................................................................15 Freudensprung v. Offshore Tech. Servs., Inc., 379 F.3d 327 (5th Cir. 2004) .........................................................................................9, 10, 11 Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915 (2011) .........................................................................................................6, 7, 13 Hartford Fin. Sys., Inc. v. Florida Software Servs., Inc., 550 F. Supp. 1079 (D. Maine 1982) ........................................................................................18 Harvey v. Joyce, 199 F.3d 790 (5th Cir. 2000) ...................................................................................................16 Complaint of Hornbeck Offshore (1984) Corp., 981 F.2d 752 (5th Cir. 1993) ...................................................................................................16 Hydrokinetics, Inc. v. Alaska Mech., Inc., 700 F.2d 1026 (5th Cir. 1983) ...........................................................................................10, 11 Johnston v. Multidata Sys. Int'l Corp., 523 F.3d 602 (5th Cir. 2008) ...............................................................................................6, 12 Kamm v. Nw. Mut. Life Ins. Co., No. 3:13-CV-0710-B, 2013 WL 5575177 (N.D. Tex. Oct. 10, 2013) .....................................14 Case 4:17-cv-00229-O Document 35 Filed 04/27/17 Page 3 of 27 PageID 149 06254-00001/9230003.1 iii Kirkpatrick v. ARM WNY LLC, No. 3:15-CV-1818-L, 2015 WL 3539604 (N.D. Tex. June 5, 2015) ......................................13 LNV Corp. v. Branch Banking & Trust Co., No. 3:12-CV-3803-L BF, 2013 WL 1686462 (N.D. Tex. Mar. 12, 2013)), report and recommendation adopted, No. 3:12-CV-3803-L BF, 2013 WL 1694421 (N.D. Tex. Apr. 18, 2013) ..........................................................................................................................15 In re Marquette Transp. Co. Gulf-Inland, LLC, No. CIV.A. H-12-0623, 2012 WL 2375981 (S.D. Tex. June 21, 2012) ..................................16 McFadin v. Gerber, 587 F.3d 753 (5th Cir. 2009) ...........................................................................6, 8, 9, 10, 11, 12 Moncrief Oil Int'l Inc. v. OAO Gazprom, 481 F.3d 309, 311 (5th Cir. 2007) .......................................................................................8, 11 Monkton Ins. Servs., Ltd. v. Ritter, 768 F.3d 429 (5th Cir. 2014) .................................................................................................7, 8 Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983) .....................................................................................................................16 Revell v. Lidov, 317 F.3d 467 (5th Cir. 2002) .....................................................................................................6 Sagebrush Sols., LLC v. Health Mgmt. Sys. Inc., No. 3:11-CV-00182-F, 2011 WL 13128837 (N.D. Tex. Apr. 29, 2011) .................................11 Sibley v. Tandy Corp., 543 F.2d 540 (5th Cir. 1976) .............................................................................................16, 18 Sierra Club v. Johnson, 623 F. Supp. 2d 31 (D.D.C. 2009) ...........................................................................................15 Stroman Realty, Inc. v. Antt, 528 F.3d 382 (5th Cir. 2008) .....................................................................................................6 Stuart v. Spademan, 772 F.2d 1185 (5th Cir. 1985) ...................................................................................................6 TSI USA, LLC v. Uber Techs., Inc., No. 3:16-CV-2177-L, 2017 WL 106835 (N.D. Tex. Jan. 11, 2017) .......................................14 U.S. ex rel. Milestone Tarant, LLC v. Fed. Ins. Co., 672 F. Supp. 2d 92 (D.D.C. 2009) ...........................................................................................18 In re Volkswagen AG, 371 F.3d 201 (5th Cir. 2004) ...................................................................................................13 In re Volkswagen of Am., Inc., 545 F.3d 304 (5th Cir. 2008) .............................................................................................13, 14 Case 4:17-cv-00229-O Document 35 Filed 04/27/17 Page 4 of 27 PageID 150 06254-00001/9230003.1 iv W. Watersheds Project v. Pool, 942 F. Supp. 2d 93 (D.D.C. 2013) ...........................................................................................15 Wilson v. Belin, 20 F.3d 644 (5th Cir. 1994) .......................................................................................................6 Rules / Statutes 28 U.S.C. § 1391 ...........................................................................................................................13 28 U.S.C. § 1391(b)(2) ..................................................................................................................12 28 U.S.C. § 1404(a) .......................................................................................................................13 Federal Rule of Civil Procedure 4(k)(1)(A) .....................................................................................6 Tex. Civ. Prac. and Rem. Code Ann. §§ 17.041-.045 .....................................................................6 Case 4:17-cv-00229-O Document 35 Filed 04/27/17 Page 5 of 27 PageID 151 06254-00001/9230003.1 1 Defendant FirstEnergy Generation, LLC f/k/a FirstEnergy Generation Corp. (“FirstEnergy”), by and through its attorneys, Quinn Emanuel Urquhart & Sullivan, LLP, and Akin Gump Strauss Hauer & Feld LLP, hereby respectfully submits this memorandum of law in support of its Motion to Dismiss the Complaint, or, in the Alternative, to Transfer Venue, or, in the Alternative, to Stay Pending Arbitration. PRELIMINARY STATEMENT This is a lawsuit that-regardless of whether it can ultimately be maintained on the merits, which it cannot-should not have been brought now and should not have been brought in Texas. It is plain why BNSF Railway Company (“BNSF), a large and well-known Fort Worth- based company, would want to file this action in its home state. But neither FirstEnergy, nor the contract at issue in this case (the “BNSF Supplement”), has any meaningful connection to Texas whatsoever. FirstEnergy owns and operates electric generating power plants in New Jersey, Ohio, Pennsylvania, Virginia and West Virginia and, as a regional energy provider, produces and sells power throughout the Mid-Atlantic and Midwest region. FirstEnergy does not own or operate any electricity generating facilities or any other business operations in Texas, has never registered to do business in Texas, has never maintained any business office or records in Texas, and has never paid franchise taxes in Texas. FirstEnergy’s only alleged contact with Texas is that it contracted with BNSF, a Texas-based company. Yet the BNSF Supplement that gives rise to the claims in this case was made and was to be performed entirely outside of Texas. It provides for the transportation of coal from coal mines located in Montana and Wyoming to FirstEnergy’s plants in Ohio, and expressly provides that the contract “shall be deemed to be an agreement made in the State of Ohio and governed by and construed according to the laws of that State.” The mere fact that one of the contracting parties (BNSF) is located in Texas, and allegations that in furtherance of the contract FirstEnergy communicated with and was obligated Case 4:17-cv-00229-O Document 35 Filed 04/27/17 Page 6 of 27 PageID 152 06254-00001/9230003.1 2 to send payments to BNSF in Texas, is patently insufficient under the law to sustain personal jurisdiction over FirstEnergy in this case. The Complaint must therefore be dismissed. And even if the Court determines that there are sufficient contacts to exercise jurisdiction here (which there are not), the Court should nonetheless exercise its discretion to transfer the case to the Northern District of Ohio, where all of the relevant evidence and witnesses reside and which has a far greater interest in adjudicating the purported breach of an Ohio contract by an Ohio company under Ohio law, particularly where, as here, the case involves six Ohio power plants that are subject to significant policy and regulatory considerations in Ohio. In the alternative, even if the Court determines that it may retain this case, the Court should, at a minimum, stay this action pending the outcome of two related arbitrations that are currently ongoing. The BNSF Supplement, by its terms, is dependent on and operates in conjunction with two underlying rail transportation agreements (the “Plant Agreements”) between FirstEnergy and BNSF. BNSF has asserted claims for liquidated damages under both of the Plant Agreements that are currently pending in arbitrations between the parties. Under the terms of the BNSF Supplement, the parties cannot litigate, and this Court cannot adjudicate, BNSF’s claims in this case without waiting for the resolution of the ongoing arbitrations of the Plant Agreements, because the BNSF Supplement provides that FirstEnergy shall not be liable to any pay liquidated damages under the BNSF Supplement to the extent that it has already paid liquidated damages under the Plant Agreements. Accordingly, the resolution of the Plant Agreement arbitrations may moot, either entirely or in substantial part, the claims in this lawsuit, and is required in order to define the scope of the dispute in this action with certainty. It would be a waste of judicial time and resources to litigate any number of hypothetical outcomes in this action when resolution of the pending arbitrations will define the scope of this dispute with Case 4:17-cv-00229-O Document 35 Filed 04/27/17 Page 7 of 27 PageID 153 06254-00001/9230003.1 3 certainty and may in fact moot it entirely. In such circumstances, Courts routinely exercise their discretion to stay claims in litigation that are dependent on and may be mooted by the resolution of currently pending arbitrable claims. For the foregoing reasons, FirstEnergy respectfully requests that this Court dismiss the Complaint with prejudice for lack of jurisdiction or transfer the case to the Northern District of Ohio. In the alternative, should the Court decide to retain this action, FirstEnergy respectfully submits that a stay of this action pending the resolution of the underlying arbitrations is both appropriate and necessary. STATEMENT OF ALLEGATIONS In 2008, FirstEnergy entered into three related rail transportation agreements with BNSF to ship coal from coal mines in Montana and Wyoming to six of FirstEnergy’s coal-fired power plants located in Ohio. (Compl. ¶¶ 1, 12-13; Compl. App. 3, §§ 2, 3; Compl. App. 9, §§ 3, 4; Compl. App. 21, §§ 3, 4.) Because BNSF’s railway network operates only in the western United States, BNSF partnered with two other rail carriers in the eastern United States to transport the coal to FirstEnergy’s Ohio plants. (Compl. ¶ 11.) The six Ohio plants were serviced by two separate contracts: the CSX Contract (between FirstEnergy, on the one hand, and BNSF and CSX Transportation Inc. (“CSX”), on the other hand) provided for transportation of coal from the west to four of the six Ohio plants; and the NS Contract (between FirstEnergy, on the one hand, and BNSF and Norfolk Southern Railway Company (“NS”), on the other hand) provided for transportation of coal from the west to two of the six Ohio plants. (Compl. ¶¶ 11-12; Compl. App. 9, §§ 3-4; Compl. App. 21, §§ 3-4.) (The CSX Contract and the NS Contract shall be referred to as the “Plant Agreements.”) Pursuant to the Plant Agreements, BNSF was to pick up the coal at the Montana or Wyoming coal mines and deliver it to either CSX or NS in Chicago, which then transported the Case 4:17-cv-00229-O Document 35 Filed 04/27/17 Page 8 of 27 PageID 154 06254-00001/9230003.1 4 coal to FirstEnergy’s plants in Ohio. (Compl. App. 9-11, §§ 3, 4, 15; Compl. App. 21-23, §§ 3, 4, 16.) The Plant Agreements each provided that: “This Agreement shall be deemed to have been executed in the State of Ohio and governed by and construed according to the laws of that State.” (Compl. App. 14, § 28; Compl. App. 26, § 29.) Each Plant Agreement specified a minimum volume of tons of coal that was required to be transported under the contract each year, and for the payment of liquidated damages to the railroads for any tons under that amount that were not delivered unless excused by force majeure. (Compl. ¶ 12; Compl. App. 10-11, §§ 8, 13; Compl. App. 22-23, §§ 9, 14.) Each Plant Agreement was to remain in effect from January 1, 2011 until December 31, 2025. (Compl. ¶ 12; Compl. App. 9, § 1; Compl. App. 21, § 1.) At the same time as entering into the Plant Agreements, BNSF and FirstEnergy entered into a third contract, the BNSF Supplement that is at issue in this litigation. (Compl. ¶¶ 1, 12- 13.) That contract was intended “to provide for certain obligations and incentives that will apply in conjunction with the . . . Plant Agreements.” (Compl. App. 3.) The term of the BNSF Supplement was to be “concurrent with the term of the Plant Agreements” and specified that “[i]n the event that either Plant Agreement is terminated, this Agreement will automatically terminate.” (Compl. App. 3, § 1.) The BNSF Supplement, like the Plant Agreements, provided for the payment of liquidated damages for any shortage between the tons of coal delivered annually and the contractual minimum volume requirement (which was the aggregate of the minimum volume requirements of the Plant Agreements). (Compl. ¶¶ 2, 32; Compl. App. 3-4, §§ 3, 6.) However, the BNSF Supplement specified that FirstEnergy “will not be responsible for payment of [liquidated damages] as specified herein on the same ton twice in the event [FirstEnergy] has paid for a shortfall ton under a Plant Agreement that would have otherwise Case 4:17-cv-00229-O Document 35 Filed 04/27/17 Page 9 of 27 PageID 155 06254-00001/9230003.1 5 been subject to [liquidated damages] herein.” (Compl. App. 4, § 6.) Like the Plant Agreements, the BNSF Supplement stipulates that: “This Agreement shall be deemed to be an agreement made in the State of Ohio and governed by and construed according to the laws of that State.” (Compl. App. 5, § 9.) FirstEnergy is currently engaged in two arbitrations with BNSF regarding BNSF’s claims that FirstEnergy breached and repudiated the Plant Agreements. (Compl. ¶ 18.) The arbitration concerning the CSX Contract has already resulted in an award on liability in favor of BNSF, with the liquidated damages to be determined at a hearing in May 2017 or soon thereafter. The arbitration concerning the NS Contract is in progress and will likely result in a hearing towards the end of this year. Notwithstanding the pendency of these two arbitrations to resolve any liquidated damages owed and payable under the Plant Agreements, on March 16 BNSF commenced this lawsuit concerning the BNSF Supplement in the Northern District of Texas- BNSF’s home state, but a state with which neither FirstEnergy nor the BNSF Supplement has any meaningful contacts. (Mellody Decl. ¶¶ 4-15; 21-23.) I. The Complaint Must Be Dismissed For Lack of Personal Jurisdiction The Complaint must be dismissed because this Court lacks personal jurisdiction over FirstEnergy. The Complaint’s jurisdictional allegations are facially insufficient to sustain long- arm jurisdiction over FirstEnergy, an Ohio company with its principal place of business in Ohio (Compl. ¶ 7), in a dispute where the Contract pertains to power plants located in Ohio (Compl. ¶¶ 1, 8), specifies that it was consummated in Ohio and is governed by Ohio law (Compl. App. 5, § 9), and requires zero contacts with Texas (see Compl. App. 3 §§ 2, 3; Compl. App. 9-11 §§ 3, 4, 15; Compl. App. 21-23 §§ 3, 4, 16). The transparent effort by BNSF, a large and well-known Fort Worth-based company and employer, to engage in forum shopping for this litigation is a Case 4:17-cv-00229-O Document 35 Filed 04/27/17 Page 10 of 27 PageID 156 06254-00001/9230003.1 6 violation of due process and offends traditional notions of fair play and substantial justice, which under Texas law requires the dismissal of the Complaint.1 Due process under the Fourteenth Amendment to the United States Constitution permits the imposition of personal jurisdiction over nonresident FirstEnergy only if BNSF can show that (1) FirstEnergy purposely availed itself of the “benefits and protections” of Texas by establishing “minimum contacts” with Texas; and (2) exercising jurisdiction here would not offend “traditional notions of fair play and substantial justice.” Johnston v. Multidata Sys. Int'l Corp., 523 F.3d 602, 609 (5th Cir. 2008) (quoting Wilson v. Belin, 20 F.3d 644, 647 (5th Cir. 1994)). Failure to meet the first prong is dispositive of the inquiry, and the court need not then examine the second prong. See McFadin, 587 F.3d at 761. To satisfy this first prong of establishing “minimum contacts” with Texas, BNSF must establish that FirstEnergy has sufficient “minimum contacts” with this forum to support the exercise by this Court of either “general jurisdiction” or “specific jurisdiction” over FirstEnergy. See Revell v. Lidov, 317 F.3d 467, 470 (5th Cir. 2002). The Complaint fails to establish either ground for jurisdiction. There is no question that a Texas court cannot assert general jurisdiction over FirstEnergy. General jurisdiction over a nonresident defendant exists only where the defendant’s “affiliations with the State are so ‘continuous and systematic’ as to render [it] essentially at home 1 See Stuart v. Spademan, 772 F.2d 1185, 1192 (5th Cir. 1985) (“When a nonresident defendant presents a motion to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of establishing the district court's jurisdiction over the nonresident.”). Federal Rule of Civil Procedure 4 provides that a federal court may exercise personal jurisdiction over a defendant “who is subject to the jurisdiction of a court of general jurisdiction in the state where the district court is located.” Fed. R. Civ. P. 4(k)(1)(A). This court sits in Texas, whose long- arm statute confers jurisdiction to the limits of due process. See Stroman Realty, Inc. v. Antt, 528 F.3d 382, 385 (5th Cir. 2008); Tex. Civ. Prac. and Rem. Code Ann. §§ 17.041-.045. Therefore, a due process analysis is dispositive of this issue. See McFadin v. Gerber, 587 F.3d 753, 759 (5th Cir. 2009). Case 4:17-cv-00229-O Document 35 Filed 04/27/17 Page 11 of 27 PageID 157 06254-00001/9230003.1 7 in the forum State.” Daimler AG v. Bauman, 134 S. Ct. 746, 761 (2014) (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011)). Only in an “exceptional case” could a foreign corporation’s contacts be “so substantial and of such a nature” that it may be considered at home in a forum other than its place of incorporation or principal place of business. Id. at 761 n.19; see also Monkton Ins. Servs., Ltd. v. Ritter, 768 F.3d 429, 432 (5th Cir. 2014) (“It is . . . incredibly difficult to establish general jurisdiction in a forum other than the place of incorporation or principal place of business.”). There are simply no continuous or systematic contacts here, much less substantial ones. FirstEnergy owns and operates electric generating power plants in New Jersey, Ohio, Pennsylvania, Virginia and West Virginia and, as a regional energy provider, produces and sells power throughout the Mid-Atlantic and Midwest, serving customers in Maryland, New Jersey, Ohio, Pennsylvania, Virginia and West Virginia. (Mellody Decl. ¶ 5.) FirstEnergy has never registered to do business in Texas, has never maintained any business office or records in Texas, and has never paid franchise taxes in Texas. (Mellody Decl. ¶¶ 6-7, 10-11.) FirstEnergy does not own or operate any electricity generating facilities or any other business operations in Texas, does not own or operate any distribution or transmission equipment in Texas nor deliver electricity to any location in Texas, and it is not regulated by the Public Utility Commission of Texas. (Mellody Decl. ¶¶ 12-14.) The substance of the Complaint’s jurisdictional allegations is that FirstEnergy contracted for non-Texas-based services with a Texas-based company (BNSF) and had sporadic and occasional communications and contacts with BNSF regarding that Contract. These jurisdictional allegations are not “so substantial” or of “such a nature” so as to render FirstEnergy at “home” in Texas, nor are they sufficiently “continuous and systematic” to confer general jurisdiction over FirstEnergy. See Choice Healthcare, Inc. v. Kaiser Found. Case 4:17-cv-00229-O Document 35 Filed 04/27/17 Page 12 of 27 PageID 158 06254-00001/9230003.1 8 Health Plan of Colo., 615 F.3d 364, 368 (5th Cir. 2010) (nonresident defendant’s fifty-three payments made to forum state over the course of three years were insufficiently “continuous and systematic” to warrant general jurisdiction). Neither are they sufficient to confer specific jurisdiction over FirstEnergy, which can only be conferred upon a prima facie showing that (i) the plaintiff’s specific cause of action “arises out of or results from the defendant’s forum-related activities,” (ii) “the defendant has minimum contacts with the forum state” such that the defendant “purposely directed its activities toward the forum state or purposely availed itself of the privileges of conducting activities there,” and (iii) the exercise of personal jurisdiction is “fair and reasonable.” Monkton, 768 F.3d at 433; see also McFadin, 587 F.3d at 759. The “touchstone” of the minimum contacts inquiry is “whether the defendant’s conduct shows that it reasonably anticipates being haled into court” in Texas, and Texas courts recognize that a defendant “must 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 third person.” McFadin, 587 F.3d at 759 (citations and quotation marks omitted). The Complaint falls well short of making such a prima facie showing. The Complaint alleges purported contacts with Texas that fall into one of three categories. First, FirstEnergy entered into a contract with a Texas-based company, BNSF. (Compl. ¶ 5.) Second, FirstEnergy had communications with and is obligated to make payments to that Texas-based company in connection with that contract. (Compl. ¶ 5.) Third, FirstEnergy representatives traveled to Texas to discuss certain of the parties’ contracts. (Compl. ¶ 5.) None of these allegations, either alone or taken together, is sufficient to support the exercise of specific jurisdiction here. Texas law is clear that merely “contracting with a resident of the forum state does not establish minimum contacts,” nor do “communications relating to the performance of a contract Case 4:17-cv-00229-O Document 35 Filed 04/27/17 Page 13 of 27 PageID 159 06254-00001/9230003.1 9 themselves.” McFadin, 587 F.3d at 760 (quoting Moncrief Oil Int'l Inc. v. OAO Gazprom, 481 F.3d 309, 311 (5th Cir. 2007)). Indeed, the Fifth Circuit has “repeatedly held” and adheres to the rule that “the combination of mailing payments to the forum state, engaging in communications related to the execution and performance of the contract, and the existence of a contract between the nonresident defendant and a resident of the forum are insufficient to establish the minimum contacts necessary to support the exercise of specific personal jurisdiction over the nonresident defendant.” Freudensprung v. Offshore Tech. Servs., Inc., 379 F.3d 327, 344 (5th Cir. 2004) (collecting cases). In McFadin, as here, a Texas-based company sued a foreign defendant (there, a Colorado-based sales representative) for breach of a long-term services contract where the services were centered entirely outside of Texas. The plaintiffs asserted as the basis for specific jurisdiction that “the contract created a ten-year sales representation relationship between the parties and that there were significant communications-including sales orders and commission payments-between [the defendant] in Colorado and the [plaintiffs] in Texas,” as well as the “sales by [defendant] to Texas residents” of plaintiffs’ products under the contract. McFadin, 587 F.3d at 760. The Fifth Circuit found these contacts-which included allegations that the Colorado defendant repeatedly faxed over the course of a ten-year period more than $1 million in sales invoices to the Texas plaintiff and that the Texas plaintiff mailed commission checks in return to the Colorado defendant-were “insufficient” to confer specific jurisdiction over the foreign defendant, particularly where, as here, the contract was “centered around [the defendant’s] operations outside Texas.” Id. at 757, 760. McFadin applies squarely here. The BNSF Supplement centers entirely around operations outside of Texas: it relates to the transportation of coal by BNSF from coal mines located in Montana and Wyoming to FirstEnergy’s plants in Ohio. (Compl. ¶ 1; Compl. App. 3, Case 4:17-cv-00229-O Document 35 Filed 04/27/17 Page 14 of 27 PageID 160 06254-00001/9230003.1 10 §§ 2, 3; Compl. App. 9, §§ 3, 4; Compl. App. 21, §§ 3, 4.) It does not require any transportation of coal through Texas, but rather through Chicago and to Ohio. (See Compl. App. 3 §§ 2, 3; Compl. App. 9-11 §§ 3, 4, 15; Compl. App. 21-23 §§ 3, 4, 16.) It expressly provides that the contract “shall be deemed to be an agreement made in the State of Ohio and governed by and construed according to the laws of that State.” (Compl. App. 5, § 9 .) When a contract is formed in a state outside the forum state, is governed by the law of a foreign state, and has its “hub of activities” outside the forum state, that contract and communications relating to it cannot be the basis for exercising specific jurisdiction in Texas over a nonresident party to the contract. See McFadin, 587 F.3d at 760-61; see also Freudensprung, 379 F.3d at 344 (contracting with and initiating long-term business relationship with Texas-based company, engaging in communications with Texas-based company to form and perform contract, and wiring payments to company in Texas did not create basis for specific jurisdiction, particularly where contract applied foreign law and contemplated performance outside Texas); Hydrokinetics, Inc. v. Alaska Mech., Inc., 700 F.2d 1026, 1028-29 (5th Cir. 1983) (despite “extensive communications” between resident and nonresident before signing contract, officers of nonresident traveling to Texas to “close” the deal, and the contract’s formal creation in Texas, nonresident had not made sufficient “minimal contacts” with Texas where the contract had an Alaska choice-of-law provision, delivery under the contract was to take place outside of Texas, and no performance by nonresident besides payment was to take place within Texas). The Complaint’s singular additional allegation that unspecified FirstEnergy employees “traveled to the Dallas-Fort Worth area to discuss issues related to the contracts with BNSF employees” (Compl. ¶ 5) cannot elevate the alleged contacts with Texas to the “minimum contacts” required to sustain jurisdiction over FirstEnergy. Indeed, this conclusory allegation Case 4:17-cv-00229-O Document 35 Filed 04/27/17 Page 15 of 27 PageID 161 06254-00001/9230003.1 11 fails to specify when and how many alleged meetings occurred in Texas, and even that these discussions pertained at all to the BNSF Supplement at issue. It should therefore not be considered in support of specific jurisdiction, which requires minimum contacts specific to the claims at issue. Even if the Court were to consider this allegation, however, it too is insufficient to confer a jurisdictional basis here. See Hydrokinetics, 700 F.2d at 1027 n.1 & 1028-29 (nonresident company’s officers’ two visits to Texas to “close” contract deal and discuss issues related to performance, together with nonresident’s agreement to purchase goods manufactured in Texas and send payment for these goods to Texas, communication with Texas resident regarding contract, and formation of the contract in Texas, did not create jurisdiction over nonresident where nonresident did not regularly do business in Texas and where contract specified for delivery of goods outside of Texas and for application of non-Texas law); Moncrief, 481 F.3d at 313 (employee of nonresident company’s visit to Texas in connection with contract with resident insufficient to create specific jurisdiction over nonresident); Sagebrush Sols., LLC v. Health Mgmt. Sys. Inc., No. 3:11-CV-00182-F, 2011 WL 13128837, at *7 (N.D. Tex. Apr. 29, 2011) (“The fact that [a nonresident’s employee] visited Texas after the contract had been entered into and coordination between the parties had begun also does not affect this determination that specific jurisdiction over [the nonresident] does not exist.”). As the Complaint makes clear, “[t]he little contact with Texas came only from the fortuity of the plaintiffs' residence there,” McFadin, 587 F.3d at 761, and “the fact that [FirstEnergy] contracted with Texas-based [BNSF], initiated and contemplated a long-term business relationship with [BNSF], communicated with [BNSF] concerning the development and execution of the contract, and [may have been obligated to] wire[] money to [BNSF] in Texas do not indicate that [FirstEnergy] intended to avail itself of the privilege of doing business in Case 4:17-cv-00229-O Document 35 Filed 04/27/17 Page 16 of 27 PageID 162 06254-00001/9230003.1 12 Texas,” Freudensprung, 379 F.3d at 345 (emphasis added). The Complaint must therefore be dismissed. The Complaint’s failure to allege the minimum contacts required for specific jurisdiction is dispositive. But even if this Court were to delve into a fairness analysis, it would find that exercising jurisdiction here would not be “fair and reasonable” and would offend “traditional notions of fair play and substantial justice.” McFadin, 587 F.3d at 759; Johnston, 523 F.3d at 609. Appropriate considerations for this inquiry include “(1) the burden on the defendant; (2) the interest of the forum state in adjudicating the dispute; (3) the plaintiff's interest in obtaining convenient and effective relief; and (4) the shared interest of the several states.” Johnston, 523 F.3d at 615; see also McFadin, 587 F.3d at 760. Here, FirstEnergy and its potential witnesses are located in Ohio, not Texas-as are the power plants at issue. (Compl. ¶¶ 7-8; Mellody Decl. ¶ 23.) Further, the parties agreed that the BNSF Supplement would be deemed an agreement “made in the State of Ohio” and governed by Ohio law. (Compl. App. 5, § 9.) Ohio has a far greater interest in determining the rights and obligations under Ohio law of parties to a contract made in Ohio than does Texas. Finally, BNSF’s interest in obtaining convenient and effective relief would not be the least bit harmed by dismissing this action, as BNSF plainly could seek judicial relief in Ohio. Thus, even in the event this Court finds minimum contacts between FirstEnergy and Texas, BNSF’s ploy to hale FirstEnergy into court in Texas is neither fair nor reasonable, and violates “traditional notions of fair play and substantial justice.” Johnston, 523 F.3d at 609. II. In The Alternative, This Action Should Be Transferred To The Northern District Of Ohio The Complaint alleges that venue in the Northern District of Texas is proper under 28 U.S.C. § 1391(b)(2), which authorizes venue in “a judicial district in which a substantial part of Case 4:17-cv-00229-O Document 35 Filed 04/27/17 Page 17 of 27 PageID 163 06254-00001/9230003.1 13 the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated.” Yet it is clear from the face of the Complaint and its appendices that no “substantial part” of the events giving rise to BNSF’s alleged claims occurred in this district. Accordingly, to the extent that this action is not dismissed outright for lack of personal jurisdiction, see supra Section I, it should at a minimum be transferred to the Northern District of Ohio, the true epicenter of this dispute. 28 U.S.C. § 1404(a) permits a district court “[f]or the convenience of parties and witnesses, in the interest of justice,” to transfer a civil action to another district court where the action might have been brought. “In applying the provisions of § 1404(a) . . . the first determination to be made is whether the judicial district to which transfer is sought would have been a district in which the claim could have been filed.” In re Volkswagen AG, 371 F.3d 201, 203 (5th Cir. 2004) (“Volkswagen I”). Here, there is no question this action could have been filed in the Northern District of Ohio. FirstEnergy is an Ohio limited liability company headquartered in Akron, where a federal courthouse of the Northern District of Ohio sits. (Compl. ¶ 7.) “With respect to a corporation, the place of incorporation and principal place of business are ‘paradig[m] . . . bases for general jurisdiction.’” Daimler, 134 S. Ct. at 760 (quoting Goodyear, 564 U.S. at 924). At bottom, section 1404(a) is intended to remedy the precise situation here-where a plaintiff files a complaint in a district that has no meaningful connection to the litigation. “The underlying premise of § 1404(a) is that courts should prevent plaintiffs from abusing their privilege under § 1391 by subjecting defendants to venues that are inconvenient under the terms of § 1404(a).” In re Volkswagen of Am., Inc., 545 F.3d 304, 313 (5th Cir. 2008) (“Volkswagen II”). Transfer under 28 U.S.C. § 1404(a) is at the court’s discretion, considering “all relevant Case 4:17-cv-00229-O Document 35 Filed 04/27/17 Page 18 of 27 PageID 164 06254-00001/9230003.1 14 factors” to determine whether or not “on balance the litigation would more conveniently proceed and the interests of justice be better served by transfer to a different forum,” Kirkpatrick v. ARM WNY LLC, No. 3:15-CV-1818-L, 2015 WL 3539604, at *2 (N.D. Tex. June 5, 2015) (citation and quotation marks omitted), through a balancing of factors affecting “private” and “public” interests.2 These factors unquestionably dictate in favor of a transfer to the Northern District of Ohio. FirstEnergy’s employees, its plants that are the subject of the contract, and its documents and records relating to the contract’s formation and performance and to the plants (whose reasons for closure or reduced operations will be a central issue in this action) are all located in Ohio. (Compl. ¶¶ 7, 8; Compl. App. 3 §§ 2, 3; Mellody Decl. ¶¶ 5, 17, 22-23.) Indeed, BSNF’s allegation that FirstEnergy “breached” the contract centers entirely around the inability of the Ohio plants to continue consuming coal. The sources of proof in this action are far easier accessed in Ohio than in the Northern District of Texas, and transferring this action to Ohio would significantly decrease the travel burden on important witnesses while allowing the court (or jury) the ability to inspect the facilities, if necessary. The states’ relative “public interests” also weigh decisively in favor of transfer where, as here, the contract is “deemed to be an agreement made in the State of Ohio and governed by and construed according to the laws of that State.” (Compl. App. 5, § 9.) The district court in the Northern District of Ohio surely sees 2 The “private interest” factors are: “(1) the relative ease of access to sources of proof; (2) the availability of compulsory process to secure the attendance of witnesses; (3) the cost of attendance for willing witnesses; and (4) all other practical problems that make trial of a case easy, expeditious and inexpensive.” See Volkswagen II, 545 F.3d at 315 (citations and quotation marks omitted). The “public interest” factors are: “(1) the administrative difficulties flowing from court congestion; (2) the local interest in having localized interests decided at home; (3) the familiarity of the forum with the law that will govern the case; and (4) the avoidance of unnecessary problems of conflict of laws or in the application of foreign law.” Id. (citation and quotation marks omitted). Case 4:17-cv-00229-O Document 35 Filed 04/27/17 Page 19 of 27 PageID 165 06254-00001/9230003.1 15 more cases applying Ohio substantive law on the central claims and defenses than courts in this district,3 and Ohio clearly has the greater interest in evaluating the enforcement of an Ohio contract under Ohio law and in the outcome of an action where the allegedly breaching conduct by an Ohio citizen of an Ohio contract took place in Ohio.4 Indeed, public policy issues surrounding the regulation and supply of electricity generation to the Cleveland, Ohio area by FirstEnergy’s Ohio plants permeate the entirety of this case, as do concerns surrounding the competitiveness and closure of the subject plants in the Ohio electricity market. These are concerns unique to Ohio that Ohio courts have a paramount interest in resolving. See, e.g., W. Watersheds Project v. Pool, 942 F. Supp. 2d 93, 102 (D.D.C. 2013) (“Courts prefer to resolve cases in the forum where people ‘whose rights and interests are in fact most vitally affected by this suit.’”) (quoting Adams v. Bell, 711 F.2d 161, 167 n.34 (D.C. Cir. 1983)); Sierra Club v. Johnson, 623 F. Supp. 2d 31, 39 (D.D.C. 2009) (transferring case involving the operation of a coal-fired power plant to the Eastern District of Kentucky where the plant was located and where the “public interest would be promoted” by deciding the case locally); Berry v. Pilgrim's Pride Corp., No. 2:16-CV-409-JRG, 2016 WL 6092701, at *4 (E.D. Tex. Oct. 19, 2016) (“local interest” factor “weigh[ed] heavily in favor of transfer” where defendant maintained a plant in 3 Cf. TSI USA, LLC v. Uber Techs., Inc., No. 3:16-CV-2177-L, 2017 WL 106835, at *10 (N.D. Tex. Jan. 11, 2017) (“Judges in the Northern District of California are more familiar with applying California law and may be able to resolve the dispute more quickly even assuming all other things were equal.”); Kamm v. Nw. Mut. Life Ins. Co., No. 3:13-CV-0710-B, 2013 WL 5575177, at *8 (N.D. Tex. Oct. 10, 2013) (“[T]his case requires application of Louisiana state law and . . . a Louisiana federal judge would be more familiar with any issues or ‘peculiarities’ that might arise thereunder. Consequently, the Court finds this factor supports transfer.”). 4 See LNV Corp. v. Branch Banking & Trust Co., No. 3:12-CV-3803-L BF, 2013 WL 1686462, at *6 (N.D. Tex. Mar. 12, 2013), report and recommendation adopted, No. 3:12-CV- 3803-L BF, 2013 WL 1694421 (N.D. Tex. Apr. 18, 2013) (recommending transfer of venue to the Northern District of Florida where “[t]he operative facts underlying this lawsuit occurred in Florida, and the documents and material witnesses are located in Florida”). Case 4:17-cv-00229-O Document 35 Filed 04/27/17 Page 20 of 27 PageID 166 06254-00001/9230003.1 16 the division to which he requested transfer); Essex Crane Rental Corp. v. Vic Kirsch Const. Co., Inc., 486 F. Supp. 529, 540 (S.D.N.Y. 1980) (discussing “the benefit to the public and courts in having localized controversies decided in ‘home’ forums”). By contrast, the private interest of the Northern District of Texas in expeditious resolution of cases and conservation of judicial resources is not well served by clogging the Court’s already-active docket with an action that belongs in a sister court. See Carolei v. Texas Mesquite Connection, No. 3:11-CV-2811-L BH, 2012 WL 3599460, at *2 (N.D. Tex. Aug. 6, 2012), report and recommendation adopted, No. 3:11-CV-281 1-L BH, 2012 WL 3613971 (N.D. Tex. Aug. 22, 2012) (“[I]t is not a prudent use of judicial resources for a court to resolve a dispute that has no connection to this forum.”) (quoting In re Marquette Transp. Co. Gulf-Inland, LLC, No. CIV.A. H-12-0623, 2012 WL 2375981, at *2 (S.D. Tex. June 21, 2012)). III. In The Alternative, At A Minimum, This Action Should Be Stayed Pending The Arbitration Of Related Claims In the event that this action is not dismissed outright or transferred to the Northern District of Ohio, this Court should at a minimum stay this action pending resolution of the underlying arbitrations of the Plant Agreements. This Court has “broad discretion to stay proceedings as incident to its power to control its own docket” in the interests of judicial efficiency and to minimize the effort and expense of litigants. Citgo Petroleum Corp. v. M/T Bow Fighter, No. CIV.A. H-07-2950, 2009 WL 960080, at *6 (S.D. Tex. Apr. 7, 2009).5 Courts routinely exercise this discretion to stay federal cases in circumstances like this, where there 5 Accord Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 20 n.23 (1983) (“In some cases, of course, it will be advisable to stay litigation . . . pending the outcome of the arbitration. This decision is one left to the district court . . . as a matter of its discretion to control its docket.”); Complaint of Hornbeck Offshore (1984) Corp., 981 F.2d 752, 755 (5th Cir. 1993) (district courts have “discretion to stay . . . claims . . . pending outcome of the arbitration simply as a means of controlling its docket”). Case 4:17-cv-00229-O Document 35 Filed 04/27/17 Page 21 of 27 PageID 167 06254-00001/9230003.1 17 exists an already pending “arbitration in which issues involved in the case may be determined,” and “the Fifth Circuit has affirmed stays on nonarbitrable claims when related arbitrable claims needed to be resolved.” Id. (citations and quotation marks omitted); see also Harvey v. Joyce, 199 F.3d 790, 795 (5th Cir. 2000) (staying nonarbitrable claims that were “based on the same operative facts and are inherently inseparable” from claims pending in arbitration); Sibley v. Tandy Corp., 543 F.2d 540, 543 (5th Cir. 1976) (staying nonarbitrable federal securities claims pending the outcome of arbitrable contractual issues where the resolution of the former was “dependent” on the outcome of the latter). Under the very terms of the BNSF Supplement at issue in this action, the parties cannot litigate, and this Court cannot adjudicate, BNSF’s claims in this case without waiting for the resolution of the ongoing arbitrations of the Plant Agreements.6 The parties are currently engaged in arbitrations under each Plant Agreement to determine whether and in what amount FirstEnergy owes liquidated damages for shortfall tons under those agreements. (Compl. ¶ 18.) The BNSF Supplement states that FirstEnergy “will not be responsible for payment of LD Charges as specified herein on the same ton twice in the event [FirstEnergy] has paid a shortfall ton under a Plant Agreement that would have otherwise been subject to LD charges herein.” (Compl. App. 4, § 6.) Thus, litigating BNSF’s claims for liquidated damages under the BNSF Supplement in this case first requires resolution of the arbitrations of the Plant Agreements to determine whether FirstEnergy must pay liquidated damages on shortfall tons under the Plant Agreements and, if so, in what amount. For example, if the pending arbitrations were to determine that FirstEnergy owed liquidated damages for the full amount of shortfall tons under 6 In each Plant Agreement there is a binding arbitration clause. See Compl. App. 14-15, § 31; Compl. App. 26-27, § 32. Case 4:17-cv-00229-O Document 35 Filed 04/27/17 Page 22 of 27 PageID 168 06254-00001/9230003.1 18 the Plant Agreements, then FirstEnergy would not be liable for any liquidated damages under the BNSF Supplement and this action would be moot. BNSF acknowledges this reality, by seeking liquidated damages only “to the extent FirstEnergy has not already paid for those shortfall tons under the Plant Agreements.” (Compl. ¶ 32.) Courts routinely exercise their discretion to stay litigation where, as here, the underlying arbitration would resolve or moot many or all of the issues in dispute. See, e.g., Citgo, 2009 WL 960080, at *6 (staying action pending resolution of related arbitration: “because the same facts and events give rise to the claims, many of the issues involved in this case may be resolved in arbitration”); Hartford Fin. Sys., Inc. v. Florida Software Servs., Inc., 550 F. Supp. 1079, 1085 (D. Maine 1982) (staying litigation where claims could “be mooted, in whole or in part, by the arbitration award”). There is simply no point to be served in litigating the current action concurrently with the underlying arbitrations, since it is impossible to assess whether any liquidated damages may be owed under the BNSF Supplement without first knowing the extent to which FirstEnergy is liable for liquidated damages under the Plant Agreements. It would be a waste of judicial time and resources, and of the parties’ efforts and expense, to litigate several hypothetical outcomes in this action when resolution of the pending arbitrations may moot this action either in part or in whole-an outcome that cannot be known until the conclusion of the arbitrations. See Citgo, 2009 WL 960080, at *7 (holding in favor of “the necessity of a stay to promote judicial efficiency and prevent inconsistent results.”); Sibley, 543 F.2d at 544 (staying nonarbitrable claims pending outcome of arbitrable claims where “considerations of judicial economy required that Parker's contractual claims be submitted to arbitration and that the federal securities law claims be stayed pending the outcome of those proceedings.”); U.S. ex rel. Milestone Tarant, LLC v. Fed. Ins. Co., 672 F. Supp. 2d 92, 102 (D.D.C. 2009) (“It seems grossly inefficient to Case 4:17-cv-00229-O Document 35 Filed 04/27/17 Page 23 of 27 PageID 169 06254-00001/9230003.1 19 have the parties arbitrate and litigate at the same time or bear unnecessary expense and the risk of inconsistent results.”) (citation and quotation marks omitted). The Court can also rest assured that any stay would be of a reasonable duration. The conclusion of the damages phase of the arbitration concerning the CSX Contract is scheduled to take place in May 2017 or soon thereafter, and the hearing on the merits in the arbitration concerning the NS Contract is likely to occur by late 2017, with a decision to be issued soon thereafter. Given that BNSF itself alleges that “[b]y 2012, . . . FirstEnergy announced the retirement of all but one of the Plants . . . [and] [s]oon thereafter, FirstEnergy attempted to walk away from its obligations under the Plant Agreements” (Compl. ¶ 17), and yet waited five years until March 2017 to bring this action, demonstrates that any brief additional stay of this action will not prejudice BNSF’s claims, should any remain following the resolution of the underlying arbitrations. Accordingly, this Court should exercise its discretion to stay this proceeding pending resolution of the underlying arbitrations. CONCLUSION For the foregoing reasons, FirstEnergy respectfully requests that this Court dismiss this action with prejudice, or in the alternative, transfer it to the Northern District of Ohio, or, in the alternative, stay this action pending the resolution of the related arbitrations. Case 4:17-cv-00229-O Document 35 Filed 04/27/17 Page 24 of 27 PageID 170 06254-00001/9230003.1 20 DATED: April 27, 2017 Respectfully submitted, /s/ Michael B. Carlinsky Michael B. Carlinsky (admitted pro hac vice) New York Bar No. 2319440 michaelcarlinsky@quinnemanuel.com Richard I. Werder, Jr. (admitted pro hac vice) New York Bar No. 4161600 rickwerder@quinnemanuel.com Maaren A. Shah (admitted pro hac vice) New York Bar No. 4621611 maarenshah@quinnemanuel.com Rollo C. Baker (admitted pro hac vice) New York Bar No. 4946257 rollobaker@quinnemanuel.com QUINN EMANUEL URQUHART & SULLIVAN, LLP 51 Madison Avenue, 22nd Floor New York, New York 10029 Tel: (212) 849-7000 Fax: (212) 849-7100 Marty L. Brimmage Jr. Texas Bar No. 00793386 mbrimmage@akingump.com Laura P. Warrick Texas Bar No. 24079546 lwarrick@akingump.com AKIN GUMP STRAUSS HAUER & FELD LLP 1700 Pacific Avenue, Suite 4100 Dallas, Texas 75201 Telephone: (214) 969-2800 Facsimile: (214) 969-4343 ATTORNEYS FOR DEFENDANT FIRSTENERGY GENERATION, LLC Case 4:17-cv-00229-O Document 35 Filed 04/27/17 Page 25 of 27 PageID 171 06254-00001/9230003.1 21 CERTIFICATE OF CONFERENCE Pursuant to Local Rule 7.1, I hereby certify that on April 25, 2017, counsel for Defendant (Maaren A. Shah) conferred with counsel for Plaintiff (Bridget K. O’Connor) by telephone, regarding Defendant’s intended motion to transfer venue or stay the litigation pending resolution of the related and pending arbitrations. Counsel for Plaintiff indicated that Plaintiff opposes Defendant’s motion. /s/ Marty L. Brimmage Jr. Marty L. Brimmage, Jr. Case 4:17-cv-00229-O Document 35 Filed 04/27/17 Page 26 of 27 PageID 172 06254-00001/9230003.1 22 CERTIFICATE OF SERVICE Pursuant to Local Rule 5.1(d), I hereby certify that on April 27, 2017, I served Defendant FirstEnergy’s Memorandum of Law in Support of Defendant FirstEnergy’s Motion To Dismiss The Complaint, Or, In The Alternative, To Transfer Venue, Or, In The Alternative, To Stay Pending Arbitration on Plaintiff via the Court’s Electronic Case Filing system. /s/ Marty L. Brimmage Jr. Marty L. Brimmage, Jr. Case 4:17-cv-00229-O Document 35 Filed 04/27/17 Page 27 of 27 PageID 173