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Sprague Energy Corp. v. Union Drawn Steel II

March 12, 2008

SPRAGUE ENERGY CORP., A NEW HAMPSHIRE CORPORATION, PLAINTIFF,
v.
UNION DRAWN STEEL II, LIMITED, A CANADIAN CORPORATION, AND BVHT, INC., A PENNSYLVANIA CORPORATION, DEFENDANTS.



The opinion of the court was delivered by: Lenihan, M. J.

OPINION AND ORDER

Doc. No. 6

Currently before the court for disposition is Defendant's Motion to Dismiss Plaintiff's Complaint pursuant to Fed.R.Civ.P. 12(b)(2) (Doc. No. 6) in this diversity action alleging violations of state common law claims. Plaintiff has alleged claims for breach of contract arising out of the sale of natural gas to Defendant BVHT. The Plaintiff also seeks to hold Union Drawn liable on the basis that BVHT is a wholly-owned subsidiary of Union Drawn. Specifically, Plaintiff contends that Defendant Union Drawn is liable for Defendant BVHT's failure to pay for natural gas supplied by Plaintiff. Plaintiff also avers that Union Drawn induced the Plaintiff to believe Union Drawn would provide payment for the natural gas in the event BVHT became delinquent in its payments. This Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1332.

For the reasons set forth below, the Court finds that Plaintiff has alleged insufficient facts to support the finding of personal jurisdiction over Defendant Union Drawn to withstand its motion to dismiss. However, if after conducting discovery Plaintiff believes that sufficient evidence has been produced to support the exercise of personal jurisdiction over Defendant Union Drawn, Plaintiff may file a Motion for Reconsideration of the Order below within ten days of the close of discovery.

I. FACTS

Sprague Energy Corporation ("Sprague" or "Plaintiff"), incorporated in the State of Delaware and having its principal place of business in the State of New Hampshire, was incorporated for the purpose of distributing and selling natural gas through local distribution companies. (Compl. ¶¶ 1, 5.) The defendants are Union Drawn Steel II, Limited ("Union Drawn" or "Defendant") and BVHT, Inc. ("BVHT"). Union Drawn is a Canadian corporation involved in the steel industry with its principal office and place of business in Hamilton, Ontario. (Compl. ¶ 2.)

BVHT is a Pennsylvania corporation that was incorporated for the purpose of producing specialty steel products and has its principal place of business in Monaca, Pennsylvania. BVHT is a wholly-owned subsidiary of Union Drawn. (Compl. ¶ 3.)

Beginning in May 2004, Sprague began to supply natural gas to BVHT's facility in Monaca, Pennsylvania. The relationship allegedly arose when Union Drawn placed a verbal order with Sprague for the delivery of natural gas to BVHT. (Compl. ¶ 8.) Before supplying any gas, Sprague determined that BVHT's creditworthiness was insufficient to allow the purchase of gas on credit. Sprague stipulated that Union Drawn would have to secure the sale of any natural gas provided to BVHT. As a result, Union Drawn provided the Plaintiff with a copy of a consolidated audit which represented financial information for both corporations. (Aff. of Brian Weego (hereinafter "Weego Aff.") at ¶¶ 3, 4, 9.) After verifying the financial information, Sprague issued a written confirmation in response to Union Drawn's request. While the confirmation outlined the terms and conditions of the purchase of natural gas, the parties did not enter into a written contract. Sprague claims to have faxed copies of the confirmation to Union Drawn; however, it appears these confirmations were actually faxed to the BVHT facility in Pennsylvania. (Compl. ¶ 9.) After this initial order, twenty (20) other verbal orders were communicated to Sprague and a similar confirmation followed each order. (Compl. ¶ 10.)

After receiving the initial order, Sprague began to supply natural gas to BVHT in June 2004 and continued to do so until May 2006. (Compl. ¶ 12.) BVHT became delinquent with its payment for the gas ordered for the months of November 2005 and January 2006 through April 2006. (Compl. ¶ 14.) After repeated demands for payment, Sprague terminated service to BVHT effective May 1, 2006. The continued lack of payment prompted Sprague to file suit for breach of contract against BVHT and Union Drawn in July 2007 claiming damages in the amount of $297,363.60, exclusive of interest and costs. (Compl. ¶¶ 15, 16.)

While Defendant BVHT acknowledges that this Court has personal jurisdiction over it, Defendant Union Drawn filed a motion to dismiss for lack of personal jurisdiction pursuant to Fed.R.Civ.P. 12(b)(2), claiming that neither specific nor general jurisdiction exists. Union Drawn asserts several arguments in support of its motion to dismiss regarding specific jurisdiction. First, Union Drawn claims that at no time was it a party to a contract to supply natural gas to BVHT. (Def. Brief in Support of Motion to Dismiss, at 2.) Further, Union Drawn claims that it used none of the gas supplied to BVHT. (Aff. of Michael Pitterich (hereinafter "Pitterich Aff.") at ¶ 5.) Union Drawn also asserts that BVHT is a separate corporation and the Monaca, Pennsylvania facility is owned and operated by BVHT and that Union Drawn was neither an agent of BVHT nor did it have the authority to act as an agent for BVHT. (Id. at ¶ 8.) Finally, Union Drawn indicates that the confirmations for gas orders were faxed to BVHT in Pennsylvania and not to Union Drawn in Ontario. (Id. at 3.)

The Plaintiff alleges that Union Drawn engaged in extensive contracting and that its course of dealings in Pennsylvania are sufficient to give rise to personal jurisdiction over the Defendant. However, the Defendant claims that its only contacts with the Commonwealth of Pennsylvania consist of several isolated sales of steel over the past ten years. (Pitterich Aff. at ¶ 4.) Union Drawn also claims that it engages in no business in the Commonwealth, it has no customers in the Commonwealth, it is not a party to any contracts in the Commonwealth, it does not actively solicit business in the Commonwealth, it does not own real property in the Commonwealth, it does not lease or otherwise maintain any offices in the Commonwealth, it does not have any employees or agents who work in the Commonwealth, and it is not registered to do business in the Commonwealth. Id.

II. STANDARD OF REVIEW

In deciding a motion to dismiss under Fed.R.Civ.P. 12(b)(2) for lack of personal jurisdiction, the court must accept as true all allegations contained in the complaint. William Rosenstein & Sons, Co. v. BBI Produce, Inc., 123 F.Supp.2d 268, 269 (M.D.Pa. 2000) (citing Dayhoff, Inc. v. H.J. Heinz Co., 86 F.3d 1287, 1302 (3d Cir. 1996)). However, in response to a 12(b)(2) motion, the plaintiff bears the burden of proving, by a preponderance of the evidence, facts sufficient to establish personal jurisdiction over the defendants, by producing affidavits or other competent evidence. Id. at 269-70(citing Dayhoff, supra; North Penn Gas Co. v. Corning Natural Gas Corp., 897 F.2d 687, 689 (3d Cir. 1990) (citations omitted)); Time Share Vacation Club v. Atlantic Resorts, Ltd., 735 F.2d 61, 65 (3d Cir. 1984) (citation omitted). Thus, because a 12(b)(2) motion requires ...


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