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Bootay v. KBR

September 9, 2010


The opinion of the court was delivered by: Terrence F. McVerry United States District Court Judge


Pending before the Court are the MOTION OF KBR, INC., OVERSEAS ADMINISTRATION SERVICES, LTD., AND SERVICE EMPLOYEES INTERNATIONAL, INC. TO DISMISS AMENDED COMPLAINT FOR LACK OF PERSONAL JURISDICTION (Document No. 33) and the MOTION OF KELLOGG BROWN & ROOT SERVICES, INC. AND KBR TECHNICAL SERVICES, INC. TO DISMISS PLAINTIFF'S AMENDED COMPLAINT UNDER FEDERAL RULE OF CIVIL PROCEDURE 12(b)(6) (Document No. 35). Plaintiff has filed responses in opposition to the motions and they have been thoroughly briefed by all parties (Document Nos. 34, 36, 40, 42, 44, 45, 48, 49, 53, 56, 57). In addition, both parties have submitted numerous exhibits for consideration by the Court. On July 20, 2010, the Court heard oral argument on the motions and provided both parties with the opportunity to further supplement the record. The motions are now ripe for disposition.

Factual Background

Plaintiff was an Army sergeant on active military duty during the Iraq war and was assigned by the Army to perform a mission at the Qarmat Ali water treatment facility in Iraq for four days in April 2003. This case was filed in 2009 and arises out of the serious health conditions suffered by Plaintiff, allegedly due to his exposure to sodium dichromate during the days he spent at Qarmat Ali. The sodium dichromate was apparently spread by members of the Iraqi Baath party in an effort to sabotage the facility. Sodium dichromate is quickly uptaken and then disposed of by the human body, such that tests are able to confirm the presence of the substance only if they are administered within weeks of the exposure. Amended Complaint ¶ 72. Bootay was in good health when he enlisted in the Army on September 12, 2001 and he received an honorable discharge in September 2003. Subsequently, Bootay has experienced severe health symptoms that have resulted in his use of a walker and disability at the age of thirty-one. Bootay's theory of the case, in essence, is that Defendants knew or should have known about the danger posed to him by exposure to sodium dichromate such that they had a duty to warn him and to protect him from that danger. Instead, Bootay alleges that Defendants concealed, misrepresented, or delayed in reporting the facts relating to the sodium dichromate exposure at Qarmat Ali, which caused Bootay to lose the opportunity to be tested to confirm whether or not he had been exposed to sodium dichromate. Sergeant Bootay has rendered patriotic service to the nation and is a sympathetic Plaintiff.

The five Defendants are related corporate entities (collectively "KBR"). Kellogg Brown & Root Services, Inc. ("KBRSI"), the operating corporation, received a contract from the United States Army under the Logistics Civil Augmentation Program ("LOGCAP") to provide logistical support services to the military forces operating in Iraq during the Gulf War. One of the projects assigned to KBR was to resume the pumping of water from the Qarmat Ali facility into Iraqi oil fields to help Restore the Iraqi Oil industry (referred to as the "RIO Contract") as quickly as possible after the invasion. KBR, Inc. is the ultimate parent corporation. The remaining Defendants are alleged to be subcontractors and/or affiliates on the project.

On March 26, 2010, the Court issued a Memorandum Opinion and Order which granted the motion to dismiss the original Complaint for lack of personal jurisdiction filed by three of the five named Defendants, KBR, Inc., Overseas Administration Services, Ltd. ("Overseas"), and Service Employees International, Inc. ("SEII") (collectively the "Jurisdictional Movants"). In the same Opinion, the Court granted the motion to dismiss for failure to state a claim filed by the remaining Defendants, KBRSI and KBR Technical Services, Inc. ("KBR Technical"), because the allegations of the original Complaint were insufficient to toll the statute of limitations. The Court permitted Plaintiff to file an Amended Complaint. Plaintiff filed his Amended Complaint on April 9, 2010 and Defendants have renewed their motions to dismiss, alleging lack of personal jurisdiction and failure to state a cognizable claim.

Motion to Dismiss Amended Complaint for Lack of Personal Jurisdiction

Two of the Defendants, KBRSI, the entity that entered into the RIO Contract, and KBR Technical, have conceded that personal jurisdiction is proper in this Court. Each of the Jurisdictional Movants has submitted an affidavit which asserts that it is not registered to do business in Pennsylvania, that it maintains no office, facilities, mailing address or employees in Pennsylvania, and that it does not conduct, direct or solicit any business in Pennsylvania.

In granting the original motion to dismiss for lack of personal jurisdiction, the Court explained that "specific" jurisdiction did not apply because all of the operative events occurred in Iraq. Plaintiff does not challenge this conclusion. The Court also observed Plaintiff had fallen far short of showing the type of "continuous and systematic" contacts with Pennsylvania that would be necessary for the exercise of "general" jurisdiction.

The Amended Complaint, ¶ 10, contains numerous new averments in an effort to establish jurisdiction. The averments largely consist of pure legal conclusions (see, e.g., Amended Complaint ¶ 10(e), (h), (m)), and/or recite the activities of separate and distinct KBR entities.*fn1 For example, Plaintiff alleges in Amended Complaint ¶¶ 10(ee) and 30 that the same individuals serve as common officers and directors of KBRSI, KBR Technical, and KBR Holdings, LLC -- none of which are the Jurisdictional Movants in this case. It is fundamental that each Defendant has a due process right to challenge the Court's exercise of jurisdiction. Plaintiff has the burden to demonstrate that the exercise of jurisdiction over each Defendant is proper. General Electric Co. v. Deutz AG, 270 F.3d 144, 150 (3d Cir. 2001). Plaintiff may not, as a general matter, use the contacts of one Defendant to establish personal jurisdiction over a separate and distinct Defendant. Indeed, Plaintiff does not contest the lack of contacts between each of the Jurisdictional Movants and Pennsylvania. Instead, Plaintiff seeks to establish personal jurisdiction by asking the Court to "pierce the corporate veil" and to consider the Pennsylvania contacts of all of the related KBR entities as alter egos.

After the Jurisdictional Movants renewed their jurisdictional challenge to the Amended Complaint, Plaintiff filed a Motion for Jurisdictional Discovery to explore the veil piercing/alter ego theory. On May 21, 2010, the Court denied Plaintiff's "unspecific request" to take discovery because counsel had failed to: (1) explain what discovery would be done; (2) demonstrate why such discovery would be warranted; and (3) address how such discovery would overcome the jurisdictional flaws identified in the Court's Memorandum Opinion. Plaintiff did not attempt to remedy the deficiencies in the request for discovery that were identified by the Court.

The well-established test for the exercise of general jurisdiction is whether a defendant has "continuous and systematic contacts" within the forum. General Elec. Co. v. Deutz AG, 270 F.3d 144, 150 (3d Cir. 2007); see also Helicopteros Nacionales de Colombia v. Hall, 466 U.S. 408 (1984). The Court incorporates its discussion of the underlying jurisdictional principles set forth in its original Memorandum Opinion and concludes that the Amended Complaint again falls far short of alleging the type of "continuous and systematic contacts" that could support the exercise of "general jurisdiction" over the Jurisdictional Movants.

The separate existence of corporate entities is generally respected for jurisdictional purposes, and the activities of one entity are imputed to another only if Plaintiff establishes that they should be regarded as alter egos. See Eldon v. Brown, 2010 WL 415317 (D.N.J. 2010) (citations omitted). Whether the corporate veil should be pierced such that separate corporations are viewed as alter egos is a question of state law. Star Creations Inv. Co. v. Alan Amron Devp., Inc., 1995 WL 495126 *12 (E.D. Pa. 1995). Pennsylvania law imposes a difficult standard for piercing the corporate veil. In Kiehl v. Action Mfg. Co., 535 A.2d 571, 574 (Pa. 1987) the Pennsylvania Supreme Court emphasized that under Pennsylvania law, "courts will disregard the corporate entity only in limited circumstances when used to defeat public convenience, justify wrong, protect fraud or defend crime."

KBRSI and KBR Technical are separate and distinct corporate entities, neither of which has challenged this Court's exercise of personal jurisdiction. There is no evidence of a disregard of corporate formalities by the various KBR entities. To the contrary, Plaintiff alleges the overuse of corporate formalities, by emphasizing repeatedly that Overseas and SEII were "shell companies" with no business or assets of their own, which were set up in the Cayman Islands to avoid United States taxes.*fn2 The fact that corporate entities file separate tax returns weighs against piercing the corporate veil. See Northeastern Power Co. v. Balcke-Durr, Inc., 49 F.Supp.2d 783, 790(E.D. Pa. 1999). Plaintiff has failed to show sufficient control and/or coordination to apply the alter ego doctrine under the facts and circumstances of this case. The testimony submitted by Plaintiff that was given by KBR employees Mark Lowes and Greg Badgett in other cases misses the point. KBRSI's control over the RIO project is distinguishable from the control over a corporate entity that must be shown to trigger the veil piercing/alter ego doctrine. At most, the Amended Complaint avers that Overseas and SEII recruited workers in Pennsylvania and provided workers that were directed by KBRSI on the RIO Contract. As to KBR, Inc., the only alleged basis for jurisdiction is that it is the ultimate parent corporation, has profited from contracts in Pennsylvania, and proclaims itself to be a "world leader." Plaintiff's showing falls far short of the Pennsylvania standard for piercing the corporate veil. The Jurisdictional Movants are not registered to do business in Pennsylvania, they do not maintain an office, facilities, mailing address or employees in Pennsylvania, they do not conduct, direct or solicit any business in Pennsylvania and they are not the alter egos of other KBR entities. In sum, it is abundantly clear that none of the Jurisdictional Movants have had continuous and systematic contacts with Pennsylvania that would support the exercise of general jurisdiction.

The Court notes that its determination is fully consistent with the results reached in McManaway v. KBR, 695 F. Supp.2d 883 (S.D. Ind. 2010) (dismissing Qarmat Ali claims by Indiana National Guard soldiers against the same KBR Defendants for lack of personal jurisdiction), Bixby v. KBR, 2010 WL 1499455 (D. Or. April 12, 2010) (concluding that there was no "general jurisdiction" over the KBR Defendants but exercising specific jurisdiction), Billiter v. KBR, 2010 WL 2901618 (N.D.W.V. July 21, 2010) (refusing to pierce corporate veil and dismissing Qarmat Ali case for lack of personal jurisdiction); and Gallaher v. KBR, 2010 WL 2901626 (N.D.W.V. July 21, 2010) (same).


Motion to Dismiss for Failure to State a Claim

The Amended Complaint asserts claims for: (1) negligence; (2) breach of contract -third-party beneficiary; (3) fraud/deceit/fraudulent concealment; and (4) intentional infliction of emotional distress. The Defendants (for convenience "KBR") have raised numerous legal challenges to the Amended Complaint. Defendants reiterate their contention that Bootay's claims are barred by the statute of limitations. In addition, Defendants contend that: (1) the negligence and contract claims must fail because Defendants owed no duty to warn an individual soldier, such as Bootay; (2) the fraud/deceit/fraudulent concealment claim must fail because the Complaint does not allege that Defendants made any misrepresentations to Bootay, and the allegations of fraud are not pled with ...

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