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CTI Systems SA v. Herr Industrial, Inc.

United States District Court, E.D. Pennsylvania

March 11, 2015

CTI SYSTEMS SA, Plaintiff,
v.
HERR INDUSTRIAL, INC., Defendant.

MEMORANDUM

LAWRENCE F. STENGEL, District Judge.

This dispute spans two states and two continents. CTI Systems is a Luxembourg corporation. Herr Industrial is a Pennsylvania corporation. CTI has asked this court to recognize and enforce a default judgment from a Luxembourg court against Herr under the Pennsylvania Uniform Foreign Money Judgment Recognition Act. The Luxembourg judgment pertains to a breach of a construction contract between CTI and Herr. The construction project is in Kansas. Prior to this suit being filed, Herr filed a federal action in the U.S. District Court of Kansas. Herr moves to dismiss the case without prejudice or, in the alternative, transfer venue under the "first-filed rule." CTI claims this action is distinct from the Kansas action. For the reasons stated below, I will dismiss this case without prejudice.

I. BACKGROUND[1]

a. Facts Alleged in This Action

On December 13, 2011, CTI entered into a contract with Herr regarding a painting installation in Hesston, Kansas. Herr was to provide supplies and labor. CTI was to pay Herr $5, 200, 000.00. The contract included a choice of law provision stating that the laws of Luxembourg applied and that the parties agreed to submit to the exclusive jurisdiction of Luxembourg.

On July 6, 2012, CTI and Herr signed an Addendum to the contract because Herr was having difficulty paying its subcontractors. CTI agreed to pay Herr's subcontractors directly under the Addendum; however, these payments would exclude the 7% management fee owed Herr for work it had done to manage those subcontractors. Herr sent a number of "purchase orders" to CTI for direct payment. Herr signed a "revised purchase order 56258PPR" of December 14, 2012, which stated that CTI paid out $2, 738, 395.99 on behalf of Herr. These payments reduced the contract price from $5, 200, 000.00 to $2, 461, 604.01. On December 21, 2012, CTI sent Herr another "revised purchase order 56258PPR" which allegedly corrected the amount of payments. The December 21, 2012 purchase order showed $2, 819, 483.71 in payments, reducing the contract price to $2, 380, 516.29. Herr did not countersign the December 21, 2012 purchase order. On January 11, 2013, Herr signed a "Contractor's affidavit, partial waiver and release of lien upon progress" stating that the total contract price owed Herr was $2, 380, 516.29. CTI allegedly paid Herr $2, 513, 582.55.

On February 13, 2013, Herr allegedly "walked off the job" before completing its contractual work. Herr allegedly did not pay other subcontractors. CTI paid those contractors an additional $321, 419.90. Herr then submitted three invoices to CTI, totaling $73, 049.21. One invoice for $11, 826.71 corresponded to a debt owed Herr's subcontractor which CTI already had paid. CTI refused to pay Herr's last three invoices, claiming that Herr had breached their agreement. CTI alleged that it had overpaid Herr by $393, 263.66.[2]

On July 29, 2013, Herr filed a lien in Kansas on the property on which the construction project was located.[3] This lien related to moneys owed by CTI for labor, equipment, material, and supplies in the amount of $80, 639.21. On December 19, 2013, CTI posted bond in the amount of $121, 000.00 to clear the Kansas property of the lien. That bond serves as replacement collateral for the lien in the event a court enters an award connected to the lien.

On April 21, 2014, CTI brought a claim for overpayment in the District Court of Luxembourg. Herr was notified of this suit via registered mail, service of process, and an email to Herr's attorney. Herr was expected to appear before the Luxembourg Court on June 6, 2014. Herr did not appear. A judgment in favor of CTI was entered on July 11, 2014. The Luxembourg Court ordered Herr to pay $393, 293.66 plus interest and costs.[4] On September 2, 2014, Herr was served a copy of that judgment. Herr did not appeal the decision. The appeal deadline expired.

On November 24, 2014, CTI filed suit in this court, requesting that the Luxembourg judgment be recognized and enforced under Pennsylvania's Uniform Foreign Money Judgment Recognition Act (UFMJRA), 42 P.S. §§22001-22009.[5] In response, Herr moved to dismiss or transfer venue based on the first-filed rule.[6]

b. Kansas Federal Action[7]

On July 28, 2014, Herr had filed a breach of contract diversity lawsuit against CTI in the U.S. District Court for the District of Kansas (Wichita). See Herr Industrial, Inc. v. CTI Systems, SA, et al. (14-cv-1232 D.C. Kan.). AGCO Corporation, the owner of the construction project's property, and Old Republic Surety Company, the company which issued CTI's bond for the property lien, were also named as defendants.[8] The Kansas complaint explained that CTI contracted with AGCO to build, supply, and install a paint workshop on AGCO's property in Hesston, Kansas. CTI then contracted with Herr to provide supplies and labor related to this project.[9] Herr alleges that the last work required on the contracted was completed on February 28, 2013. Herr claims it was not paid $80, 639.21 under the contract.

On May 29, 2013, Herr filed a notice of extension for filing a mechanic's lien with the Kansas state court. This notice was sent to CTI and AGCO. On July 29, 2013, Herr filed a lien on the project's property for the $80, 639.21 it was allegedly owed under the contract. CTI posted a bond pursuant to Kansas law K.S.A. §60-1110 through Old Republic Surety Company in order to clear the lien.[10]

On July 28, 2014, Herr filed an action in the District Court of Kansas (Wichita) against CTI, AGCO, and Old Republic Surety Company. Herr's original complaint alleged counts for breach of contract, quantum meruit/unjust enrichment, suit on bond, lien foreclosure, and a violation of the Kansas Fairness in Private Construction Contract Act (KFPCCA), K.S.A. §16-1806. The KFPCCA requires all payment disputes concerning construction ...


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