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Gasbarre Products Inc. v. Diamond Automotive Group Florida Inc.

United States District Court, W.D. Pennsylvania

March 23, 2017

GASBARRE PRODUCTS, INC., Plaintiff,
v.
DIAMOND AUTOMOTIVE GROUP FLORIDA, INC. and INDUSTRIAL DE AUTOPARTES PARRAL S. DE R. L. DE C.V., Defendants.

          MEMORANDUM OPINION

          KIM R. GIBSON UNITED STATES DISTRICT JUDGE.

         I. Introduction

         This diversity action for breach of contract was filed on February 24, 2016, by Plaintiff Gasbarre Products, Inc., a Pennsylvania corporation. (ECF No. 1.) Gasbarre alleges that it contracted for the sale of, and in fact delivered, two pieces of equipment to the Defendants, Diamond Automotive Group Florida, Inc. ("Diamond Florida") and Industrial de Autopartes Parral S.de R.I. de C.V. ("IAP"), for which Defendants have not yet paid almost $1, 000, 000. (Id.) While it brings relatively run-of-the-mill contract claims, Gasbarre's Complaint quickly hit a wall. Diamond Florida filed a motion to dismiss on the grounds that Gasbarre's contract was only with IAP and that the Court has no personal jurisdiction over Diamond Florida. (ECF No. 8.) At the same time, IAP, a Mexican corporation represented by the same attorney as Diamond Florida, proved quite difficult to serve.[1]

         After approximately eight months, Gasbarre filed a motion for alternative service on IAP, which the Court granted. (ECF No. 32.) Thus, IAP has finally been served and the Court turns to Diamond Florida's motion to dismiss for lack of personal jurisdiction and failure to state a claim. Gasbarre argues that Diamond Florida should not be dismissed from the lawsuit under the theory that Diamond Florida is an alter ego of IAP. For the reasons that follow, Diamond Florida's motion will be granted with respect to the claim for breach of the covenant of good faith and fair dealing and denied in all other respects.

         II. Jurisdiction and Venue

         The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1332(a)(1), as there is complete diversity of citizenship between the parties, and the amount in controversy exceeds $75, 000. Venue is proper under 28 U.S.C. § 1391(b)(2) because a substantial portion of the events giving rise to the claims occurred in the Western District of Pennsylvania.

         III. Factual Background

         A. Gasbarre's Complaint

         The following facts are alleged in the Complaint, which the Court will accept as true for the sole purpose of deciding the pending motion.

         On October 3, 2012, Gasbarre was contacted about supplying a piece of equipment to Diamond Automotive[2] and IAP. (ECF No. 1 ¶ 14.) Negotiations took place over the course of several months. (Id. ¶¶ 15-26.) Gasbarre's sales manager visited Diamond Automotive's office in Chihuahua, Mexico in November of 2012. (Id. ¶ 19.) Employees from either IAP and or Diamond Automotive also visited Gasbarre's office in Dubois, Pennsylvania several times. (Id. ¶ 27.) A proposal review was conducted in Chihuahua, Mexico on February 12, 2013, and attended by several employees of IAP and or Diamond Automotive, including Said Carbajal and Gregorio Carbajal, and Gasbarre's sales manager. (Id. ¶ 28.) After the proposal review, Diamond Automotive requested a revised proposal with IAP listed as the customer instead of Diamond Automotive. (Id. ¶ 29.) Gasbarre's initial proposal dated January 7, 2013, lists “Diamond Automotive Power” as the customer. (ECF No. 28-1 at 5.) On or about March 6, 2013, Gasbarre and IAP entered into a contract for Gasbarre to sell IAP a furnace and a hydraulic press. (ECF No. 1 ¶¶ 30-31.)

         Employees from IAP and or Diamond Automotive traveled to Dubois, Pennsylvania frequently to inspect the progress and to Gasbarre's office in Michigan for training. (Id. ¶¶ 38-43.) All equipment was delivered and installed at the plant in Mexico by June 2014. (Id. ¶ 44.) It is alleged that Defendants accepted delivery and made partial payments totaling $1, 335, 000 but still owe $961, 707.94 for the press and furnace. (Id. ¶¶ 45-46.) Gasbarre alleges that Defendants subsequently made several promises to pay the remainder but never actually did so. (Id. ¶¶ 47-66.) Most of the communications regarding the Defendants' promises to pay came from Said Carbajal. (Id. ¶¶ 49-66.) Based on these allegations, Gasbarre brings claims against IAP and Diamond Florida for breach of contract, unjust enrichment, and breach of the implied covenant of good faith and fair dealing.

         B. Summary of Arguments and Facts from Discovery

         The parties also submitted additional facts and arguments after conducting limited discovery into the issue of personal jurisdiction. The basis for each party's position can be summarized as follows.

         Gasbarre takes the position that Diamond Florida, Diamond Mexico, and IAP are all essentially the same entity and that they have been playing “an elaborate shell game.” (ECF No. 13 at 2.) Under Gasbarre's theory, employees of the combined entity negotiated with Gasbarre as Diamond Automotive, while keeping it vague as to whether it was Diamond Mexico, Diamond Florida, or both, and then at the last minute switched in a third entity, IAP, as the party to the contract. When sued, Diamond Florida claims no involvement and no personal jurisdiction and IAP attempts to dodge service. This “shell game” as Gasbarre calls it, would leave Gasbarre with no remedy to collect the money owed to it for goods shipped in good faith to Mexico.

         Gasbarre points to a number of facts in support of its prima facie showing of this Court's personal jurisdiction over Diamond Florida. First, it submits that in response to its interrogatories, Diamond Florida was unable to produce significant corporate documents, including records of the Board of Director's, minutes of meetings, or documentation of stockholder meetings. (ECF No. 28 at 9-10, 18.) The only two shareholders of Diamond Florida are its President, Hector Carbajal Vazquez, and Said Carbajal Vazquez, who is also a director of IAP and Diamond Mexico. (Id. at 13.) Additionally, the treasurer of Diamond Florida, Gregorio Carbajal, was simultaneously a director and general manager of IAP. (Id. at 14.) Gregorio Carbajal and Said Carbajal were both involved in the negotiations with Gasbarre and were described to Gasbarre as “investors in the project.” (Id. at 14-15.) Diamond Florida was founded in 2012 and capitalized with $1, 000 in shares and a loan from Hector Carbajal Vazquez. (ECF No. 28-1 at 24.) Diamond Mexico's website (www.diamondautomotive.com.mx) shows that Diamond Mexico and Diamond Florida share a unified marketing image, including a logo with the words “Diamond Power.” The website also prominently displays IAP's logo, and lists the physical address and email address of Diamond Florida. (ECF No. 28 at 16.) The same logo also appears on Diamond Florida's Facebook page. (Id.) Statements suggesting the three companies are part of the same group have also appeared in the press. (Id. at 17.) Likewise, Diamond Florida and IAP are represented by the same attorneys. (Id. at 20.)

         For its part, Diamond Florida argues that the two entities[3] are simply different companies; that Diamond Florida had no involvement in the contract between Gasbarre and IAP; and that Gasbarre has failed to come forward with sufficient evidence to support an alter ego theory. In support of its position, Diamond Florida relies largely on a sworn affidavit from its President, Hector Carbajal Vazquez, which states that the companies are separate. (ECF Nos. 9-1; 29 at 7) (IAP and Diamond Florida do not own shares in each other and “Diamond Automotive Florida is not a parent company, subsidiary, agent, shareholder, alter ego, or affiliate of Diamond Automotive Mexico.”.)

         With respect to the President, Gasbarre's attorneys state that they wanted to depose him, but were told he could only be available for deposition in Mexico and not the United States. (ECF No 28 at 19) (“This Court is thus told that a company named Diamond in Florida, whose President will only appear in Mexico, has nothing to do with a company named Diamond in Mexico . . . .”).

         The motion has now been extensively briefed (ECF Nos. 9, 13, 27, 28, 29, 40, 44-1), and the parties have had the opportunity to conduct limited discovery as to the issue of personal ...


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