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Eddystone Rail Company, LLC v. Bridger Logistics, LLC

United States District Court, E.D. Pennsylvania

July 19, 2017

EDDYSTONE RAIL COMPANY, LLC, Plaintiff,
v.
BRIDGER LOGISTICS, LLC, JULIO RIOS, JEREMY GAMBOA, FERRELLGAS PARTNERS, L.P., and FERRELLGAS, L.P., Defendants.

          MEMORANDUM

          ROBERT F. KELLY, Sr. J.

         Presently before this Court are the Motion to Dismiss filed by Defendants, Julio Rios (“Rios”) and Jeremy Gamboa (“Gamboa”), the Motion to Dismiss filed by Bridger Logistics, LLC (“Bridger Logistics”), Ferrellgas Partners, L.P. and Ferrellgas, L.P. (collectively, “Ferrellgas”), the Response in Opposition to Defendants' Motions to Dismiss filed by Plaintiff, Eddystone Rail Company, LLC (“Eddystone”), and all of the Replies and Sur-Replies thereto. For the reasons set forth below, Defendants' Motions are denied.[1]

         I. FACTS [2]

         Eddystone seeks to recover from the owners and controlling persons of Bridger Transfer Services, LLC (“BTS”), who allegedly used BTS as a sham entity to defraud Eddystone out of more than $140 million that it spent to build a transloading facility on the banks of the Delaware River. Bridger Logistics and its principals, Rios and Gamboa, developed a business plan to deliver North Dakota crude oil by railcar to Eddystone, Pennsylvania, transload it to river barges, and deliver it to a refinery in Trainer, Pennsylvania.[3] To accomplish this, Eddystone alleges that they induced it to spend over $170 million to construct a transloading facility that was essential to their plan in return for a contractual commitment that they would transload a minimum volume of crude oil at Eddystone's facility over five years. Eddystone entered into a Rail Facilities Services Agreement (“RSA” or “Eddystone Contract”) to build the facility with BTS, which Rios and Gamboa held out as a bona fide independent entity with substantial business.

         Eddystone alleges that BTS was a sham - a shell entity with no employees and no independent revenue dominated entirely by Rios and Gamboa. According to Eddystone, BTS made the transloading capacity it obtained from Eddystone (at a substantial cost and in return for a five-year minimum volume commitment) exclusively available to Bridger Logistics without obtaining any written contract or opportunity for profit in return. Despite securing and providing the critical transloading capacity at great expense, Eddystone alleges that BTS did not share in any of the profits Bridger Logistics earned from its refinery client. It further asserts that Bridger Logistics directly paid the amounts due under the Eddystone Contract with BTS, including deficiency payments in months when the minimum volume commitment was not met, for as long as it needed Eddystone's transloading capacity. Eddystone states that, as soon as the economics of Bridger Logistics' shipping arrangement began to fail, Bridger Logistics, Rios, Gamboa, and Bridger Logistics' new parent, Ferrellgas, [4] came up with a scheme to saddle Eddystone with the cost of the transloading facility that they had induced Eddystone to build.

         Eddystone states that Defendants stripped BTS of all of the assets on its balance sheet and transferred them to Ferrellgas entities. Then, according to Eddystone, they abrogated the arrangement by which Bridger Logistics had paid amounts BTS owed under the Eddystone Contract. Eddystone further alleges that, in order to put distance between them and BTS before the inevitable default on its obligations to Eddystone, they sold BTS to Jamex Transfer Holdings (“JTH”), a newly formed shell company. Under the sale agreement, Eddystone asserts that this asset-less and revenue-less new company assumed the obligation to fund minimum volume commitment payments in the future. Eddystone further asserts that Defendants knew that JTH had no ability to fund minimum volume commitment payments. Stripped of its assets and cut off from its source of funding, Eddystone states that BTS promptly defaulted on its obligations to it.

         Eddystone filed its Complaint on February 2, 2017.[5] The Complaint includes the following counts: Count I - Alter Ego; Count II - Intentional Fraudulent Transfer (12 Pa. C.S. § 5104(a)); Count III - Constructive Fraudulent Transfer (12 Pa. C.S. § 5105); and Count IV -Breach of Fiduciary Duties of Care and Loyalty to Creditors. (See Compl.) It alleges that Defendants' supposed manipulation of a shell entity as an instrumentality for the purpose of obtaining the fruits of the Eddystone Contract without bearing any of its burdens makes them liable as alter egos of BTS. Moreover, it claims that Defendants' alleged decision to strip BTS of its assets, abrogate the course of dealing by which Bridger Logistics paid the minimum volume commitment charges of BTS, and then purport to transfer that obligation to an insolvent entity gives rise to fraudulent transfer liability. Furthermore, it alleges that, because BTS was purportedly well within the zone of insolvency with obligations to Eddystone far in excess of its actual assets or cash flow, Defendants owed fiduciary duties to manage BTS in the interests of its creditor, Eddystone. Instead, Defendants supposedly used their control over BTS to exploit it for their own benefit, and to the detriment of Eddystone, in violation of their fiduciary duties.

         Rios and Gamboa deny Eddystone's allegations, and move to dismiss Eddystone's Complaint on several grounds, which include a failure to state a claim and lack of personal jurisdiction. Regarding personal jurisdiction, Defendants assert that they both are residents of Texas who have not paid taxes in Pennsylvania, own no real or personal property in Pennsylvania, and maintain no bank accounts or licenses in Pennsylvania. (Defs.' Mot. to Dismiss at 8) (citing Ex. A (Declaration of Julio Rios) (“Rios Decl.”) ¶ 2; Ex. B (Declaration of Jeremy Gamboa) (“Gamboa Decl.”) ¶ 2.)[6] They also argue that they are shielded by the fiduciary shield doctrine because Eddystone's claims are asserted against them solely in their corporate roles, and their only contacts with Pennsylvania were in their corporate capacities. (See id.)

         For the reasons set forth below, the Motion to Dismiss by Rios and Gamboa based upon a lack of personal jurisdiction is denied. Likewise, Rios and Gamboa's Motion to Dismiss based upon a failure to state a claim, as well as the Motion to Dismiss for failure to state a claim filed by Bridger Logistics and Ferrellgas, are denied as meritless at this stage of the litigation.

         II. DISCUSSION

         A. Motion to Dismiss For Lack of Personal Jurisdiction

         1 . Specific Jurisdiction

         “Federal courts . . . may exercise personal jurisdiction over nonresident defendants to the extent provided by the law of the state in which the federal court sits.” Penco Prods., Inc. v. WEC Mfg., LLC, 974 F.Supp.2d 740, 746 (E.D. Pa. 2013) (citation omitted). “Pennsylvania's Long-Arm Statute allows personal jurisdiction over nonresident defendants to the constitutional limits of the due process clause of the Fourteenth Amendment.” Id. (citing 42 Pa. Cons. Stat. Ann. § 5322(b); Mellon Bank (East) PSFS, Nat'l Ass'n v. Farino, 960 F.2d 1217, 1221 (3d Cir. 1992)). “Under this standard, nonresident defendants are required to have minimum contacts with Pennsylvania so as not to offend traditional notions of fair play and substantial justice.” Id. (citing Marten v. Godwin, 499 F.3d 290, 296 (3d Cir. 2007); Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). “There are two types of personal jurisdiction: general and specific.”[7] Id. (citing Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414-15 & n.9 (1984)).

         Regarding specific jurisdiction, the United States Court of Appeals for the Third Circuit (“Third Circuit”) has provided a ...


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