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Flame Spray North America Inc. v. Kerr Pumps Inc.

United States District Court, D. South Carolina, Greenville Division

September 5, 2019

Flame Spray North America, Inc., Plaintiff,
v.
Kerr Pumps, Inc., Defendant.

          OPINION AND ORDER

          BRUCE HOWE HENDRICKS UNITED STATES DISTRICT JUDGE

         Opinion and Order This matter is before the Court on Defendant Kerr Machine Co.'s ("Kerr"), improperly named in Plaintiffs complaint as "Kerr Pumps, Inc.," motion to dismiss for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2), filed on December 21, 2018. (ECF No. 11.) Plaintiff Flame Spray North America, Inc. ("Flame Spray") filed a response in opposition on January 3, 2019. (ECF No. 13.) Kerr filed a reply on January 17, 2019. (ECF No. 16.) The relevant issues are fully briefed and the matter is ripe for disposition. For the reasons set forth in this Order, the motion to dismiss is denied.

         BACKGROUND

         Flame Spray is a South Carolina company headquartered in Laurens County, South Carolina. (Compl. ¶ 1, ECF No. 1.) Flame Spray makes thermal spray coatings that enhance the performance of machine and industrial parts, as well as certain industrial component parts, including plungers used in oil and gas industry pumps. (Id.) Kerr is an Oklahoma corporation with its principle place of business in Sulphur, Oklahoma. (Mot. to Dismiss, ECF No. 11 at 1.) Kerr manufactures and sells large pumps for use in oil and gas exploration and production. (ECF No. 11-1 at 2.) Flame Spray alleges that Kerr ordered from Flame Spray the manufacturing and coating of a large volume of custom plungers for use in Kerr's fracking pumps but failed to pay Flame Spray for more than a million dollars' worth of plungers that Kerr ordered, received, and/or accepted. (Compl. ¶¶ 2-3.) Flame Spray asserts causes of action for breach of contract, unjust enrichment, and specific performance. (Id. ¶¶ 38-70.) Kerr asserts that a number of the Flame Spray plungers in its pumps failed prematurely, and that several of Kerr's customers notified Kerr to cease installing Flame Spray plungers in pumps to be sold to such customers. (ECF No. 11-1 at 2.) Kerr states that it determined it could not continue to use Flame Spray plungers in its pumps and notified Plaintiff that it could not accept any more plungers and that it would not pay for the plungers that it could not use. (Id. at 2-3.) Kerr's motion to dismiss asserts that Plaintiff has not and cannot show that Kerr had sufficient contacts with South Carolina to meet the requirements of due process for personal jurisdiction. (Id. at 1.)

         STANDARD OF REVIEW

         When personal jurisdiction is challenged by a defendant, the plaintiff bears the burden of showing that jurisdiction exists. See In re Celotex Corp., 124 F.3d 619, 628 (4th Cir. 1997). If the court addresses the issue of jurisdiction on the basis of pleadings and supporting legal memoranda without an evidentiary hearing, "the burden on the plaintiff is simply to make a prima facie showing of a jurisdictional basis in order to survive the jurisdictional challenge." Combs v. Bakker, 886 F.2d 673, 675 (4th Cir. 1989). In deciding such a motion, "the court must construe all relevant pleading allegations in the light most favorable to the plaintiff, assume credibility, and draw the most favorable inferences for the existence of jurisdiction." Id. at 676.

         A district court sitting in diversity, when evaluating whether it possesses personal jurisdiction over a defendant, utilizes a two-step inquiry:

[F]irst, it must be determined whether the statutory language [of the state's long-arm statute], as a matter of construction, purports to assert personal jurisdiction over [the] defendant; and second, assuming that the answer to the first question is affirmative, it must be determined whether the statutory assertion of personal jurisdiction is consonant with the Due Process Clause of the United States Constitution.

Peanut Corp. of Am. v. Hollywood Brands, Inc., 696 F.2d 311, 313 (4th Cir. 1982) (citing Haynes v. James H. Carr, Inc., 427 F.2d 700, 703 (4th Cir. 1970)). "South Carolina's long-arm statute has been interpreted to reach the outer bounds permitted by the Due Process Clause." ESAB Grp., Inc. v. Centricut, Inc., 126 F.3d 617, 623 (4th Cir. 1997) (citations omitted). "Consequently, 'the statutory inquiry necessarily merges with the constitutional inquiry, and the two inquiries essentially become one.'" Id. (quoting Stover v. O'Connell Assocs., Inc., 84 F.3d 132, 135-36 (4th Cir. 1996)). "The canonical opinion in this area remains International Shoe [Co. v. Washington, 326 U.S. 310 (1945)], [which held that a trial court may] exercise personal jurisdiction over an out-of-state defendant if the defendant has 'certain minimum contacts with [the State] such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'" Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 923 (2011) (quoting International Shoe, 326 U.S. at 316).

The analytical framework for determining whether minimum contacts exist differs according to which species of personal jurisdiction-general or specific-is alleged. See generally ESAB Group v. Centricut, 126 F.3d 617, 623-24 (4th Cir. 1997). When a cause of action arises out of a defendant's contacts with the forum, a court may seek to exercise specific jurisdiction over that defendant if it purposefully directs activities toward the forum state and the litigation results from alleged injuries that arise out of or relate to those activities. See Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984). However, when the cause of action does not arise out of the defendant's contacts with the forum, general jurisdiction may be exercised upon a showing that the defendant's contacts are of a "continuous and systematic" nature. Id. at 416. [Whereupon, the court clarified that it would only determine whether the defendants' contacts were sufficient to subject them to specific jurisdiction in South Carolina because the plaintiff did not contend that general jurisdiction applied].
A defendant has minimum contacts with a jurisdiction if "the defendant's conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there." World-Wide Volkswagen Corp. v. Woodson, AAA U.S. 286, 297 (1990). Under this standard, "it is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958). In determining the existence of minimum contacts, the court is mindful that it must draw all reasonable inferences from both parties' pleadings, even if they conflict, in the Plaintiff's favor. See, e.g., Precept Med. Products, Inc., v. Klus, 282 F.Supp.2d 381, 385 (W.D. N.C. 2003) ("for the purposes of a Rule 12(b)(2) motion, the Court will accept the Plaintiff's version of disputed facts").
The Fourth Circuit has applied a three-part test when evaluating the propriety of exercising specific jurisdiction: (1) whether and to what extent the defendant "purposely availed" itself of the privileges of conducting activities in the forum state, and thus invoked the benefits and protections of its laws; (2) whether the plaintiff's claims arise out of those forum-related activities; and (3) whether the exercise of jurisdiction is constitutionally "reasonable." [Christian Sci. Bd. of Dirs. of the First Church of Christ v. Nolan, 259 F.3d 209, 215-16 (4th Cir. 2001)] (citing Helicopteros, 466 U.S. at 415-16, and Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472, 476-77, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1988)).
Although the test for purposeful availment can be somewhat imprecise, significant factors typically include: defendant's physical presence in the forum state, the extent of negotiations in the forum state, the extent to which the contract was to be performed in the forum state, and who initiated the relationship. Mun. Mortgage & Equity v. Southfork Apartments Ltd. P'ship, 93 F.Supp.2d 622, 626 (D. Md. 2000). Underlying these factors is the central question of whether a defendant has performed purposeful acts in the forum state such that the defendant has created a substantial relationship with the forum ...

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