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Outdoor Venture Corporation v. Ronald Mark Associates, Inc.

United States District Court, Sixth Circuit

May 15, 2013

OUTDOOR VENTURE CORPORATION Plaintiff.
v.
RONALD MARK ASSOCIATES, INC., Defendant.

MEMORANDUM ORDER AND OPINION

DAVID L. BUNNING, District Judge.

Plaintiff Outdoor Venture Corporation ("OVC") commenced this action against Defendant Ronald Mark Associates, Inc. ("RMA"), alleging Kentucky state-law claims of breaches of express and implied warranties, fraudulent misrepresentation, and negligent misrepresentation arising from RMA's purported failure to provide OVC with fabric that met specifications outlined in its purchase orders. (Doc. # 1-3). The Court's jurisdiction is premised on diversity of citizenship pursuant to 28 U.S.C. § 1332.

This matter is currently before the Court on Defendant RMA's Motion To Dismiss Or, In The Alternative, To Transfer Venue. (Doc. # 3). This motion is fully briefed and ripe for review. ( See Docs. # 9 & 10). For the following reasons, Defendant's motion is denied.

I. STANDARD OF REVIEW

The plaintiff bears the burden of establishing through specific facts that personal jurisdiction exists over a non-resident defendant. Conn v. Zakharov, 667 F.3d 705, 711 (6th Cir. 2012). Where, as here, the defendant has moved to dismiss the case under Federal Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction and the Court is ruling on the motion without first holding an evidentiary hearing, the plaintiff need only make a prima facie case for jurisdiction. Id. Under such procedural posture, the Court does "not weigh the facts disputed by the parties but instead consider[s] the pleadings in the light most favorable to the plaintiff...." Id. The Court must also consider the affidavits in a light most favorable to the plaintiff. CompuServe, Inc. v. Patterson, 89 F.3d 1257, 1262 (6th Cir. 1996). The Court may also consider the defendant's undisputed factual assertions. Conn, 667 F.3d at 711.

Under these circumstances, the "burden of the plaintiff is relatively slight." American Greetings Corp. v. Cohn, 839 F.2d 1164, 1169 (6th Cir. 1988). Thus, the Court "need only find that [the] plaintiff has set forth specific facts that support a finding of jurisdiction in order to deny the motion to dismiss." Kroger Co. v. Malease Foods Corp., 437 F.3d 506, 510 (6th Cir. 2006). The Court now turns to the facts in the pleadings and affidavits under this standard of review.

II. FACTUAL AND PROCEDURAL BACKGROUND

The following facts are taken from Plaintiff's Complaint (Doc. # 1-3); the Affidavit of J.C. Egnew, President of OVC (Doc. # 9-1); and, where the defendant's factual assertions are undisputed, the Declarations of Charles J. Riotto, Senior Vice President of RMA (Doc. # 3-2) and Kristen L. Repyneck, counsel for RMA (Doc. # 10-1).

Plaintiff OVC is a Kentucky corporation with its principal place of business in Kentucky. (Doc. # 1-3 § 1). Defendant RMA is a New Jersey corporation alleged by OVC to be "doing business in Kentucky." ( Id. at § 2). RMA sold and delivered 44, 000 yards of 68 inch 442171C TAN/BLACK fabric (the "fabric") to OVC between October 2009 and January 2011 for $226, 600. ( Id. at §§ 3-4). OVC purchased the Fabric for the purpose of manufacturing tent components for sale to Hunter Defense Technologies ("HDT"). ( Id. at § 4). HDT integrated OVC's components into the Tent, Extendable, Modular, Personnel tent system ("TEMPER"), and the TEMPER was then sold to the United States government. ( Id. ).

In 2003, RMA sales representative Tom DelVecchio visited OVC's headquarters in Stearns, Kentucky. (Doc. # 9-1 § 3). DelVecchio had developed a relationship with OVC during his previous employment; he therefore visited RMA to discuss potential business between OVC and RMA. (Doc. # 3-2 §§ 6, 9). RMA was "eager to become an OVC supplier, " but, prior to this visit, OVC had not seriously considered using RMA as a supplier of components for its products. (Doc. # 9-1 § 3). At the meeting, DelVecchio presented OVC with price quotes for RMA products. ( Id. ).

OVC and RMA then commenced an eight-year business relationship, during which time RMA provided numerous samples to OVC for testing in hopes of enticing OVC to order additional RMA products. ( Id. at § 4). OVC issued all purchase orders from Kentucky to RMA in New Jersey. (Doc. # 3-2 § 21). All of RMA's production, manufacture, quality control testing, and services obligated under the OVC purchase orders were then rendered solely in New Jersey. ( Id. at §§ 23-26). RMA's products were shipped free on board ("FOB") in New Jersey where OVC had its own contract carrier pick up the goods. ( Id. at § 27). RMA did not have control over where OVC shipped the products it manufactured. ( Id. at § 28). RMA does not have any office, warehouse, real property, employee, or agent in Kentucky. ( Id. at § 4). RMA is not authorized to do business in Kentucky and does not conduct any advertising in Kentucky. ( Id. ).

RMA's sales force was aware that Outdoor used a specialty fabric in its military TEMPER tent components that it was not initially capable of producing. ( Id. at § 12). Hoping to procure additional business from OVC, RMA began developing the speciality fabric in accordance with specification provided by OVC. ( Id. at §§ 13-14). During the development of the fabric, Mr. DelVecchio communicated with OVC on average four times per month primarily by telephone and email regarding the fabric. ( Id. at § 15). He also occasionally had in-person communications regarding the fabric with OVC at industry trade shows and military specification meetings outside of Kentucky from 2003 to 2009. ( Id. at § 16). RMA completed development of the fabric in 2009 and OVC began ordering the fabric from RMA to be incorporated into the TEMPER tents for HDT. ( Id. at § 17; Doc. # 9-1 § 5).

RMA employees visited OVC facilities in Kentucky on several occasions during the business relationship, increasing in frequency as more problems were discovered with the Fabric.[1] (Doc. # 9-1 § 7). On November 8, 2009, Mr. DelVecchio visited OVC in Kentucky to review quality defects per OVC's request. ( Id. ). In May 2010, Mr. DelVecchio and an RMA employee visited OVC in Kentucky to review quality issues. ( Id. ). OVC also continually contacted RMA about quality issues from Kentucky and often received specific information from RMA in Kentucky. ( Id. at § 10).

From May to August of 2012, HDT stopped all orders from OVC because the TEMPER tent was suffering a high number of failures in the field, which were linked to problems with the fabric. This caused OVC to lose most of its trained operators working on the HDT tent production and resulted in a replacement cost of at least $1, 700, 000. ( Id. at §§ 8-9, 11).

Plaintiff OVC filed its Complaint in McCreary Circuit Court on December 3, 2012. (Doc. # 1-3). On January 14, 2013, Defendant RMA removed the action to federal court on the basis of diversity jurisdiction. (Doc. # 1). Defendant RMA then filed the instant Motion To Dismiss Or, In The Alternative, To Transfer Venue on January 22, 2013. (Doc. # 3).

III. ANALYSIS

A. Motion to Dismiss for Lack of Personal Jurisdiction

In this diversity action, the court "must look to the law of the forum state to determine the reach of the district court's jurisdiction over the parties, subject to the constitutional due process requirements." Air Products and Controls, Inc. v. Safetech Intern., Inc., 503 F.3d 544, 550 (6th Cir. 2007). This requires a two-step analysis: first, the Court must determine whether Kentucky's long-arm statute authorizes the exercise of jurisdiction over RMA; and, if so, the Court must determine whether the exercise of that jurisdiction comports with constitutional due process. Id.

1. Kentucky's Long-Arm Statute

Under Kentucky's long-arm statute, "[a] court may exercise personal jurisdiction over a person who acts directly or by an agent, as to a claim arising from a person's... [c]ontracting to supply services or goods in this Commonwealth." K.R.S. § 454.210(2)(a)(2). The Kentucky Supreme Court has broadly interpreted the statute, finding that the contract need not be made or executed in Kentucky. Hinners v. Robey, 336 S.W.3d 891, 896 (Ky. 2011). Instead, the contract need only "provide for the supplying of services or goods to be transported into, consumed or used in Kentucky." Id. (emphasis added).

The Kentucky Supreme Court's analysis of the long-arm statute in Hinners v. Robey is instructive. In that case, the defendant, situated in Missouri, advertised a vehicle for sale on eBay, which contained misrepresentations about the condition of the vehicle. Id. The plaintiff, in Kentucky, submitted a winning bid, and then traveled out of state to take possession of the vehicle. Id. The defendant executed vehicle transfer documents in Missouri to enable the plaintiff to obtain a Kentucky registration and title for the vehicle. Id. The plaintiff then brought the vehicle back to Kentucky covered by the defendant's warranty. Id.

The Kentucky Supreme Court held that the defendant's conduct in Hinners constituted "contracting to supply services or goods in the Commonwealth" as set forth in KRS § 454.210(2)(a)(2). Although the contract was executed out-of-state, and possession of the vehicle was transferred out-of-state, the Kentucky Supreme Court held that "it was anticipated by the parties from the outset that the vehicle would be transported to and used in Kentucky." Id. The parties' anticipation, coupled with the fact that the vehicle was brought back to Kentucky ...


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