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Carter v. Paschall Truck Lines, Inc.

United States District Court, W.D. Kentucky, Paducah

May 29, 2019

GALE CARTER, et al. PLAINTIFFS
v.
PASCHALL TRUCK LINES, INC., et al. DEFENDANTS

          MEMORANDUM OPINION AND ORDER

          Thomas B. Russell, Senior Judge

         This matter is before the Court upon Defendants ECN Capital Corp. (“ECN-Cap”) and ECN Financial, LLC's (“ECN-Fin”) Motion to Dismiss for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2). [R. 149.] Plaintiffs Gale Carter and Forbes Hayes (“Plaintiffs”) responded, [R. 159], and ECN-Cap and ECN-Fin (together “ECN Defendants”) replied, [R. 160]. Fully briefed, this matter is ripe for adjudication. For the reasons stated herein, ECN Defendants' Motion to Dismiss, [R. 149], is GRANTED.

         BACKGROUND

         This case arises out of Gale Carter and Forbes Hayes's previous employment as truck drivers for Paschall Truck Lines, Inc. (“PTL”). Further detail about this case can be found in this Court's previous Memorandum Opinion and Order concerning Element Transportation, LLC's Motion for Summary Judgment. [R. 136 at 1-3.] In short, this motion revolves around Paschall Truck Lines, Inc.'s (“PTL”) relationship with Element Financial Corp. (“EFC”), ECN Financial, LLC (“ECN-Fin”), ECN Capital (“ECN-Cap”), and Quality Equipment Leasing, LLC (“Quality”).

         As of March 31, 2014, EFC, a Delaware corporation, entered into a Servicing Agreement under which Plaintiffs allege that “EFC authorized Quality Equipment Leasing[1] to act as its agent in procuring individual drivers and fleets to lease its trucks.” [R. 159 at 6 (citing [R. 159-2 (3rd Amended Service Agreement).] Plaintiffs claim that, on or around March 12, 2014, “Defendant PTL entered into a Vehicle Lease Program Agreement with Quality in order to facilitate the operation of its lease-operator program.” [Id. at 9.][2] Among other things, Plaintiffs allege that, under the Vehicle Lease Program Agreement, Quality agreed to provide vehicle leasing and financing services to drivers in PTL's lease-operator program. [Id.] Plaintiffs summarize the details of the agreement as follows:

Quality agreed to assist PTL's personnel with the negotiation of leases and lease documentation, and the closing of lease transactions. Id. Under the agreement, Quality would enter into vehicle lease agreements with drivers while PTL would simultaneously enter into Independent Contractor Agreements with said drivers. Id. at 2. PTL was required to, on a weekly basis, directly remit to Quality all lease payments made by drivers. Id. PTL was specifically required to “promote [Quality] as a recognized and credible source of lease financing” for the individual drivers and to give Quality a “right of first refusal” for leasing vehicles to PTL's drivers.

[Id. (emphasis in original).]

         The working relationship between PTL and Quality is exemplified through the experience of Plaintiffs Gale Carter, Forbes Hays, and Lakendal Harris. All three aver that after they received training from PTL at PTL's headquarters in Murray, KY, they were instructed to travel to Quality's facility in Indianapolis, Indiana to lease a truck. [See R. 159 at 15 (citing Hays Depo); R. 159-17 at 65:17-24, 111:15-112:16 (Hays Depo); R. 159-18 at 51:9-11, 84:9-17 (Carter Depo); R.159-19 at 50:21-23, 84:3-6 (Harris Depo).] According to Plaintiffs, Carter, Hays, and Harris entered into lease agreements with EFC, which were all serviced by Quality. [R. 159 at 9 (citing plaintiffs' lease agreements R. 159-4, R. 159-5, R.159-6; R. 159-21; R. 159-22; and R. 159-2).]

         In order to explain ECN-Fin and ECN-Cap's relation to EFC, the Court will quote its previous explanation of this complicated corporate lineage from its previous Memorandum Opinion and Order:

On June 30, 2016, EFC became Element Financial, LLC. [R. 110-11 at 3 (Certificate of Conversion).] Element Financial, LLC continued to operate the commercial and vendor leasing business it had previously operated as EFC. [R. 110-2 at 4; R. 98-1 at 6.] On September 19, 2016, a transaction occurred between Element Financial, LLC and Element Transportation, LLC, another subsidiary of Element Financial, LLC's parent company-Element Financial Corporation. [R. 110-19 at 67:17-21 (Bradley Rowse Deposition); R. 110-2 at 4; R. 98-1 at 7.] . . . Element Financial, LLC transferred the trucks and the rights to receive lease payments on those trucks to Element Transportation . . . [R. 110-2 at 4 (citing R. 110-14).] . . . .
On October 3, 2016, Element Financial Corporation split to form ECN Capital Corp. and Element Fleet Management Corporation. [R. 110-19 at 49:12-18; R. 98-1 at 7.] As a part of the split, Element Financial, LLC became ECN Financial, LLC (ECN). [R. 110-19 at 49:12-18; R. 98-1 at 7; R. 110-2 at 5.] Plaintiffs states that, with that name change, ECN Financial, LLC was divested from Element Fleet Management Corporation and became a subsidiary of ECN Capital Corp. [R. 110-2 at 5.]

[R. 136 at 2-3.]

         On October 11, 2017, Plaintiffs filed their original complaint in federal district court. [R. 1.] On March 1, 2019, Defendants ECN-Cap and ECN-Fin (together “ECN Defendants”) filed a Motion to Dismiss for lack of personal jurisdiction, which is currently before the Court. [R. 149.]

         LEGAL STANDARD

         Under Rule 12(b)(2), the burden is on the Plaintiffs to show that personal jurisdiction exists as to each defendant. Theunissen v. Matthews, 935 F.2d 1454, 1458 (6th Cir. 1991). “[I]n the face of a properly supported motion for dismissal, the plaintiff may not stand on his pleadings but must, by affidavit or otherwise, set forth specific facts showing that the court has jurisdiction.” Id. When “[p]resented with a properly supported 12(b)(2) motion and opposition, the court has three procedural alternatives: it may decide the motion upon the affidavits alone; it may permit discovery in aid of deciding the motion; or it may conduct an evidentiary hearing to resolve any apparent factual questions.” Id. (citing Serras v. First Tennessee Bank Nat. Ass'n., 875 F.2d 1212, 1214 (6th Cir. 1989)). When an evidentiary hearing has not been held, as in this case, a plaintiff's burden is “relatively slight” and “the plaintiff must make only a prima facie showing that personal jurisdiction exists in order to defeat dismissal.” AlixPartners, LLP v. Brewington, 836 F.3d 543, 548-49 (6th Cir. 2016) (quoting Air Prods. & Controls, Inc. v. Safetech Int'l, Inc., 503 F.3d 544, 549 (6th Cir. 2007)). “[T]he pleadings and affidavits submitted must be viewed in a light most favorable to the plaintiff, and the district court should not weigh ‘the controverting assertions of the party seeking dismissal.'” Air Prods., 503 F.3d at 549 (quoting Theunissen, 935 F.2d at 1459).

         “A federal court sitting in diversity may exercise personal jurisdiction over an out-of-state defendant only to the extent that a court of the forum state could do so.” Kerry Steel, Inc. v. Paragon Indus., Inc., 106 F.3d 147, 148 (6th Cir. 1997). Under Kentucky law, the Court first considers Kentucky's long-arm statute to determine whether “the cause of action arises from conduct or activity of the defendant that fits into one of the statute's enumerated categories.” Caesars Riverboat Casino, LLC v. Beach, 336 S.W.3d 51, 57 (Ky. 2011). If the statutory requirements are met, the Court must then apply the constitutional due process test “to determine if exercising personal jurisdiction over the non-resident defendant offends [its] federal due process rights.” Id.[3]

         DISCUSSION

         This matter is ripe, and the Court will decide the motion upon the record before it, including pleadings and affidavits, and require Plaintiffs to make a prima facie showing that personal jurisdiction exists. In their Motion to Dismiss pursuant to Rule 12(b)(2), ECN Defendants argue that Plaintiffs have failed to make this prima facie showing both under the Kentucky long-arm statute and the federal due process analysis. As ...


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