Conrad Shipyard, LLC v. Franco Marine 1, LLC

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF LOUISIANA

CONRAD SHIPYARD, L.L.C. CIVIL ACTION

VERSUS No.: 19-10864

FRANCO MARINE 1 LLC, et al SECTION: “J” (1)

ORDER & REASONS

Before the Court is a Motion to Dismiss Third-Party Claim for Lack of Subject-

Matter Jurisdiction, Personal Jurisdiction, or Forum Non Conveniens (Rec. Doc. 26),

filed by Third-Party Defendant Harley Franco (“Franco”), an opposition thereto (Rec.

Doc. 32) filed by Third-Party Plaintiff Harley Marine Services (“HMS”), and a reply

(Rec. Doc. 43) filed by Franco. Additionally before the Court is a supplemental

opposition (Rec. Doc. 45) furnished by HMS after a briefing order issued by the Court.

Having considered the motion and legal memoranda, the record, and the applicable

law, the Court finds the motion should be DENIED.

FACTS AND PROCEDURAL BACKGROUND

HMS is a marine transportation company that provides clients with tug and

barge services. Franco is the founder of HMS as well as, until March 2019, its

Chairman, President, and CEO. Currently, HMS, via a derivative action brought by

Macquarie Marine Services, LLC., is suing Franco in the Court of Chancery in

Delaware for a wide swath of alleged activity including, amongst other things,

misappropriation of assets, destruction of evidence, and coercing employees to engage

in wrongful conduct. (Rec. Doc. 32-3). HMS is also suing Franco in Washington state

court for breach of contract and breach of fiduciary duty. (Rec. Doc. 26-1 at p. 67).

Franco, in turn, is suing HMS in Washington state court for wrongful termination,

breach of contract, and defamation. (Rec. Doc. 26-1 at p. 111-14).

The underlying cause of this action is the sale of two anchor-handling tugboats

(the “Vessels”) by Conrad Shipyard, L.L.C. (“Conrad”) to Franco Marine 1, LLC

(“FM1”) and Franco Marine 2, LLC (“FM2”, hereinafter referred to with FM1 as the

“Franco LLCs”).1 The Franco LLCs are wholly owned by Franco and were formed by

him for the sole purpose of being the contracting parties for the purchase of the

Vessels.

Negotiations for purchase of the Vessels began when Franco reached out to

Conrad to discuss HMS acquiring the vessels directly. Eventually, negotiations

shifted to focus on Franco acquiring the Vessels himself, with the intention to then

lease them to HMS for use. Franco formed the Franco LLCs to conduct this business.

On September 12, 2017, while Franco was still in his position as head of HMS, the

Franco LLCs and Conrad entered into Purchase Agreements for the sale of the

Vessels.

According to Conrad’s allegations, the Franco LLCs ceased making the

monthly payments required by the Purchase Agreements after five months of

construction. As recompense, Conrad sold two winches in its possession that it

believed belonged to the Franco LLCs based on representations made by the Franco

1 The following facts are taken from Conrad’s initial complaint (Rec. Doc. 1-1) and HMS’s third-party complaint

(Rec. Doc. 9).

LLCs in the Purchase Agreements. HMS, however, claims the winches were in fact

its property.

On June 3, 2019, Conrad commenced the present action by filing a complaint

against the Franco LLCs for breach of contract arising out of the Purchase

Agreements. Conrad also named HMS as a defendant in its breach of contract claim,

despite HMS not being a party to the Purchase Agreements, under a “single business

enterprise” theory. Furthermore, Conrad brought an additional claim for detrimental

reliance claim against HMS alone, presumably in case its single business enterprise

argument failed.

On July 17, 2019, HMS filed the third-party claim against Franco that is the

subject of Franco’s present motion to dismiss. HMS seeks indemnification from

Franco in the event HMS is found liable for the Franco LLCs breach of contract. The

basis for HMS’s claims is that Franco’s negotiations with Conrad and subsequent

purchasing of the Vessels via the Franco LLCs exceeded his authority as CEO and

breached his fiduciary duty to HMS by misrepresenting HMS’s role in the

transaction. Specifically, HMS alleges that Franco exceeded his authority by (1)

directing HMS employees to negotiate with Conrad regarding the Vessels and (2) by

negotiating and interacting with Conrad himself in a manner that, according to

Conrad, led Conrad to believe HMS was the true party-in-interest to the Purchase

Agreements, not the Franco LLCs. None of the prior litigation between HMS and

Franco addresses this particular alleged breach of fiduciary duty, i.e. Franco

exceeding his authority during negotiations with Conrad and misrepresenting HMS’s

role in the Purchase Agreements.

On September 13, 2019, Franco filed his Motion to Dismiss for Lack of Personal

Jurisdiction, or in the alternative Forum Non Conveniens. In his reply to HMS’s

opposition, Franco raised, for the first time, an argument that the Court should

dismiss HMS’s third-party claim for lack of subject-matter jurisdiction. In the interest

of fairness, the Court allowed HMS the opportunity to file supplemental briefing in

opposition to Franco’s arguments relating to the Court’s lack of subject-matter

jurisdiction.

LEGAL STANDARD

In deciding a motion to dismiss for lack of subject matter jurisdiction under

Federal Rule of Civil Procedure 12(b)(1), “the district court is ‘free to weigh the

evidence and resolve factual disputes in order to satisfy itself that it has the power to

hear the case.’” Krim v. pcOrder.com, Inc., 402 F.3d 489, 494 (5th Cir. 2005). The

party asserting jurisdiction must carry the burden of proof for a Rule 12(b)(1) motion

to dismiss. Randall D. Wolcott, M.D., P.A. v. Sebelius, 635 F.3d 757, 762 (5th

Cir.2011). The standard of review for a motion to dismiss under Rule 12(b)(1) is the

same as that for a motion to dismiss pursuant to Rule 12(b)(6). United States v. City

of New Orleans, No. 02–3618, 2003 WL 22208578, at *1 (E.D. La. Sept. 19, 2003). If

a court lacks subject matter jurisdiction, it should dismiss without prejudice. In re

Great Lakes Dredge & Dock Co., 624 F.3d 201, 209 (5th Cir. 2010). When a Rule

12(b)(1) motion is filed in conjunction with other Rule 12 motions, the court should

consider the Rule 12(b)(1) jurisdictional attack before addressing any attack on the

merits. Hill v. City of Pasadena, 561 F.2d 606, 608 (5th. Cir. 1977) (per curiam)).

Rule 12(b)(2) of the Federal Rules of Civil Procedure permits dismissal of a suit

for lack of personal jurisdiction. “Where a defendant challenges personal jurisdiction,

the party seeking to invoke the power of the court bears the burden of proving that

jurisdiction exists.” Luv N'Care, Ltd. v. Insta-Mix, Inc., 438 F.3d 465, 469 (5th Cir.

2006). However, the plaintiff is not required to establish jurisdiction by a

preponderance of the evidence; a prima facie showing is sufficient. Id. The court

must accept the plaintiff’s uncontroverted allegations and resolve all conflicts

between the facts contained in the parties’ affidavits and other documentation in

favor of jurisdiction. Id.

A federal court sitting in diversity must satisfy two requirements to exercise

personal jurisdiction over a nonresident defendant. Pervasive Software Inc. v.

Lexware GmbH & Co. KG, 688 F.3d 214, 220 (5th Cir. 2012). “First, the forum state’s

long-arm statute must confer personal jurisdiction. Second, the exercise of

jurisdiction must not exceed the boundaries of the Due Process Clause of the

Fourteenth Amendment.” Id. The limits of the Louisiana long-arm statute are

coextensive with constitutional due process limits. Jackson v. Tanfoglio Giuseppe,

SRL, 615 F.3d 579, 584 (5th Cir. 2010). Accordingly, the inquiry here is whether

jurisdiction comports with federal constitutional guarantees. See id.

The Due Process Clause of the Fourteenth Amendment guarantees that no

federal court may assume personal jurisdiction of a non-resident defendant unless

the defendant has certain “minimum contacts with [the forum state] such that the

maintenance of the suit does not offend ‘traditional notions of fair play and

substantial justice.’” Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (citation

omitted). The Supreme Court has recognized two types of personal jurisdiction:

specific and general. Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773,

1779-80 (2017).2

Specific jurisdiction is limited to “adjudication of issues deriving from, or

connected with, the very controversy that establishes jurisdiction.” Goodyear Dunlop

Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011) (internal quotation marks

and citation omitted). To establish specific jurisdiction, a plaintiff must show that “(1)

there are sufficient (i.e., not random fortuitous or attenuated) pre-litigation

connections between the non-resident defendant and the forum; (2) the connection

has been purposefully established by the defendant; and (3) the plaintiff’s cause of

action arises out of or is related to the defendant’s forum contacts.” Pervasive

Software, 688 F.3d at 221 (internal quotation marks and citation omitted). The

defendant can then defeat the exercise of specific jurisdiction by showing that it would

be unreasonable. Id. at 221-22.

DISCUSSION

I. WHETHER THE COURT HAS SUBJECT-MATTER JURISDICTION OVER

HMS’S THIRD-PARTY CLAIM

2 HMS does not attempt to argue that the Court possesses personal jurisdiction over Franco based on general

jurisdiction. Indeed, the theory of general personal jurisdiction is so clearly inapplicable here that it warrants no further

discussion.

Franco argues that HMS’s third-party claim for indemnification is not yet ripe

and therefore the Court must dismiss it for lack of subject-matter jurisdiction. The

crux of Franco’s lack of ripeness argument is that “the harm [can] not even occur until

or unless an adverse judgment against HMS is entered.” (Rec. Doc. 43 at 3). HMS

counters by arguing that despite the technical posture of its claim in indemnity, the

true nature of its claim is tortious in nature, thereby differentiating it from the

majority of “true” indemnity claims that are contractual or statutory in nature.

Moreover, HMS argues that there is no support under either Washington or

Louisiana law for the argument that an indemnity claim cannot be brought until after

adjudication of the underlying suit.

In general, a claim is “ripe if any remaining questions are purely legal ones;

conversely, a case is not ripe if further factual development is required.” Chevron

U.S.A. Inc., v. Traillour Oil Co., 987 F.2d 1138, 1153 (5th. Cir. 1993). To demonstrate

that a claim is ripe, a litigant must show “the fitness of the issues for judicial decision,

and (2) the hardship to the parties caused by withholding court consideration.”

Window Specialists, Inc. v. Forney Enters, 26 F. Supp. 3d 52 (D.D.C. 2014).

Here, the true facts at issue are ready for judicial decision. Franco has already

committed the acts that allegedly constitute a breach of his fiduciary duty. Conrad

has already instituted suit against HMS based on those acts, undoubtedly causing

HMS to incur legal fees and expenses. The fact that a determination of HMS’s liability

to Conrad has not yet occurred does not affect the Court’s ability to find whether

Franco breached his fiduciary duty to HMS.

Furthermore, adjudicating this case without Franco here is akin to a missing

seat at the table. A significant portion of this case will be dedicated to determining

Franco’s actions and deciding what legal significance to impart to them. Obtaining

and interpreting crucial operative facts without Franco will increase the difficulty of

properly assessing Conrad’s claims and HMS’s defenses, thereby causing the parties

hardship. Franco’s absence will cause further hardship as HMS will likely be forced

to relitigate this case to some extent, expending even more in legal fees and costs.

When it comes to indemnity claims specifically, courts use state law to

determine whether an indemnity claim is ripe. Northfield Ins. Co. v. Loving Home

Care, Inc., 363 F. 3d 523, 536-37 (5th. Cir. 2004).

Franco argues that the Court should use Washington law to analyze the

ripeness of an indemnity claim in this case. Despite not stating so explicitly, Franco

likely premises this argument on the fact that HMS’s breach of fiduciary claim will

be analyzed under Washington law. However, “the body of law that governs a claim

for indemnity or contribution usually is the same body of law that establishes the

indemnitee’s primary liability to the plaintiff.” Hardy v. Gulf Oil Corp., 949 F. 2d 826,

830 n.7 (5th. Cir. 1992) (citing Marathon Pipe Line Co. v. Drilling Rig

Rowan/Odessa, 761 F.2d 229, 235 (5th Cir.1985)). Here, Conrad’s claims against

HMS, the claims that would establish HMS’s liability, are governed by Louisiana law.

(Rec. Doc. 26-1 at p. 38). Regardless, under either Washington or Louisiana law,

HMS’s third-party indemnity claim is ripe.

A. Louisiana Law

In Suire v. Lafayette City–Parish Consolidated Government, 04–1459, 04–

1460, 04–1466 (La.4/12/05), 907 So.2d 37, 51, the Louisiana Supreme Court held that

“an indemnitor is not liable under an indemnity agreement until the indemnitee

actually makes a payment or sustains losses.” Id. Crucially, the Suire court’s holding

focused on when an indemnitor became liable, not when the indemnitee’s claim

became ripe. Subsequent Louisiana jurisprudence clarifies that “there is a distinction

between the right to ‘claim’ indemnity and the right to ‘collect’ indemnity.” Reggio v.

E.T.I., 07–1433, p. 11 (La.12/12/08), 15 So.3d 951, 960 (Weimer, J., concurring); see

Pizani v. St. Bernard Parish, 2012-1084 (La. App. 4 Cir. 9/26/13), 125 So.3d 546, 553;

Dean v. Entergy La., L.L.C., 10-887 (La. App. 5 Cir. 10/19/2010), 2010 WL 9447498 at

*4 (unpublished).

Although the right to collect indemnity does not accrue until the underlying

dispute is settled, the right to claim indemnity via impleader before adjudication of

the underlying dispute is “consistent with the legislative history and purpose of La.

C.C.P. art 1111.” Pizani, 2012-1084 at p. 10, 125 So. 2d at 553 (citing Moreno v.

Entergy Corp., 10–2268, p. 5 (La.2/18/11), 64 So.3d 761, 765–66) (Victory, J.,

concurring).3 This is consistent with the purpose of the impleader procedure, which

is to “avoid multiple lawsuits; to facilitate and expedite the trial of litigation; and,

wherever possible, consistent with the orderly procedure and due regard for the rights

3 La. C.C.P. art. 11 states “[t]he defendant in a principal action by petition may bring in any person, including a

codefendant, who is his warrantor, or who is or may be liable to him for all or part of the principal demand.” Notably,

the language of La. C.C.P. art 11 tracks FRCP(14) in its entirety. In fact, Louisiana courts have relied on federal courts

interpretation of FRCP(14) when holding that third-party indemnity impleader claims are allowed before settlement

of the underlying suit. See Pizani, 2012-1084 at p. 12-13, 125 So. 2d at 554-55.

of all litigants, to dispose of all three phases of an action in a single proceeding.”

Breaux v. Texas & P. Ry. Co., 147 So.2d 693 (La. App. 1 Cir. 1962).

The present case is an excellent example of the rationale behind impleader.

HMS’s defenses against Conrad and claims against Franco present the same legal

issues and arise out of identical facts. Allowing HMS to implead Franco reduces

litigation costs and the possibility of inconsistent rulings. All questions of liability

and fault surrounding the Vessels will be adjudicated and handled in one proceeding.

Moser v. Navistar International Corp., No. 17-598, 2019 WL 763480 *4 (E.D.

Tex. Feb. 2019) addressed the precise issue before the Court, namely whether a claim

for indemnity brought under Louisiana law before the indemnitee “actually makes

payment or sustains loss” is constitutionally ripe. Id. After a thorough review of

Louisiana jurisprudence, the Moser court held that the indemnitee “may plausibly

assert its third-party claims under Louisiana case law. Therefore, dismissal is

improper at this time.” Id. This further persuades the Court that its interpretation of

the interplay between Louisiana indemnity law and ripeness is correct, and Franco’s

motion for dismissal of HMS’s third-party claim for lack of subject matter jurisdiction

must fail if analyzed under Louisiana law.

B. Washington Law

Franco has not cited, nor has the Court’s independent research revealed, any

Washington state court decisions addressing the ripeness of an indemnity claim.

Rather Franco’s proffered legal support, Sabey v. Howard Johnson & Co., 101 Wash.

App. 575, 593, 5 P. 3d 730, 739 (2000), is inapposite.

Sabey does not discuss the ripeness of indemnity claims at all. Instead, Sabey

stands for the proposition that under Washington law an indemnity claim accrues for

statute of limitation purposes “when the party seeking indemnity pays or is legally

adjudged obligated to pay damages to a third party.” Id. Franco’s argument assumes

that accrual and ripeness are synonymous. On the contrary, “once a claim has accrued

it is necessarily ripe; but the converse, that once a claim is ripe it has necessarily

accrued for statute-of-limitations purposes, need not follow.” Jones v. Allen, 483 F.

Supp. 2d 1142, 1149 (M.D. Ala. Apr. 2007). Thus, it is entirely possible for a claim to

be ripe for standing purposes but to have not yet accrued for statute of limitations

purposes. See 6 Wright & Miller, FED. PRAC. & PROC. CIV. § 1451 (3d ed.) (“Rule

14 allows defendant to implead one ‘who ... may be liable’ to the third-party plaintiff

for all or part of the plaintiff's claim against it. The words ‘may be liable’ mean that

defendant is permitted to join someone against whom a cause of action has not yet

accrued, provided that the claim is contingent upon the success of plaintiff's action

and will accrue when defendant's liability is determined in the main action or

plaintiff's claim is satisfied.”) (emphasis added).

In further support of the conclusion that Washington’s indemnity accrual

jurisprudence has no bearing on indemnity ripeness, Washington federal district

courts routinely find that indemnity claims seeking declarations as to the duty to

indemnify are ripe before liability is found as to the underlying claim. See Allstte

Indem. Co. v. Pacheco, 14-5366, 2014 WL 5421187 at *4 (W.D. Wash. Oct. 2014);

Canal Indem. Co. v. Adair Homes, Inc., No. 09-5561BHS, 2010 WL 3021874 at *2;

Lamar Co., LLC. v. Continental Cas. Co., No. 05-320, 2006 WL 1210228 at *5.

Washington seems to have reached a similar balance as Louisiana. While the

collection of indemnity or the accrual of an indemnity claim does not begin until some

imposition of damages or liability on the indemnitee, that does not prohibit the

impleading of or bringing suit against the potential indemnitor before full resolution

of the underlying liability.

Accordingly, regardless of whether Louisiana or Washington law governs the

ripeness of the indemnity claim, the Court finds that HMS’s third-party claim is ripe

and therefore the Court possesses subject-matter jurisdiction.

II. WHETHER THE COURT HAS PERSONAL JURISDICTION OVER FRANCO

In order to assert personal jurisdiction over Franco, the Court must establish

two things. First, that Franco’s contacts with Louisiana were truly outside the scope

of his authority as CEO of HMS, thereby making the contact attributable to him

personally. See Stuart v. Spademan, 772 F. 2d 1185, 1197 (5th.Cir. 1985) (“[A]n

individual’s transaction of business within the state solely as a corporate officer does

not create personal jurisdiction over that individual though the state has in personam

jurisdiction over the corporation.”). Secondly, even if the contacts are attributable to

Franco personally, it must be established that said contacts are sufficient to establish

personal jurisdiction.

A. Whether Franco Exceeded His Corporate Authority in His

Negotiations Regarding the Vessels

Resolving all facts in favor of jurisdiction, the Court has little difficulty in

finding that Franco’s activities directed towards Louisiana exceeded the scope of his

authority as CEO of HMS, thereby making his activities attributable to him

personally. Luv N'Care, Ltd., 438 F.3d at 469. The declaration of Matthew Gooden,

current CEO/President of HMS and former COO of HMS under Franco, unequivocally

asserts that all activity directed towards Conrad was initiated and orchestrated by

Franco personally, not Franco in his capacity as head of HMS. (Rec. Doc. 32-1).

The key facts stated in Mr. Gooden’s declaration are as follows: (1) Franco

contacted Conrad in 2017 to begin negotiations regarding the purchase of the Vessels;

(2) Franco had no authorization or approval from the HMS board to direct HMS

employees to negotiate and communicate with Conrad regarding the Vessels; (3)

absent such authorization or approval, Franco had no authority to direct HMS

employees interact with Conrad on his personal behalf; and (4) all negotiation and

interaction between HMS employees and Conrad was actually undertaken at the

behest of Franco. Id. Thus, HMS has properly alleged that that Franco engaged in

tortious activity outside of his role as a corporate representative, thereby potentially

subjecting himself to personal jurisdiction. See Dykes v. Maverick Motion Picture

Group, LLC, No. 08-536, 2011 WL 900276 at *5 (M.D. La. Mar. 2011).4

B. Whether Franco’s Activities Constitute Minimum Contacts

4 Although not relevant to the ultimate success of HMS’s breach of fiduciary duty claim in the present case before this

Court, the detailed allegations of corporate impropriety levied against Franco in Washington state court (Rec. Doc.

32-5), support HMS’s overall narrative that Franco was acting in breach of his fiduciary duty.

HMS’s assertion that all negotiations, activities, contacts, etc. undertaken by

HMS employees in connection with the Vessels were undertaken for Franco

personally and not HMS is particularly important when analyzing whether the Court

has personal jurisdiction over Franco. Taken as true, HMS’s allegations mean all the

activities and contacts Conrad attributes to HMS in its complaint are more properly

attributed to Franco. This includes (1) contacting Conrad in 2017 for the price of

acquiring the Vessels, (2) conducting several months of negotiations related to

pricing, financing, payment terms and other contractual issues, (3) convincing

Conrad to proceed with construction of the Vessels by representing that HMS was in

the process of finalizing financing arrangements with CAT Financing, (4) directing

employees of HMS, including employees in key officer positions, to be copied on

correspondence between himself and Conrad, (5) arranging for the two Winches

owned by HMS to be sent to Conrad for eventual placement on the Vessels,5 (6)

directing HMS representatives to engage in post-contract discussions with Conrad

regarding payment of invoices, and (7) directing HMS employees to attend the project

kick-off meeting, attend project status meetings, and handle all change orders and

questions of design. (Rec. Doc. 1 at para. 12-27).

The Court finds the Fifth Circuit’s opinion in Panda Brandywine Corp. v.

Potomac Elec. Power. Co., 253 F.3d 865 (5th.Cir.2001) to be instructive when

answering the question of its jurisdiction over Franco. In Brandywine, the plaintiff

5 The Court is only noting the shipment of the Winches to Conrad as part of Franco’s alleged unauthorized conduct

that led to Conrad believing HMS was the true party-in-interest to the contract. (Rec. Doc. 1 at Para. 24). The Court

is explicitly not finding that HMS has properly plead a claim against Franco for the value of the Winches.

was suing the defendant for tortious interference with plaintiff’s financing

agreements. Id. at 867. Plaintiff was a Delaware corporation with its principal place

of business in Texas, and the defendant was a Virginia corporation with its principal

place of business in Washington D.C. Id. The alleged tortious interference was

defendant’s divestiture of certain electricity-generating assets and power-purchasing

contracts, which allegedly caused plaintiff harm in Texas. Plaintiff then brought suit

in Texas. Id. In determining whether Texas possessed jurisdiction over the defendant,

the court looked to whether defendant had “invoked the benefits and protections of

Texas’s laws when it acted to divest its interests” in the financing agreements Id. at

869. Ultimately, the court found Texas did not possess jurisdiction over defendant

because “the financing agreements [were] not governed by Texas law, [were] not to

be performed in Texas, and have no relation other than the fortuity that [plaintiff]

resides there. Id. at 870.

Subsequent Fifth Circuit decisions expanded on the jurisdictional principles

discussed in Brandywine. “A non-resident can establish contact with the forum [state]

by taking purposeful and affirmative action, the effect of which is to cause business

activity (foreseeable by the defendant) in the forum state.” Central Freight Lines, Inc.

v. APA Transp. Corp., 322 F.3d 376, 382 (5th Cir. 2003). The business activity is

“foreseeable by the defendant” if the forum state is “clearly the hub of the parties’

activities.” Moncrief Oil. Intern. Inc. v. OAO Gazprom, 481 F.3d 309, 313 (5th. Cir.

2007). The most important consideration in determining the “hub of the parties’

activities” is where the work contemplated by the contract is to be done. Id. In Central

Freight Lines, the court placed heavy emphasis on the lack of a forum selection or

choice-of-law clause of another state when upholding jurisdiction over the defendant

in Texas. 322 F.3d 383. The lack of such a clause made it much more likely the

defendant was aware of the possibility of being haled into court in Texas. Id.

Conversely, in OAO Gazprom, the court found the existence of a foreign arbitration

and choice-of-law clause militated strongly against a finding of personal jurisdiction

in the forum state. 481 F.3d at 313.

Here, Franco took purposeful and affirmative action by initiating and

conducting negotiations with Conrad that he intended to result in the building of the

Vessels in Louisiana. All significant activity contemplated by the contract was to take

place in Louisiana. Not only does the Purchase Agreement lack a choice-of-law or

forum selection clause for a non-Louisiana state, but it in fact contains an extremely

strong choice-of-law and venue provision in favor of Louisiana and Louisiana law.

(Rec. Doc. 26-1 at p. 38); Cf. Jones v. Petty–Ray Geophysical, Geosource, Inc., 954 F.2d

1061, 1069 (5th Cir.1992) (stating that forum-selection and choice-of-law clauses

“indicate rather forcefully” that defendant “did not purposefully direct its activities

towards Texas.”). Thus, a fortiori, Franco was even more acutely aware of the

possibility of being haled into court in Louisiana than if the Purchase Agreement had

merely been silent regarding forum selection and choice-of-law.

Moreover, unlike the defendant in Brandywine whose tortious conduct was not

directed towards Texas in any way, Franco repeatedly sent communications to

Louisiana that were an alleged breach of his fiduciary duty. “When the actual content

of communications with a forum gives rise to intentional tort causes of action, this

alone constitutes purposeful availment.” Wien Air Alaska, Inc. v. Brandt, 195 F.3d

208, 213 (5th. Cir. 1999). In Brandt, the court found the existence of personal

jurisdiction when the claim “arises from a breach of fiduciary duty based on a failure

to disclose material information…[and] the [defendant] continually communicated

with the forum while steadfastly failing to disclose material information.” Id. Here,

HMS’s claim for breach of fiduciary duty is based on Franco’s continued

misrepresentations to Conrad as to his authority as CEO to engage in the Vessels

transaction on HMS’s behalf. See Central Freight Lines, 322 F.3d at 383 (“[I]t is clear

that specific personal jurisdiction may be based on intentionally tortious conduct that

is purposefully directed toward the forum state.”).

Furthermore, the Brandt court noted the immateriality of the number of

defendant’s physical visits to the forum state in cases where the claim arises from the

content, or lack thereof, of defendant’s communications. Id. (“[I]t is an inescapable

fact of modern commercial life that a substantial amount of business is transacted

solely by mail and wire communications across state lines, thus obviating the need

for physical presence within a state in which business is conducted.”) (citations

omitted). Accordingly, the Court finds that Franco’s repeated negotiations, both

personally and via HMS employees, with Conrad to build and eventually purchase

Vessels in Louisiana constitute sufficient contacts that Franco could reasonably

anticipate being haled into Court in Louisiana. See id.

C. Whether HMS’s Claim Arises Out of or Relates to Franco’s

Activities

The Court further finds that HMS’s cause of action arises out of Franco’s

contacts with Louisiana. See Pervasive Software, 668 F.3d at 221. Franco’s conduct

and communications with Conrad giving rise to HMS’s third-party complaint are the

same conduct and communications subjecting Franco to jurisdiction in Louisiana. See

Central Freight, 322 F.3d at 383; see also Brandt, 195 F. 3d at 213. It is, in fact, the

exact same contacts and conduct upon which Conrad based its initial complaint

against HMS. The primary disputed issue between HMS and Franco is which party

was truly responsible for those contacts, Franco in his personal capacity or Franco as

a representative of HMS.

Franco attempts to argue that because “HMS’s third-party complaint arises

out of Mr. Franco’s relationship with HMS—a relationship having its hub in

Washington,” the claim does not arise of Franco’s contacts with Louisiana. (Rec. Doc.

26-1 at p. 81). The Court is not persuaded. Franco offers no legal support for this

metaphysical take on specific jurisdiction analysis. The crux of a specific jurisdiction

analysis is the defendant’s actual conduct, not legal technicalities such as HMS and

Franco’s relationship being governed by Washington fiduciary law. See Luv N’ Care,

Ltd., 438 F.3d at 471 (declining to consider “technicalities”). “A minimum contacts

analysis is more realistic than mechanical, turning on matters of substance rather

than form.” In re DePuy Orthopaedics, Incorporated, Pinnacle Implant Hip Product

Liability Litigation, 888 F. 3d 753, 779 (5th. Cir. 2018) (citing Bd. Of Cty. Comm’rs v.

Umbehr, 518 U.S. 668, 680 (1996)) (“In determining what is due process of law regard

must be had to substance, not to form.”)

Here, the actual conduct or communication giving rise to HMS’s indemnity

claim was directed at Louisiana. Franco has offered no legal support for his argument

that because his contacts with Louisiana constituted a breach of Washington

fiduciary law, the Court should treat HMS’s suit as arising out of Franco’s contacts

with Washington, not Louisiana. Doing so would be precisely the sort of formulaic

analysis that is inappropriate when analyzing personal jurisdiction. See id. Instead,

the Court finds that the substance of HMS’s third-party indemnity claim clearly

arises out Franco’s allegedly unauthorized communications and negotiations directed

towards an entity in Louisiana, thereby satisfying the requirement that HMS’s action

arises out of or is related to Franco’s contacts with Louisiana. Pervasive Software, 688

F.3d at 221.

D. Whether Exercise of Jurisdiction over Franco is Fair or Reasonable

Because HMS has established a prima facie case that Franco has minimum

contacts with Louisiana, the burden now shifts to Franco to show that the exercise of

jurisdiction would be unreasonable. Luv N’ Care, 438 F.3d at 473. The Court considers

five factors when determining if exercising jurisdiction over Franco would be

reasonable. “(1) [T]he burden on the nonresident defendant, (2) the forum state’s

interests, (3) the plaintiff’s interest in securing relief, (4) the interest of the interstate

judicial system in the efficient administration of justice, and (5) the shared interest

of the several states in further fundamental societal policies.” Id.

First, Franco has failed to identify any burdens outside of the basic

inconveniences imposed on any party to litigation, such as “having to travel to

Louisiana for depositions, hearings, and trial and retain local counsel.” (Rec. Doc. 26-

1 at p. 2). Not only are such inconveniences present in every litigation but considering

both Franco’s position as sole owner of the Franco LLCs and that Franco’s behavior

is a substantial component of HMS’s defense, Franco will be subject to the

inconveniences of this case to some degree regardless of whether he is personally a

party.

Second, Louisiana has an interest in fully adjudicating a contract dispute

regarding Vessels constructed in Louisiana and governed by Louisiana law. Franco’s

reliance on Asahi Metal Industry Co. Ltd. v. Superior Court of California, Solano

County, 480 U.S. 102, (1987), is misplaced. Franco relies on Asahi for the proposition

that the forum state has a lessened interest when the claim is for indemnification

and the indemnitee is not from the forum state. As part of its analysis in determining

California lacked interest in a Japanese company’s claim for indemnification over a

Taiwanese company, the Asahi court noted that “[a]ll that remains is a claim for

indemnification” and “the transaction on which the indemnification claim is based

took place in Taiwan.” Id. at 115.6 Here, there is more than just HMS’s claim for

indemnification against Franco. Conrad’s claim, which HMS’s claim is essentially

derivative of, is still pending before the Court. Moreover, HMS’s indemnification

6 To the extent Louisiana does have a lessened interest, it is worth nothing the Asahi Court based its ultimate finding

of unreasonableness on a combination of “the international context, the heavy burden on the alien defendant, and the

slight interests of the plaintiff and the forum state.” Asahi, 480 U.S. at 116. There is no international context or heavy

burden on an alien defendant in the present case.

claim is based on Franco’s allegedly unauthorized conduct concerning a transaction

entered into in Louisiana. Thus, the Court finds Louisiana has an interest in

adjudicating this dispute.

Third, HMS has an interest in litigating this issue in Louisiana to avoid

duplicity of litigation. HMS’s defense to Conrad’s claims present precisely the same

legal and factual issues that give rise to its cause of action against Franco. Forcing

HMS to litigate essentially the same case in two different courts not only risks

inconsistent results, but also subjects HMS to additional expenses and burdens.

Fourth and fifth, the efficient administration and the shared interest of the

several states in furthering fundamental societal policies counsel the Court that

exercising jurisdiction over Franco is not unreasonable. Exercising jurisdiction over

Franco allows arguments and claims related to the Vessels to be litigated in one case,

thereby furthering the efficient administration of justice and expediting an end to

this particular dispute. For the foregoing reasons, the Court finds Franco has failed

to meet his burden evincing that the establishment of personal jurisdiction is

unreasonable. See Pervasive Software, 688 F.3d at 221-22.

III. WHETHER THE COURT SHOULD DISMISS HMS’S CLAIM UNDER THE

DOCTRINE OF FORUM NON CONVENIENS

The doctrine of forum non conveniens allows a court to “decline jurisdiction

and [to] actually dismiss a case, even when the case is properly before the court, if

the case could more conveniently be tried in another forum.” In re Volkswagen of Am.

Inc., 545 F.3d 304, 313 (5th. Cir. 2008). In determining whether to utilize forum non

conveniens, a court must first decide whether there exists an adequate and available

alternative forum. Gonzalez v. Chrysler Corp., 301 F.3d 377, 379-80 (5th. Cir. 2002).

An alternative forum is available if the parties will be subject to the new forum’s

jurisdiction, and it is adequate “if the parties will not be deprived of all remedies or

treated unfairly. Id. Here, it is undisputed that the state of Washington is a viable

alternative forum.7

Nevertheless, the doctrine of forum non conveniens has been severely

restricted in recent years. In 2007, the Supreme Court, in Sinochem International

Company, Ltd. v. Malaysia International Shipping Corp., stated that “[t]he common-

law doctrine of forum non conveniens has continuing application in federal courts

only in cases where the alternative forum is abroad, and perhaps in the rare instances

where a state or territorial court serves litigational convenience best.” 549 U.S. 422,

430 (2007). The Sinochem court does not elaborate on what facts may give rise to the

“rare instances” that warrant forum non conveniens dismissal in favor of a state

court, nor has the Court’s independent research revealed a case that defines the “rare

circumstances” exception. See Waste Management of Louisiana, L.L.C. v. Jefferson

Parish, 48 F. Supp. 3d 894, 906 n. 110 (E.D. La. Sept. 2014). Regardless, the Court

finds that whatever “rare circumstances” is intended to encompass, this case does not

fit the definition.

7 Both Franco and HMS are citizens of Washington.

Litigational convenience in the forum non conveniens context is determined

after consideration of both the public and private factors elucidated by the Supreme

Court in Gulf Oil v. Gilbert, 330 U.S. 501 (1947). The factors include:

Private Factors

(1) the relative ease of access to sources of proof;

(2) the availability of compulsory process to secure the attendance of witnesses;

(3) the cost of attendance for willing witnesses;

(4) whether the plaintiff has sought to vex, harass, or oppress the defendant;

and

(5) all other practical problems that make trial of a case easy, expeditious and

inexpensive.

Public Factors

(1) the administrative difficulties flowing from court congestion;

(2) the local interest in having localized controversies decided at home;

(3) the familiarity of the forum with the law that will govern the case;

(4) the avoidance of unnecessary problems of conflict of laws and the

application of foreign law and

(5) the unfairness of burdening citizens in an unrelated forum with jury duty.

DTEX, LLC v. BBVA Bancomer, S.A. 508 F. 3d 785, 794 (5th. Cir. 2007). A

weighing of the public and private factors in this case does not favor Franco enough

to qualify as a “rare circumstance” and thereby invoke forum not conveniens.

The private factors militate against dismissal. It is true that many important

witnesses in this matter are located in Washington. (Rec. Doc. 26-1). Conversely, it is

also true that Louisiana is home to many crucial witnesses. (Rec. Doc. 32-6). Franco

identifies key witnesses from Washington who are no longer HMS employees, and

thus will not be subject to compulsory process in this Court. However, HMS identifies

even more key witnesses from Louisiana, primarily Conrad employees, who would

not be subject to compulsory service in Washington. Furthermore, HMS is not seeking

to “vex” or “harass” or Franco by bringing him into a suit in Louisiana. See DTEX,

508 F.3d at 794. HMS is bringing its claims against Franco in Louisiana for the

simple reason that Conrad is a Louisiana entity who brought suit against HMS in

Louisiana, and HMS’s primary defense is Franco’s alleged misconduct.

Ultimately, forcing HMS to bring its indemnification claim in Washington

would “result in increased costs for the parties, as they will be forced to litigate in

both fora, in addition to the possibility of inconsistent rulings that may result from

conducting trials in two jurisdictions.” Brice v. C.R. England, Inc., 278 F. Supp 2d

487, 490 (E.D. Pa. Aug. 2003).8 The benefits of adjudicating all disputes over the

Vessels in one action means the private factors weigh in favor of retaining HMS’s

third-party claim over Franco.

8 In Brice, the court dismissed because a case on very similar grounds was already pending in Ohio state court. 278 F.

Supp. at 490. Here, the present action is the first case attempting to adjudicate the Vessels dispute.

Franco argues that the public factors are heavily in his favor because “the

dispute between Mr. Franco and HMS is a controversy that is local to Washington,

and Washington courts have an interest in resolving this dispute, which will be

governed by Washington law.” (Rec. Doc. 26-1 at p. 12). Franco’s arguments

consistently misconstrue HMS’s complaint as an independent claim arbitrarily

brought against Franco in Louisiana. The fact remains that Conrad, a Louisiana

entity, initiated this lawsuit. The ultimate question to be answered by the various

claims in this suit is who is responsible for the roughly $18 million owed to Conrad

under the Purchase Agreements—HMS, the Franco LLC’s, or Franco himself. Unlike

a minimum contacts analysis, which requires the Court to analyze HMS’s third-party

claim independently from Conrad’s suit against HMS, there is no requirement that

the Court ignore practical consequences of Conrad’s initial suit when conducting a

forum non conveniens analysis. 9

The ongoing litigation between HMS and Franco in Washington state court

has very little to do with the facts of this case. (Rec. Doc. 26-1). Whether either party

wronged the other over the course of Franco’s time as head of HMS is of little

consequence to the specific dispute at issue here; namely, whether Franco exceeded

his authority during negotiations with Conrad such that he is liable to HMS for any

misrepresentation he made on HMS’s behalf during negotiations.

9 Seiferth v. Helicopteros Atunderos, Inc., 472 F. 3d 266, 275 n. 6 (5th. Cir. 2006) (“There is no such thing as

supplemental specific personal jurisdiction; if separate claims are pled, specific personal jurisdiction must

independently exist for each claim.”) (quoting 5B Charles Alan Wright & Arthur Miller, Fed. Prac. & Proc: Civil 3d

§ 135, at 299 n. 30 (2004)).

Franco further posits that the public interest factors weigh in his favor because

Washington fiduciary law will govern HMS’s claim. Assuming arguendo that Franco

is correct about the application of Washington law to HMS’s claim, the application of

said Washington law to HMS’s claim may weigh in favor of dismissal. See Dart-

Barnett Operating Co., LLC v. Esperada Texas, LP, No. 07-1099, 2008 WL 4056783

(W.D. Mich. Aug. 2008). Moreover, while Washington does recognize indemnity based

on breach of duty, the Washington Supreme Court has never explicitly held a

defendant in Franco’s position to be liable for indemnity. See Fortune View

Condominium Ass’n v. Fortune Star Dev. Co., 90 P.3d 10, 62, 1067 (Wash. 2004).

Thus, the Court will be required to undergo an Erie analysis and attempt to

prognosticate as to whether the Washington Supreme Court would hold Franco liable

for such a breach of duty. See Ladue v. Chevron, USA., Inc., 920 F. 2d 272, 274 (5th.

Cir. 1991).

Nevertheless, it can hardly be said that it is a “rare circumstance” for a federal

court in one state to decide an issue using the law, even unsettled law, of another

state. See Moser, 2019 WL 763480 *4 (where a federal district court in Texas

interpreted an unclear question of Louisiana law). Furthermore, Franco’s case cited

in support, Dart-Barnett Operating, only found use of foreign law as grounds for

dismissal after determining the private interest factors favored neither party. 2008

WL 4056783 at *4. Here, the Court has determined the private factors weigh in favor

of retaining jurisdiction over HMS’s claim in Louisiana.

Thus, for the foregoing reasons, the Court declines to dismiss HMS’s third-

party claim against Franco under the doctrine of forum non conveniens.

CONCLUSION

Accordingly,

IT IS ORDERED that Third-Party Defendant Harley Franco’s Motion to

Dismiss Third-Party Claim for Lack of Subject-Matter Jurisdiction, Personal

Jurisdiction, or Forum Non Conveniens (Rec. Doc. 26) is hereby DENIED.

New Orleans, Louisiana, this 3rd day of January, 2020.

UK Bake

HK

CARL J. BARBIER

UNITED ST iE S DISTRICT JUDGE

27