The opinion
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TENNESSEE
KNOXVILLE DIVISION
CAPITAL PLUS CONSTRUCTION )
SERVICES, LLC, )
)
)
Plaintiff/Counter-Defendant,
)
)
vs.
)
) 3:19-CV-00471-DCLC-HBG
BLUCOR CONTRACTING, INC.,
)
)
Defendant/Counter-Plaintiff/ )
Third-Party Plaintiff, )
vs. )
)
STODGHILL & SONS MINING, LLC, )
)
)
Third-Party Defendant. )
MEMORANDUM OPINION AND ORDER
This matter is before the Court on Third-Party Defendant Stodghill & Sons Mining, LLC’s
(“Stodghill”) Motion to Dismiss for Lack of Personal Jurisdiction [Doc. 25]. Third-Party Plaintiff
Blucor Contracting, Inc. (“Blucor”) responded in opposition [Doc. 34] and Stodghill replied [Doc.
36]. This matter is now ripe for resolution. For the following reasons, Stodghill’s Motion to
Dismiss [Doc. 25] is DENIED.
I. BACKGROUND
In 2017, the Flood Control District of Maricopa County, Arizona hired Blucor as the
general contractor for a project in Phoenix, Arizona (“the project”) [Doc. 13, p. 2]. On January 1,
2019, Blucor accepted a bid proposal from Stodghill for the purpose of manufacturing and
delivering various rock products to the project [Id.]. Blucor and Stodghill entered into a
Subcontractor Agreement on January 30, 2019, in which Stodghill agreed to “supply and deliver
specified quantities and quality of rip-rap and gravel” to the project [Id.]. The Subcontractor
Agreement provides that Blucor would only be responsible for payment of rock meeting the
contract specifications, delivered by Stodghill, and incorporated into the project by Blucor [Id. at
p. 3]. Additionally, Stodghill agreed to indemnify Blucor from any and all liability, claims, suits,
damages, loss, judgment, or expense which may be incurred by Blucor for any reason of
Stodghill’s failure to timely and adequately perform under the Subcontractor Agreement [Doc. 14,
p. 10].
In March and April of 2019, Blucor asserts that Stodghill failed to deliver the rock in
compliance with the Subcontractor Agreement [Doc. 13, p. 3]. For example, Stodghill only
delivered 1,442 tons of rock rather than the 5,000 tons needed to meet Blucor’s construction
schedule in March 2019, and 495 tons rather than the 10,000 tons needed to meet Blucor’s
construction schedule in April 2019 [Id. at p. 4]. Blucor was also required to transfer 1,367 tons
of rock due to Stodghill’s inability to deliver the rock on its own [Id.]. In an attempt to increase
the speed and rate of delivery, Stodghill sought lending from an “underwriter,” later determined
to be CapitalPlus Construction Services, LLC (“CapitalPlus”), to obtain funds needed to repair
and/or supplement its hauling fleet [Doc. 34-1, p. 3]. On April 25, CapitalPlus notified Stodghill
that the addendum to the Subcontractor Agreement would need to be revised to “call out the scope
of [Stodghill’s] services and requirements by Blucor for payment of the two scopes which include:
1) generation and storage of the material on [Stodghill’s] site; and 2) delivery of the material to
the Blucor site.” [Id. at p. 28]. Stodghill subsequently informed Blucor of the required revisions
and the parties executed a Revised Addendum on May 1, 2019 [Id. at p. 36-38].
On May 6, 2019, Stodghill and CapitalPlus entered into a Master Accounts Receivable
Purchase and Security Agreement (“the Master Agreement”) pursuant to which CapitalPlus
purchased invoices from Stodghill, Stodghill assigned the invoices to CapitalPlus, and payment of
such invoices were directed to be remitted to CapitalPlus [Doc. 5, p. 1]. On May 8, 2019, Stodghill
sent Blucor documents titled “General Assignment” and “Invoice Verification” which both
contained the CapitalPlus letterhead [Doc. 14-4]. The Invoice Verification instructed Blucor to
verify that Invoice # 4646 for the amount of $529,220.62 would be paid by Blucor to Stodghill
and mailed to the Knoxville, Tennessee address of CapitalPlus [Id. at p. 2]. The General
Assignment, which Blucor Refers to as the “Joint Check Agreement,” provides, in relevant part:
Stodghill & Sons Mining, LLC has contracted with CapitalPlus Construction
Services, LLC (“CapitalPlus”) to provide a variety of services including but not
limited to: funds control and payment processing; lien rights compliance and
managing lien releases; risk management services; and providing working capital.
This partnership and availability of these services will enable Stodghill & Sons
Mining LLC to serve your organization in a more efficient and effective manner.
Therefore, payments for all invoices should be made payable to Stodghill & Sons
Mining LLC and mailed to Stodghill & Sons Mining LLC C/O CapitalPlus
Construction Services, LLC Dept #888083 Knoxville, TN 37995-0001.
Furthermore, for the aforementioned services, please allow this letter to serve as
written Notice of Assignment that CapitalPlus has been granted an assignment of
all accounts receivable of Stodghill & Sons Mining LLC. This assignment has been
duly recorded under the Uniform Commercial Code. Please make proper notations
on your Ledger. Please note that Blucor Contracting Inc. is not waiving any claims
that it may have against Stodghill & Sons Mining LLC, but is merely agreeing not
to assert those claims against CapitalPlus. Additionally, there will be no claims,
setoffs, or defenses of any nature against funds paid to CapitalPlus. This notice shall
not be modified and remain in full force and effect until you are notified by
CapitalPlus to the contrary. Tennessee Law, jurisdiction and venue shall apply
hereto. . .
[Id.]. On May 8, 2019, Blucor signed the General Assignment and Invoice Verification and
returned both documents to Stodghill [Doc. 34-1, p. 40].
Despite the funding provided by CapitalPlus, Blucor asserts that Stodghill continued to fail
to timely deliver the quantities or quality of specified rock throughout the summer of 2019 [Doc.
13, p. 7]. Blucor contends that it continued to make timely payments to Stodghill and CapitalPlus
for rock received or delivered for use on the project [Id.]. On August 5, 2019, CapitalPlus sent
Blucor a letter reiterating that Stodghill assigned and sold the invoice for Blucor’s project to
CapitalPlus and demanding payment of the invoice in the amount of $529,220.62 [Id.].
CapitalPlus directed Stodghill not to transfer any rock to the Blucor project without prior written
consent, subsequently gave written permission for Blucor to remove the rock that was ordered,
and then revoked such permission a week later [Doc. 34-1, p. 49-52]. The parties then negotiated
a “recovery plan” [Doc. 14, p. 8-9]. However, Blucor contends that, due to interference by
CapitalPlus, Stodghill continued to fail to produce, process, and make available the quality and
quantity of rock required for the project [Id. at p. 9]. Blucor asserts that the total value of rock
actually delivered for the project is $358,428.78 and that it has paid Stodghill and CapitalPlus a
total of $358,428.78 [Id.]. CapitalPlus asserts that, based on the assignment by Stodghill and
Blucor’s representation that the invoice amount was due and owing, it is entitled payment of the
balance of the $529,220.62 invoice.
Based on these facts, CapitalPlus initiated this action against Blucor in the Chancery Court
for Knox County, Tennessee on October 22, 2019 [Doc. 5] asserting claims for breach of contract,
promissory estoppel, and unjust enrichment/quantum meruit [Id. at p. 3-4]. Blucor removed the
action to this Court on November 19, 2019, based on diversity jurisdiction pursuant to 28 U.S.C.
§ 1332 [Doc. 1]. Following removal, Blucor filed counterclaims against CapitalPlus for intentional
interference with a business relationship, statutory and common law inducement and procurement
of breach of contract, and civil conspiracy [Doc. 13, p. 10-12] and a Third-Party Complaint against
Stodghill asserting claims for breach of contract, fraudulent inducement, negligent
misrepresentation, and civil conspiracy [Doc. 14, p. 11-14]. Stodghill filed the Motion to Dismiss
[Doc. 25] that is currently before the Court on February 7, 2020, asserting that this Court lacks
personal jurisdiction over it pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure.
II. LEGAL STANDARD
The plaintiff bears the burden of establishing personal jurisdiction. Weller v. Cromwell Oil
Co., 504 F.2d 927, 929 (6th Cir. 1974). A district court may decide whether to rule on a 12(b)(2)
motion upon a full trial record, after an evidentiary hearing, or merely on the basis of a written
record. Welsh v. Gibbs, 631 F.2d 436, 438-39 (6th Cir. 1980). The Court finds that the issue of
personal jurisdiction in this matter can be properly decided on the basis of the written record; thus,
the plaintiff must make a “prima facie showing that personal jurisdiction exists.” Theunissen v.
Matthews, 935 F.2d 1454, 1458 (6th Cir. 1991). The plaintiff can satisfy this burden by
“‘establishing with reasonable particularly sufficient contacts between [the defendant] and the
forum state to support jurisdiction.’” Neogen Corp. v. Neo Gen Screening, Inc., 282 F.3d 883, 887
(6th Cir. 2002) (quoting Provident Nat'l Bank v. California Fed. Savings Loan Ass'n, 819 F.2d
434, 437 (3d Cir. 1987)). Additionally, the Court “‘must consider the pleadings and affidavits in
the light most favorable to the plaintiff.’” Welsh, 631 F.2d at 439 (quoting Poston v. American
President Lines, Ltd., 452 F.Supp. 568, 571 (S.D. Fla. 1978)).
A federal court sitting in diversity must apply the law of the state in which it sits to
determine the existence of personal jurisdiction. Id. Tennessee’s long-arm statute1 is “coterminous
with the limits on personal jurisdiction imposed by the due process clause.” Payne v. Motorists'
Mut. Ins. Companies, 4 F.3d 452, 455 (6th Cir. 1993) (citing Masada Investment Corp. v. Allen,
697 S.W.2d 332, 334 (Tenn. 1985)). Thus, the Court need only determine whether the exercise of
1 Under Tennessee's long-arm statute, jurisdiction may be asserted on “any basis not inconsistent
with the constitution of [Tennessee] or of the United States.” Tenn. Code Ann. § 20-2-214(a)(6).
personal jurisdiction over Defendant would violate constitutional due process. Id. Personal
jurisdiction comes into two forms—general jurisdiction and specific jurisdiction. Conn v.
Zakharov, 667 F.3d 705, 712-13 (6th Cir. 2012).
General jurisdiction allows a court to hear any claims against such defendant when its
connections with the forum state are so “continuous and systematic” as to render it “at home” in
the state. Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011) (citing Int'l
Shoe Co. v. State of Wash., Office of Unemployment Comp. & Placement, 326 U.S. 310, 317
(1945). A corporation is “at home” in the state where its principal place of business is located or
in which it is incorporated. Daimler AG v. Bauman, 571 U.S. 117, 118 (2014). This Court has
extended this rule to limited liability companies. Convenience Network, Inc. v. AATAC, LLC, No.
3:18-CV-21, 2018 WL 10195667, at *2 (E.D. Tenn. Sept. 27, 2018) (holding that “in the context
of a limited liability company…general jurisdiction has typically been limited to the states where
the LLC is organized and/or keeps its principal office.”).
Specific jurisdiction focuses “on the relationship among the defendant, the forum, and the
litigation.” Shaffer v. Heitner, 433 U.S. 186, 204 (1977). A court may exercise specific jurisdiction
if 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.,
326 U.S. at 316 (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)). The Sixth Circuit applies
a three-part test to determine whether the exercise of specific jurisdiction is valid:
First, the defendant must purposefully avail himself of the privilege of acting in the
forum state or causing a consequence in the forum state. Second, the cause of action
must arise from the defendant's activities there. Finally, the acts of the defendant
or consequences caused by the defendant must have a substantial enough
connection with the forum state to make the exercise of jurisdiction over the
defendant reasonable.
S. Mach. Co. v. Mohasco Indus., Inc., 401 F.2d 374, 381 (6th Cir. 1968).
III. ANALYSIS
CapitalPlus is a Delaware limited liability company with its principal place of business in
Knoxville, Tennessee [Doc. 5, p. 1]. Blucor is incorporated in Arizona [Id.] and Stodghill is an
Arizona limited liability company with its principal place of business in Arizona [Doc. 14, p. 1-2].
Stodghill contends that this Court lacks general jurisdiction over it because “there are no
connections that are ‘continuous and systematic’ enough to render it “at home” in Tennessee [Doc.
26, p. 8]. Blucor does not argue in its response that this Court has general jurisdiction over
Stodghill [Doc. 34]. Therefore, the Court will focus its personal jurisdiction analysis on the
existence of specific jurisdiction and the requirements of (1) purposeful availment; (2) the cause
of action arises from the defendant's activities in the forum state; and (3) reasonableness of the
exercise of personal jurisdiction.
A. Purposeful Availment
Stodghill asserts that its dealings with CapitalPlus are “not broad enough to open the door
for personal jurisdiction against Stodghill in Tennessee.” [Doc. 26, p. 9]. Specifically, Stodghill
contends that “seeking funding from a Tennessee lender through a separate contract and assigning
payments under the subcontract to that lender in Tennessee is not purposeful availment of doing
business in Tennessee” [Id. at p. 10]. The majority of Blucor’s argument in response relies on the
assertion that Stodghill and CapitalPlus are “in a partnership and agency relationship.” [Doc. 34,
p. 17]. Although the Court must consider the pleadings and affidavits in the light most favorable
to Blucor, the Court “need not accept legal conclusions” as true. Morgan v. Church's Fried
Chicken, 829 F.2d 10, 12 (6th Cir. 1987).
Without regard to any legal assertions concerning a partnership and agency relationship,
Blucor argues that Stodghill purposefully availed itself of the privilege of acting in Tennessee
because Stodghill (1) “orchestrated and accomplished” amendments to the Subcontractor
Agreement at the direction of CapitalPlus; (2) executed the Master Agreement with CapitalPlus in
Tennessee; (3) appointed CapitalPlus as its “attorney-in-fact…to do and perform all acts, matters,
and things…as [Stodghill] could personally do”; (4) directed all payments by Blucor to be sent to
Stodghill “care of CapitalPlus at an address located in Knoxville, Tennessee”; and (5) agreed that
“Tennessee law, jurisdiction and venue” applied to the General Assignment. [Doc. 34, p. 16-19].
The requirement of “purposeful availment” protects out-of-state defendants from being
“haled into a jurisdiction solely as a result of ‘random,’ ‘fortuitous,’ or ‘attenuated’ contacts, or of
the ‘unilateral activity of another party or third person.” Burger King Corp. v. Rudzewicz, 471 U.S.
462, 475 (1985) (citations omitted). Thus, to establish purposeful availment, the defendant’s
contacts with the forum state must “proximately result from the actions by the defendant himself
that create a ‘substantial connection’ with the forum State.” Id. (quoting McGee v. Int'l Life Ins.
Co., 355 U.S. 220, 223 (1957)). Although the Supreme Court has recognized that a “contract with
an out-of-state party alone” is not enough to establish purposeful availment in the out-of-state
party’s home forum, it has “emphasized that parties who ‘reach out beyond one state and create
continuing relationships and obligations with citizens of another state’ are subject to regulation
and sanctions in the other State for the consequences of their activities.” Id. at 473 (quoting
Travelers Health Assn. v. Virginia, 339 U.S. 643, 647 (1950)).
Here, Stodghill has not been “haled into” court in Tennessee as a result of “random,”
“fortuitous,” or “attenuated” contacts, or of the “unilateral activity of another party or third
person.” Id. at 475. Rather, Stodghill’s contacts with Tennessee are a direct result of its own
actions. First, Stodghill solicited lending from CapitalPlus, a Tennessee LLC, for the sole purpose
of “assist[ing] Blucor and Stodghill in their relationship.” [Doc. 5, p. 3]. Stodghill and CapitalPlus
executed such lending arrangement, the Master Agreement, in Tennessee. Although this fact,
alone, cannot establish purposeful availment, Stodghill’s activities involving CapitalPlus and
Tennessee went far beyond the Master Agreement. Stodghill sent the General Assignment and
Invoice Verification documents from CapitalPlus, in Tennessee, to Blucor, in Arizona.
Furthermore, Stodghill signed the General Assignment, which specified that “Tennessee law,
jurisdiction and venue” applied thereto. [Doc. 14-4, p. 1]. The General Assignment also directed
Blucor to send all payments to Stodghill at CapitalPlus’s address in Knoxville, Tennessee. This
General Assignment further confirms that the purpose of the agreement between Stodghill and
CapitalPlus was to “enable [Stodghill] to serve [Blucor] in a more efficient and effective manner.”
[Id.].
Moreover, Stodghill, from the beginning of its relationship with CapitalPlus, allowed
CapitalPlus to significantly control its operations and dealings with Blucor. This is evidenced by
the ability of CapitalPlus to demand revision of the addendum to the Subcontractor Agreement
and essentially halt all removal or transfer of rock at Stodghill’s site. Stodghill reached out beyond
the state of Arizona and created continuing relationships and obligations with CapitalPlus in
Tennessee. Likewise, Stodghill also created continuing obligations for Blucor in Tennessee by
virtue of its agreement with CapitalPlus. Thus, Stodghill purposefully availed itself of the
privileges of the state of Tennessee and, as a result, is “subject to regulation and sanctions in
[Tennessee] for the consequences of [its] activities.” Burger King Corp., 471 U.S. at 473.
B. Cause of Action arises from Defendant’s Activities in the Forum State
As for the second element required for specific jurisdiction, Stodghill asserts that the causes
of action asserted in the Third-Party Complaint do not arise from the its activities in Tennessee
[Doc. 26, p. 10]. Stodghill argues that its only activities in Tennessee were its lending agreement
with CapitalPlus and assignment of payments by Blucor to CapitalPlus, and that Blucor’s claims
“arise solely from Stodghill’s contacts with Arizona” [Id. at p. 10-11]. In response, Blucor argues
that the claims in the Third-Party Complaint “all relate to or arise out of consequences and fallout
from [the] transaction of business” in Tennessee [Doc. 34, p. 20].
A cause of action arises from the defendant's activities in the forum state if the “defendant’s
contacts with the forum state are related to the operative facts of the controversy.” CompuServe,
Inc. v. Patterson, 89 F.3d 1257, 1267 (6th Cir. 1996). This “arising from” requirement involves a
“lenient standard.” Bird v. Parsons, 289 F.3d 865, 875 (6th Cir. 2002). The cause of action does
not have to “formally ‘arise from’ defendant’s contacts with the forum.” Third Natl. Bank in
Nashville v. WEDGE Group, Inc., 882 F.2d 1087, 1091 (6th Cir. 1989). The cause of action must
only “‘have a substantial connection with the defendant’s in-state activities’” Id. (quoting S. Mach.
Co., 401 F.2d at 384 n.27).
Stodghill’s contacts with the state of Tennessee—soliciting funding from CapitalPlus
solely to assist the relationship with Blucor, executing the Master Agreement in Tennessee,
directing payments from Blucor to Tennessee, and allowing CapitalPlus to extensively control its
operations with Blucor—are significantly related to the operative facts of the current controversy.
The Court, considering the facts in a light most favorable to Blucor, is not persuaded by Stodghill’s
argument that Blucor’s claims arise solely from Stodghill’s contacts with Arizona. The contracts
in this matter—the Revised Addendum to the Subcontractor Agreement, the Master Agreement,
and the General Assignment—are undeniably intertwined. CapitalPlus’s claims against Blucor
and Blucor’s claims against Stodghill are direct consequences of Stodghill’s solicitation of funding
from CapitalPlus and assignment of the Blucor invoice to CapitalPlus. In fact, Blucor asserts, with
respect to each of its third-party claims, that Stodghill is liable to Blucor for all or part of any
damages that Blucor incurs to CapitalPlus as a result of the original complaint against Blucor [Doc.
14, p. 11-14].
C. Exercise of Personal Jurisdiction is Reasonable
Finally, the third requirement of reasonableness is generally inferred to be met “[w]hen the
first two elements are met.” First Nat. Bank of Louisville v. J. W. Brewer Tire Co., 680 F.2d 1123,
1126 (6th Cir. 1982). Although Stodghill asserts that its connections to Tennessee are not
substantial enough to make this Court’s exercise of personal jurisdiction over it reasonable, the
Court has found that Stodghill purposefully availed itself of the privileges of Tennessee and that
this cause of action arises from Stodghill’s contacts with Tennessee. Tennessee has an interest in
resolving this dispute because CapitalPlus, a Tennessee LLC, asserts that it is owed damages from
Blucor, and Blucor asserts that Stodghill, rather than Blucor, is liable for all or part of those
damages.
Considering the three-part test for specific jurisdiction is satisfied, the Court finds that
Stodghill is subject to personal jurisdiction in Tennessee for this cause of action. Additionally,
because the Court finds that Stodghill’s contacts with Tennessee are sufficient to exercise specific
personal jurisdiction over it with respect to this matter, the Court need not address Blucor’s
alternative arguments concerning conspiracy jurisdiction, content-based jurisdiction, estoppel, and
pendent jurisdiction. [Doc. 34]
IV. CONCLUSION
Accordingly, for the reasons stated herein, Third-Party Defendant Stodghill’s Motion to
Dismiss [Doc. 25] is DENIED.
SO ORDERED:
s/ Clifton L. Corker
United States District Judge