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POSVEN v. LIBERTY MUTUAL INSURANCE CO.

January 12, 2004.

POSVEN, C.A., Plaintiff, -against- LIBERTY MUTUAL INSURANCE CO. d/b/a LIBERTY BOND SERVICES, Defendants LIBERTY MUTUAL INSURANCE CO. d/b/a LIBERTY BOND SERVICES, Defendants, Third-Party Plaintiffs, -against- POSCO ENGINEERING & CONSTRUCTION CO., LTD., Third-Party Defendants


The opinion of the court was delivered by: PETER LEISURE, District Judge Page 2 [EDITOR'S NOTE: THIS PAGE CONTAINED "ATTORNEYS' NAMES"] Page 3

OPINION AND ORDER

Plaintiff POSYEN, C.A. ("POSVEN") commenced this diversity action seeking damages for breach of a $39,375,000 performance bond ("Performance Bond" or "Bond") issued by defendant and third-party plaintiff Liberty Mutual Insurance Co. d/b/a Liberty Bond Services ("Liberty Mutual"). The Bond secured performance by Energy Overseas International, Inc. ("EOI") and United Engineers, Inc. ("UEI") on a series of contracts between POSVEN and EOI, UEI, and third-party defendant POSCO Engineering & Construction Co., Ltd. ("POSEC"). Liberty Mutual, in turn, brought a third-party complaint against POSEC for exoneration and quia timet, subrogation, contribution, reimbursement, restitution and indemnity. In response, POSEC now moves to dismiss the third-party complaint for lack of personal jurisdiction, pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure. Liberty Mutual opposes the motion to dismiss and has filed a cross-motion to transfer the entire action to the Eastern District of Pennsylvania pursuant to 28 U.S.C. § 1404(a). Both POSVEN and POSEC oppose transfer of venue. For the reasons set for below, the Court denies the motion to dismiss and grants the motion to transfer.

 I. BACKGROUND

  This case centers on the performance of various contracts relating to the construction of a hot-briquette iron facility in Peurto Ordaz, Venezuela ("the Project"). Plaintiff POSVEN is a Venezuelan company, with its principal place of business in Venezuela, formed as a joint venture among a number of companies including Pohang Iron & Steel Co., Ltd., third-party defendant POSEC — itself a subsidiary of Pohang Iron Page 4 & Steel Co., Ltd., and UEI for the purpose of owning and operating the Project. (Third Party Compl. ¶ 2; Willems Aff., Ex. D.)

  In 1997, POSEC, EOI, and UEI, formed a consortium and entered into a series of contracts ("the EPC Contracts") with POSVEN to provide engineering, procurement and construction services for the Project. (Willems Aff. Ex. C, E-H.) The EPC Contracts were not negotiated in New York and none of the parties to the EPC Contracts were New York citizens or residents (Koo Decl. ¶ 9-10); however, the EPC Contracts do contain New York choice of law provisions (Willems Aff, Exs. E-H). Under the EPC Contracts, EOI and UEI were required to furnish a performance bond for the benefit of POSVEN. (Compl. ¶ 7.) To fulfill this obligation, EOI and UEI obtained the Bond from defendant Liberty Mutual, a Massachusetts company with its principle place of business in Boston, Massachusetts and its headquarters in the Philadelphia, Pennsylvania area. (Compl. ¶¶ 2, 8; Liberty Mutual Opp. at 9 n.5.)

  In early 2001, problems began to arise relating to the quality of hot-briquette iron produced by the Project and the construction and engineering of the Project. POSVEN now alleges in its complaint filed January 25, 2002 that EOI and UEI breached the EPC Contracts in numerous respects, including failing to pay liquidated damages for delay and lack of performance to POSVEN, failing to perform required work and failing to correct deficient and defective work on the Project, abandoning the Project, and filing for bankruptcy. (Compl. ¶ 9.) POSVEN contends that because EOI and UEI are in default and have been declared to be in default of their obligations under the EPC Contracts POSVEN is entitled to the full sum of the Bond. (Compl. ¶¶ 10-12.) Page 5

  Liberty Mutual, in turn, alleges in its third-party complaint that POSEC, a Korean company with its principal place of business in the Republic of Korea, is jointly and severally liable for the alleged breaches of the EPC Contracts and moreover that the alleged breaches relate in substantial part to the performance of equipment supplied by POSEC as part of its obligations under the EPC Contracts. (Third Party Compl. ¶¶ 6-12.) Accordingly, Liberty Mutual seeks recovery from POSEC under various subrogation, contribution and indemnification causes of action. POSEC has moved to dismiss the third-part complaint on the grounds that it is not subject to personal jurisdiction in this Court. Liberty Mutual argues that this Court does have personal jurisdiction over POSEC but that if the Court is inclined to find otherwise, the appropriate course is to transfer venue to the Eastern District of Pennsylvania where, according to Liberty Mutual, POSEC is subject to personal jurisdiction.

  While most of the relevant acts and omissions in this case occurred in Venezuela, certain acts of jurisdictional significance occurred in both Pennsylvania and New York. Between 1997 and 2001, both UEI and EOI had their principal place of business in Philadelphia, Pennsylvania, where UEI performed most of its engineering and procurement duties under the EPC Contracts. (Marrone Decl. ¶ 3.) From February 1997 to October 1997, POSEC essentially ran a satellite office in space it rented within UEI's Philadelphia office. (Id.) As many as seven POSEC employees performed substantial procurement and engineering work relating to the EPC contracts out of this office, including taking part in meetings and other communications with UEI, EOI and various contractors and subcontractors and preparing reports outlining the progress of POSEC's performance under the EPC Contracts. (Marrone Decl. ¶ 3, Exs. 4-12.) In addition, Page 6 POSVEN corresponded extensively with the Philadelphia offices of UEO, EOI and POSEC via mail, facsimile and telephone regarding the Project. (Marrone Decl. ¶ 3.) After October 1997, POSEC maintained a liaison officer in Philadelphia through mid-February 1998. (Id.)

  The relevant contacts in New York occurred on May 16, 2001 when all of POSVEN's shareholders attended a meeting in New York City. The agenda for this meeting was to resolve the financial restructuring of POSVEN; however, the minutes of the meeting show substantial discussion regarding the construction and quality problems impeding the Project. (Id. ¶ 4 and Ex. 13.) Furthermore, the minutes indicate that the proposed financial restructuring was closely integrated with and largely contingent upon the resolution of these same construction and quality problems. (Id., Ex. 13). POSEC was represented at the meeting by POSVEN's general counsel, Mr. Fernando Pelaez Pier, Esq. (Id.) Mr. Pier was not an employee of POSEC, but rather was granted power of attorney for the purpose of representing POSEC in the May 16 meeting. (Supp. Koo Decl. ¶ 4.) Specifically, Mr. Pelaez Pier was authorized to represent POSEC in resolving the financial restructuring of POSVEN, including taking part in the deliberations and voting on this issue. (Supp. Koo Decl., Ex. A.)

 II. DISCUSSION

  A. Personal Jurisdiction

  On a Rule 12(b)(2) motion to dismiss for lack of personal jurisdiction, it is well established that "the plaintiff bears the burden of showing that the court has jurisdiction over the defendant." Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 171 F.3d 779, 784 (2d Cir. 1999); Metropolitan Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 566 (2d Cir. 1996). Page 7

  "Prior to discovery, a plaintiff may defeat a motion to dismiss based on legally sufficient allegations of jurisdiction." Metropolitan Life Ins. Co., 84 F.3d at 566. Where the parties have conducted discovery on the jurisdictional issue but no evidentiary hearing has been held, the plaintiff must aver facts that, if credited by the ultimate trier of fact, would establish jurisdiction over the defendant. Id. at 567. "Eventually, personal jurisdiction must be established by a preponderance of the evidence, either at an evidentiary hearing or at trial. But where the issue is addressed on affidavits, all allegations are construed in the light most favorable to the plaintiff and doubts are resolved in the plaintiff's favor, notwithstanding a controverting presentation by the moving party." A.I. Trade Fin. Inc. v. Petra Bank, 989 F.2d 76, 79-80 (2d Cir. 1993); see also United States Theatre Corp. v. Gunwyn/Lansburgh Ltd. Partnership, 825 F. Supp. 594, 595 (S.D.N.Y. 1993). The parties have not indicated in their pleadings whether they have actually engaged in discovery relating to the question of jurisdiction over POSEC; however, Liberty Mutual and POSEC have submitted affidavits and supporting documents supporting their jurisdictional arguments. The affidavits and documents of both parties are, for the most part, factually consistent and there are no significant disagreements over the jurisdictional facts in this case. Rather, the parties differ over the legal consequences of those facts. Accordingly, the Court will determine whether the facts, as alleged by third-party plaintiff Liberty Mutual, are legally sufficient to support personal jurisdiction over third-party defendant POSEC.

  "Absent a specific grant of jurisdiction, the reach of a federal district court's personal jurisdiction is coterminous with that of the personal jurisdiction of a court of general jurisdiction in the state in which the court sits." Geller Media Management, Inc. Page 8 v. Beaudreault, 910 F. Supp. 135, 137 (S.D.N.Y. 1996) (Leisure, J.) (citing Fed.R.Civ.P. 4(k)(1)(A)). Thus, "the amenability of a foreign corporation to suit in a federal court in a diversity action is determined in accordance with the law of the state where the court sits, with `federal law' entering the picture only for the purpose of deciding whether a state's assertion of jurisdiction contravenes a constitutional guarantee." Metropolitan Life Ins., 84 F.3d at 567 (quoting Arrowsmith v. United Press Int'l 320 F.2d 219, 223 (2d Cir. 1963) (en banc)). To determine whether it has personal jurisdiction over POSEC, the Court engages in a two-part inquiry. First, it must determine whether there is personal jurisdiction over POSEC under New York state law; second, if New York law provides for personal jurisdiction, the Court must determine whether the assertion of jurisdiction comports with the constitutional requirements of due process. Id.

  Third-party plaintiff Liberty Mutual contends that this Court has personal jurisdiction over third-party defendant POSEC pursuant to New York's long arm statute, which allows a court to exercise specific jurisdiction over a non-domiciliary who, in person or through an agent, "transacts any business within the state." N.Y. C.P.L.R. § 302(a)(1) (McKinney's 2001).*fn1 Under section 302(a)(1), jurisdiction is proper when: (1) Page 9 the defendant has transacted business in New York; and (2) the cause of action arises out of the subject matter of the transacted business. Id.; Cutco Indus., Inc. v. Naughton, 806 F.2d 361, 365 (2d Cir. 1986). A non-domiciliary transacts business under section 302(a)(1) when he "purposefully avails [himself] of the privilege of conducting activities within [New York], thus invoking the benefits and protections of its laws." Cutco Indus., 806 F.2d at 365 (quoting McKee Elec. Co. v. Rauland-Borg Corp., 20 N.Y.2d 377, 382, 283 N.Y.S.2d 34, 37-38 (1967)). Courts look to the totality of the circumstances to determine whether the defendant has engaged in such purposeful activity and require a "substantial nexus" between the business transacted and the cause of action sued upon. See PDK Labs, Inc. v. Freidlander, 103 F.3d 1105, 1109 (2dCir. 1997); Agency Rent a Car System. Inc. v. Grand Rent a Car Corp., 98 F.3d 25, 29-31 (2d Cir. 1996); Cutco Indus., 806 F.2d at 365; Cedric Kushner Productions, Ltd, v. Thobela, 1994 WL 163992 at *2 (S.D.N.Y. 1994) (Leisure, J.). In a breach of contract case, the central question is "whether the defendant has performed purposeful acts in New York in relation to the contract." Cedric Kushner Productions, 1994 WL 163992 at *2 (quoting A.C.K. Sports, Inc. v. Doug Wilson Enterprises, 661 F. Supp. 386, 390 (S.D.N.Y. 1989)). Notably, New York's provision for specific jurisdiction under section 302 does not extend as far as the federal Constitution permits. Cuccioli v. Jekyll & Hyde Neue Metropol Bremen Theater Produktion GMBH & Co., 150 F. Supp.2d 566, 572 (S.D.N.Y. 2001).

  Liberty Mutual argues that POSEC is subject to personal jurisdiction in this Court based on the attendance of its agent, Mr. Pelaez Pier, at the POSVEN shareholders meeting in New York on May 16, 2001 and further because the EPC Contracts are Page 10 subject to New York law.*fn2 The Court finds, however, that while these contacts do relate to this action, they are insufficient to submit POSEC to personal jurisdiction in New York.

  Although it initially denied attending any meetings in New York relating to the Project (Koo Decl. ¶ 10), POSEC now admits that it was represented by Mr. Pelaez Pier at the May 16 shareholders meeting (Supp. Koo Decl. ¶ 4). The minutes of the meeting clearly indicate that issues central to this litigation, including construction, engineering and quality problems at the Project, were discussed. (Marrone Dec., Ex. 13.) The minutes also clearly show that POSEC was present at the meeting, albeit through an agent. (Id.) POSEC argues, however, that its presence at the meeting does not provide a basis for personal jurisdiction because the single meeting does not rise ...


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