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Allied Dynamics Corp. v. Kennametal, Inc.

United States District Court, E.D. New York

September 4, 2013

ALLIED DYNAMICS CORP., Plaintiff,
v.
KENNAMETAL, INC. AND KENNAMETAL STELLITE, FORMERLY KNOWN AS MICROFUSIONE STELLITE S.P.A., Defendants

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For Plaintiff: Edward L. Birnbaum, Herzfeld & Rubin, P.C., New York, N.Y; Lydia Ferrarese, Mark A. Weissman, Herzfeld & Rubin, P.C., New York, N.Y.

For Defendants: Thomas J. Hall, Stacey Lynn Trimmer, Chadbourne & Parke LLP, New York.

OPINION

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MEMORANDUM AND ORDER

JOSEPH F. BIANCO, United States District Judge.

Plaintiff Allied Dynamics Corporation (" plaintiff" or " Allied" ) brings this action against Kennametal, Inc. (" Kennametal" ) and Kennametal Stellite, formerly known as Microfusione Stellite S.p.A., (" MFS" ) (collectively, " defendants" ), alleging causes of action for breach of contract, negligent misrepresentation, fraud, and replevin.

This case relates to the business relationship that began between plaintiff, a corporation headquartered in New York, and MFS, a company doing business in Italy, back in 2007. Plaintiff, an engineer and manufacturer of turbine parts, sought to purchase blade parts from MFS for gas turbine assembly. In alleged reliance on MFS's representations about its experience producing the blades plaintiff desired and its ability to manufacture blades in the amount and quality that plaintiff required, plaintiff issued various purchase orders to MFS. According to plaintiff, MFS failed to provide goods of the quantity and quality promised. Thereafter, plaintiff initiated this lawsuit, alleging that MFS and its parent company, Kennametal, breached their contracts for the provision of blades to plaintiff, negligently and fraudulently misrepresented both their ability to perform under the contracts and the quality

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of the goods that they sent to plaintiff pursuant to the contracts, and have retained unlawful possession of tools that plaintiff sent them to aid in their manufacture of the blades.

Presently before this Court is defendants' motion to dismiss. Defendants move to dismiss the complaint on three grounds. First, defendants move, pursuant to Federal Rule of Civil Procedure 12(b)(2), to dismiss the complaint as to MFS for lack of personal jurisdiction. Second, defendants move, pursuant to Federal Rule of Civil Procedure 12(b)(3), to dismiss the action for improper venue (or, in the alternative, under the doctrine of forum non conveniens ). Finally, defendants move to dismiss various claims contained within the complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a plausible cause of action upon which relief may be granted.

For the reasons discussed in detail below, the Court denies defendants' Rule 12(b)(2) motion to dismiss as to MFS for lack of personal jurisdiction. As explained infra, the Court concludes that, because plaintiff has adequately alleged a prima facie case of personal jurisdiction over MFS, its exercise of jurisdiction over MFS is appropriate. Specifically, based on the facts alleged and the affidavits submitted on the issue of personal jurisdiction, the Court finds that its exercise of jurisdiction over MFS on all causes of action is proper under N.Y. C.P.L.R. § 302(a)(1) and the Due Process Clause of the Fourteenth Amendment.

However, the Court concludes that, given the disputed issues of fact that exist with regard to the forum selection clause issue discussed in detail below, an evidentiary hearing in connection with the Rule 12(b)(3) motion is necessary. Thus, the Court defers deciding defendants' Rule 12(b)(3) and Rule 12(b)(6) motions until an evidentiary hearing has been conducted.

I. Background

A. The Complaint

The following facts are taken from the complaint, including documents attached to or incorporated by reference in the complaint. These facts are not findings of fact by the Court. Instead, the Court assumes these facts to be true for purposes of deciding the pending motion, and will construe them in a light most favorable to plaintiff, the non-moving party.

1. General Business Relationship Between Plaintiff and MFS

Plaintiff, an engineer and manufacturer of turbine parts, began its business relationship with MFS, a manufacturing company headquartered in Italy that specializes in prevision investment castings for gas turbines, in 2007. (Compl. ¶ ¶ 17, 19, 20.) Plaintiff sought to purchase parts from MFS for gas turbine assembly. (Id. ¶ 20.) In order to do so, plaintiff issued purchase orders to MFS that included the description of the goods to be provided, the amount, the delivery date, and the price. (Id.) MFS would generally acknowledge the purchase orders it received from plaintiff via a telephone call or e-mail. On certain occasions, MFS would also send plaintiff a formal written confirmation order. (Id. ¶ 21.)

" As part of the agreement among the parties, [plaintiff] provided MFS with the tools to case the engine parts in compliance with the requested specifications." (Id. ¶ 22.) Plaintiff bore the costs of producing those tools. (Id.) Also " [p]ursuant to the agreement between the parties, and as customary in the industry, MFS undertook to complete required inspections prior to the delivery of the products," which included x-rays, fluorescent penetrant inspection

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(" FPI" ), and dimensional check reports. (Id. ¶ 23.)

2. Purchase Orders for W251 Blade 1

In the fall of 2007, plaintiff participated in a videoconference with MFS. During that conference, Gabriele Tuzi (" Tuzi" ), MFS's sales director, and Carlo Mauri (" Mauri" ), MFS's technical director, represented to David Mott (" Mott" ), plaintiff's sales manager, MFS's ability to manufacture W251 Blade 1 (" Blade 1" ). (Id. ¶ 24.) During that videoconference, Tuzi and Mauri showed Mott a Blade 1 that they claimed to have manufactured. (Id.)[1] Tuzi also visited Mott at plaintiff's headquarters in New York to discuss MFS's ability to manufacture Blade 1. (Id. ¶ 25.) Moreover, during a conference call in June 2008, Mott again questioned Tuzi about MFS's ability to manufacture such blades, to which Tuzi replied that MFS was fully equipped to manufacture the engine parts. (Id. ¶ 26-27.)

In reliance on Tuzi's and Mauri's assurances, plaintiff proceeded to place orders for the product. (Id. ¶ 28 (indicating that plaintiff placed orders and began manufacturing the tools to case the engine parts " [i]n reliance" on the " false assurances concerning MFS's ability to manufacture the products" ).) On September 23, 2008, plaintiff issued a purchase order for Blade 1 to MFS for $194,665.92 (the " First Purchase Order" ). (Id. ¶ 30.) Pursuant to the First Purchase Order, 170 parts were to be delivered by October 1, 2009 and 88 parts were to be delivered by December 1, 2009. (Id.) Plaintiff provided MFS with wax tools to complete the First Purchase Order -- tools that plaintiff manufactured at its own expense. (Id.) The First Purchase Order also set forth MFS's " obligation to deliver certificates of completed chemical and mechanical analysis jointly with the products." (Id. ¶ 31.)

Plaintiff placed another order for Blade 1 with MFS, in the amount of $39,615.00 (the " Second Purchase Order" ). (Id. ¶ 32.)[2] The Second Purchase Order contained the same requirement that MFS x-ray each part, complete an FPI inspection, and conduct a dimensional check report before sending the products produced to plaintiff. (Id. ¶ 33.) Following the placement of the Second Purchase Order, MFS requested that plaintiff provide additional wax tools, as MFS had broken some of the tools originally provided by plaintiff. (Id. ¶ 34.) Plaintiff spent $100,388.00 on those additional tools. (Id.)[3]

On April 28, 2009, plaintiff issued a third purchase order for Blade 1, in the amount of $146,115.00 (the " Third Purchase Order" ). (Id. ¶ 38.) Like the purchase orders that came before it, the Third Purchase

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Order set forth MFS's obligation to conduct the requisite testing and inspection of the products before sending them to plaintiff. (Id. ¶ 39.)

On August 8, 2009, plaintiff placed a fourth order for Blade 1, in the amount of $133,366.00 (the " Fourth Purchase Order" ). (Id. ¶ 40.)[4] The cost to plaintiff of manufacturing the tools MFS needed to fulfill the Fourth Purchase Order was $300,000 plus an additional $175,000 to cast, machine, and coat the tools once manufactured. (Id. ¶ 42.) During the manufacture of these later purchase orders, MFS requested additional tool replacements, which plaintiff provided at its own expense. (Id. ¶ 44.) The costs plaintiff incurred for all of the additional tools MFS requested during its production of Blade 1 amounted to $20,000. (Id. ¶ 61.)

3. Purchase Orders for Additional Blades

At some point in time, MFS replaced Mauri with a new technical director, Hurlich Huber (" Huber" ). (Id. ¶ 46.) On " various occasions throughout 2010," Huber and Terry Williams (" Williams" ), one of MFS's lead engineers, represented to Mott MFS's capability to produce other highly complex blades. (Id. ¶ 47.) During a conference call in December 2010, Huber and Williams " described specific blades that, they asserted, could be successfully created by their company." (Id. ¶ 48.)[5]

In reliance on those representations, on January 26, 2011, plaintiff placed a purchase order for 13E2 Blade 4 (" Blade 4" ) and 13E2M05 Blade 5 (" Blade 5" ) engine parts, in the amount of $1,098,895.00 (the " Fifth Purchase Order" ). (Id. ¶ 49.) Plaintiff's cost of producing the tools MFS needed to fulfill the Fifth Purchase Order amounted to $500,000. (Id. ¶ 50.) Plaintiff also paid for the tests that would be conducted on the products to ensure their proper functioning, which cost € 46,000. (Id. ¶ 51.) After issuing the Fifth Purchase Order, plaintiff received orders for the blades and executed contracts for their sale with its customer Turbo Dynamics, for the price of $1,062,500 (for Blade 4) and $1,197,000 (for Blade 5). (Id. ¶ 53.)

4. MFS's Failure to Adequately Fulfill the Purchase Orders

Defendants delayed delivery of Blade 1 for quite some time. Despite its delay, MFS " maintained that it was fully capable to complete the purchase orders." (Id. ¶ 45.) In May 2011, MFS finally delivered 56 parts from the First Purchase Order. (Id. ¶ 36.) Several of those parts had " material defects," and the remaining parts that had not been sent were never delivered. (Id.) As a result, a customer of plaintiff's who had ordered the product, Aviation Technology & Turbine Services Inc. (" ATTS" ), cancelled the order it had placed (in the amount of $265,000) for the remaining parts. (Id.; see also id. ¶ 78.) Following the defective shipment and MFS's failure to complete the First Purchase

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Order, Mott sent an email to Bianchi, an MFS employee, requesting that MFS return the tools plaintiff had provided for production of Blade 1. (Id. ¶ 69.) Bianchi responded that the tools would be returned, and added the following: '" we failed, but we should have never taken this [sic] blades on board from start.'" (Id.)

On July 29, 2011, MFS delivered additional Blade 1 to plaintiff. (Id. ¶ 62.) The delivery was accompanied by the requisite inspection reports, which indicated that the parts complied with the specifications contained within the purchase orders, and that none of the parts were defective. (Id. ¶ 62.) Plaintiff then delivered Blade 1 to Energy Deployment, one of its customers (pursuant to Energy Deployment's April 26, 2009 order for $417,000 worth of product). (Id. ¶ 63; see also id. ¶ 80.) Before using the product, Energy Deployment conducted its own tests of the product (the same tests that MFS had allegedly completed) and discovered " a myriad of concealed defects, which should have -- and certainly could have -- been detected by MFS, had MFS truly performed the tests it certified were conducted." (Id. ¶ 64.) Energy Deployment then returned the products to plaintiff. Plaintiff paid an additional $75,000 to a third party to have the parts ...


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