FEDERATED RURAL ELEC. INS. v. KOOTENAI ELEC., 91-4083-R to 91-4098-R.

• Decision Date: 13 January 1993
• Docket Number: No. 91-4083-R to 91-4098-R.,91-4083-R to 91-4098-R.
• Citation: 812 F. Supp. 1139
• Parties: FEDERATED RURAL ELECTRIC INSURANCE CORPORATION, Plaintiff, v. KOOTENAI ELECTRIC COOPERATIVE, Defendant. FEDERATED RURAL ELECTRIC INSURANCE CORPORATION, Plaintiff, v. FALL RIVER RURAL ELECTRIC COOPERATIVE, INC., Defendant. FEDERATED RURAL ELECTRIC INSURANCE CORPORATION, Plaintiff, v. RURAL ELECTRIC COMPANY, Defendant. FEDERATED RURAL ELECTRIC INSURANCE CORPORATION, Plaintiff, v. LOST RIVER ELECTRIC COOPERATIVE, INC., Defendant. FEDERATED RURAL ELECTRIC INSURANCE CORPORATION, Plaintiff, v. PRAIRIE POWER COOPERATIVE, INC., Defendant. FEDERATED RURAL ELECTRIC INSURANCE CORPORATION, Plaintiff, v. SALMON RIVER ELECTRIC COOPERATIVE, Defendant. FEDERATED RURAL ELECTRIC INSURANCE CORPORATION, Plaintiff, v. MIDSTATE ELECTRIC COOPERATIVE, Defendant. FEDERATED RURAL ELECTRIC INSURANCE CORPORATION, Plaintiff, v. DOUGLAS ELECTRIC COOPERATIVE, INC., Defendant. FEDERATED RURAL ELECTRIC INSURANCE CORPORATION, Plaintiff, v. HOOD RIVER ELECTRIC COOPERATIVE, Defendant. FEDERATED RURAL ELECTRIC INSURANCE CORPORATION, Plaintiff, v. LANE ELECTRIC COOPERATIVE, INC., Defendant. FEDERATED RURAL ELECTRIC INSURANCE CORPORATION, Plaintiff, v. NESPELEM VALLEY ELECTRIC COOPERATIVE, INC., Defendant. FEDERATED RURAL ELECTRIC INSURANCE CORPORATION, Plaintiff, v. OKANOGAN COUNTY ELECTRIC COOPERATIVE, INC., Defendant. FEDERATED RURAL ELECTRIC INSURANCE CORPORATION, Plaintiff, v. TANNER ELECTRIC COOPERATIVE, Defendant. FEDERATED RURAL ELECTRIC INSURANCE CORPORATION, Plaintiff, v. OHOP MUTUAL LIGHT COMPANY, Defendant. FEDERATED RURAL ELECTRIC INSURANCE CORPORATION, Plaintiff, v. LINCOLN ELECTRIC COOPERATIVE, Defendant. FEDERATED RURAL ELECTRIC INSURANCE CORPORATION, Plaintiff, v. INLAND POWER & LIGHT CO., Defendant.
• Court: U.S. District Court — District of Kansas

812 F. Supp. 1139

FEDERATED RURAL ELECTRIC INSURANCE CORPORATION, Plaintiff, v. KOOTENAI ELECTRIC COOPERATIVE, Defendant.

FEDERATED RURAL ELECTRIC INSURANCE CORPORATION, Plaintiff, v. FALL RIVER RURAL ELECTRIC COOPERATIVE, INC., Defendant.

FEDERATED RURAL ELECTRIC INSURANCE CORPORATION, Plaintiff, v. RURAL ELECTRIC COMPANY, Defendant.

FEDERATED RURAL ELECTRIC INSURANCE CORPORATION, Plaintiff, v. LOST RIVER ELECTRIC COOPERATIVE, INC., Defendant.

FEDERATED RURAL ELECTRIC INSURANCE CORPORATION, Plaintiff, v. PRAIRIE POWER COOPERATIVE, INC., Defendant.

FEDERATED RURAL ELECTRIC INSURANCE CORPORATION, Plaintiff, v. SALMON RIVER ELECTRIC COOPERATIVE, Defendant.

FEDERATED RURAL ELECTRIC INSURANCE CORPORATION, Plaintiff, v. MIDSTATE ELECTRIC COOPERATIVE, Defendant.

FEDERATED RURAL ELECTRIC INSURANCE CORPORATION, Plaintiff, v. DOUGLAS ELECTRIC COOPERATIVE, INC., Defendant.

FEDERATED RURAL ELECTRIC INSURANCE CORPORATION, Plaintiff, v. HOOD RIVER ELECTRIC COOPERATIVE, Defendant.

FEDERATED RURAL ELECTRIC INSURANCE CORPORATION, Plaintiff, v. LANE ELECTRIC COOPERATIVE, INC., Defendant.

FEDERATED RURAL ELECTRIC INSURANCE CORPORATION, Plaintiff, v. NESPELEM VALLEY ELECTRIC COOPERATIVE, INC., Defendant.

FEDERATED RURAL ELECTRIC INSURANCE CORPORATION, Plaintiff, v. OKANOGAN COUNTY ELECTRIC COOPERATIVE, INC., Defendant.

FEDERATED RURAL ELECTRIC INSURANCE CORPORATION, Plaintiff, v. TANNER ELECTRIC COOPERATIVE, Defendant.

FEDERATED RURAL ELECTRIC INSURANCE CORPORATION, Plaintiff, v. OHOP MUTUAL LIGHT COMPANY, Defendant.

FEDERATED RURAL ELECTRIC INSURANCE CORPORATION, Plaintiff, v. LINCOLN ELECTRIC COOPERATIVE, Defendant.

FEDERATED RURAL ELECTRIC INSURANCE CORPORATION, Plaintiff, v. INLAND POWER & LIGHT CO., Defendant.

Nos. 91-4083-R to 91-4098-R.

United States District Court, D. Kansas.

January 13, 1993.

Dale E. Fredericks, Bruce D. Celebrezze, Robert G. Miller, Sheppard, Mullin, Richter & Hampton, San Francisco, CA, Michael K. Seck, Fisher, Patterson, Sayler & Smith, Overland Park, KS, for plaintiff Federated Rural Elec. Ins. Corp.

Wesley A. Weathers, Weathers & Riley, Topeka, KS, David F. Jurca, Andrew J. Kinstler, Helsell, Fetterman, Martin, Tood & Hokanson, Seattle, WA, for defendants Kootenai Elec. Co-op., Fall River Rural Elec. Co-op., Inc., Rural Elec. Co., Lost River Elec. Co-op., Inc., Midstate Elec. Co-op., Douglas Elec. Co-op., Inc., Hood River Elec. Co-op., Lane Elec. Co-op., Inc. and Inland Power & Light Co.

Wesley A. Weathers, Weathers & Riley, Topeka, KS, John D. Lowery, Riddell, Williams, Bulitt & Walkinshaw, Seattle, WA, for defendants Prairie Power Co-op., Inc., Nespelem Valley Elec. Co-op., Inc., Okanogan County Elec. Co-op., Inc. and Ohop Mut. Light Co.

Steve A. Leben, Law Offices of Steve Leben, Overland Park, KS, Gregory E. Keller, Lynne M. Cohee, Hillis, Clark, Martin & Peterson, P.S., Seattle, WA, for defendants Salmon River Elec. Co-op., Tanner Elec. Co-op. and Lincoln Elec. Co-op.

MEMORANDUM AND ORDER

ROGERS, Senior District Judge.

These cases have been consolidated for pretrial purposes and are currently before the court upon motions to dismiss for lack of personal jurisdiction. The court shall grant the motions to dismiss because plaintiff has failed to establish that defendants have purposefully maintained the minimum contacts with Kansas to satisfy the constitutional requirements for the exercise of specific or general jurisdiction over defendants.

Plaintiff is an insurance company which specializes in providing insurance for rural electric and telephone cooperatives and similar organizations. Plaintiff's policyholders are stockholders and eligible to participate in the election of plaintiff's board of directors and to serve on plaintiff's board of directors. A portion of the premiums paid by policyholders is invested by plaintiff into the National Rural Utilities Cooperative Financial Corporation, which makes the funds available to rural electric cooperatives for borrowing.

Each defendant is a rural electric cooperative providing service primarily in the states of Washington, Idaho and Oregon. These cases arise from litigation which, in turn, arose from defendants' participation, along with 76 other cities, utility districts, and rural electric cooperatives, in a project to construct two nuclear power plants in the Pacific Northwest. In 1976, defendants formally agreed to participate in this project with the Washington Public Power Supply System (WPPSS). WPPSS is a municipal corporation with the authority to acquire, build, operate and own power plants. Chemical Bank v. Washington Public Power Supply System, 99 Wash.2d 772, 666 P.2d 329, 331 (1983). It also has the authority to issue revenue bonds. Id.

The 1976 agreement to build the two plants followed a previous WPPSS project to build three nuclear power plants. Each of the two power plants was to be built at a different location and joined in some fashion with one of the earlier authorized nuclear plants. Bonds in the amount of $2.25 billion were issued by WPPSS for construction of the two plants. In 1982, because of inflation, high interest rates and cost overruns, it was clear that enough money could not be raised to complete construction of the plants. The project was terminated.

When the project failed, defendants were sued in litigation brought by or on behalf of bondholders, which was consolidated in multidistrict litigation (MDL 551). Defendants were also sued in what the parties in these cases denominate as "cost-sharing" litigation, which concerned how money raised for the project was allocated in connection with the construction of the related nuclear power plants. The cost-sharing litigation was started on October 26, 1982. Plaintiff paid for defendants' litigation expenses in the multidistrict litigation and in the cost-sharing litigation to a point and then ceased.

In the cases at bar, plaintiff seeks a determination of whether it is obliged under certain insurance policies to pay defendants' litigation expenses and whether defendants should pay plaintiff tort and contract damages connected with plaintiff's past reimbursement of defendants' expenses. The insurance policies in question are liability policies for defendants' directors, officers and managers, referred to as "DOM insurance." Plaintiff asserts (except in Case Nos. 91-4086, 91-4087, 91-4091, 91-4094, and 91-4095) that defendants misrepresented the probability of future litigation before purchasing policies or increasing the limits on preexisting policies issued by plaintiff. All of the above-captioned cases include claims alleging that plaintiff is not responsible for defendants' expenses arising from the cost-sharing litigation.

Plaintiff is an insurance company incorporated in Wisconsin. It operates in more than thirty states from coast to coast. Plaintiff maintained its principal place of business in Madison, Wisconsin until it moved to Kansas in late September 1982.

Defendants are rather small electric cooperatives that buy electric power to supply their customers. Defendants' business is limited to their service areas. They do not sell electricity or send employees or officers to Kansas. They do not own property or solicit business in Kansas. Defendants bought and renewed the insurance policies in question through an area representative of plaintiff. This representative, Patricia Phillips, was located either in Wisconsin or Washington during the relevant times of this litigation. She visited each defendant annually or semi-annually to review its insurance. Plaintiff's counsel has stated that the policies were originally acquired from plaintiff while plaintiff was located in Wisconsin. The policies and renewals were countersigned in Spokane, Washington. Defendants did not make any written or oral communications into Kansas to purchase or renew the insurance policies in question before the bondholder and cost-sharing litigation was filed.¹

Since plaintiff moved its headquarters to Kansas, defendants have continued to buy and renew insurance from plaintiff. It is estimated that defendants have purchased or renewed more than 400 policies since plaintiff moved to Kansas and paid more than $5.4 million in premiums to plaintiff in Kansas. Defendants have also made hundreds of contacts or claims with plaintiff in Kansas in regard to suits filed against defendants. In turn, plaintiff has paid millions of dollars from Kansas to handle claims made by defendants, including claims under the policies in question.

To reiterate, defendants challenge this court's personal jurisdiction over them. This is a diversity case. Therefore, our exercise of personal jurisdiction must comport with the standards of the Kansas longarm statute, K.S.A. 60-308(b), and the United States Constitution. Equifax Services, Inc. v. Hitz, 905 F.2d 1355, 1357 (10th Cir.1990). The Tenth Circuit has stated that "these inquiries are essentially the same, because `the Kansas long arm statute Kan.State.Ann. § 60-308(b) is liberally construed to assert personal jurisdiction over nonresident defendants to the full extent permitted by the due process clause of the Fourteenth Amendment to the U.S. Constitution.'" Id., quoting Volt Delta Resources, Inc. v. Devine, 241 Kan. 775, 740 P.2d 1089, 1092 (1987).

The "touchstone" for our analysis must be whether defendants purposefully established minimum contacts in Kansas. Asahi Metal Industry Co. v. Superior Court, 480 U.S. 102, 109, 107 S.Ct. 1026, 1030, 94 L.Ed.2d 92 (1987); Equifax Services, Inc. v. Hitz, supra. Jurisdiction over a corporation may be either general or specific. Rambo v. American Southern Ins. Co., 839 F.2d 1415, 1418 (10th Cir.1988). Specific jurisdiction exists when the lawsuit allegedly arises from the defendant's contacts with the forum state which are sufficient to comport with the Constitution. General jurisdiction exists when a defendant's presence or contacts with a forum state are sufficient to comport with the Constitution...