Lyman Steel Corp. v. Ferrostaal Metals Corp.

• Decision Date: 15 August 1990
• Docket Number: No. C88-2502.,C88-2502.
• Citation: 747 F. Supp. 389
• Parties: LYMAN STEEL CORP., et al., Plaintiffs, v. FERROSTAAL METALS CORP., et al., Defendants.
• Court: U.S. District Court — Northern District of Ohio

747 F. Supp. 389

LYMAN STEEL CORP., et al., Plaintiffs, v. FERROSTAAL METALS CORP., et al., Defendants.

No. C88-2502.

United States District Court, N.D. Ohio, E.D.

August 15, 1990.

James T. Crowley, Karen E. Rubin, Thompson Hine & Flory, Cleveland, Ohio, for plaintiffs.

John E. Martindale, Pete C. Elliott, Benesch, Friedlander, Coplan & Aronoff, Cleveland, Ohio (Stephen E. Smith, Siemon, Larsen & Purdy, Chicago, Ill., of counsel), for defendants.

MEMORANDUM AND ORDER

BATTISTI, District Judge.

After the ships transporting the custom ordered steel plates delivered only some, but not all of the goods, upon arrival at port Cleveland, Plaintiffs Lyman Steel Company ("Lyman") and Federal Insurance Company of New Jersey/Chubb Insurance ("Chubb") filed this diversity action on July 14, 1988 alleging causes of action for conversion and breach of contract and requesting compensatory and punitive damages. Defendants Ferrostaal Metals Corporation ("Ferrostaal U.S.A.") Franz Kirchfeld GMBH & Company ("Kirchfeld") and Ferrostaal, Aktiengesellschaft ("Ferrostaal of West Germany") have filed, pursuant to Fed.R.Civ.P. 12(b)(2) and (b)(4), Motions to Dismiss the Complaint for lack of personal jurisdiction, and to quash service of process over both Kirchfeld and Ferrostaal of West Germany.¹ For the following reasons, the Court DENIES the Motion to Dismiss for Lack of Personal Jurisdiction, and GRANTS the Motion to Quash Service of Process. Plaintiffs are GRANTED forty-five (45) days in which to perfect service under the provisions of the Hague Service Convention.

Lyman has properly pleaded diversity of citizenship; therefore, this court has subject matter jurisdiction under 28 U.S.C. § 1332.²

A. Facts.

Lyman engages in the business of "developing, purchasing, fabricating, warehousing, and ultimately, selling steel products to industrial users." Complaint at ¶ 1. Chubb is partially subrogated to the rights claimed by Lyman in this lawsuit. Id. at ¶ 2. In 1980, Lyman began developing a process by which it could sell "a unique abrasion-resistant steel plate (`AR plate')." Id., at ¶ 7. (Emphasis supplied). By 1986 — six years later — Lyman located a steel mill in Galatz, Romania that could produce AR plate to Lyman's specifications. Because of Romanian counter-trade requirements, Lyman could not book orders with the Galatz mill directly; instead, it structured the transaction through an intermediary, Kirchfeld, a designated counter-trading channel with Romania. Id., at ¶ 7. Lyman booked an order with Kirchfeld, which in turn booked an order for AR plate made to Lyman's specifications with the Galatz, Romania mill. Lyman would pay Kirchfeld through a letter of credit opened by Lyman at an Ohio bank. Id. at ¶ 8. After the AR plate was produced and loaded onto a shipping vessel, Kirchfeld would present an invoice, bill of lading, and other required documents upon which, a corresponding bank in Dusseldorf, Germany, would pay Kirchfeld. Kirchfeld, pursuant to its counter-trading arrangements, would then compensate the Galatz mill. Id.

On December 12, 1986, Lyman and Kirchfeld entered into an agreement, "memorialized" in Lyman's telex to Kirchfeld dated December 13, 1986, for the production and purchase of Lyman's AR plate for 1987. Id., ¶¶ 9-10 & Exhibit A ("Exh. A.") Under this agreement, Kirchfeld would procure a total 14,000 metric tons ("MT") of AR plate in 1987, at specified times and places, in three orders: the first 2,000 MT would be shipped to an East Coast port in January, 1987; the second 6,000 MT would be shipped to Cleveland in March, 1987, by the time navigation in the Great Lakes opened; and the third, an option for 6,000 MT, to be shipped prior to the close of the Great Lakes shipping season. The first order of 2,000 was completed without incident; the steel was loaded on the vessel, M/V Aegeon in Romania on March 31, 1987 (apparently, a few months late); Kirchfeld invoiced Lyman, was paid $746,853.03 for 1,939.878 MT,³ and Lyman received all of this steel. On January 12, 1987, Lyman submitted the second order for 6,000 MT of AR plate. The 6,000 MT was shipped from Galatz, Romania on two vessels: the M/V Mayombe, loaded with 1,662 AR plates (3,508.372 MT) in Romania around August 11, 1987 and the M/V Likouala, loaded with 1,335 AR plates (2,314.158 MT) in Romania around October 28, 1987. According to the allegations in the Complaint, all the steel cargo (with the exception of Lyman's AR plate) was consigned to Ferrostaal. Id., at ¶ 11. This steel cargo "consisted of standard A-36 steel plate, a lower-grade plate than that ordered by Lyman." Id. Kirchfeld invoiced Lyman the sum of $1,368,265 for 1,662 AR plates, and the sum $886,509.67 for the 1,355 AR plates. Id. at ¶ 11-13. When these vessels unloaded the AR plate in Cleveland, around September 4, 1987 and November 23, 1987, Lyman alleges that it did not receive all of the AR plate described on the bills of lading. There were 64 AR plates missing, which total 119.90 MT (18 pieces of the total 1,662 from the M/V Mayombe and 46 from the total 1,355 aboard the M/V Likouala). Id., at ¶ 13. Lyman alleges that it notified the defendants that all the steel plate did not arrive. Kirchfeld and Ferrostaal of West Germany failed to account for these shortages and deliver the missing tonnage, despite Lyman's demand they do so. Id. at ¶ 14.

B. Motion to Dismiss under Rule 12(b)(2).

1. Prima Facie Burden

In both subject matter and personal jurisdiction, the party invoking federal jurisdiction ultimately bears the burden of affirmatively establishing its existence by a preponderance of the evidence. McNutt v. General Motors Acceptance Corp. of Indiana, 298 U.S. 178, 189, 56 S.Ct. 780, 785, 80 L.Ed. 1135 (1936); Weller v. Cromwell Oil Co., 504 F.2d 927 (6th Cir.1974). Although a trial court has discretion to determine how to resolve a 12(b)(2) motion, the case law of this Circuit clearly "establishes a settled procedural scheme to guide trial courts in the exercise of this discretion." Serras v. First Tennessee Bank National Association, 875 F.2d 1212, 1214 (6th Cir.1989). Since the parties have, apparently, agreed not to conduct extensive discovery,⁴ and the motion is decided on written submissions alone, pursuant to Local Civil Rule 3.01, the weight of Plaintiffs' burden is "merely that of making a prima facie showing that personal jurisdiction exists." Id. As Chief Judge Merritt summarized:

If the court rules on written submissions alone, the plaintiff may not rest on his pleadings to answer the movant's affidavits, but must set forth, "by affidavit or otherwise, ... specific facts showing that the court has jurisdiction." Weller v. Cromwell Oil Co., 504 F.2d at 930. When the trial court has determined that the motion to dismiss for lack of personal jurisdiction can be decided upon these written submissions, it "must consider the pleadings and affidavits in the light most favorable to the plaintiff." Welsh v. Gibbs, 631 F.2d 436, 439 (6th Cir.1980), cert. denied, 450 U.S. 981, 101 S.Ct. 1517, 67 L.Ed.2d 816 (1981) (quoting Poston v. American President Airlines, Ltd., 452 F.Supp. 568, 571 (S.D.Fla. 1978) .... If she meets the prima facie burden the motion to dismiss should be denied, "notwithstanding any controverting presentation by the moving party." Marine Midland Bank v. Miller, 664 F.2d 899 at 904 2d Cir. 1981.⁵ (Emphasis supplied).

Serras, at 1214.

2. Due Process Standard

In diversity cases, it is settled that the assertion of personal jurisdiction must comport with both the state long-arm statute and the Due Process Clause of the United States Constitution. Fed.R.Civ.P. 4(e); U.S. Const. Amend. 5, 14. International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). Plaintiff relies on three provisions of the Ohio long-arm statute, Ohio Rev.Code Ann. § 2307.382,⁶ which provides in pertinent part:

(A) A court may exercise personal jurisdiction over a person who acts directly or by an agent, as to a cause of action arising from the person's:

(1) Transacting any business in this state;

(2) Contracting to supply services or goods in this state;

(3) causing tortious injury by an act or omission in this state.

* * * * * *

(C) When jurisdiction over a person is based solely upon this section, only a cause of action arising from acts enumerated in this section may be asserted against him.

The Sixth Circuit has repeatedly interpreted the Ohio long-arm statute, particularly the "transacting any business" provision, as extending to the outer limits under the Due Process Clause. See Creech v. Roberts, 908 F.2d 75, 79 (6th Cir.1990); American Greetings Corp. v. Cohn, 839 F.2d 1164 (6th Cir.1988); R.L. Lipton Distributing Co. v. Dribeck Importers, Inc., 811 F.2d 967, 969 (6th Cir.1987); In-Flight Devices Corp. v. Van Dusen Air, Inc., 466 F.2d 220, 225 (6th Cir.1972).⁷ Thus, "an Ohio personal jurisdictional analysis becomes an examination of constitutional limitations." American Greetings, 839 F.2d at 1167 (quoting Lipton, 811 F.2d at 969). The fundamental inquiry will be whether each Defendant has "minimum contacts" with the forum state Ohio and whether the exercise of jurisdiction offends "traditional notions of fair play and substantial justice." International Shoe Co. v. Washington, 326 U.S. at 316, 66 S.Ct. at 158, 90 L.Ed. at 102 (1945).

The Supreme Court has repeatedly stressed that "each defendant's contacts with the forum state must be assessed individually." Calder v. Jones, 465 U.S. 783, 790, 793, 104 S.Ct. 1482, 1489, 79 L.Ed.2d 804 (1984) Rush v. Savchuk, 444 U.S. 320, 332, 100 S.Ct. 571, 579, 62 L.Ed.2d 516 (1980) ("The requirements of International Shoe ... must be met as to each defendant over whom a state court exercises jurisdiction.")

In the Sixth Circuit, there are three criteria that must be met to comport with due process:

First, the defendant must purposely avail himself of the privilege of acting in the forum state or

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