Outokumpu Engineering Enterprises, Inc. v. Kvaerner EnviroPower, Inc., No. 95C-12-080-JOH

• Court: Superior Court of Delaware
• Writing for the Court: HERLIHY
• Citation: 685 A.2d 724
• Parties: OUTOKUMPU ENGINEERING ENTERPRISES, INC., Plaintiff, v. KVAERNER ENVIROPOWER, INC., Kvaerner, Inc. and Kvaerner EnviroPower, AB, Defendants. . Submitted:
• Docket Number: No. 95C-12-080-JOH
• Decision Date: 19 March 1996

Page 724

685 A.2d 724 OUTOKUMPU ENGINEERING ENTERPRISES, INC., Plaintiff,
v.
KVAERNER ENVIROPOWER, INC., Kvaerner, Inc. and Kvaerner
EnviroPower, AB, Defendants. No. 95C-12-080-JOH. Superior Court of Delaware,
New Castle County. Submitted: March 19, 1996.
Decided: July 10, 1996.

Page 725

Upon Motion of Defendant Kvaerner EnviroPower, AB to Dismiss for Lack of Personal Jurisdiction--GRANTED.

Thomas R. Hunt, Jr., and Kurt M. Heyman, of Morris, Nichols, Arsht & Tunnell, Wilmington, and Leland G. Cook (argued), of Smith, Gambrell & Russell, Atlanta, GA, for plaintiff.

M. Duncan Grant (argued), and Daniel V. Folt, of Pepper, Hamilton & Scheetz, Wilmington, for defendants.

OPINION

HERLIHY, Judge.

Defendant Kvaerner EnviroPower, AB [KAB] has moved this Court to dismiss for lack of personal jurisdiction. Plaintiff Outokumpu Engineering Enterprises, Inc. [Outokumpu], brought this action for breach of contract against all three defendants.

FACTS

It is important to identify the players as part of the factual background of this case. Plaintiff Outokumpu is a Delaware corporation with its principal place of business in Atlanta, Georgia. It is a wholly owned subsidiary of Outokumpu Technology Oy, a Finnish corporation located in Espoo, Finland.

Defendant Kvaerner EnviroPower, Inc. [KEPI] is a Delaware corporation. At the time of the transactions at issue here, its principal place of business was in Owings Mills, Maryland. Defendant Kvaerner, Inc. [KI] is a Delaware corporation with its principal place of business in Stamford, Connecticut. Defendant KAB is a Swedish corporation with its principal place of business in

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G"teborg, Sweden. The stock of KAB is wholly owned by Kvaerner a.s. [KAS], a Norwegian corporation with its principal place of business in Oslo, Norway. KAS is not a party to this action.

On February 28, 1994, KI purchased all the stock of Outokumpu EcoEnergy, Inc., [EcoEnergy], a Delaware corporation, from plaintiff Outokumpu. EcoEnergy was subsequently renamed Kvaerner EnviroPower, Inc. (KEPI). All of KI's stock is owned by KAS. Various of these parties executed a stock purchase agreement, along with an agreement to complete construction of a power station in Whitecourt, Alberta, Canada. In addition, a technology agreement was signed.

The Finnish corporation signed the stock purchase agreement as a guarantor. It also signed a performance and payment agreement which included clauses stating that that agreement would be governed by and construed in accordance with Norwegian law. Oslo was designated as the proper "venue" for any dispute under that agreement.

The negotiations involving all these agreements occurred in Connecticut, Georgia, Maryland, New Jersey, New York, Washington, D.C., Canada, Finland and Sweden. There were no negotiations in Delaware.

KEPI was the general contractor on the Whitecourt power plant construction project. Outokumpu's complaint implies that KI also undertook certain duties to help complete the Whitecourt plant. KAB signed a "Performance and Payment Guarantee" [Guarantee Agreement] guaranteeing it would pay, indemnify and perform all KEPI and KI obligations in connection with the technology agreement, the stock purchase agreement and the agreement to complete the Whitecourt power plant.

Paragraph 3 of the Guarantee Agreement states:

This guarantee and the obligations of the undersigned shall be governed by and construed in accordance with the laws of the Kingdom of Sweden. The undersigned hereby agrees:

a. to subject itself to the jurisdiction of the Swedish Courts;

b. to accept as validly and properly served any documents, notice or other process sent to it at its address Anders Carlssons gata 14, S-40273, G"teborg, Sweden; and

c. that G"teborg shall be the proper venue for any dispute concerning any claim or dispute relating to this Guarantee.

Appended to Outokumpu's response to KAB's motion to dismiss are several affidavits. One is from a Warwick Johnston [Johnston] who participated, through a consulting firm hired by Outokumpu, in the negotiations for the sale of EcoEnergy's stock. KAB and KAS were on the other end of the negotiations. Johnston says KAB's president was the principal decision-maker on that end of the negotiations.

KAS sent a proposal to the Finnish corporation regarding the stock sale. It proposed that KI buy EcoEnergy's stock. KAS describes KI as "the holding company for all Kvaerner activities in the United States." KAS proposal of November 15, 1993. KAS also states KAB was to be "operational[ly] responsib[le] for [KEPI]". Id.

Because of the structure of the deal and who the real parties were, Johnston says KAB signed the guarantee for KI and KEPI. He also says the Finnish corporation provided certain guarantees for Outokumpu.

Another affidavit supplied by Outokumpu is from David S. Thomas [Thomas]. He says he had certain operational responsibilities for Outokumpu at the Canadian power plant. Thomas relates that he participated in a telephone conference call with KAB's president who promised to put a KAB project manager on the site. Such a person did appear. In 1995, KAB's president, Thomas and others attended a meeting in Atlanta, Georgia, to discuss the need to complete the project.

Additional KAB employees appeared at the Whitecourt construction site after the Atlanta meeting. Thomas states, "my understanding was that [KAB's president] maintained an active involvement in [Whitecourt], in an attempt to insure KEPI performed its contractual obligations." Thomas affidavit at 3. Thomas also says site reports indicate KAB's chairman visited the Canadian site.

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Kalevi M. Turkia [Turkia], another affiant for Outokumpu, states he attended a meeting in Toronto, Canada, in September 1994, which KAB's president also attended. Whitecourt's owner threatened to fire KEPI as construction manager, but, according to Turkia, KAB convinced the owner to keep KEPI.

KAB's current president, not the one identified above, says that EcoEnergy's assets after the stock deal was closed were contracts to construct two power plants. One was in Whitecourt and the other was in Nova Scotia.

Outokumpu is suing the defendants for alleged breaches of contract arising out of the construction project in Canada.

PARTIES' CLAIMS

KAB moves to dismiss on the basis that it never expected to be haled into a Delaware court because its actions in Delaware were limited to guaranteeing certain obligations of KEPI and KI and because the guarantee would be governed by Swedish law and that KAB agreed to be sued in Sweden. Outokumpu counters that the contract language is permissive, rather than mandatory, and that KAB's actions are sufficient to justify personal jurisdiction. Outokumpu also argues that KAB should be liable in Delaware for the actions of KI under either an alter ego or agency theory.

APPLICABLE STANDARD

When personal jurisdiction is challenged by a motion to dismiss, the plaintiff has the burden to show a basis for the Court's jurisdiction over the nonresident defendant. Plummer & Co. Realtors v. Crisafi, Del.Super., 533 A.2d 1242, 1244 (1987). The plaintiff satisfies this burden by making a prima facie showing that jurisdiction is conferred by statute. Mid-Atlantic Machine & Fabric, Inc. v. Chesapeake Shipbuilding, Inc., Del.Super., 492 A.2d 250, 253 (1985). All factual inferences must be viewed in a light most favorable to the plaintiff. Greenly v. Davis, Del.Supr., 486 A.2d 669, 670 (1984).

The issues involved here have been submitted on the pleadings, several affidavits and a copy of the Guarantee Agreement. Neither party has requested an evidentiary hearing and the Court has determined, in its discretion, that one is not necessary. Sears, Roebuck & Co. v. Sears, plc, D.Del., 744 F.Supp. 1297, 1301 (1990). The facts do not appear to be in dispute.

DISCUSSION

Outokumpu relies upon two parts of Delaware's long-arm statute to support its claim that this Court has jurisdiction over KAB. Specifically it relies upon 10 Del.C. §§ 3104(c)(1) and (2):

As to a cause of action brought by any person arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any nonresident, or his personal representative, who in person or through an agent:

(1) Transacts any business or performs any character of work or service in the State;

(2) Contracts to supply services or things in this State;

This Court must follow a two-part test in determining whether it has personal jurisdiction over defendant KAB. First, the Court determines whether the actions of KAB fall under either the general jurisdiction or specific jurisdiction provisions of Delaware's long-arm statute. Second, the Court determines whether exercising jurisdiction over KAB is constitutionally permissible. See LaNuova D & B, S.p.A. v. Bowe Co., Del.Supr., 513 A.2d 764, 768-69 (1986).

A

Delaware Long-Arm Statute

The general jurisdiction issue can be considered first. The portion of Delaware's long-arm statute dealing with general jurisdiction, 10 Del.C. § 3104(c)(4), permits a Delaware court to exercise personal jurisdiction over one who "[c]auses tortious injury in the State or outside of the State by an act or omission outside the State if he regularly does or solicits business, engages in any other persistent course of conduct in the State or derives substantial revenue from services, or things used or consumed in the State."

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The facts clearly show that KAB's activities do not fall within this section.

Actions of the Parent

Creation of the Subsidiary

The inquiry necessarily turns to the two above-cited specific subsections of § 3104. Although Delaware's long-arm statute is to be construed to the maximum extent consistent with due process, see Jeffreys v. Exten, D.Del., 784 F.Supp. 146, 151 (1992), and a single act may create the minimum contacts necessary to support personal jurisdiction, id., the statute nevertheless requires that...