Slate Rock Constr. v. Admiral Ins. Co.

• Decision Date: 30 August 2011
• Docket Number: Case No. 2:10-CV-1031
• Parties: SLATE ROCK CONSTRUCTION, COMPANY, LTD., Plaintiff, v. ADMIRAL INSURANCE CO., et al., Defendants.
• Court: U.S. District Court — Western District of Pennsylvania

SLATE ROCK CONSTRUCTION, COMPANY, LTD., Plaintiff,

v.ADMIRAL INSURANCE CO., et al., Defendants.

Case No. 2:10-CV-1031

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF OHIO EASTERN DIVISION

DATED: August 30, 2011

JUDGE ALGENON L. MARBLEY

MAGISTRATE JUDGE DEAVERS

OPINION & ORDER

I. INTRODUCTION

This matter is before the Court on a number of motions. They include the following: the Motions to Dismiss for Lack of Personal Jurisdiction of Defendant Jack Bonus Insurance, Inc.'s (Dkt. 159) and Defendant The Brants Company (Dkt.171); the Motions to Dismiss for Failure to State a Claim by Jack Bonus, The Brants Company, and Marsh USA, Inc. (Dkt. 117); the Motions to Transfer Venue by Defendants Admiral Insurance Company, First Specialty Insurance Company, Penn National Security Insurance, Fireman's Insurance Company of Washington, Maryland Casualty Insurance Company, Donegal Mutual Insurance Company, Mutual Benefit Insurance Company, and General Accident Insurance, Transportation Insurance Company, Valley Forge Insurance Company (Dkt. 167), as well as Motions to Join the Motion to Transfer Venue by Defendants Federal Mutual Insurance Company (Dkt. 169), Zurich American Insurance Company and Zurich Commercial Insurance (Dkt. 191).

II. BACKGROUND

Plaintiff Slate Rock was the general contractor for the construction of three apartment projects in Allegheny County, Pennsylvania. The owners of each of the projects sued Slate Rock in Allegheny County, Pennsylvania for alleged construction defects. In turn, Slate Rock filed third-party actions in Allegheny County, Pennsylvania asserting claims against twelve of its subcontractors. Each subcontract required the subcontractor to defend, indemnify, and hold harmless Slate Rock from any liability arising from the subcontractor's performance. Additionally, each required the subcontractor to acquire commercial general liability insurance for the project and name Slate Rock as an "additional insured" under those policies. The subcontractors were then to file the certificates of insurance with Slate Rock to document that Slate Rock had been given such status. Slate Rock relied upon these certificates in the construction of the apartment projects, and did not purchase separate insurance to cover each subcontractor's work.

Slate Rock brought the case sub judice alleging that it tendered the defense and any indemnification obligations relating to the Allegheny County lawsuits. The insurers, however, failed to defend or indemnify Slate Rock. Slate Rock seeks a declaratory judgment that the subcontractors and the insurers are required to defend and indemnify Slate Rock. In the alternative, it asserts claims of negligent misrepresentation and promissory estoppel against the insurance agencies and brokers that issued certificates of insurance at the request of the subcontractors.

III. MOTIONS

A. PERSONAL JURISDICTION

1. STANDARD OF REVIEW

Jack Bonus and Brants have filed motions to dismiss for lack of personal jurisdiction. The plaintiff bears the burden of proving personal jurisdiction exists. CompuServe Inc. v. Patterson, 89 F.3d 1257, 1262-63 (6th Cir. 1996). In the face of a supported motion to dismiss, the plaintiff may not rest on his pleadings, but must, by affidavit or otherwise, set forth specific evidence supporting jurisdiction. Theunissen v. Matthews, 935 F.2d 1454, 1458 (6th Cir. 1991) (citing Weller v. Cromwell Oil Co., 504 F.2d 927, 930 (6th Cir. 1974)). When the Court considers a motion to dismiss pursuant to Rule 12(b)(2) without an evidentiary hearing on the issue of personal jurisdiction, however, the plaintiff "'need only make a prima facie showing of jurisdiction.'" Bird v. Parsons, 289 F.3d 865, 871 (6th Cir. 2002) (quoting Neogen Corp. v. Neo Gen Screening, Inc., 282 F.3d 883, 887 (6th Cir. 2002)) (internal citation omitted). The plaintiff can make this prima facie showing by "'establishing with reasonable particularity sufficient contacts between [the Defendants] and the forum state to support jurisdiction.' " Neogen Corp., 282 F.3d at 887 (quoting Provident Nat'l Bank v. California Savings Loan Ass'n, 819 F.2d 434, 437 (3d Cir. 1987)).

In deciding a Rule 12(b)(2) motion to dismiss, the Court is to construe the facts in the light most favorable to the non-moving party. Significantly, the Court is not to weigh the controverting assertions of the party seeking dismissal. CompuServe, 89 F.3d at 1262 (citing Theunissen, 935 F.2d at 1459). This refusal to weigh the defendants' controverting assertions is necessary to prevent non-resident defendants from avoiding jurisdiction simply by filing anaffidavit that denies all jurisdictional facts. Compuserve, 89 F.3d at 1262 (citing Theunissen, 935 F.2d at 1459).

2. LAW AND ANALYSIS

a. Introduction

A federal court sitting in a diversity matter can exercise personal jurisdiction over a defendant if jurisdiction is "(1) authorized by the law of the state in which it sits, and (2) in accordance with the Due Process Clause of the Fourteenth Amendment." Tharo Sys., Inc. v. Cab Produkttechnik GMBH & Co. KG, 196 F. App'x 366, 369 (6th Cir. 2006) (quoting Neogen Corp. v. Neo Gen Screening, Inc., 282 F.3d 883, 888 (6th Cir. 2002)).

b. Ohio's Long Arm Statute

Pursuant to Ohio's long-arm statute, a court may properly exercise personal jurisdiction over a non-resident defendant who is "[t]ransacting any business in this state." Ohio Rev.Code § 2307.382(A)(1). "Transact" is interpreted in Ohio as meaning "the carrying on or prosecution of business negotiations . . . and may involve business negotiations which have been either wholly or partly brought to a conclusion." Kentucky Oaks Mall Co. v. Mitchell's Formal Wear, Inc., 53 Ohio St.3d 73, 559 N.E.2d 477, 480 (Ohio 1990).¹ This Court may exercise jurisdiction over someone who directly transacts business in Ohio or over someone who transacts business by an agent in Ohio. Ohio Rev.Code § 2307.382(A).

In order to determine whether a non-resident defendant transacted business in Ohio within the meaning of Ohio's long-arm statute, courts have considered two factors. Indus.Fiberglass Specialities, Inc. v. Alsco Indus. Prods., Inc., No. 3:08-cv-0351, 2009 WL 982805, at *3-4 (S.D.Ohio April 13, 2009); U.S. v. Sprint Communications Co. Ltd. Partnership v. Mr. K's Foods, Inc., 624 N.E.2d 1048, 1052 (Ohio 1994). First, the court may consider whether the nonresident defendant initiated the business dealing. Id. at *3 (citing Paglioni & Assoc., Inc. v. Winnercomm, Inc., No. 2:06-cv-276, 2007 WL 852055 at *9 (S.D.Ohio Mar.16, 2007)). This is, however, just one factor to be considered, and the determination is not always dependent on who initiates the contact. Id. (citing Military Supply, Inc. v. Reynosa Constr., Inc., No. 19326, 2000 WL 109783, at *3 n. 3 (Ohio Ct.App. Jan. 26, 2000)).

Second, the Court may consider whether the parties conducted their negotiations or discussions in Ohio or with terms affecting Ohio. Id. at *4 (citing Shaker Constr. Group, LLC v. Schilling, No. 1:08cv278, 2008 WL 4346777, at *3 (S.D.Ohio Sept.18, 2008)). If the parties negotiated in Ohio with provisions affecting Ohio, the non-resident transacted business in Ohio, provided there is "some continuing obligation that connects the non-resident defendant to the state or some terms of the agreement that affect the state." Shaker, 2008 WL 4346777 at *3.

Looking to the first factor, "the use of interstate lines of communication such as mail and telephones does not automatically subject a defendant to the jurisdiction of the courts in the forum state." Indus. Fiberglass Specialities, Inc., at *3 (citing Benjamin v. KPMG Barbados, No. 03AP-1276, 2005 Ohio App. LEXIS 1860 at *P48, 2005 WL 995589 (Ohio Ct. App. Apr. 28, 2005)). In this case, both Jack Bonus and Brants issued Certificates of Insurance to Slate Rock at the request of their clients, Mito Insulation and All American Builders respectively, and mailed the Certificates to Slate Rock in Ohio.² While Jack Bonus and Brants mailed theCertificates to Ohio, they did so at the request of a third party, and thus this factor is inconclusive.

Considering the second factor, an agreement that creates a continuing obligation that connects the non-resident defendant to Ohio or has terms that affect Ohio is sufficient to confer personal jurisdiction. See, e.g., Kentucky Oaks Mall Co. v. Mitchell's Formal Wear, Inc., 53 Ohio St.3d 73, 559 N.E.2d 477, 480 (Ohio 1990) (holding that nonresident lessee was "transacting any business" in the state where it negotiated, and through the course of dealing became obligated, to make payments to its lessor in Ohio); U.S. Sprint Commc'ns Co. Ltd P'ship, 624 N.E.2d at 1052 (holding, in a lawsuit to collect unpaid long-distance phone charges, that the defendant transacted business in Ohio by using U.S. Sprint long distance to conduct business in Ohio and to take orders from its Ohio independent distributors for goods to be sold in Ohio). Here, the Certificates indicated that Slate Rock was an additional insured on both Mito Insulation's and All American Builders' insurance policy. In essence, Jack Bonus and Brants agreed to provide a continuing service to an Ohio corporation. That corporation, Slate Rock, relied on the representations in the Certificates in its construction projects. In sum, the act of adding an Ohio company to an insurance policy for a designated period of time created a continuing obligation that bound the non-resident defendants to the state. See ALTA Analytics, Inc. v. Muussi, 75 F.Supp. 773, 779 (S.D. Ohio 1999) (finding that "transacting business" means that: (1) the "necessary nexus" exists between the defendant's actions and the claims at issue; and (2) the cause of action arises from the contract or agreement) (citing Berning v. BBC, Inc., 575 F. Supp. 1354, 1357 (S.D. Ohio 1983)). Accordingly, the facts indicate that Jack Bonus and Brants have transacted business in Ohio sufficient to meet the statutory requirement set forth...