South Alabama Pigs, LLC v. Farmer Feeders, Inc.

• Decision Date: 09 February 2004
• Docket Number: Nos. CIV.A. 02-T-1413-N, CIV.A. 02-T-1415-N.,s. CIV.A. 02-T-1413-N, CIV.A. 02-T-1415-N.
• Citation: 305 F.Supp.2d 1252
• Parties: SOUTH ALABAMA PIGS, LLC, Plaintiff, v. FARMER FEEDERS, INC., et al., Defendants. South Alabama Pigs, LLC, Plaintiff, v. Farmer Feeders, Inc., et al., Defendants.
• Court: U.S. District Court — Middle District of Alabama

Page 1252

305 F.Supp.2d 1252

SOUTH ALABAMA PIGS, LLC, Plaintiff, v. FARMER FEEDERS, INC., et al., Defendants.

South Alabama Pigs, LLC, Plaintiff, v. Farmer Feeders, Inc., et al., Defendants.

Nos. CIV.A. 02-T-1413-N, CIV.A. 02-T-1415-N.

United States District Court, M.D. Alabama, Northern Division.

February 9, 2004.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Rhon E. Jones, Larry A. Golston, Jr., Beasley, Allen, Crow, Methvin, Portis & Miles, PC, Montgomery, AL, Michael E. Jones, Jones & Sport, Luverne, AL, for Plaintiff.

Joseph Lister Hubbard, R. Brooke Lawson, III, Wyndall A. Ivey, Capell Howard, PC, Montgomery, AL, C. Jeffery Ash, Larry W. Harper, Kathryn L. Harman, Porterfield, Harper & Mills, P.A., Birmingham, AL, for Defendants.

OPINION

MYRON H. THOMPSON, District Judge.

Plaintiff South Alabama Pigs, LLC (Pigs, LLC) brought these lawsuits in state court against individual defendants Dennis McCool (McCool) and Scott Benton (Benton) and corporate defendants Farm Feeders, Inc. (Farm Feeders), Audubon Wholesale Vet Supply, Inc. ("Audubon Wholesale"), and Suidae Technology, Inc. (Suidae Tech), alleging fraudulent misrepresentation, fraudulent suppression, negligent misrepresentation, negligent or wanton hiring and supervision, breach of contract, and conspiracy to commit fraud. Defendants removed these cases to this Alabama federal court pursuant to 28 U.S.C.A. §§ 1332 (diversity jurisdiction) and 1441(b) (removal jurisdiction), where the cases were consolidated.

These cases are now before the court on motions to dismiss for lack of personal jurisdiction and alternative motions to compel arbitration, submitted by Benton, McCool, Farm Feeders, and Audubon Wholesale. Also before the court is Suidae Tech's motion to compel arbitration. For the reasons that follow, the motions to dismiss and motions to compel arbitration will be granted as to certain defendants and denied as to others.

I. FACTUAL BACKGROUND

A. The Defendants

McCool, Audubon Wholesale, and Farm Feeders: Audubon Wholesale sells livestock supplies; it is incorporated and has its principal place of business in Iowa; it has no customers in Alabama, has never transacted any business here, and has no ties here. Farm Feeders was incorporated in Iowa and is in the business of raising pigs. McCool is the owner of Audubon Wholesale and Farm Feeders. He has never been to Alabama; does not own property here; has never conducted business here for either Farm Feeders or Audubon Wholesale; and has never spoken to, corresponded with, or met with any employee, agent or representative of Pigs, LLC.

Benton: According to corporate documents, Benton holds the positions of secretary and director of Farm Feeders. Benton also stated in his affidavit that he is the president of Farm Feeders, though a 2002 corporate report indicates that McCool is the president.

Suidae Tech: Suidae Tech was incorporated and has its principal place of business is Batesville, Indiana. It is, among other things, a feed supplier.

B. The Events

In January 2002, Benton (on behalf of Farm Feeders) and Burton and Bob Chalus (on behalf of Suidae Tech) came to Alabama and approached Pigs, LLC about entering into an agreement to supply weaned pigs to Farm Feeders. At that time, Pigs, LLC had already contracted to supply weaned pigs to Farmland Industries. Pigs, LLC alleges that, during negotiations, these individuals represented to Pigs, LLC that Farm Feeders was in the business of finishing pigs; that it had the capability to raise weaned pigs to a specific weight for slaughter and sale; that, if defendants had to resell any pigs, they had numerous buyers willing to purchase the pigs and they were not dependent on any one buyer; and that McCool and Audubon Wholesale had personally guaranteed the agreement.

On February 14, Pigs, LLC repudiated its contract with Farmland Industries and entered into a four-year written contract with Farm Feeders.

In June, Farm Feeders notified Pigs, LLC that it would not purchase any additional pigs. Pigs, LLC later learned of Farm Feeders's alleged misrepresentations; specifically, according to Pigs, LLC, it discovered that Farm Feeders did not have multiple buyers willing to buy any surplus pigs; that Farm Feeders was not in the business of finishing pigs; that Farm Feeders was going to resell most or all of the pigs; and that it did not have financial backing from McCool or Audubon Wholesale.

II. DISCUSSION

A. Personal Jurisdiction over McCool, Benton, and Audubon Wholesale

McCool, Benton, Audubon Wholesale move the court to dismiss these lawsuits against them on the ground that the court has no personal jurisdiction over them. In considering a defendant's motion to dismiss for lack of personal jurisdiction, the court must deny the motion if the plaintiff has alleged facts sufficient to support a reasonable inference that the defendant can be subject to the jurisdiction of the court. Jackam v. Hospital Corp. of Am. Mideast, 800 F.2d 1577, 1579 (11th Cir.1986); Bracewell v. Nicholson Air Servs., Inc., 680 F.2d 103, 104 (11th Cir.1982). A plaintiff need only establish a prima-facie case of jurisdiction, and may do so by presenting evidence sufficient to defeat a motion for judgment as a matter of law. Perry v. Household Retail Servs., Inc., 953 F.Supp. 1378, 1380-81 (M.D.Ala.1996) (DeMent, J.). The burden for overcoming a motion for judgment as a matter of law is the same as that for overcoming a motion for summary judgment; legally sufficient evidence must exist to create a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Everett v. Napper, 833 F.2d 1507, 1510 (11th Cir.1987). The court, in considering the motion, must take all allegations of the complaint that the defendant does not contest as true, and, where the parties' affidavits conflict, the court must construe all reasonable inferences in favor of the plaintiff. Perry, 953 F.Supp. at 1380-81.

When a non-resident defendant challenges personal jurisdiction, the plaintiff must establish that personal jurisdiction over the defendant comports with (1) the forum State's long-arm statute and (2) the requirements of the due-process clause of the Fourteenth Amendment to the United States Constitution. Williams Elec. Co. v. Honeywell, Inc., 854 F.2d 389, 391 (11th Cir.1988) (per curiam). Alabama's long-arm provision, Ala. R. Civ. P. 4.2(a), authorizes the assertion of personal jurisdiction to the limits of the United States Constitution; therefore, Pigs, LLC may establish the court's personal jurisdiction over McCool, Benton, and Audubon Wholesale by demonstrating that the requirements of federal due process are met. Morris v. SSE, Inc., 843 F.2d 489, 494 n. 3 (11th Cir.1988); Brock v. Hutto, 617 F.Supp. 623, 629 (M.D.Ala.1985) (Thompson, J.). Due process requires that the defendant have had "minimum contacts" with the forum State, and that the exercise of jurisdiction over the defendant does not offend "traditional notions of fair play and substantial justice." Burnham v. Super. Ct. of California, 495 U.S. 604, 618, 110 S.Ct. 2105, 2114-15, 109 L.Ed.2d 631 (1990) (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945)). Both conditions must be satisfied to establish personal jurisdiction over a defendant.

1. Personal Jurisdiction over McCool and Audubon Wholesale on an Alter Ego Theory

Neither McCool nor Audubon Wholesale has had any contact with the State of Alabama, much less "minimum contacts." Pigs, LLC contends that the court may nonetheless exercise personal jurisdiction over them on an alter ego theory of liability. Pigs, LLC maintains that Farm Feeders was the alter ego of McCool and Audubon Wholesale; thus, it argues that any activity by Farm Feeders in Alabama may be attributed to McCool and Audubon Wholesale establishing that they have had the minimum contacts necessary for personal jurisdiction.

a. McCool

McCool is the owner of Farm Feeders and Audubon Wholesale. Generally, a corporation is a legal entity with a separate existence from its owner. Backus v. Watson, 619 So.2d 1342, 1345 (Ala.1993). Thus, McCool may not be held liable for the actions of Farm Feeders unless the corporate form is disregarded. Under Alabama law, the corporate form may be disregarded, that is, the corporate veil pierced, when the corporation is the alter ego of its owner. Even when the corporation appears to be an alter ego, in order to pierce the corporate veil, "[t]here must be the added elements of misuse of control and harm or loss resulting from it." Id. at 1345; see also Messick v. Moring, 514 So.2d 892, 894-95 (Ala.1987).

"The mere fact that a party owns all or a majority of the stock of a corporation does not, of itself, destroy the corporate identity." Simmons v. Clark Equip. Credit Corp., 554 So.2d 398, 400 (Ala.1989).¹ For corporations owned by an individual, domination of the corporation by the individual is not uncommon and is not the focus of the court's veil-piercing inquiry. "In a closely held corporation, it is not unusual for the majority stockholder to control the entity's operation. The fact that [the majority shareholder] controlled his business does not make that corporation such a sham" that the corporate veil should be pierced. McKissick v. Auto-Owners Ins. Co., 429 So.2d 1030, 1033 (Ala.1983).

"The corporate veil may be pierced where a corporation is set up as a subterfuge, where shareholders do not observe the corporate form, where the legal requirements of corporate law are not complied with, where the corporation maintains no corporate records, where the corporation maintains no corporate bank account, where the corporation has no employees, where corporate and personal funds are intermingled and corporate funds are used for personal purposes, or where an individual drains funds from the corporation." Simmons, 554 So.2d at 401. Additionally, case law implies that an...