United Coal Co. v. Land Use Corp.

• Decision Date: 08 December 1983
• Docket Number: Civ. A. No. 82-0218-A.
• Parties: UNITED COAL COMPANY, et al., Plaintiffs, v. LAND USE CORPORATION, Defendant.
• Court: U.S. District Court — Western District of Virginia

575 F. Supp. 1148

UNITED COAL COMPANY, et al., Plaintiffs, v. LAND USE CORPORATION, Defendant.

Civ. A. No. 82-0218-A.

United States District Court, W.D. Virginia, Abingdon Division.

December 8, 1983.

COPYRIGHT MATERIAL OMITTED

W. Challen Walling, James P. Jones, Bristol, Va., for plaintiffs.

Roger W. Tompkins, Thomas E. Scarr, Charleston, W. Va., for defendant.

MEMORANDUM OPINION

GLEN M. WILLIAMS, District Judge.

The plaintiffs, United Coal Company, incorporated under the laws of the Commonwealth of Virginia with its principal place of business in Bristol, Virginia, and Harbour Marine, Inc., incorporated under the laws of the State of Ohio with its principal place of business in Proctorville, Ohio, brought this action for declaratory judgment and injunctive relief against Land Use Corporation, organized under the laws of the State of West Virginia with its principal place of business in Summersville, West Virginia. Jurisdiction is predicated upon diversity of citizenship and more than ten thousand dollars ($10,000) in controversy, exclusive of interest and costs. 28 U.S.C. § 1332.

Personal jurisdiction over the nonresident defendant is achieved, if at all, under the Virginia long-arm statute, Va.Code § 8.01-328.1.A.1. (Repl.Vol.1977 & Supp. 1983), with service of process pursuant to Rule 4(e) of the Federal Rules of Civil Procedure and Va.Code § 8.01-329 (Repl. Vol.1977 & Supp.1983), authorizing substituted service on the Secretary of the Commonwealth of Virginia as statutory agent for the nonresident defendant.

The issues presented are whether this court can exercise personal jurisdiction over a nonresident corporation which contracted with a resident corporation for the resident to act as an exclusive sales agent of the nonresident in the selling of coal to Appalachian Power Company and whether the claim arose in this judicial district for purposes of the federal venue statute.

I.

This case focuses on a contract to buy and sell coal, which the plaintiffs and defendant have negotiated, executed and partially performed. The court briefly reviews the essential facts so that the jurisdictional and venue issues may be determined.

In 1980 Hobert Orton, a consultant and intermediary exploring potential coal sales, contacted Ralph Haring, Director of International Marketing at United Coal Company. Acting as a broker to find buyers of coal mined by Land Use Corporation, Orton discussed with Haring the possibility of selling coal to United Coal and its affiliates and subsidiaries. After various telephone conversations between Orton, William Bright of Land Use, and James Williamson of United Coal's Tri-State Division, Bright shipped a test order of coal to United Coal. When the results proved to be promising, Williamson and two others visited the mining operation of Land Use near Summersville, West Virginia, and met with Bright. These discussions over the telephone and at the mine concluded in an agreement for Land Use to sell to United Coal Company coal on the "spot" market. Garry Keene of United Coal and Williamson journeyed to the mine in West Virginia several times in 1980 and 1981 to help with a truckers' strike and to check the quality of coal. Land Use sold coal on the "spot" market to United Coal as it was needed from April 1980 through September 1981 when Bright cancelled the sales. According to Williamson's affidavit, neither company was committed to buy or to sell any specified amount of coal over any certain period. The coal was shipped by truck. Bright's second affidavit reveals that the terms of the agreement contemplated that Land Use load the coal in West Virginia. When United Coal directed that the coal be shipped to Proctorville, Ohio, Land Use would pay the independent truckers and United Coal would reimburse it these costs.

Also as a result of the meeting between Haring and Orton, National Collieries, then an affiliate of United Coal, bought some coal from Land Use on a "spot" market basis for exporting purposes. According to Haring's first affidavit, only four purchases were made between June 1980 and June 1981.

The resale of these "spot" purchases to American Electric Power Company, as part of one continuous contract now before the court, is in some dispute. The defendant asserts that these visits and first negotiations are necessarily part of the contract in dispute, for United Coal sold most of the coal to American Electric Power Company or a subsidiary. The plaintiffs, on the other hand, contend that the transactions dealt solely with "spot" market purchases. Resolution of this conflict, however, is unnecessary to the determination of the issue at bar.

On August 12, 1983 Orton and Bright toured the facilities of United Coal in Bristol, Virginia. Bright claims that during the visit the parties discussed "spot market sales, the type of product Land Use had available, and the possibility of a long-term arrangement between our two companies." (Bright's second affidavit 3). Haring asserts that they discussed "the operations of Land Use, the type of product it had available, and the general services and the like it could offer to United Coal regarding domestic and export coal." (Haring's first affidavit 2). Gary Chilcot of United Coal describes the discussions as generally explaining the operations of Land Use and soliciting business. (Chilcot's first affidavit 1). These affidavits show that the foundation for a long-term arrangement apparently was laid.

Orton continued to urge United Coal to purchase from Land Use. On July 30, 1981 he and his wife flew from New Jersey to Bristol. The next day Orton met with Chilcot to begin negotiations for a long-term coal sales agreement FOB barge at a barge loading facility on the Kanawha River between Land Use, supplier, and United Coal, buyer. After a week of consultation with both parties, Orton successfully brought them together. On August 6 and 7, Bright and Lawson of Land Use met with Chilcot and Haring to negotiate a contract whereby Land Use would supply coal to Harbour Marine, an wholly-owned subsidiary of United Coal. Harbour Marine holds a contract for coal supply with Appalachian Power Company. During the negotiations in Bristol, general terms and conditions of the contract were dickered. The parties seemed to reach some specifics during negotiation, and Orton recalls that exact percentages were being negotiated when the meeting concluded on August 7. (Orton's affidavit 4). Following the parties' exchanges of telephone conversations and telexes, Chilcot executed the final draft of the letter agreement dated August 21, 1981 in Bristol and sent it to Bright in West Virginia. There Bright signed the agreement and returned it to United Coal. Under the letter agreement United Coal was to buy and apply approximately fifteen thousand (15,000) tons coal per month that Land Use mined "on our present Harbour Marine Contract with AEP."¹

At some point in the negotiations Chilcot or Bright insisted that United Coal would be the exclusive sales agent for Land Use in the supplying of coal to Appalachian Power Company.² Notwithstanding who insisted upon the exclusive agency term, Bright agreed to it,³ and it is incorporated in the final letter agreement.⁴

Seven weeks later Land Use paid Orton for his brokerage services of bringing the parties together. The plaintiffs did not furnish Orton any compensation for his involvement in this transaction.

Plaintiffs allege that prior to November 1981 approximately fifteen thousand (15,000) tons of coal per month were shipped and that from November 1981 until April 1982 Land Use shipped approximately twenty-one thousand (21,000) tons of coal per month to Harbour Marine in Ohio. According to Chilcot's first affidavit, "all Appalachian Power Company payments for Land Use coal were made in Virginia and United Coal's payments to Land Use in regard thereto were written drawn on Virginia banks and finally paid in Virginia. In addition, Land Use coal was tested, for quality control purposes, by United Coal personnel in Buchanan County, Virginia." (Chilcot's first affidavit 3). Furthermore, employees of United Coal, as agents for Land Use, frequently contacted American Electric Power Company and its subsidiary Appalachian Power Company concerning "coal deliveries, quality control problems, shipment dates, delivery problems, barge scheduling, general contract problems and correspondence, price escalations, premium penalties and the like. Further such important functions as calculation of premium penalties (based on American Electric Power's information), preparing and distributing to Land Use the monthly analysis statements, and determination of price escalations were performed in United Coal's Bristol, Virginia office." Id. United Coal performed its duties as agent for Land Use through its offices in Bristol.

Apparently, problems arose under the Harbour Marine contract with Appalachian Power Company, for a letter of May 14, 1982 from American Electric Power Service Corporation to United Coal sets forth a schedule of reduced coal shipments. During April through July 1982 Bright met four times with James McGlothlin, president of United Coal and Harbour Marine. Plaintiffs contend that, on behalf of Land Use, Bright asserted:

(a) That HMI Harbour Marine and, presumably, UCC United Coal, are obligated to purchase from LUC Land Use, under the terms of the Chilcot letter 25,000 tons per month through December, 1982;

(b) That the amendment set forth in the May 14, 1982 letter (Exhibit C) by which 350,000 tons of coal are to be delivered by HMI to APCO Appalachian Power Company at the rate of 116,667 tons per year for 1983, 1984 and 1985 constitutes an extension and/or renegotiation of the APCO Contract which, pursuant to the Chilcot Letter, gives it the right and option to require that HMI and UCC purchase 40,000 tons of coal per month for a period of 10 years from it; and

(c) That, pursuant to the terms of the

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