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US Magnesium, LLC v. ATI Titanium, LLC

United States District Court, D. Utah

March 7, 2017

US MAGNESIUM, LLC, a Delaware limited liability company, Plaintiff,
v.
ATI TITANIUM, LLC, a Delaware limited liability company, ALLEGHENY TECHNOLOGIES, INC., a Delaware corporation, and DOES 1-20, Defendants.

          MEMORANDUM DECISION AND ORDER ON PENDING MOTIONS

          Ted Stewart United States District Judge.

         This matter is before the Court on a Motion to Dismiss filed by Defendant ATI Titanium LLC (“ATI-Ti”), a Motion to Dismiss filed by Defendant Allegheny Technologies, Inc. (“Allegheny”), and a Motion for Discovery filed by Plaintiff. For the reasons discussed below, the Court will grant the Motions to Dismiss and deny Plaintiff's Motion for Discovery.

         I. BACKGROUND

         Plaintiff is a producer and supplier of magnesium, and operates a manufacturing facility in Rowley, Utah. On or about September 1, 2006, Plaintiff and ATI-Ti entered into the Supply and Operating Agreement (the “Agreement”). Under the Agreement, ATI-Ti promised to purchase magnesium from Plaintiff for use in manufacturing titanium sponge.

         The Agreement contained an economic force majeure clause which, under certain circumstances, allowed ATI-Ti to suspend its performance under the Agreement. On August 23, 2016, ATI-Ti invoked the economic force majeure clause and informed Plaintiff that it was suspending its performance under the Agreement 180 days following the letter. Soon thereafter, ATI-Ti began ramping down the amount of magnesium it accepted from Plaintiff and the amount of magnesium chloride it provided to Plaintiff. By doing so, Plaintiff alleges that ATI-Ti breached the Agreement and caused permanent damage to the electrolytic cells Plaintiff used to produce magnesium. Plaintiff brings claims for breach of contract and for declaratory judgment. In addition, Plaintiff asserts claims against Allegheny, ATI-Ti's parent company, based on an alter ego theory of liability. Both Defendants seek dismissal.

         II. STANDARD OF REVIEW

         In considering a motion to dismiss for failure to state a claim upon which relief can be granted under Rule 12(b)(6), all well-pleaded factual allegations, as distinguished from conclusory allegations, are accepted as true and viewed in the light most favorable to Plaintiff as the nonmoving party.[1] Plaintiff must provide “enough facts to state a claim to relief that is plausible on its face, ”[2] which requires “more than an unadorned, the-defendant-unlawfully harmed-me accusation.”[3] “A pleading that offers ‘labels and conclusions' or ‘a formulaic recitation of the elements of a cause of action will not do.' Nor does a complaint suffice if it tenders ‘naked assertion[s]' devoid of ‘further factual enhancement.'”[4]

         “The court's function on a Rule 12(b)(6) motion is not to weigh potential evidence that the parties might present at trial, but to assess whether the plaintiff's complaint alone is legally sufficient to state a claim for which relief may be granted.”[5] As the Court in Iqbal stated,

only a complaint that states a plausible claim for relief survives a motion to dismiss. Determining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. But where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not shown-that the pleader is entitled to relief.[6]

         In considering a motion to dismiss, a district court not only considers the complaint, “but also the attached exhibits, ”[7] and “documents incorporated into the complaint by reference, and matters of which a court may take judicial notice.”[8] The Court “may consider documents referred to in the complaint if the documents are central to the plaintiff's claim and the parties do not dispute the documents' authenticity.”[9]

         Federal Rule of Civil Procedure 12(b)(2) is the vehicle by which a party may move for dismissal based on lack of personal jurisdiction. Plaintiff bears the burden of establishing the jurisdiction over Defendant.[10] When a motion to dismiss for lack of personal jurisdiction is brought before trial and supported by affidavits and other written materials, Plaintiff need only make a prima facie showing of jurisdiction.[11] “The ‘well pled facts' of the complaint must be accepted as true if uncontroverted by the defendant's affidavits, and factual disputes at this initial stage must be resolved in the plaintiff's favor when the parties present conflicting affidavits.”[12]

         Unlike a claim under Rule 12(b)(6), when assessing personal jurisdiction under Rule 12(b)(2), the Court may consider matters outside of the pleadings without converting the motion to dismiss to one for summary judgment.[13]

         III. DISCUSSION

         A. ATI-TI'S MOTION TO DISMISS

         ATI-Ti seeks dismissal of Plaintiff's Complaint without prejudice based on Plaintiff's failure to abide by the dispute resolution provision of the Agreement. Article 12 of the Agreement, entitled “Dispute Resolution, ” states:

Section 12.1 Mediation. Any dispute, difference, controversy or claim between the parties arising out of or in connection with this Agreement or as to rights or obligations hereunder may be referred by either Party to the respective executive officers or the parties for resolution to the satisfaction of the parties, if possible. Such executive officers may, if they so desire, consult outside experts for assistance in arriving at a resolution. Such executive officers will make a bona fide attempt to settle any such dispute, difference, controversy or claim amicably through negotiations within sixty (60) days of its submission to them. If the dispute, difference, controversy, or claim has not settled within sixty (60) days or within such other period as the parties may agree in writing, the parties will submit such dispute, difference, controversy or claim to settlement proceedings pursuant to mediation administered by the American Arbitration Association. Section 12.2 Litigation. If any dispute, controversy, or claim has not been resolved within sixty (60) days of its submission to mediation pursuant to Section 12.1, either Party may submit such dispute, controversy, or claim to litigation.

         Plaintiff filed the instant action on October 12, 2016. That same day, Cameron Tissington, Vice President of Sales for Plaintiff, sent Defendants a letter invoking Section 12.1 of the Agreement. The parties have completed the informal resolution portion of Section 12.1 and, as of the filing of the Motion, were engaging in mediation.[14] The sixty-day period to engage in mediation expired on February 10, 2017.

         ATI-Ti seeks dismissal, arguing that Plaintiff failed to comply with the dispute resolution provision of the Agreement prior to filing its Complaint. In response, Plaintiff first argues that Article 12 does not apply to its claims because Article 11, concerning the economic force majeure, contains a different resolution process. Second, Plaintiff argues that the dispute resolution process under Article 12 is voluntary and, therefore, not a condition precedent to litigation. Finally, Plaintiff argues that by the time the Court rules on this Motion, the parties will have completed mediation, making this Motion moot. Each argument will be addressed in turn.

         Plaintiff first argues that Article 12's dispute resolution provision does not apply because Article 11 contains a more specific dispute resolution process concerning the economic force majeure clause. Article 11's economic force majeure clause allows ATI-Ti the ability to suspend its performance under the Agreement in certain circumstances. Providing notice of an economic force majeure triggers certain procedures. In particular, notice from ATI-Ti that it is invoking the clause begins a negotiation and audit period. Plaintiff argues that this more specific process governs this dispute, as opposed to Article 12's general dispute resolution clause.

         Plaintiff's argument is without merit and is contradicted by the plain language of the Agreement. Article 12's dispute resolution process applies to “[a]ny dispute, difference, controversy or claim between the parties arising out of or in connection with this Agreement.” The broad language of the Agreement necessarily includes disputes related to the economic force majeure clause. The fact that invocation of the economic force majeure clause triggers certain procedures is irrelevant to whether Article 12 applies. The two provisions are not mutually exclusive. Nothing in Article 11 or 12 would take disputes related to the economic force majeure clause out of the dispute resolution process set out in Article 12.

         Plaintiff next argues that Article 12 is optional and not a condition precedent to suit. Article 12 is not a model of clarity. As stated, Article 12 applies to “[a]ny dispute, difference, controversy or claim between the parties arising out of or in connection with” the Agreement. Those disputes “may be referred by either Party to their respective executive officers of the parties for resolution to the satisfaction of the parties, if possible.” The executive officers then “will make a bona fide attempt to settle any such dispute.” If the dispute is not resolved in this manner within sixty days “the parties will submit such dispute, difference, controversy or claim to settlement proceedings pursuant to mediation administered by the American Arbitration Association.” If the dispute is not resolved within sixty days of its submission to mediation, “either Party may submit such dispute, controversy, or claim to litigation.”

         Plaintiff argues that the parties' use of the permissive word “may” with respect to the first level of dispute resolution shows that the parties did not intend to require this process in every circumstance. This argument does not withstand scrutiny.

         As stated, Section 12.1 states that disputes “may be referred by either Party to their respective executive officers of the parties for resolution to the satisfaction of the parties, if possible.” The use of the word “may” in Section 12.1 relates to who may refer disputes to the parties' executive officers, not whether the parties must engage in such attempts. The word “may” in this instance indicates that either party can begin the dispute resolution process. That is, either party may refer a dispute to the executive officers. Once the dispute has been referred to the executive officers, they “will make a bona fide attempt to settle any such dispute.” If a dispute remains, the parties “will submit such dispute, difference, controversy or claim to settlement proceedings pursuant to mediation administered by the American Arbitration Association.” Only after the parties have engaged in mediation may the parties resort to litigation.

         In any event, the issue of whether the parties must engage in informal dispute resolution through their executive officers is largely academic. After all, Plaintiff began that process when it filed its Complaint. By invoking the executive officer portion of dispute resolution process, Plaintiff must now comply with the remainder of Article 12. That includes engaging in mediation before filing suit.

         Plaintiff's third argument is that ATI-Ti's Motion is moot because by the time the Court rules on it, the parties will have completed the dispute resolution process, including mediation. Essentially, the question is what should be done given Plaintiff's failure to comply with the dispute resolution process set out in the Agreement. Courts faced with similar cases have used their discretion to either dismiss the action or to stay it pending mediation.[15] In making this determination, Courts focus on three main factors: the harm of dismissal to the plaintiff, the harm of not dismissing to the defendant, and the interests of judicial efficiency.[16]

         Here, there is no suggestion that Plaintiff would be harmed if the Court were to dismiss this action. Defendant seeks dismissal without prejudice. Therefore, Plaintiff could re-file this action after mediation is completed and there is no risk that their claims will be lost.

         Defendant argues that dismissal is necessary to reflect the parties' agreement and to allow mediation to proceed without the cloud of litigation. The Court agrees. The parties contracted for a certain dispute resolution procedure. By failing to engage in mediation prior to filing suit, Plaintiff has denied Defendant the benefit of their bargain. If the Court simply ignored Plaintiff's conduct “it would be setting a precedent that parties may disregard such conditions and pay no consequences so long as they subsequently engage in fruitless mediation. Such a position would plainly render the mediation requirement a nullity.”[17] The Court cannot countenance such a clear disregard for a party's contractual obligations.

         Finally, while the dismissal may result in certain inefficiencies, those inefficiencies do not outweigh the harm to Defendant if this case is not dismissed. Further, any inefficiency in dismissing the Complaint is due to Plaintiff failing to abide by the terms of the Agreement. Had Plaintiff complied with the dispute resolution process to which it agreed, dismissal would not be necessary.

         Plaintiff further argues that various hurdles make any attempts at mediation futile. Plaintiff specifically points to the lack of compulsory process and the absence of Allegheny. Plaintiff's futility arguments are unavailing. Plaintiff agreed to the dispute resolution procedures in Article 12. It cannot now be heard to complain about any supposed deficiencies in those procedures. Therefore, the Court will dismiss Plaintiff's Complaint against ATI-Ti without prejudice.[18]

         B. ALLEGHENY'S MOTION TO DISMISS

         Allegheny seeks dismissal for lack of personal jurisdiction and for failure to state a claim. Both arguments are addressed below.

         1.Personal Jurisdiction

         Plaintiff carries the burden of establishing personal jurisdiction over Defendant.[19] “To obtain personal jurisdiction over a nonresident defendant in a diversity action, a plaintiff must show that jurisdiction is legitimate under the laws of the forum state and that the exercise of jurisdiction does not offend the due process clause of the Fourteenth Amendment.”[20] Utah's long arm statute applies “to the fullest extent permitted by the due process clause of the Fourteenth Amendment to the United States Constitution.”[21] Thus, it is “helpful to undertake the due process analysis first, because any set of circumstances that satisfies due process will also satisfy the long-arm statute.”[22]

         To satisfy the constitutional requirement of due process there must be “minimum contacts” between the defendant and the forum state.[23] The “minimum contacts” standard may be met by a finding of either general jurisdiction or specific jurisdiction. For general jurisdiction to exist, “the defendant must be conducting substantial and continuous local activity in the forum state.”[24] In order for the Court to find specific jurisdiction, there must be “some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.”[25] When the “defendant has ‘purposely ...


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