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Delta Stone Products v. Xpertfreight, U.S. Express, LLC

United States District Court, D. Utah, Central Division

August 14, 2017

DELTA STONE PRODUCTS, a Utah corporation, Plaintiff,
v.
XPERTFREIGHT, U.S. EXPRESS, LLC, EMBASSY CARGO S.P.A., HARBOR FREIGHT TRANSPORT CORP., RSA - SUN INSURANCE OFFICE, LTD., SERAN SALAMON, an individual, RAFIK NAZAROV an individual, and DOES 1 through 10, Defendants.

          MEMORANDUM DECISION & ORDER GRANTING RSA-SUN INSURANCE'S MOTION TO DISMISS

          CLARK WADDOUPS, United States District Judge

         Judge Clark Waddoups Plaintiff Delta Stone Products (“Delta Stone”) seeks recovery for losses stemming from damage to a stone cutting machine it had purchased, occurring while the machine was in transit from Italy to Utah. (See generally Dkt. No. 2.) Among others, Delta Stone has sued RSA-Sun Insurance Office, Ltd. (“RSA”), an Italian insurance company. RSA issued a “Cargo Insurance Policy” to Embassy Cargo S.P.A., a broker/shipper, to insure the cargo during its transit. (See Dkt. Nos. 70-1 & 75-1, p. 19 (the policy).)

         RSA moves the court to dismiss the case against it for lack of personal jurisdiction and improper service. (Dkt. No. 61.) RSA also seeks to enforce a forum selection clause in the insurance contract indicating that Italy is the proper venue for the dispute. (Id.) On March 15, 2017, the court heard oral argument from RSA and Delta Stone, and requested supplemental briefing on the question of the court's personal jurisdiction over RSA. (See Dkt. No. 78.)

         After considering the parties' briefing and supplemental materials, oral argument, and relevant case law, the court GRANTS RSA's Motion to Dismiss for lack of personal jurisdiction, (Dkt. No. 61). Though RSA's explicit inclusion of Utah in the insurance policy's territory of coverage constitutes some showing of minimum contacts with this forum, the court concludes that exercising personal jurisdiction over RSA would offend traditional notions of fair play and substantial justice. Because the court lacks personal jurisdiction over RSA, the court does not reach the issues of improper service or the forum selection clause.

         BACKGROUND

         Delta Stone, a Utah corporation based in Heber City, Utah, purchased a stone cutting machine from Simec SPA, an Italian company, for use in cutting stone slabs for a time sensitive government project. (Compl. ¶¶ 1-2, 16-17, Dkt. No. 2.) Embassy Cargo S.P.A., an Italian company with its principal place of business in New York, [1] acted as a broker/shipper for the machine from Italy to Heber City and obtained the cargo insurance from RSA. (Id. ¶ 7.) The cargo was located in Italy at the time Embassy Cargo and RSA entered into the insurance contract, and Embassy Cargo paid the insurance premium on the policy in Italy. (See Genesio Decl. ¶ 9-10, Ex. A, Dkt. No. 61-1.)

         The “Certificate” to the insurance policy is written in Italian with translations below the Italian in English. (See Dkt. No. 70-1, p. 2-3 & 75-1, p. 19.) The Certificate shows that RSA contracted with Embassy Cargo on November 26, 2014 to provide cargo insurance on the stone cutting machine “for the voyage from Castello di Godego (TV) to Heber City UT, USA.” (Id.) In addition, the Certificate states: “This contract is subject to Italian Law ad [sic] practice and in case of dispute the place of jurisdiction shall be Genoa.” (Id.) The contract also contains a number of “Clauses” and attachments written in English. (See Dkt. No. 70-1.) In the “Institute Cargo Clauses, ” the “Risks Covered” provision states: “This insurance covers all risks of loss of or damage to the subject-matter insured, ” with enumerated exceptions not relevant to this motion. (Id. at 8.) The “Institute Cargo Clauses” concludes with a “Law and Practice” provision, which states: “This insurance is subject to English law and practice.” (Id. at 10.) The same language regarding English law also appears at the end of the “Institute War Clauses” and “Institute Strikes Clauses.” (Id. at 13, 17.)

         Delta Stone tendered its claim for payment of the damages to the machine to RSA. (See Compl. ¶ 51.) When RSA received notice of the alleged damage to the machine it hired VeriClaim, an independent surveying company, to appoint a surveyor to inspect the damage. (See Genesio Decl. ¶ 12.)

         Unsatisfied with RSA's offer to resolve the claim, Delta Stone now sues RSA for breach of contract as a third-party beneficiary of the cargo insurance contract between RSA and Embassy Cargo. (See Compl. ¶¶ 48-56.) Delta Stone alleges this court has jurisdiction pursuant to the diversity statute, 28 U.S.C. § 1332. (Id. ¶ 10.)[2] Delta Stone alleges that RSA has “denied complete coverage for the subject loss by claiming that the subject insurance only covers the direct damage to the Stone Cutting Machine (i.e., the repair costs), and denies that such insurance covers the foreseeable consequential damages resulting from such damage.” (Id. ¶ 52.) Thus, Delta Stone alleges RSA has breached the insurance contract by “its refusal to accept Plaintiffs' complete tender of claim” and seeks as damages “the actual repair and delay costs in an amount not less than $430, 611, together with interest, costs and attorneys' fees.” (Id. ¶¶ 53, 56.) Delta Stone seeks this amount of damages in its claims against the other defendants, which include shippers and forwarders along the machine's path of transportation. (See Id. ¶¶ 35-36, 42, 46-47.)

         In its motion, RSA does not dispute that the insurance policy covers Delta Stone's claim for repair costs, but denies that the policy covers any delay damages. (Mot. to Dismiss at 3, Dkt. No. 61.)

         For the reasons that follow, the court holds that it lacks personal jurisdiction over RSA.

         ANALYSIS

         “Because a court without jurisdiction over the parties cannot render a valid judgment, [the court] must address Defendants'[s] personal jurisdiction argument before reaching the merits of the case.” OMI Holdings, Inc. v. Royal Ins. Co. of Canada, 149 F.3d 1086, 1090 (10th Cir. 1998).

         “[P]laintiffs bear the burden of establishing personal jurisdiction.” Dudnikov v. Chalk & Vermilion Fine Arts, Inc., 514 F.3d 1063, 1069 (10th Cir. 2008). To meet this burden on a pre-trial motion to dismiss, the plaintiff need only make a prima facie showing of personal jurisdiction. Id. at 1070. “The plaintiff may make this prima facie showing by demonstrating, via affidavit or other written materials, facts that if true would support jurisdiction over the defendant.” OMI Holdings, 149 F.3d at 1091.

         Because the parties base their personal jurisdiction arguments on the pleadings, declarations, and other written materials, Delta Stone need only make a prima facie showing of personal jurisdiction over RSA. Dudnikov, 514 F.3d at 1070. The court takes as true all “plausible, non-conclusory, and non-speculative” facts and resolves factual disputes in favor of Delta Stone. Id. (citation omitted).

         “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.” Pro Axess, Inc. v. Orlux Distribution, Inc., 428 F.3d 1270, 1276 (10th Cir. 2005) (quoting Far West Capital, Inc. v. Towne, 46 F.3d 1071, 1074 (10th Cir. 1995)). Because Utah's long-arm statute confers the maximum jurisdiction allowed by due process of law, Utah Code Ann. § 78B-3-201(3), the inquiry under Utah law “collapses . . . into the more general ‘due process' standard for jurisdiction.” Rusakiewicz v. Lowe, 556 F.3d 1095, 1100 (10th Cir. 2009).

         Delta Stone concedes that the facts of this case do not implicate the court's general personal jurisdiction. (See Opp'n 7, Dkt. No. 70.) Thus, the court turns to the issue of its specific personal jurisdiction over RSA.

         The due process inquiry for specific personal jurisdiction has two steps. First, the court must “ask whether the nonresident defendant has ‘minimum contacts' with the forum state such ‘that he should reasonably anticipate being haled into court there.'” TH Agric. & Nutrition, LLC v. Ace European Grp. Ltd., 488 F.3d 1282, 1287 (10th Cir. 2007) (quoting OMI Holdings, 149 F.3d at 1091); accord Rusakiewicz, 556 F.3d at 1100 (“[The] jurisdictional inquiry in Utah diversity cases is reduced to a single question: did the defendants have sufficient ‘minimum contacts' with the state of Utah to establish personal jurisdiction over them?”). Next, even where a defendant had “minimum contacts” with a forum, the court must consider “whether the exercise of personal jurisdiction over the defendant offends traditional notions of fair play and substantial justice.” Rusakiewicz, 556 F.3d at 1102 (quoting OMI Holdings, 149 F.3d at 1091).[3]

         “This analysis is fact specific.” Employers Mut. Cas. Co. v. Bartile Roofs, Inc., 618 F.3d 1153, 1160 (10th Cir. 2010) (citing TH Agric. & Nutrition, 488 F.3d at 1287, 1292).

         A. Minimum Contacts

         A defendant has minimum contacts with a forum where “the defendant has purposefully directed his activities at residents of the forum, and the litigation results from alleged injuries that arise out of or relate to those activities.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985) (citations and internal quotation marks omitted). In analyzing the first prong of the inquiry--a defendant's purposefully directed activities-- “it is essential in each case that there 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.” Id. at 475 (quoting Hanson v. Denckla, 357 U.S. 235, 253 (1958)); see Racher v. Lusk, 674 F. App'x 787, 791 (10th Cir. 2016) (unpublished) (noting that specific jurisdiction “is premised on the defendant obtaining a benefit in exchange for purposeful conduct directed at the forum state”). This inquiry ensures that “an out-of-state defendant is not bound to appear to account for merely ‘random, fortuitous, or attenuated contacts' with the forum state.” Dudnikov, 514 F.3d at 1071 (quoting Burger King, 471 U.S. at 475).

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