United States District Court, D. Montana, Billings Division
BUCKHORN ENERGY OAKS DISPOSAL SERVICES, LLC and OAKS DISPOSAL SERVICES, LLC, Plaintiffs,
CLEAN ENERGY HOLDING COMPANY, LLC, BRUCE BENTZ, T.J. HERRMANN, JOHN WALSH, KEN HOSTETTER, SHELDON SMITH, JOHN DOES 1-50, and JOHN DOE ENTITIES 1-5, Defendants.
TIMOTHY J. CAVAN United States Magistrate Judge
Buckhorn Energy Oaks Disposal Services, LLC
(“Buckhorn”) and Oaks Disposal Services, LLC
(“Oaks”) (collectively, “Plaintiffs”)
filed this action against Clean Energy Holding Company, LLC
(“Holdings”), Bruce Bentz, T.J. Herrmann, John
Walsh, Sheldon Smith (collectively, the “individual
Defendants”), and Ken Hostetter, alleging various
causes of action related to a debt accrued by a nonparty
corporation, Clean Energy Fluid Systems, LLC
(“Fluids”). (See generally Doc. 1-1.)
Complaint and Demand for Jury Trial (the
“Complaint”) (Doc. 1-1) asserts claims for
piercing the corporate veil (Count I); unjust
enrichment/quantum meruit (Count II); breach of a
personal guaranty against the individual Defendants and
Hostetter (Count III); and breach of the covenant of good
faith and fair dealing against the individual Defendants and
Hostetter (Count IV).
before the Court is Holdings' and the individual
Defendants'Motion to Dismiss for Lack of Personal
Jurisdiction or Forum non Conveniens (the
“motion”). (Doc. 6.) Defendant Hostetter joins
the motion with respect to forum non conveniens and
change of venue only. (Doc. 8.) For the following reasons,
the Court orders (1) that the motion to dismiss is denied as
to the individual Defendants, and denied with leave to renew
following jurisdictional discovery as to Holdings; and (2)
the motion to transfer venue is denied.
purposes of the instant motion, the Court accepts as true the
uncontroverted facts from Plaintiffs' Complaint.
Schwarzenegger v. Fred Martin Motor Co., 374 F.3d
797, 800 (9th Cir. 2004). In addition, “[i]n ruling on
a motion to dismiss for lack of personal jurisdiction, a
court may consider declarations, discovery materials, and
uncontroverted allegations in the complaint.”
Nationwide Agribusiness Ins. Co. v. Buhler Barth
GmbH, 2015 WL 6689572, *3 (E.D. Cal. Oct. 30, 2015)
(citing ADO Fin., AG v. McDonnell Douglas Corp., 931
F.Supp. 711, 714 (C.D. Cal. 1996)).
operate a landfill near Glendive, Montana (the “Montana
landfill”), which accepts waste with high levels of
radioactivity from the exploration and production of oil and
gas. (Doc. 1-1 at ¶ 2.) The Montana landfill was
established by Oaks, but was acquired by Buckhorn in April
2014. (Docs. 15 at 2, 7-1 at 1.)
2013 or early 2014, Fluids entered into an oral contract with
Oaks to dispose of waste at the Montana landfill. (Doc. 1-1
at ¶¶ 3-8.) Fluids agreed to make payment to Oaks
every fifteen (15) days. (Id. at ¶ 9.) Fluids
initially complied with the oral agreement, but later fell in
arrears with its payments to Plaintiffs. (Id. at
¶¶ 14-16.) Plaintiffs claim that Fluids owes them
approximately $610, 118.20, plus interest. (Id. at
¶ 17.) The instant lawsuit is Plaintiffs' attempt to
hold the named Defendants liable for Fluids' debt.
(See generally Doc. 1-1.)
respect to personal jurisdiction, the individual Defendants
are all residents of North Dakota, and Holdings is a North
Dakota limited liability company (“LLC”) with its
principal place of business in North Dakota. (Doc. 1 at
¶ 3.) Nevertheless, Plaintiffs allege that the Court has
personal jurisdiction over all Defendants on the basis that
Fluids was merely the alter ego of Defendants. Plaintiffs
further allege that the Court has jurisdiction of the
individual Defendants because their forum-related activities
subject them to specific personal jurisdiction under
Montana's long-arm statute.
support their allegations with the affidavits of Ross
Oakland, the owner of Oaks at the time Fluids began disposing
of waste at the Montana landfill, and Gary Ebel, the chief
executive officer of Buckhorn after the landfill was acquired
from Oaks. (Docs. 15 at ¶¶ 2-3, 17-1 at ¶ 2.)
to Oakland, Fluids initially fell behind in its payments to
Oaks in the amount of approximately $200, 000.00. (Doc15 at
¶ 6). After Oakland contacted various individuals at
“Clean Energy” about the debt, Defendants Walsh
and Hostetter travelled to Montana and personally met with
Oakland at Oakland's farm near the
landfill. Oakland discussed with Walsh “the
past due payments for Clean Energy, and the fact that [he]
had determined to cut it off from any further disposal
services until they were current.” (Id. at
¶ 5.) According to Oakland, “[Walsh] told [him]
that he and a partner from Bismarck, I believe his name was
Bruce, were interested in investing in Clean Energy and would
see that we were paid.” (Id. at ¶ 7.)
Oakland maintains Walsh guaranteed Oaks would be paid every
two weeks, and the two shook hands on the promise.
(Id. at ¶ 8.)
the course of the next two weeks, Oaks received two money
wires totaling $190, 000.00 from the law firm of Smith Bakke
Porsberg & Schweigert (“SBPS”), which appears
from other exhibits to be Defendant Smith's law firm.
(Id. at ¶ 9; see also Doc. 13-6.)
Oakland maintains that he continued to allow Clean Energy to
dispose of waste at the Montana landfill “[b]ased on
[Walsh's] personal assurances at my property in Montana
and payments I received from [SBPS].” (Id. at
the Montana landfill was acquired by Buckhorn, Ebel
discovered that “Clean Energy” had again fallen
approximately $500, 000.00 behind in its payments for waste
deposited in Montana. (Doc. 17-1 at ¶ 6.) Ebel explains
that “Clean Energy” “dumped hundreds of
loads, totaling 33, 845.47 tons of oilfield waste, ” at
the landfill from May of 2014 to June of 2015. (Id.
at ¶ 5.) After discovering “Clean
Energy's” arrearage to Buckhorn, Ebel spoke to
Herrmann, who represented to Ebel “that he and his
partners, Walsh, Bentz, and Smith, would make sure Buckhorn
was paid.” (Id. at ¶ 11.) Ebel claims
that he thereafter had several phone and email contacts with
the individual Defendants who “made repeated
representations that Buckhorn would get paid.”
(Id. at ¶¶ 12, 13.)
the debt had grown to approximately $1, 000, 000.00, however,
Ebel informed the individual Defendants that he would not
accept their waste at the Montana landfill “unless they
paid off the balance of their account.” (Id.
at ¶ 15.) Ebel claims the individual Defendants
“suggested restructuring the debt into a note, and
agreed that they would personally guarantee the note to
Buckhorn.” (Id. at ¶ 16.)
upon the promises received from the individual Defendants,
Buckhorn continued to allow the disposal of waste at the
Montana landfill. Ebel makes clear that Buckhorn would not
have allowed “Clean Energy” to continue disposing
of waste at the landfill without the individual
Defendants' personal guaranty. (Id. at ¶
19.) A few months later, however, Ebel learned that the
individual Defendants “had not actually signed the Note
and Personal Guaranty and were no longer paying off the
account as we agreed.” (Id. at ¶ 20).
individual Defendants never informed Ebel that they were not
the owners and operators of “Clean Energy, ” and
Ebel believed them to be responsible for “Clean
Energy's” operational and financial decisions.
(Id. at ¶ 17.) Ebel did not discover until
later that the individual Defendants were involved in
multiple companies with the name “Clean Energy, ”
including Holdings and Fluids. In Ebel's experience, the
individual Defendants ran all of the businesses as “one
combined operation which they referred to as Clean
Energy.” (Id. at ¶ 21.)
dispute Plaintiffs' personal jurisdiction allegations
through affidavits executed by Bentz (Doc. 7-4), Herrmann
(Doc. 7-3), Walsh (Docs. 7-5 and 21-1), and Smith (Docs. 7-2
and 21-2). According to Bentz,  none of the members of
Fluids' ownership group own any part of Holdings, and
none of the owners of Holdings own any part of Fluids. (Doc.
7-4 at ¶ 8.) The formal relationship between Holdings
and Fluids is a joint venture the two entities created in
December, 2013. (Id. at ¶ 10.)
states that Fluids opened a waste processing plant in 2012.
(Id. at ¶ 9.) Earthworks, Inc.
(“Earthworks”) began managing the plant in
December 2013, and it was Fluids, through Earthworks, who
incurred the debt to Plaintiffs. (Id. at
¶¶ 11, 13.) “The members of Holdings were
investors and did not intend to operate or manage the plant
in any way, shape, or form.” (Id. at ¶
12.) Bentz denies that any of the individual Defendants
“have met with or been to the plant of the plaintiff,
” although Walsh admits in his second affidavit that he
did meet with Oakland at Oakland's farm. (Id. at
¶ 19; Doc. 21-1 at ¶ 2.
maintains in his second affidavit that Earthworks paid the
“approximately $195, 000.00” debt to Oaks. (Doc.
21-2 at ¶¶ 4-6.) Smith denies that any of the
individual Defendants “ever agreed to personally
guarantee the indebtedness to Buckhorn.” (Id.
at ¶ 10.) Rather, Smith claims that the Fluids/Holdings
joint venture proposed to pay $80, 000.00 per month to
Plaintiffs for the indebtedness and any new charges incurred.
(Id. at ¶ 28.)
plaintiff bears the burden of demonstrating that jurisdiction
is appropriate when a defendant moves to dismiss a complaint
for lack of personal jurisdiction. Poliseno v. Credit
Suisse Securities (USA), LLC, 2013 WL 1767951, *2 (D.
Mont. April 24, 2013) (citing Schwarzenegger, 374
F.3d at 800). Where the motion is based on written materials
rather than an evidentiary hearing, the plaintiff need only
make a prima facie showing of jurisdictional facts.
Id. A court's duty is to inquire into whether
the plaintiff's pleadings and affidavits make a prima
facie showing of personal jurisdiction, accepting the
plaintiff's allegations as true. Id. Although
the plaintiff cannot simply rest on the bare allegations of
its complaint, uncontroverted allegations in the complaint
must be taken as true. Conflicts between parties over
statements contained in affidavits must be resolved in the
plaintiff's favor. Schwarzenegger, 374 F.3d at
800 (quotations and citations omitted).
as here, no applicable federal statute governs personal
jurisdiction, the district court must apply the law of the
state in which the district court sits. Id. Thus,
Montana law will govern whether the Court has personal
jurisdiction over defendants. See Omeluk v. Langsten Slip
and Batbyggeri A/S, 52 F.3d 267, 271 (9th Cir. 1995).
R. Civ. P. 4(b)(1) governs personal jurisdiction in Montana.
Rule 4(b)(1) embodies principles of both general and specific
jurisdiction. General jurisdiction may lie if a nonresident
defendant maintains “substantial” or
“continuous and systematic” contacts with the
state so as to be “found within the state, ” and
“subject to the state's jurisdiction even if the
cause of action is unrelated to the defendant's
activities with the forum.” Bi-Lo Foods, Inc. v.
Alpine Bank, 955 P.2d 154, 157 (Mont. 1998). Specific
jurisdiction, on the other hand, will extend to “any
person ‘as to any claim for relief arising from the
doing personally, or through any employee or agent, of any of
the . . . acts'” set forth in Rule 4(b)(1).
Milky Whey, Inc. v. Dairy Partners, LLC, 342 P.3d
13, 17 (Mont. 2015).
exercise of personal jurisdiction must also comport with
traditional notions of fair play and substantial justice
embodied in the due process clause. Id. The Ninth
Circuit has recognized that Mont. R. Civ. P. 4(b)(1)
“permits the exercise of personal jurisdiction over
nonresident defendants to the maximum extent permitted by
federal due process. As a result, the jurisdictional analyses
under state law and federal due process are the same.”
King v. American Family Mut. Ins. Co., 632 F.3d 570,
578-579 (9th Cir. 2011) (quotations and citations omitted).
Plaintiffs do not argue that either Holdings or the
individual Defendants are subject to general personal
jurisdiction,  the Court will focus its analysis on
specific personal jurisdiction. In order to subject a party
to specific personal jurisdiction, the court must find that
the defendant had “fair warning that a particular
activity may subject [them] to the jurisdiction of a foreign
sovereign.” Burger King Corp. v. Rudzewicz,
471 U.S. 462, 472 (1985) (quoting Shaffer v.
Heitner, 433 U.S. 186, 218 (1977) (Stevens, J.,
concurring in judgment)). The Ninth Circuit employs a
three-part test to determine whether Burger
King's requirements are satisfied with respect to a
(1) The nonresident defendant must do some act or consummate
some transaction with the forum or perform some act by which
he purposefully avails himself of the privilege of conducting
activities in the forum, thereby invoking the benefits and
protections of its laws[;] (2) [t]he claim must be one which
arises out of or results from the defendant's
forum-related activities[; and] (3) [e]xercise of
jurisdiction must be reasonable.
Omeluk, 52 F.3d at 270 (citing Data Disc, Inc.
v. Systems Tech. Assoc., Inc., 557 F.2d 1280, 1287 (9th
Cir.1977) and Roth v. Garcia Marquez, 942 F.2d 617,
620- 21 (9th Cir.1991)). The plaintiff bears the burden of
establishing the first two requirements.
Schwazenegger, 374 F.3d at 802. If a plaintiff does
so, the defendant must come forward with a
“‘compelling case' that the exercise would
not be reasonable.” Id.
satisfy the first requirement, a plaintiff must establish the
defendant “either purposely availed itself of the
privilege of conducting activities [in the forum state], or
purposely directed its activities toward [the forum
state].” Id. The purposeful availment analysis
is generally used in contract cases, such as the instant
case, while the purposeful direction analysis is most often
used in tort cases. Id.
Dismissal of Individual Defendants under Rule
Court will first consider whether the individual Defendants
purposely availed themselves of the privilege of conducting
activities in Montana. “Purposeful availment, which
satisfies the first part of the Ninth Circuit test, requires
a finding that the defendant has performed some type of
affirmative conduct which allows or promotes the transaction
of business within the forum state.” Doe v. Unocal
Corp., 248 F.3d 915, 924 (9th Cir. 2001) (quotations and
citations omitted). The Supreme Court explained in Burger
[W]e have emphasized the need for a highly realistic approach
that recognizes that a contract is ordinarily an intermediate
step to serving to tie up business negotiations with future
consequences which themselves are the real object of the
business transaction. It is these factors - prior
negotiations and contemplated future consequences, along with
the terms of the contract and the parties' actual course
of dealing - that must be evaluated in determining whether
the defendant purposefully established minimum contacts
within the forum.
Burger King, 471 U.S. at 478-479 (quotations and
Court finds that Plaintiffs have made a prima facie showing
that the individual Defendants purposely availed themselves
of the privilege of conducting activities in Montana.
Plaintiffs pled in their Complaint that the individual
Defendants “agreed with Plaintiffs to pay their bill in
timely installments and to also personally guaranty the
amounts owed by [Fluids].” (Doc. 1-1 at ¶ 33.) The
affidavits of Oakland and Ebel support this allegation, and
further establish that Buckhorn would have denied any further
waste disposal in Montana without the individual
Defendants' assurances and personal guaranty. (Doc. 17-1
at ¶¶ 16, 19).
their opening brief, Defendants concede that Plaintiffs
“allege certain ‘oral contracts' by certain
Defendants.” (Doc. 7 at 12, n. 2.) But they
characterize these allegations as “factually vacuous,
” and do not address them at any length, other than to
say that oral such contracts “would not necessarily
establish sufficient minimum contacts.” (Id.)
After the submission of Oakland's and Ebel's
affidavits with the Plaintiffs' response, the individual
Defendants do not address the personal guaranty further in
their reply, except for a general denial in Smith's
second affidavit that such a guaranty was made. (Doc. 21-1 at
Plaintiffs need only make a prima facie showing of
jurisdictional facts, and conflicting statements in the
parties' affidavits must be resolved in Plaintiffs'
favor. Schwarzenegger, 374 F.3d at 800. The Court
must, therefore, resolve the conflicting affidavits in
Plaintiffs' favor at this stage. The Court therefore
assumes to be true that the individual Defendants repeatedly
reassured the ...