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Signal Peak Energy, LLC v. Generon IGS, Inc.

United States District Court, D. Montana, Billings Division

August 3, 2018

SIGNAL PEAK ENERGY, LLC, Plaintiff,
v.
GENERON IGS, INC; SULLAIR, LLC; POWER SERVICE, INC.; JOHN DOES 1-10, Defendants.

          FINDINGS AND RECOMMENDATION OF U.S. MAGISTRATE JUDGE

          TIMOTHY J. CAVAN UNITED STATES MAGISTRATE JUDGE

         Plaintiff Signal Peak Energy, LLC (“Signal Peak”) filed this action against Generon IGS, Inc. (“Generon”), Sullair, LLC, (“Sullair”[1]) and Power Service, Inc. (“Power Service”) seeking damages related to a fire that broke out at its Roundup, Montana coal mine on November 14, 2014. (Doc. 4.) Generon has also filed a Crossclaim against Sullair and Power Service. (Doc. 19.)

         Presently before the Court are Sullair's Motions to Dismiss the Complaint and the Crossclaim for lack of personal jurisdiction pursuant to Fed.R.Civ.P. 12(b)(2), and for failure to state a claim pursuant to 12(b)(6). (Docs. 13, 20.)

         Having considered the parties' submissions, the Court RECOMMENDS Sullair's Motion to Dismiss for lack of personal jurisdiction be GRANTED.

         I. FACTUAL BACKGROUND

          “In 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)). Therefore, for purposes of the instant motion, the Court accepts as true the uncontroverted facts from Plaintiff's Complaint. Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004).

         Signal Peak is a Delaware corporation with its principal place of business in Columbus, Ohio. (Doc. 4 at ¶ 1.) It owns a coal mine located at 100 Portal Drive in Roundup, Montana (the “Mine”), where the events giving rise to this lawsuit occurred. (Id. at ¶ 8.)

         Sullair is an Indiana limited liability company that maintains its principal place of business in Michigan City, Indiana. (Id. at ¶ 3.) Sullair manufactures and sells air compressors and related equipment. (Doc. 14-2 at ¶ 4.) Sullair has three channels or divisions through which it operates. (Id.) The first and largest is “Commercial and Industrial, ” which sells compressors for use in industrial manufacturing facilities. (Id.) The second channel is “Rental and Infrastructure, ” which sells portable air compressors used in construction, mining and other large-scale operations. (Id.) The third channel is “Original Equipment Manufacture Solutions” or “OEM Solutions Group, ” which sells compressor components that are incorporated into a finished product. (Id.) One of the products the OEM Solutions Group sells is a compressor component called an “oil/air separator.” (Id.) Sullair states that it does business globally, generally by selling its products to independent distributors or equipment rental centers. (Doc. 14-2 at ¶ 5.) Sullair admits that from “time to time, ” it sells products to independent distributors and rental centers in Montana. (Id.)

         Relevant here, Sullair manufactured and sold various compressor components, including an oil/air separator, to an independent distributor in Houston, Texas. (Doc. 4 at ¶ 19; Doc. 14-2 at ¶ 6.) The Houston distributor in turn resold the compressor components to Generon, which is a Delaware Corporation, with its principle place of business in Houston, Texas. (Doc. 4 at ¶ 2; Doc. 14-2 at ¶ 6.)

         Generon then incorporated the compressor components, including the oil/air separator, into a “containerized nitrogen generating plant” (the “Plant”). (Doc. 4 at ¶¶ 9, 10, 19.) Generon sold the Plant to Signal Peak, and installed the various components of the Plant at the mine in stages from August, 2012 through April, 2013. (Id. at ¶¶ 9, 43, 44.)

         On November 24, 2014, mine employees discovered smoke escaping from one of the Plant's compressor units. (Doc. 4 at ¶ 12.) Further inspection revealed a fire within the compressor unit, which spread to other equipment and caused extensive damage. A subsequent expert investigation revealed the fire originated in the oil/air separator manufactured by Sullair. (Id. at ¶ 18.)

         Signal Peak alleges that Generon improperly installed the compressor unit containing Sullair's oil/air separator. (Id. at ¶¶ 18, 21.) Specifically, Generon allegedly installed the compressor unit's oil pressure switch and temperature switch, which are safety devices, with the incorrect setting. (Id. at ¶ 22.) Rather than installing the switches with the correct setting, Signal Peak claims Generon employees wired or “jumped” around them, rendering them totally ineffective. (Id. at ¶ 24.) Signal Peak asserts the failure to install the switches correctly caused and/or contributed to the damage. (Id. at ¶ 25.) As a result of the fire, Signal Peak alleges it incurred damages totaling $2, 355, 271.00. (Id. at ¶ 17.)

         On August 15, 2016, Signal Peak filed a complaint in state court alleging claims against Sullair and the other Defendants for negligence, breach of warranty, and strict products liability. (Doc. 4 at ¶¶ 49-66.) The action was removed to this Court on May 18, 2017. (Doc. 1.) Thereafter, Sullair filed the instant motion to dismiss. (Doc. 13.)

         On November 16, 2017, Generon filed a Crossclaim for contribution and/or indemnity against Sullair and Power Service. (Doc. 19.) Sullair has also moved to dismiss the Crossclaim. (Doc. 20.)

         II. DISCUSSION

         Sullair seeks dismissal of the Complaint on two grounds. First, Sullair argues this Court lacks personal jurisdiction over it, and therefore moves to dismiss Signal Peak's claims pursuant to Fed.R.Civ.P. 12(b)(2). Second, Sullair argues that even if there is personal jurisdiction, Signal Peak cannot satisfy the necessary elements of its negligence, breach of warranty, or strict products liability claims, and therefore, moves to dismiss Signal Peak's claims pursuant to Fed.R.Civ.P. 12(b)(6). Sullair further argues that Generon's crossclaim should be dismissed for the same reasons.

         A. Motion to Dismiss for Lack of Personal Jurisdiction Under Federal Rule of Civil Procedure 12(b)(2)

         1. Legal Standard

         When a defendant moves to dismiss a claim for lack of personal jurisdiction, the plaintiff bears the burden of proving that personal jurisdiction exists. Learjet, Inc. v. Oneok, Inc. (In re W. States Wholesale Nat. Gas Antitrust Litig.), 715 F.3d 716, 741 (9th Cir. 2013) (internal citations omitted). 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. Schwarzenegger, 374 F.3d at 800. 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 the parties over statements contained in affidavits must be resolved in the plaintiff's favor. Id.

         To exercise personal jurisdiction over a non-resident defendant in a diversity case, a federal court must make the following determinations: (1) whether an applicable state rule or statute confers personal jurisdiction over the defendant; and (2) whether assertion of jurisdiction comports with constitutional principles of due process. Data Disc Inc. v. Systems Tech. Assocs., Inc., 557 F.2d 1280, 1286 (9th Cir. 1977). With respect to the first inquiry, this Court is bound to look to Montana law. Haywood v. Travelers Indem. Co. of Am., 2006 WL 2860588, at *2 (D. Mont. October 3, 2016) (citations omitted).

         The Montana Supreme Court has articulated a similar two-part test to determine the existence of personal jurisdiction: (1) the court must ascertain whether personal jurisdiction exists pursuant to Montana Rule of Civil Procedure 4(b)(1), Montana's long-arm statute; and (2) the court must assess whether asserting such jurisdiction is consistent with “traditional notions of fair play and substantial justice embodied in the due process clause.” Cimmaron Corp. v. Smith, 67 P.3d 258, 260 (Mont. ...


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