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Colstrip Energy LP v. JBED Ventures, LLC

United States District Court, D. Montana, Billings Division

September 30, 2019




         On October 26, 2018, defendant JBED Ventures, LLC (JBED) filed a motion to dismiss Colstrip Energy LP's (Colstrip) amended complaint for lack of personal jurisdiction. (Doc. 23.) On July 8, 2019, Judge Cavan issued findings and recommendations (Doc. 28) and recommended this Court grant JBED's motion. (Doc. 28 at 12.) Colstrip timely filed objections to the findings and recommendations. (Doc. 29.) JBED then timely filed a reply on August 5, 2019. (Doc. 30.) The Court disagrees with Judge Cavan's recommendation. For the following reasons, JBED's motion to dismiss for lack of personal jurisdiction is denied.[1]

         I. Background

         Colstrip is a Montana limited partnership with its principal place of business in Rosebud County, Montana. (Doc. 22 at ¶ 1.) It owns and operates a waste coal-fired power plant near Colstrip, Montana. (Id.)

         JBED is a Missouri limited liability company with its principal place of business in Missouri. (Id. at ¶ 2.) JBED does not have facilities, property, or employees in Montana, and it has not provided, advertised, or entered into contracts for services in Montana. (Doc. 24-1 at ¶¶ 10-12.) JBED is a contractor that provides turbine parts and repair services to power plants. (Doc. 22 at ¶ 2.)

         In June 2011, Colstrip entered into a contract with Turbine Generator Maintenance, Inc. (TGM), a Florida company (Doc. 24-1 at ¶ 13), to inspect and repair a rotor from one of Colstrip's steam turbines. (Doc. 22 at ¶¶ 5-6.) TGM then entered into a contract with JBED to repair the rotor. (Id. at ¶ 6; Doc. 24-1 at ¶ 13.) Although the plan was originally to repair the rotor onsite, pursuant to a change order, the rotor was shipped to JBED's facility in Missouri. (Doc. 22 at ¶ 6.) After completing repairs, JBED shipped the rotor back to Colstrip's Montana facility, where it was installed back in the steam turbine. (Id. at ¶ 9.)

         In July 2017, one or more of the rotor's low-pressure blades broke loose inside the turbine, causing substantial damage. (Id. at ¶¶ 11, 14, 17-18.) Colstrip attributes this failure to JBED's earlier repair work on the rotor. (Id. at ¶ 11.) Colstrip alleges JBED was negligent because it failed to properly control and monitor heat during its brazing work when repairing the rotor, which caused the rotor blade base material to slightly soften, introduced harmful residual stresses, and led to the low-pressure blades breaking off and causing the turbine's failure. (Id. at ¶¶ 11-12, 14, 17-18.) Colstrip alleges approximately $9, 438, 996 in damages. (Id. at¶19.)

         Colstrip filed a negligence suit in Montana state court on August 17, 2018, which JBED removed to this Court. (Doc. 1.) JBED later filed the instant motion to dismiss for lack of personal jurisdiction. (Doc. 23.)

         Judge Cavan concluded the Court lacks general and specific personal jurisdiction over JBED under Montana's long-arm statute, Mont. R. Civ. P. 4(b). Specifically, he held that even though the rotor JBED repaired failed in Montana, the specific injury-causing event-which he concluded was JBED's faulty repair- occurred in Missouri. (Doc. 28 at 8-10.) Therefore, he concluded JBED's actions did not result in the accrual of a tort action within Montana for purposes of conferring personal jurisdiction under Mont. R. Civ. P. 4(b)(1)(B). (Id.) Judge Cavan further concluded JBED did not transact any business within Montana or enter into a contract for services to be rendered or for materials to be furnished in Montana because it contracted with TGM, not Colstrip directly. (Id. at 10-12.)

         Colstrip objects to the Magistrate's conclusion that its injury-causing event did not occur in Montana. It avers the tort of negligence accrued in Montana because the injury-causing event and damages-the rotor failure and damages to Colstrip's turbine-occurred in Montana. (Doc. 29 at 5.) JBED responds that Judge Cavan was correct in concluding the tort did not accrue in Montana because all JBED's repair work on the rotor occurred in Missouri. (Doc. 30 at 9.)

         II. Standard of Review

          "When a defendant moves to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of demonstrating that the court has jurisdiction." In re W. States Wholesale Nat. Gas Antitrust Litig, 715 F.3d 716, 741 (9th Cir. 2013). Where the defendant bases its motion on written materials rather than an evidentiary hearing, the plaintiff need only make a prima facie showing of jurisdictional facts. Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004). In such cases, the Court only determines whether the plaintiffs pleadings and affidavits establish a prima facie showing of personal jurisdiction. Id. (citing Caruth v. International Psychoanalytical Ass'n, 59 F.3d 126, 128 (9th Cir.1995)). The plaintiff cannot "simply rest on the bare allegations of its complaint, " but the Court takes the uncontroverted allegations in the complaint as true and resolves conflicts between the parties over statements contained in affidavits in the plaintiffs favor. Id. (quoting Amba Marketing Systems, Inc. v. Jobar International, Inc., 551 F.2d 784, 787 (9th Cir. 1977)).

         Where there is no applicable federal statute governing personal jurisdiction, this Court applies Montana law. Id; see Fed. R. Civ. P. 4(k)(1)(A). Montana courts employ a two-part test to determine whether they may exercise personal jurisdiction over a nonresident defendant. Ford Motor Co. v. Montana Eighth Jud. Dist. Ct9 443 P.3d 407, 412 (Mont. 2019). First, the Court determines whether personal jurisdiction exists under Montana's long-arm statute, M. R. Civ. P. 4(b)(1). Id. If so, then the Court determines "whether exercising personal jurisdiction is constitutional; that is, whether it conforms with 'the traditional notions of fair play and substantial justice embodied in the due process clause.'" Id. (quoting Cimmaron Corp. v. Smith, 67 P.3d 258, 260 (Mont. 2003)).

         III. Discussion

         A. Montana's long-arm statute establishes personal jurisdiction over JBED because JBED committed an act resulting in the accrual of a tort within Montana.

         M. R. Civ. P. 4(b)(1) lists several means of establishing jurisdiction over persons not found within the state. Here, Colstrip objects only to Judge Cavan's conclusion that the long-arm statute does not establish personal jurisdiction over JBED because it did not commit an act resulting in the accrual of a tort in Montana. M. R. Civ. P. 4(b)(1)(B) ("[A]ny person is subject to the jurisdiction of Montana courts as to any claim for relief arising from the doing personally, or through an employee or agent, of... the commission of any act resulting in accrual within Montana of a tort action-----") Specifically, Colstrip objects to Judge Cavan's conclusion that the negligence Colstrip alleges accrued in Missouri, not Montana.

         Establishing where a tort accrues is not always an easy task, especially given the facts here. Colstrip alleges JBED received Colstrip's steam turbine rotor in Missouri, made faulty repairs on the rotor, and shipped the rotor back to Colstrip in Montana. (Doc. 22 at ¶¶ 7-14.) Afterwards, the rotor was reinstalled, and due to the faulty repairs, it substantially damaged Colstrip's steam turbine a few years later. (Id.) Colstrip alleges that as a direct result of JBED's negligence, it suffered substantial damages to its property and a loss of business income. (Id. at ¶ 17-19.) Critically, the question before the Court is at which point in time the alleged negligence accrued. If it accrued at the moment JBED made faulty repairs, then it accrued in Missouri, and the Court lacks personal jurisdiction over JBED. If it accrued when the rotor failed and damaged Colstrip's steam turbine, then it accrued in Montana, and Montana's long-arm statute is satisfied.

         Central to this issue is the location of the "injury-causing event." Bi-Lo Foods, Inc. v. Alpine Bank, Clifton, 955 P.2d 154, 157-59 (Mont. 1998). Personal jurisdiction does not exist merely because a person experiences an injury in Montana. Milky Whey, Inc. v. Dairy Partners, LLC, 342 P.3d 13, 18 (Mont. 2015). The Court must focus on "where the events giving rise to the tort claims occurred, rather than where the plaintiffs allegedly experienced or learned of their injuries." Tackett v. Duncan, 334 P.3d 920 (Mont. 2014).

         After reviewing the Montana cases analyzing the subject, the Court finds there are few common applicable themes. For one, a tort does not accrue in Montana merely because the plaintiff experiences the effects of some out-of-state injury-causing event; rather, the injury-causing event must physically manifest in Montana. See Milky Whey, 342 P.3d at 17 (assuming claims for breaches of warranties could even sound in tort, holding the alleged torts did not accrue in Montana where negotiation, transfer of money, and transfer of product all occurred outside Montana). For example, where a plaintiff sends funds or other assets to an out-of-state defendant and the defendant refuses to return the property, the resulting tort (i.e., conversion) does not accrue in Montana merely because the plaintiff feels or experiences the effects of the pecuniary loss in Montana. See Tackett,334 P.3d 920 (holding a tort accrued in Florida where a plaintiff transferred funds from a Montana bank account to the Florida defendant and the defendant refused to return them); Cimmaron Corp. v. Smith, 61 P.3d 258 (Mont. 2003) (holding a tort accrued in Pennsylvania where a Montana plaintiff transferred accounts receivable to a Pennsylvania collections firm but the firm misappropriated the assets); Bi-Lo Foods,955 P.2d 154 (holding a tort accrued in Colorado ...

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