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Sac and Fox Nation, Inc. v. Containment Solutions, Inc.

United States District Court, D. Kansas

July 20, 2018

THE SAC AND FOX NATION, INC., Plaintiff,
v.
CONTAINMENT SOLUTIONS, INC., et al., Defendants.

          MEMORANDUM AND ORDER

          JOHN W. BROOMES UNITED STATES DISTRICT JUDGE.

         This case comes before the court on Defendant Denali, Inc.'s (“Denali”) amended motion to dismiss for lack of personal jurisdiction. (Doc. 35.)[1] The motion has been fully briefed and is ripe for decision. (Docs. 36, 42, 44.) Denali's motion is GRANTED for the reasons herein.

         I. Procedural History and Relevant Facts

         Plaintiff, The Sac and Fox Nation of Missouri in Kansas and Nebraska, is a federally-recognized Indian tribe. Plaintiff is the owner and operator of the Sac & Fox Truck Stop (“truck stop”) in Powhattan, Kansas. The truck stop was built in 1998 by contractor M.A.C. Corporation (“M.A.C.”). Defendant Containment Solutions, Inc. (“CSI”), formerly Fluid Containment, Inc., is in the business of manufacturing fiberglass composite underground storage tanks. Denali is the parent company of CSI.[2] Denali is a Delaware corporation with its principal place of business in Houston, Texas. (Doc. 45 at 5-6.)

         The original underground storage tank system at the truck stop contained four tanks. Two of the tanks were CSI's 15, 000-gallon single wall fiberglass underground storage tanks (the “tanks”). They were designed and manufactured in 1998 by CSI and then sold to M.A.C. to install at the truck stop. The tanks were installed according to CSI's specifications. The tanks had monitoring equipment as part of its system which would sound an alarm if there were any monitoring problems. On July 20, 2015, an alarm on the tanks went off. All pump dispensers were shut off by the truck stop staff. A video inspection showed a rupture of the single wall CSI tank used to store gasoline fuels. Plaintiff made a claim for a limited warranty under CSI's warranty on the tanks. CSI denied Plaintiff's warranty claims. (Doc. 45 at 11-14.)

         In December 2016, the tanks were removed by M.A.C. New double wall tanks have been installed to replace the failed tanks. Ongoing remediation is being performed by Plaintiff at the truck stop. Estimated remediation costs for the failed tanks exceed $2.5 million. (Doc. 45 at 15-16.)

         Plaintiff brought this action against CSI and Denali, alleging various claims of product liability, breach of warranty, negligence and fraud.[3] (Doc. 1.) Plaintiff has since filed an amended complaint. (Doc. 45.)[4] Plaintiff's amended complaint alleges that Defendants, including Denali, manufactured, marketed, distributed and sold the tanks to Plaintiff through M.A.C. Plaintiff further alleges that although Denali is the parent company of CSI, Denali exerts complete dominion over CSI and that the creation of CSI as a separate entity is a “subterfuge designed to defeat public convenience, justify a wrong, perpetrate a fraud and/or otherwise work an injustice.” (Doc. 45 at 9.)

         Denali moves to dismiss on the basis that this court lacks personal jurisdiction. (Doc. 35.)

         II. Analysis

         On a Rule 12(b)(2) motion to dismiss, Plaintiff must make a prima facie showing that the court has personal jurisdiction over the defendants. Old Republic Ins. Co. v. Continental Motors, Inc., 877 F.3d 895, 903 (10th Cir. 2017). If a defendant challenges the jurisdictional allegations, such as Denali has done here, Plaintiff “must support the jurisdictional allegations of the complaint by competent proof of the supporting facts.” Sunlight Saunas, Inc. v. Sundance Sauna, Inc., 427 F.Supp.2d 1011, 1014 (D. Kan. 2006) (citing Pytlik v. Prof'l Res., Ltd., 887 F.2d 1371, 1376 (10th Cir. 1989)). All factual disputes must be resolved in Plaintiff's favor and, to the extent that they are uncontroverted by Denali's affidavit, “the allegations in the complaint must be taken as true.” Id. (citing Intercon. Inc. v. Bell Atl. Internet Solutions, Inc., 205 F.3d 1244, 1247 (10th Cir.2000) (only well-pled facts, as distinguished from conclusory allegations, accepted as true)).

         “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.” TH Agriculture & Nutrition, LLC v. Ace European Group, Ltd., 488 F.3d 1282, 1286-87 (10th Cir. 2007). Because the Kansas long-arm statute is construed liberally to allow jurisdiction to the full extent permitted by due process, the court ordinarily proceeds directly to the constitutional issue. Id. at 1287 (citing OMI Holdings, Inc. v. Royal Ins. Co. of Canada, 149 F.3d 1086, 1087 (10th Cir. 1998)).

         “The Due Process Clause protects an individual's liberty interest in not being subject to the binding judgments of a forum with which he has established no meaningful ‘contacts ties, or relations.'” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 471-72 (1985). Therefore a “court may exercise personal jurisdiction over a nonresident defendant only so long as there exist minimum contacts between the defendant and the forum state.” World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 291 (1979). The requisite minimum contacts may be established under one of two theories: “specific jurisdiction” or “general jurisdiction.” If the requisite minimum contacts are met, the court proceeds to determine whether the “assertion of personal jurisdiction would comport with fair play and substantial justice.” Old Republic Ins. Co., 877 F.3d at 903. General jurisdiction is based on an out-of-state corporation's “continuous and systematic” contacts with the forum state. Id. at 904. Specific jurisdiction exists if 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., 471 U.S. at 472 (internal citations omitted); See Mitchell v. BancFirst, No. 17-2036, 2018 WL 338217, at *2 (D. Kan. Jan. 9, 2018).

         Plaintiff contends that the amended complaint establishes both general and specific jurisdiction in this matter. (Doc. 42.)

         A. General Jurisdiction

         General jurisdiction arises based on a defendant's business contacts with Kansas. Hutton & Hutton Law Firm, LLC v. Girardi & Keese, 96 F.Supp.3d 1208, 1217 (D. Kan. 2015). To establish general jurisdiction, Plaintiff must ‚Äúdemonstrate the defendant's ...


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