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Lewis & Clark Regional Water System, Inc. v. Carstensen Contracting, Inc.

United States District Court, D. South Dakota, Southern Division

December 31, 2018

LEWIS & CLARK REGIONAL WATER SYSTEM, INC., Plaintiff,
v.
CARSTENSEN CONTRACTING, INC., Defendant/Third-Party Plaintiff,
v.
AMERON WATER TRANSMISSION GROUP, LLC, Third-Party Defendant.

          OPINION AND ORDER DENYING MOTION TO DISMISS

          ROBERTO A. LANGE UNITED STATES DISTRICT JUDGE

         Plaintiff Lewis & Clark Regional Water System, Inc. (Lewis & Clark) sued Defendant/Third-Party Plaintiff Carstensen Contracting, Inc. (Carstensen), alleging breach of contract. Doc. 1-1. Carstensen filed a third-party action against Third-Party Defendant Ameron Water Transmission Group, LLC (Ameron), alleging breach of contract, breach of warranty, unjust enrichment, negligence, contractual indemnity, and legal contribution and indemnity. Doc. 7. Ameron initially filed a motion to transfer venue to Minnesota under 28 U.S.C. § 1404(a), Doc. 13, which this Court denied, Doc. 42. On the day before the hearing on the motion to transfer venue, Ameron filed a Motion to Dismiss Claims of Third-Party Plaintiff Carstensen for Lack of Personal Jurisdiction, Doc. 38, which Lewis & Clark and Carstensen opposed, Docs. 46, 49. For the reasons stated below, Ameron's Motion to Dismiss Claims of Third-Party Plaintiff Carstensen is denied at this time.

         I. Facts Pertinent to Motion to Dismiss [1]

         This action concerns part of a massive multistate treated water pipeline system (the System) to bring potable water from the Missouri River to communities in eastern South Dakota, southwest Minnesota, and northwest Iowa. Doc. 1 at 1; Doc. 10 at ¶ 7. Lewis & Clark started building the System in 2003, and, when complete, the System will span over 330 miles of total pipeline. Doc. 17-1 at ¶ 13. Lewis & Clark is a South Dakota nonprofit 501(c)(4) corporation with its principal place of business in Tea, South Dakota. Doc. 17-1 at ¶ 3. Lewis & Clark's executive and administrative staff work in South Dakota. Doc. 17 at ¶ 5. The System is funded by federal, state, and local monies. Doc. 17-1 at ¶ 15.

         To assist with the System, Lewis & Clark retained Banner Associates (Banner), an engineering firm headquartered in Sioux Falls, South Dakota. Doc. 17 at ¶ 6; Doc. 17-3. Lewis & Clark contracted with Carstensen, a Minnesota corporation with its principal place of business in the southwest Minnesota town of Pipestone, Doc. 1 at ¶ 10, to install approximately ten miles of pipeline for the System, roughly between Magnolia and Adrian, Minnesota (the Project).[2] Doc. 10 at ¶ 6. Specifically, the contract calls for Carstensen to install twenty-inch diameter steel pipe with a polyurethane exterior coating exhibiting a minimum adhesion strength of 1, 750 pounds per square inch (psi) post-installation and 2, 500 psi pre-installation. Doc. 1-1 at 5.

         To perform the contract with Lewis & Clark, Carstensen issued a Purchase Order to Ameron to supply the pipes for the Project, which contains detailed specifications for the ordered pipes. Doc. 10-2. After the bid for the Project was awarded, an Ameron representative traveled to South Dakota and met with, among others, Senior Project Manager Scott Vander Meulen, the Banner engineer on the Project, over dinner in Tea, South Dakota, in part to discuss the Project. Doc. 50 at ¶ 3. Thereafter, Ameron supplied the pipes for the Project. Doc. 16 at 2.

         During construction, Ameron representatives had numerous phone calls, email contacts, and other communications with Banner. Ameron representatives visited the Project site multiple times. Doc. 50 at ¶ 5. On those occasions, Ameron representatives would travel to South Dakota to meet Banner representatives there, and then would travel to the Project site just across the border in Minnesota. Doc. 50 at ¶ 5. At the end of the day, Ameron representatives would return to South Dakota and typically would stay overnight there. Doc. 50 at ¶ 5. While outside South Dakota, Ameron participated in 29 separate conference calls with Banner and sent a substantial number of emails regarding the Project.[3] Doc. 50 at ¶¶ 6-7.

         Alleged defects with the coating of the Ameron-supplied pipes became an issue. Doc. 16 at 2. On October 5, 2017, two Ameron employees-Troy Parrack[4] and David Escamilla- attended a lengthy meeting in Sioux Falls, South Dakota, at Banner's office to discuss the problems and potential solutions for the Project with Lewis & Clark. Doc. 50 at ¶ 3; Doc. 51 at ¶ 4. On March 28, 2018, Banner, on behalf of Lewis & Clark, notified Carstensen that the pipes were being rejected because of defective coating. Doc. 17-3. Lewis & Clark believes that about nine of the ten miles of pipes on the Project must be replaced. Doc. 16 at 2. Carstensen maintains that the alleged failure of the pipes to meet the coating specifications is due to manufacturing problems in Mexico encountered by Ameron. Doc. 1-1 at ¶7.

         Ameron is incorporated in Delaware with its principal place of business in Rancho Cucamonga, California. Doc. 39-1 at ¶¶ 3-4. Ameron does not maintain an office, bank account, telephone number, or post office box in South Dakota, nor does it employ anyone in South Dakota. Doc. 39-1 at ¶¶ 9-10. Prior to the Project at issue in this case, Ameron had previous contacts with South Dakota. Ameron attended the bid opening at Lewis & Clark's office in Tea, South Dakota, for one of the System's Minnesota segments preceding the Project. Doc. 51 at ¶ 3. Sometime during Ameron and Lewis & Clark's dealings, Ameron sent Lewis & Clark three sample pipes of different sizes affixed with the Ameron logo to display in Lewis & Clark's South Dakota facilities. Doc. 51 at ¶ 2; Doc. 51-1. Additionally, from March 2017 through April 2017, Ameron delivered product to Eagle Butte, South Dakota, for an entirely different job. Doc. 39-1 at ¶ 11. In 2017, Ameron's sales in South Dakota were $1.6 million of its $57 million in total sales. Doc. 39-1 at ¶¶ 13-14.

         On May 17, 2018, Lewis & Clark commenced this action. Doc. 1-1 at 1. Lewis & Clark seeks to recover: (a) the expense to remove and replace the allegedly defective pipe; (b) liquidated damages totaling $1, 350 per day from November 17, 2017, to the date the project is substantially complete; and (c) consequential damages. Doc. 1-1 at ¶¶ 8-10. Carstensen filed a third-party action against Third-Party Defendant Ameron. Ameron filed a Motion to Transfer Venue to the District of Minnesota under 28 U.S.C. § 1404(a), Doc. 13, which Lewis & Clark and Carstensen opposed, Docs. 16, 40. This Court denied Ameron's § 1404(a) Motion to Transfer Venue. Doc. 42.

         Ameron's motion to dismiss under Rule 12(b)(2) argues that there is no personal jurisdiction over Ameron in the District of South Dakota. Docs. 38, 39. The facts used to contest Ameron's motion come primarily from two affidavits and three exhibits filed by Lewis & Clark. Docs. 50, 51. Lewis & Clark and Carstensen argue that Ameron waived any personal jurisdiction defense argument by not raising the defense alongside the previous 28 U.S.C. § 1404(a) motion to transfer for inconvenient forum, or, alternatively, Ameron has sufficient contacts with South Dakota for this Court to exercise personal jurisdiction over it. Docs. 46, 49. This Court first considers the waiver argument to determine whether it is necessary to address the question of personal jurisdiction over Ameron in South Dakota.

         II. Discussion

         A. Waiver of Personal Jurisdiction

         Lewis & Clark and Carstensen argue that Ameron waived any personal jurisdiction argument under Rule 12(b)(2) by not raising the defense with its earlier-filed motion to transfer venue under 28 U.S.C. § 1404(a). Doc. 46 at 2-3; Doc. 49 at 3-5. The requirement that a court have personal jurisdiction over the parties is a due process right that in fact may be waived either explicitly or implicitly. See Ins. Corp. of Ir. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 703-05 (1982); E. Coast Test Prep LLC v. Russ, Civil No. 15-3705, 2018 WL 3795942, *4 (D. Minn. Aug. 9, 2018), appeal docketed. No. 18-3197 (8th Cir. Oct. 15, 2018) ("Although 'waiver is ordinarily an intentional relinquishment or abandonment of a known right or privilege,' Johnson v. Zerbst304 U.S. 458, 464, 58 S.Ct. 1019, 82 L.Ed. 1461 (1938), a personal-jurisdictional defense may be unintentionally waived by failing to raise it in a Rule 12 motion or responsive ...


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