United States District Court, E.D. Louisiana
CONRAD SHIPYARD, L.L.C.
FRANCO MARINE 1 LLC, et al
ORDER & REASONS
J. BARBIER, UNITED STATES DISTRICT JUDGE.
the Court is a Motion to Dismiss Third-Party Claim for
Lack of Subject-Matter Jurisdiction, Personal Jurisdiction,
or Forum Non Conveniens (Rec. Doc. 26),
filed by Third-Party Defendant Harley Franco
(“Franco”), an opposition thereto (Rec. Doc. 32)
filed by Third-Party Plaintiff Harley Marine Services
(“HMS”), and a reply (Rec. Doc. 43) filed by
Franco. Additionally before the Court is a supplemental
opposition (Rec. Doc. 45) furnished by HMS after a briefing
order issued by the Court. Having considered the motion and
legal memoranda, the record, and the applicable law, the
Court finds the motion should be DENIED.
AND PROCEDURAL BACKGROUND
a marine transportation company that provides clients with
tug and barge services. Franco is the founder of HMS as well
as, until March 2019, its Chairman, President, and CEO.
Currently, HMS, via a derivative action brought by Macquarie
Marine Services, LLC., is suing Franco in the Court of
Chancery in Delaware for a wide swath of alleged activity
including, amongst other things, misappropriation of assets,
destruction of evidence, and coercing employees to engage in
wrongful conduct. (Rec. Doc. 32-3). HMS is also suing Franco
in Washington state court for breach of contract and breach
of fiduciary duty. (Rec. Doc. 26-1 at p. 67). Franco, in
turn, is suing HMS in Washington state court for wrongful
termination, breach of contract, and defamation. (Rec. Doc.
26-1 at p. 111-14).
underlying cause of this action is the sale of two
anchor-handling tugboats (the “Vessels”) by
Conrad Shipyard, L.L.C. (“Conrad”) to Franco
Marine 1, LLC (“FM1”) and Franco Marine 2, LLC
(“FM2”, hereinafter referred to with FM1 as the
“Franco LLCs”). The Franco LLCs are wholly owned
by Franco and were formed by him for the sole purpose of
being the contracting parties for the purchase of the
for purchase of the Vessels began when Franco reached out to
Conrad to discuss HMS acquiring the vessels directly.
Eventually, negotiations shifted to focus on Franco acquiring
the Vessels himself, with the intention to then lease them to
HMS for use. Franco formed the Franco LLCs to conduct this
business. On September 12, 2017, while Franco was still in
his position as head of HMS, the Franco LLCs and Conrad
entered into Purchase Agreements for the sale of the Vessels.
to Conrad's allegations, the Franco LLCs ceased making
the monthly payments required by the Purchase Agreements
after five months of construction. As recompense, Conrad sold
two winches in its possession that it believed belonged to
the Franco LLCs based on representations made by the Franco
LLCs in the Purchase Agreements. HMS, however, claims the
winches were in fact its property.
3, 2019, Conrad commenced the present action by filing a
complaint against the Franco LLCs for breach of contract
arising out of the Purchase Agreements. Conrad also named HMS
as a defendant in its breach of contract claim, despite HMS
not being a party to the Purchase Agreements, under a
“single business enterprise” theory. Furthermore,
Conrad brought an additional claim for detrimental reliance
claim against HMS alone, presumably in case its single
business enterprise argument failed.
17, 2019, HMS filed the third-party claim against Franco that
is the subject of Franco's present motion to dismiss. HMS
seeks indemnification from Franco in the event HMS is found
liable for the Franco LLCs breach of contract. The basis for
HMS's claims is that Franco's negotiations with
Conrad and subsequent purchasing of the Vessels via the
Franco LLCs exceeded his authority as CEO and breached his
fiduciary duty to HMS by misrepresenting HMS's role in
the transaction. Specifically, HMS alleges that Franco
exceeded his authority by (1) directing HMS employees to
negotiate with Conrad regarding the Vessels and (2) by
negotiating and interacting with Conrad himself in a manner
that, according to Conrad, led Conrad to believe HMS was the
true party-in-interest to the Purchase Agreements, not the
Franco LLCs. None of the prior litigation between HMS and
Franco addresses this particular alleged breach of fiduciary
duty, i.e. Franco exceeding his authority during negotiations
with Conrad and misrepresenting HMS's role in the
September 13, 2019, Franco filed his Motion to Dismiss for
Lack of Personal Jurisdiction, or in the alternative Forum
Non Conveniens. In his reply to HMS's opposition, Franco
raised, for the first time, an argument that the Court should
dismiss HMS's third-party claim for lack of
subject-matter jurisdiction. In the interest of fairness, the
Court allowed HMS the opportunity to file supplemental
briefing in opposition to Franco's arguments relating to
the Court's lack of subject-matter jurisdiction.
deciding a motion to dismiss for lack of subject matter
jurisdiction under Federal Rule of Civil Procedure 12(b)(1),
“the district court is ‘free to weigh the
evidence and resolve factual disputes in order to satisfy
itself that it has the power to hear the case.'”
Krim v. pcOrder.com, Inc., 402 F.3d 489, 494 (5th
Cir. 2005). The party asserting jurisdiction must carry the
burden of proof for a Rule 12(b)(1) motion to dismiss.
Randall D. Wolcott, M.D., P.A. v. Sebelius, 635 F.3d
757, 762 (5th Cir.2011). The standard of review for a motion
to dismiss under Rule 12(b)(1) is the same as that for a
motion to dismiss pursuant to Rule 12(b)(6). United
States v. City of New Orleans, No. 02-3618, 2003 WL
22208578, at *1 (E.D. La. Sept. 19, 2003). If a court lacks
subject matter jurisdiction, it should dismiss without
prejudice. In re Great Lakes Dredge & Dock Co.,
624 F.3d 201, 209 (5th Cir. 2010). When a Rule 12(b)(1)
motion is filed in conjunction with other Rule 12 motions,
the court should consider the Rule 12(b)(1) jurisdictional
attack before addressing any attack on the merits. Hill
v. City of Pasadena, 561 F.2d 606, 608 (5th. Cir. 1977)
12(b)(2) of the Federal Rules of Civil Procedure permits
dismissal of a suit for lack of personal jurisdiction.
“Where a defendant challenges personal jurisdiction,
the party seeking to invoke the power of the court bears the
burden of proving that jurisdiction exists.” Luv
N'Care, Ltd. v. Insta-Mix, Inc., 438 F.3d 465, 469
(5th Cir. 2006). However, the plaintiff is not required to
establish jurisdiction by a preponderance of the evidence; a
prima facie showing is sufficient. Id. The court
must accept the plaintiff's uncontroverted allegations
and resolve all conflicts between the facts contained in the
parties' affidavits and other documentation in favor of
federal court sitting in diversity must satisfy two
requirements to exercise personal jurisdiction over a
nonresident defendant. Pervasive Software Inc. v. Lexware
GmbH & Co. KG, 688 F.3d 214, 220 (5th Cir. 2012).
“First, the forum state's long-arm statute must
confer personal jurisdiction. Second, the exercise of
jurisdiction must not exceed the boundaries of the Due
Process Clause of the Fourteenth Amendment.”
Id. The limits of the Louisiana long-arm statute are
coextensive with constitutional due process limits.
Jackson v. Tanfoglio Giuseppe, SRL, 615 F.3d 579,
584 (5th Cir. 2010). Accordingly, the inquiry here is whether
jurisdiction comports with federal constitutional guarantees.
Process Clause of the Fourteenth Amendment guarantees that no
federal court may assume personal jurisdiction of a
non-resident defendant unless the defendant has certain
“minimum contacts with [the forum state] such that the
maintenance of the suit does not offend ‘traditional
notions of fair play and substantial justice.'”
Int'l Shoe Co. v. Washington, 326 U.S. 310, 316
(1945) (citation omitted). The Supreme Court has recognized
two types of personal jurisdiction: specific and general.
Bristol-Myers Squibb Co. v. Superior Court, 137
S.Ct. 1773, 1779-80 (2017).
jurisdiction is limited to “adjudication of issues
deriving from, or connected with, the very controversy that
establishes jurisdiction.” Goodyear Dunlop Tires
Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011)
(internal quotation marks and citation omitted). To establish
specific jurisdiction, a plaintiff must show that “(1)
there are sufficient (i.e., not random fortuitous or
attenuated) pre-litigation connections between the
non-resident defendant and the forum; (2) the connection has
been purposefully established by the defendant; and (3) the
plaintiff's cause of action arises out of or is related
to the defendant's forum contacts.” Pervasive
Software, 688 F.3d at 221 (internal quotation marks and
citation omitted). The defendant can then defeat the exercise
of specific jurisdiction by showing that it would be
unreasonable. Id. at 221-22.
Whether the Court has Subject-Matter Jurisdiction
Over HMS's Third-Party Claim
argues that HMS's third-party claim for indemnification
is not yet ripe and therefore the Court must dismiss it for
lack of subject-matter jurisdiction. The crux of Franco's
lack of ripeness argument is that “the harm [can] not
even occur until or unless an adverse judgment against HMS is
entered.” (Rec. Doc. 43 at 3). HMS counters by arguing
that despite the technical posture of its claim in indemnity,
the true nature of its claim is tortious in nature, thereby
differentiating it from the majority of “true”
indemnity claims that are contractual or statutory in nature.
Moreover, HMS argues that there is no support under either
Washington or Louisiana law for the argument that an
indemnity claim cannot be brought until after adjudication of
the underlying suit.
general, a claim is “ripe if any remaining questions
are purely legal ones; conversely, a case is not ripe if
further factual development is required.” Chevron
U.S.A. Inc., v. Traillour Oil Co., 987 F.2d 1138, 1153
(5th. Cir. 1993). To demonstrate that a claim is ripe, a
litigant must show “the fitness of the issues for
judicial decision, and (2) the hardship to the parties caused
by withholding court consideration.” Window
Specialists, Inc. v. Forney Enters, 26
F.Supp.3d 52 (D.D.C. 2014).
the true facts at issue are ready for judicial decision.
Franco has already committed the acts that allegedly
constitute a breach of his fiduciary duty. Conrad has already
instituted suit against HMS based on those acts, undoubtedly
causing HMS to incur legal fees and expenses. The fact that a
determination of HMS's liability to Conrad has not yet
occurred does not affect the Court's ability to find
whether Franco breached his fiduciary duty to HMS.
adjudicating this case without Franco here is akin to a
missing seat at the table. A significant portion of this case
will be dedicated to determining Franco's actions and
deciding what legal significance to impart to them. Obtaining
and interpreting crucial operative facts without Franco will
increase the difficulty of properly assessing Conrad's
claims and HMS's defenses, thereby causing the parties
hardship. Franco's absence will cause further hardship as
HMS will likely be forced to relitigate this case to some
extent, expending even more in legal fees and costs.
comes to indemnity claims specifically, courts use state law
to determine whether an indemnity claim is ripe.
Northfield Ins. Co. v. Loving Home Care, Inc., 363
F.3d 523, 536-37 (5th. Cir. 2004).
argues that the Court should use Washington law to analyze
the ripeness of an indemnity claim in this case. Despite not
stating so explicitly, Franco likely premises this argument
on the fact that HMS's breach of fiduciary claim will be
analyzed under Washington law. However, “the body of
law that governs a claim for indemnity or contribution
usually is the same body of law that establishes the
indemnitee's primary liability to the plaintiff.”
Hardy v. Gulf Oil Corp., 949 F.2d 826, 830 n.7 (5th.
Cir. 1992) (citing Marathon Pipe Line Co. v. Drilling Rig
Rowan/Odessa, 761 F.2d 229, 235 (5th Cir.1985)). Here,
Conrad's claims against HMS, the claims that would
establish HMS's liability, are governed by Louisiana law.
(Rec. Doc. 26-1 at p. 38). Regardless, under either
Washington or Louisiana law, HMS's third-party indemnity
claim is ripe.
Suire v. Lafayette City-Parish Consolidated
Government, 04-1459, 04- 1460, 04-1466 (La.4/12/05), 907
So.2d 37, 51, the Louisiana Supreme Court held that “an
indemnitor is not liable under an indemnity agreement until
the indemnitee actually makes a payment or sustains
losses.” Id. Crucially, the Suire
court's holding focused on when an indemnitor became
liable, not when the indemnitee's claim became ripe.
Subsequent Louisiana jurisprudence clarifies that
“there is a distinction between the right to
‘claim' indemnity and the right to
‘collect' indemnity.” Reggio v.
E.T.I., 07-1433, p. 11 (La.12/12/08), 15 So.3d 951, 960
(Weimer, J., concurring); see Pizani v. St. Bernard
Parish, 2012-1084 (La.App. 4 Cir. 9/26/13), 125 So.3d
546, 553; Dean v. Entergy La., L.L.C., 10-887
(La.App. 5 Cir. 10/19/2010), 2010 WL 9447498 at *4
the right to collect indemnity does not accrue until the
underlying dispute is settled, the right to claim indemnity
via impleader before adjudication of the underlying dispute
is “consistent with the legislative history and purpose
of La. C.C.P. art 1111.” Pizani, 2012-1084 at
p. 10, 125 So.2d at 553 (citing Moreno v. Entergy
Corp., 10-2268, p. 5 (La.2/18/11), 64 So.3d 761, 765-66)
(Victory, J., concurring). This is consistent with the purpose of
the impleader procedure, which is to “avoid multiple
lawsuits; to facilitate and expedite the trial of litigation;
and, wherever possible, consistent with the orderly procedure
and due regard ...