RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 09a0154p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
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X
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SUNCOKE ENERGY INC., fka Sun Coke
Plaintiff-Appellant, --
Company,
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No. 08-5414
,
>
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v.
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MAN FERROSTAAL AKTIENGESELLSCHAFT;
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MAN FERROSTAAL DO BRASIL COMERCIO E
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Defendants-Appellees. -
INDUSTRIA LTDA.,
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N
Appeal from the United States District Court
for the Eastern District of Tennessee at Knoxville.
No. 07-00006—Thomas A. Varlan, District Judge.
Argued: January 15, 2009
Decided and Filed: April 20, 2009
Before: MERRITT, ROGERS, and WHITE, Circuit Judges
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COUNSEL
ARGUED: Richard W. Foltz, Jr., PEPPER HAMILTON, Philadelphia, Pennsylvania, for
Appellant. Sydney B. McDole, JONES DAY, Dallas, Texas, for Appellees. ON BRIEF:
Richard W. Foltz, Jr., PEPPER HAMILTON, Philadelphia, Pennsylvania, W. Kyle
Carpenter, WOOLF, McCLANE, BRIGHT, ALLEN & CARPENTER, Knoxville,
Tennessee, for Appellant. Sydney B. McDole, JONES DAY, Dallas, Texas, W. Thomas
Dillard, Wayne A. Ritchie II, RITCHIE, DILLARD & DAVIES, Knoxville, Tennessee, for
Appellees.
MERRITT, J., delivered the opinion of the court, except as to Part III, and delivered
an opinion as to Part III. WHITE, J. (pp. 10-13), delivered a separate concurring opinion.
ROGERS, J. (pp. 14-17), delivered a separate opinion, dissenting in part.
1
No. 08-5414 SunCoke Energy v. MAN Ferrostaal, et al. Page 2
_________________
OPINION
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MERRITT, Circuit Judge. This is a diversity action for injunctive relief seeking the
return of confidential trade information generated and provided by SunCoke Co. of
Knoxville,Tennessee to the defendant, MAN Ferrostaal, a German engineering and
construction company. Relying on the Tennessee long-arm statute, SunCoke brought suit
in federal court in Knoxville, where its principal place of business is located. The District
Court dismissed for lack of personal jurisdiction. It held that the activities of the German
corporation did not create a sufficiently “substantial connection with the forum state,”
Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985), to meet the due process standard
of “fair play and substantial justice,” Asahi Metal Indus. Co. v. Superior Court of Cal., 480
U.S. 102, 116 (1982). This broad constitutional standard requires us to consider all of the
facts concerning the business relationship at issue to determine whether the exercise of
1
federal jurisdiction is reasonable under the circumstances. We believe that the defendant’s
1
The Restatement (Second) of Judgments and the Restatement (Second) of Conflict of Laws
describe the concept of personal jurisdiction by listing a total of eleven broad factors to be considered. For
example, § 5 of the Restatement (Second) of Judgments lists the following factors relevant here:
§ 5. Jurisdiction Over Persons
A state may exercise jurisdiction over a person who has a relationship to the state such
that the exercise of jurisdiction is reasonable . . . .
(1) A state has power to exercise judicial jurisdiction over an individual on one
or more of the following bases . . .
(g) doing business in the state
(h) an act done in the state
(i) causing an effect in the state by an act done
elsewhere
(j) ownership, use or possession of a thing in the
state
(k) other relationships to the state which make the
exercise of judicial jurisdiction reasonable.
....
REPORTER’S NOTE:
....
A minimal involvement of the defendant in activity in the forum is required. See World-
Wide Volkswagen v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980).
Assuming such an involvement, the question of territorial jurisdiction is to be resolved
No. 08-5414 SunCoke Energy v. MAN Ferrostaal, et al. Page 3
dealings with SunCoke in Tennessee were substantial enough to meet the due process
standard, and hence we reverse and remand the case for further proceedings.
I.
The two parties entered into a detailed contract in April 2001, focused on the
disclosure of the confidential trade information, which the parties described as “highly
valuable.” The stated use of the information by Ferrostaal was to develop coke and
related co-generation facilities in Brazil. In anticipation of possible future disputes, the
contract provided a set of equitable remedies in case of misuse of the information,2 and
included two distinct forum-selection provisions, one for equitable claims and the other
for legal claims. As to equitable claims, the contract provides that “a claim for equitable
relief . . . may be brought to any court of competent jurisdiction,” while other claims are
to be arbitrated in Paris under certain international rules of arbitration.3
In this equitable action by the Tennessee corporation against the German
corporation, the parties have treated the contract forum-selection clause for equitable
relief — calling for adjudication in “any court of competent jurisdiction” — to mean any
court with personal jurisdiction under the “minimum contacts,” due process test of
International Shoe Co. v. Washington, 326 U.S. 310 (1945). The defendant was not
personally served with process in the forum state, so the question before us is whether
the activities of the defendant with respect to the confidential trade information meet the
by reference to convenient administration of justice in all its aspects, including
alternative forums, the plaintiff’s connection with the forum state, and the consequences
with respect to joinder of other parties.
2
Section 6 of the contract provided: Remedies. The Receiving Parties acknowledge and agree
that (i) the Confidential Information embodies substantial and highly valuable know how that is proprietary
to the Disclosing Party; (ii) the Disclosing Party does not have an adequate remedy at law, and (iii) the
Disclosing Party shall be irreparably harmed if any of the provisions of this Agreement are breached.
Accordingly, in addition to any other remedy to which the Disclosing Party may be entitled at law or in
equity, the Receiving Parties agree that the Disclosing Party shall be entitled to temporary and permanent
injunctive relief to prevent breaches of this Agreement, and to specifically enforce this Agreement.
3
Section 9 of the contract provided: Governing Law: Arbitration of Disputes. This Agreement
shall be governed by and construed in accordance with the laws of England (United Kingdom) applicable
to agreements made and performed therein. Other than a claim for equitable relief, which may be brought
to any court of competent jurisdiction, all disputes arising out of this Agreement shall be settled by
arbitration in accordance with the rules of the International Chamber of Commerce (“ICC”), Paris. Any
such arbitration shall be take place in Paris, France.
No. 08-5414 SunCoke Energy v. MAN Ferrostaal, et al. Page 4
“minimum contacts” test that would justify finding personal jurisdiction in the Tennessee
federal court. We conclude that the test is satisfied primarily because of defendant’s
travels to Tennessee and its communications sent to and received from Tennessee about
the proprietary information that originated in Tennessee and was to be returned there
under the contract between the parties. The parties contemplated in their contract that
litigation for injunctive relief might become necessary. A federal court in the United
States with the most contacts with the transaction in question would be one logical place
to resolve the dispute. The contract itself gives an explanation of differences between
law and equity that contemplates a lawsuit brought to a “competent” court presumably
familiar with this common law distinction and the various forms of injunctive relief and
specific performance referred to in the contract.
Concerning visits to Tennessee by Ferrostaal employees, there is a conflict as
noted by the District Court:
A Sun Coke representative, Alison Grant, reports that Ferrostaal
employees visited Tennessee on several occasions. Specifically, Marco
Antonio Marcial, Villian Oliverira, Renata Souza, and Marcos Daré
visited Tennessee in July 2001; Joern Walter and Jan Krull visited
Tennessee in November 2001; and Howard Barnes, Helmut Kucken,
Marco Antonio Marcial, and Jan Krull visited Tennessee in September
2002. Ms. Grant does not know which of these Ferrostaal representatives
were from Ferrostaal Germany. Ferrostaal Germany asserts that
representatives from Ferrostaal Germany were only present in Tennessee
during the September 2002 visit. Additionally, Ms. Grant states that
there were multiple phone conversations and email messages from
Ferrostaal Germany to Sun Coke employees in Knoxville to arrange
meetings.
Sun Coke v. MAN Ferrostaal do Brasil Commercio e Industria Ltda., 543 F.Supp.2d
836, 838 (E.D. Tenn. 2008) (citations omitted). There is no conflict concerning the fact
that the confidential trade information, which related to “heat recovery Coke oven
technology,” was sent by SunCoke in Tennessee to Ferrostaal in Essen, Germany, its
headquarters. The information was sent by computer network and website.
By 2005, SunCoke believed that Ferrostaal was improperly disclosing its
protected information to third parties and had improperly put on its website a photograph
No. 08-5414 SunCoke Energy v. MAN Ferrostaal, et al. Page 5
showing its “proprietary designs.” In October 2005, SunCoke filed an arbitration
proceeding in Paris and demanded that all of its confidential information be returned to
it. In late 2005, during the pendency of the arbitration proceeding, a high executive of
Ferrostaal, Dr. Wolfgang Knothe, traveled to Knoxville for discussions concerning the
return of the information and the settlement of their dispute with Mr. M.H.R. Dingus, the
president of SunCoke. The principals of the two companies then exchanged letters. Dr.
Knothe’s letter says that they had settled the controversy in their Knoxville meeting.4
Mr. Dingus’s reply responds that the parties must take further steps to implement the
understanding arrived at in the Knoxville meeting.5
4
Dr. Knothe’s letter reads:
Dear Mr. Dingus:
After my safe return to Germany, I want to thank you very much for the warm welcome
extended to me during my recent visit to the United States.
You and I have discussed the problems relating to the alleged breach of confidentiality
and the arbitration proceedings instituted against us and our Brazilian subsidiary. Please
allow me to summarize my understanding of the terms reached during our talks:
1. We invite you to send one of your management delegates to our Esson headquarters
and/or to our Brazilian offices with the aim to provide you with the necessary comfort
that such alleged breach of confidentiality has not occurred.
2. Without hereby acknowledging a breach, we and our Brazilian subsidiary withdraw
from the heat recovery coke oven project for the CSA ThyssenKrupp Atlantic Steel
plant which we pursued together with Udhe GmbH. It is understood that the withdrawal
would not extend to other projects within the CSA ThyssenKrupp Atlantic Steel plant
project.
3. I have reorganized the structure in such a way that Mr. Jürgen Both and Mr. Stefan
Kratz shall be the points of contact for your company. In case of execution of major
projects I suggest to form a steering committee in which the two of us should sit to
discuss and implement strategic decisions.
4. You stop with immediate effect the arbitration proceedings against us and our
Brazilian subsidiary and would not begin any new proceedings with respect to the above
mentioned project.
Provided I have correctly summarized the agreement reached I would kindly ask you to
countersign and return a copy of this letter to us before the 2nd December 2005, being
the last day of the 30-day period granted by the ICC.
Best regards,
MAN Ferrostaal Aktiengesellschaft
5
Mr. Dingus’s reply reads:
Dear Wolfgang:
I enjoyed our recent meeting and appreciate your response to the claims raised
No. 08-5414 SunCoke Energy v. MAN Ferrostaal, et al. Page 6
The District Court describes the activities of the parties thereafter as follows:
On April 21, 2006, Sun Coke again requested that Ferrostaal
return of its [sic] confidential information as defined in the MOU and
confidentiality agreement and requested that Ferrostaal remove all
depictions of Sun Coke’s proprietary designs from its website. By cover
letters dated September 1, 2006, March 9, 2007, and September 17, 2007,
Ferrostaal Germany returned some of the information that it had received
from Sun Coke. Ferrostaal Germany invited Sun Coke to call if there
were any questions about the return of the information, but Sun Coke has
never contacted Ferrostaal Germany to verify or discuss the return of any
of the information.
On January 8, 2007, Sun Coke filed the instant action requesting
that Ferrostaal be required to (1) return the proprietary information;
(2) certify it has done so and describe the means taken to assure no
copies have been retained, nor other improper uses made of the
proprietary information; and (3) permit Sun Coke access to Ferrostaal’s
in our arbitration demand.
After carefully reviewing your November 28th letter, we acknowledge the
following:
1. Based upon your representations that Ferrostaal (namely MAN
Ferrostaal Aktiengesellschaft and MAN Ferrostaal do Brasil
Comercio e Industria Ltda.) has (i) withdrawn from participation in
the coke plant portion of the Seperiba project on behalf of Udhe
GmbH, and (ii) has not breached any of its confidentiality obligations
in respect of Sun Coke Company, Sun Coke will withdraw, without
prejudice and without waiving any of its rights, its pending demand
for arbitration. Provided those representations are confirmed, we do
not anticipate re-filing that arbitration demand.
2. Based upon your proposal, Sun Coke’s team will visit the offices
of your Brazilian affiliate for the purpose of determining whether
Ferrostaal has breached its confidentiality obligations. In addition to
reviewing all materials submitted by Ferrostaal to Udhe, our team
will review Ferrostaal’s procedures for maintaining the secrecy and
security of Sun Coke’s proprietary information and know-how,
including its document control procedures and confidentiality
agreements with contractors and suppliers for the Vitoria project.
Richard Westbrook will head our team, and I have asked him to
contact Christoph Schlumbom to coordinate our team’s visit. Legal
representatives will not be included as members of our team. Of
course, we reserve the right to further visits, including visits to your
Essen office, as reasonably required.
3. We appreciate your designation of Mr. Both and Mr. Kratz as
points of contact, and your proposal for the two of us to meet and
discuss significant issues. However, we believe that the formation of
a formal steering committee is not necessary at this time.
Once again, thank you for your visit and your consideration of these issues.
I look forward to meeting with you again in the near future.
No. 08-5414 SunCoke Energy v. MAN Ferrostaal, et al. Page 7
Essen headquarters and Brazilian offices to confirm all proprietary
information has been returned.
Sun Coke, 543 F.Supp.2d at 839 (citations omitted).
II.
In deciding this case against jurisdiction, the District Court relied heavily on an
intellectual property case in which a Michigan company sued a Swiss company for
misappropriation of confidential information released under a contract negotiated in
Switzerland — a contract which expressly provided that “jurisdiction for this contract
is Bern, Switzerland.” Int’l Tech. Consultants, Inc. v. Euroglass S.A., 107 F.3d 386 (6th
Cir. 1997). Relying on language from a Supreme Court case interpreting International
Shoe to allow “potential defendants to structure their primary conduct with some
minimum assurance as to where that conduct will and will not render them liable to
suit,” World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980), the
International Technologies court held that the forum-selection clause establishing
jurisdiction in Bern, Switzerland, was strong evidence that Michigan lacked a substantial
basis for jurisdiction against the Swiss company. In the present case, instead of limiting
jurisdiction to a court in Essen, Germany, and foreclosing jurisdiction elsewhere, the
contract between SunCoke and Ferrostaal allows equity jurisdiction enjoining misuse of
intellectual property in any court of “competent jurisdiction.” This means any court in
which the “connection” with the dispute is sufficient to satisfy the standard of “fair play
and substantial justice.”6
The District Court also erroneously foreclosed the use of the late-2005 discussion
in Knoxville which led to the exchange of correspondence and the alleged agreement
between the principals of the two companies regarding the return of SunCoke’s
confidential information. Based on language from Nationwide Mutual Insurance Co. v.
Tryg International Insurance Co., 91 F.3d 790, 796 (6th Cir. 1996), the Court concluded
that the activities of Dr. Knothe in Tennessee leading to the alleged new agreement may
6
See footnote 1 supra.
No. 08-5414 SunCoke Energy v. MAN Ferrostaal, et al. Page 8
not be used in the calculus for establishing jurisdiction. Although the parties appear to
differ as to the nature of their new understanding in November 2005, Dr. Knothe states
in his letter that an agreement was “reached during our talks” consisting of four points
which he then enumerates. This alleged new agreement in Knoxville and the activities
of the parties leading to it and resulting from it should count as contacts in the
determination of whether it is fair for Tennessee courts to act as a competent jurisdiction
for resolving the dispute arising from the alleged contract that the parties formed there.
III.
The author of this opinion is doubtful that there is a rational basis for the dicta
in the Nationwide Mutual Insurance case that in effect converts Federal Rule of
Evidence 408 (“conduct or statements made in compromise negotiations” may not be
used “to prove liability for, invalidity of, or amount of a claim”) into a rule of personal
jurisdiction under the Due Process clause. Why should these contacts be discounted for
the entirely separate question of constitutional contacts? We should not constitutionalize
this rule of evidence.
In addition, we need not decide whether all of the contacts with Tennessee prior
to the late-2005 discussions in Knoxville and follow-up letters are sufficient alone to
establish Tennessee as a “competent jurisdiction” under the forum-selection and Due
Process clauses. We believe that the 2005 activities are sufficient to eliminate any
serious problem of fairness and substantial justice when we add to the 2005 activities the
prior visits, the generation of the confidential information in — and the obligation to
return it to — Tennessee, the foreseeability of a dispute arising from this obligation, and
the use of actual concepts of English and American law as the remedy for such disputes.
The fact that SunCoke divided its case into two separate claims — one for breach
of the original 2001 contract and one for breach of the 2005 contract — should not
defeat federal jurisdiction over the entire case. See RESTATEMENT (SECOND) OF
JUDGMENTS § 24 (“What factual grouping constitutes a ‘transaction,’ and what
groupings constitute a ‘series’, are to be determined pragmatically, giving weight to such
considerations as whether the facts are related in time, space, origin, or motivation,
No. 08-5414 SunCoke Energy v. MAN Ferrostaal, et al. Page 9
whether they form a convenient trial unit, and whether their treatment as a unit conforms
to the parties expectations or business understanding or usage.”).7 It would not be an
efficient use of either the parties’ or the court’s time to handle the two counts of the
complaint separately as though they were unrelated. Fairness and substantial justice
support the view that personal jurisdiction over a set of highly integrated transactions
between the same parties arising from the same subject matter and legal theory should
be adjudicated as a whole and not piecemeal. See United States v. Cal. and Or. Land
Co., 192 U.S. 355, 358 (1904) (“But the whole tendency of our decisions is to require
a plaintiff to try his whole cause of action and his whole case at one time.”).
Although we do not agree entirely as to the reasoning leading to the result, Judge
White and I agree that the District Court has personal jurisdiction on remand over the
entire case.
IV.
For these reasons, the decision of the District Court is reversed, and the case is
remanded for further proceedings.
7
Judge Rogers’ separate opinion barring personal jurisdiction over claim 1 based on the 2001
contract but allowing claim 2 to go forward is based on a metaphysical distinction that would likely leave
the District Court puzzled as to what precise issue is being tried and what evidence is admissible. The
2005 agreement allegedly replaces the 2001 agreement in part. But without having all the facts before us
in this appeal, it is not possible to tell the nature of the modification or how the two agreements fit together.
That is why the RESTATEMENT’s “pragmatic” approach based in part on judicial efficiency seems best.
After all, we are dealing with the “equitable” powers of the court which are inconsistent with fine,
formalistic distinctions separating two interlocking contracts that must be read together in a factual context
not known to us at the present time.
No. 08-5414 SunCoke Energy v. MAN Ferrostaal, et al. Page 10
_________________
CONCURRENCE
_________________
WHITE, Circuit Judge, concurring. I join my colleagues in the conclusion that
the district court erred in finding that it could not constitutionally exercise personal
jurisdiction over Ferrostaal Germany (Ferrostaal) in relation to SunCoke’s claim for
breach of the alleged 2005 agreement. Nationwide, supra, is properly distinguished on
the basis that SunCoke alleges that a new contract was formed as a result of the
negotiations in Tennessee and seeks enforcement of that contract. Cf. Minn. Mining &
Mfg. Co. v. Nippon Carbide Indus. Co., 63 F.3d 694, 698 (8th Cir. 1995).
I join parts I and II of Judge Merritt’s opinion. However, I agree with Judge
Rogers that personal jurisdiction must be proper as to each claim, and that the two
contract claims do not share a common nucleus of facts. Thus, personal jurisdiction as
to the claim based on the 2001 confidentiality agreement must be established in its own
right. Because I conclude that SunCoke has established the requisite minimum contacts
as to this claim as well, I concur in the judgment that Ferrostaal is subject to personal
jurisdiction as to SunCoke’s claim for breach of the 2001 agreement.
SunCoke, a corporation with its principal place of business in Knoxville,
Tennessee (Compl. ¶ 4), entered into a confidentiality agreement with Ferrostaal on
April 2, 2001, under which it would disclose its confidential, proprietary, or otherwise
nonpublic information to Ferrostaal so that Ferrostaal could “perform certain services
on behalf of SunCoke Company and its affiliates . . . related to the development and
installation of a heat recovery coke plant and related cogeneration facility in Brazil
pursuant to a ‘Memorandum of Understanding’ [MOU] to be entered into” between
SunCoke and Ferrostaal. J.A. 23. The confidentiality agreement was specifically and
solely addressed to the protection, limited use, and return of SunCoke’s and its affiliates’
confidential information and materials. Although related to the underlying MOU and
incorporated into the MOU by reference (J.A. 67), the confidentiality agreement is a
No. 08-5414 SunCoke Energy v. MAN Ferrostaal, et al. Page 11
separate contract in its own right, and is the agreement SunCoke seeks to compel
Ferrostaal to specifically perform.
While the MOU itself has little connection to Tennessee, the confidentiality
agreement has a significant connection to Tennessee. The subject of the confidentiality
agreement was not a contract to be performed in Brazil, but rather confidential
information and materials originating mainly in Tennessee and belonging to a business
with its principal offices in Tennessee. By the terms of the confidentiality agreement,
which was written on SunCoke’s Tennessee letterhead, Ferrostaal acknowledged that
“the Confidential Information embodies substantial and highly valuable know[-]how that
is proprietary to [SunCoke]” and that SunCoke “shall be irreparably harmed if any of the
provisions of the Agreement are breached.” J.A. 25 (Agreement ¶ 6). Importantly, the
agreement provided that Ferrostaal “will promptly return all Confidential Information
and other materials furnished by [SunCoke] to [defendant] (including copies thereof
regardless of format) upon the occurrence of” certain prescribed events, including “the
termination of the Memorandum of Understanding or any agreements entered into by
such parties or their affiliates pursuant to such Memorandum of Understanding” or “the
conclusion of the Project.” J.A. 24-25 (Agreement ¶ 4). Thus, final performance of the
contract required that the materials be returned to SunCoke. Indeed, the record reflects
that when Ferrostaal eventually returned certain confidential materials and
drawings—doing so explicitly pursuant to the 2001 confidentiality agreement—it
returned them by courier to SunCoke in Tennessee. See J.A. 88.
On its own, the existence of a contract would be insufficient to confer personal
jurisdiction. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 478 (1985). Rather,
“prior negotiations and contemplated future consequences, along with the terms of the
contract and the parties’ actual course of dealing,” are to be considered to determine
whether “the defendant purposefully established minimum contacts within the forum.”
Id. at 479. In executing the confidentiality agreement, the parties contemplated a
continuing relationship. By the very terms of the agreement, defendant knew it was
contracting with a company in Tennessee, understood the value of the confidential
No. 08-5414 SunCoke Energy v. MAN Ferrostaal, et al. Page 12
information to this Tennessee company, and anticipated a course of dealing that would
involve accessing information located in Tennessee, protecting that information for the
benefit of a Tennessee company, and returning the information to Tennessee. The
“contemplated future consequences” of a failure to protect or return that information
were expressly stated—irreparable injury to the Tennessee company and the possible
commencement of an equitable action in a court of competent jurisdiction.
Moreover, the confidentiality agreement enabled an ongoing relationship
between the parties. See CompuServe, Inc. v. Patterson, 89 F.3d 1257, 1265 (6th Cir.
1996) (distinguishing between “a relationship intended to be ongoing in nature” and a
“one-shot affair”). With this agreement in place, SunCoke provided and facilitated
Ferrostaal’s access to proprietary information and materials through computer access to
SunCoke’s Tennessee-maintained website1 and visits to its United States facilities.
Although such visits did not occur in Tennessee, Ferrostaal’s arrangements for its United
States visits were made through SunCoke’s Tennessee office. And although Ferrostaal
argues that any breach of the confidentiality agreement would have occurred outside
Tennessee because any failure to return the information occurred outside Tennessee, and
that any misuse or misappropriation occurred outside Tennessee, the gravamen of
SunCoke’s complaint is the failure to return the confidential materials to Tennessee as
contemplated by the confidentiality agreement.
The facts and circumstances, in the aggregate, establish sufficient minimum
contacts with Tennessee to support the exercise of personal jurisdiction over a claim for
equitable relief under the confidentiality agreement. Traditional notions of fair play and
substantial justice would not be offended by such an exercise. See Floratine Prods.
Group, Inc. v. Brawley, 282 F. Supp. 2d 798, 801 (W.D. Tenn. 2003) (“Tennessee has
a substantial interest in protecting the contracts upon which its citizens rely, especially
when those contracts create continuing relationships.”) (citing J.I. Case Corp. v.
Williams, 832 S.W.2d 530, 533 (Tenn. 1992)); see also Burger King, 471 U.S. at 475-76
1
Given that the website was maintained at SunCoke’s Tennessee office, I do not find it significant
that the server was located in Houston, Texas.
No. 08-5414 SunCoke Energy v. MAN Ferrostaal, et al. Page 13
(observing that “where the defendant deliberately . . . has created continuing obligations
between himself and residents of the forum, he manifestly has availed himself of the
privilege of conducting business there”) (citation and quotation marks omitted).
For these reasons, I conclude that SunCoke has established the requisite
minimum contacts to support the constitutional exercise of personal jurisdiction over
Ferrostaal as to each of SunCoke’s two claims for equitable relief.
No. 08-5414 SunCoke Energy v. MAN Ferrostaal, et al. Page 14
___________________________
DISSENTING IN PART
___________________________
ROGERS, Circuit Judge, dissenting in part. Because there is not personal
jurisdiction over Ferrostaal on SunCoke’s claim for breach of the 2001 contract, I would
uphold the dismissal of that claim. Under Nationwide Mutual Insurance Co. v. Tryg
International Insurance Co., 91 F.3d 790, 796 (6th Cir. 1996), the parties’ settlement
negotiations cannot be used as a contact to establish personal jurisdiction on the 2001
contract. Without that contact, there is insufficient connection to the forum on that claim
and it should be dismissed for want of jurisdiction.
There is not personal jurisdiction over Ferrostaal on one of SunCoke’s claims,
and “[p]ersonal jurisdiction . . . must be proper as to each claim.” Jack H. Friedenthal,
et al., Civil Procedure § 6.6, at 368 (4th ed. 2005); see also, e.g., Seiferth v. Helicopteros
Atuneros, Inc., 472 F.3d 266, 274-75 (5th Cir. 2006); Remick v. Manfredy, 238 F.3d 248,
255-56 (3d Cir. 2001); Phillips Exeter Acad. v. Howard Phillips Fund, 196 F.3d 284,
289 (1st Cir. 1999). SunCoke brought two claims: breach of the 2001 contract and
breach of the 2005 settlement contract. There is only personal jurisdiction over
Ferrostaal on the latter.
There is personal jurisdiction on the 2005 settlement contract claim because
Ferrostaal’s “negotiations and contemplated future consequences, along with the terms
of the contract and the parties’ actual course of dealing,” Burger King Corp. v.
Rudzewicz, 471 U.S. 462, 479 (1985), establish minimum contacts with Tennessee. By
coming to Tennessee to negotiate, Ferrostaal “purposefully directed” its activities toward
Tennessee residents, “and the litigation result[ed] from alleged injuries that arise out of
or relate to those activities.” Burger King, 471 U.S. at 473 (citations and internal
quotations omitted). Ferrostaal’s activity in the state was not “random” or “fortuitous,”
Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 774 (1984), nor was the travel to
Tennessee a “jurisdictional trap,” as described in Minnesota Mining & Manufacturing
Co. v. Nippon Carbide Industries Co., 63 F.3d 694, 698 (8th Cir. 1995). The settlement
No. 08-5414 SunCoke Energy v. MAN Ferrostaal, et al. Page 15
contract contemplated future consequences relevant to Tennessee: Ferrostaal agreed to
allow SunCoke representatives to travel from Tennessee to Ferrostaal offices to
investigate the alleged misappropriation of confidential information. Parties who “create
continuing relationships and obligations with citizens of another state are subject to
regulation and sanctions in the other State for the consequences of their activities.”
Burger King, 471 U.S. at 473 (citation and internal quotations omitted).
There are not, however, minimum contacts to establish personal jurisdiction over
Ferrostaal on the 2001 contract claim. The settlement negotiations are a contact only for
the purposes of the settlement contract itself1—Nationwide precludes using the
negotiations as a contact to establish personal jurisdiction on a claim for the original
2001 contract. 91 F.3d at 796; see also Iowa Elec. Light & Power Co. v. Atlas Corp.,
603 F.2d 1301, 1302 n.2 (8th Cir. 1979); Erlanger Mills, Inc. v. Cohoes Fibre Mills,
Inc., 239 F.2d 502, 508-09 (4th Cir. 1956). Ferrostaal’s other contacts with Tennessee
are not sufficient to warrant jurisdiction under Southern Machine Co. v. Mohasco
Industries, Inc., 401 F.2d 374, 381 (6th Cir. 1968).
First, Ferrostaal did not purposefully avail itself of the privilege of acting in
Tennessee, as required by Southern Machine, 401 F.2d at 381. Connection to Tennessee
is minimal: The 2001 contract was negotiated in Florida and the contract dealt with
services in Brazil. In 2002, Ferrostaal employees visited SunCoke’s Tennessee offices
for one day to discuss the project in Brazil. The parties arranged the trip via telephone,
email, and facsimile. Ferrostaal electronically accessed information on SunCoke’s
website (maintained in Tennessee) via a remote server in Texas. The breach occurred
in Brazil, where Ferrostaal allegedly misappropriated SunCoke’s intellectual property.
Of these contacts, the 2002 visit provides the strongest connection to Tennessee, and the
trip lasted one day and concerned actions in Brazil. The communications between the
parties add little weight as “the only reason the communications . . . were directed [at the
forum] was that [plaintiff] found it convenient to be present there.” Int’l Techs.
1
In considering settlement contacts, the Eighth Circuit in Minnesota Mining & Manufacturing
Co., 63 F.3d at 698, explicitly distinguished cases where the suit was over the underlying contract that the
parties were trying to settle as opposed to a suit over a resulting settlement contract.
No. 08-5414 SunCoke Energy v. MAN Ferrostaal, et al. Page 16
Consultants, Inc. v. Euroglas S.A., 107 F.3d 386, 395 (6th Cir. 1997). The absence of
other contacts is notable: Ferrostaal is not licensed to operate in Tennessee, provides no
services there, and maintains no offices or property there. These contacts did not
provide a “substantial connection” with Tennessee that creates a reasonable anticipation
of being “haled into court there.” Burger King, 471 U.S. at 474-75 (citation omitted).
Second, the 2001 contract claim did not arise from Ferrostaal’s actions in the
forum state, as considered in Southern Machine, 401 F.2d at 381. “[T]he operative facts
of the controversy,” CompuServe, Inc. v. Patterson, 89 F.3d 1257, 1267 (6th Cir. 1996),
occurred in Brazil when Ferrostaal supposedly misappropriated confidential information.
The claim did not arise from contacts with Tennessee, nor did it have “substantial
connection with the defendant’s in-state activities.” Southern Machine, 401 F.2d at 384
n.27.
Third, the exercise of jurisdiction is not reasonable, the final element of the
Southern Machine test, 401 F.2d at 381, because of the insubstantial connection between
Ferrostaal and Tennessee. Where international defendants are involved, courts must
“exercise restraint in extending our notions of personal jurisdiction into the international
field.” Int’l Techs., 107 F.3d at 388. Extensions of jurisdiction may harm the forum by
discouraging international investment. See id. at 394. Ferrostaal structured this contract
to avoid jurisdiction in Tennessee and a subsequent contract between the parties should
not undo that choice.
SunCoke cannot ride the 2001 contract claim into court on the coattails of the
2005 settlement contract claim. Such “pendent personal jurisdiction” has been sparingly
permitted in federal diversity cases,2 and the district court has discretion whether or not
to exercise it, Oetiker v. Jurid Werke, G. m. b. H., 556 F.2d 1, 5 (D.C. Cir. 1977).
Application of the doctrine requires a common nucleus of operative fact between the
claims, see, e.g., United States v. Botefuhr, 309 F.3d 1263, 1272 (10th Cir. 2002), but
2
“Pendent personal jurisdiction is typically found where one or more federal claims for which
there is nationwide personal jurisdiction are combined in the same suit with one or more state or federal
claims for which there is not nationwide personal jurisdiction.” Action Embroidery Corp. v. Atl.
Embroidery, Inc., 368 F.3d 1174, 1180-81 (9th Cir. 2004).
No. 08-5414 SunCoke Energy v. MAN Ferrostaal, et al. Page 17
there is not a common nucleus here. SunCoke’s claims are factually distinct: For the
2001 contract claim, SunCoke must show that Ferrostaal misappropriated confidential
documents in Brazil, constituting a breach. For the 2005 settlement contract claim,
SunCoke must show that there was a settlement contract, that one of the terms of the
contract guaranteed that multiple SunCoke employees could visit Ferrostaal’s
headquarters, and that Ferrostaal’s actions repudiated the agreement, constituting a
breach. Trial efficiency is not necessarily aided by trying these two claims together,
because they arise out of separate occurrences. Regardless, even if these claims did arise
from a common nucleus, the proper course of action would be to remand to the district
court so that it may, in its discretion, “decide whether to retain or dismiss” the pendent
claims. Action Embroidery, 368 F.3d at 1181.
Prudential concerns for efficiency should not overwhelm the larger policy issues
that arise if personal jurisdiction is found here. If the parties had not reached a
settlement agreement, Nationwide would preclude using the settlement talks as a contact
for personal jurisdiction. The successful creation of a settlement agreement should not
eviscerate this holding, as it would create a disincentive to settle. Furthermore, because
it is unclear whether a settlement contract was formed, the 2005 settlement contract
claim could be dismissed. If that occurs, Ferrostaal would be in federal court only on
the 2001 contract claim, over which there is no personal jurisdiction. Such precedent
creates an opportunity for gamesmanship by future plaintiffs, who could always assert
a “settlement contract” in their complaint. That result would gut the holding of
Nationwide.
The 2001 contract claim should be dismissed for lack of personal jurisdiction and
the case remanded to the district court to determine whether the 2005 settlement contract
claim alone satisfies the amount-in-controversy requirement.