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Wartsila NSD North America, Inc. v. Hill International

June 18, 2003


The opinion of the court was delivered by: Brotman, District Judge.



Defendant/Third Party Plaintiff Hill International, Inc. ("Hill") filed a third party complaint in this action on August 20, 2001, seeking contribution (Count I) and indemnification (Count II) from third party defendants, John H. Clegg, Esq.("Clegg"), Daphne McNutt, Esq. ("McNutt"), and Chaffe, McCall, Phillips, Toler & Sarpy LLP ("Chaffe firm"). Each of the third party defendants now moves, pursuant to Federal Rule of Civil Procedure 12(b)(2), to dismiss Hill's third party complaint based on this Court's purported lack of personal jurisdiction. For the reasons set forth below, that motion will be denied.


In July 1994, Wartsila Diesel, Inc., an engineering and construction company and the predecessor to Plaintiff Wartsila NSD North America, Inc. ("Wartsila"), entered into a contract with Coastal Salvadorian Ltd. ("Coastal"), wherein Wartsila agreed to design, engineer, procure, construct, start up and test a diesel engine power plant in Nejapa, El Salvador ("the Project"). (Pl.'s First Supplemental & Amended Complaint at ¶ 6). Wartsila, whose business had up to that point focused primarily on the sale and maintenance of diesel engines, in turn subcontracted much of the plant's construction to a variety of other entities, including Black & Veatch International ("BVI"). (Id. at ¶¶ 7-8). The Project quickly fell behind schedule, resulting in numerous contractual disputes between Wartsila, BVI, and Coastal. (Id. at ¶ 9). In an effort to get the project back on track, Wartsila sought the services of a construction consulting firm that could provide expert advice and management for the Project. (Id. at ¶ 10).

On January 18, 1995, Hill International, Inc. submitted a proposal for the consulting position. (Id. at ¶ 31). In its proposal, Hill recommended that Richard LeFebvre, one of the firm's senior consultants, be assigned to the Project to "collect, organize and evaluate . . . factual information and report . . his findings as to the best way to proceed with the completion of the project." (Id. at ¶ 33). LeFebvre's responsibilities were to include gathering information and materials related to the construction project, visiting the project site "to evaluate the adequacy of the plans and specifications," and comparing the actual performance of the construction work to Wartsila's obligations under its contract with Coastal. (Id.). Attached to the proposal was a copy of LeFebvre's professional resume which represented that he: (a) had received a B.S. in electrical engineering from Penn State in 1966; (b) had earned a B.A. in business administration from Duquesne University in 1969; (c) had taken courses in business law at the University of North Florida in 1983; and (d) was registered and licensed as a professional engineer in Pennsylvania, New York, and Massachusetts. (Id. at ¶ 32).

On January 24, 1995, Wartsila and Hill entered into a written consulting agreement that incorporated by reference the January 18 proposal. (Id. at ¶ 34). Pursuant to the terms of the agreement, Hill assigned LeFebvre to work as a senior consultant on the Project. (Id. at ¶ 35). LeFebvre was quickly promoted by Wartsila to the position of Project Manager and continued to work on the Project as a Hill employee until May 25, 1995. (Id. at ¶¶ 37, 40). Among his responsibilities was the task of analyzing issues bearing on potential claims and defenses in contractual disputes between Wartsila and BVI. (Id. at ¶¶ 38-39).

On June 1, 1995, with Hill's approval, Wartsila hired LeFebvre "as an independent contractor to provide assistance with construction and claims management on the Project." (Id. at ¶ 41). Based in part on LeFebvre's analysis and recommendations, Wartsila in May 1996 decided to pursue claims against BVI before the American Arbitration Association and retained the Louisiana law firm of Chaffe, McCall, Phillips, Toler & Sarpy, L.L.P., and two of its attorneys, John H. Clegg, Esq., and Daphne McNutt, Esq., to initiate arbitration proceedings against BVI in Charlotte, North Carolina. ( ¶ 43; Third Party Complaint at ¶ 11). LeFebvre became a "key witness" in the proceedings due to his intimate and extensive knowledge of the facts underlying the points of contention between the two parties and his participation in the drafting of various "claim support" documents. (Pl.'s First Amended Compl. at ¶¶ 43-44).

At the arbitration proceedings in September 1997, LeFebvre offered testimony regarding the academic and professional credentials listed on his resume. (Id. at ¶ 47). On September 8, 1997, toward the end of his direct testimony, Wartsila became aware, "for the first time," that there were questions concerning LeFebvre's educational and professional credentials when counsel for BVI requested that LeFebvre execute a release for background academic information. (Id. at ¶ 48). Later that day, after the proceedings had been adjourned, LeFebvre admitted to Wartsila's attorneys that the statements on his resume concerning a business degree from Duquesne University were not accurate. (Id. at ¶ 49). He allegedly told Wartsila that Hill had asked him to overstate the extent of his training at Duquesne. (Id.).

The next morning, LeFebvre requested and received from Hill a revised resume which omitted any reference to a business degree from Duquesne or business law courses at North Florida and modified the date on which he claimed to have received an electrical engineering degree from Penn State. (Id. at ¶ 50). When the proceedings resumed later that day, BVI's attorneys subjected LeFebvre to a vigorous cross-examination, forcing him to acknowledge the obvious inconsistencies between the two resumes. LeFebvre nevertheless insisted that the revised resume was entirely accurate and truthful. (Id. at ¶ 50(b)). However, by the conclusion of the day's proceedings, Wartsila's attorneys were forced to concede that a hasty investigation into LeFebvre's academic credentials had uncovered no evidence that he had ever received an engineering degree from Penn State or attended any of the other schools listed on his resume. (Id. at ¶ 51). Wartsila also found no evidence that LeFebvre had ever been licensed as a professional engineer in either New York, Pennsylvania, or Massachusetts. (Id.).

In light of LeFebvre's perjury, Wartsila's counsel withdrew his testimony, and the arbitration panel granted Wartsila a short recess to restructure its case based on new witnesses. (Id. at ¶ 53). During that time, the company re-examined materials prepared by LeFebvre and discovered that he had improperly altered original "claim support" documents. (Id. at ¶ 53). Consequently, Wartsila was forced to withdraw certain claims. (Id.). On March 5, 1998, the arbitration panel issued a judgment of $4.65 million in favor of BVI. (Id. at ¶ 57). Wartsila attributes the arbitration award to the complete loss of credibility it allegedly suffered as a result of LeFebvre's blatant misrepresentations, both on his resume and in his testimony before the arbitration panel. (Id. at ¶ 52).

In November 1997, shortly after LeFebvre was exposed as a fraud and a perjurer, BVI brought claims in tort and contract against Wartsila in the United States District Court for the District of Kansas ("Kansas litigation"). (Id. at ¶ 58, 60). The lawsuit was based on Wartsila's "placement of an individual lacking in the necessary education, skills, professional licenses and trustworthiness as Project Manager charged with oversight of BVI's work." (Id. at ¶ 59). Wartsila ultimately settled this dispute with BVI for $850,000. (Id. at ¶ 61).

Wartsila thereafter retained attorneys Clegg and McNutt, who had since left the Chaffe firm to join the New Orleans law firm of McGlinchey Stafford, LLC, to initiate litigation against Hill in the United States District Court for the District of New Jersey. As amended, Wartsila's complaint asserts claims for negligence, fraud, and breach of contract and seeks recovery of both compensatory and punitive damages for the harm allegedly suffered as a result of the misrepresentations concerning LeFebvre's academic and professional credentials, including amounts paid to Hill and LeFebvre for services rendered, a portion of the arbitration award, and the $850,000 paid in settlement of the Kansas lawsuit.

On August 20, 2001, Hill filed a third party complaint asserting claims for contribution (Count I) and indemnification (Count II) against Clegg, McNutt, and the Chaffe law firm (hereinafter collectively referred to as "Defendants"). Hill's complaint alleges that, as counsel for Wartsila during the BVI arbitration proceedings, Defendants acted "recklessly and negligently" by: (1) failing to investigate and verify LeFebvre's educational and professional credentials before presenting him as Wartsila's key fact witness (Third Party Complaint at ¶ 33); and (2) "assert[ing] claims and submitt[ing] documents prepared by LeFebvre to the arbitration panel without having previously checked the accuracy of those claims and/or documents." (Id. at ¶ 34). The complaint further alleges that it was the Defendants' failure to provide Wartsila with "adequate legal representation" which "caused the losses Wartsila allegedly sustained in both the BVI arbitration and the Kansas litigation." (Id. at ¶ 36).

On August 8, 2002, Defendants filed the instant motion to dismiss Hill's third party complaint for lack of personal jurisdiction. Hill was granted permission to undertake limited jurisdictional discovery before responding to Defendants' motion. Now that such discovery has been completed and Hill has filed its opposition brief, Defendants' motion to dismiss is ripe for consideration by this Court.


"When a defendant raises the defense of the court's lack of personal jurisdiction, the burden falls upon the plaintiff to come forward with sufficient facts to establish that jurisdiction is proper." Mellon Bank (East) P.S.F.S. v. Farino, 960 F.2d 1217, 1223 (3d Cir. 1992). In ruling on a motion to dismiss, the court must accept as true the well-pleaded, material allegations contained in the plaintiff's complaint and afford plaintiff the benefit of all reasonable inferences which can be drawn therefrom. See Cateret Savings Bank, F.A. v. Shushan, 954 F.2d 141, 142 n. 1 (3d Cir. 1992). Still, a Rule 12(b)(2) motion, such as the motion made by the defendants here, is inherently a matter which requires resolution of factual issues outside the pleadings, i.e. whether in personam jurisdiction actually lies. Once the defense has been raised, then the plaintiff must sustain its burden of proof by establishing jurisdictional facts through sworn affidavits and competent evidence . . . [A]t no point may a plaintiff rely on the bare pleadings alone in order to withstand a defendant's Rule 12(b)(2) motion to dismiss for lack of personal jurisdiction. Once the motion is made, plaintiff must respond with actual proofs, not mere allegations.

Patterson v. Federal Bureau of Investigation, 893 F.2d 595, 603-04 (3d Cir. 1990) (citation omitted) (quoting Time Share Vacation Club v. Atlantic Resorts, Ltd., 735 F.2d 61, 67 n.9 (3d Cir. 1984)). A plaintiff can meet its burden of proof and present a prima facie case for the court's exercise of personal jurisdiction by establishing "with reasonable particularity ...

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