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Control Screening, LLC v. Integrated Trade Systems

August 3, 2011

CONTROL SCREENING, LLC PLAINTIFF,
v.
INTEGRATED TRADE SYSTEMS, INC., AND PEMEX-PETROQUIMICA, DEFENDANTS.



The opinion of the court was delivered by: Katharine S. Hayden, U.S.D.J.

NOT FOR PUBLICATION

OPINION

Now before the Court are two closely related motions. First, plaintiff Control Screening moves to vacate the order entered by Magistrate Judge Patty Shwartz transferring this action to the Southern District of Texas. [D.E. 36.] In addition, defendant PEMEX-Petroquimica moves to dismiss the claims against it on numerous grounds or, in the alternative, to transfer the action. [D.E. 47.] The motions arise out of an order for limited discovery on the jurisdictional and venue issues presented by the motions. [D.E. 16.]

I. Facts

A. The Subject of the Litigation

This litigation arises from a purported contract between the plaintiff, Control Screening, LLC, and defendants Integrated Trade Systems, Inc. ("ITS"), and PEMEX-Petroquimica. Control Screening is a New Jersey company that manufactures x-ray screening devices. (Second Amended Compl. ("SAC") ¶ 1.) It alleges that it entered into a contract to provide x-ray scanners to ITS and PEMEX, and that ITS and PEMEX breached the contract. (SAC ¶¶ 8, 11, 15.) Through a series of emails and letters, ITS, as the buying agent for PEMEX, and Control Screening negotiated the terms of an anticipated agreement. (SAC ¶ 3--4.) Negotiations began in June 2009 and collapsed in December of the same year due to a disagreement over the terms of payment. ITS's original proposed payment terms were "net 30 days," which meant the buyer would "pay [the] seller in full on or before the 30th calendar day . . . of when the goods were dispatched by the seller or the services were fully provided." (Contreras Certif. ¶ 17.) Control Screening, however, insisted on a letter of credit, something that PEMEX, as an instrumentality of the Mexican government, could not agree to. (Letter of Aug. 27, 2009, attached to Contreras Certif. as Ex. F; Emails of Oct. 28, 2009, attached to Talan Decl. as Ex. C.) As a concession, ITS altered its proposed terms to "net 20 days," but Control Screening rejected that option because it "does not ship outside of the United States without payment." (Emails of Nov. 25, 2009, attached to Contreras Certif. as Ex. J.)

On December 21, 2009, ITS emailed Gregory Schaefer, Control Screening's representative in the negotiations, to explain why PEMEX would not use a letter of credit, offer assurances that Control Screening would receive payment, and ask Control Screening to reconsider its position on the terms of payment and accept the purchase orders ITS had sent on behalf of PEMEX, which included ITS's revised payment terms. (Contreras Certif. ¶ 14; Email of Dec. 21, 2009, attached to Contreras Certif. as Ex. N; Purchase Orders, attached to Contreras Certif. as Ex. H.) The next day, however, ITS sent Schaefer a letter indicating that because Control Screening had not accepted the purchase orders, ITS was canceling them. (Letter of Dec. 22, 2009, attached to Contreras Certif. as Ex. L.) Schaefer responded via email on December 23, 2009, stating that there was a "fundamental misunderstanding" and that PEMEX's purchase orders constituted an acceptance of Control Screening's August 27, 2009, proposal and offer and created a binding contract under the Uniform Commercial Code. (Emails of Dec. 23-- 24, 2009, attached to Contreras Certif. as Ex. O.) Schaefer warned ITS that if it did not reconsider its cancellation, it would be in breach of the contract. (Id.) In the SAC, Control Screening alleges that, in reliance on the contract, it built scanner parts in New Jersey and sent those parts, as well as New Jersey-based personnel, to the Philippines to manufacture the scanners. (SAC ¶¶ 9--10.)

On January 28, 2010, Schaefer sent ITS an email expressing Control Screening's view that a contract existed, and ITS replied by stating its view to the contrary. (Emails of Jan. 28, 2010, attached to Contreras Certif. as Ex. P.) The same day, Control Screening filed its original complaint alleging breach of contract. [D.E. 1.]

B. Facts Integral to the Current Motions

As noted above, Control Screening is a New Jersey company that has its principal place of business in New Jersey and has factories in New Jersey and the Philippines. (SAC ¶¶ 1, 8, 10.) ITS is a Delaware corporation with its principal place of business in Texas. (Id. ¶ 2.) It is a wholly-owned subsidiary of Petrleos Mexicanos, the Mexican national oil company, and was created to provide "procurement services for Petrleos Mexicanos and its subsidiaries." (Cano Certif., attached to Rohrberger Decl. as Ex. 1, ¶ 3.) It serves as the American agent and buying office for PEMEX, which is another wholly-owned subsidiary of Petrleos Mexicanos, and which is organized under Mexican law with its principal place of business in Coatzacoalcos, Mexico. (SAC ¶ 3--4; Linares Certif., attached to PEMEX Mot. to Dismiss, ¶ 2.) ITS asserts that although it has obtained supplies in New Jersey for Petrleos Mexicanos, it has never done so for PEMEX. (Cano Certif. ¶ 11.) Also, ITS asserts that it has no connections to New Jersey because it does not have a license to do business there, does not conduct or solicit business there, does not have a telephone listing or bank account there, and does not send its employees there. (Id. ¶¶ 5--9.) PEMEX makes the same assertions. (Linares Certif. ¶¶ 8--12.) In addition, ITS's employees, files, documents, and records are located in Houston, Texas, and PEMEX's employees, files, documents, and records are located in Mexico, except for those files and records ITS maintains for PEMEX in Houston. (Cano Certif. ¶ 10; Linares Certif. ¶ 13.)

The set of events underlying this action began in June 2009, when ITS sent an email on behalf of PEMEX to "sales@autoclearUS.com" seeking a "Request for Quotation for [plaintiff's] AUTOCLEAR 6040 X-Ray Scanner." (Contreras Certif., attached to Rohrberger Decl. as Ex. 2, ¶¶ 2, 4; Email of June 4, 2009, attached to Contreras Certif. as Ex. A.) Control Screening customer service representative Rosa Maria Garcia replied via email on June 5, 2009, informing ITS that its request had been forwarded to Schaefer, Control Screening's regional sales manager for Texas, who is located in Illinois. (Contreras Certif. ¶ 7; Email of June 5, 2009, attached to Contreras Certif. as Ex. B.) Garcia's email signature included a New Jersey telephone number. (Email of June 5, 2009.) The ensuing negotiations for the scanners occurred only between Schaefer, who negotiated the purported contract on behalf of Control Screening from his office in Illinois, and Jorge Contreras and Maria Contreras, who negotiated on behalf of ITS from their offices in Texas. Much of these negotiations took place via email, and PEMEX itself had no direct communications with Control Screening. (Linares Certif. ¶ 15.)

Several additional communications between the parties are relevant to the instant motions. Schaefer's initial letter to ITS, sent on June 17, 2009, included a quote and product literature. (Contreras Certif. ¶ 8; Letter of June 17, 2009, attached to Contreras Certif. as Ex. C.) The letter had no letterhead, suggested that Control Screening deliver the scanners from its Philippine factory directly to PEMEX in Mexico, and also noted that the critical parts for the scanners were built in Fairfield, New Jersey. (Contreras Certif. ¶¶ 8--9; Letter of June 17, 2009.) The quotation attached to the letter listed the address of Control Screening's Midwest regional office in Hawthorn Woods, Illinois, and the product literature included Control Screening's Fairfield, New Jersey address. (Letter of June 17, 2009.)

On August 21, 2009, ITS sent Control Screening several requests for quotation. The requests set forth the payment terms as "net 30 days" and listed the seller as "AUTOCLEAR CONTROL SCREENING," with no address. (Requests for Quotation, attached to Contreras Certif. as Ex. E; Contreras Certif. ¶ 17.) Schaefer's letter in response, dated August 27, 2009, reiterated that the scanners would be shipped from the Philippines to Mexico, and that the critical parts would be manufactured in New Jersey. (Contreras Certif. ¶ 18; Letter of Aug. 27, 2009, attached to Contreras Certif. as Ex. F.) The letter included a footer listing Control Screening's Illinois address, and the quotation attached to the letter indicated that the term of payment was by letter of credit. (Letter of Aug. 27, 2009.)

On October 27, 2009, ITS, on behalf of PEMEX, issued several purchase orders to Control Screening. (Contreras Certif. ¶ 22.) Each purchase order stated that the terms of payment were "net 20 days," that Texas law applied to the transaction, and that any disputes would be resolved via arbitration in Houston. (Id. ¶¶ 22, 27--28; Purchase Orders, attached to Contreras Certif. as Ex. H.) ITS delivered the purchase orders to Control Screening's Illinois address on November 2, 2009. (Contreras Certif. ¶ 22.)

In addition to communicating with ITS's representatives in Texas, Schaefer communicated with other Control Screening employees about the negotiations with ITS. On October 28, 2009, Schaefer forwarded an email containing ITS's commercial and bank references to Lou Tang, a Control Screening employee located in New Jersey. (Emails of Oct. 28, 2009, attached to Talan Decl. as Ex. C.) The email explained the issue with the payment terms, noting that the "real problem" was that Mexico could not issue a letter of credit. (Id.). On November 12, 2009, Schaefer sent another email to Tang, attaching the terms from ...


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