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Civil Procedure – Personal Jurisdiction – Transacting Business – Coal Sale Contracts

Although an Oklahoma coal company wants to apply the “transacting business” test under Virginia’s long-arm statute narrowly to its sale of coal to third parties outside Virginia, a Richmond Circuit says the test applies to contract formation between the coal company and Dominion Virginia Power, and that execution of the contract documents governed by Virginia law, the coal company’s solicitation of Dominion’s business and its meetings in Virginia, were business contacts that satisfied the test for personal jurisdiction over Dominion’s contract action against the coal company.

Dominion Virginia Power, a Virginia corporation, and defendant Alliance Coal LLC, a Delaware corporation with headquarters in Tulsa, Okla. and an office in Lexington, Ky., are parties to three agreements: 1) an agreement for the supply of coal to Dominion’s Mount Storm Power Station, effective June 22, 20065 (CSA); 2) an amendment to the CSA, effective Jan. 1, 2007; and 3) a letter agreement of Aug. 29, 2007 (settlement agreement). According to their terms, Virginia law governs all three agreements. The CSA, by its terms, and the amendment, by incorporation of the CSA, are deemed to have been executed in Virginia. The settlement agreement was executed in Virginia by Dominion’s signed acceptance of such in Richmond, Va. Meetings took place both in Virginia and Oklahoma relating to these agreements. Under the CSA and the amendment, among other terms, Alliance supplies coal to Dominion’s power station in West Virginia. All coal sold by Alliance to Dominion is mined or purchased by Alliance outside of Virginia. Dominion also highlights Alliance’s original solicitation of business with Dominion, as well as Alliance’s numerous visits to Virginia for meetings with Dominion related to the contracts.

Dominion alleges Alliance breached its contract by failing to share with Dominion certain profits from sales of Alliance’s coal to third parties. Alliance moves to dismiss the cause of action for lack of personal jurisdiction under the Virginia long-arm statute, Va. Code § 8.01-328.

The key determination of this case is whether Alliance’s alleged breach of contract arises out of Alliance’s transaction of business, if any, within the commonwealth. The court says yes.

Alliance argues the relevant business contacts for personal jurisdiction in a breach of contract claim include the activity encompassing the breach – specifically Alliance’s sale of coal to third parties – which occurred outside Virginia. Dominion argues the relevant business contacts include the three contracts formed in Virginia, the meetings in Virginia and Alliance’s solicitation of Dominion’s business.

Alliance insists that a breach of contract claim resulting from sales to third parties cannot arise from the contract-formation activities that occurred in Virginia. However, Alliance concedes that a claim based on delivery of defective goods could arise from such activities. The court fails to see a distinction, and none of the cases cited by either party suggests the need for such a distinction.

Whether Alliance refuses to share certain profits according to a contract term or misdelivers goods according to a contract term, both situations constitute breaches of contract, which arise from the formation of the contracts under which the parties voluntarily assumed certain obligations. In fact, the holdings of the Supreme Court of Virginia support this interpretation.

The court finds that Virginia’s long-arm statute has been satisfied to confer personal jurisdiction over the defendant based on its transactions of business in Virginia consisting of the execution of the CSA, amendment and settlement agreement, all of which are governed by Virginia law; Alliance’s solicitation of business with Dominion; and Alliance’s meeting in Virginia related to these contracts. The court determines Dominion’s alleged breach of contract properly arises from these contacts.

Motion to dismiss for lack of personal jurisdiction denied.

Virginia Elec. & Power Co. d/b/a Dominion Virginia Power v. Alliance Coal LLC (Snukals, J.) No. CL 10-2852, Sept. 29, 2010; Richmond Cir.Ct.; Stephen A. Northup, Lewis F. Powell III for the parties. VLW 010-8-193, 4 pp.

VLW 010-8-193

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