Article

Note: Siskin Steel & Supply Co., Inc. (Supplier) supplied steel plates to SIAG Aerisyn, LLC (Subcontractor) to be used to build wind turbines. When Subcontractor failed to pay USD 983,046.89, Supplier sued Highland North, LLC (Owner)-the owner of the farm on which the wind turbines were located-to enforce a mechanic's lien against the farm. Nordex USA, Inc. (Primary Contractor) appeared on behalf of Owner pursuant to a contractual obligation and presented a standby LC to the court as security to discharge the lien claim. The court issued an order accepting Primary Contractor's standby as security for the lien and discharged the claim.

Thereafter, Supplier filed a "Complaint to Obtain Judgment on a Mechanic's Lien Claim" which re-alleged the contractual basis for its dispute with Subcontractor and recited the Owner-Contractor-Subcontractor relationship. Subsequently, Subcontractor filed for Chapter 11 (reorganization) bankruptcy. The case was stayed pending a bankruptcy proceeding in which Subcontractor identified Supplier as one of its largest creditors, listing an unsecured claim of USD 998,658.56. Neither Owner nor Primary Contractor were listed as a creditor despite Primary Contractor having posted the standby as security.

Both Supplier and Primary Contractor filed proofs of claim against Subcontractor in the Bankruptcy proceedings. Primary Contractor's filing contained a copy of the contract between Primary Contractor and Subcontractor, a settlement agreement between Primary Contractor and Subcontractor's parent company (Settlement Agreement), and documentation explaining Primary Contractor's contractual obligation to appear on behalf of Owner in the lien claim. Primary Contractor also claimed that Subcontractor had failed to fulfill the terms of the Settlement Agreement and did not replace Primary Contractor's LC. Additionally, Primary Contractor filed an objection to Supplier's proof of claim in the Bankruptcy Court. The Bankruptcy Court scheduled a hearing on the matter to occur after the date of this opinion.

The U.S. District Court for the Western District of Pennsylvania, Gibson, J., heard several motions, including Supplier's motion to remand the case to state court and Owner's motion to transfer venue to the Eastern District of Tennessee. The Judge ruled that Primary Contractor "stepped into the shoes" of Owner through its supplied LC that was accepted by the state trial court as discharging the lien. Further, Judge Gibson ruled that the Settlement Agreement indemnified Primary Contractor against Subcontractor's failure to satisfy the lien. The Judge determined that, even though the case was styled as being between Supplier and Owner, it was actually between Supplier and Primary Contractor since satisfying a potential order in favor of Supplier necessarily calls for drawing on Primary Contractor's security, the LC. As a result, the Judge denied Supplier's motion to remand, ruling that there was proper subject matter jurisdiction and the case had warranted removal to federal court since the case was "related to" Subcontractor's bankruptcy proceeding.

In regards to Owner's motion to transfer venue, because Supplier and Subcontractor both had principal places of business in Tennessee and the other parties had minimal contact with Pennsylvania outside the underlying project, the Judge determined that transferring venue to the U.S. District Court for the Eastern District of Tennessee "provides a more convenient forum and a more economic use of resources for all parties involved" and granted the motion.

[DHS/mjb]

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