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Defence Training Sys. v. International Charter Inc.

United States District Court, D. Alaska

July 3, 2014

Defense Training Systems and Katmai Government Services, LLC, Plaintiffs,
v.
International Charter Inc. of Wyoming and Brian J. Boquist, Defendants

Ordered Filed: June 18, 2014

Page 868

For Defense Training Systems, a Division of ILSC Holdings, L.C. a Florida Limited Liability Company, Katmai Government Services, LLC, an Alaskan Limited Liability Company, Plaintiffs: Brewster H. Jamieson, LEAD ATTORNEY, Lane Powell LLC, Anchorage, AK; William K. Walker, LEAD ATTORNEY, Law Offices of William K. Walker, Washington, DC.

For International Charter Inc of Wyoming, Wyoming Corporation, Brian J. Boquist, Defendants: Joshua P. Stump, LEAD ATTORNEY, PRO HAC VICE, Harrang Long Gary Rudnick P.C. (Portland), Portland, OR; James N. Leik, Perkins Coie, LLP, Anchorage, AK.

For International Charter Inc of Wyoming, Wyoming Corporation, Counter Claimant: Joshua P. Stump, LEAD ATTORNEY, PRO HAC VICE, Harrang Long Gary Rudnick P.C. (Portland), Portland, OR; James N. Leik, Perkins Coie, LLP, Anchorage, AK.

For Defense Training Systems, a Division of ILSC Holdings, L.C. a Florida Limited Liability Company, Katmai Government Services, LLC, an Alaskan Limited Liability Company, Counter Defendants: Brewster H. Jamieson, LEAD ATTORNEY, Lane Powell LLC, Anchorage, AK; William K. Walker, LEAD ATTORNEY, Law Offices of William K. Walker, Washington, DC.

For R. David Stephens, Gary Wood, Ed Coyle, Counter Defendants: Brewster H. Jamieson, LEAD ATTORNEY, Lane Powell LLC, Anchorage, AK.

Page 869

ORDER FROM CHAMBERS [Re: Motion at docket 12]

JOHN W. SEDWICK, UNITED STATES DISTRICT JUDGE.

I. BACKGROUND

At docket 12 defendant Brian J. Boquist moved to dismiss the claims against him arguing that his contacts with the State of Alaska are insufficient to support the exercise

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of personal jurisdiction in this district. Plaintiffs opposed at docket 22. Boquist replied at docket 33. The court's order at docket 41 held that it could not exercise general jurisdiction over Boquist. The order found that the record was not sufficiently developed to determine whether the court could exercise specific jurisdiction over Boquist. The court referred the specific jurisdiction issue to a magistrate judge for purposes of conducting an evidentiary hearing and providing this court with a recommendation on the specific jurisdiction issue pursuant to 28 U.S.C. § 636(b)(1)(B).

The referral was assigned to Magistrate Judge Smith who conducted an evidentiary hearing on February 6 and 7. A transcript of the hearing was filed at dockets 61 and 62. Judge Smith entertained additional briefing. Thereafter, she filed her report at docket 69 recommending that this court exercise specific jurisdiction over defendant Boquist. The time for filing objections to the report has run. No objections have been filed.

II. STANDARD OF REVIEW

The district court may " accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate." [1] When reviewing a magistrate judge's report and recommendation, the district court conducts de novo review of all conclusions of law,[2] and any findings of fact to which objections have been made.[3] Uncontested findings of fact are reviewed for clear error.[4]

III. DISCUSSION

Having reviewed the file and applied the standard of review articulated above, this court concludes that the magistrate judge has correctly found the facts and applied the law. Judge Smith's report is exceedingly thorough and very well reasoned. Defendant Boquist's contacts with Alaska clearly support the exercise of specific jurisdiction in this case. This court adopts Magistrate Judge Smith's recommended findings and conclusions in her report at docket 69. Based thereon, the motion at docket 12 is DENIED with respect to specific jurisdiction. The court will adjudicate plaintiffs' claims.

INITIAL REPORT AND RECOMMENDATION REGARDING MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION (DOC. 12)

DEBORAH M. SMITH, United States Magistrate Judge.

I. MOTION PRESENTED

Defendant Brian J. Boquist (Boquist) moves to dismiss the lawsuit against him, asserting that he does not have sufficient contacts with the state of Alaska to permit the United States District Court for the District of Alaska to exercise personal jurisdiction over him. (Doc. 12). Plaintiffs Defense Training Systems (DTS) and Katmai Government Services (Katmai) oppose dismissal. (Doc. 22). This matter was referred to this Court by District Court Judge John Sedwick. When ordering an evidentiary hearing to resolve the question of personal jurisdiction, Judge Sedwick noted that " Plaintiffs likely have established

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a prima facie case to support specific jurisdiction." (Doc. 41 at 10). However, he pointed out there were direct contradictions between the assertions of David Stephens, Chief Executive Officer of Katmai and DTS, the Plaintiffs, and Defendant Brian Boquist, stating " One of the parties is not being entirely truthful." (Doc. 41 at 11).

This Court held the evidentiary hearing to resolve the factual dispute between the parties regarding Boquist's connections to Alaska. (Docs. 61 and 62, hereinafter " Tr." for Transcript). The issue is ripe for this Court's consideration.

II. FACTUAL FINDINGS

Following the attacks of September 11, 2001, the United States launched Operations Enduring Freedom and Iraqi Freedom. To prepare U.S. troops for battlefields of Afghanistan and Iraq, the U.S. military hired private contractors to provide training programs that simulated the types of environments that they would encounter when deployed. (Tr. at 11). This litigation arises out of a breakdown in the business relationship between a contractor and subcontractor that provided these services. (Doc. 1-1 at 4-13).

A. The Formation of the DTS/ICI Relationship

In 2006, Plaintiff Defense Training Systems (DTS) and Defendant International Charter Inc. (ICI) teamed up to procure training-support service contracts from the U.S. military. (Tr. 10, 25, 153-55).

ICI is a closely-held corporation. At all times pertinent to this case, Boquist and his wife owned a minimum of 45 percent of the company, with another 45 percent being held by another ICI executive and business partner, Danny O'Brien, and his wife, and the remaining ten percent owned by the individual " Errol Van Eaton." [1](Tr. at 140-41).

Defendant ICI had previous experience in military contracting that DTS lacked. During the 1990s, ICI provided aviation services in African conflict zones for the U.S. State Department. (Tr. at 128, 138). For example, during the Liberian Civil War, ICI was hired to locate Russian pilots and aircraft and to protect peacekeepers. (Tr. at 128, 138). By 2004, however, ICI's contracts with the State Department had dried up. (Tr. at 142). The State Department advised Boquist to partner with an Alaska Native or American Indian business, because those entities enjoyed unique privileges[2] over other small businesses in obtaining government contracts under Section 8(a) of the Small Business Act.[3] (Tr. at 142-43).

In late 2004 or 2005, Boquist followed this advice and traveled to Anchorage, Alaska with other ICI managers (including Danny O'Brien) to talk with David Stephens who was, at that time, CEO of Tatitlek Support Services. (Tr. at 7, 9, 143).

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Tatitlek was an Alaska Native Corporation that was providing training services for the U.S. Marine Corps in California. (Tr. at 7, 9, 143). Tatitlek passed on contracting with ICI, however, because ICI only had prior experience in aviation services, not training services. But, Tatitlek did hire two ICI employees with military experience to provide short term consulting services. (Tr. at 9, 145-47). Stephens and Boquist kept in contact after this initial meeting and continued to explore future contracting opportunities. (Tr. at 144).

In late 2006 or early 2007, Stephens left Tatitlek and joined DTS/Katmai. (Tr. at 10). Ouzinkie Native Corporation (Ouzinkie), an Alaska Native Corporation created for the village of Ouzinkie on Spruce Island, Alaska, is the majority owner of Katmai, a holding company for its for-profit corporations. (Tr. at 92-93). Katmai Government Service owns 51% of ILSC Holdings LC, and DTS is a division of ILSC that provides training support services to the U.S. military. (Tr. 10, 92-93).

At about the same time, DTS, with the assistance of ICI as its teaming partner,[4] was awarded its first contract with the military to provide realistic-training services for the Marine Corps troops at Camp Lejeune, North Carolina before they were deployed to Iraq and Afghanistan. (Tr. at 10-12). This contract was to be primarily performed at Camp Lejeune, but during the summer of 2007, DTS and ICI conducted training services for troops at the U.S. Army base at Fort Greeley, Alaska. (Tr. at 27-28). Boquist traveled to Alaska for the mission, and brought with him numerous blank-firing AK-47s (and/or SKS rifles) and camping gear for the ICI employees taking part in the mission. (Tr. at 28, 155-56, 168-69); (Exhibits 3-5). He also brought a .45 caliber handgun as his personal sidearm. (Tr. at 28). When the mission was over, Boquist left his handgun with Stephens to be stored in Stephens' personal gun safe located at DTS's Anchorage office. (Tr. at 28-29). Whenever he returned to Alaska, Stephens would return the handgun to Boquist for him to carry while in Alaska. (Tr. at 29).

B. The 8028 Contract and Subcontract

In 2008, the Program Manager for Training Systems for the U.S. Marine Corps (PM TRASYS) awarded DTS Prime Contract Number M67854-08-D-8028, which all parties refer to as the " 8028 Contract." Under the 8028 Contract, the U.S. Marine Corps again hired DTS to provide pre-deployment training missions at Camp Lejeune, but this time for a five-year period. (Tr. at 37). In conformity with their previous understandings, DTS awarded ICI a subcontract to provide on-the-ground support for DTS's obligations to the Marines. That subcontract forms the basis of the litigation: Subcontract DTS 08-D-0001 (the 8028 Subcontract or Subcontract). (Exhibit 21).

Subcontract 8028 is 24-pages long and calls for DTS to pay ICI over $29.5 Million for its part in performing the 8028 Contract. (Exhibit 21 at 3). The cover page of the Subcontract prominently states that the agreement is:

BETWEEN

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Defense Training Systems (DTS)

701 E. Tudor Road, Suite ...


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