Opinion
CIVIL ACTION NO. 02-CV-1767
September 30, 2002
MEMORANDUM OPINION
This is a contract dispute. Plaintiffs in this case are T.R. Palm Investments; T.R. Palm, Inc., a general partner of T.R. Palm Investments; and Todd and Stephanie Palmieri, limited partners of T.R. Palm Investments (collectively, "T.R. Palm," unless otherwise noted). Defendants are David and Nancy Corvese (collectively, the "Corveses," unless otherwise noted). Before the Court is Defendant's motion to dismiss for lack of personal jurisdiction pursuant to Fed.R.Civ.P. 12(b)(2).
BACKGROUND
T.R. Palm alleges that it entered into a Management Services Agreement with the Corveses on March 31, 1998 (the "Agreement," attached as Ex. C to Def's Brief). The Agreement provided that T.R. Palm would act as a discretionary portfolio manager for stock and options owned by the Corveses, and provide a limited guarantee of a loan that David Corvese was seeking from a bank. T.R. Palm provided Corvese with a stock pledge so that he would have liquid assets to collateralize the loan, and it maintained a brokerage account in Pennsylvania to manage trading activity under the Agreement.
The Plaintiffs and Defendants negotiated the Agreement by phone, facsimile, and mail. T.R. Palm faxed the final Agreement from Pennsylvania to the Corveses in Rhode Island, and the Corveses signed the Agreement in Rhode Island. The Agreement provides that Pennsylvania law shall govern all disputes, but it does not contain a forum selection clause. The Corveses never traveled to Pennsylvania in connection with the Agreement at any time.
On April 28, 1998, the parties executed a second written accord terminating the Agreement (the "Termination," attached as Ex. B to the Complaint). Under the Termination, the Corveses agreed to pay T.R. Palm $1,412,733.93 by November 30, 1998. According to the Complaint, the Corveses made partial payments, leaving a balance of $380,792.23. Despite demand, the Corveses have refused to pay the balance due. T.R. Palm instituted a breach of contract suit in the Court of Common Pleas of Philadelphia on February 20, 2002, and the Corveses removed to this Court on April 1, 2002. Defendants now move to dismiss for lack of personal jurisdiction.
The Corveses argue that they lack sufficient minimum contacts or business activity in Pennsylvania to enable this Court to exercise personal jurisdiction over them in this case. The Corveses are Rhode Island residents, and they have never been residents of Pennsylvania. Although David Corvese was CEO of a Pennsylvania corporation for several years in the 1990s, that corporation is unrelated to this dispute. They acknowledge that they entered into the Agreement with Pennsylvania residents and entities, but argue that their Agreement-related contacts do not create personal jurisdiction.
Plaintiffs argue that David Corvese's contacts with Pennsylvania are much more substantial, and are sufficient for the exercise of either specific or general personal jurisdiction in this case. They argue that Defendant David Corvese and Plaintiff Todd Palmieri met in the Philadelphia airport in 1991, and that this meeting eventually led to the formation of PPI, a Pennsylvania corporation having Corvese as its CEO and 25% shareholder, and with Pennsylvania-based attorneys as counsel. MMG, a company controlled by a Philadelphia-based company, eventually purchased PPI, and Corvese traveled to MMG's Philadelphia offices on a number of occasions. In addition to his PPI-related contacts, Corvese also worked for MIM Corporation, and later hired attorneys from the Philadelphia-based law firm of White Williams to negotiate his separation from MIM. The Agreement relates to T.R. Palm's management of MIM stock and options. Plaintiffs argue that the Corveses' specific and general contacts with the Commonwealth, in conjunction with their Agreement-related contacts, are sufficient to support the exercise of personal jurisdiction, and they ask this Court to deny Defendants' motion.
The Plaintiffs make little or no argument that Nancy Corvese has any contacts with Pennsylvania beyond her signature to the Agreement.
DISCUSSION
A court may exercise personal jurisdiction over a non-forum resident where the state's long-arm statute allows it and when the exercise of such jurisdiction comports with due process. See English Sports Betting, Inc. v. Tostigan, No. 01-CV-2202, 2002 WL 461592, *2 (E.D. Pa. Mar. 15, 2002). Pennsylvania's long arm statute permits jurisdiction over out-of-state defendants to the full extent permitted by the U.S. Constitution. Id.; see 42 Pa. Cons. Stat. Ann. § 5322(b).
Personal jurisdiction may be based on one of two theories — general or specific jurisdiction. General jurisdiction exists where a nonresident defendant has continuous and systematic contacts with the forum state. General Elec. Co. v. Deutz AG, 270 F.3d 144, 150 (3d Cir. 2001) (citing Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414-416 (1984)). Specific jurisdiction exists only if the plaintiff's cause of action arises out of defendant's forum-related activities such that the defendant should "reasonably anticipate being haled into court in that forum." Id. (internal citations omitted). The proper exercise of personal jurisdiction "depends upon the `relationship among the defendant, the forum, and the litigation.'" Imo Indus., Inc. v. Kiekert AG, 155 F.3d 254, 259 (3d Cir. 1998) (quoting Shaffer v. Heitner, 433 U.S. 186, 204 (1977)). T.R. Palm must show that the Corveses have "purposefully directed [their] activities toward the residents of the forum state," or "otherwise purposefully availed [themselves] of the privilege of conducting activities with the forum State, thus invoking the benefits and protections of its laws." Id. (internal cites and quotations omitted).
When deciding a motion to dismiss under Fed.R.Civ.P. 12(b)(2), this Court must accept all of Plaintiffs' allegations as true and construe disputed facts in favor of the Plaintiffs. Pinker v. Roche Holdings, Ltd., 292 F.3d 361, 368 (3d Cir. 2002). However, Plaintiffs bear the burden of proving that personal jurisdiction is proper. Imo Indus., 155 F.3d at 257. T.R. Palm may satisfy its burden by meeting a two-part test. First, it must show that the Defendants have constitutionally sufficient "minimum contacts" with Pennsylvania. Second, it must demonstrate that exercising jurisdiction over the Defendants "comport[s] with traditional notions of fair play and substantial justice." Id. at 259 (internal cites and quotes omitted). Each prong of this analysis is addressed below.
Plaintiffs argue that this Court may exercise general jurisdiction over Defendants. Because the defendants in this case lack any "continuous and systematic general business contacts" with Pennsylvania, the Court disagrees. Helicopteros, 466 U.S. at 414.
Minimum Contacts
Although this is a close case, Plaintiffs have satisfied their burden of demonstrating that the Corveses have sufficient minimum contacts with Pennsylvania such that this Court may exercise jurisdiction over them. Defendants argue that a single contract with a Pennsylvania resident, standing alone, is insufficient contact with Pennsylvania to establish personal jurisdiction over a non-forum resident. See Vetrotex Certainteed Corp. v. Consol. Fiber Glass Prods. Co., 75 F.3d 147, 151 (3d Cir. 1995). Defendants accurately state the position of the Vetrotex court, as well as that of several Pennsylvania courts. See, e.g., Kubik v. Letteri, 614 A.2d 1110, 1114 (Pa. 1992); Fidelity Leasing v. Limestone County Bd., 758 A.2d 1207, 1211 (Pa.Super. 2000). However, in this case there were two related contracts — the initial Agreement and the subsequent Termination.The analysis does not end there. In determining whether specific jurisdiction exists, the Court must consider not only the two contracts, but also any prior negotiations and contemplated future consequences, along with the terms of the contracts and the parties' actual course of dealing. Vetrotex, 75 F.3d at 151. The analysis should consider the totality of the circumstances, and whether the defendant should "reasonably anticipate being haled into court" in Pennsylvania due to his Pennsylvania-related contacts. Remick v. Manfredy, 238 F.3d 248, 255-256 (3d Cir. 2001) (internal cites omitted).
1) The Terms of the Agreement
The terms of the Agreement created in the Corveses a continuing obligation in favor of T.R. Palm in Pennsylvania. The Third Circuit has "emphasized that parties who `reach out beyond one state and create continuing relationships and obligations with citizens of another state' are subject to regulation and sanctions in the other State for the consequences of their activities." Mellon Bank (East) PSFS, et al v. Farino, 960 F.2d 1217, 1222 (3d Cir. 1992) (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 473-74 (1985)). The first paragraph of the Agreement identifies T.R. Palm as "a Pennsylvania limited partnership." By the terms of the Agreement, the Corveses agreed to pay T.R. Palm a $500,000 "Lump Sum Management Payment" plus a 25% management fee (Agreement ¶ 6a); it requires the Corveses to reimburse T.R. Palm for "all out of pocket costs and expenses" incurred in managing MIM stock and options (Id. ¶ 7); it provides that the Corveses' obligation to pay the "Lump Sum Management Payment, Management Fee and Expenses . . . shall continue following the termination of this Agreement." (Id. ¶ 10). The Termination provides that the Corveses would pay $1,412,733.93 to T.R. Palm. (Termination at ¶ 2, ¶ 4).
David Corvese does not dispute that he knew T.R. Palm Investments and Todd Palmieri were located in Pennsylvania.
Additionally, under both the Agreement and the Termination, Pennsylvania law governs. Although a choice of law provision "standing alone would be insufficient to confer jurisdiction," when combined with other contacts, "it reinforce[s] [a] "deliberate affiliation with the forum State and the reasonable foreseeability of possible litigation there." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 483 (1985).
2) Place and Character of Prior Negotiations and Contemplated Future Consequences
The negotiations of the Agreement took place entirely via an unspecified number of facsimiles, phone calls, and regular mail between T.R. Palm in Pennsylvania and the Corveses in Rhode Island. See Corvese Aff. ¶ 9; Palmieri Aff. ¶ 8. In arguing against jurisdiction, the Corveses argue that they never traveled to Pennsylvania in the course of the negotiations, that T.R. Palm faxed them the final version of the Agreement to them in Rhode Island, and that they signed the Agreement in Rhode Island. Corvese Aff. ¶ 10-11. However, the Third Circuit has said, "contract negotiations with forum residents can empower a court to exercise personal jurisdiction over persons outside the forum." Grand Entm't Group, Ltd. v. Star Media Sales, 988 F.2d 476, 482 (3d Cir. 1993) (citing Taylor v. Phelan, 912 F.2d 429, 433 n. 4 (10th Cir. 1990) ("So long as it creates a substantial connection, even a single telephone call into the forum state can support jurisdiction.")). Moreover, lack of physical presence is not dispositive. "When a defendant has received the benefits and protections of the forum's laws by engaging in business activities with a forum resident, the courts have `consistently rejected the notion that an absence of physical contacts can defeat personal jurisdiction there.'" Farino, 960 F.2d at 1225 (quoting Burger King, 471 U.S. at 476).
The Defendants presented no evidence that the Corveses were precluded from employing a portfolio manager in some other jurisdiction. Rather, the Corveses chose to reach out to Pennsylvania entities and residents for these services. Such contact weighs in favor of jurisdiction. See Farino, 960 F.2d at 1223 (noting defendants freely chose Pennsylvania bank for financing); GMAC, 737 A.2d at 282 (same).
Defendants argue that the use by T.R. Palm of a brokerage account located in Pennsylvania to hold the assets transferred under the contract is irrelevant to the jurisdictional question because it is "unilateral activity" on the part of T.R. Palm. Helicopteros, 466 U.S. at 417 (1984). Yet, T.R. Palm still managed this account, and the Corveses chose T.R. Palm to perform such management.
3) Actual Course of Dealing
Although Plaintiffs argue that certain other contacts between Corvese and Palmieri long before the Agreement weigh in favor of jurisdiction, analysis of the "course of dealing" between the parties contemplates dealings " between the parties in regard to the disputed contract, not dealings unrelated to the cause of action." Vetrotex, 75 F.3d at 153 (emphasis in original). With respect to the Agreement and the Termination, Plaintiff Palmieri alleges that he "communicated regularly by phone and mail between Rhode Island and Pennsylvania about the termination of the agreement throughout 1998 regarding the continued liquidation of the MIM stock, release of my $3.5 million in collateral and payment of fees owed." Palmieri Aff. ¶ 11. Further, Plaintiff alleges that Defendant made partial payments prior to November 30, 1998 (the due date under the Termination). Complaint ¶ 7. Lastly, Plaintiff attaches to his Complaint a letter purportedly from David Corvese's accountant to T.R. Palm, discussing the balance due under the Agreement and/or Termination. Where such communications made by the Corveses into Pennsylvania are related to the underlying dispute in the case, they may count toward minimum contacts. See Grand Entm't, 988 F.2d at 482.
The Supreme Court has cautioned out-of-state defendants, "[w]here individuals `purposely derive benefit' from their interstate activities, it may well be unfair to allow them to escape having to account in other States for consequences that arise proximately from such activities."Burger King, 471 U.S. at 473-74. Although the Agreement itself was short-lived, its very terms, as well as the terms of the Termination, provided that the Corveses' obligations to T.R. Palm lived on. Here, the Agreement's raison d'etre was to assist the Corveses; it provided a limited loan guarantee of a loan David Corvese was seeking from a bank. See Corvese Aff. ¶ 7. Unlike a simple one-time sales contract, the Agreement created continuing rights in a Pennsylvania corporation, and significant obligations in the Corveses. T.R. Palm alleges that the Corveses have failed to meet their obligations under these contracts, and this Court believes that in light of the above contacts, it may be unfair to allow them to escape having to account in Pennsylvania for consequences that may arise proximately from the Corveses' obligations to Pennsylvania residents and entities. See Burger King, 471 U.S. at 473-74.
Whether Exercise of Jurisdiction Comports with Fair Play and Substantial Justice
Once the plaintiff makes out a prima facie case in favor of personal jurisdiction, the burden shifts and the defendant "must present a compelling case that the presence of some other considerations would render jurisdiction unreasonable." Farino, 960 F.2d at 1226 (internal quotes and citations omitted). To evaluate the "fair play and substantial justice" prong of the personal jurisdiction standard, a court applies the following "fairness factors":
. . . the burden on the defendant, the forum State's interest in adjudicating the dispute, the plaintiff's interest in obtaining convenient and effective relief, the interstate judicial system's interest in obtaining the most efficient resolution of the controversies, and the shared interest of the several States in furthering fundamental substantive social policies.Pennzoil Prods. Co. v. Colelli Assocs., Inc., 149 F.3d 197, 205-206 (3d Cir. 1998).
Defendants' sole argument here is that the exercise of jurisdiction is unfair because they had no reason to believe that they were availing themselves of the protections of Pennsylvania law when they entered into the Agreement. Yet, the Corveses did not submit any evidence with their Motion or Memorandum of Law demonstrating that the assertion of jurisdiction would be unreasonable. T.R. Palm clearly has an interest in obtaining "convenient and effective relief and Pennsylvania has an interest in providing redress for a contractual breach inflicted on its citizen[s]." Specialty Ring Prods., Inc. v. MHF, Inc., No. 01-CV-2683, 2001 WL 1466152, at *3 (E.D. Pa. Nov. 15, 2001).
Therefore, the Court concludes that Defendants' minimum contacts with Pennsylvania, coupled with the fairness factors, support the exercise of personal jurisdiction in this case. An appropriate order follows.
ORDER
AND NOW, this 30th day of September, 2002, upon consideration of Defendants' Motion to Dismiss for Lack of Personal Jurisdiction [2], and upon consideration of any reply thereto, for the reasons set forth in the accompanying memorandum opinion, it is hereby ORDERED that Defendant's motion is DENIED.