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VESPE CONTR. CO. v. ANVAN CORP.

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA


May 23, 1977

VESPE CONTRACTING CO.
v.
ANVAN CORPORATION, a Pennsylvania Corporation and ANVAN CORPORATION, an Illinois Corporation and ANARCA, a Pennsylvania limited partnership and ANVAN CO., an Illinois partnership and ANTHONY ANTONIOU, IRENE ANTONIOU and MICHAEL KAHLES, Individually and as co-partners trading as ANVAN CO., an Illinois partnership

The opinion of the court was delivered by: BECHTLE

MEMORANDUM AND ORDER

 BECHTLE, J.

 Presently before this Court are motions by defendants Anvan Corporation of Pennsylvania ("Anvan-Pa."), Anvan Corporation of Illinois ("Anvan-Ill."), and Anarca, a Pennsylvania limited partnership ("Anarca"), to stay proceedings pending arbitration of a contract dispute between plaintiff Vespe Contracting Company ("Vespe") and Anvan-Pa. Also before the Court is a motion by defendants Anvan Company ("Anvan Co."), an Illinois partnership consisting of copartners Anthony Antoniou, Irene Antoniou and Michael Kahles ("individual defendants"), to dismiss for lack of personal jurisdiction and for insufficient service of process pursuant to Fed.R.Civ.P. 12(b)(2) and (5), respectively, or, in the alternative, to stay proceedings pending arbitration of the dispute between Vespe and Anvan-Pa. The jurisdiction of this Court is based upon 28 U.S.C. § 1332(a), and the amount in controversy is alleged to exceed $10,000, exclusive of interest and costs.

 A brief procedural history of the dispute between the parties and an outline of the relationships among the defendants are necessary to an understanding of the case. The following facts emerge from the pleadings submitted by the parties: Anvan-Ill. is a corporation organized and existing under the laws of the State of Illinois, and has its principal place of business in the State of Illinois; Anvan-Pa. is a corporation organized and existing under the laws of the Commonwealth of Pennsylvania, and has its principal place of business in the State of Illinois; Anvan Co. is an Illinois general partnership and maintains its principal place of business in the State of Illinois; and Anarca is a Pennsylvania limited partnership, and maintains its principal place of business in the Commonwealth of Pennsylvania. Anvan-Pa. is the wholly-owned subsidiary of Anvan-Ill. Anvan Co. and Anarca are general partners. Anthony Antoniou, Irene Antoniou and Michael Kahles are citizens of the State of Illinois and are the general partners of Anvan Co. In addition, Anthony Antoniou is President and a major shareholder of Anvan-Pa. and of Anvan-Ill., and serves individually as a class B limited partner of Anarca. Michael Kahles, in addition to being a general partner in Anvan Co., is Senior Vice-President of Anvan-Ill. and of Anvan-Pa. Vespe is a corporation organized and existing under the laws of the State of New Jersey, and has its principal place of business in New Jersey.

 Vespe was hired as a subcontractor to perform the concrete work on the construction of the Holiday Inn at 36th and Chestnut Streets, Philadelphia, Pennsylvania ("the project"), by Anvan-Pa., the general contractor on the project. The subcontract was signed in New Jersey. Anarca is the owner of the land on which the Holiday Inn was erected.

 The subcontract between Anvan-Pa. and Vespe was terminated by Anvan-Pa. on February 20, 1975, after Vespe had completed a major portion of the contract. On February 24, 1975, Anvan-Pa. instituted suit against Vespe alleging breach of contract and requesting a temporary restraining order to enjoin Vespe from entering the construction site (Civil Action No. 75-541). The temporary restraining order was granted by this Court on February 24, 1975. On February 28, 1975, Anvan-Pa., after informing Vespe that it would no longer be allowed on the construction site and that Anvan-Pa. would complete the concrete work that Vespe had begun on the project, withdrew the complaint against Vespe. That same day, Vespe filed its original complaint against Anvan-Pa., alleging breach of contract and requesting injunctive relief to prevent Anvan-Pa.'s continuation of the project's concrete work from destroying evidence of the work performed by Vespe under the subcontract, and also requesting appropriate equitable relief (Civil Action No. 75-610).

 Anvan responded by filing a motion to stay proceedings pending arbitration of the contract dispute. In its response to Anvan's motion, Vespe conceded that, if there were an agreement to arbitrate, the parties would be bound to submit their disputes to arbitration. However, Vespe argued that there was no binding arbitration agreement. In Vespe Contracting Co. v. Anvan Corp., 399 F. Supp. 516 (E.D.Pa. 1975), this Court held that Anvan-Pa. and Vespe were contractually bound to submit their dispute to arbitration. Due to the fact that evidence of the alleged breach of contract was "disappearing," we permitted discovery to continue until arbitrators were selected. Id. at 522.

  Before arbitrators were selected, Vespe voluntarily withdrew the action against Anvan-Pa., without prejudice, pursuant to Fed.R.Civ.P. 41(a)(1)(i). Vespe filed the instant action on November 13, 1975.

 In the present action, in addition to naming Anvan-Pa., Vespe also named Anvan-Ill., Anarca, Anvan Co. and the individuals as defendants. The complaint alleges three causes of action, in addition to the cause of action alleged in Civil Action No. 75-610, against the various defendants. Count I of the complaint alleges breach of contract by Anvan-Pa. and states facts identical to those in its first breach of contract action. The relief requested, however, is for monetary damages rather than for injunctive relief. Count II alleges that all of the defendants combined, conspired, arranged and agreed to erect the project in such a manner as to avoid payment to, and to defraud, subcontractors, including Vespe. Count II also outlines specific overt acts which were committed in Pennsylvania, in furtherance of the conspiracy. *fn1" Finally, Count II states that the express purpose, motive and intention of the conspiracy was to defraud subcontractors of payments for work performed on the project, and that each defendant had that intention and understood that each coconspirator shared that intention.

 Count III charges that Anvan-Ill. operated Anvan-Pa. as its instrumentality and alter ego for the express purpose of avoiding payment to, and defrauding, subcontractors and that Anvan-Pa. is in fact without sufficient funds to pay subcontractors. Count IV names as defendants Anarca, Anvan Co., and the individual defendants and alleges that Anarca contractually agreed to provide Anvan-Pa. with sufficient funds to pay the subcontractors on the project. Based on its allegations of the contract between Anarca and Anvan-Pa., and of the fact that Anarca did not provide Anvan-Pa. with sufficient funds to pay subcontractors, Vespe seeks damages from the defendants named in Count IV on a third-party beneficiary theory.

 The first issue we must decide is whether the addition of parties and causes of action abrogates the basis for this Court's decision in Vespe Contracting Co. v. Anvan Corp., supra. We hold that it does not. The allegations of law and fact in Count I are identical to those alleged in Vespe's original complaint. The sole difference is the form of relief requested. However, the mere fact that monetary rather than equitable relief is requested does not alter the conclusion that Anvan-Pa. and Vespe are contractually bound to submit their dispute to arbitration. This Court is bound to enforce the contractual obligations of the parties. John Ashe Associates, Inc. v. Envirogenics Co., 425 F. Supp. 238, 241-242 (E.D.Pa. 1977). Accordingly, Vespe and Anvan-Pa. will be ordered to proceed to arbitration on Count I, in accordance with this Court's opinion in Vespe Contracting Co. v. Anvan Corp., supra.

 The second issue presented is whether the proceedings pertaining to Counts II through IV should be stayed pending arbitration of Count I by Vespe and Anvan-Pa. *fn2" We hold that they should not be stayed. The controversy between Vespe and Anvan-Pa. has been pending since February of 1975. The interests of justice will best be served by a prompt resolution of the issues. Furthermore, although arising out of facts concerning the building of the project, the cause of action alleged in Count I is factually and legally separate and distinct from those causes of action alleged in Counts II through IV. The parties will not be prejudiced by the simultaneous disposition of the arbitration and judicial proceedings. Accordingly, the motion to stay proceedings in Counts II through IV pending arbitration of Count I will be denied.

 Finally, we must determine whether the motions of Anvan Co. and of the individual defendants to dismiss for lack of personal jurisdiction and for insufficient service of process, pursuant to Fed.R.Civ.P. 12(b)(2) and (5), respectively, should be granted.

 Defendants were served in accordance with Pennsylvania's Long Arm Statute, 42 Pa.C.S.A. § 8301 et seq. (Supp. 1976-1977) ("Long Arm Act"), *fn3" as authorized by Fed.R.Civ.P. 4(e). *fn4" Defendants make no arguments in support of their motion to dismiss for insufficient service of process pursuant to Fed.R.Civ.P. 12(b)(5). The procedure pursuant to which the defendants were served *fn5" conforms to the requirements of this Commonwealth for service of process upon nonresident defendants. *fn6" The motion to dismiss for insufficient service of process will, therefore, be denied. *fn7"

 Defendants' motion to dismiss for lack of in personam jurisdiction, Fed.R.Civ.P. 12(b)(2), raises three issues: (1) whether the Long Arm Act applies only to corporations (§§ 8301, 8302) and to individuals (§§ 8303-8305) and not to partnerships, (2) whether the alleged lack of an allegation in the complaint that the tortious act charged occurred in Pennsylvania brings the defendants within the provisions of § 8303; and, (3) whether the assertion of long-arm jurisdiction over the defendants would constitute a denial of due process of law. *fn8" Vespe's response to defendants' motion to dismiss is that the conduct of the defendants, as alleged in the complaint, amounts to tortious conduct within the meaning of § 8303 and that assertion of long-arm jurisdiction over them would not violate due process of law.

 The Court notes preliminarily that the Pennsylvania Long Arm Act divides potential nonresident defendants into two categories for the purpose of determining extraterritorial in personam jurisdiction. Sections 8301-8302 enunciate the standard for extraterritorial in personam jurisdiction over foreign corporations. Sections 8303-8305 set forth standards for asserting extraterritorial in personam jurisdiction over all nonresidents, including partnerships, who are not corporations. General Heat and Power Co., Inc. v. Diversified Mortgage Investors, 552 F.2d 556, slip op. at 6-7 (3d Cir., 1977); Sipe v. Local Union No. 191 United Brotherhood of Carpenters and Joiners of America, 393 F. Supp. 865, 873-874 (M.D.Pa. 1975).

 The Court notes further that it is well settled in this jurisdiction that, before personal jurisdiction over nonresident defendants is established, two separate and independent tests must be satisfied. First, the conduct of the defendants must be shown to be within the relevant statutory provisions of the Long Arm Act. Secondly, if the statutory requirements are satisfied, the plaintiff must establish that the application of those statutes to the particular defendant does not violate the constitutional requirements of due process of law. Lau v. Change, 415 F. Supp. 627, 629-630 (E.D.Pa. 1976); Miller v. American Telephone & Telegraph Co., 394 F. Supp. 58, 62 (E.D.Pa. 1975), aff'd mem., 530 F.2d 964 (3d Cir. 1976); AAMCO Automatic Transmissions, Inc. v. Tayloe, 368 F. Supp. 1283, 1292 (E.D.Pa. 1973). Therefore, if the conduct of Anvan Co. and the individual defendants conforms to the statutory requirements of § 8303 of the Long Arm Act and satisfies the requirements of due process of law, then this Court has valid in personam jurisdiction over them as nonresident, noncorporate defendants, pursuant to § 8303.

 The next determination, then, is whether the conduct of each of the defendants satisfies the statutory requirements of § 8303. Section 8303, entitled "Commission of tortious acts by individuals," states in pertinent part:

 

Any nonresident of this Commonwealth who, acting individually, under or through a fictitious business name, or through an agent, servant or employee, shall have committed a tortious act within this Commonwealth on or after August 30, 1970, . . . shall be conclusively presumed to have designated the Department of State as his agent for the receipt of service of process in any civil action or proceeding instituted in the courts of this Commonwealth against such individual.

  To establish that in personam jurisdiction lies under § 8303, Vespe must allege in its complaint, with sufficient specificity to convince the Court of the non-frivolous nature of its allegations, that an act, which would be tortious if proved as alleged, was committed by the nonresident defendants in Pennsylvania. *fn9"

 Under the laws of Pennsylvania, a conspiracy is actionable in tort once an overt act in furtherance of that conspiracy has been committed. Giannini v. Roessler, 347 F. Supp. 1322, 1323 (E.D.Pa. 1972); Helmig v. Rockwell Manufacturing Co., 131 A.2d 622, 629, 389 Pa. 21 (S. Ct.Pa. 1957), cert. denied, 355 U.S. 832, 2 L. Ed. 2d 44, 78 S. Ct. 46 (1957), rehearing denied, 355 U.S. 885, 78 S. Ct. 146, 2 L. Ed. 2d 115 (1957). In its complaint, Vespe alleges numerous overt acts committed by defendants in Pennsylvania in furtherance of the conspiracy. *fn10" If the allegations of the complaint are proved at trial, a jury could conclude that an actionable tort was committed by the defendants in Pennsylvania, within the meaning of § 8303. *fn11" On the basis of the complaint before us, and construing all allegations and reasonable inferences in a light most favorable to Vespe, the Court is satisfied that the assertion of extraterritorial in personam jurisdiction over each of the defendants in their individual, corporate and partnership capacities satisfies the statutory requirements of § 8303. *fn12"

 We must, therefore, determine whether the assertion by this Court of § 8303 in personam jurisdiction would violate the requirements of due process of law.

 As we stated in Miller v. American Telephone & Telegraph Co., supra, 394 F. Supp. at 64, and reiterated in Lau v. Change, 415 F. Supp. 627, 629-630 (E.D.Pa. 1976),

 

The due process standard enunciated by the Supreme Court as to when in personam jurisdiction may properly be exercised over a nonresident defendant is whether there are "sufficient contacts or ties with the state of the forum to make it reasonable and just, according to our traditional conception of fair play and substantial justice, to permit the state to enforce the obligations which [the party] has incurred there." International Shoe Co. v. Washington, 326 U.S. 310, 320, 66 S. Ct. 154, 160, 90 L. Ed. 95 (1945).

 The sufficiency of the contacts between the nonresident defendants and the state of the forum must be evaluated by a qualitative rather than a quantitative analysis. International Shoe Co. v. Washington, supra, 326 U.S. at 319. See generally Jonnet v. Dollar Savings Bank, 530 F.2d 1123 (3d Cir. 1976) (Gibbons, J. concurring). Furthermore, in addition to an analysis of the quality of the defendants' activities, it is important to measure the contact on some basis other than the nonresidents' chance contact with the forum. As the Supreme Court stated in Hanson v. Denckla, 357 U.S. 235, 253, 2 L. Ed. 2d 1283, 78 S. Ct. 1228 (1958), ". . . it is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws." This standard must be applied separately to Anvan Co. and the individuals in their partnership capacities and to the individuals in their personal capacities.

 In its complaint, Vespe alleges that Anvan Co. and the individuals in their partnership capacities conspired with the other named defendants to construct the project through a business network which was designed with the intention of defrauding subcontractors on the project. The complaint enumerates various overt acts alleged to have been committed in Pennsylvania in furtherance of the conspiracy. *fn13" In essence, the complaint alleges that the defendants conspired to establish an interlocking business network which was intended from the outset to defraud subcontractors by undercapitalizing the general contractor (Anvan-Pa.) and by using the business network to shield the defendants from liability to subcontractors.

 Assuming the allegations of the complaint to be true for purposes of the motion before us, Melo-Sonics Corp. v. Cropp, 342 F.2d 856, 858-859 (3d Cir. 1965), we find that the contacts between Anvan Co. and its partners with this Commonwealth are sufficient to satisfy the requirements of due process of law. The alleged contacts are numerous, continuous and of a substantial quality. The contacts are alleged to be purposeful acts by which the defendants availed themselves of the benefits and protection of the laws of the forum. Furthermore, the Commonwealth has a strong interest in preventing nonresidents from committing tortious acts of this nature within its borders. The motion to dismiss for lack of in personam jurisdiction over Anvan Co. and the individual defendants in their partnership capacities will, therefore, be denied.

 The application of the relevant due process standards to the individuals in their personal capacities is more difficult. The greater portion of the alleged conspiratorial activities was conducted by the defendants in their partnership and/or corporate capacities. However, reading the complaint in a light most favorable to Vespe, it is possible to infer that the individual defendants, in their personal capacities, masterminded the scheme to establish the business network by which they intended to defraud the subcontractors and, further, that at least some of the overt acts in furtherance of the conspiracy were committed in Pennsylvania by the individuals acting as individuals. *fn14" Whether or not any acts were actually committed by the individuals qua individuals in Pennsylvania and, if so, whether those acts come within the statutory provisions of § 8303 or satisfy the due process of law requirements, is impossible to discern conclusively from the allegations of the complaint before us. We find, however, that Vespe made allegations which are sufficient to overcome defendants' motion to dismiss for lack of in personam jurisdiction. *fn15" Defendants' motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(2) will, therefore, be denied.

 [EDITOR'S NOTE: The following court-provided text does not appear at this cite in 433 F. Supp.]

 ORDER

 AND NOW, TO WIT, this 23th day of May, 1977, IT IS ORDERED as follows:

 1. The motions of defendants Anvan Corporation (Pennsylvania), and of Anvan Corporation (Illinois) and Anarca to stay proceedings pending arbitration are hereby denied.

 2. The motions of defendants Anvan Company, Anthony Antoniou, Irene Antoniou and Michael Kahles, individually and as co-partners trading as Anvan Company, to dismiss for lack of personal jurisdiction and for insufficient service of process pursuant to Fed.R.Civ.P. 12(b)(2) and (5), respectively, are denied. The alternative motion to stay proceedings pending arbitration is denied.

 3. Vespe Contracting Company and Anvan Corporation (Pennsylvania) shall proceed to arbitration on Count I of the complaint in accordance with Vespe Contracting Co. v. Anvan Corp., 399 F. Supp. 516 (E.D.Pa. 1975).

 4. Vespe Contracting Company, Anvan Corporation (Pennsylvania), Anvan Corporation (Illinois), Anarca, Anvan Company, Anthony Antoniou, Irene Antoniou and Michael Kahles, individually and as co-partners trading as Anvan Company, shall proceed to trial on Counts II through IV of the complaint.

 LOUIS C. BECHTLE, J.


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