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LIEB v. AMERICAN PAC. INTERNATION-AL

April 24, 1980

Mary LIEB, Trustee of the Trust U/W/O Joseph Lieb, Deceased,
v.
AMERICAN PACIFIC INTERNATION-AL, INC., et al.



The opinion of the court was delivered by: GREEN

MEMORANDUM

In 1972 and 1973, plaintiffs, whom I shall refer to collectively as the Lieb Group, *fn1" purchased limited partnership interests in some oil and gas drilling programs operated by defendant, American Pacific International, Inc. (API). For reasons not disclosed of record, plaintiffs became disenchanted with their investment. Consequently, on September 28, 1977, the parties entered into another contract by which API agreed to repurchase the interests held by the Lieb Group in API gas and oil drilling programs. In this transaction, API made partial payment in cash and issued some Series Installment Notes for the balance still due on the purchase price. As a part of the contract, the four individual defendants, Gerald T. and Alyda L. Raydon and W. P. and Dorothy C. Blair, who are the principal stockholders of API, signed a security agreement pledging a substantial number of shares of their API common stock as collateral for API's notes in favor of plaintiffs.

 It is the alleged breach of the terms of both the contract and the security agreement which is the subject of the present suit. The complaint consists of two counts: the first seeks money damages for API's supposed failure to make the installments payments due in September, 1978, under the terms of the contract of sale, and the second requests an injunction compelling the individual defendants to deposit additional shares of API stock as collateral as allegedly required by the security agreement.

 I. PERSONAL JURISDICTION

 It is undisputed that the individual defendants in this case, Mr. and Mrs. Raydon and Mr. and Mrs. Blair, do not live within the territorial limits of the Eastern District of Pennsylvania; they are in fact all residents of the Los Angeles area. The Pennsylvania "long-arm" statute, 42 Pa.C.S.A. § 5322(b), provides jurisdiction over nonresident corporations and individuals "to the fullest extent allowed under the Constitution of the United States." *fn2" In order for a court to exercise jurisdiction over a nonresident defendant without violating the due process guarantees of the Constitution, it must be established that the defendant has had such "minimum contacts" with the forum that permitting the suit to go forward there would not offend "traditional notions of fair play and substantial justice." International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S. Ct. 154, 158, 90 L. Ed. 95 (1945) (citations omitted). *fn3"

 As the United States Supreme Court has observed in its most recent discussion of in personam jurisdiction, the concept of minimum contacts performs a dual function. It protects the defendant's interest in not being required to defend a case in a distant forum as well as ensures that the States do not attempt to exercise authority beyond the limits imposed by their status as coequal sovereigns in a federal system. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S. Ct. 559, 564, 62 L. Ed. 2d 490 (1980). The determination of whether a defendant has had sufficient contacts with the forum requires an analysis of the quality and nature of the contacts. There must be evidence that defendant's relation to the forum makes the exercise of personal jurisdiction over the party reasonable; for example, his conduct or connection should be such that he should have anticipated being haled into court there. Shaffer v. Heitner, 433 U.S. 186, 216, 97 S. Ct. 2569, 2586, 53 L. Ed. 2d 683 (1977). Moreover, constitutional standards demand a showing that the defendant has purposefully availed himself of the privileges of conducting activities within the forum, thus invoking the benefits and protection of its laws. Hanson v. Denckla, 357 U.S. 235, 253, 78 S. Ct. 1228, 1240, 2 L. Ed. 2d 1283 (1958).

 In the case now before me, the individual defendants argue that the facts demonstrate that they have not had sufficient contacts with the Eastern District of Pennsylvania to justify this Court's exercise of jurisdiction over them. Although they concede that Mr. Raydon and Mr. Blair attended business meetings, concerning the contract, in Philadelphia, the defendants maintain that the two men appeared solely in their capacity as officers of API. They further allege that Mrs. Raydon and Mrs. Blair have had no contacts whatsoever with the Eastern District of Pennsylvania.

 By the security agreement, the Blairs and Raydons pledged, as collateral for the outstanding debt of API to the Lieb Group, their common stock in API. Appointing the Fidelity Bank of Philadelphia as their agent, the four individual defendants delivered, via Mr. Jeffers, the first installment of their API stock certificates to be placed in an escrow account at that bank. (Attach. C to plaintiffs' memo, PP 9, 16 Sec.Agr.) The security agreement further provided that should the market value of the API stock decline below certain levels, the securing parties, the four individual defendants, would deliver additional shares to be deposited as collateral in the escrow account at Philadelphia's Fidelity Bank. (Attach. C to plaintiff's memo, P 11(b), Sec.Agr.) Paragraph 21 of the security agreement states that the agreement "shall be deemed a contract made under and shall be construed in accordance with and governed by the laws of the Commonwealth of Pennsylvania."

 It is settled that a plaintiff seeking relief in federal court has the burden of alleging and proving jurisdiction. Chapman v. Houston Welfare Rights Org., 441 U.S. 600, 99 S. Ct. 1905, 1913 n. 28, 60 L. Ed. 2d 508 (1979); McNutt v. General Motors Acceptance Corp, 298 U.S. 178, 189, 56 S. Ct. 780, 785, 80 L. Ed. 1135 (1936). However, when deciding a motion to dismiss for lack of personal jurisdiction, the Court must consider the pleadings and affidavits in the light most favorable to the non-moving party. Oxford First Corp. v. PNC Liquidating Corp., 372 F. Supp. 191, 193 (E.D.Pa.1974). The evidence now before the Court on this motion shows that the nature of the individual defendants' contacts with the Eastern District of Pennsylvania make exercise of personal jurisdiction over them by this Court reasonable and that their conduct demonstrates that they have availed themselves of the benefits and protection of the law of this forum. The allegations against the Raydons and Blairs found in the complaint concern only the purported breach of the security agreement; they are undisputably parties to that agreement. As previously described, under the terms of the agreement, the individual defendants appointed a Philadelphia bank as their agent, delivered stock to that agent in Philadelphia to be held in escrow here and stipulated that Pennsylvania law should govern the interpretation of the contract and security agreement. *fn4" In addition, Messrs. Raydon and Blair came to Philadelphia on several occasions to negotiate the contract and security agreement. Bruce Jeffers, a representative of all the defendants, appeared in Philadelphia for the closing of the transaction and delivered some of the collateral as well as the security agreement which had already been executed by the defendants. Given the language of the agreement and the conduct of the individual defendants, it is clear that they "could reasonably anticipate being haled into court" in the Eastern District of Pennsylvania. Shaffer v. Heitner, 433 U.S. at 216, 97 S. Ct. at 2586.

 II. VENUE

 Venue in a diversity action is governed by 28 U.S.C. § 1391(a), which provides as follows:


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