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PSC PROFESSIONAL SERVS. GROUP v. AMERICAN DIGITAL

January 19, 1983

PSC PROFESSIONAL SERVICES GROUP, INC.
v.
AMERICAN DIGITAL SYSTEMS, INC., PETER D. PETROFF, and RALPH G. PETROFF



The opinion of the court was delivered by: LUONGO

 LUONGO, Ch.J.

 Plaintiff, PSC Professional Services Group, Inc. (PSG), brought this civil action charging the wrongful use of civil process, unfair competition and trade libel. The individual defendants, Ralph and Peter Petroff (the Petroffs), are alleged shareholders, officers and directors of the corporate defendant, American Digital Systems, Inc. (ADS). *fn1" Presently before me is the Petroffs' motion to dismiss for lack of in personam jurisdiction. Fed. R. Civ. P. 12(b)(2). Discovery having been ordered and completed on the jurisdictional issue, *fn2" I conclude for reasons hereafter stated that jurisdiction over the Petroffs is lacking. Accordingly, their motion to dismiss will be granted, and the complaint will be dismissed as to them.

 PSG and ADS are competitors in the business of analyzing the infiltration of water into sewer lines. This action was brought by PSG after it had been sued for patent infringement (the infringement action) in federal court in North Carolina by two ADS affiliates -- Apex, Inc. (Apex) and Condor Systems, Inc. (Condor). *fn3" Although Apex and Condor are not named as defendants in the instant action, PSG alleges that they conspired with or were directed by ADS and the Petroffs to file the infringement action for the purpose of interfering with PSG's ability to compete with ADS. PSG also alleges that defendants issued or caused to be issued a press release announcing the filing of the infringement action. Turning to the various counts of PSG's complaint, Count I charges unfair competition and wrongful use of civil process through the issuance of the press release and the filing of the infringement action. Count II essentially asserts the same claim, but in addition, alleges that defendants conspired with Apex and Condor to wrongfully use civil process. Count III alleges that defendants tortiously interfered with PSG's contractual rights by orally threatening its present and prospective customers that they, too, would be the subject of patent infringement actions if they continued to deal with PSG. Specifically, PSG alleges in Count III that threats were made concerning contracts for infiltration studies with customers in California, Indiana and Texas. Finally, in Count IV, PSG alleges that defendants committed trade libel and business defamation by making false and misleading statements about PSG to PSG's present and prospective customers. The Petroffs are charged throughout the complaint with having personally taken part in the tortious conduct alleged. In addition, PSG alleges that the Petroffs were and continue to be instrumental in the establishment of ADS' marketing and sales practices.

 The Motion to Dismiss

 The Petroffs first contend that jurisdiction over them generally is lacking because they were not present or domiciled in Pennsylvania when served with process and they have never consented to the exercise of personal jurisdiction over them by the courts of Pennsylvania. See 42 Pa. Cons. Stat. Ann. § 5301. Second, the Petroffs assert that long-arm jurisdiction under 42 Pa. Cons. Stat. Ann. § 5322 is likewise lacking because they, as individuals, have had no meaningful contacts with Pennsylvania and none of the allegations in the complaint states a claim arising out of any acts committed by them or ADS in Pennsylvania.

 The Petroffs having properly raised the jurisdictional issue, the burden lies with PSG to establish that jurisdiction does in fact exist. See Lucas v. Gulf & Western Industries, Inc., 666 F.2d 800, 805 (3d Cir. 1981). PSG asserts two bases for exercising jurisdiction over the Petroffs: (1) the instant action is based on acts personally engaged in by the Petroffs in Pennsylvania; and (2) jurisdiction exists over the Petroffs for tortious acts they committed as agents of a corporation subject to jurisdiction in Pennsylvania. I shall consider each of these alleged bases in turn.

 In its supplemental memorandum in opposition to the motion to dismiss, PSG states: "The depositions of defendants Ralph and Peter Petroff have now established that both Petroffs were personally present in this District and that, while here, they personally participated in the very matters upon which this consolidated litigation is based." Document 14, at p.8. I do not accept PSG's statement that this litigation is based upon matters participated in by the Petroffs in Pennsylvania. After making that broad assertion, PSG proceeds to recite instances of non-tortious conduct engaged in by the Petroffs in Pennsylvania on behalf of ADS and all of which relate to the infringement action. It is irrelevant for present purposes that the infringement action may arise out of events in Pennsylvania in which the Petroffs participated in their capacity as agents for ADS. The gravamen of PSG's claim is the filing of the infringement action and the threats allegedly made against its customers that they might also be subjected to suit if they continued to deal with PSG. None of that alleged tortious conduct has been shown by discovery to have occurred in Pennsylvania. The sole alleged tortious action committed in Pennsylvania to which plaintiff can point is the service on PSG of the complaint in the infringement action. Even if the act of service were tortious, there is nothing in the record to indicate that the Petroffs actually made service. *fn4" Accordingly, there is no basis for concluding that this action arises out of tortious conduct committed by the Petroffs in Pennsylvania either individually or as officers or directors of ADS.

 PSG next argues that the Petroffs are subject to in personam jurisdiction in Pennsylvania because ADS is subject to jurisdiction and Pennsylvania substantive law provides that corporate agents are personally liable for the torts they commit in their corporate capacities. PSG's argument rests primarily on Donner v. Tams-Witmark Music Library, Inc., 480 F. Supp. 1229 (E.D. Pa. 1979). In that case, a Pennsylvania plaintiff was granted a license to produce performances of Porgy and Bess by the corporate defendant following negotiations by telephone and correspondence between plaintiff in Philadelphia and a corporate officer in New York. After an alleged infringing performance in Philadelphia by the Philadelphia Orchestra, plaintiff sued the licensing corporation and the officer in Pennsylvania for fraudulent misrepresentation and for tortiously approving the infringing performance. Applying minimum contacts analysis, the court first found that the corporate defendant's contacts with Pennsylvania were sufficient to assert jurisdiction over it. Then, recognizing that Pennsylvania substantive law imposes personal liability on corporate officers who commit torts while acting in their corporate capacities, the court concluded:

 
It would be anomalous, and would defeat the purposes of the law creating substantive liability, to permit a corporate officer to shield himself from jurisdiction by means of the corporate entity, when he could not interpose the same shield as a defense against substantive liability. Therefore we hold that [the officer's] allegedly tortious conduct in his capacity as president of [the corporate defendant] may be considered to determine whether the court has jurisdiction over [him] as an individual defendant. For the reasons stated above with respect to [the corporate defendant], we find that [the officer's] conduct includes sufficient contact with this forum to make [him] subject to the personal jurisdiction of this court.

 480 F. Supp. at 1234 (footnote omitted).

 It is essential to understand that Donner does not hold that Pennsylvania may assert jurisdiction over corporate officers simply by virtue of their participation in tortious activity on behalf of a corporation which itself is subject to jurisdiction in this state. Indeed, if that were so, officers of corporations that do business in Pennsylvania would be subject to suit here based upon torts, committed in their corporate capacities, which bear absolutely no relationship to the forum. *fn5" The non sequitur flows from the confusion of well-established jurisdictional principles with substantive legal precepts and obviously is inconsistent with the reasoning in Donner. In my view, Donner stands for the proposition that all of a non-resident defendant's contacts with the forum, in whatever capacity, will be weighed in determining whether those contacts are, from a due process standpoint, sufficient to exercise jurisdiction over him for claims arising from those contacts. In other words, minimum contacts analysis does not discount a defendant's contacts with the forum simply because that defendant was acting at the time as agent for another.

 I am not certain that I would agree with Donner that a person's contacts with the forum in a non-individual capacity are proper elements that weigh in the determination of whether that person is subject to jurisdiction. I am aware that at least two federal district court judges in Pennsylvania have held that a non-resident defendant may be sued here for tortious acts committed within this state while acting on behalf of another. E.g., Lighting Systems, Inc. v. International Merchandising Associates, Inc., 464 F. Supp. 601 (W.D. Pa. 1979); Vespe Contracting Co. v. Anvan Corp., 433 F. Supp. 1226 (E.D. Pa. 1977). I am also aware that contrary authority exists. E.g., Techno Corp. v. Dahl Associates, Inc., 521 F. Supp. 1036 (W.D. Pa. 1981). In the instant case, however, the complaint alleges and discovery reveals no tortious conduct in Pennsylvania by the Petroffs in any capacity. Rather, they are alleged to have committed torts on behalf of ADS outside the state which caused harm to PSG in Pennsylvania. Assuming, without deciding, that the alleged tortious conduct does bear on their amenability to suit in this state, I conclude that the exercise of jurisdiction over the Petroffs in this case would violate due process.

 PSG's position is that due process would not be violated by asserting jurisdiction over the Petroffs under the "tort out/harm in" theory of long-arm jurisdiction. According to PSG, it was clearly and specifically foreseeable that the institution of the infringement action and the issuance of the press release would result in harm to its reputation in Pennsylvania, the state where it has its principal place of business. Furthermore, PSG contends that Pennsylvania has a strong interest in protecting the good will of corporations domiciled within its borders. Given this strong interest as well as the ...


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