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KYLE v. CONTINENTAL CAPITAL CORP.

November 21, 1983

A. B. KYLE
v.
CONTINENTAL CAPITAL CORPORATION



The opinion of the court was delivered by: LUONGO

 In this diversity action, plaintiff A. B. Kyle seeks compensatory and punitive damages as well as an order for future compliance with respect to a contract allegedly entered into between Kyle and defendant Continental Capital Corporation (Continental). Plaintiff, a Pennsylvania citizen, alleges that the Panama-based defendant breached its obligation to pay plaintiff a portion of brokerage fees obtained as a result of the placement of certain loans. Continental has moved to dismiss the claims against it on the grounds that this court lacks personal jurisdiction, and that service of process was ineffective. Continental argues that personal jurisdiction is lacking because it did not transact business within Pennsylvania, and otherwise lacked minimum contacts with the forum state. Continental's argument that service of process was ineffective rests upon similar premises.

 Because I conclude that the complaint and affidavits submitted by plaintiff are sufficient to establish a prima facie case of personal jurisdiction and sufficiency of process, I will deny defendant's motion at this time. However, in view of the factual assertions advanced by defendant in support of its motion to dismiss, I will permit the parties sixty days during which they may conduct discovery and/or submit additional documentation limited to the issues material to the resolution of this motion.

 In its motion to dismiss and supporting briefs, defendant argues that Kyle's allegations are geographically vague or simply untrue, and that they therefore fail to establish that defendant possessed sufficient factual contacts with the forum state to render it subject to this court's jurisdiction. Relying on Supreme Court decisions such as International Shoe Company v. Washington, 326 U.S. 310, 90 L. Ed. 95, 66 S. Ct. 154 (1945); and World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 62 L. Ed. 2d 490, 100 S. Ct. 559 (1980), Continental argues that it never engaged in business in the forum state, and never purposefully availed itself of the protection of Pennsylvania's laws. On this basis, defendant concludes that it would be fundamentally unfair to permit plaintiff to compel it to litigate in this jurisdiction.

 For similar reasons defendant argues that service of process was ineffective. As noted by defendant, service was made upon it in the Republic of Panama. Because there is no federal authorization for service of process in a foreign state for claims such as those here presented, service was made pursuant to the forum state's rules as authorized by Fed.R.Civ.P. 4(i). See, e.g., Omni Exploration, Inc. v. Graham Engineering Corporation, 562 F. Supp. 449, 451 (E.D. Pa. 1983) (applying Fed.R.Civ.P. 4(e) to suit involving out-of-state defendant). In turn, Pennsylvania's rule permitting service upon a foreign defendant limits effective service to those defendants who are constitutionally subject to the jurisdiction of Pennsylvania tribunals. 42 Pa. C.S.A. § 5323. Thus, defendant concludes that because courts sitting in Pennsylvania lack personal jurisdiction in this matter, the attempted service of process was ineffective.

 In the context of this case, however, defendant's arguments may not be resolved by simple reference to the Supreme Court's well established precedents. The allegations of plaintiff's complaint and his recently filed affidavits seek to establish that defendant's connection to the forum state occurred in regard to the very transaction in which defendant now denies participation. Defendant's denial of those allegations therefore raises not only the question whether defendant's factual contacts with Pennsylvania support jurisdiction, but also the issue of how and when that determination should be made.

 In the instant case, this latter inquiry presents a procedural dilemma because the factual dispute relevant to jurisdiction is enmeshed with the ultimate issue of the merits of this lawsuit. In resolving the question of jurisdiction, therefore, the court is faced with an apparent tension between two accepted maxims of federal civil procedure: On the one hand, the court is ordinarily bound to accept as true all factual allegations advanced by the plaintiff when considering a Rule 12(b) motion to dismiss, Scheuer v. Rhodes, 416 U.S. 232, 237, 40 L. Ed. 2d 90, 94 S. Ct. 1683 (1974); In re Arthur Treacher's Franchisee Litigation, 92 F.R.D. 398, 409-410 (E.D. Pa. 1981); on the other hand, the court has been instructed to require the plaintiff to prove jurisdictional facts by a preponderance of the evidence. McNutt v. General Motors Acceptance Corporation, 298 U.S. 178, 189, 80 L. Ed. 1135, 56 S. Ct. 780 (1936). Indeed, the Third Circuit Court of Appeals has ruled that "a defendant's challenge to the court's in personam jurisdiction imposes on the plaintiff the burden of 'com[ing] forward with facts, by affidavit or otherwise, in support of personal jurisdiction.'" Compagnie Des Bauxites De Guinea v. Insurance Company of North America, 651 F.2d 877, 880 (3d Cir. 1981), cert. denied, 457 U.S. 1105, 73 L. Ed. 2d 1312, 102 S. Ct. 2902 (1982), quoting, DiCesare - Engler Productions, Inc. v. Mainman, Ltd., 81 F.R.D. 703, 705 (W.D. Pa. 1979). See also Nocella v. Bulletin Co., CA No. 82-3971 (E.D. Pa., June 30, 1983).

 When confronted with this predicament, several courts, particularly the Ninth Circuit Court of Appeals, have articulated a graduated burden of proof on the issue of jurisdiction against which the sufficiency of a plaintiff's evidence may be measured at various stages in the development of the factual record. See Data Disc, Inc. v. Systems Technology Associates, Inc., 557 F.2d 1280, 1284-1286 (9th Cir. 1977); Wells Fargo & Co. v. Wells Fargo Express Co., 556 F.2d 406, 430 n.24 (9th Cir. 1977). See also Visual Sciences, Inc. v. Integrated Communications Incorporated, 660 F.2d 56 (2d Cir. 1981) (personal jurisdiction). *fn1"

 Under this approach, a plaintiff whose factual record consists only of the pleadings and supporting affidavits need simply establish a prima facie case of jurisdiction. At this stage, plaintiff's burden would be satisfied if the documents submitted demonstrate facts sufficient to support a finding of jurisdiction. Data Disc, Inc., 557 F.2d at 1285. If the court then proceeds to conduct a full hearing on the question of jurisdiction, the plaintiff may be put to his full burden of proof by a preponderance of the evidence. Id. Where the dispute over jurisdictional facts constitutes the ultimate issue in the case, however, the plaintiff should not ordinarily be required to sustain its full burden of persuasion before the commencement of the trial. Id. at 1285-1286 n.2. As the court stated:

 
Where the jurisdictional facts are intertwined with the merits, a decision on the jurisdictional issues is dependent on a decision of the merits. In such a case, the district court could determine its jurisdiction in a plenary pretrial proceeding. . . . However, it is preferable that this determination be made at trial, where a plaintiff may present his case in a coherent, orderly fashion and without the risk of prejudicing his case on the merits. . . . Accordingly, where the jurisdictional facts are enmeshed with the merits, the district court may decide that the plaintiff should not be required in a Rule 12(d) preliminary proceeding to meet the higher burden of proof which is associated with the presentation of evidence at a hearing, but rather should be required only to establish a prima facie showing of jurisdictional facts with affidavits and perhaps discovery materials. . . . Of course, at any time when the plaintiff avoids a preliminary motion to dismiss by making a prima facie showing of jurisdictional facts, he must still prove the jurisdictional facts at trial by a preponderance of the evidence. . . .

 Id. at 1285-1286 n.2 (citations omitted). See also Oxford First Corporation v. PNC Liquidating Corporation, 372 F. Supp. 191, 193 (E.D. Pa. 1974); 5 C. Wright & A. Miller, Federal Practice and Procedure, § 1351.

 Applying this standard of proof to the pleadings and affidavits presently before me, I am satisfied that plaintiff has carried his burden of establishing a prima facie case of personal jurisdiction. The complaint alleges that David A. Barnes, an agent of Continental, met with plaintiff at the offices of Carson Helicopters, Inc. in Bucks County, Pennsylvania. The complaint further alleges that this meeting occurred pursuant to the parties' agreement to co-broker Carson's loan.

 Moreover, in support of his opposition to defendant's present motion, plaintiff has submitted two affidavits which assert additional connections between the alleged transaction and Pennsylvania. The first affidavit states that the alleged contract relating to the Carson loan was signed by defendant's agent in Philadelphia, and that Mr. Barnes agreed to establish a line of credit in favor of Carson during his visit to Bucks County. The second affidavit specifies that Barnes acted as defendant's Senior Vice-President during his trip to Pennsylvania. Plaintiff's first affidavit further states that in connection with the Carson loan, defendant filed dozens of liens in Pennsylvania under the Commonwealth's version of the Uniform Commercial Code, and that defendant constantly monitored the arrangement by means of mail, phone, and personal visits to Pennsylvania. Plaintiff's initial statement also alleges that Continental has performed brokerage services for numerous other Pennsylvania ...


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