The opinion of the court was delivered by: GILES
All defendants, with the exception of Gourmet Resources International, Inc. ("Gourmet"),
have filed a motion to dismiss plaintiff's complaint for lack of personal jurisdiction under Fed. R. Civ. P. 12(b)(2). For the following reasons, defendants' motion is granted and the complaint is dismissed as to these defendants.
This is a diversity action brought by Simkins Corporation ("Simkins") against six defendants. Of the five defendants who have filed this motion to dismiss, one is a corporation, one is a partnership and three are individual members of Gourmet's Board of Directors sued for actions taken in their corporate capacities.
Plaintiff alleges a complex interrelationship among and between the six named defendants. For the purposes of this motion, the salient relationships are as follows. Gourmet sells imported chocolates under the trade-name "Michel Guerard." Simkins supplied boxes and box wraps to Gourmet for use in packaging their gourmet-quality sweets. Paramount Capital Corporation ("Paramount") is a shareholder of Gourmet. Greenberg, Irwin and Weisinger ("Greenberg") is a New York partnership engaged in the practice of law. Greenberg provides legal representation for Gourmet. Plaintiff asserts that Greenberg is also a shareholder of Gourmet. Gordon Ewart is alleged to be either a controlling shareholder of Paramount or a shareholder who controls Paramount. Martin Stern is alleged to be both a shareholder and a director of Gourmet. Albert J. Pechenik is the President of Gourmet.
Although the thrust of plaintiff's action appears to be a failure to pay for goods sold and delivered to Gourmet, only the first two counts of the complaint are contractual in nature. Counts three through five of the complaint allege that Paramount, Greenberg, Ewart and Stern, as shareholders and/or directors of Gourmet, have breached their duty to Gourmet and its creditors by causing Gourmet, while it was insolvent, to satisfy the corporation's indebtedness to them in preference to the indebtedness owed to the corporation's creditors. The final count of the complaint states that Pechenik fraudulently misrepresented to Simkins, through its President, Morton Simkins, that Gourmet would use the proceeds from a public offering of its stock to repay Simkins for credit Simkins had extended in reliance on such a promise.
Defendants filed their motion to dismiss for lack of personal jurisdiction under Fed. R. Civ. P. 12(b)(2). Paramount, Greenberg, Ewart and Stern asserted that they had no contact with Pennsylvania. Pechenik argued that he had no personal contact with the Commonwealth other than in his corporate capacity through his affiliation with Gourmet. Plaintiff responded by stating that this court has personal jurisdiction over the movant-defendants by virtue of the Pennsylvania long-arm statute.
42 Pa. Cons. Stat. Ann. § 5322(a)(4) (Purdon's 1981). Specifically, plaintiff asserts that each defendant has caused its tortious injury in Pennsylvania by his actions outside the Commonwealth.
In order to aid Simkins in discharging its burden of demonstrating sufficient contacts with the forum state, this court afforded the parties an evidentiary hearing on the issue of jurisdiction. See Compagnie des Bauxites de Guinee v. L'Union Atlantique S.A. D'Assurances, 723 F.2d 357, 362 (3d Cir. 1983). In response to the ruling of the Third Circuit in Time Share Vacation Club v. Atlantic Resorts, Ltd., 735 F.2d 61, 66-67 n.9 (3d Cir. 1984), this court advised the plaintiff that it could not rest on mere allegations to respond to the jurisdictional defense raised, but rather, was required to establish jurisdictional facts through affidavits or other competent evidence. This court not only addressed the general issue of burden of proof, but also raised multiple weaknesses in plaintiff's evidence of forum-related contacts. Accordingly, I allowed the plaintiff thirty days to complete discovery on the limited issue of personal jurisdiction in order to buttress its actual proofs. Both parties were allowed an appropriate amount of time to prepare supplemental briefs.
Pursuant to Rule 4(e) of the Federal Rules of Civil Procedure, this court may exercise personal jurisdiction over the non-resident defendants to the extent the laws of Pennsylvania allow. The Pennsylvania long-arm jurisdiction statute, 42 Pa. Cons. Stat. Ann. § 5322(b) (Purdon's 1981), provides for jurisdiction over non-residents "to the fullest extent allowed under the Constitution of the United States." The Pennsylvania courts have recognized that this provision makes the reach of the long-arm statute co-extensive with the scope of personal jurisdiction permitted by the due process clause of the United States Constitution. Koenig v. International Brotherhood of Boilermakers, 284 Pa. Super. 558, 426 A.2d 635, 640 (1980), cited in Rees v. Mosaic Technologies, Inc., 742 F.2d 765, 768 (3d Cir. 1984). Because this court is not obliged to follow the Pennsylvania courts' interpretation of the United States Constitution, I am free to assess independently the constitutional permissibility of the exercise of jurisdiction over the foreign defendants in this case in accordance with the law of this circuit. Empire Abrasive Equipment v. H.H. Watson, Inc., 567 F.2d 554, 556 n.1 (3d Cir. 1977).
In determining whether due process considerations permit the exercise of in personam jurisdiction, this court will follow the two-step inquiry which has been consistently applied by the Third Circuit. See, e.g., Dollar Savings Bank v. First Security Bank of Utah, N.A., 746 F.2d 208, 212; Schwilm v. Holbrook, 661 F.2d 12, 14 (3d Cir. 1981); Dunnigan v. Silverthorn, 542 F. Supp. 32, 33 (E.D. Pa. 1982) (Giles, J.). See also Procter & Schwartz v. Cleveland Lumber Co., 228 Pa. Super. 12, 19, 323 A.2d 11, 15 (1974) (Pennsylvania courts constitutional analysis roughly parallels the inquiry followed by this circuit). First, I must determine whether the claim is related to, or arises out of, the defendant's contacts with the forum. If the claim does not arise out of or is unrelated to defendant's contacts with the forum, a plaintiff must demonstrate that the defendant maintained continuous and substantial forum affiliations ("general jurisdiction"). Dollar Savings Bank, supra, 746 F.2d at 212. On the other hand, if the claim arises out of or is related to a defendant's transaction or transactions in the forum, then the court must engage in minimum contacts analysis ("specific jurisdiction"). Id. This distinction between general and specific jurisdiction is critical because the former test requires a substantially stronger showing of forum contact than is required under the latter. See Reliance Steel Products Co. v. Watson, Ess, Marshall & Enggas, 675 F.2d 587, 589 (3d Cir. 1982).
Because there is insufficient evidence to sustain an ultimate finding that general jurisdiction exists as to any movant-defendant, our inquiry in this case is simplified. The plaintiff has failed to allege or produce any evidence that either the corporate defendants, or the individual defendants acting in their corporate capacities, have had the "extensive and pervasive" forum-related activities required under the more stringent standards of general jurisdiction. See Reliance Steel Products, supra, 675 F.2d at 589. Further, defendants' pleading, briefs and affidavits abound with unrefuted statements that none of them had or has a continuing presence in Pennsylvania. See Defendants' Motion to Dismiss at 3-4. Therefore, this court will direct its attention to whether specific jurisdiction is applicable, and, if so, whether plaintiff has proffered sufficient evidence to establish a finding of minimum contacts.
Where it is alleged that a tort has occurred out of state and the harm resulting from that tort is alleged to have occurred within the state, the task of determining whether a plaintiff's cause of action arose out of a defendant's forum-related activities is often perplexing. The difficulty of this task is particularly hard, where, as here, the nature of the transaction is commercial in nature yet the claims arising out of the transaction are characterized by the plaintiff as tortious. Simkins argues that its claims fall within the purview of the "tort out/harm in" provision of the Pennsylvania long-arm jurisdiction statute. See Pa. Cons. Stat. Ann. § 5322(a)(4) (Purdon's 1981). The Pennsylvania legislature has mandated that tortious activity, even though its only connection with the forum is the in-state harm which gives rise to the cause of action, is sufficiently forum-related to subject a non-resident to personal jurisdiction. This "tort out/harm in" theory of jurisdiction does not fit neatly within the Third Circuit's two-prong constitutional inquiry. Whereas the test set forth in Schwilm, supra, focuses on actual contact by the defendant with the forum, section 5322(a)(4) of the long-arm statute provides for jurisdiction by creating either a fictional contact with, or a fictional presence within the forum.
In order to avoid this inherent conflict between the case law and the statute, the courts have focused on the ultimate question of whether the exercise of ...