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ELBECO INC. v. ESTRELLA DE PLATO

December 29, 1997

ELBECO INCORPORATED, Plaintiff,
v.
ESTRELLA de PLATO, CORP., and MAQUILADORA TEXTIL ESTRELLA DE PLATA S.A. DE C.V., and MORTON KATZ, and DAVID KATZ, and ALLAN POLLOCK, Defendants.



The opinion of the court was delivered by: JOYNER

 JOYNER, J.

 DECEMBER 29, 1997

 Plaintiff, Elbeco, Incorporated ("Elbeco" or "Plaintiff") filed this lawsuit against defendants, Estrella de Plata, Corp. ("Estrella"), Maquiladora Textil Estrella De Plata S.A. De C.V. ("Maquiladora"), Morton Katz, David Katz, and Allan Pollock, alleging three counts. Count I alleges that defendants, Estrella and Maquiladora, breached their contract with Elbeco to timely supply finished first quality goods; Count II alleges that defendants, Estrella and Maquiladora, converted Elbeco's fabric, trim, and material for their own use as they have not returned these items to Elbeco; and Count III alleges that defendants, Morton Katz, David Katz, and Allan Pollock, knowingly misrepresented to Elbeco that Estrella and Maquiladora had the capability to timely meet the contractual obligations and that defendants knew Elbeco would rely upon these representations. Subject matter jurisdiction is proper under 28 U.S.C. § 1332.

 Presently before the Court is Defendants' Motion to Dismiss Plaintiff's Complaint for lack of personal jurisdiction and improper venue pursuant to Rules 12(b)(2) and (b)(3) of the Federal Rules of Civil Procedure. Defendants have made an alternative Motion to Transfer this case to the Southern District of Texas, pursuant to 28 U.S.C. § 1406. For the following reasons the Motions are Denied.

 BACKGROUND

 Plaintiff, Elbeco, is a Pennsylvania corporation with its corporate offices located in Reading, Pennsylvania and with two factories also located in Pennsylvania. Defendant Estrella is a Texas corporation, and defendant Maquiladora is a Mexican corporation. The individual defendants, Morton Katz, David Katz, and Allan Pollock, are all alleged to be officers, directors, and shareholders of Estrella and Maquiladora. Morton Katz is a resident of Texas. David Katz is a resident of North Carolina. Allan Pollock is a resident of Georgia.

 Plaintiff has alleged the following facts. In November 1995, Claudia DeLeon, a representative of Estrella and Maquiladora, contacted David Lurio, the Executive Vice President of Elbeco. DeLeon contacted Lurio by telephone at Lurio's office in Reading, Pennsylvania. During the initial phone conversation, DeLeon solicited Elbeco to enter into a contract with Estrella and Maquiladora, which are related companies, whereby Estrella and Maquiladora would serve as subcontractors for Elbeco for the production of shirts to be used as security guard uniforms. Shortly after the phone conversation, DeLeon sent promotional materials concerning Estrella and Maquiladora along with sample shirts to Lurio in Pennsylvania.

 Following these communications, the parties entered into a contract whereby Elbeco would provide the fabric, trimmings, and patterns to Estrella, who would cut the fabric, and then Estrella would ship the cut fabric to Maquiladora, who would manufacture the shirts. The completed shirts were to be returned to Elbeco for sale to its customers. Plaintiff alleges that defendants agreed to deliver between 300-350 dozen first quality garments per week and that, prior to contracting, Morton Katz represented to Elbeco that Estrella and Maquiladora had the ability to produce this quantity.

 Based on this agreement, Elbeco entered into contracts with its customers for the sale of the shirts. In compliance with the contract, Elbeco sent all materials to Estrella and Maquiladora. However, Estrella and Maquiladora did not send the correct quantity of completed shirts to Elbeco in a timely fashion in accordance with the contract, and many of the shirts that Estrella and Maquiladora sent to Elbeco were allegedly defective. Due to the defects, Elbeco was forced to sell the shirts as second quality rather than first quality garments. This resulted in a financial loss to Elbeco. Moreover, to meet the contracts with their customers, Elbeco was forced to manufacture some of the garments in their own factory in Pennsylvania, which resulted in further financial loss.

 To date, Elbeco has not received approximately 10,000 garments that were allegedly in the possession of Estrella and Maquiladora and made for Elbeco according to the contract. Plaintiff alleges that the reason it has not received the 10,000 garments is that defendants sold them to another customer. Following the failure of the contract, the parties entered into an agreement that Estrella and Maquiladora would return to Elbeco all of the uncut fabric and the cut fabric that was not in production. Plaintiff alleges that all of the fabric has not been returned.

 DISCUSSION

 I. Personal Jurisdiction

 A. Legal Standard

 Once a defendant raises a personal jurisdiction defense, the burden of establishing the court's jurisdiction rests with the plaintiff. Provident Nat. Bank v. Cal. Fed. Sav. & Loan Ass'n, 819 F.2d 434, 437 (3d Cir. 1987). Prior to trial, however, a plaintiff need only make a prima facie showing of jurisdiction. Mellon Bank (East) PSFS, Nat'l Ass'n v. Farino, 960 F.2d 1217, 1223 (3d Cir. 1992). Factual disputes created by the affidavits, documents and depositions submitted for the court's consideration are resolved in favor of the non-moving party. Friedman v. Israel Labour Party, 957 F. Supp. 701, 706 (E.D. Pa. 1997).

 Under Federal Rule of Civil Procedure 4(e), we apply Pennsylvania law to determine whether personal jurisdiction is proper. Pennsylvania's long-arm statute, in turn, authorizes both general and specific jurisdiction to the "fullest extent allowed under the Constitution of the United States." 42 Pa. Cons. Stat. Ann. § 5322(b)(Purdon's 1981). Thus, because Pennsylvania's "reach is coextensive with the limits placed on the states by the federal Constitution," Vetrotex CertainTeed Corporation v. Consolidated Fiber Glass Products Company, 75 F.3d 147, 150 (3d Cir. 1996), we apply the familiar two-part test recently summarized by our Court of Appeals as follows:

 
First, the defendant must have made constitutionally sufficient 'minimum contacts' with the forum. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474, 85 L. Ed. 2d 528, 105 S. Ct. 2174 (1985). The determination of whether minimum contacts exist requires an examination of the 'relationship among the forum, the defendant and the litigation,' Shaffer v. Heitner, 433 U.S. 186, 204, 53 L. Ed. 2d 683, 97 S. Ct. 2569 (1977), in order to determine whether the defendant has '"purposefully directed"' its activities towards residents of the forum. Burger King, 471 U.S. at 472 (quoting Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 774, 79 L. Ed. 2d 790, 104 S. Ct. 1473 (1984)). There must 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.' Hanson v. Denckla, 357 U.S. 235, 253, 2 L. Ed. 2d 1283, 78 S. Ct. 1228 (1958). Second, if 'minimum contacts' are shown, jurisdiction may be exercised where the court determines, in its discretion, that to do so would comport with 'traditional notions of fair play and substantial justice.' International Shoe Co. v. Washington, 326 U.S. 310, 90 L. Ed. 95, 66 S. Ct. 154 (1945).

 Vetrotex, 75 F.3d at 150-151. "'Specific jurisdiction is invoked when the cause of action arises from the defendant's forum related activities' such that the defendant 'should reasonably anticipate being haled into court there.'" 75 F.3d at 151 (quoting North Penn Gas Co. v. Corning Natural Gas Corp., 897 F.2d 687, 690 (3d Cir. 1990) and Helicopteros Nacionales de Colombia v. Hall, 466 U.S. 408, 414 n. 8, 80 L. Ed. 2d 404, 104 S. Ct. 1868 (1984)). However, even where the cause of action does not arise from the defendant's forum related activities, jurisdiction may be based on general jurisdiction where the defendant has maintained ...


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