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Pennzoil Products Co. v. Colelli & Associates

July 09, 1998

PENNZOIL PRODUCTS COMPANY, APPELLANT,
v.
COLELLI & ASSOCIATES, INC.; PYRAMID TREATING INC; T.O.P. PRODUCTION & OILFIELD SERVICES INC.; COLELLI OIL WELL SERVICES INC.; CHEMICAL SOLVENTS, INC. PYRAMID TREATING INC.; T.O.P. PRODUCTION & OILFIELD SERVICES, INC. CHEMICAL SOLVENTS, INC., APPELLANTS IN 97-3344 PENNZOIL PRODUCTS COMPANY APPELLANT IN 97-3335



On Appeal from the United States District Court for the Western District of Pennsylvania (D.C. Civil Action No. 95-cv-00229E)

Before: Mansmann, Roth and Mckee, Circuit Judges

The opinion of the court was delivered by: Roth, Circuit Judge.

Argued March 26, 1998

(Opinion filed: July 9, 1998)

OPINION OF THE COURT

This appeal arises from a diversity action brought by Pennzoil Products Company ("Pennzoil") against, among others, Colelli & Associates, Inc. and Colelli Oil Well Services, Inc. (collectively "Colelli"). Colelli sold to crude oil producers in Ohio a solvent, which was designed to reduce the accumulation of wax in the shafts of oil wells. The oil producers sold the oil to refineries, one of which was Pennzoil's refinery in Pennsylvania. Pennzoil alleges that Colelli's solvent contained silicon and that the silicontainted oil caused damage to its refinery. The district court granted Colelli's motion to dismiss for lack of personal jurisdiction and certified its order for interlocutory appeal. Because we conclude that Pennsylvania's long-arm statute extends personal jurisdiction to Colelli and that the exercise of such jurisdiction complies with constitutional due process requirements, we will reverse and remand to the district court for further proceedings consistent with this opinion.

I.

Pennzoil is a Nevada corporation with its principal place of business in Texas. Pennzoil operates an oil refinery in Rouseville, Pennsylvania, for which it purchases Penn grade and Corning grade crude oil from producers in Ohio. The two Colelli entities are Ohio corporations with principal places of business in Ohio. Colelli is in the oil well maintenance business. It sells chemicals to oil producers to clean residue from their wells. Unlike most of the crude oil produced in the United States, Penn grade and Corning grade crude oil from the Ohio oil fields contain high levels of paraffin (i.e., wax). The high wax content results in the gradual accumulation of wax in the shafts of oil wells. Wax build-up impedes oil flow and production. Colelli sold a paraffin solvent to Ohio oil producers which they injected into the oil wells to reduce the accumulation of wax. As a result, however, the solvent also mixed with the oil produced from those wells.

Approximately sixty percent of the Penn grade and Corning grade crude oil produced by the Ohio producers was sold and shipped to Pennsylvania refineries. One of these was Pennzoil's Rouseville refinery. The other was a refinery owned by Witco in Bradford, Pennsylvania. The remaining oil was sold to a refinery in West Virginia. Cam C. Colelli, who founded and runs Colelli, has stated in deposition that he knew his customers (the producers) would be shipping oil to Pennzoil's Rouseville refinery. In fact, in 1994 (prior to the events that underlie the present case), Pennzoil had complained of damage caused to its refinery by chlorides in Colelli solvents. Once the issue was brought to his attention, Cam Colelli worked with Pennzoil to alleviate the chloride problem. He sent samples of solvents to Pennzoil's laboratories for testing and attended a trade association seminar on the dangers of chlorides in crude oil solvents.

In September 1995, Pennzoil initiated a diversity action in the Western District of Pennsylvania against Colelli & Associates, alleging that the anti-paraffin solvent injected into the Ohio oil wells contained silicon and that the silicon damaged its Rouseville refinery. The complaint also named Pyramid Treating, Inc. ("Pyramid") and T.O.P. Production and Oilfield Services, Inc. ("T.O.P.") as defendants. In April 1996, Pennzoil amended its complaint to add Colelli Oil Well Services and Chemical Solvents, Inc. ("Chemical") as defendants. Like Colelli, the other defendants are Ohio corporations with principal places of business in Ohio.

In August 1996, Colelli moved to dismiss for lack of personal jurisdiction pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure. On February 7, 1997, the district court granted Colelli's motion. Later that month, Pennzoil moved for modification of the February 7 order to permit an interlocutory appeal. Pyramid, T.O.P. and Chemical joined Pennzoil's motion. In May 1997, the district court granted Pennzoil's motion to permit the appeal. Subsequently, Pennzoil filed a petition for permission to appeal to this court, which was granted. Pyramid, T.O.P. and Chemical also filed a notice of appeal. The two appeals have been consolidated.

II.

Although the propriety of personal jurisdiction is in dispute, the district court clearly had subject-matter jurisdiction over this diversity action, pursuant to 28 U.S.C. § 1332(a). Furthermore, since its order dismissed some, but not all, of the defendants, the order was not final and appealable under 28 U.S.C. § 1291. Nonetheless, the district court did grant permission for an interlocutory appeal. Therefore, we have jurisdiction to hear this appeal pursuant to 28 U.S.C. § 1292(b).

To the extent that a district court makes factualfindings in determining personal jurisdiction, we review for clear error. Mellon Bank (East) PSFS, National Association v. Farino, 960 F.2d 1217, 1220 (3d Cir. 1992). However, a district court's decision that it possesses or lacks personal jurisdiction over certain defendants is an issue of law of which our review is plenary. Id. at 1221.

III.

There are specific analytical steps we must take in determining whether personal jurisdiction can be asserted over a nonresident defendant. Rule 4(e) of the Federal Rules of Civil Procedure is the starting point. This rule "authorizes personal jurisdiction over non-resident defendants to the extent permissible under the law of the state where the district court sits." Farino, 960 F.2d at 1221 (citation omitted). The forum state in this case is Pennsylvania. That state's long-arm statute is codified at 42 Pa. Cons. Stat. Ann. § 5322.*fn1 We have acknowledged that the statute permits Pennsylvania courts to exercise personal jurisdiction over nonresident defendants"to the constitutional limits of the [D]ue [P]rocess [C]lause of the [F]ourteenth [A]mendment." Farino, 960 F.2d at 1221 (citations omitted); see also Renner v. Lanard Toys Limited, 33 F.3d 277, 279 (3d Cir. 1994) (noting that "Pennsylvania's long-arm statute authorizes jurisdiction to the fullest extent permissible under the Constitution"). A district court's exercise of personal jurisdiction pursuant to Pennsylvania's long-arm statute is therefore valid as long as it is constitutional. Farino, 960 F.2d at 1221; see also Renner, 33 F.3d at 279 ("[T]his court's inquiry is solely whether the exercise of personal jurisdiction over the defendant would be constitutional.") (citation omitted).

Next, we must determine whether the defendant's contacts with the forum state are sufficient to support general personal jurisdiction. Farino, 960 F.2d at 1221. When a state has general jurisdiction over a party, that party can be haled into court in that state "regardless of whether the subject matter of the cause of action has any connection to the forum." Id. A nonresident's contacts with the forum must be "continuous and substantial" to establish general jurisdiction. Provident National Bank v. California Federal Savings & Loan Association, 819 F.2d 434, 437 (3d Cir. 1987) (citations omitted). However, no party in this case contends that there is a basis for general jurisdiction in Pennsylvania -- so we are free to consider solely whether the alternative form of personal jurisdiction is present: specific personal jurisdiction. Specific jurisdiction exists when the plaintiff's claim " `is related to or arises out of the defendant's contacts with the forum.' " Farino, 960 F.2d at 1221 (quoting Dollar Savings Bank v. First Security Bank of Utah, N.A., 746 F.2d 208, 211 (3d Cir. 1984)).

To make a finding of specific jurisdiction, a court generally applies two standards, the first mandatory and the second discretionary. These standards serve to ensure that defendants receive due process as required by the Fourteenth Amendment. First, a court must determine whether the defendant had the minimum contacts with the forum necessary for the defendant to have "reasonably anticipate[d] being haled into court there." World-Wide Volkswagen Corporation v. Woodson, 444 U.S. 286, 297 (1980) (citations omitted). Second, assuming minimum contacts have been established, a court may inquire whether "the assertion of personal jurisdiction would comport with `fair play and substantial Justice.' " Burger King Corporation v. Rudzewicz, 471 U.S. 462, 476 (1985) (quoting International Shoe Company v. Washington, 326 U.S. 310, 320 (1945)). Although the latter standard need only be applied at a court's discretion, see Farino, 960 F.2d at 1222 (citing Rudzewicz, 471 U.S. at 476-77), we have generally chosen to engage in this ...


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