(Affidavit of Ilene Blanton ¶ 11). Further, in July of 1996
and August of 1997, IMS and MatchWare entered into additional
maintenance, support and training agreements relating to the
MatchWare software. (Affidavit of Stephen L. Engber ¶ 5).
In December 1997, Vality, a Massachusetts corporation, acquired
MatchWare, (Plt. Mem. at 8), and became the successor-in-interest
to MatchWare, a status which still characterizes it today.*fn1
(Def. Mem. at 2). Over a year later, on or about January 14,
1999, a meeting transpired between officers of IMS and Vality at
the Boston headquarters of Vality. At this meeting, Mark. E.
Atkins, President of Vality, alleged that IMS had misappropriated
its trade secrets and engaged in unauthorized use of its
copyrighted matching software. (Affidavit of Stephen L. Engber
¶ 9). Specifically, Vality alleges that while the agreements
between it and IMS were "end-user" agreements, meaning that IMS
was authorized only to use the matching software for its own
internal purposes and not for providing data-processing services
to third parties,*fn2 IMS was in fact using the software to
provide precisely these services to its own clients. (Memorandum
of Law in Support of Motion of Defendant ("Def. Mem." at 4, 5)).
Over the ensuing months, the parties then engaged in an
exchange of letters and conference calls focusing on the proper
interpretation of the 1994 agreements, and on how to resolve the
disagreement which had developed between them. Although Mr. Jaro
asserts that "[t]he negotiations respecting Vality's claim that
IMS's conduct breached the [1994 agreements] . . . took place
primarily in Massachusetts," (Affidavit of Matthew Jaro ¶ 7),
it is unclear what he means by this statement, as except for the
January 12, 1999 meeting when the allegations were first leveled,
no face to face meeting is alleged by either party to have taken
place. The only contacts discussed by either party were the
aforementioned letters and conference calls, and there is every
indication that these occurred with all IMS officers situated in
Plymouth Meeting, and all Vality officers in Boston.
IMS contends that Vality's communiques expressly threatened
litigation. (Affidavit of Stephen L. Engber ¶ 12). Vality
argues that no such threat was made or reasonably inferred from
any of the letters exchanged. (Def. Mem. at 6-9). In contrast,
the defendant asserts that the parties were attempting to come to
an amicable resolution of the dispute when IMS filed this
declaratory judgment action on March 25, 1999. (Def. Mem. at 9).
Finally, on May 5, 1999, Vality filed an action in the District
of Massachusetts ("the Massachusetts action") in which it
asserted claims sounding in copyright infringement, breach of
contract, breach of implied covenant of good faith and fair
dealing, quantum meruit and misappropriation of trade secrets.
Vality moves to dismiss the complaint on the ground that the
Court lacks subject matter jurisdiction over the action, as no
actual case or controversy existed at the time of filing. In the
alternative, Vality argues that the Court should decline to
exercise its discretionary jurisdiction over this declaratory
judgment action because: (1) IMS engaged in strategic, preemptive
litigious tactics which should not be rewarded by this Court via
a refusal to dismiss; (2) the "first-filed" rule is not
controlling; and (3) the balance of conveniences and judicial
economy favor proceeding in the United States District Court for
the District of Massachusetts.
In the alternative, Vality moves to transfer the case to the
District of Massachusetts under 28 U.S.C. § 1406(a) on the
ground that substantial activity giving rise to the claims did
not occur in Pennsylvania, thus rendering venue improper under
28 U.S.C. § 1391(b), and making § 1406(a) applicable.
In the alternative, Vality moves to transfer the case to the
District of Massachusetts under 28 U.S.C. § 1404(a) on the
grounds that (1) the District of Massachusetts is a more
convenient forum than the Eastern District of Pennsylvania, (2)
the interest of justice mandates transfer, and (3) the case
"might have been brought" in Massachusetts.
In the alternative, Vality moves to stay these proceedings
pending the resolution of the Massachusetts action.
IMS responds to the motion of Vality by arguing that (1) the
Court does have subject matter jurisdiction over the action, (2)
the "first-filed rule does require the Court to retain this
jurisdiction, and (3) Vality is not entitled to a transfer of
venue pursuant to either 28 U.S.C. § 1404(a) or
28 U.S.C. § 1406(a). IMS also cross-moves the Court to enjoin Vality
from proceeding in the Massachusetts action."
II. Dismissal for Lack of Subject Matter Jurisdiction
28 U.S.C. § 2201(a) (1994) reads in
In a case of actual controversy within its
jurisdiction, . . . any court of the United
States, upon filing of an appropriate
pleading, may declare the rights and other
legal relations of any interested party seeking
such declaration, whether or not further relief
is or could be sought.
The Declaratory Judgment Act has a remedial character, and should
therefore be interpreted liberally. Algrant v. Evergreen Valley
Nurseries, Ltd. Partnership, 126 F.3d 178, 189 (3d Cir. 1997)
(Mansmann, J., dissenting) (citing Exxon Corp. v. Fed. Trade
Comm'n, 588 F.2d 895, 900 (3d Cir. 1978)). Despite this
predilection, however, a court may assert jurisdiction over an
action brought pursuant to the Declaratory Judgment Act only if
an actual case or controversy which is ripe for disposition is
before the tribunal. See Travelers Ins. Co. v. Obusek,
72 F.3d 1148, 1153-54 (3d Cir. 1995).
In order to satisfy the "actual controversy" requirement, a
declaratory judgment action must present a controversy that "'(1)
is real and not hypothetical; (2) affects an individual in a
concrete manner so as to provide the factual predicate for
reasoned adjudication, and (3) sharpens the issues for judicial
resolution.'" Travelers Ins. Co., 72 F.3d at 1154 (quoting
Armstrong World Indus. v. Adams, 961 F.2d 405, 410 (3d Cir.
1992)). "Basically, the question . . . is whether the facts
alleged, under all the circumstances, show that there is a
substantial controversy, between parties having adverse legal
interests, of sufficient immediacy and reality to warrant the
issuance of a declaratory judgment." Maryland Cas. Co. v. Pacific
Coal & Oil Co., 312 U.S. 270, 273, 61 S.Ct. 510, 85 L.Ed. 826
Ripeness, similarly, is determined by examining (1) the
adversity of the interest between the parties to the action, (2)
the conclusiveness of the declaratory judgment, and (3) the
utility or practical help that a declaratory judgment would
provide. See TIG Ins. Co. v. Insinger Mach. Co., Inc., No.
Civ.A.97-3164, 1998 WL 748287, at *3 (E.D.Pa. Oct.27, 1998)
(citing Armstrong, 961 F.2d at 411).
There is a great deal of overlap in the factors needed to make
these two determinations, and at the core of both inquiries are
the following questions, as this Court has previously
articulated: "whether a controversy is based on real and concrete
facts, whether the parties are adverse, and the potential
conclusiv[eness] of the declaratory action go to the fitness of
for judicial review." TIG Ins. Co., 1998 WL 748287, at * 3. It
is this amalgamated inquiry with which the Court is concerned.*fn3
B. Real and Concrete Facts
Here, the dispute is indisputably real, and indeed, Vality does
not contend otherwise. The allegations of copyright infringement
leveled by Vality are of a highly specific nature, based upon
equally specific facts, and the outcome of the suit will squarely
affect the respective rights and obligations of the parties to
this suit. The contentions of both Vality and IMS provide this
Court with a clear factual predicate for reasoned, sharpened
The Court of Appeals for the Third Circuit has stated that in
order for a declaratory judgment to be considered conclusive, it
must change or clarify the legal status of the parties, not
merely lend the opinion of the court on a hypothetical set of
facts. Travelers Ins. Co., 72 F.3d at 1155. In the context of
this case, this requirement is unquestionably met. Consider, for
example, the possibility that the motion of IMS for a declaratory
judgment was granted. In that instance, it is likely that the
plaintiff could rest assured that, despite the contrary
contentions of Vality, it did not infringe on any of the
copyrights held by the defendant. Such would unquestionably
constitute a clarification of the legal status of the parties,
and this element of the test is therefore satisfied.
D. Adversity of Interests
The Court of Appeals for the Third Circuit has also spoken on
the adversity of interests, the remaining component of the
present inquiry: "[p]arties' interests are adverse where harm
will result if the declaratory judgment is not entered."
Travelers Ins. Co., 72 F.3d at 1154. Thus, importantly, "in
an appropriate circumstance, a litigant can seek a declaratory
judgment where the harm is threatened in the future. However the
plaintiff must demonstrate that the probability of that future
event occurring is real and substantial, 'of sufficient immediacy
and reality to warrant the issuance of a declaratory judgment.'"
Id. (citation omitted).
This is the point at which Vality has selected to attack the
proposition that this Court has jurisdiction over this matter. In
fact, the gravamen of the argument made by Vality is that IMS did
not have a reasonable apprehension of a lawsuit at the time of
filing. It contends that the parties were engaged in continuing
efforts to resolve the matter out of court when IMS, on the same
day that it sent a letter to Vality indicating its continuing
interest in negotiation, filed this action. IMS had no reason to
believe, Vality posits, that litigation was imminent, or even
likely. Vality specifically argues that had IMS truly feared
litigation, it would have filed this action directly after the
January 14, 1999 meeting, the only time, according to Vality, at
which any express reference to litigation was made. (Reply at
4-5). Vality contends that IMS could not have been forced to endure
tactics designed to intimidate Vality, as IMS is a corporation of
global proportions, employing in excess of 8,500 employees and
generating over $1.2 billion in revenues in 1998. (Reply at 7).
It also asserts that, as a matter of law, the fact that Vality
later commenced the Massachusetts action is insufficient as a
basis for a claim that Vality had a reasonable
apprehension of a lawsuit, as while this occurred after the
filing of this action, the law mandates that the filing party
have such a fear at the time of filing. Hence, it posits, no
justiciable case or controversy existed at that time. At the root
of the argument of Vality is the notion that for this Court to
hold a case or controversy existed at the time of filing here, it
would undermine the public policy that "potential litigants must
be encouraged to seek to avoid litigation rather than adopt a
`sue first, talk later' philosophy." Hanson PLC v.
Metro-Goldwyn-Mayer Inc., 932 F. Supp. 104, 107-08 (S.D.N Y
I, however, find this view to be unpersuasive. First, while the
series of correspondence between the parties is not replete with
explicit threats to sue, the specter of litigation undoubtedly
hung over the post-January 14, 1999 dealings between the parties.
Mr. Atkins, stated during the January 14, 1999 meeting that he
had "retained 'the best attorney in town.'" (Affidavit of Stephen
L. Engber ¶ 10). Deadlines were repeatedly set by Vality for
the return of the matching software absent a sizable payment from
IMS to Vality (delineated further in note 6), and the overall
tone of the letters exchanged between January 19, 1999 and March
25, 1999 was adversarial. Specific references to litigation and
breach of contract, for example, are found in the March 5, 1999
and March 25, 1999 letters from IMS to Vality, and the deadlines
set by Vality are mentioned in the majority of these communiques
as well. (See Affidavit of Inez H. Friedman at Exhibits C —
H). IMS also alleges that litigation was threatened during
telephone conferences between the parties on February 4, 1999 and
February 24, 1999. (See Affidavit of Stephen L. Engber ¶
12). While Vality does not contest the account of the January 14,
1999 meeting offered by IMS, it does take issue with this
characterization of the telephone conversations. (Reply at 4-5).
It is quite possible for two parties to simultaneously consider
nonlitigious settlement of a dispute, while at the same time
maintaining an awareness that either settlement is improbable or
that litigation is equally likely, particularly where these
negotiations have continued over an extended period of time but
yielded little in the way of agreement. Thus, while there was no
indication on March 25, 1999 that Vality was ready and willing to
file an action immediately, given the positions stated and the
demands made by Vality, the disagreement in which IMS found
itself with these positions, and its unwillingness to acquiesce
in those demands, IMS could have justifiably believed, and acted
upon the belief that Vality might take such action in the near
future. See Pep Boys, Manny, Moe & Jack v. Am. Waste Oil Servs,
[W]hile it was clear that litigation
was a threat, should the parties fail to
resolve their differences amicably, litigation
initiated by [plaintiff] was not yet imminent
at the time the [first] action was filed.
Plaintiff was still willing to meet with
Defendants to try to reach a settlement. In
addition, Plaintiff, while acknowledging the
possibility of litigation, had not yet directly
threatened litigation . . . . Defendants' decision
to forgo settlement discussions is not, by itself,
evidence of bad faith. While our judicial system
favors and, indeed, relies upon the efforts of parties
to resolve their own disputes, Defendants' decision to
protect their interests by filing suit does not rise
to the level of bad faith.
No. Civ.A.96-7098, 1997 WL 367048, at *8 (E.D.Pa. June 25,
1997). In this case, by contrast, IMS did not forgo settlement
negotiations. Indeed, despite being confronted with an
unmistakable threat of litigation on January 14, 1999, it waited
until March 25, 1999 to file this declaratory judgment action.
As for the contention of Vality that had IMS truly feared
litigation, it would have
filed suit immediately upon being so threatened, the simply
response is that although it likely could have done so, it
opted, in what appears to be an act of good faith, for
negotiation in the face of this threat, and should not be
penalized for so doing.
Vality is correct as a matter of law that a later filed suit
cannot be considered in determining whether a court had
jurisdiction over a declaratory judgment action at the time such
was filed. See GTE Directories Publishing Corp. v. Trimen Am.,
Inc., 67 F.3d 1563, 1568 (11th Cir. 1995) ("A case or controversy
must exist at the time the declaratory judgment action is
filed.") (citing Indium Corp. of Am. v. Semi-Alloys, Inc.,
781 F.2d 879, 883 (Fed.Cir. 1985) and Luis v. Dennis, 751 F.2d 604,
608 (3d Cir. 1984)). This, however, does not undermine the
argument espoused by IMS that an actual controversy existed, as
the actions of Vality prior to the filing of this action provided
IMS with a reasonable apprehension of litigation.
As for the policy argument of Vality that the "sue first talk
later" philosophy must be not be facilitated, I find that
although this policy is undoubtedly sound in theory, it is
outweighed here by the policy underlying the Declaratory Judgment
Act. Instead of allowing IMS to seek an affirmative declaration
of its freedom from liability with the threat of an affirmative
filing by Vality looming in the indeterminate future, a decision
to dismiss for lack of an actual controversy would punish IMS for
taking precisely those actions. Allegations of copyright
infringement are serious charges, and the potential liability for
such acts is severe. Any financially responsible party, no matter
how full its coffers, would be at the very least concerned at the
leveling of such accusations against it. Moreover, as stated in
its sur-reply, IMS would likely suffer significant disruption of
its operations were it forced to replace the MatchWare software,
as the degree to which IMS relies upon the software appears to be
considerable. (Sur-Reply of IMS in Opposition to the Motion of
the Defendant ("Sur-Reply") at 2).
As the Court of Appeals for the Federal Circuit has explained,
"after the [Declaratory Judgment] Act . . . competitors were no
longer restricted to an in terrorem choice between the incurrence
of a growing potential liability for patent infringement and
abandonment of their enterprises; they could clear the air by
suing for a judgment that would settle the conflict of
interests." Arrowhead Indus. Water, 846 F.2d at 734-35. It is
clear that this reasoning applies with equal force in this, an
infringement action of a different sort. Indeed, the central
point of the Declaratory Judgment Act is that a party is not
required to talk until the other party decides to sue. Indeed,
had the threat of "the Sword of Damocles" not been felt by IMS to
any extent, this action would be improper. Hunt Mfg. Co. v.
Fiskars Oy AB, No. Civ.A.97-2460, 1997 WL 667117, at *4 (E.D.Pa.
Oct.2, 1997); see also Genentech v. Eli Lilly & Co.,
998 F.2d 931, 937 (Fed.Cir. 1993). Therefore, I find that the interests of
the parties were adverse at the time of the filing of this
Given this analysis, all aspects of the inquiry delineated by
the Court of Appeals for the Third Circuit in Armstrong World
Indus. v. Adams, 961 F.2d 405, 410 (3d Cir. 1992) and Travelers
Ins. Co. v. Obusek are satisfied in this case, and subject matter
jurisdiction therefore exists over this declaratory judgment
action. Dismissal on the grounds of the lack of a justiciable
case or controversy would consequently be inappropriate.
III. The First-Filed Rule
IMS contends not only that jurisdiction over this action is
proper in this Court, as a justiciable case or controversy
exists, but further that the first-filed rule mandates the
retention of this action here. Vality asserts that because IMS
engaged in forum shopping and acted in bad faith, both of which
constitute exceptions to the firstfiled rule, see EEOC v.
Pennsylvania, 850 F.2d 969, 976 (3d Cir. 1988), that rule
does not require the Court to retain jurisdiction.*fn4 I find
the arguments made by Vality to be unpersuasive.
In brief, the first-filed rule stands for the proposition that
"[i]n all cases of federal concurrent jurisdiction, the court
which first has possession of the subject must decide it."
University of Pennsylvania, 850 F.2d at 971 (internal quotation
omitted). "It gives a court 'the power' to enjoin the subsequent
prosecution of proceedings involving the same parties and the
same issues already before another district court." Id. Though
the rule cannot be applied in an overly rigid fashion "without
regard to rare or extraordinary circumstances, inequitable
conduct, bad faith, or forum shopping," id. at 972, "'courts
must be presented with exceptional circumstances before exercising
their discretion to depart from the first-filed rule.'" Pep
Boys, 1997 WL 367048, at *5 (quoting University of
Pennsylvania, 850 F.2d at 979).
The only the exceptions to the first-filed rule which are
relevant in this case are the two mentioned above: forum shopping
and bad faith. The two inquiries are quite similar, as paramount
in both considerations is the question of whether the first-filed
action was filed in "'apparent anticipation of imminent judicial
proceedings'" by the opposing party. University of
Pennsylvania, 850 F.2d at 977 (quoting Yoder v. Heinold
Commodities, Inc., 630 F. Supp. 756, 760, 761 (E.D.Va. 1986)).
This was explained by the court in Hunt Mfg. Co.:
The purpose of the Declaratory Judgment Act is
"to enable a person caught in controversy to obtain
resolution of the dispute, instead of being forced to
await the initiative of the antagonist." Genentech,
Inc. v. Eli Lilly & Co., 998 F.2d 931, 937
(Fed.Cir. 1993). In many cases, the declaratory
defendant is prepared to, and does, file its own
affirmative suit shortly afterwards. Therefore, a
district court cannot dismiss a proper declaratory
action merely because affirmative infringement
litigation is subsequently brought elsewhere. See [id.]
at 938. It may, however, dismiss the action where it is
shown that the declaratory action was filed in anticipation
of the impending litigation and motivated solely by
considerations of forum shopping. See [Serco Servs. Co.,
L.P. v. Kelley Co., Inc.,] 51 F.3d [1037,] 1040 [(Fed.Cir.
1995)] . . . .
1997 WL 667117, at *3 (emphasis added).
In addition to the foregoing, the bad faith inquiry also
encompasses consideration of the amount of time between the
declaratory and affirmative filings, with a shorter period
indicating bad faith, see Hanson v. Metro-Goldwyn-Mayer Inc.,
932 F. Supp. 104, 106 (S.D.N.Y. 1996), and whether the suit
preemptively foreclosed settlement opportunities. Id. at 107.
In support of its position, Vality analogizes the instant facts
to several cases in which exceptions to the rule were made. In
University of Pennsylvania, the EEOC was prepared to commence
an imminent subpoena enforcement action against the University when
the latter, mindful of precedent in District of Columbia Circuit,*fn5
with which it had no other connection, filed an action in that district.
850 F.2d at 977.
In One World Botanicals, Ltd. v. Gulf Coast Nutritionals,
Inc., the court explicitly indicated the importance of the fact
that the declaratory plaintiff filed its action for a declaratory
judgment "in [conscious] anticipation of [the declaratory
defendant's] infringement action." 987 F. Supp. 317,
329 (D.N.J. 1997). The affirmative suit was filed a mere seven
days after the declaratory judgment action in that case.
In Hanson, the declaratory plaintiffs made no effort at
settlement, as they filed the declaratory judgment action a mere
three days after receiving the cease and desist letter which
sparked their actions. Further, the filing of an affirmative suit
by the declaratory defendant was quite imminent, as that party
indicated that it would begin litigation if a prompt settlement
could not be reached, and that it had a complaint already
prepared when the declaratory judgment action was filed. The
declaratory plaintiff even apologized for the filing of the
declaratory action, given the temporal proximity of the
affirmative filing. See 932 F. Supp. at 106. The Hanson
court also declared that "allowing this action to proceed would
discourage potential plaintiffs from initiating settlement
discussions prior to filing suit." Id. at 107.
Vality specifically argues that the facts of this case are
similar, as IMS deliberately lulled Vality into believing that it
was willing to engage in settlement negotiations and then, in bad
faith, secretly filed this preemptive declaratory judgment
action. (Def.Mem. at 12-13, 15). Vality asserts that in a letter
from Stephen Engber, Vice President of Technical Services of IMS,
to Mark Atkins dated March 25, 1999; the former requested further
negotiations between Vality and IMS. Then, before Vality could
respond, IMS raced to the courthouse and filed this action that
As far as the allegation of forum shopping leveled by Vality
against IMS is concerned, there is no indication that a situation
analogous to that in University of Pennsylvania exists here,
i.e. that practice in this district or the precedent of the Court
of Appeals for the Third Circuit is less conducive in any way to
the success of copyright infringement claims than is practice or
judicial policy in the District of Massachusetts or the
jurisprudence of the Court of Appeals for the First Circuit. This
finding, coupled with the conclusion, below, that an affirmative
filing by Vality was not imminent in the eyes of IMS when it
filed this action, dictates that the first-filed rule will not be
abrogated in this case on forum shopping grounds.
Turning to Vality's argument that IMS acted in bad faith in
filing its declaratory action in this Court, I conclude that
while litigation was in the air here, it does not appear that
such was nearly as imminent as in University of Pennsylvania, One
World Botanicals or Hanson. Numerous deadlines after which
litigation would purportedly ensue had been set by Vality, and
expired without consequence. Indeed, IMS did not file this suit
immediately before such a deadline was to arrive, as did the
declaratory plaintiff in University of Pennsylvania. Nor is
there is any indication whatsoever that a complaint had already been
prepared and was in the possession of Vality when IMS filed this
action, or if that was the case, that IMS was aware of such. Even
were such a showing to be made, IMS is a corporation
headquartered in this district, and has alleged that many of its
witnesses and all of the evidence in its possession are located
here. As was the case in Fundamental Too, Ltd. v. Universal Music
Group, Inc., these circumstances indicate that bad faith or forum
shopping was not the sole motivation behind the actions of IMS.
See No. Civ.A.97-1595, 1997 WL 181255, at *5 (E.D.Pa. Apr.10,
Second, allowing this action to proceed would not provide a
disincentive to settlement, as roughly three and one-half months
passed between the January 14, 1999 meeting and the filing of
this action, during which time they made little if any headway
toward resolving their dispute. While IMS did file this action
the same day it wrote to Vality inviting further negotiations,
this was merely the latest in a lengthy series of exchanges
between the parties. If IMS really was interested in racing to
the courthouse, it seems probable that it would have done so well
three months had passed from the time of the January 14, 1999
Finally, the affirmative filing of Vality did not immediately
follow the institution of this action; rather six weeks passed
before the complaint was filed in Massachusetts. This is a marked
departure from the facts of One World Botanicals, and further
indicates that the filing by IMS of this action was likely not in
anticipation of an imminent affirmative filing by its adversary.
As additional evidence of bad faith, Vality contends that IMS,
having filed this action on March 25, 1999, waited until April
12, 1999 before serving Vality with a copy of the complaint.
(Reply at 1). This, however, is well within the bounds
established by Fed.R.Civ.P. 4(m), and does not indicate bad
faith. See University of Pennsylvania, 850 F.2d at 972 and
One World Botanicals, 987 F. Supp. at 328.
Thus, contrary to Vality's assertions, the cases on which it
relies do not instruct this Court that the bad faith or forum
shopping exceptions to the first-filed rule are applicable here.
The Court concludes, by contrast, that neither exception is
applicable, and the rule mandates that this action remain in this
Court. The Court will therefore not exert its discretion in the
manner suggested by Vality, and will instead exercise
jurisdiction over this declaratory judgment action.
IV. Transfer Pursuant to 28 U.S.C. § 1404(a) or
The distinction between 28 U.S.C. § 1404(a) and §
1406(a) is straightforward: whereas § 1406(a) provides for
the transfer of cases where venue is improper in the transferor
district, § 1404(a) provides for the transfer of cases
between two districts where the action "might have been brought."
28 U.S.C. § 1404(a) (1948); see also 28 U.S.C.A. § 1404
(West Supp. 1999), commentary on 1996 amendment of section 1404
at 30; Jumara v. State Farm Ins. Co., 55 F.3d 873, 878 (3d Cir.
1995). Because the applicability of these statutes turns on
whether venue is proper in the Eastern District of Pennsylvania,
the Court must first resolve that issue.
This is a declaratory judgment action, and therefore, the
statute relevant to the venue inquiry is 28 U.S.C. § 2201.*fn6
However, neither the 1994 agreements nor that statute
contain a special venue provision, and therefore the federal
venue statute, 28 U.S.C. § 1391(b) is controlling. See AMP
Inc. v. Allied Signal Inc., No. CIV.A.98-4405, 1998 WL 967579, at
*1 (E.D.Pa. Nov.18, 1998) (holding that where jurisdiction was
based on 28 U.S.C. § 2201, venue was determined as per
28 U.S.C. § 1391); Am. Cyanamid Co. v. Eli Lilly & Co.,
903 F. Supp. 781, 784 n. 1 (D.N.J. 1995) ("Venue in a declaratory
judgment action . . . is governed by the general venue statute,
codified at 28 U.S.C. § 1391(b).").*fn7
Under the general venue statute:
A civil action wherein jurisdiction is not founded
solely on diversity of citizenship may, except as
otherwise provided by law, be brought only in (1) a
judicial district where any defendant resides, if all
defendants reside in the same State, (2) a judicial
which a substantial part of the events or omissions
giving rise to the claim occurred, or a substantial
part of property that is the subject of the action is
situated, or (3) a judicial district in which any
defendant may be found, if there is no district in which
the action may otherwise be brought.
28 U.S.C. § 1391(b). Here, the Court is particularly
concerned with § 1391(b)(1),*fn8 i.e. whether Vality
"resides" within the Eastern District of Pennsylvania. The
residence of a corporate party is determined by subsection (c) of
that statute, which states: "[f]or purposes of venue under this
chapter, a defendant that is a corporation shall be deemed to
reside in any judicial district in which it is subject to
personal jurisdiction at the time the action is commenced."
28 U.S.C. § 1391(c). Thus, it is this determination of whether
Vality was subject to personal jurisdiction in this district at
the time this action was commenced that the Court must first
Whether personal jurisdiction may be exercised over a
nonresident defendant is a question which depends, first of all,
on the scope of the long arm statute of the forum state. See
Fed.R.Civ.P. 4(e) (authorizing personal jurisdiction over
nonresident defendants to the extent permitted by the law of the
forum state); see also Provident Nat'l Bank v. California Fed.
Sav. & Loan Ass'n, 819 F.2d 434, 436 (3d Cir. 1987).
Pennsylvania's long arm statute, codified at 42 Pa. Cons.Stat.
Ann. § 5322(b) (West 1981 & Supp. 1998), allows courts within
this state to exercise personal jurisdiction over nonresident
defendants to the extent permissible under the federal
constitution. In other words, provided that a particular exercise
of personal jurisdiction is valid under the Constitution of the
United States, it is permissible under Pennsylvania's long-arm
statute. See generally Mellon Bank (E.) PSFS Nat. Ass'n. v.
Farino, 960 F.2d 1217, 1220 (3d Cir. 1992).
Under the federal constitution, specific personal jurisdiction
exists only where the defendant has sufficient minimum contacts
with the forum state "'such that [a defendant] should reasonably
anticipate being haled into court [in the forum state].'" Babn
Techs. Corp. v. Bruno, 25 F. Supp.2d 593, 595-96 n. 1 (E.D.Pa.
1998) (quoting World-Wide Volkswagen Corp. v. Woodson,
444 U.S. 286, 297, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980)). The
"constitutional touchstone" of the specific jurisdiction inquiry
is whether the defendant purposefully established those contacts.
Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474, 105 S.Ct.
2174, 85 L.Ed.2d 528 (1985), quoted in North Penn Gas Co. v.
Corning Natural Gas Corp., 897 F.2d 687, 690 (3d Cir. 1990). A
defendant should not be subjected to jurisdiction in a particular
district "solely as a result of random, fortuitous or attenuated
contacts. . . ." Burger King, 471 U.S. at 475, 105 S.Ct. 2174.
Therefore, "[t]he relationship among the forum, the defendant and
the litigation" must also be taken into account. Mellon Bank
(East), 960 F.2d at 1221 (quoting Shaffer v. Heitner,
433 U.S. 186, 204, 97 S.Ct. 2569, 53 L.Ed.2d 683 (1977)). Once minimum
contacts are demonstrated, the Court must progress to a
determination of whether in personam jurisdiction would comport
with "'traditional notions of fair play and substantial
justice.'" Vetrotex Certainteed Corp. v. Consolidated Fiber Glass
Prods. Co., 75 F.3d 147, 150-51 (3d Cir. 1996) (quoting Int'l
Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95
In Mellon Bank (East), the Court of Appeals for the Third
Circuit held that:
[t]he fact that a non-resident has contracted
with a resident of the forum state is not, by itself,
sufficient to justify
personal jurisdiction over the nonresident. The requisite
contacts, however, may be supplied by the terms of the
agreement, the place and character of prior negotiations,
contemplated future consequences, or the course of dealings
between the parties.
960 F.2d at 1223 (citing Burger King, 471 U.S. at 479, 105 S.
Ct. 2174). The court went on to declare that because the defendants
were aware that they were contracting with a Pennsylvania party,
solicited business within Pennsylvania, supplied personal
financial information and secured the debts upon which the
contract was based with personal guarantees, sufficient minimum
contacts, existed. See id. at 1223-26, 105 S.Ct. 2174.