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SUPERIOR PRECAST v. SAFECO CO. OF AMERICA

October 4, 1999

SUPERIOR PRECAST, INC.
v.
SAFECO INS. CO. OF AMERICA.



The opinion of the court was delivered by: Giles, Chief Judge

    MEMORANDUM

Superior Precast, Inc. ("Superior") brings this diversity action to recover from Safeco Insurance Co. of America ("Safeco"), as surety, money owed for materials and work that Superior performed on a construction project in Allegheny County, Pennsylvania. Now before the court are three separate motions of Safeco. For the reasons stated below, this court denies Safeco's Motion to Dismiss for Improper Venue, pursuant to Fed.R.Civ.P. 12(b)(3); denies Safeco's Motion to Transfer the Case for the convenience of the parties, pursuant to 28 U.S.C. § 1404(a); and grants Safeco's Motion to Dismiss Count II of the Amended Complaint, pursuant to Fed.R.Civ.P. 12(b)(6).

Background

Factual Background

According to the Amended Complaint, non-party A & L, Inc. ("A & L") was the general contractor on a highway construction project located in Allegheny County, Pennsylvania, known as Phase I of the Airport/Busway/Wabash HOV facility. The Port Authority of Allegheny County was the project owner. Superior negotiated directly with A & L and alleges that it understood that it was to be designated as the supplier of sound wall materials for the project. Safeco issued a labor and material payment bond on behalf of A & L as general contractor and for the protection of subcontractors, materialmen, and suppliers providing labor, equipment, and materials for the project.

Although Superior generally received purchase orders for sound wall materials from Global Consultants, Inc. ("Global"), a subcontractor, Superior alleges that it dealt directly with A & L on all issues relating to the sound wall materials. Various problems allegedly arose during the course of the construction project, relating primarily to timely payment to Superior and increased costs of production due to limitations placed on Superior's ability to use anticipated suppliers and subcontractors for its work. Superior and A & L negotiated directly to resolve some of the payment issues, meeting in Superior's plant in Pottstown, Pennsylvania and exchanging correspondence in an effort to arrange an agreement. Superior alleges that it completed its last substantial work on the project in December 1998 and avers that all labor and materials it furnished were approved and accepted by the Port Authority. According to the Amended Complaint, however, A & L and/or Global refused to pay for all costs and materials, leaving an unpaid balance of $761,109.55. In September 1998, Superior provided written notice of its claim for unpaid balances to the Port Authority, A & L, and Safeco, as surety for A & L.

Procedural History

Superior commenced the instant action against Safeco on March 9, 1999 in the Court of Common Pleas of Montgomery County; Superior filed a Complaint in that court on May 14, 1999. On June 3, Safeco removed the case to this court, pursuant to 28 U.S.C. § 1441(a), invoking this court's diversity jurisdiction pursuant to 28 U.S.C. § 1332.

Safeco then filed a motion, seeking relief from this complaint on any of three alternative grounds: 1) dismissal, pursuant to Fed.R.Civ.P. 12(b)(3), for improper venue; 2) transfer of the case to the Western District of Pennsylvania, pursuant to 28 U.S.C. § 1404(a), for the "convenience of parties and witnesses, in the interest of justice:" and 3) dismissal, pursuant to Fed.R.Civ.P. 12(b)(6), for failure to state a claim. In the last alternative, Safeco moved, pursuant to Fed.R.Civ.P. 12(e), for a more definite statement of the plaintiff's claim. Superior responded to the two venue motions and filed its Amended Complaint, rendering the Rule 12(b)(6) and 12(e) motions moot. Because the Amended Complaint did not cure any venue problems, the venue motions have not been rendered moot and remain properly before this court. Safeco then filed a second motion pursuant to Fed.R.Civ.P. 12(b)(6), seeking to dismiss only Count II of the Amended Complaint, which asserts a claim under the Pennsylvania Bad Faith Statute, 42 Pa.C.S. § 8371; Safeco argues that a § 8371 action, as a matter of law, is unavailable in the instant action to recover against a surety.

Discussion

This court has jurisdiction over this matter based on diversity of citizenship between the corporate parties, where Superior is a Michigan corporation with its principal place of business in Pottstown, Pennsylvania, and Safeco is a Washington corporation with its principal place of business in Seattle, Washington. See 28 U.S.C. § 1332(a)(1), 1332(c)(1) (stating that a corporation is a citizen for diversity purposes of its state of incorporation, and the state in which it has its principal place of business).

Motion to Dismiss for Improper Venue

Safeco first argues, pursuant to Fed.R.Civ.P. 12(b)(3), that venue is not properly laid in this judicial district and this matter therefore should be dismissed or transferred to another district. See 28 U.S.C. § 1406(a) ("The district court of a district in which is filed a case laying venue in the wrong . . . district shall dismiss, or if it be in the interest of justice, transfer such case to any district . . . in which it could have been brought."). Safeco removed the case to this court because it is the district embracing Montgomery County, the place where the action was pending. See 28 U.S.C. § 1441(a) (providing for removal to the district court for the district embracing the place where the action is pending). Safeco's removal of the case to this court did not waive its right subsequently to object to this court's venue; rather, this court after removal takes up the case where the state court procedurally left off and can address procedural issues such as venue. See Fillmore Mercantile, Inc. v. ETM Entertainment Network, Inc., No. 98-4133, 1999 WL 178547, *5 (E.D.Pa. 1999) (Waldman, J.) (quoting Dunn, By and Through Tatum v. Skate 22, Inc., 1997 WL 786439, *1 (E.D.Pa. 1997) (Reed, J.)); see also Lambert v. Kysar, 983 F.2d 1110, 1113 n. 2 (1st Cir. 1993) (stating that it is well settled that the filing of a removal petition, without more, does not waive the right to challenge venue in federal court); 14C Charles Alan Wright, Arthur R. Miller, Edward H. Cooper. Federal Practice and Procedure § 3726 (3d ed. 1998).

Contrary to Safeco's suggestion, as the defendant, it bears the burden of proving its affirmative defense and showing that venue is improper on a motion to dismiss. Myers v. American Dental Ass'n, 695 F.2d 716, 724-25 (3d Cir. 1982), cert. denied, 462 U.S. 1106, 103 S.Ct. 2453, 77 L.Ed.2d 1333 (1983); Frontier Ins. Co. v. National Signal Corp., No. 98-4265, 1998 WL 778333, *4 (E.D.Pa. 1998) (Giles, J.). As noted supra, this court's jurisdiction is founded solely on diversity. In such a case, venue is controlled by 28 U.S.C. § 1391(a) and is proper only in:

  (1) a judicial district where any defendant resides, if all
  defendants reside in the same State, (2) a judicial district in
  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 is subject to personal
  jurisdiction at the time the action is commenced, if there is
  no district in which the action may otherwise be brought.

A plaintiff need satisfy only one of the three in order for venue to be proper. Superior argues that venue is proper under both (a)(1) and (a)(2).

§ 1391(a)(1)

Because Safeco is the only defendant in this case, all the defendants do reside in Pennsylvania. The first element of § 1391(a)(1) is satisfied. As to the second element, the question of where a corporate defendant such as Safeco resides for purposes of § 1391(a)(1) is controlled by 28 U.S.C. § 1391(c), which provides:

  [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. In a State
  which has more than one judicial district and in which a
  defendant that is a corporation is subject to personal
  jurisdiction at the time an action is commenced, such
  corporation shall be deemed to reside in any district in that
  State within which its contacts would be sufficient to subject
  it to personal jurisdiction if that district were a separate
  State.

Pennsylvania is a state that has more than one judicial district. This court must undertake a two-part inquiry: 1) Is Safeco subject to personal jurisdiction in Pennsylvania; and 2) If the Eastern District of Pennsylvania were a separate state, is Safeco subject to personal jurisdiction here. If the answer to both questions is yes, then Safeco is deemed to reside in the Eastern District of Pennsylvania and venue is proper in this district. See Zinn v. Gichner Sys. Group, No. 93-5817, 1994 WL 116014, *2 (E.D.Pa. 1994) (Yohn, J.). There is no question that Safeco is subject to personal jurisdiction in this state and Safeco does not contend otherwise.

This court thus addresses the second, and central, question by engaging in a fictitious personal jurisdiction analysis. Id. A federal district court sitting in diversity exercises personal jurisdiction over non-resident defendants to the extent permissible under the laws of the state in which the court sits. Grand Entertainment Group v. Star Media Sales, Inc., 988 F.2d 476, 481 (3d Cir. 1993). Personal jurisdiction may be specific, in that the cause of action arises from the defendant's activities within the forum state, or general, in that the defendant has sufficient continuous and systematic contacts with the forum state as to be subject to jurisdiction there for all purposes. See Provident Nat'l Bank v. California Fed. Sav. & Loan Ass'n, 819 F.2d 434, 437 (3d Cir. 1987). Because this court concludes that there is general jurisdiction over Safeco in this district, it will not reach the question of specific jurisdiction.

Under Pennsylvania law, a court may have general jurisdiction over a foreign corporation that carries on "a continuous and systematic part of its general business within this Commonwealth." 42 Pa. C.S. § 5301(a)(2)(iii). Pennsylvania law also permits courts to exercise jurisdiction to the fullest extent permitted by the Due Process Clause of the Fourteenth Amendment to the United States Constitution. 42 Pa.C.S. § 5322(b). Due process permits the assertion of general jurisdiction over defendants with continuous, systematic, and substantial general business contacts or affiliations with the forum, Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 416, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984); Provident Nat'l Bank, 819 F.2d at 437, particularly where those contacts are "central to the conduct" of the defendant's business or those contacts are the "bread and butter of its daily business." Id. at 438. As a general rule, this looks to whether a defendant regularly solicits business in the particular forum or advertises in a way specifically targeted at the forum market. See Zinn, 1994 WL 116014. at *4 (citing cases). The evidence before this court shows that Safeco maintains a regional business office in Bala Cynwyd, Pennsylvania, within this judicial district. It also advertises the fact that it has several surety agents located and available in and around the City of Philadelphia to issue and provide bonds. These are sufficiently continuous, substantial, and systematic, and sufficiently central to Safeco's business of providing surety bonds, to satisfy the statutory and constitutional requirements for general jurisdiction within this district.*fn1 Thus Safeco would be subject to general personal jurisdiction in the Eastern District of Pennsylvania if this district were its own state, Safeco can be said to reside in this district, and this district is a proper venue pursuant to §§ 1391(a)(1) and (c).

§ 1391(a)(2)

Alternatively, venue is proper in this court if substantial events or omissions relating to this action occurred in this judicial district. 28 U.S.C. § 1391(a)(2). Venue is concerned with the location of the events and omissions underlying the claim and requires that those events be "substantial" to the dispute; events or omissions having only a tangential connection with the dispute are not enough. Cottman Transmission Sys., Inc. v. Martino, 36 F.3d 291, 294 (3d Cir. 1994). Importantly, a court considering § 1391(a)(2) is not required to determine the "best" forum or the forum with the most substantial events, id.; rather more than one federal district may be the site of substantial events or omissions and therefore more than one federal district may be a proper venue in a given case. See BABN Technologies Corp. v. Bruno, 25 F. Supp.2d 593, 597 (E.D.Pa. 1998) (Reed, J.); School Dist. of Philadelphia v. Pennsylvania Milk Mktg. Bd., 877 F. Supp. 245, 249 (E.D.Pa. 1995) (Joyner, J.).

In assessing the substantiality of the events or omissions, this court must examine the nature of the dispute. Cottman, 36 F.3d at 295. This action is at bottom one for breach of the supply contract and recovery of moneys owed on the contract between Superior and A & L or Global; the relevant events and omissions surrounding that supply contract are the subject of the venue inquiry.*fn2 Courts in this district generally look to the place of performance of a contract in determining whether venue is proper. See J.L. Clark Mfg. Co. v. Gold Bond Corp., 629 F. Supp. 788, 791 (E.D.Pa. ...


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