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Palmitessa v. Tidewater Builders

June 23, 2006

PAUL J. PALMITESSA & CYNTHIA J. PALMITESSA, PLAINTIFFS,
v.
TIDEWATER BUILDERS, INC., SCOTT SUTHERLAND, JERRY WILES, JOHN GUNTHER, AND ELLIS BARNES, DEFENDANTS.



The opinion of the court was delivered by: Judge McClure

MEMORANDUM

BACKGROUND

On April 20, 2006, plaintiffs Paul and Cynthia Palmitessa filed a twenty-three count complaint involving the alleged defects in defendants' construction of a custom-built home located at 7700 Woodland Drive, Myrtle Beach, South Carolina. Exhibit A to the complaint is a copy of the executed construction contract. Nineteen of the complaint's counts were brought on a breach of contract theory and four additional counts sound in fraud and deceptive business practices. The defendants are a South Carolina corporation and individual residents of South Carolina. The plaintiffs are residents of Pennsylvania. Plaintiffs seek damages in the amount of $250,000.00 in compensatory and punitive damages.

Now before the court are defendants' motion to compel arbitration, motion to dismiss plaintiffs' complaint for lack of personal jurisdiction, motion to dismiss plaintiffs' complaint for insufficiency of service of process, and motion to dismiss plaintiffs' complaint for improper venue. For the following reasons we will deny defendants' motion to dismiss for lack of personal jurisdiction as to the corporate defendant and grant the motion as to the individual defendants, grant defendants' motion to compel arbitration, dismiss plaintiffs' complaint, direct the clerk to close the case file, and dismiss defendants' motions to dismiss plaintiffs' complaint for improper venue and for insufficiency of service of process as moot.

DISCUSSION

I. Statement of Relevant Facts

Plaintiffs are residents of Pennsylvania who contracted with defendant Tidewater Builders, Inc. to build a custom home in Myrtle Beach, South Carolina. The defendants are a South Carolina construction company and several employees of the company. In February 2005, after placing a telephone call to Palmitessa, Tidewater mailed the construction contract to plaintiff Paul Palmitessa in Pennsylvania. He signed the contract on February 5, 2005 in Pennsylvania.

Article 22 of the contract provides:

Attorney's Fees/Arbitration. If it becomes necessary for either party to enforce provisions of this Contract or to obtain redress for the violation of any provisions hereof, whether by litigation, arbitration, or otherwise, the prevailing party, in addition to any recovery obtained in such action, shall be entitled to reasonable attorney's fees, court costs, and other legal fees incurred herein. Any controversy or claim arising out of or relating to this Contract, or the breach thereof, shall be settled by arbitration pursuant to South Carolina law and in accordance with the Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrator(s) may be entered in any Court having jurisdiction thereof. Either party may initiate arbitration. (Rec. Doc. No. 1, Ex. A, at 5.)

Plaintiffs' complaint alleges nineteen claims of breach of contract and four claims of fraud and deceptive business practices stemming from the construction of the home.

II. Motion to Dismiss for Lack of Personal Jurisdiction Pursuant to Fed. R. Civ. P. 12(b)(2)

The court has subject matter jurisdiction under 28 U.S.C. § 1332. Defendants assert that we lack personal jurisdiction over defendants and have filed a motion to dismiss on those grounds under Federal Rule of Civil Procedure 12(b)(2). Defendants assert that plaintiffs' claims do not arise from any alleged activity in the Commonwealth of Pennsylvania and that defendants do not have the necessary continuous or systematic contacts with Pennsylvania that would allow us to exercise personal jurisdiction over the South Carolina defendants. Plaintiffs' brief in opposition indicates that plaintiffs looked for builders while they were visiting South Carolina. It also asserts that defendant Gunther placed a telephone call to Paul Palmitessa at his Pennsylvania business in February 2005 indicating that a construction contract would be sent to Pennsylvania. Days later a construction contract arrived at plaintiffs' residence in Pennsylvania and Palmitessa signed the contract and returned it to Tidewater's offices in South Carolina. The brief in response also indicates that defendants entered into a series of communications with Mr. Palmitessa in Pennsylvania during the construction of the home from February 2005 to September 9, 2005.

Under Federal Rule of Civil Procedure 4(e) a district court applies "the law of the forum state in determining whether personal jurisdiction is proper." Vetrotex Certainteed Corp. v. Consol. Fiber Glass Prod. Co., 75 F.3d 147, 160 (3d Cir. 1996); see Pennzoil Prod. Co. v. Colelli & Assocs., Inc., 149 F.3d 197, 200 (3d Cir. 1998). Pennsylvania's long-arm statute, codified at 42 Pa. C.S.A. § 5322(b), authorizes Pennsylvania courts to "exercise personal jurisdiction over nonresident defendants to the constitutional limits of the due process clause of the fourteenth amendment." Mellon Bank (East) PSFS, Nat'l Ass'n v. Farino, 960 F.2d 1217, 1221 (3d Cir. 1992).

Under the Constitution, personal jurisdiction over a nonresident defendant is appropriate only if the defendant has "minimum contacts" with the forum state such that a suit in that state does not "offend traditional notions of fair play and substantial justice." Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). There is no fixed standard for assessing "minimum contacts", but there must exist "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 (1958) (citing ...


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