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Raddison Design Management, Inc. v. Cummins

January 3, 2008


The opinion of the court was delivered by: Judge McLaughlin



This matter is before the Court upon Defendant's Motion to Dismiss for Lack of Subject Matter Jurisdiction.


This action arises out of an agreement entered into between Defendant, Bob Cummins Construction Company and, individually, Bob Cummins (collectively, "Cummins") and Gestion Technomarine International Inc. ("Technomarine"). Cummins, as general contractor, subcontracted with Technomarine in December, 2005, for the design, manufacture and delivery of a floating dock system for the Wolf Run Marina project ("Project") for the United States Department of Agriculture, Forest Service. Technomarine, a Canadian company, agreed to perform the subcontract for $678,325.00. (See Complaint, Ex. A, Subcontract). The subcontract included the following non-assignment clause:

Assignment. Neither this Agreement nor any portion of the proceeds may be assigned by Supplier [Technomarine] without prior notice and approval of Contractor [Cummins].


Technomarine's performance under the subcontract suffered, and Cummins became concerned about defective, incomplete and delayed performance. (See Affidavit of Bob Cummins, ¶¶ 11-17). Cummins was forced to compensate for Technomarine's failure to timely pay its own subcontractors and failure to undertake warranty services for its on work. (Id.) On March 6, 2006, Technomarine commenced bankruptcy proceedings in the provincial Court of Quebec, District of Joliette. (See Affidavit of Michel Lavoie, ¶ 4). On March 15, 2006, a bankruptcy was filed for Technomarine and Raymond Chabot, Inc., was appointed trustee in bankruptcy. Michel Lavoie was named the responsible person. On April 5, 2006, pursuant to a formal bid offering, the trustee sold to Plaintiff Raddison Design Management, Inc., ("Raddison") "all assets, accounts receivable, outstanding contracts, know-how, trademarks, equipment, licenses, etc. of Technomarine International Management Inc." (Cummins Aff., Ex. 1).

On May 1, 2007, Raddison filed the instant Complaint seeking payment under the subcontract and claiming status as an assignee of Technomarine. On July 16, 2007, Cummins filed the instant Motion to Dismiss for lack of subject matter jurisdiction. Cummins asserts that Raddison lacks standing because the assignment of the subcontract was invalid as a matter of state, federal and international law.*fn1 An oral hearing on the motion took place on October 30, 2007.


Subject matter jurisdiction is a mandatory prerequisite to maintaining an action in federal court. Robinson v. Dalton, 107 F.3d 1018, 1020 (3rd Cir. 1997). Where a court lacks subject matter jurisdiction over a case, the case must be dismissed. A federal court may dismiss for lack of jurisdiction only if the claims are "insubstantial on their face," rather than "merely because the legal theory alleged is probably false." St. Vincent Health Center v. Shalala, 937 F.Supp. 496, 501 (W.D. Pa. 1995) (quoting Hagans v. Lavine, 415 U.S. 528 (1974); Kulick v. Pocono Downs Racing Ass'n, 816 F.2d 895, 899 (3rd Cir. 1987). Thus, the threshold for dismissal on a motion attacking subject matter jurisdiction is lower than for a Rule 12(b)(6) motion. NMC Homecare, Inc. v. Shalala, 970 F.Supp. 377, 382 (M.D. Pa. 1977); St. Vincent, 937 F.Supp. at 501 (W.D. Pa. 1995).While the former deals with the ability of the court to entertain the matter, the latter deals with the merits of the claim itself. St. Vincent, 937 F.Supp. at 501.


In the motion to dismiss, Cummins alleges that Raddison is an invalid assignee of the subcontract and, therefore, lacks standing to pursue payment on that instrument. The three requirements for Article III standing are: (a) an injury-in-fact, which is a concrete invasion of a legally protected interest; (2) a causal connection between the injury and the defendants' conduct; and (3) a substantial likelihood that the injury will be redressed by a favorable decision. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992). In addition, in Pennsylvania, an assignee of contractual rights must demonstrate the validity of his ownership of the claim in order to maintain the cause of action. Federal Deposit Ins. Corp. v. Barness, 484 F.Supp. 1134, 1150 (E.D. Pa. 1980).*fn2

The assignment at issue in this case occurred during the liquidation and sale of Technomarine's assets in the course of a Canadian bankruptcy proceeding. As such, in order to attack the assignment's validity, Cummins must demonstrate that the results of the Canadian bankruptcy proceeding are not entitled to comity from a court sitting in the United States. Comity is recognition by one nation, within its own territory, of the validity of legislative, executive or judicial acts of another nation. Hilton v. Guyot, 159 U.S. 113 (1895). Under principles of comity, foreign judgments will not be enforced where a foreign judgment violates "a positive, well defined, universal public sentiment, deeply integrated in the customs and beliefs of the people [of Pennsylvania] and in their conviction of what is just and right and in the interests of the public weal." Somportex Ltd. v. Phila. Chewing Gum Corp., 318 F.Supp. 161 (E.D. Pa. 1970) (quoting Christoff Estate, 192 A.2d 739 (Pa. 1963)).

In determining whether to extend comity and recognize foreign judgments, courts examine whether: (1) the foreign judgment was rendered by a court of competent jurisdiction; (2) the judgment is supported by due allegations and proof; (3) the relevant parties had an opportunity to be heard; (4) the foreign court follows procedural rules; and (5) the foreign proceedings are stated in a clear and formal record. Int'l Transactions, Ltd. v. Embotellardora Agral Regiomontana, 347 F.3d 589, 594 (5th Cir. 2003); Somportex Ltd. v. Phila. Chewing Gum Corp., 453 F.2d 435 (3rd Cir. 1972). Thus, a foreign judgment "cannot be enforced in a U.S. court unless it was obtained under a system with procedures compatible with the [United States law] requirements of due process of law." Int'l Transactions, 347 F.3d at 594.

United States courts "have long extended comity to foreign bankruptcy actions," Victrix S.S. Col., S.A. v. Salen Dry Cargo A.B., 825 F.2d 709, 714 (2nd Cir. 1987), so as to enable "assets of the debtor to be disbursed in an equitable, orderly, and systemic manner, rather than in a haphazard, erratic or piecemeal fashion." Smith v. Dominion Bridge Corp., 33 Bankr. Ct. Dec. 1263 (E.D. Pa. 1999). It is a well-settled principle of comity that "federal courts will recognize foreign bankruptcy proceedings provided the foreign laws comport with due process and fairly treat the claims of local creditors." Victrix, 825 F.2d at 714; see also Philadelphia Gear Corp. v. Philadelphia Gear De Mexico, 44 F.3d 187, 193 (3rd Cir. 1994) ("[W]hen the foreign bankruptcy court shares our 'fundamental principle that assets be distributed equally among creditors of similar standing,' we should be inclined to extend comity.") (citing Remington Rand v. Business Sys. Inc., 830 F.2d 1260, 1266 (3rd Cir. 1987)). Accordingly, American federal courts have uniformly and consistently granted comity to Canadian bankruptcy proceedings because the Canadian Bankruptcy & Insolvency Act, like the United States Bankruptcy Code, "contains a comprehensive procedure for the orderly marshaling and equitable distribution of the Canadian debtor's assets. . .". See, e.g., In re Davis, 191 B.R. 577, 587 (S.D.N.Y. 1996).

Cummins primarily argues that the assignment should not be accorded comity because to do so would violate Pennsylvania public policy. "It is a well established rule of law that a court will not enforce a foreign judgment, be it of a sister state or foreign nation, if to do so would violate the forum's public policy." Somportex, 318 F.Supp. at 168 (citing Christoff Estate, 192 A.2d at 739). In the bankruptcy context, "federal courts must be careful not to force 'American creditors to participate in foreign proceedings in which their claims will be treated in some manner inimical to this country's policy of equality.'" Philadelphia Gear, 44 F.3d at 193 (quoting Remington, 830 F.2d at 1271) (citations omitted). See also Republic of the Philippines v. Westinghouse Elect. Corp., 43 F.3d 65, 75 (3rd Cir. 1994) (holding that "principles of comity cannot compel a domestic court to uphold foreign interests at the expense of the public policies of the forum state."). The Pennsylvania Supreme Court has stated that it will not enforce a foreign judgment which violates "a positive, well defined, universal public sentiment, deeply integrated in the customs and beliefs of the ...

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