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Philadelphia Macaroni Co. v. Italpasta Limited

April 20, 2010

PHILADELPHIA MACARONI COMPANY PLAINTIFF,
v.
ITALPASTA LIMITED, DEFENDANT.



The opinion of the court was delivered by: Eduardo C. Robreno, J.

MEMORANDUM

Presently before the Court is the motion to dismiss for lack of personal jurisdiction filed by Defendant Italpasta Limited. For the reasons stated herein, the Court concludes that the exercise of specific jurisdiction is proper under the circumstances of this case, therefore the motion will be denied.

I. BACKGROUND

This action arises from a dispute over a master supply order entered into by and between Plaintiff Philadelphia Macaroni Company ("PMC") and Defendant Italpasta Limited ("Italpasta") concerning the delivery of flour to Italpasta. PMC is incorporated under the laws of Pennsylvania and operates a wheat milling plant in Minot, North Dakota under the registered business name Minot Milling ("Minot"). Italpasta is a Canadian company located in Brampton, Ontario and produces and sells pasta products.

The exact origin of the parties' business relationship is disputed, however, both PMC and Italpasta agree that the initial contact between the companies was in 1998.*fn1 PMC alleges that Joe Vitale ("Vitale"), Italpasta's President, placed a phone call to James Streetar ("Streetar"), then-President of Minot, at some time in 1998. Italpasta counters that Streetar made the initial call to Italpasta to inquire about potentially selling flour to Italpasta. Italpasta claims that Streetar was its exclusive business contact for Minot until the time of his retirement at the end of 2008.

Regardless of how the parties' relationship began, both parties agree that during the period from 1998 until 2008, Italpasta and PMC (through Minot) entered into a series of master orders for the sale of large quantities of flour. After the parties completed negotiations with respect to price, quantity and a time frame for delivery, Streetar would memorialize these terms in his office in Minnesota and send copies to Vitale in Canada. Vitale would then return a signed copy of the master order to Streetar, at which point Streetar would inform PMC in Philadelphia of the relevant terms of the new agreement. In September 2005, Minot began the practice of including an expiration date in the terms of the master orders. (Vitale Dec. ¶¶ 22-23.)

Streetar arranged for the product covered by a relevant master order to be stored at a rail terminal in Guelph, Ontario. Italpasta would then contact the rail transfer station to request that a particular quantity of truckloads of flour be delivered to Italpasta's facility by Polymer Distribution, Inc. ("Polymer"). Streetar would monitor the inventory levels at the rail transfer station to ensure that sufficient flour was available to satisfy the relevant master order. When the full quantity of flour under a master order was delivered, the parties would negotiate a new master order for future purchases. In essence, each master order would provide that a particular amount of flour would be available at the transfer station at Italpasta's request, and upon depletion of that inventory, the parties would negotiate a replacement master order in accordance with the fluctuation in the price of wheat.

PMC claims that during the parties' ten-year relationship, Italpasta would occasionally telephone PMC's employees in Philadelphia concerning invoices and billing. PMC further asserts that Italpasta paid for its purchases by mailing checks to PMC's Philadelphia office.

Independent of its dealings with PMC, Italpasta utilizes independent sales brokers in order to distribute its products throughout the United States. (Fiorelli Dec. ¶ 9.) Since 2000, Italpasta has engaged in sales of its pasta products to customers in Pennsylvania totaling over $5.6 million, which amounts to 0.76% of its gross sales for that period. (Id. ¶ 6.) In 2008 and 2009, Italpasta's total sales in Pennsylvania were $263,453 (.023% of gross sales) and $7,287 (.01% of gross sales), respectively. (Id. ¶¶ 7-8.)

On March 25, 2008, the parties entered into master order number 1545 ("MD 1545"), pursuant to which Minot was required to ship 100,000 hundred weight units (CWT) of ward seminola flour. MD 1545 covered the draw-down period of June 1, 2008 to August 30, 2008. The crux of the instant litigation is whether PMC (through Minot) timely delivered the flour to Italpasta's Ontario facility in accordance with the terms and conditions of MD 1545. PMC claims that it continually supplied flour to Italpasta according to its inventory needs, but that Italpasta did not finish drawing down on the previous master order, master order 1512 ("MD 1512"), until after August 2008. PMC claims that once Italpasta exhausted the available supply under MD 1512, it sought to draw on the supply provided by MD 1545, but that by this time wheat prices had dropped and Italpasta then sought to procure flour under more favorable terms, thereby breaching MD 1545. Italpasta counters that PMC is in breach of MD 1545 because no shipments of flour were delivered pursuant to MD 1545 until after the August 30, 2008 expiration date, and that Italpasta received limited shipments under MD 1545 only until October 2, 2008.

On June 2, 2009, Italpasta filed an action in the Ontario Superior Court of Justice against PMC alleging a breach of contract. See Italpasta Limited v. Philadelphia Macaroni Company, CV-09-379-996 (the "Canadian Litigation"). The Canadian Litigation was filed four days after the instant case. It encompasses the identical claim that is before this Court. PMC filed a Notice of Intent to Defend in the Canadian Litigation, and PMC does not argue that it will not participate in the Canadian Litigation or contest jurisdiction in Canada. Italpasta contends that it was unaware of the instant proceeding at the time it commenced the Canadian Litigation. The pleadings have closed in the Canadian Litigation and discovery is underway.

On October 5, 2009, the Court held a hearing on Italpasta's motion to dismiss. Thereafter, the Court granted the parties leave to conduct jurisdictional discovery and file supplemental briefs with respect to the question of jurisdiction. The Court held a subsequent evidentiary hearing on April 14, 2010 at which the parties relied upon affidavits and deposition testimony. No live testimony was offered. The motion to dismiss is now ripe for adjudication.

II. APPLICABLE LAW

A. Personal Jurisdiction

Federal Rule of Civil Procedure 4(e) authorizes a district court to exercise personal jurisdiction "over non-resident defendants to the extent permissible under the law of the state where the district court sits." Pennzoil Prod. Co. v. Colelli & Assocs., Inc., 149 F.3d 197, 200 (3d Cir. 1998) (internal citation omitted). Thus, the relevant starting point for the Court's analysis is Pennsylvania's long-arm statute, 42 Pa. C.S. § 5322(b). This statute permits Pennsylvania courts, and by extension this Court, "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); see 42 Pa. C.S. § 5322(b) ("[T]he jurisdiction of the tribunals of this Commonwealth shall extend... to the fullest extent allowed under the Constitution of the United States and may be based on the most minimum contacts with this Commonwealth allowed under the Constitution of the United States.").

Since Pennsylvania's long-arm statute is coextensive with the due process limitations of the federal Constitution, the focal point of the Court's inquiry is whether the exercise of personal jurisdiction is consistent with the well-established constitutional standard of a non-resident defendant having "certain minimum contacts with [the forum state] such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice." Marten v. Finchuam, 499 F.3d 290, 296 (3d Cir. 2007) (citing Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)); see also Vetrotex Certainteed Corp. v. Consol. Fiber Glass Prods. Co., 75 F.3d 147, 150 (3d Cir. 1996) (noting that federal constitutional doctrine is determinative with respect to personal jurisdiction over non-residents in Pennsylvania). The purpose of requiring such minimum contacts is to provide "fair warning" to a non-resident as to the possibility of being subject to suit in a foreign jurisdiction. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985) (quoting Shaffer v. Heitner, 433 U.S. 186, 218 (1977) (Stevens, J., concurring in judgment)). In light of this underlying purpose, the Supreme Court has instructed that "minimum contacts must have a basis in '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.'" Asahi Metal Indus. Co., Ltd. v. Superior Court of Cal., 480 U.S. 102, 109 (1987) (quoting Burger King, 471 U.S. at 475).

Consistent with these principles of due process, this Court may exercise personal jurisdiction over a non-resident under two independent theories: (1) general jurisdiction; and (2) specific jurisdiction. General jurisdiction requires a party to litigate in a forum state regardless of whether the defendant's contacts with the forum state relate to the underlying cause of action. Helicopteros Nacionales de Colombia v. Hall, 466 U.S. 408, 414 (1984); Mellon Bank, 960 F.2d at 1221. Since general jurisdiction may be invoked when the cause of action arises from a defendant's non-forum ...


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