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Peter Guzzi v. Joseph Morano and U.S. Benefit Partners LLC

October 6, 2011

PETER GUZZI, PLAINTIFF,
v.
JOSEPH MORANO AND U.S. BENEFIT PARTNERS LLC, DEFENDANTS.



The opinion of the court was delivered by: Buckwalter, S. J.

MEMORANDUM

Currently pending before the Court is Defendants' Motion to Dismiss Plaintiff's Amended Complaint for Lack of Jurisdiction and/or for Failure to State a Claim, or, in the Alternative, to Transfer for Forum Non Conveniens. For the following reasons, the Motion is denied in its entirety.

I. FACTUAL BACKGROUND

According to the facts set forth in the First Amended Complaint, Defendant U.S. Benefit Partners, LLC ("USBP") is in the business of, among other things, selling insurance policies through large marketing channels. (Am. Compl. ¶ 16.) In April of 2005, Plaintiff Peter Guzzi entered into a verbal agreement with Defendant USBP and its part-owner, Defendant Joseph Morano, whereby Defendants agreed to pay Plaintiff one-third of USBP's gross profits on distribution channels secured by the Plaintiff. (Id. ¶ 17.) As a direct result of Plaintiff's efforts, USBP secured several high level contracts. (Id. ¶ 18.) In addition, USBP secured distribution relationships that totaled more than four million dollars in revenue. (Id. ¶ 19.)

In March 2007, Defendants "wrongfully" terminated their agreement with Plaintiff. (Id. ¶¶20-21.) Despite Plaintiff's efforts and success and despite his generation of significant revenue for the Defendants, Defendants did not compensate him pursuant to the agreement. (Id. ¶ 22-23.) Likewise, Plaintiff was not compensated for future revenue for application renewals, as provided in the oral contract. (Id. ¶ 24.) Ultimately, at the time of Defendants' breach, Plaintiff was owed commissions and/or salary in excess of $175,000, plus future profits on insurance contract renewals. (Id. ¶ 25.) Despite his demands, these amounts have not been paid by Defendants. (Id. ¶ 26.)

On March 15, 2010, Plaintiff initiated the present litigation. Following some initial motion practice, Plaintiff filed a First Amended Complaint on March 18, 2011, setting forth three causes of action. Count I alleges breach of contract. (Id. ¶¶ 31-34.) Count II claims a violation of the Pennsylvania Wage Payment and Collection Law, 43 Pa.C.S § 260.2a. (Id. ¶¶ 35-42.) Finally, Count III seeks an accounting of the precise sums owed to him under the aforementioned contract. (Id. ¶¶ 43-46.) Plaintiff further alleges that Defendant Morano intermingled USBP's corporate funds with his own funds and diverted corporate funds for his own use, thereby making USBP his "alter ego." (Id. ¶ 27.) Accordingly, Plaintiff asserts that the corporate veil should be pierced, making Defendant Morano personally liable for any breach of contract by USBP. (Id. ¶¶ 28-29.)

On April 1, 2011, Defendants filed the present Motion to Dismiss for Lack of Jurisdiction, Motion to Dismiss for Failure to State a Claim, or, in the Alternative, Motion to Transfer this Action for Forum Non Conveniens. Following receipt of an extension of time, Plaintiff filed his Response in Opposition on June 17, 2011. Defendants filed a Reply Brief on July 28, 2011, Plaintiff submitted a Sur-reply Brief on August 29, 2011, and Defendants filed a Reply to Plaintiff's Sur-reply on September 14, 2011.

Faced with this broad-reaching Rule 12 Motion, the Court turns first to Defendants' personal jurisdiction argument. Second, the Court discusses Defendants' Motion to Dismiss for failure to state a claim. Finally, the Court considers the Motion to Dismiss for forum non conveniens.

II. MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION*fn1

A. Standard for Motion to Dismiss for Lack of Personal Jurisdiction

Motions to dismiss for lack of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2) require the court to accept as true the allegations of the pleadings and all reasonable inferences therefrom, and to resolve all factual disputes in favor of the plaintiff. Fed. R. Civ. P. 12(b)(2); see also Pinker v. Roche Holdings Ltd., 292 F.3d 361, 368 (3d Cir. 2002). The Rule, however, "does not limit the scope of the court's review to the face of the pleadings"; rather the court must consider any affidavits submitted by the parties. Scott v. Lackey, No. Civ.A.02-1586, 2005 WL 2035598, at *1 (M.D. Pa. Aug. 11, 2005).

Although a defendant has the initial burden of raising the defense of lack of personal jurisdiction, once such a defense is raised, the burden shifts to the plaintiff to demonstrate facts that suffice to support an exercise of personal jurisdiction. Provident Nat. Bank v. Cal. Fed. Sav. & Loan Ass'n, 819 F.2d 434, 437 (3d Cir. 1987); Cumberland Truck Equip. Co. v. Detroit Diesel Corp., 401 F. Supp. 2d 415, 418 (E.D. Pa. 2005). Plaintiff may do so through affidavits or competent evidence that show sufficient contacts with the forum state. De Lage Landen Fin. Servs., Inc. v. Rasa Floors, LP, No. Civ.A.08-0533, 2008 WL 4822033, at *3 (E.D. Pa. Nov. 4, 2008). Such contacts must be established with "reasonable particularity," to present a prima facie case. Mellon Bank (East) PSFS, Nat'l Ass'n v. Farino, 960 F.2d 1217, 1223 (3d Cir. 1992) (quoting Provident, 819 F.2d at 437). If the plaintiff meets this burden, the defendant must then establish the presence of other considerations that would render personal jurisdiction unreasonable. De Lage, 2008 WL 4822033, at *3 (citing Carteret Sav. Bank v. Shushan, 954 F.2d 141, 150 (3d Cir. 1992)).

B. Discussion

Under Federal Rule of Civil Procedure 4(k)(1)(A), a federal court may exercise personal jurisdiction over a non-resident defendant to the extent provided by the law of the state in which the federal court sits. Fed. R. Civ. P. 4(k)(1)(A); see also Martin v. Citizens Fin. Group, Inc., No. Civ.A.10-260, 2010 WL 3239187, at *3 (E.D. Pa. Aug. 13, 2010). Pennsylvania law, which governs the present case, necessitates the application of Pennsylvania's long-arm statute, 42 Pa. C.S. § 5322. Under this statute, personal jurisdiction of Pennsylvania courts over nonresident defendants is permitted "to the fullest extent allowed under the Constitution of the United States and may be based on the most minimum contact with this Commonwealth allowed under the Constitution of the United States." 42 PA. CONS. STAT. § 5322(b); see Mellon Bank, 960 F.2d at 1221 ("The Pennsylvania statute permits the courts of that state to exercise personal jurisdiction over nonresident defendants to the constitutional limits of the due process clause of the fourteenth amendment."). Therefore, a court need only inquire whether the exercise of personal jurisdiction over the defendant would be constitutional under the Due Process Clause. Mellon Bank, 960 F.2d at 1221. Pursuant to such constitutional considerations, physical presence within the forum is not required to establish personal jurisdiction over a nonresident defendant. IMO Indus., Inc. v. Kiekert AG, 155 F.3d 254, 259 (3d Cir. 1998). Instead, personal jurisdiction may be based on either a defendant's general contacts or his specific contacts with the forum. Gen. Elec. Co. v. Deutz AG, 270 F.3d 144, 150 (3d Cir. 2001).

"General jurisdiction depends on a defendant having maintained 'continuous and systematic contacts' with the forum state." D'Jamoos es rel. Weingeroff v. Pilatus Aircraft Ltd., 566 F.3d 94, 107 (3d Cir. 2009) (citing Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 415-16 (1984)). Proof of such contact requires a showing of "extensive and pervasive" activity in the forum state. See Reliance Steel Prods. Co. v. Watson, Ess, Marshall, & Engass, 675 F.2d 587, 589 (3d Cir. 1982) (quotations omitted). The defendant's contacts need not be related to the cause of action being litigated. McMullen v. Eur. Adoption Consultants, Inc., 109 F. Supp. 2d 417, 418 (W.D. Pa. 2000). If the foreign defendant "maintains 'continuous and systematic' contacts with a state, the state has general personal jurisdiction over the party, and the non-resident may be sued in that state on any claim." Wilmington Fin., Inc. v. Moonis, No. Civ.A.08-2365, 2008 WL 4661033, at *3 (E.D. Pa. Oct. 21, 2008) (quotations omitted).

In the absence of "continuous and systematic" contacts, a plaintiff may rely on "specific jurisdiction" where the cause of action is related to or arises out of the defendant's contacts with the forum. IMO Indus., 155 F.3d at 259 (citing Helicopteros, 466 U.S. at 414 n.8). Proper establishment of specific jurisdiction under the Due Process Clause requires satisfaction of a three-part test.*fn2 Louis A. Grant, Inc. v. Hurricane Equip., Inc., No. Civ.A07-438, 2008 WL 892152, at *3 (W.D. Pa. Apr. 2, 2008). First, the plaintiff needs to show that the defendant has "constitutionally sufficient 'minimum contacts' with the forum." IMO Indus., 155 F.3d at 259 (citingBurger King Corp. v. Rudzewicz, 471 U.S. 462, 474 (1985)). Second, the plaintiff's claim must "arise out of or relate to those activities." Helicopteros, 466 U.S. at 414. Third, the reviewing court should consider additional factors to ensure that the exercise of jurisdiction otherwise "comport[s] with 'fair play and substantial justice.'" Burger King, 471 U.S. at 476 (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 320 (1945)); see also O'Connor v. Sandy Lane Hotel Co., Ltd., 496 F.3d 312, 317 (3d Cir. 2007) (enumerating the three elements of specific jurisdiction).

In the present case, Plaintiff does not assert that the Court has general jurisdiction over the Defendants. Rather, he claims that Defendants have minimum contacts with Pennsylvania, from which the present dispute arises, such that this Court's exercise of jurisdiction over them will not violate traditional notions of fair play and substantial justice. Defendants, in turn, respond that any contacts with Pennsylvania are too attenuated to constitutionally allow for the extension of personal jurisdiction over them. In an effort to resolve this dispute, the Court now turns to an analysis of the three steps enumerated by the Supreme Court.

1. Whether Defendants Have Sufficient Minimum Contacts with Pennsylvania to Warrant the Exercise of Personal Jurisdiction

To satisfy the first two components of the specific jurisdiction test, the acts identified by plaintiff must be "such that [the defendant] should reasonably anticipate being haled into court [in the forum state]." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980). It has long been recognized that minimum contacts necessary to support specific jurisdiction exist only where the defendant "has purposefully directed its activities toward the residents of the forum state . . . or otherwise 'purposefully avail[ed] itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.'" IMO Indus,, 155 F.3d at 259 (quoting Hanson v. Denckla, 357 U.S. 235, 253 (1958) (other internal quotations omitted)). "This test is intended to protect a non-resident defendant from jurisdiction based on contacts that are 'random, fortuitous,' or 'attenuated,' or that result from the unilateral activity of another party or a third person." Pullman Fin. Corp. v. Hotaling, No. Civ.A.07-1703, 2008 WL 2563372, at *4 (W.D. Pa. June 24, 2008) (quoting Burger King, 471 U.S. at 475). As noted by the United States Court of Appeals for the Third Circuit, "in the course of this necessarily fact-sensitive inquiry, the analysis should hew closely to the reciprocity principle upon which specific jurisdiction rests . . . . With each purposeful contact by an out-of-state resident, the forum state's laws will extend certain benefits and impose certain obligations . . . . specific jurisdiction is the cost of enjoying the benefits." O'Connor, 496 F.3d at 323 (internal citations omitted).

In the context of a contract dispute between residents of different states, "[m]erely entering into a contract with a forum resident does not subject a nonresident to personal jurisdiction." Quandel Grp. v. Chamberlin Co., Inc., No. Civ.A.98-5762, 1999 WL 382878, at *2 (E.D. Pa. June 14, 1999) (citations omitted). Nonetheless, "[i]t is sufficient for purposes of due process that the suit was based on a contract which had substantial connection with [the forum] State." McGee v. Int'l Life Ins. Co., 355 U.S. 220, 223 (1957). The question of who initiated the relationship is less significant than "the intention to establish a common venture extending over a substantial period of time." Gen. Elec. Co. v. Deutz AG, 270 F.3d 144, 150-51 (3d Cir. 2001). When assessing whether minimum contacts are present in a contracts case, a court should look to the terms of the agreement, the place and character of prior negotiations, performance, contemplated future consequences, resolution of post-contract difficulties, and the course of dealings between the parties. Id. at 150; Mellon Bank, 960 F.2d at 1223. Additionally, mail and telephone contacts about the performance of the contract and directed at the forum state may support jurisdiction. Shanks v. Wexner, No. Civ.A.02-7671, 2003 WL 1343018, at *3 (E.D. Pa. Mar. 18, 2003) (citing Grand Entm't Grp., Ltd. v. Star Media Sales, Inc., 988 F.2d 476, 482 (3d Cir. 1993)). Finally, "[i]n contract cases, courts should inquire whether the defendant's contacts with the forum were instrumental in either the formation of the contract or its breach." Gen. Elec., 270 F.3d at 150.

Several analogous cases arising in this Court offer persuasive guidance. First, in Elbeco Inc. v. Estrella de Plato, Corp., 989 F. Supp. 669 (E.D. Pa. 1997), a Pennsylvania-based shirt manufacturer brought a breach of contract action against non-resident subcontractors due to their misrepresentation of their capability to meet their contractual obligations. Id. at 672. Upon review of the defendants' motion to dismiss for lack of personal jurisdiction, the court remarked that the defendants had reached into Pennsylvania to solicit the plaintiff to enter into a contract and, upon execution of the agreement, continued contact with Pennsylvania via mail and telephone. Id. at 674. In addition, representatives of the defendants visited Pennsylvania in connection with the contract on two separate occasions. Id. Ultimately, the court held that "[d]efendants have purposely availed themselves of the opportunity to do business in Pennsylvania by voluntarily seeking out a Pennsylvania corporation with whom to contract. Thus, defendants were aware that they were contracting with a Pennsylvania corporation and that a breach of contract would result in economic harm in Pennsylvania." Id. at 675. Although the defendants argued that they did not maintain an office, bank account, real property, or telephone listing in Pennsylvania, the court responded that "'where the defendants have received the benefits and protections of the forum's laws by engaging in business activities with a forum resident, the courts have consistently rejected the notion that an absence of physical contacts can defeat personal jurisdiction there.'" Id. (quoting Mellon Bank, 960 F.2d at 1225) (further quotations omitted). Accordingly, defendants were deemed subject to personal jurisdiction in Pennsylvania. Id.

Similarly, in Mickleburgh Mach. Co., Inc. v. Pacific Econ. Dev. Co., 738 F. Supp.159, (E.D. Pa. 1990), the defendant was a California corporation in the business of procuring heavy machinery in the United States for clients in Asia. Id. at 160. It had no office, mailing address, tangible or intangible asset, employee, director, or agent in Pennsylvania, nor did it advertise in Pennsylvania. Id. The defendant contacted the plaintiff, a Pennsylvania entity, for assistance in finding new and used vertical boring mills on behalf of the defendant's foreign client. Id. at 160. The parties thereafter entered into an exclusive dealing agreement to that effect. Id. Although the plaintiff originally secured a Tennessee seller of such a boring mill, the deal ultimately collapsed. Id. at 160-61. By way of several subsequent communications, the defendant indicated that it still required the plaintiff's assistance to locate a seller and acknowledged the plaintiff as its sole representative for those purposes. Id. at 161. The plaintiff, in turn, engaged in further efforts under the agreement. Id. At some point, however, the plaintiff learned that the defendant purchased a vertical boring mill directly from another machine company without using the plaintiff as an intermediary. Id. The plaintiff brought suit for violation of the exclusive dealing agreement and the defendant responded with a motion to dismiss the complaint for lack of personal jurisdiction. Id.

On review, the court acknowledged that although the mere entry into a contract was insufficient to establish minimum contacts:

[I]n this instance PEDC played an active role in both developing and extending its contacts in the forum. PEDC initiated negotiations with the Pennsylvania plaintiff. PEDC and Mickleburgh communicated at frequent intervals over the telephone. PEDC sent written correspondence to Mickleburgh's Pennsylvania headquarters on at least ten occasions. Each letter further solidified the relationship between the two. In fact, in both the original agreement and in a subsequent letter PEDC acknowledges Mickleburgh's role as its purchasing agent. This is not a case where the defendant is a passive player or is unaware of the citizenship of the plaintiff. . . . PEDC cultivated the relationship with Mickleburgh and could reasonably expect to answer for any alleged misdeeds arising out of that relationship in Pennsylvania.

PEDC could reasonably foresee that the signing of the agreement would lead to economic impact in this forum. . . . Although Mickleburgh spent most of its efforts to secure the boring mill in other states, it engaged in fiscally burdensome activity in Pennsylvania. Moreover, if the sale of the mill had been completed, the parties' contract called for performance by PEDC in Pennsylvania. PEDC was to deliver a letter of credit to a bank in Philadelphia out of which Mickleburgh was to draw its compensation. . . .

Lastly, and perhaps most importantly, is that even after the first attempt to secure the boring mill failed, PEDC again sought Mickleburgh's aid in finding an alternative supplier showing that PEDC intended to "participat[e] in the continuation of th[e] relationship.". . . It seems that PEDC intended to create a long-term relationship with Mickleburgh going beyond just a single transaction. I find that PEDC purposefully established more than minimum ...


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