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Woods Services, Inc. v. Disability Advocates, Inc.

United States District Court, E.D. Pennsylvania

May 8, 2018

WOODS SERVICES, INC.
v.
DISABILITY ADVOCATES, INC., d/b/a Disability Rights New York

          MEMORANDUM RE: MOTION TO DISMISS

          BAYLSON, JUDGE

         Introduction

         At issue in this diversity case is whether this Court should grant Defendant's motion to dismiss for lack of personal jurisdiction, pursuant to Fed.R.Civ.P. 12(b)(2), and for failure to state a claim, pursuant to Fed.R.Civ.P. 12(b)(6). For the reasons described below, the motion is DENIED.

         II. Relevant Factual[1] and Procedural History

         Plaintiff Woods Services, Inc. (“Woods”) alleges that Defendant Disability Advocates, Inc. d/b/a Disability Rights New York (DRNY”) issued a public report (the “DRNY Report”) regarding purported abuse and neglect of New York residents in the care of Woods, a provider of residential, educational, and clinical services to children and adults with developmental disabilities. (ECF 1, Compl. ¶ 1). The DRNY Report purports to make 34 recommendations for corrective actions at Woods, but Woods alleges that DRNY knows or should have known that the vast majority of the recommended policies and procedures are already in place at Woods, while others are impossible, would be contrary to regulatory requirements, or would degrade resident safety. (Id. ¶ 2). Woods was not permitted to review and respond to the DRNY Report. (Id. ¶ 3). Instead, DRNY publicly released the Report and broadly disseminated it through social media and its website, thereby increasing the harm to Woods. (Id.). Woods also alleges that DRNY encouraged subsequent media coverage. (Id.). As a result, Woods received numerous investigative visits from oversight agencies, suspensions of new resident referrals, and inquiries from family members and the public regarding its practices. (Id.). Woods has also had to conduct its own internal investigations. (Id.). The investigations and inquiries have generally found no basis for DRNY's allegations of abuse and neglect, but have required significant investments in time and energy. (Id.).

         Woods filed its Complaint in this Court on January 24, 2018. The Complaint alleges four counts:

Count I: Defamation
Count II: Commercial Disparagement
Count III: Intentional Interference With Contractual Relationships
Count IV: Intentional Interference With Prospective Contractual Relationships

         The Complaint alleges that this Court has personal jurisdiction over DRNY based on DRNY's systematic and continuous contacts with Pennsylvania, including by way of its past and ongoing investigations of Woods, legal representations of Woods residents, and publishing of the DRNY Report to Pennsylvania residents, including via The Philadelphia Inquirer.

         Plaintiff's principal place of business is in Langhorne, Pennsylvania, while Defendant's is in Albany, New York, and the amount in controversy exceeds $75, 000. (Id. ¶¶ 4-6).

         On February 15, 2018, Defendant filed the Motion to Dismiss that this Court presently considers (ECF 8), to which Woods filed a response on March 1, 2018 (ECF 9). Defendant then filed its reply on March 8, 2018 (ECF 10), and Plaintiff was granted leave to file a sur-reply brief on March 19, 2018. (ECF 12, Order granting leave to file sur-reply; ECF 13, Sur-reply brief).[2]Following a recorded telephone call with the parties, Defendant's counsel filed a letter informing the Court that Defendant “does not require any jurisdictional discovery.” (ECF 22). As part of that letter submission, Defendant filed a supplemental declaration. (Id.)

         The parties' submissions only relate to two questions: (1) whether this Court has personal jurisdiction over the case; and (2) whether Count I (Defamation) fails to state a claim for which relief can be granted by this Court.

         III. Legal Standard

         A. Rule 12(b)(2) Motions

         In considering a motion to dismiss under Rule 12(b)(2), “a court is required to accept the plaintiff's allegations as true, and is to construe disputed facts in favor of the plaintiff.” Toys R Us v. Step Two, S.A., 318 F.3d 446, 457 (3d Cir. 2003) (citing Pinker v. Roche Holdings Ltd., 292 F.3d 361, 368 (3d Cir. 2002). Once a jurisdictional defense has been raised, “the plaintiff must sustain its burden of proof in establishing jurisdictional facts through sworn affidavits or other competent evidence.” Time Share Vacation Club v. Atlantic Resorts, Ltd., 735 F.2d 61, 67 n. 9 (3d Cir. 1984). When the district court does not hold an evidentiary hearing, the plaintiff must establish only a prima facie case of personal jurisdiction. Eurofins Pharma U.S. Holdings v. BioAlliance Pharma SA, 623 F.3d 147, 155 (3d Cir. 2010) (citing Metcalfe v. Renaissance Marine, Inc., 566 F.3d 324, 330 (3d Cir. 2009)).

         A federal district court may assert personal jurisdiction over a non-resident to the extent of the law of the state in which it sits according to Federal Rule of Civil Procedure 4(e). Time Share Vacation Club, 735 F.2d at 63. The long-arm statute for Pennsylvania provides that a court may exercise personal jurisdiction over non-residents “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. C.S. § 5322(b). The Due Process Clause of the Fourteenth Amendment requires non-resident defendants to have “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. Godwin, 499 F.3d 290, 296 (3d Cir. 2007) (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)) (alteration in original). “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.'” Remick v. Manfredy, 238 F.3d 248, 255 (3d Cir. 2001) (quoting Asahi Metal Indus. Co., Ltd. v. Superior Court of California, 480 U.S. 102, 109 (1987)).

         There are two types of personal jurisdiction a court may have over a defendant: general jurisdiction and personal jurisdiction. General jurisdiction requires a defendant to have maintained systematic and continuous contacts with the forum state, and specific jurisdiction requires the claim to arise out of conduct purposely directed at the forum state. Remick, 238 F.3d at 296. (citing Helicopteros Nacionalesa de Colombia, 466 U.S. 408, 414-15 (1984)). When neither party argues that general jurisdiction exists over the defendant in the forum state, the court may examine specific jurisdiction on its own. Remick, 238 F.3d at 296. (citing Pennzoil Prods. Co. v. Colelli & Assocs., Inc., 149 F.3d 197, 200-01 (3d Cir. 1998)).

There are three steps to determining specific jurisdiction:
First, the defendant must have purposefully directed his activities at the forum. Second, the plaintiff's claim must arise out of or relate to at least one of those specific activities. Third, courts may consider additional factors to ensure that the assertion of ...

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