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Capital Suppression Company, LLC v. Kurant

United States District Court, E.D. Pennsylvania

December 19, 2019

CAPITAL SUPPRESSION COMPANY, LLC, t/a UNIPRO
v.
MICHAEL KURANT, JACOB WILLIAMS, NANCY KURANT and MAXIMUM FIRE PROTECTION, LLC

          MEMORANDUM OPINION

          TIMOTHY J. SAVAGE J.

         Moving to dismiss this action for lack of personal jurisdiction, the defendants, citizens of Maryland, contend that they do not have sufficient contacts with the Commonwealth of Pennsylvania and have not purposefully directed any conduct at Pennsylvania to justify the exercise of jurisdiction over them.[1] Capital Suppression Company, LLC, t/a UniPro (“Capital), the individual defendants' former employer whose principal place of business is in Philadelphia, Pennsylvania, responds that the defendants are subject to personal jurisdiction because they expressly aimed their intentional tortious conduct at Pennsylvania, causing it to feel the brunt of the resulting harm here.

         Capital brings this action against three former employees and the company for which they currently work. It asserts claims arising out of the defendants' alleged misappropriation and retention of confidential and proprietary information and trade secrets, and tortious interference with current and prospective customer contracts and business relationships.

         We conclude that Capital has not met its burden of establishing the existence of general or specific personal jurisdiction over the defendants. Rather than dismiss the action, we shall transfer it to the United States District Court for Maryland where it could have been brought when it was filed.[2]

         Background

         Capital, a limited liability company headquartered in Philadelphia, Pennsylvania, provides fire extinguishers and fire-suppression services in the Mid-Atlantic region. Around February of 2018, Capital expanded its fire-suppression business, purchasing the assets of Chesapeake Uniform Rental, Inc. (“Chesapeake”), a Maryland corporation.[3] At the time of the purchase, defendants Michael Kurant and Jacob Williams were employed by Chesapeake, where Williams worked as a shop technician testing, refilling and certifying fire extinguishers, and Michael Kurant was a manager.[4] They were and remain residents of Dundalk, Maryland.[5]

         Shortly after the purchase of Chesapeake, Edward Darcy, Capital's Operations Manager who worked out of Capital's Philadelphia office, conducted telephonic job interviews with Michael Kurant, Williams, and Nancy Kurant.[6] Capital hired Michael Kurant and Williams as service technicians, performing on-site inspections, and servicing portable fire extinguishers, suppression systems and emergency exit lighting exclusively in Maryland.[7] Capital hired Nancy Kurant in June of 2018 as a service technician and Michael Kurant's assistant. They were informed that Capital was a Pennsylvania company and that their work would be directed from, generated in and supervised from the Philadelphia office.[8]

         Darcy met with each individual defendant in Maryland to review Capital's procedures and the company's expectations. He told them that he would be their supervisor and his office was located in Philadelphia.[9] He also discussed with Michael Kurant and Williams the terms of the non-compete agreement they had signed, including the provision stating that it “is to be governed and construed according to the law of the State of Pennsylvania.”[10] Darcy's supervision of the individual defendants involved daily phone calls from his Philadelphia office to them in Maryland. He also made weekly personal visits in Maryland.[11]

         The individual defendants also had daily contact via phone and email with another Philadelphia office employee, Anila Saraci, who maintained and updated Capital's customer lists and scheduled the defendants' customer site visits. From customer leads developed by the Philadelphia office, Saraci generated an invoice for each appointment, which included the customer's name and address, appointment date and time, description of the service to be provided, and the cost of the service. The individual defendants communicated daily with Saraci[12] about the status of customer appointments, pricing and other customer questions. When appointments were completed, they emailed the customer invoice to Saraci.[13] Capital used these daily reports to track sales, services and inventory, order supplies and equipment, and monitor employee performance.[14]

         In addition to mailing supplies and equipment to the individual defendants in Maryland, Capital's Philadelphia office provided Michael Kurant and Williams each a van that served as a mobile work station for their daily site visits. The vans were registered and insured at Capital's Philadelphia address. Capital paid for the vehicles' maintenance and service. The Philadelphia office provided the equipment and supplies to stock the vans.[15]

         The individual defendants submitted requests for pay and commissions to Capital's Philadelphia office. Their salary and commission payments were sent from Philadelphia, and company benefits were administered in Philadelphia.[16]

         While employed by Capital, Michael Kurant and Williams were present in Pennsylvania on a few occasions. Each time it was at the direction of and for the benefit of Capital. On April 2, 2018, Michael Kurant and Williams each drove a van from Maryland to Philadelphia and back to Maryland to have the vehicles titled and registered in Pennsylvania.[17] Williams traveled to Pennsylvania twice more in connection with his employment with Capital. Once, he went to York, Pennsylvania, to service life safety equipment. The last time, he drove a van to Philadelphia to be recertified.[18]

         Around October of 2018, Michael Kurant resigned from his job. Shortly thereafter, Capital terminated Nancy Kurant's employment.[19] On May 3, 2019, when Williams last drove the van to Philadelphia, Capital terminated his employment and gave him train fare to return to Maryland.[20]

         Michael Kurant had formed Maximum Fire Protection, LLC (“Maximum”), a fire suppression business, in July of 2018, more than two months before he resigned from Capital.[21] Maximum is a limited liability company formed in Maryland and registered to do business only in Maryland.[22] Maximum has four employees, all of whom are domiciled in Maryland.[23]

         Capital claims that the individual defendants conspired to actively solicit Capital's customers and induce them to move their business to Maximum. It alleges that Michael Kurant misappropriated Capital's proprietary and confidential information, including its customer lists and pricing information, [24] to undercut Capital's prices, and induced Capital's customers to terminate their contractual relationships with Capital and enter into contracts with Maximum.[25] It further alleges that Williams, while still employed by Capital, aided Michael Kurant and Maximum by using Capital's mobile van and equipment to service former Capital customers as customers of Maximum.[26]

         Capital asserts seven claims. They are tortious interference with Capital's contractual relations; tortious interference with Capital's prospective contractual and business relationships; misappropriation of trade secrets; unfair competition; conversion; and civil conspiracy, and a request for accounting. Except for the accounting claim, all are intentional torts.

         Personal Jurisdiction Standards

         Once a defendant challenges personal jurisdiction, the plaintiff bears the burden of proving, by a preponderance of the evidence, facts establishing a basis for the exercise of jurisdiction. Metcalfe v. Renaissance Marine, Inc., 566 F.3d 324, 330, 336 (3d Cir. 2009) (citing Carteret Sav. Bank, F.A. v. Shushan, 954 F.2d 141, 146 (3d Cir. 1992)). In considering a motion to dismiss for lack of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2), as we do with a motion to dismiss for failure to state a claim under Rule 12(b)(6), we accept as true the plaintiff's allegations and draw all reasonable inferences in favor of the plaintiff. Shuker v. Smith & Nephew, PLC, 885 F.3d 760, 780 (3d Cir. 2018) (citing O'Connor v. Sandy Lane Hotel Co., 496 F.3d 312, 316 (3d Cir. 2007)). However, unlike with Rule 12(b)(6), the scope of review under Rule 12(b)(2) is not limited to the face of the pleadings. Patterson by Patterson v. FBI, 893 F.2d 595, 603-04 (3d Cir. 1990) (citation omitted) (holding Rule 12(b)(2) motion is “inherently a matter which requires resolution of factual issues outside the pleadings”). Once a defendant challenges personal jurisdiction, the plaintiff must “prove by affidavits or other competent evidence” that jurisdiction is proper. Metcalfe, 566 F.3d at 330 (citation omitted).

         When the parties do not conduct jurisdictional discovery and there is no evidentiary hearing, the plaintiff need only establish a prima facie case of personal jurisdiction. Shuker, 885 F.3d at 780. To determine whether the plaintiff has made this prima facie showing, we assume all factual allegations in the affidavits and other evidence submitted to be true and construe all factual disputes in the plaintiff's favor. Metcalfe, 566 F.3d at 331, 333.[27]

         There are two types of personal jurisdiction, general and specific. The focus of general jurisdiction is on the relationship between the defendant and the forum state, not on the relationship of the claims to the forum. Bristol-Myers Squibb Co. v. Superior Court of California, San Francisco Cty., 137 S.Ct. 1773, 1780 (2017) (citing Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011)). The specific jurisdiction inquiry focuses on the relationship of the litigation to the defendant's contacts with the forum. Walden v. Fiore, 571 U.S. 277, 284 (2014).

         Before exercising personal jurisdiction over a nonresident, a district court must conduct a two-step analysis. Eurofins Pharma U.S. Holdings v. BioAlliance Pharma SA, 623 F.3d 147, 155 (3d Cir. 2010). First, there must be a statutory basis under the law of the forum state for exercising jurisdiction. Walden, 571 U.S. at 283 (citing Daimler AG v. Bowman, 571 U.S. 117, 125 (2014)); Fed.R.Civ.P. 4(k)(1)(A). Second, the nonresident must have sufficient minimum contacts with the forum state to satisfy constitutional due process. BNSF Ry. Co. v. Tyrrell, 137 S.Ct. 1549, 1558 (2017).

         Statutory Basis for Jurisdiction

         Pennsylvania's long-arm statute supplies several bases for personal jurisdiction over a nonresident defendant. 42 Pa. Cons. Stat. Ann. §§ 5301, 5322; Pennzoil Prods. Co. v. Colelli & Assocs., Inc., 149 F.3d 197, 200 & n.1 (3d Cir. 1998). Section 5301 provides for general jurisdiction over an individual defendant who was domiciled or present in the state at the time of service of process, or who consents to suit. 42 Pa. Cons. Stat. Ann. § 5301(a)(1)(i)-(iii). General jurisdiction exists over an unincorporated association that was formed as a Pennsylvania entity, is a foreign company registered to do business in Pennsylvania, carries on “a continuous and systematic part” of its business in Pennsylvania, or consents to suit. Id. § 5301(a)(3)(i)-(iii). When personal jurisdiction is premised on this section of the Pennsylvania long-arm statute, any cause of action may be asserted against the defendant whether or not it arises from acts forming the basis of jurisdiction. Id. § 5301(b).

         The statute's “tort out/harm in” provision confers specific jurisdiction over anyone who “[c]aus[es] harm or tortious injury in th[e] Commonwealth by an act or omission outside th[e] Commonwealth.” Id. § 5322(a)(4); Pennzoil, 149 F.3d at 200 n.1. Additionally, section 5322(b) provides that specific jurisdiction extends “to all persons who are not within the scope of section 5301 . . . 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. Ann. § 5322(b). Under this section, only causes of action arising from the defendant's contacts with the forum may be asserted. Id. § 5322(c).

         Minimum Contacts with Pennsylvania

         A statutory basis for the exercise of personal jurisdiction alone is not sufficient. The exercise of jurisdiction must also be consistent with the limits imposed by the Due Process Clause of the Fourteenth Amendment. Walden, 571 U.S.at 283 (citing Daimler, 571 U.S. at 125). To meet this standard, the plaintiff must establish that “certain minimum contacts” exist between the nonresident defendant and the forum so that the exercise of jurisdiction will “not offend ‘traditional notions of fair play and substantial justice.'” Tyrrell, 137 S.Ct. at 1558 (quoting Int'l Shoe Co. v. Wash., 326 U.S. 310, 316 (1945)).

         General jurisdiction over a foreign corporation, partnership or unincorporated entity exists where its “affiliations with the [forum] State are so ‘continuous and systematic' as to render [it] essentially at home” there. Id. at 1558 (quoting Daimler, 571 U.S. at 127). “[O]nly a limited set of affiliations with a forum will render a defendant amenable to general jurisdiction” there. Bristol-Myers Squibb, 137 S.Ct. at 1780 (quoting Daimler, 571 U.S. at 137). The “paradigm forum” for the exercise of general jurisdiction over a corporation is where it is incorporated and has its principal place of business;[28] for an individual, it is the individual's domicile. Daimler, 571 U.S. at 137 (quoting Goodyear, 564 U.S. at 924). Once these contacts are established, the defendant can be answerable for any claim even if the subject matter of the cause of action has no relationship to the forum. Bristol-Myers Squibb, 137 S.Ct. at 1780 (citing Goodyear, 564 U.S. at 919).

         Specific jurisdiction arises when the cause of action is related to or arises out of the defendant's contacts with the forum and the plaintiff's injury in the forum is related to those contacts. Bristol-Myers Squibb, 137 S.Ct. at 1780 (quoting Daimler, 571 U.S. at 127). The specific jurisdiction inquiry “focuses on the relationship among the defendant, the forum, and the litigation.” Walden, 571 U.S. at 283-84 (quoting Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 775 (1984) (internal quotations omitted)).

         The “traditional test” for the exercise of specific jurisdiction over a nonresident defendant has three requirements. First, the defendant's conduct must have been purposefully directed at the forum state, resulting in contacts with the forum. J. McIntyre Mach., Ltd. v. Nicastro, 564 U.S. 873, 881, 883 (2011) (minimum contacts requires “contact with and activity directed at” the forum state) (citations omitted). Second, the plaintiff's claim must arise out of or relate to those contacts. Walden, 571 U.S. at 284 (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985). Third, if the first two requirements are met, the court considers whether the exercise of jurisdiction otherwise comports with “fair play and substantial justice.” D'Jamoos ex rel. Estate of Weingeroff v. Pilatus Aircraft Ltd., 566 F.3d 94, 102 (3d Cir. 2009) (quoting Burger King, 471 U.S. at 476).

         The first two requirements assess whether a defendant has the requisite minimum contacts with the forum. Although the purposeful direction requirement does not require physical presence in the forum, it does require that the defendant created the contacts with the forum state. Walden, 571 U.S. at 284-85 (citing Burger King, 471 U.S. at 475- 76). The defendant's contacts must be with the forum state itself, not just “with persons who reside there.” Walden, 571 U.S. at 285 (citing Int'l Shoe, 326 U.S. at 319). In other words, “the plaintiff cannot be the only link between the defendant and the forum. Rather, it is the defendant's conduct that must form the necessary connection with the forum State that is the basis for its jurisdiction over him.” Walden, 571 U.S. at 285-86 (citing Burger King, 471 U.S. at 478).

         The relatedness requirement demands a causal connection between the defendant's activities and the effects of that activity in the forum. Walden, 571 U.S. at 284. The relationship among the defendant, the forum, and the litigation “must arise out of contacts that the ‘defendant himself' creates with the forum State.” Id. (citing Burger King, 471 U.S. at 475) (emphasis in original). There must be an “affiliation between the forum and the underlying controversy” that is connected to the defendant's conduct. Bristol-Myers Squibb, 137 S.Ct. at 1780 (quoting Goodyear, 564 U.S. at 919).

         The plaintiff's contacts are not relevant. Only the defendant's contacts are analyzed. Thus, no matter how significant the plaintiff's contacts are, they are not “decisive in determining whether the defendant's due process rights are violated.” Walden, 571 U.S. at 285 (quoting Rush v. Savchuk, 444 U.S. 320, 332 (1980)).

         Once a plaintiff has met its burden of showing the defendant has “minimum contacts” with the forum state, the exercise of jurisdiction is presumed constitutional, and the burden shifts to the defendant to “present a compelling case that the presence of some other considerations would render jurisdiction unreasonable.” O'Connor, 496 F.3d at 324 (quoting Burger King, 471 U.S. at 477). The relevant factors to consider in the fair play analysis include “the burden on the defendant, ” “the forum State's interest in adjudicating the dispute, ” “the plaintiff's interest in obtaining convenient and effective relief, ” “the interstate judicial system's interest in obtaining the most efficient resolution of controversies, ” and the “shared interest of the several States in furthering fundamental substantive social policies.” Burger King, 471 U.S. at 477 (quoting World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292 (1980).[29]

         If, under the “traditional test, ” a defendant lacks sufficient contacts with the forum to comport with the requirements of due process, it may still be subject to jurisdiction under the Calder “effects test.” See Calder v. Jones, 465 U.S. 783 (1984). Calder recognizes that, in certain circumstances, the relationship among the defendant, the forum, the plaintiff and the intentional tort may render a defendant's otherwise insufficient contacts with the forum under the “traditional test” sufficient. IMO Indus., Inc. v. Kiekert AG, 155 F.3d 254, 260, 265 (3d Cir. 1998). Unlike the “traditional test, ” which requires a defendant to have made direct contacts with or in the forum, minimum contacts can be established under Calder if the plaintiff's injury, which was caused by the defendant's conduct outside the forum, connects the defendant's conduct to the forum, not just to the plaintiff. Walden, 571 U.S. at 288.

         In Calder, a California resident brought a claim in California state court against the author and the editor of an allegedly libelous article and their employer newspaper. The individual defendants were domiciled in Florida where they researched, wrote and edited most of the article. The defendant ...


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