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Laurel Gardens, LLC v. McKenna

United States Court of Appeals, Third Circuit

January 14, 2020

LAUREL GARDENS, LLC; AMERICAN WINTER SERVICES, LLC; LAUREL GARDENS HOLDINGS, LLC; LGSM, GP; CHARLES P. GAUDIOSO, Appellants
v.
TIMOTHY MCKENNA; MICHAEL MCKENNA; MAT SITE MANAGEMENT, LLC; BOBBY AERENSON; GREGORY PETTINARO; CHARLES WILKINSON; WILKINSON BUILDERS, LLC; TECHNIVATE, INC.; THOMAS DIDONATO; KEVIN EAISE; EAISE DESIGN & LANDSCAPING, LLC; EAISE SNOW SERVICES, LLC; HAINES & KIBBLEHOUSE, INC.; HANK JULICHER; MARGIT JULICHER; CHRISTOPHER W. WRIGHT; LONGVIEW MANAGEMENT, LLC; MATTHEW SIBLEY; M&M LANDSCAPING, LLC; ALAN PERRY; MARY TRESIZE; FRANK ALCARAZ; STRIVE FORCE, LLC; MJL ENTERPRISES; JOHN HYNANSKI; NORMAN AERENSON; ISKEN ENTERPRISES, LLC; FRONTIER MULCH, LLC; LONGVIEW MANAGEMENT, LP; DON ISKEN; PAUL ISKEN; SAUL EWING, LLP; DAVID FALCONE; JOHN SNYDER

          Submitted under Third Circuit L.A.R. 34.1(a) October 22, 2019

          On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Civ. No. 5-17-cv-00570) Honorable Jeffrey L. Schmehl, District Judge

          Kevin F. Berry Tamara S. Grimm O'Hagan Meyer Attorneys for Appellants

          Ryan M. Ernst George Pazuniak Sean T. O'Kelly O'Kelly Ernst & Joyce Attorneys for Appellees

          BEFORE: GREENAWAY, JR., PORTER, and COWEN, Circuit Judges

          OPINION

          COWEN, CIRCUIT JUDGE.

         Plaintiffs, Laurel Gardens, LLC ("LG"), American Winter Services, LLC ("AWS"), Laurel Garden Holdings, LLC ("LGH"), LGSM, GP ("LGSM"), and Charles P. Gaudioso, appeal from the order of the United States District Court for the Eastern District of Pennsylvania granting the motion for entry of final judgment pursuant to Federal Rule of Civil Procedure 54(b) filed by Defendants, Don Isken, Paul Isken, and Isken Enterprises, LLC ("IE") ("the Isken Defendants"). Specifically, the District Court designated its prior order-granting the Isken Defendants' motion to dismiss for lack of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2) while denying all but one of the motions to dismiss filed by the other defendants-as its final judgment as to the Isken Defendants. Plaintiffs argue that the District Court erred by applying the traditional requirements for personal jurisdiction as opposed to a specific provision of the Racketeer Influenced and Corrupt Organizations Act ("RICO") authorizing the nation-wide exercise of personal jurisdiction in certain circumstances.

         Initially, we conclude that the issue of personal jurisdiction is properly before us and accordingly limit our ruling to this threshold jurisdictional issue. We agree with Plaintiffs that 18 U.S.C. § 1965(b) (and not 18 U.S.C. §1965(d)) governs the exercise of personal jurisdiction in this case and that they satisfy the statutory (and constitutional) requirements for the District Court to exercise such jurisdiction over the Isken Defendants. In turn, Plaintiffs' state law claims fall under the doctrine of pendent personal jurisdiction. Accordingly, we will vacate the order entered by the District Court disposing of the parties' dismissal motions to the extent that it granted the Isken Defendants' motion to dismiss for lack of personal jurisdiction under Rule 12(b)(2) as well as the District Court's Rule 54(b) order insofar as it designated this prior order as the final judgment as to the Isken Defendants.

         I.

         Naming a total of thirty-three defendants, Plaintiffs alleged in their lengthy amended complaint that "[t]he primary cause of this action is a widespread criminal enterprise engaged in a pattern of racketeering activity across State lines, and a conspiracy to engage in racketeering activity involving numerous RICO predicate acts during the past ten (10) calendar years." (JA70.) Plaintiffs alleged predicate acts of bribery, extortionate credit transactions, mail fraud, wire fraud, witness tampering, and retaliation. They then set forth three separate RICO claims, i.e., conduct and participation in an enterprise through a pattern of racketeering under 18 U.S.C. § 1962(c), acquisition and maintenance of an interest in and control of an enterprise engaged in a pattern of racketeering activity pursuant to 18 U.S.C. § 1972(b), and conspiracy to engage in a pattern of racketeering activity in violation of 18 U.S.C. § 1962(d). Finally, the pleading included claims against all defendants under Pennsylvania law for aiding and abetting the breach of fiduciary duty, civil conspiracy, fraud, conversion, negligent misrepresentation, and tortious interference with contract and prospective contractual arrangements (as well as a claim for breach of fiduciary duty against Defendants Timothy McKenna and Michael McKenna).

         According to Plaintiffs, [1] the enterprise's primary objective has been to inflict severe economic hardship upon the Plaintiffs with the intent to impair, obstruct, prevent, and discourage them from continuing to work in the field of landscaping and snow removal services. "[A]t the center of [the] criminal enterprise" are Defendants Timothy McKenna and Michael McKenna. (JA77.) Timothy McKenna (a resident of Delaware who maintains a business address in Delaware) was the managing member of LG and AWS until May 2012 (when he was replaced by Gaudioso) and remained a consultant for Plaintiffs until his termination for cause in June 2014. Likewise, Michael McKenna (Timothy McKenna's son and a Pennsylvania resident who maintains a Delaware business address) was the general manager for LG and AWS until he resigned on November 9, 2014. "Timothy McKenna, Michael McKenna, Catherine McKenna (Timothy's wife), and [Defendant] MAT Site Management, LLC (the McKennas' business) sought to steal the Plaintiffs' customers and continue in the business of servicing the commercial landscaping and snow removal needs for those customers." (Appellants' Brief at 5-6 (citing JA70).)

         It is undisputed that brothers Don Isken and Paul Isken are residents of the State of Delaware and that IE is a Delaware limited liability company with its principal place of business located in Newark, Delaware.[2] The first amended complaint included the following allegations against the Isken Defendants:

         Isken and Isken Enterprises

134. DON ISKEN and PAUL ISKEN have been associated with TIMOTHY McKENNA for several years. They own several local hotels, specifically the Homewood Suites, Holiday Inn Express, and Comfort Inn in Wilmington, DE.
135. TIMOTHY McKENNA conspired with DON ISKEN and PAUL ISKEN to steal Company assets and labor by delivering loads of salt and calcium at no charge to the ISKEN' [sic] hotels in return for some debt relief to TIMOTHY McKENNA. This was late in the 2014 season when salt and melt products were generally unavailable at any price and the Company's inventory was stretched. TIMOTHY McKENNA and MICHAEL McKENNA also directed snow removal services to the hotels and DON ISKEN' [sic] home with no intention of billing DON ISKEN. When the Company learned of this, the Company sent a bill and attempted to collect payment from DON ISKEN and PAUL ISKEN. DON ISKEN and PAUL ISKEN refused to pay advising GAUDIOSO, 'Our deal was with Tim McKenna". When GAUDIOSO pressed as to what that meant, neither DON ISKEN nor PAUL ISKEN would explain.
136. Having loaned TIMOTHY McKENNA a significant amount of money (upwards of $200, 000) and TIMOTHY McKENNA being unable to pay it back, DON ISKEN has initiated several Sherriff Goods and Chattel sales on TIMOTHY McKENNA's home.
The email trail between TIMOTHY McKENNA and DON ISKEN goes back years and shows TIMOTHY McKENNA promising to pay DON ISKEN and always reneging on payment. Ultimately, DON ISKEN initiated the Sherriff sale and then TIMOTHY McKENNA somehow came up with an amount to get DON ISKEN off his back for a short time. Then the process started again.
137. Counsel for the Company, SNYDER and FALCONE of SAUL EWING were advising TIMOTHY McKENNA on how to handle this situation with ISKEN.

(JA95-JA96.)[3] Plaintiffs attached several exhibits to their pleading, including an exhibit consisting of documents purportedly relating to the Isken Defendants. These documents are: (1) an April 28, 2014 e-mail from Don Isken to Timothy McKenna indicating that Timothy McKenna intended to have his partner in the salt business make a wire transfer in the amount of $103, 750 "to each Paul and I" within the next two days, forwarding wiring instructions from Paul Isken, and expressing frustration about the whole process (stating that the amount would only increase and specifically pointing to earlier e-mails in which Timothy McKenna had assured Don Isken that payment was forthcoming) (JA293); (2) a May 2, 2014 e-mail from Don Isken to Timothy McKenna stating that he received a payment of $20, 000 instead of the $207, 000 he had long expected and Timothy McKenna had absolutely guaranteed he would receive, refusing to accept payment, and indicating that he had no intention to halt the judicial actions (and in particular that he intended to push for a judicial sale of Timothy McKenna's personal belongings at the earliest opportunity); (3) an April 15, 2014 invoice from AWS billing Homewood Suites $12, 874 for services related to snow removal, including $10, 000 for calcium; and (4) a June 5, 2014 e-mail from Don Isken to Timothy McKenna replying to an e-mail forwarded by Timothy McKenna from Defendant Christopher Wright, inquiring why the Wright e-mail message[4] was sent to him and "[w]hat am I supposed to do with this information and documentation- deposit it in the bank" (JA296).

         Fifteen separate motions to dismiss were filed by the respective defendants. In fact, all but one of the defendants (Mary Tresize) moved to dismiss. On May 15, 2017, the Isken Defendants moved to dismiss with prejudice pursuant to Rule 12(b)(2) and Federal Rule of Civil Procedure 12(b)(6). In their memorandum of law, they argued that the District Court must dismiss this action pursuant to Rule 12(b)(2) because it lacks personal jurisdiction over Paul Isken and IE. Under

         Pennsylvania's long-arm statute providing for personal jurisdiction over non-resident defendants to the fullest extent allowed under the United States Constitution, see 42 Pa. Cons. Stat. Ann. § 5322, the amended complaint purportedly fails to allege either general or specific jurisdiction over Paul Isken and IE. The Isken Defendants further sought dismissal under Rule 12(b)(6) on the grounds that the pleading does not assert a claim against the Isken Defendants upon which relief may be granted, the state law claims are outside the statute of limitations, and the claims are alleged against improper parties. On June 16, 2017, Plaintiffs filed a lengthy omnibus response in opposition to several motions to dismiss, including the Isken Defendants' own motion. In their June 23, 2017 reply brief, the Isken Defendants acknowledged that the Plaintiffs' opposition had responded to two of their grounds for dismissal (failure to state a claim and statute of limitations). They then addressed the merits of these two grounds. However, the Isken Defendants also pointed out that "Plaintiffs do not respond to the Isken Defendants' arguments for dismissal based on the lack of personal jurisdiction and the naming of an improper party." (E.D. Pa. Docket Entry #97 at 2.) "Pursuant to Local Rule 7.1(c), these arguments are unopposed, and the [first amended complaint] should be dismissed by the Court on that basis." (Id. (citing Dennis v. DeJong, 867 F.Supp.2d 588, 622 (E.D. Pa. 2011); Toth v. Bristol Twp., 215 F.Supp.2d 595, 598 (E.D. Pa. 2002); Smith v. Nat'l Flood Ins. Program of FEMA, 156 F.Supp. 2d 520, 525 (E.D. Pa. 2001)).)

         On July 14, 2017, Plaintiffs submitted a motion for leave to file a sur-reply in further opposition to the Isken Defendants' motion to dismiss. Noting that most defendants had filed nearly identical motions to dismiss, "Plaintiffs do not intend to waste this Court's time by repeating its own arguments in a surreply, but does seek leave to briefly address the Isken Defendants' argument that this Court lacks personal jurisdiction over Defendants Paul Isken and [IE]." (E.D. Pa. Docket Entry #108 at 2.) "Plaintiffs respectfully request that this Court exercise its discretion and grant leave to file a surreply to clarify the record and respond to Defendants' jurisdictional arguments." (Id.)

         The District Court granted Plaintiffs' motion for leave on July 19, 2017, and the sur-reply was filed on the same day. In addition to responding to the Isken Defendants' argument that the first amended complaint should be dismissed because of Plaintiffs failure to respond on the issue of personal jurisdiction, Plaintiffs argued that the District Court possesses both general and specific jurisdiction over Paul Isken and IE (and also asserted that the affidavits submitted by Paul Isken and Don Isken falsely state that IE has never owned or held any interest in any real property in Pennsylvania). They also argued that the District Court has personal jurisdiction pursuant to the RICO statute as well as the doctrine of pendent personal jurisdiction.

         On March 14, 2018, the District Court disposed of the various dismissal motions. All of them were denied with two exceptions, namely, the respective motions to dismiss filed by Defendant MJL Enterprises ("MJL") and the Isken Defendants. The District Court expressed concern that the lengthy pleading violates the requirement to set forth "a short and plain statement of the claim," Fed.R.Civ.P. 8(a), noting that its "302 pages (337 paragraphs with attached exhibits) include[ed] a mass of details which may be relevant and appropriate at summary judgment or trial, but are clearly surplusage in stating a claim at this stage" (JA18). However, it found "Plaintiffs' claims survive a Rule 12(b)(6) challenge." (Id.) "Defendant MJL moves to dismiss arguing venue is improper here because the terms of the settlement agreement between MJL and Laurel Gardens expressly provides each of the Parties involved in the agreement (MJL and Laurel Gardens) consents to jurisdiction in the Eastern District of Virginia." (Id. (citing E.D. Pa. Docket Entry #60).) While concluding that venue is proper under 28 U.S.C. § 1391, the District Court transferred the claims against MJL to the United States District Court for the Eastern District of Virginia pursuant to 28 U.S.C. § 1404. Finally, the District Court agreed with the Isken Defendants that it lacks both specific and general jurisdiction over them. It looked to Pennsylvania's long-arm statute and the Fourteenth Amendment's contacts test. "Applying the above principles, this Court concludes the Iskens lack the requisite 'minimum contacts' with Pennsylvania to the exercise of jurisdiction over them. Walden v. Fiore, 134 S.Ct. 1115, 1124 (2014). Therefore, this Court lacks specific jurisdiction." (JA22.) The District Court also found that the Isken Defendants also do not possess the continuous and systematic contacts with the forum state required for the exercise of general jurisdiction. "Accordingly, the Iskens' Motion to Dismiss for lack of personal jurisdiction under Rule 12(b)(2) is granted. The Iskens are dismissed from this matter." (JA23.)

         On May 17, 2018, the Isken Defendants moved for entry of final judgment pursuant to Rule 54(b). The District Court granted this motion on November 20, 2018, determining that "the Order is a final judgment as to Defendants Don Isken, Paul Isken, and Isken Enterprises, LLC for the purposes of Federal Rule of Civil Procedure 54(b), and no just cause exists for delaying entry of final ...


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