SMB CONSULTING AND INVESTING LLC v. APPLE VALLEY WASTE SERVICE, INC.

Filing 14

MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE RONALD L. BUCKWALTER ON 7/20/2011. 7/21/2011 ENTERED AND COPIES E-MAILED.(sg, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
SMB CONSULTING AND INVESTING LLC,
Plaintiff,
v.
APPLE VALLEY WASTE SERVICE, INC.,
Defendant.

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CIVIL ACTION

NO. 11-2939

MEMORANDUM
BUCKWALTER, S.J.

July 20, 2011

Defendant Apple Valley Waste Service, Inc. has filed the present Motion to Dismiss or
Transfer Venue. For the following reasons, the Motion is granted and the case is transferred to
the Northern District of West Virginia.
I.

FACTUAL AND PROCEDURAL HISTORY
Plaintiff SMB Consulting and Investing LLC (“Plaintiff”) is a Pennsylvania limited

liability company that provides consulting advice to waste management companies. (Compl. ¶
6.) Defendant Apple Valley Waste Service, Inc. (“Defendant”) is a West Virginia corporation
engaged in the business of waste transportation. (Id. ¶ 7.) According to the facts alleged in the
Complaint, Plaintiff and Defendant entered into a Consulting Agreement under which Plaintiff
would provide exclusive consulting services in connection with the sale of Defendant’s assets.
(Id. ¶ 2.) In exchange, Plaintiff would receive a six percent commission on the total sale price of
the assets. (Id.) In furtherance of the Consulting Agreement, Plaintiff compiled information
pertaining to Defendant’s assets, marketed the assets for sale, and sought out potential
purchasers. (Id. ¶ 3.) Among those potential buyers was Summer Street Capital Partners

(“Summer Street”). (Id.) After Plaintiff informed Summer Street that Defendant’s assets were
available for purchase, Defendant and Summer Street entered into a contract for the sale of the
assets without informing Plaintiff of the transaction. (Id. ¶ 4.) Plaintiff alleges that Defendant
breached the Consulting Agreement by failing to pay it a commission on this sale. (Id. ¶ 5.)
On April 7, 2011, Plaintiff filed its Complaint in the Court of Common Pleas for Bucks
County, Pennsylvania. The Complaint seeks damages for breach of contract and breach of the
duty of good faith and fair dealing. (Id. ¶¶ 56-75.) Defendant removed the Complaint to this
Court on May 3, 2011, and filed the present Motion to Dismiss or Transfer Venue on May 9,
2011. Plaintiff filed a Response in Opposition on May 23, 2011, and Defendant filed a Reply
Brief on June 7, 2011.
II.

STANDARD OF REVIEW
Pursuant to Federal Rule of Civil Procedure 12(b)(2), a defendant bears the initial burden

of raising the lack of personal jurisdiction defense. Nat’l Paintball Supply, Inc. v. Cossio, 996 F.
Supp. 459, 460 (E.D. Pa. 1998) (citing Clark v. Matsushita Elec. Indus. Co., Ltd., 811 F. Supp.
1061, 1064 (M.D. Pa. 1993)). Once the defense has been raised, the burden shifts to the plaintiff
to demonstrate that such jurisdiction exists. Poole v. Sasson, 122 F. Supp. 2d 556, 557 (E.D. Pa.
2000) (citation omitted). Although the court is required to accept as true the allegations of the
pleadings and all reasonable inferences therefrom, “a plaintiff may not solely rely on bare
pleadings to satisfy his jurisdictional burden. Rather, the plaintiff must offer evidence that
establishes with reasonable particularity sufficient contact between the defendant and the forum
state to support jurisdiction.” Id. If the plaintiff meets this burden, the defendant must then
establish the presence of other considerations that would render jurisdiction unreasonable. De
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Lage Landen Fin. Servs., Inc. v. Rasa Floors, LP, No. CIV.A.08-00533, 2008 WL 4822033, at *3
(E.D. Pa. Nov. 4, 2008) (citing Carteret Sav. Bank v. Shushan, 954 F.2d 141, 150 (3d Cir.
1992)).
III.

DISCUSSION
A.

Personal Jurisdiction

Pursuant to 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). In Pennsylvania,
personal jurisdiction 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 also Mellon Bank (East) PSFS, Nat’l Ass’n v. Farino, 960 F.2d 1217, 1221 (3d Cir.
1992) (“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.”).
The Due Process Clause “requires that nonresident defendants 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.’” Kehm Oil Co. v. Texaco, Inc., 537 F.3d 290, 299300 (3d Cir. 2008) (quoting Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). Two types
of personal jurisdiction have been recognized by federal courts: “general and specific
jurisdiction. General jurisdiction exists when a defendant has maintained systematic and
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continuous contacts with the forum state.” Id. at 300 (citing Helicopteros Nacionales de
Colombia, S.A. v. Hall, 466 U.S. 408, 414-15 & n.9 (1984)). Specific jurisdiction is present
“when the claim arises from or relates to conduct purposely directed at the forum state.” Id.
(citing Helicopteros, 466 U.S. at 414-15 & n.8). In deciding whether specific jurisdiction exists,
a district court conducts a three-part analysis. First, the defendant’s activities must have been
“purposefully directed” at the forum. Marten v. Godwin, 499 F.3d 290, 296 (3d Cir. 2007)
(quoting Burger King v. Rudzewicz, 471 U.S. 462, 472 (1985)). Next, “the plaintiff’s claim
must ‘arise out of or relate to’ at least one of those specific activities.” Id. (quoting Helicopteros,
466 U.S. at 414). Finally, “courts may consider additional factors to ensure that the assertion of
jurisdiction otherwise ‘comport[s] with “fair play and substantial justice.”’” Id. (quoting Burger
King, 471 U.S. at 476).
Defendant, a West Virginia corporation, argues that it does not have the requisite contacts
with Pennsylvania to establish either general or personal jurisdiction. (Def.’s Mot. Dismiss 814.) According to Defendant, there is no general jurisdiction because it does not operate in
Pennsylvania, have business contacts in the state, or have any property, investors, board
members, shareholders, or agents in Pennsylvania. (Id. at 10-11.) With respect to specific
jurisdiction, Defendant contends that Plaintiff initiated the business discussions that resulted in
the formation of the Consulting Agreement, that it never traveled to Pennsylvania in connection
with its dealings with Plaintiff, and that the Consulting Agreement was presented to it in West
Virginia. (Id. at 4, 14.) Defendant states that the only contacts it had with Pennsylvania were
telephone calls concerning Plaintiff’s request to provide consulting services, which are
insufficient to create specific jurisdiction. (Id.)
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In response, Plaintiff first argues that specific jurisdiction1 exists over Defendant because
its claims arise of out the Consulting Agreement, which was executed in Pennsylvania. (Pl.’s
Resp. Opp’n 7-8.) Next, Plaintiff acknowledges that while the mere existence of the Consulting
Agreement does not create jurisdiction, the totality of the circumstances in this case indicates that
the exercise of jurisdiction would be proper. (Id. at 8.) To that end, Plaintiff contends that
Defendant knew it was dealing with a Pennsylvania entity, that the Consulting Agreement
required any notices to be sent to Plaintiff in Pennsylvania, that Defendant was to communicate
with Plaintiff regarding performance of the contract, and that the Consulting Agreement and any
claims arising out of it were governed by Pennsylvania law. (Id. at 9.) Furthermore, Defendant
was aware that Plaintiff was using a Confidential Offering Memorandum that Plaintiff prepared
in Pennsylvania to pursue Pennsylvania companies as possible purchasers for the assets. (Id.)
Finally, Plaintiff argues that Defendant initiated seventy-one e-mails and twelve telephone calls
to Plaintiff, both before and after the execution of the contract. (Id. at 10.)
At the outset of its analysis, the Court notes – and both parties have acknowledged – that
“[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). Rather, when assessing whether
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Plaintiff also contends that Defendant has had sufficient systematic and continuous
contacts with Pennsylvania to support a finding of general jurisdiction. (Pl.’s Resp. Opp’n 1214.) In support of this argument, Plaintiff points to the fact that Defendant’s owner, Randie
Lawson, sold a waste hauling company to a Pennsylvania entity in 1997 or 1998, and that
Plaintiff’s owner, Steven Berry, assisted Mr. Lawson in purchasing the assets that would
eventually be used to form Apple Valley Waste Service, Inc. (Id. at 13.) As Defendant notes,
however, all of these alleged contacts with Pennsylvania were made by Mr. Lawson before
Defendant was even incorporated. (Def.’s Reply Br. 8.) As such, they cannot be attributed to
Defendant, and the Court finds no basis for asserting general jurisdiction.
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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, contemplated future consequences, or
the course of dealings between the parties.” Mellon Bank, 960 F.2d at 1223. Here, the
Consulting Agreement states that it “is executed in, shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.” (Pl.’s Resp. Opp’n, Ex. A ¶
19.) Nevertheless, choice of law clauses and contractual language indicating that an agreement
was executed in a particular forum do not definitively establish jurisdiction, Quandel Grp., 1999
WL 382878, at *3, and there is nothing else in the Consulting Agreement to establish a
connection with Pennsylvania. The contract merely describes the services to be rendered by
Plaintiff in connection with its objective of finding a purchaser for Defendant’s assets. The
Consulting Agreement is silent with respect to the location of performance; it does not identify
Pennsylvania or any other forum as the one in which Plaintiff or Defendant must execute their
duties under the contract. In sum, the terms of the Consulting Agreement itself do not
conclusively establish personal jurisdiction over Defendant.
The Court next turns to Plaintiff’s argument concerning the e-mails and phone calls made
by Defendant. Plaintiff correctly observes that “‘mail and telephone communications sent by the
defendant into the forum may count toward the minimum contacts that support jurisdiction.’”
(Pl.’s Resp. Opp’n 9 (quoting Grant Entm’t Group, Ltd. v. Star Media Sales, Inc., 988 F.2d 476,
482 (3d Cir. 1993).) The Third Circuit, however, has also held that “‘informational
communications in furtherance of [a contract between a resident and a nonresident] [do] not
establish the purposeful activity necessary for a valid assertion of personal jurisdiction over [the
nonresident defendant].’” Vetrotex Certaineed Corp. v. Consol. Fiber Glass Prods. Co., 75 F.3d
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147, 152 (3d Cir. 1996) (quoting Sunbelt Corp. v. Noble, Denton & Assoc., Inc., 5 F.3d 28, 32
(3d Cir. 1993)).2 Here, although Defendant may have sent numerous e-mails and made several
phone calls in furtherance of the contract, Plaintiff has not identified anything concerning those
communications that establish any kind of connection with Pennsylvania. Furthermore, Plaintiff
has not alleged that any of its claims arise from any of these communications. See Sunbelt, 5
F.3d at 33 (finding that the appellee’s telephone calls from Pennsylvania to Texas did not
establish jurisdiction in Texas when the calls themselves were not the basis of the cause of
action).
Finally, the Court considers the argument that jurisdiction exists in this case because
Plaintiff created in Pennsylvania a Confidential Offering Memorandum for Defendant’s assets,
pursued Pennsylvania companies as potential purchasers, and acted with Defendant’s knowledge
when carrying out these activities. The Supreme Court, however, has held that
[t]he unilateral activity of those who claim some relationship with a nonresident
defendant cannot satisfy the requirement of contact with the forum State. . . . [I]t is
essential in each case that there be 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.
Hanson v. Denckla, 357 U.S. 235, 253 (1958) (citing Int’l Shoe, 326 U.S. at 319). Therefore, the
fact that Plaintiff conducted activity in Pennsylvania in furtherance of the contract does not
provide the Court with a basis for asserting jurisdiction over Defendant. More importantly,
Plaintiff does not contend that the alleged breach in this case stems from any of its own or
Defendant’s actions in Pennsylvania. To the contrary, the Complaint states that Plaintiff
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The Third Circuit has held that this rule applies to informational communications that
are made both before and after a contract commences. See Vetrotex, 75 F.3d at 152; Sunbelt, 5
F.3d at 32.
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contacted Summer Street – a New York entity – to see if it would be interested in purchasing
Defendant’s assets, that Summer Street declined the offer, but that subsequent to these
negotiations Defendant and Summer Street entered into their own deal for the sale and purchase
of the assets. (Compl. ¶¶ 25-38.) The Complaint further asserts that pursuant to the Consulting
Agreement, Plaintiff was Defendant’s exclusive representative, and that Defendant breached the
contract by failing to pay Plaintiff a commission on the sale. (Id. ¶¶ 16, 55.) Therefore, the harm
allegedly suffered by Plaintiff in this case occurred when Defendant sold its assets – located in
West Virginia – to a company in New York.
After considering the above facts and the relevant arguments of both parties, the Court
notes that there are strong similarities between the present matter and the Third Circuit’s opinion
in Time Share Vacation Club v. Atlantic Resorts, Ltd., 735 F.2d 61 (3d Cir. 1984). In
Time Share, the appellant, a Pennsylvania corporation, entered into a contract with the appellees,
citizens of Maryland, to assist the appellees in finding potential customers to buy time shares at
their resort. Id. at 62. As in this case, the appellees allegedly breached the agreement by failing
to pay the appellant’s commission and other expenses. Id. at 62-63. The appellant alleged that
Pennsylvania had jurisdiction over the appellees because all of the sales and promotional
materials were developed in the appellant’s Pennsylvania office, and because the appellant
brought Pennsylvania residents to the appellees’ location in Maryland. Id. at 64. Despite these
facts – and despite the existence of a Pennsylvania choice of law provision in the contract – the
Third Circuit found no personal jurisdiction existed. Id. at 65. The court held that “[t]he fact
that Time Share itself prepared promotional material and solicited customers in Pennsylvania,
albeit in compliance with the terms of the contract with defendants, does not in any way show
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that the defendants, or any one of them, has performed acts for or by which it could reasonably
expect to be haled into court in Pennsylvania.” Id. Importantly, the Third Circuit noted that
none of the appellees’ actions – such as advertising in Pennsylvania and sending an airplane to
transport potential customers from Pennsylvania to its resort – were related to the appellant’s
injuries, and so they could not be used as a basis for asserting jurisdiction. Id. at 66.
In sum, the Court finds that Time Share is a controlling precedent and concludes that
Defendant lacks the necessary minimum contacts with Pennsylvania to establish personal
jurisdiction.
B.

Plaintiff’s Request to Conduct Discovery on the Issue of Jurisdiction

Plaintiff has requested the opportunity to conduct discovery to obtain additional
information concerning Defendant’s contacts with Pennsylvania. (Pl.’s Resp. Opp’n 18-19.)
The Third Circuit has held that when “a plaintiff presents factual allegations that suggest ‘with
reasonable particularity’ the possible existence of the requisite ‘contacts between [the party] and
the forum state,’ the plaintiff’s right to conduct jurisdictional discovery should be sustained.”
Toys “R” Us, Inc. v. Step Two, S.A., 318 F.3d 446, 456 (3d Cir. 2003) (quoting Mellon Bank,
960 F.3d at 1223). Here, Plaintiff has simply asked the Court to open discovery on the
jurisdictional issue without articulating with reasonable particularity what additional contacts it
hopes to find. Given the allegations made in the Complaint, the Court is unable to discern how
allowing Plaintiff to seek more information would help demonstrate jurisdiction in this case. As
discussed above, Plaintiff was harmed when Defendant – a West Virginia company that
contracted with Plaintiff to sell assets located in West Virginia – entered into a purchase and sale
agreement with a New York company and failed to pay Plaintiff its commission. As such, even
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if Plaintiff was able to show that Defendant knew it was negotiating with potential buyers in
Pennsylvania – indeed, even if Defendant had discussions with Plaintiff about those potential
purchasers – it would not be enough to establish jurisdiction because those activities were
unrelated to the breach. Plaintiff’s request to conduct discovery on the issue of jurisdiction is
therefore denied.
C.

Transfer

Having found that it lacks jurisdiction over Defendant, the Court must decide whether to
dismiss the case or transfer it to a proper venue. Pursuant to 28 U.S.C. § 1631,
[w]henever a civil action is filed in a court . . . and that court finds that there is a want of
jurisdiction, the court shall, if it is in the interest of justice, transfer such action or appeal
to any other such court in which the action or appeal could have been brought at the time
it was filed or noticed.
Although neither party has asked for a transfer pursuant to § 1631,3 the Court may do so sua
sponte. See Junge v. Wheeling Island Gaming, Inc., No. CIV.A.10-1033, 2010 WL 4537052, at
*7 (W.D. Pa. Nov. 2, 2010) (citing Chicosky v. Presbyterian Med. Ctr., 979 F.Supp. 316, 320-23
(D.N.J. 1997)). Here, Defendant has stated that the United States District Court for the Northern
District of West Virginia would be an adequate alternative forum for this litigation. (Def.’s Mot.
Dismiss 17.) Rather than dismiss the case, which would force Plaintiff to re-file and pay the
attendant fees, the Court finds that the interest of justice would be best served by transferring the
matter to the Northern District of West Virginia.
IV.

CONCLUSION
For all of the foregoing reasons, the Court finds that it lacks personal jurisdiction over
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In the event that the Court found it did have personal jurisdiction, Defendant requested
a transfer pursuant to 28 U.S.C. § 1404. (Def.’s Mot. Dismiss 18-19.)
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Defendant, and Defendant’s Motion to Dismiss or Transfer Venue is therefore granted. Rather
than dismiss this action, the Court transfers the case to the United States District Court for the
Northern District of West Virginia pursuant to 28 U.S.C. § 1631. An appropriate Order follows.

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