ABC MEDICAL HOLDINGS, INC. et al v. HOME MEDICAL SUPPLIES, INC. et al
MEMORANDUM AND ORDER THAT DEFENDANT HOME MEDICAL SUPPLIES, INC. MOTION TO TRANSFER VENUE FOR THE CONVENIENCE AND AVAILABILITY OF THIRD PARTY WITNESSES OR TO DISMISS FOR LACK OF PERSONAL JURISDICTION IS GRANTED IN PART AND DENIED IN PART; ETC.. SIGNED BY HONORABLE JAN E. DUBOIS ON 10/5/15. 10/6/15 ENTERED AND E-MAILED, MAILED TO PRO SE.(jl, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
ABC MEDICAL HOLDINGS, INC., and
ABC HOME MEDICAL SUPPLY, INC.,
HOME MEDICAL SUPPLIES, INC., and
October 5, 2015
This is a breach of contract and business tort case arising out of the sale of medical
supplies in Colorado. Presently before the Court is defendant Home Medical Supplies, Inc.’s
Motion to Transfer Venue for the Convenience and Availability of Third Party Witnesses or to
Dismiss for Lack of Personal Jurisdiction, filed July 17, 2015. For the reasons set forth below,
the Court concludes that it lacks personal jurisdiction over defendant Home Medical Supplies,
Inc., and transfers the case to the United States District Court for the District of Colorado
pursuant to 28 U.S.C. § 1404(a) and 28 U.S.C. § 1406(a).
The facts of this case as alleged in plaintiffs’ Amended Complaint and plaintiffs’
subsequent briefing on the instant Motion are summarized as follows. Because neither party in
this case has requested discovery or an evidentiary hearing on the issue of personal jurisdiction,
the Court considers the allegations of ABC’s Amended Complaint and the Memorandum of
Points and Authorities in Opposition to the Motion to Transfer Venue or to Dismiss for Lack of
Jurisdiction, taking them as true and drawing all inferences in favor of ABC. Metcalfe v.
Renaissance Marine, Inc., 566 F.3d 324, 330 (3d Cir. 2009) (“[I]n deciding a motion to dismiss
for lack of jurisdiction, a court is required to accept the plaintiff’s allegations as true, and is to
construe disputed facts in favor of the plaintiff.” (citations omitted)).
Plaintiff ABC Medical Holdings, Inc., through its subsidiary, ABC Home Medical
Supply, Inc., (collectively “ABC”) sells urological and ostomy supplies to customers throughout
the United States with chronic medical diagnoses, such as spinal cord injuries, spina bifida,
multiple sclerosis, and transverse myelitis. Am. Compl. ¶ 11. ABC has its principal place of
business in Pennsylvania. Am. Compl. ¶¶ 10-11. Customers pay for supplies directly, or through
their private medical insurance, Medicare, or Medicaid. Am. Compl. ¶ 12. ABC identifies new
customers for its products through referrals from medical care providers, including individual
physicians, clinics, and hospitals. Am. Compl. ¶ 27.
Defendant Rick Modderman (“Modderman”) is a former employee of ABC. Am. Compl.
¶ 13. In early 2013, ABC acquired another medical supply company, UroSource.
Am. Compl. ¶ 31. The primary asset in the acquisition was UroSource’s lists of current and
former customers. Am. Compl. ¶ 31. As part of the purchase, ABC agreed to hire Modderman,
who had previously worked for UroSource selling medical supplies. Am. Compl. ¶ 32.
Modderman was employed as ABC’s Regional Sales Manager for Colorado, Wyoming, and New
Mexico. Am. Compl. ¶ 37. As Regional Sales Manager, Modderman was responsible for
working directly with customers to determine their needs and insurance coverage, and then sell
them products supplied by ABC. Am. Compl. ¶¶ 39. In addition, Modderman developed
consultative relationships with the medical care providers, hospitals, and clinics that served as
sources of new client referrals. Am. Compl. ¶ 39. ABC provided Modderman with training on its
internal sales process and goals. Am. Compl. ¶ 40. As of December 2014, ABC had 262
Colorado customers who represented $1.1 million in annual sales, all serviced by Modderman.
Am. Compl. ¶ 33.
On April 26, 2013, at the outset of his employment with ABC, Modderman signed a
Restrictive Covenant Agreement which provides for, inter alia, a noncompetition period of two
years in “any business whose primary business . . . is the selling of urological supplies, wound
care supplies, ostomy supplies, or other durable medical equipment products or services to health
care suppliers” after termination of Modderman’s employment with ABC for any reason. Am.
Compl. ¶ 46; Ex. A. The Agreement also provides that during and for one year after
Modderman’s employment with ABC he would not solicit “any customer, supplier . . . or other
business relation of [ABC].” Am. Compl. ¶ 47.
Defendant Home Medical Supplies, Inc., (“HMS”) is a regional competitor of ABC. Am.
Compl. ¶ 14. HMS also sells urological and ostomy supplies directly to consumers, primarily in
Colorado. Am. Compl. ¶ 16. HMS is owned and operated by Pamela and Richard Jones. Am
Comp. ¶ 14.
ABC alleges that beginning in the fall of 2014, Modderman diverted ABC customers to
HMS. Am. Compl. ¶ 4-5. Modderman resigned from his position at ABC on January 26, 2015.
Am. Compl. ¶ 62. ABC alleges that following his resignation, at least sixteen Colorado ABC
customers serviced by Modderman have canceled their accounts, and that at least some of those
customers now purchase supplies through HMS. Am. Compl. ¶ 67. In addition, ABC alleges that
Modderman has continued to solicit Colorado customers for HMS who would otherwise have
been ABC customers. Am. Compl. ¶ 71.
HMS and Modderman maintain, and ABC does not dispute, that there was no formal
employment relationship between HMS and Modderman. ABC does not allege that Modderman
received any payment for referring customers to HMS. However, ABC points to a series of
emails and other communications 1 between Modderman, HMS employees, and former ABC
clients that ABC argues demonstrate a deliberate attempt to divert customers from ABC in
violation of Modderman’s Restrictive Covenant Agreement. Am. Compl. ¶ 60.
As early as September 2014, while Modderman was still employed by ABC, Modderman
referred ABC patients to HMS. Am. Compl. ¶ 55-58, 60. On September 30, 2014, Modderman
forwarded an ABC order form from an ABC customer to Pamela and Richard Jones and referred
to the customer as “[o]ur first real client.” Plaintiff’s Memorandum in Opposition to Transfer,
Ex. A. Modderman referred other ABC patients to HMS on October 15, October 17, October 20,
and December 11, 2014. Id. Exs. C-D, F. On January 19, 2015, just before his resignation from
ABC, Modderman sent a new customer referred to Modderman by a urology office to HMS
using a different email signature line, which gave Modderman’s job title as “Rocky Mountain
Regional Sales Manager” and omitted any affiliation with ABC. Id. Ex. G. On the same day,
January 19, 2015, Modderman emailed another new customer introducing himself and Pamela
Jones as “Rick & Pam from Home Medical Supply (HMS) in LoneTree.” Id. Ex. H.
Modderman also communicated with HMS regarding his marketing efforts on HMS’s
behalf, beyond simply referring patients. On September 30, 2014, Modderman emailed Pamela
Jones to discuss creating a marketing brochure specifically for HMS. Id. Ex. B. Modderman
asked Jones “what HMS contact info” to print on the brochure. Id. Modderman reminded Jones
“my name is nowhere near this” and instead said he would use a promo number, “007,” as an
identifier. Id. Modderman later followed up by email to Richard Jones attaching a PDF of the
It appears that ABC recovered these emails from a hard drive backup retained by ABC after
Modderman’s resignation that was created by remote backup software Modderman previously
installed on his laptop at ABC’s suggestion. Am. Compl. ¶ 52.
HMS flyer and requesting fifty copies. Id. Ex. E. The attached flier gave contact information for
HMS and Pamela and Richard Jones, but requested that prospective customers use the promo
code “007.” Id.
In addition, ABC alleges that Modderman approached ABC customers and asked them to
switch from ABC to HMS. “Following Modderman’s resignation, an ABC medical supply
customer has reported [to ABC] that Modderman called the patient and asked the patient to
‘come with me.’” Am. Compl. ¶ 63. ABC also alleges that Modderman solicited referrals from
medical providers on behalf of HMS. On or around February 25, 2015, after his resignation from
ABC, Modderman allegedly visited an ABC referring provider “on behalf of HMS.” Am.
Compl. ¶ 65. During that visit, Modderman provided contact information for HMS. Id. When an
ABC employee called HMS and asked for Modderman, an HMS employee provided
Modderman’s cell phone number and said that “Modderman was not in the office and that
Modderman does not come into the office very often and could be reached by cell phone.” Id.
On June 23, 2015, ABC filed its Amended Complaint in this Court asserting claims for
breach of contract against Modderman, tortious interference with contract against HMS, and
misappropriation of trade secrets against both defendants. In summary, ABC alleges that
Modderman and HMS deliberately diverted Colorado customers from ABC to HMS in violation
of the Restrictive Covenant Agreement and that Modderman provided HMS with ABC’s
confidential business material in the form of client lists and contact information.
ABC avers that this Court has personal jurisdiction and that venue is properly laid
because of a clause in ABC and Modderman’s Restrictive Covenant Agreement, which provides:
This Agreement and the respective rights and obligations of the parties shall be
governed by and determined in accordance with the laws of the Commonwealth of
Pennsylvania, without giving effect to its conflicts of law principles or rules. Each
party hereby irrevocably consents to the exclusive jurisdiction of the state and federal
courts of the Commonwealth of Pennsylvania and irrevocably agrees that all actions
or proceedings relating to this Agreement shall be litigated in such courts. Each party
waives any objection which it may have based on lack of personal jurisdiction,
improper venue or forum non conveniens to the conduct of any proceeding in any
such court and waives personal service of any and all process upon them.
Am. Compl. ¶ 18. ABC argues that this clause is also binding on HMS based on HMS’s close
relationship with Modderman. Am. Compl. ¶ 20. There is subject matter jurisdiction in this
Court based on diversity of citizenship. 28 U.S.C. § 1332.
On July 17, 2015, HMS filed the instant Motion requesting this Court transfer the case to
the District of Colorado pursuant to 28 U.S.C. § 1404(a) or in the alternative to dismiss the
Amended Complaint as to HMS for lack of personal jurisdiction. HMS argues that it lacks
sufficient minimum contacts with Pennsylvania to establish personal jurisdiction and that there is
no substantial relationship between HMS and Modderman to bind HMS to the Restrictive
Covenant Agreement. Brief in Support of Motion of HMS to Transfer at 9, 12.
Modderman is proceeding pro se in this case and has not officially joined HMS’s motion
to transfer. Modderman is a paraplegic and has used a wheelchair since a motorcycle accident in
1987. Modderman’s Answer to Complaint (Document No. 11) at 1. He has informed the Court
that he is currently unemployed and has applied for Social Security disability benefits. Id.
A. Personal Jurisdiction over Defendant HMS
This case involves events that occurred almost entirely in Colorado. All of the customers
and referral providers allegedly diverted from ABC to HMS are located in Colorado. Thus, the
first question the Court must address is whether personal jurisdiction over HMS is proper.
“A district court sitting in diversity may assert personal jurisdiction over a nonresident
defendant to the extent allowed under the law of the forum state.” Metcalfe v. Renaissance
Marine, Inc., 566 F.3d 324, 330 (3d Cir. 2009). Pennsylvania’s long-arm statute provides for
personal jurisdiction to the fullest extent allowed under the Constitution’s due process clause. 42
Pa. Cons. Stat. Ann. § 5322. There are two types of personal jurisdiction: general and specific.
General jurisdiction exists where defendant has “continuous and systematic” contact with the
forum state and does not require the underlying cause of action to be related to defendant’s
activities in the state. Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846, 2851
(2011). General jurisdiction over a corporation is limited to its place of incorporation and its
principal place of business. Chavez v. Dole Food Co., Inc., 796 F.3d 261, 270 (3d Cir. 2015)
There is no general jurisdiction over HMS in this Court. HMS is a Nevada corporation
with a principal place of business in Colorado. Am. Compl. ¶ 14. HMS does not have any
customers in Pennsylvania. No officer or representative of HMS has ever visited Pennsylvania.
Accordingly, as plaintiff concedes, HMS does not have “continuous and systematic contacts”
with Pennsylvania sufficient for general jurisdiction.
Specific jurisdiction “depends on an affiliation between the forum and the underlying
controversy.” Goodyear, 131 S. Ct. at 2851 (citations omitted). “Specific jurisdiction is confined
to adjudication of issues deriving from, or connected with, the very controversy that establishes
jurisdiction.” Id. (citations omitted). To establish specific jurisdiction, plaintiff must show that
(1) “the defendant purposely directed its activities at the forum” and (2) “the litigation must arise
out of or relate to at least one of those activities.” Corigliano v. Classic Motor, Inc., 611 F.
App’x 77, 79-80 (3d Cir. 2015). If these requirements are satisfied, the court has jurisdiction if
the exercise of jurisdiction “would comport with fair play and substantial justice.” Id. at 80.
Plaintiff avers that this Court has specific jurisdiction over HMS based on two separate
arguments. First, plaintiff argues that jurisdiction is appropriate based on the Calder effects test.
Calder v. Jones, 465 U.S. 783 (1984). Second, plaintiff alleges that HMS is bound by the forum
selection clause in the Restrictive Covenant Agreement between ABC and Modderman and that
therefore HMS has consented to personal jurisdiction in this case. For the reasons discussed
below, the Court finds that neither of these arguments provides a basis for the exercise of
specific jurisdiction over HMS in this case.
1. Specific Jurisdiction Based on the Calder Effects Test
ABC alleges that HMS became subject to specific jurisdiction in this Court when HMS
committed the intentional torts of tortious interference with contract and misappropriation of
trade secrets. An intentional tort committed outside of the forum state may provide a basis for
specific jurisdiction if the “brunt of the harm” is felt in the forum state. Calder, 465 U.S. at 789.
In the context of business torts, Calder requires a three-step analysis. IMO Indus., Inc. v. Kiekert
AG, 155 F.3d 254, 265-66 (3d Cir. 1998). Plaintiff must show “(1) the defendant committed an
intentional tort; (2) the plaintiff felt the brunt of the harm in the forum such that the forum can be
said to be the focal point of the harm suffered by the plaintiff as a result of that tort; [and] (3) the
defendant expressly aimed his tortious conduct at the forum such that the forum can be said to be
the focal point of the tortious activity.” Id. The third part of this test can only be satisfied “if the
plaintiff can point to contacts which demonstrate that the defendant expressly aimed its tortious
conduct at the forum.” Id. at 265 (emphasis original). “Simply asserting that the defendant knew
that the plaintiff’s principal place of business was located in the forum would be insufficient in
itself to meet this requirement.” Id.
In cases involving alleged tortious interference with contract, courts conduct a factspecific inquiry to determine whether the high standard of the third element of the Calder test is
met. Radian Guaranty Inc. v. Bolen, 18 F. Supp. 3d 635, 644 (E.D. Pa. 2014). In Radian, the
court considered a claim of tortious interference with a similar non-compete provision to the one
in this case. Id. at 639. In that case, the corporate defendant hired the defendant employee to
work in Texas and the defendant employee worked exclusively with customers in Texas. Id. at
644. Neither the defendant corporations nor the defendant employee were Pennsylvania residents
and no part of the contractual negotiations occurred in Pennsylvania. Id. The Radian court held
that defendants’ knowledge that plaintiff was headquartered in Pennsylvania combined with
defendants’ awareness of the Pennsylvania forum selection clause in the defendant employee’s
contract of employment was insufficient to show the defendants’ had expressly aimed their
tortious conduct at Pennsylvania as required by Calder. Id. at 645. That court therefore
concluded that it lacked personal jurisdiction over the defendants. Id.
ABC cites Remick v. Manfredy for the proposition that if plaintiff’s professional activities
are centered in Pennsylvania, the tortious interference must have been aimed at Pennsylvania.
238 F.3d 248, 258 (3d Cir. 2001). In Remick, the plaintiff was a lawyer whose office was located
in Pennsylvania. Id. at 252-53. The dispute arose out of plaintiff’s representation of defendants in
his capacity as a lawyer licensed by Pennsylvania in a contract governed by Pennsylvania law.
Id. The plaintiff and defendants conducted most of the business underlying the contract at issue
within Pennsylvania and the representation agreement itself was executed in Pennsylvania. Id.
The court concluded that the tortious conduct was expressly aimed at Pennsylvania because
plaintiff “conducted the majority of his negotiation, consultation, and advice services . . . out of
his Philadelphia office” and that therefore personal jurisdiction was appropriate. Id. at 260.
In this case, the first two elements of Calder are met: based on ABC’s Amended
Complaint, HMS committed an intentional tort and ABC felt the brunt of the harm of the tort in
Pennsylvania at its principal place of business. However, ABC has not satisfied the third element
of Calder because it has not alleged sufficient evidence that HMS expressly aimed its tortious
conduct at Pennsylvania. In this case, all of the tortious conduct, the diversion of customers and
Modderman’s activities, occurred in Colorado. While ABC alleges that because the harm was
felt in Pennsylvania, HMS’s conduct was directed at Pennsylvania, this conflates the second and
third elements of the Calder test. As in Radian where the defendant employee subject to the noncompete worked solely in Texas, Modderman solicited and serviced customers solely in
Colorado, not Pennsylvania. This case is distinguishable from Remick where the plaintiff was a
Pennsylvania lawyer who conducted most of the relevant services on the underlying contract in
Pennsylvania because no significant part of the contractual performance in this case occurred in
In this case, Modderman, HMS, and the customers at issue only had contact with
Pennsylvania tangentially, when information was routed through ABC’s central office or when
payments were ultimately remitted to ABC. No significant part of the business transactions
covered by the contract—the initial referral of the customer, the customer’s order of supplies
from Modderman, or the ultimate provision of the supplies to the customer—occurred in
Pennsylvania. All of the alleged customers who were diverted from ABC to HMS reside in
Colorado and the trade secrets at issue in this case are the lists of Colorado customers and
providers. Moreover, the underlying Restrictive Covenant Agreement in this case was not
negotiated in Pennsylvania, but rather was prepared by ABC in Pennsylvania and submitted to
Modderman in Colorado by fax, where he signed and returned it to Pennsylvania by fax. ABC
does not even allege that Modderman has ever visited Pennsylvania. As explained in Radian
where the defendants were also aware that the plaintiffs were headquartered in Pennsylvania, the
mere fact that Modderman and HMS were aware that ABC was headquartered in Pennsylvania is
not sufficient to show that HMS’s alleged tortious conduct was expressly aimed at Pennsylvania.
18 F. Supp. 3d at 644-45 (citing IMO Indus., 155 F.3d at 265). Accordingly, there is no specific
jurisdiction over HMS based on the Calder effects test.
2. Specific Jurisdiction based on the Restrictive Covenant Agreement
In the alternative, ABC argues that because of the close relationship between HMS and
Modderman, HMS is bound by the Restrictive Covenant Agreement and personal jurisdiction is
appropriate in this Court based on the Agreement’s forum selection clause. “It is widely accepted
that non-signatory third-parties who are closely related to a contractual relationship are bound by
forum selection clauses contained in the contracts underlying the relevant contractual
relationship.” First Fin. Mgmt. Grp. Inc. v. Univ. Painters of Balt., Inc., No. 11-cv-5821, 2012
WL 1150131 at *3 (E.D. Pa. Apr. 5, 2012). “[C]ourts considering this question of whether a nonsignatory may be bound by a forum selection clause take a common sense, totality of the
circumstances approach that essentially inquires into whether, in light of those circumstances, it
is fair and reasonable to bind a non-party to the forum selection clause.” Synthes, Inc. v. Emerge
Medical, Inc., 887 F. Supp. 2d 598, 607 (E.D. Pa. 2012) (citations omitted). “All that is required
is facts demonstrating a close relationship to the signatory or to the contractual dispute, such that
application of the forum selection clause was reasonably foreseeable.” Id. at 613.
Courts in two recent cases in this district have considered the effect of forum selection
clauses in employment contracts on third-parties in alleged tortious interference with contract
claims. See Synthes, 887 F. Supp. 2d at 603; Radian, 18 F. Supp. 3d at 645. In both of those
cases, the courts focused on specific facts that made it reasonably foreseeable that the third-party
defendant would be bound by the defendant employee’s forum selection clause. Because the
defendants in Synthes and Radian were aware of the non-compete clauses prior to the alleged
tortious conduct and because of the close relationships between the signatory and non-signatory
defendants, those courts concluded that personal jurisdiction over the non-signatory defendants
was appropriate based on the signatory defendants’ forum selection clauses. Synthes, 887 F.
Supp. 2d at 611; Radian, 18 F. Supp. 3d at 647.
In Synthes, the plaintiff was a medical device company that employed three of the
defendants as salespeople. 887 F. Supp. 2d at 599. The salespeople signed non-solicitation and
non-competition agreements that included forum selection clauses. Id. at 599, 606. The
defendant salespeople created a competing venture, Emerge, along with an unaffiliated
defendant, who became the new venture’s Chief Operating Officer (“COO”). Id. at 603. The
plaintiff sought to join the COO and asserted personal jurisdiction based on the salespeoples’
forum selection clause, even though the COO was not a signatory to the agreement. Id. at 606.
The Synthes court focused on four key pieces of evidence. First, plaintiff in that case
alleged that the COO worked closely with the salespeople while they were still employed by the
plaintiff. Id. at 610. Second, plaintiff produced evidence that the COO “had extensive knowledge
of the Non-Competition Agreements and worked with lawyers to structure Emerge’s initial
business in such a way that Emerge hoped would avoid the appearance of a breach of those
agreements.” Id. at 610-11. Third, the COO and other employees of Emerge warned investors of
the possibility of liability based on breach of the salespeoples’ non-compete agreements. Id. at
611. Finally, the plaintiff produced evidence of frequent discussions at Emerge of the “perils
associated with the non-compete provisions.” Id. Taken together, the court concluded that this
evidence showed that the non-signatory defendant COO “should have reasonably foreseen that
he would be bound by these forum selection clauses” and therefore that personal jurisdiction was
In Radian, the court considered whether there was personal jurisdiction over a nonsignatory defendant who hired a defendant employee who had a non-compete agreement
(including a forum selection clause) with the plaintiff. 18 F. Supp. 3d at 645. As in Synthes, the
court focused on evidence that the non-signatory defendant was aware of the non-compete
agreement prior to hiring the defendant employee. Id. at 646-47. Specifically, the court first
noted that the non-signatory defendant interviewed the defendant employee before she left her
job with the plaintiff. Id. at 646. Second, the court noted that the non-signatory defendants were
aware of the existence of the non-compete agreement before the employee defendant was hired.
Id. at 647. Third, plaintiff presented evidence that the officers of the non-signatory defendants
discussed the “risk of hiring a new employee with a non-competition agreement.” Id. The Radian
court thus concluded that personal jurisdiction was appropriate because the non-signatory
defendant sought to employ the defendant employee “while knowing that she was employed . . .
under a contract with a noncompetition agreement, [defendants] are sufficiently closely related to
[the employee] so as to foresee being bound by the forum selection clause.” Id.
In this case, ABC has not established that HMS could reasonably have foreseen being
bound by Modderman’s Restrictive Covenant Agreement. There has been no evidentiary hearing
on personal jurisdiction in this case and therefore “the plaintiff need only establish a prima facie
case of personal jurisdiction.” Corigliano, 611 F. App’x at 79. There are several key differences
between the facts of this case as alleged in ABC’s Amended Complaint and the facts of Synthes
and Radian that make it unreasonable to bind HMS to the terms of Modderman’s restrictive
First, Modderman, unlike the defendants in Synthes and Radian, is not employed by
HMS. While ABC alleges some circumstantial evidence that Modderman has in the past and
continues to distribute marketing materials on HMS’s behalf, they have not alleged that HMS
compensated Modderman for referring customers. HMS could not reasonably foresee being
bound to Modderman’s agreement when Modderman is not an HMS employee or independent
contractor, or legally affiliated in any way with HMS.
Second, in Synthes and Radian, the plaintiffs adduced evidence that the non-signatory
defendants were aware of the non-compete agreements before the tortious conduct occurred and
the fact that they might be affected by the agreement. This is markedly different than the facts of
this case. ABC does not allege that HMS became aware of Modderman’s Restrictive Covenant
Agreement until after the alleged tortious activity. Am. Compl. ¶ 69. Specifically, HMS learned
of the Restrictive Covenant Agreement on March 16, 2015, when ABC’s lawyer sent a demand
letter with a copy of the Agreement attached. Id. ABC does not allege that HMS became aware
of the Restrictive Covenant Agreement through other means prior to the demand letter. At the
time Modderman and HMS allegedly diverted ABC’s customers, HMS was not aware of
Modderman’s Restrictive Covenant Agreement and thus could not have foreseen being bound by
the forum selection clause.
The informal relationship between Modderman and HMS and the lack of notice to HMS
of the non-compete agreement until after the alleged tortious acts make it unreasonable to bind
HMS to Modderman’s Restrictive Covenant Agreement and the included forum selection clause.
Under the totality of the circumstances, it would not be fair and reasonable to bind HMS to
Modderman’s selection of a Pennsylvania forum. Accordingly, there is no specific jurisdiction
over HMS based on Modderman’s Restrictive Covenant Agreement.
B. Transfer Under 28 U.S.C. §1404(a) and § 1406(a)
Having concluded that the Court lacks jurisdiction over HMS, the Court must decide
whether to transfer the entire case, sever and transfer only the claims against HMS, or dismiss
HMS from the case for lack of personal jurisdiction. In the interest of justice and judicial
efficiency, the Court transfers the entire case to the District of Colorado.
When a district court lacks personal jurisdiction over a defendant, the court may choose
to dismiss the defendant from the action or transfer the case to “any district or division in which
it could have been brought” pursuant to 28 U.S.C. § 1406(a). Goldlawr, Inc. v. Heiman, 369 U.S.
463, 466 (1962) (citing 28 U.S.C. § 1406(a)). By contrast, when the court has personal
jurisdiction and venue is proper, “for the convenience of parties and witnesses, in the interest of
justice, a district court may transfer any civil action to any other district or division where it
might have been brought” pursuant to 28 U.S.C. § 1404(a).
There is a complication in this case posed by Modderman’s Restrictive Covenant
Agreement. Modderman is undoubtedly bound by that agreement, which provides that
Modderman “irrevocably consents to the exclusive jurisdiction of the state and federal courts of
the Commonwealth of Pennsylvania” and “waives any objection . . . based on lack of personal
jurisdiction, improper venue, or forum non conveniens.” Am. Compl. ¶ 18; Ex. A. Modderman
and HMS do not dispute the validity of the forum selection clause as applied to Modderman.
However, as discussed above, the forum selection clause does not bind HMS in this case because
of the lack of a relationship between Modderman and HMS such that HMS could reasonably
have foreseen being bound.
Where a valid forum selection clause exists, the district court should only transfer the
case “under extraordinary circumstances unrelated to the convenience of the parties.” Atlantic
Marine Construction Co., Inc. v. United States District Court for W.D. Tex., 134 S. Ct. 568, 581
(2013). In Atlantic Marine, the Supreme Court held that in considering a motion for transfer “for
the convenience of parties and witnesses” pursuant to § 1404(a), the district court should
ordinarily defer to the parties preselected choice of forum. Id. at 582. “[W]hen parties agree to a
forum-selection clause, they waive the right to challenge the preselected forum as inconvenient
or less convenient for themselves or their witnesses[.]” Id. This leaves only the so-called “public
interest factors” to be considered in deciding whether to transfer an action over a forum selection
clause. Id. These factors include “the enforceability of the judgment; practical considerations that
could make the trial easy, expeditious, or inexpensive; the local interest in deciding local
controversies at home; the public policies of the fora; and the familiarity of the trial judge with
the applicable state law in diversity cases.” Jumara v. State Farm Ins. Co., 55 F.3d 873, 879-80
(3d Cir. 1995).
Any transfer of the claims against HMS in this case would be pursuant to § 1406(a),
not § 1404(a), because the Court lacks personal jurisdiction over HMS. Lafferty v. St. Riel, 495
F.3d 72, 77 (3d Cir. 2007) (“Section 1406(a) comes into play where plaintiffs file suit in an
improper forum. In those instances, district courts are required either to dismiss or transfer to a
proper forum.”). Thus, the Supreme Court’s Atlantic Marine analysis, which dealt with transfer
under § 1404(a), does not apply to the decision of whether to transfer the claims against HMS.
The claims against HMS must either be transferred to an appropriate court under § 1406(a) or
dismissed from the case entirely.
The Court must also decide whether to transfer the claims against Modderman along with
HMS. Because personal jurisdiction and venue are appropriate as to Modderman based on the
Restrictive Covenant Agreement, transfer of the claims against Modderman to another district
under § 1406(a) is not appropriate. Lafferty, 495 F.3d at 79 (“[W]e do not allow courts to force
transfers [under § 1406(a)] ‘in the interest of justice’ where venue is otherwise proper.”).
Accordingly, the claims against Modderman must be transferred, if at all, pursuant to § 1404(a).
While Atlantic Marine dealt with the transfer of a case to the preselected forum over plaintiff’s
objection, rather than as in this case a transfer of a defendant out of the preselected forum over
plaintiff’s objection, the Court believes that the principals of Atlantic Marine should govern the
analysis. The Court considers, therefore, in light of Atlantic Marine, whether this is one of the
rare cases where “extraordinary circumstances unrelated to the convenience of the parties”
justify transfer of a defendant pursuant to § 1404(a) over an exclusive forum selection clause.
Because the claims against HMS must be transferred or dismissed, failing to transfer the
claims against Modderman as well would require severance of the defendants currently joined in
this case. A situation where only some of the parties are bound to the forum selection clause
“implicat[es] concerns attending parallel lawsuits not present in Atlantic Marine.” In re Rolls
Royce Corp., 775 F.3d 671, 679 (5th Cir. 2014). In Rolls Royce, the Court of Appeals for the
Fifth Circuit determined that “the need—rooted in the valued public interest in judicial
economy—to pursue the same claims in a single action in a single court can trump a forum
selection clause.” 775 F.3d at 679; see also Howmedica Osteonics Corp. v. Sarkisian, No. 14-cv3449, 2015 WL 1780941 at *5-7 (D.N.J. Apr. 20, 2015) (transferring entire case to single forum
where defendants had multiple conflicting exclusive forum selection clauses, rather than sever
litigation and transfer each defendant to separate forums). In determining whether to sever
defendants in a multiparty case, the court must consider whether “the administration of justice
would be materially advanced.” Sunbelt Corp. v. Noble, Denton, & Assocs., Inc., 5 F.3d 28, 34
(3d Cir. 1993). “The court should not sever if the defendant over whom jurisdiction is retained is
so involved in the controversy to be transferred that partial transfer would require the same
issues to be litigated in two places.” Id. at 33-34 (citations omitted). “[B]efore dividing the case,
the District Court should weigh the factors favoring transfer against the potential inefficiency of
requiring the similar and overlapping issues to be litigated in two separate forums.” D’Jamoos v.
Pilatus Aircraft Ltd., 566 F.3d 94, 111 (3d Cir. 2009).
This case concerns a single dispute that cannot be easily separated without requiring
substantially the same issues to be litigated in two separate forums. The underlying allegations of
the breach of contract claim and the tortious interference with contract claim both involve a
transfer of patients from ABC to HMS via the alleged activities of Modderman and will require
establishing substantially the same factual record. The misappropriation of trade secrets claim is
asserted against both defendants and would therefore need to be litigated twice in both forums.
Modderman and the HMS officers will be required to participate as witnesses in both actions if
they are severed because the witnesses in all of the claims will be the same: ABC officers and
employees, HMS officers and employees, Modderman, and third-party patients and referral
sources. The Court concludes that severing the two defendants is not appropriate because it
would require litigation of substantially the same issues in two different courts.
For the foregoing reasons the Court concludes that “extraordinary circumstances
unrelated to the convenience of the parties” exist that justify the transfer of the claims against
Modderman pursuant to § 1404(a). This is proper despite the forum selection clause because this
Court lacks personal jurisdiction over HMS and severance of the claims against HMS from the
claims against Modderman would result in inefficient and duplicative litigation. The public
interest in efficiency served by litigating substantially the same claims in one court rather than
two outweighs the prior agreement as to forum of ABC and Modderman.
Accordingly, the Court will transfer the claims against HMS pursuant to § 1406(a) and
the claims against Modderman pursuant to § 1404(a) to a district in which this action originally
could have been filed. Because the events underlying this action occurred in Colorado and both
Modderman and HMS are subject to general personal jurisdiction in Colorado, the Court will
transfer the entire case to the United States District Court for the District of Colorado.
For all of the foregoing reasons, defendant Home Medical Supplies, Inc.’s Motion to
Transfer Venue for the Convenience and Availability of Third Party Witnesses or to Dismiss for
Lack of Personal Jurisdiction is granted in part and denied in part. That part of HMS’s motion
seeking transfer of the claims against HMS to the District of Colorado is granted pursuant to 28
U.S.C. § 1406(a). That part of HMS’s motion seeking dismissal of the claims against HMS for
lack of personal jurisdiction is denied as moot. In addition, in the interest of justice, the Court
transfers the claims against defendant Modderman to the District of Colorado pursuant to 28
U.S.C. § 1404(a). The entire case is thus transferred to the United States District Court for the
District of Colorado. An appropriate order follows.
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