HAPPY PHOTO SHOPPES, INC. v. RIVERSHORE CHARTERS, INC. et al

Filing 7

MEMORANDUM. SIGNED BY HONORABLE GERALD A. MCHUGH ON 7/6/2017. 7/7/2017 ENTERED AND COPIES E-MAILED. (aeg)

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA

HAPPY PHOTO SHOPPES, INC., t/a
RIVER LOOP FERRY CORP. OF NJ,
Plaintiff,

:
:
:
:
:
:
:
:
:

v.
RIVERSHORE CHARTERS, INC., and
MARK PERRY,
Defendants.

MCHUGH, J.

CIVIL ACTION
No. 16-5071

July 6, 2017
MEMORANDUM

This case concerns a breach of contract action by a Pennsylvania Plaintiff against Defendants
from Virginia. The question before me is whether, under Pennsylvania’s long-arm statute, this Court
can exercise personal jurisdiction over Defendants. Because I find that Defendants established
constitutionally sufficient minimum contacts with Pennsylvania, I conclude that jurisdiction is proper.
I.

BACKGROUND
In or around September 2012, Alfred Krawitz, president of Plaintiff of Happy Photo Shoppes,

Inc. (Happy Photo), 1 placed an ad on the website of Boats and Harbors Magazine, offering the sale of
the Riverloop, a commercial sight-seeing vessel that was then docked in Philadelphia. Krawitz’s ad
attracted the interest of Defendant Mark Perry, a commercial boat captain and the sole owner of CoDefendant Rivershore Charters, Inc. (Rivershore). In September and again in November, Perry
traveled from his home in Virginia to Philadelphia to inspect the Riverloop and discuss terms with
Krawitz. Krawitz’s asking price was too high, however, and the meetings failed to produce a deal.
1

Happy Photo trades as River Loop Ferry Corp. of NJ. Despite this trade name, it is undisputed that Happy Photo is a
Pennsylvania resident.

1

Nevertheless, Perry and Krawitz continued their discussions over the course of the next year-and-a-half
through sporadic phone and e-mail communications. During this time, the City of Philadelphia
revoked Krawitz’s docking privileges, and Krawitz moved the Riverloop to a dock in Wilmington,
Delaware. It was there, in April 2014, that Perry and Krawitz next met in person. By this time,
Krawitz had abandoned his original plan of an outright sale of the Riverloop and had decided instead to
lease the boat to Rivershore. In anticipation of a final lease agreement, Perry took possession of the
Riverloop following the April meeting and piloted the vessel from Delaware first to a Coast Guard
inspection station in Maryland and then to his dock in Virginia. After additional negotiations by email and phone, Perry and Krawitz agreed in May on a final set of terms, which were memorialized in
a “Bareboat Boat Charter Agreement” (Agreement).
The Agreement provided for a two-year renewable lease. Rivershore agreed to pay Happy
Photo up to thirty percent of the gross receipts earned by the Riverloop, but in no event less than
$25,000 per year, in twelve monthly installments. Rivershore further agreed to replace and repair, “at
the outset of the lease, . . . carpet, ceiling tiles, roof a/c, [and] toilet parts” and to provide Happy Photo
with notice before doing so. Happy Photo retained the right to retake possession of the Riverloop if
Rivershore missed a lease payment, and to terminate the Agreement (for any reason) upon thirty days’
written notice. Though it contained no forum selection clause, the Agreement stipulated that it was to
be enforced under to Pennsylvania law.
Perry signed the Agreement in Virginia and mailed a completed copy to Krawitz in
Philadelphia. Rivershore sent Happy Photo the first monthly payment due under the Agreement, but a
short time later, Perry and Kraswitz disagreed over the cost of repairs to the Riverloop and no further
payments were made. Pursuant to the Agreement’s cancellation and termination provisions, Krawitz
retook possession of the Riverloop in July or August, 2016, and later filed the instant breach of

2

contract action. Perry and Rivershore, both residents of Virginia, now seek dismissal for lack of
personal jurisdiction pursuant to Rule 12(b)(2).
II.

STANDARD
“To survive a motion to dismiss for lack of personal jurisdiction, a plaintiff bears the burden of

establishing the court’s jurisdiction over the moving defendants.” Miller Yacht Sales, Inc. v. Smith,
384 F.3d 93, 97 (3d Cir. 2004). Where, as here, “the court does not hold an evidentiary hearing on the
motion to dismiss, the plaintiff need only establish a prima facie case of personal jurisdiction and the
plaintiff is entitled to have its allegations taken as true and all factual disputes drawn in its favor.” Id.
III.

DISCUSSION
To determine whether personal jurisdiction is proper, a district court sitting in diversity applies

the law of the forum state. Fed. R. Civ. P. 4(e). Pennsylvania’s long-arm statute, 42 Pa. Cons. Stat.
Ann. § 5322(b), has a reach coextensive with the limits of the Fourteenth Amendment’s Due Process
Clause. “Accordingly, in determining whether personal jurisdiction exists, we ask whether, under the
Due Process Clause, the defendant has certain minimum contacts with Pennsylvania such that the
maintenance of the suit does not offend traditional notions of fair play and substantial justice.”
O’Connor v. Sandy Lane Hotel Co., 496 F.3d 312, 316 (3d Cir. 2007) (quoting Int’l Shoe Co. v.
Washington, 326 U.S. 310, 316 (1945)).
Personal jurisdiction may be either general or specific. The only question here is whether
Pennsylvania can assert specific jurisdiction over Defendants.
The inquiry as to whether specific jurisdiction exists has three parts. First, the
defendant must have purposefully directed its activities at the forum. Second, the
litigation must arise out of or relate to at least one of those activities. And third, if the
prior two requirements are met, a court may consider whether the exercise of
jurisdiction otherwise comports with fair play and substantial justice.
Id. at 317 (citations omitted).
3

A. Purposeful Availment
“At the threshold, the defendant must have purposefully availed itself of the privilege of
conducting activities within the forum. . . . [W]hat is necessary is a deliberate targeting of the forum.”
Id. (citations omitted). Defendants contend that this case’s only connection with Pennsylvania is
Plaintiff’s residence there. Noting that “‘minimum contacts’ analysis looks to the defendant’s contacts
with the forum State itself, not the defendant’s contacts with persons who reside there,” Walden v.
Fiore, 134 S. Ct. 1115, 1122 (2014), they argue that their business dealings with Plaintiff do not
establish personal jurisdiction here. I disagree.
In contract cases like this, the Third Circuit directs courts to “analyze the totality of the
circumstances surrounding a contract to determine whether the exercise of jurisdiction over the
defendant is proper.” Miller Yacht Sales, 384 F.3d at 99. 2
The mere existence of a contract is insufficient to establish minimum contacts. . . . But
a contract is typically an intermediate step between past negotiations and future
transactions, and . . . it is these factors—prior negotiations and contemplated future
consequences, along with the terms of the contract and the parties’ actual course of
dealing—that must be evaluated in determining whether the defendant purposefully
established minimum contacts with the forum.
Budget Blinds, Inc. v. White, 536 F.3d 244, 261 (3d Cir. 2008) (quoting Burger King Corp. v.
Rudzewicz, 471 U.S. 462, 479 (1985)). Ultimately, “[c]ourts are not reluctant to find personal
jurisdiction” over “[p]arties who reach out beyond their state and create continuing relationships and
obligations with citizens of another state.” Gen. Elec. Co. v. Deutz AG, 270 F.3d 144, 150 (3d Cir.
2001) (quoting Burger King, 471 U.S. at 482).
It is a close question, but under the “totality of the circumstances” test, I find that Defendants
have purposefully availed themselves of the privilege of conducting business in Pennsylvania. After
responding to Krawitz’s ad, Perry traveled to Philadelphia twice in order to inspect the Riverloop and
2

The Third Circuit has frequently examined personal jurisdiction in cases where, as here, the defendant’s contact with the
forum state arises out of a contractual relationship with the plaintiff. Unfortunately, neither party has briefed a single
decision from this line of binding case law.

4

discuss terms with Krawitz—physical presence in the forum that weighs against dismissal. See id.
Moreover, when Perry’s trips to Philadelphia failed to produce a deal, he maintained e-mail and phone
contact with Krawitz for more than year until the two reached a tentative lease arrangement. Although
such “informational communications” alone are insufficient grounds for personal jurisdiction, Vetrotex
Certainteed Corp. v. Consol. Fiber Glass Prod. Co., 75 F.3d 147, 152 (3d Cir. 1996), the prolonged
course of negotiation further demonstrates Perry’s purposeful direction of business activity toward
Pennsylvania. See Remick v. Manfredy, 238 F.3d 248, 256 (3d Cir. 2001) (citing Grand Entm’t Grp.,
Ltd. v. Star Media Sales, Inc., 988 F.2d 476, 482 (3d Cir. 1993) (“Mail and telephone communications
sent by the defendant into the forum may count toward the minimum contacts that support
jurisdiction.”)).
More important still, the Agreement’s terms, and the parties’ course of dealing, evince the type
of “continuing relationships and obligations” that support specific jurisdiction in contract cases. For
instance, the Agreement required Defendants to notify Plaintiff before making any of the anticipated
upgrades to the Riverloop’s carpet, ceiling, and bathroom fixtures—indeed, the fight over costs that
ultimately led to the parties’ falling out arose from these contemplated communications. The
Agreement also required Defendants to make monthly lease payments—a periodic compensation
scheme that further ensured regular contacts between the parties over the course of the lease’s two-year
term. Cf. Budget Blinds, 536 F.3d at 262 (questioning whether a contract that “merely describes what
will happen in the event of default” could support specific jurisdiction based on contemplated future
contacts between the parties). Finally, I find it significant that the Agreement contained a
Pennsylvania choice-of-law provision and was signed by Krawitz in, after being signed by Perry and
mailed to, Pennsylvania. See Remick, 238 F.3d at 256 (noting significance of similar factors). In light
of Defendants’ pursuit and formation of a business venture with a known resident of Pennsylvania, I
find these factors “reinforce [Defendants’] deliberate affiliation with the forum State and the
5

reasonable foreseeability of possible litigation there.” Budget Blinds, 536 F.3d at 261 (quoting Burger
King, 471 U.S. at 482).
In sum, Defendants’ actions during pre-contract negotiations, the parties’ course of dealing
within the contractual relationship, and the terms of the Agreement itself establish purposeful
availment. Although I do not believe that any one of these factors, standing alone, would justify the
exercise of specific jurisdiction, their combined force is sufficient.
B. Relatedness
“Identifying some purposeful contact with the forum is but the first step in the specificjurisdiction analysis. The plaintiffs’ claims must also arise out of or relate to at least one of those
contacts.” O’Connor, 496 F.3d at 318 (citing Helicopteros Nacionales de Colom., S.A. v. Hall, 466
U.S. 408, 414 (1984)). “In contract cases, courts should inquire whether the defendant’s contacts with
the forum were instrumental in either the formation of the contract or its breach.” Gen. Elec. Co., 270
F.3d at 150. Defendants offer no argument regarding this element of the specific jurisdiction test, nor
could they. As discussed at length above, their telephonic, electronic, and physical contacts with
Pennsylvania were essential to the Agreement’s formation. The relatedness element is therefore
satisfied.
C. Fair Play and Substantial Justice
Finally, I must determine whether “the exercise of jurisdiction would offend “traditional
notions of fair play and substantial justice.” Int’l Shoe, 326 U.S. at 316. Relevant considerations
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, [and] the interstate judicial system’s
interest in obtaining the most efficient resolution of controversies.” Burger King, 471 U.S. at 477.
Because I have found that Defendants made minimum contacts with Pennsylvania, they “must present
6

a compelling case that the presence of some other considerations would render jurisdiction
unreasonable.” Id.
Defendants fail to carry this burden. 3 Plaintiff has a strong interest in litigating this matter in
its home state and Pennsylvania has a strong interest in providing a forum for its injured residents.
Moreover, because the Agreement includes a Pennsylvania choice-of-law provision, there is no
concern about frustrating the policies of another state. Finally, while “the burden on the defendant is a
primary concern in any case,” O’Connor, 496 F.3d at 324, this alone is insufficient grounds to defeat
otherwise constitutional jurisdiction. “When minimum contacts have been established, often the
interests of the plaintiff and the forum in the exercise of jurisdiction will justify even the serious
burdens placed on the . . . defendant.” Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102, 114
(1987). That is the case here.
IV.

CONCLUSION
For the forgoing reasons, Defendants’ Motion to Dismiss will be denied. An appropriate order

follows.

/s/ Gerald Austin McHugh
United States District Judge

3

In fact, Defendants make no argument why exercising jurisdiction in Pennsylvania would offend traditional notions of fair
play and substantial justice.

7