CALA DIAMONDS, LLC v. HRA GROUP HOLDINGS et al

Filing 20

MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE J. CURTIS JOYNER ON 9/21/17. 9/22/17 ENTERED AND COPIES E-MAILED.(mbh, )

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

CALA DIAMONDS, LLC

:
: CIVIL ACTION
Plaintiff,
:
:
vs.
:
: NO. 17-CV-1136
HRA GROUP HOLDINGS,
:
ITAY ARIEL,
:
CROSSWORKS MANUFACTURING LTD, :
HRA USA LTD, and
:
MICHELLE SEGOLY
:
:
Defendants.
:
MEMORANDUM AND ORDER

JOYNER, J.

September 21, 2017

This civil action has been brought before the Court on
Motion of the Defendants to Dismiss the Plaintiff’s Complaint
(Doc. Nos. 11 and 12) pursuant to Fed. R. Civ. P. Nos. 12(b)(2),
12(b)(6), and 9(b).

For the reasons set forth below, Defendants’

Motion shall be granted in part and denied in part.
Factual Hackground
Plaintiff CALA Diamonds, LLC (“CALA” or “Plaintiff”) is a
family-owned, retail jewelry business founded in 2014 by Paul
and Becky Physh, with its principal place of business in
Brookville, Pennsylvania. (Compl., ¶¶ 1, 10).

Defendant HRA

Group Holdings (“HRA Group”) is incorporated under the laws of

British Columbia, Canada and maintains a principal place of
business in Vancouver, British Columbia, Canada and is involved
in the international, wholesale jewelry business. (Compl.,¶ 2).
Defendant H.R.A. U.S.A., Ltd. (“HRA USA”) is alleged to be a
registered agent of HRA Group and is incorporated in the State of
Washington. (Compl., ¶ 5).

Defendant Crossworks Manufacturing

Ltd. (“Crossworks”)(HRA Group, HRA USA, and Crossworks,
collectively, “Corporate Defendants”) is alleged to be “a
division, subsidiary, partner or entity legally related to HRA
Group” and maintains its principal place of business in
Vancouver, British Columbia, Cananda, and is incorporated under
the laws of the Northwest Territories, Canada. (Compl., ¶ 4).
Defendant Michelle Segoly (“Segoly”) is employed as the Brand
Manager of Forevermark USA and Canadian Rocks for HRA Group, and
resides in Vancouver, British Columbia, Canada. (Compl., ¶ 8).
Lastly, Defendant Itay Ariel (“Ariel”)(Segoly and Ariel,
together, “Individual Defendants”)(Corporate Defendants and
Individual Defendants, together, “Defendants”) “is an officer and
authorized sales representative of Crossworks, HRA Group and/or
HRA USA,” and resides in Vancouver, British Columbia, Canada.
(Compl., ¶ 6).
This action arises from a business relationship that
developed between Plaintiff and Defendants in 2014, after Paul
Physh contacted, scheduled, and traveled to Vancouver, Canada to

2

“seek[] guidance and advice on how to become successful diamond
dealers.”

(Compl., ¶¶ 12-16).

At this meeting in August 2014,

Mr. Physh met with Defendants Segoly and Ariel, who allegedly
offered Plaintiff assistance and assurance that Defendants would
sell diamonds to Plaintiff. (Compl., ¶¶ 17-18). Over the course
of the following two years, Plaintiff would make several
purchases from Defendants, with three transactions in particular
making up the substance of this action.
According to the complaint, in March 2015, Segoly presented
Plaintiff with a diamond (“Pink Diamond”) that she claimed was
unique, as it was “one of only two diamonds in the pink color
grade to come out of Canada larger than 1 carat,” which Plaintiff
subsequently purchased for $25,000. (Compl., ¶¶ 23-25).

After

experiencing difficulty in selling this diamond, Plaintiff
requested documentation to substantiate Segoly’s alleged claims
about the uniqueness of this particular gemstone; however, this
request proved fruitless.

(Compl., ¶¶ 27-29).

Plaintiff alleges

that, in reliance on these misrepresentations by Segoly, it
overpaid for the diamond and injured its reputation with its
potential customers who perceived Plaintiff as having overpriced
the diamond. (Compl., ¶ 30).
Plaintiff also alleges that, in May 2015, it purchased five
rings (“Diamond Rings”), each of which contained colored
diamonds, for a total of $558,000. (Compl., ¶ 37).

3

Defendants

included a certification on the second page of the invoice for
these rings, which stated that the diamonds were not “clarity
enhanced diamonds.” (Compl., ¶ 40).

Plaintiff argues that it is

industry practice for sellers of colored diamonds to disclose to
purchasers “whether the clarity of the color of the diamonds has
been enhanced in any way.” (Compl., ¶ 39).

In the process of

getting the colored diamonds appraised, Plaintiff had mentioned
to Defendants that it might need to have the diamonds extracted
from the rings to more accurately determine their value. (Compl.,
¶ 46).

Allegedly, Defendants repeatedly urged Plaintiff not to

do so as removal would damage the settings.

(Compl., ¶ 47).

Nevertheless, in April 2016, Plaintiff discovered that the
diamonds were color-enhanced after extracting them from the
rings. (Compl., ¶ 60).

Consequently, Plaintiff requested a

refund, but Defendants refused. (Compl., ¶ 65).
In July 2015, Defendants brought it to the attention of
Plaintiff that there was a necklace for purchase, referred to as
the Ideal Square Riviera (“Riviera necklace”), which Defendants
claimed was worn by Kate Hudson on the red carpet at the Academy
Awards ceremony. (Compl., ¶¶ 70-71).

After discussing an offer

with Ariel, Plaintiff purchased the necklace for $799,000.
(Compl., ¶ 75).

Following the purchase of the Riviera necklace,

it is alleged that Defendants had inconsistently stated who
designed the necklace.

(Compl., ¶¶ 77-78).

4

Despite Plaintiff’s

repeated requests for documentation to verify that Kate Hudson
had worn the necklace on the red carpet, and to establish who
actually designed the necklace, Defendants never provided such
information. (Compl., ¶ 80).

Plaintiff asserts that they relied

on these claims when purchasing the necklace, which caused them
to pay significantly more for it than they otherwise would have.
(Compl., ¶¶ 85-89).

Eventually in May 2016, Segoly informed

Plaintiff that it was the Defendants who had actually designed
the Riviera necklace. (Compl., ¶ 120).

In June 2016, Ariel

stated that the Riviera necklace had been “sent to Forevermark to
be used on the Red Carpet and that Forevermark ‘used’ the Riviera
on many occasions,” but still provided no proof that it was ever
worn by Kate Hudson.

(Compl., ¶ 122).

Against this backdrop, Plaintiff brings this lawsuit against
all of the Defendants alleging fraud and fraudulent concealment.
In addition, Plaintiff brings claims only against the Corporate
Defendants for breach of contract, breach of express and implied
warranties, and negligent misrepresentation.
Standards Governing Motions under Fed. R. Civ. P.12(b)(2),
12(b)(6) and 9(b)
(A) Dismissal Pursuant to Rule 12(b)(2)
It is axiomatic that “[j]urisdiction to resolve cases on the
merits requires both authority over the category of claim in suit
(subject matter jurisdiction) and authority over the parties
(personal jurisdiction) so that the court’s decision will bind
5

them.

Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 577, 119 S.

Ct. 1563, 1566, 143 L. Ed. 2d 760 (1999).

Indeed, a court of

competent jurisdiction is a court with the power to adjudicate
the case before it.

Lightfoot v. Cendant Mortgage Corp., 137 S.

Ct. 553, 560, 196 L. Ed. 2d 493, 501 (2017).

“Jurisdiction is

power to declare the law, and when it ceases to exist, the only
function remaining to the court is that of announcing the fact
and dismissing the cause.”

Vermont Agency of Natural Resources

v. United States ex rel. Stevens, 529 U.S. 765, 778-779, 120 S.
Ct. 1858, 1865-1866, 146 L. Ed. 2d 836 (2000)(quoting Ex parte
McCardle, 74 U.S. 506, 7 Wall. 506, 514, 19 L. Ed. 264 (1986));
Steel Co. v. Citizens for a Better Environment, 523 U.S. 83, 94,
118 S. Ct. 1003, 1012, 140 L. Ed. 2d 210 (1998).

Therefore the

validity of an order of a federal court depends upon the court’s
having jurisdiction over both the subject matter and the parties.
Insurance Corporation of Ireland v. Compagnie Des Bauxites, 456
U.S. 694, 701, 102 S. Ct. 2099, 2103, 72 L. Ed. 2d 492 (1982).
Unlike subject matter jurisdiction which is both an Article
III and a statutory requirement which cannot either be waived or
conferred by agreement of the parties, personal jurisdiction
represents an individual liberty interest which can, like other
such rights, be waived.
2104-2105.

Id, 456 U.S. at 702-704, 102 S. Ct. at

Consequently, a defendant has the initial burden of

raising the defense of lack of personal jurisdiction and this may

6

be done by filing a motion for dismissal.

TES Franchising, LLC

v. Dombach, Civ. A. No. 10-0017, 2010 U.S. Dist. LEXIS 130314 at
*3 (E.D. Pa. Dec. 9, 2010); Potts v. Harrah’s Atlantic City Hotel
& Casino, Civ. A. No. 06-5422, 2007 U.S. Dist. LEXIS 47197 at *3
(E.D. Pa. June 28, 2007); Poole v. Sasson, 122 F. Supp. 2d 556,
557 (E.D. Pa. 2000); Fed. R. Civ. P. 12(b)(2), 12(h)(1), (3).
Once the defense is raised, the burden falls to the plaintiff to
establish the court’s jurisdiction over the moving defendant(s)
by filing affidavits or producing other competent evidence.
Metalfe v. Renaissance Marine, Inc., 566 F.3d 324, 330 (3d Cir.
2009); Dayhoff Inc. v. H.J. Heinz Co., 86 F.3d 1287, 1302 (3d
Cir. 1996).

In the absence of an evidentiary hearing, a

plaintiff’s complaint need only establish a prima facie case of
personal jurisdiction.

Allaham v. Naddaf, No. 15-2575, 635 Fed.

Appx. 32, 36-37 (3d Cir. Dec. 17, 2015); Miller Yacht Sales, Inc.
v. Smith, 384 F.3d 93, 97 (3d Cir. 2004).

And, unless and until

an evidentiary hearing is held, a district court “must accept all
of the plaintiff’s allegations as true and construe disputed
facts in favor of the plaintiff.”

Allaham, at 37(quoting

Carteret Savings Bank, FA v. Shushan, 954 F.2d 141, 142, n.1 (3d
Cir. 1992)).

See also, Toys “R” Us, Inc. v. Step Two, S.A., 318

F.3d 446, 457 (3d Cir. 2003).

7

(B) Dismissal Under Rule 12(b)(6)
Under Fed. R. Civ. P. 12(b)(6), a complaint may be dismissed
for “failure to state a claim upon which relief can be granted.”
Renfro v. Unisys Corp., 671 F.3d 314, 320 (3d Cir. 2011).

In

reviewing a challenged pleading, the courts are required to
accept all well-pleaded factual allegations as true and draw all
reasonable inferences in the non-movant’s favor. Ebert v. Prime
Care Medical, Inc., No. 14-2020, 2015 U.S. App. LEXIS 1843 at *4
(3d Cir. Feb. 5, 2015); Phillips v. County of Allegheny, 515 F.3d
224, 233 (3d Cir. 2008); Krantz v. Prudential Investments Fund
Management, 305 F.3d 140, 142 (3d Cir. 2002); Pinker v. Roche
Holdings Ltd., 292 F.3d 361, 368 (3d Cir. 2002).

In so doing,

reliance is placed upon “the complaint, attached exhibits, and
matters of public record.”

Ebert, supra, (quoting Sands v.

McCormick, 502 F.3d 263, 268 (3d Cir. 2007)).

Because Fed. R.

Civ. P. 8(a)(2) requires a ‘showing,’ rather than a blanket
assertion, of entitlement to relief, courts evaluating the
viability of a complaint must look beyond conclusory statements
and determine whether the complaint has alleged enough facts to
state a claim to relief that is plausible on its face.

Bell

Atlantic v. Twombly, 550 U.S. 544, 127 S. Ct. 1955, 1974, 167 L.
Ed. 2d 929, 949 (2007); Renfro, supra.

Indeed, it is no longer

sufficient to allege mere elements of a cause of action; instead
a complaint must allege facts suggestive of the proscribed

8

conduct.”

Umland v. Planco Financial Services, Inc., 542 F.3d

59, 64 (3d Cir. 2008)(quoting Philips v. County of Allegheny, 515
F.3d 224, 233 (3d Cir. 2008)).

A claim has facial plausibility

when the plaintiff pleads factual content that allows the court
to draw the reasonable inference that the defendant is liable for
the misconduct alleged.

Ashcroft v. Iqbal, 129 S. Ct. 1937,

1949, 173 L. Ed. 2d 868 (2009).
(C) Dismissal Pursuant to Rule 9(b)
Fed. R. Civ. P. 9(b) states that “[i]n alleging fraud or
mistake, a party must state with particularity the circumstances
constituting fraud or mistake.

Malice, intent, knowledge, and

other conditions of a person’s mind may be alleged generally.”
Rule 9(b) is therefore satisfied when a plaintiff “plead[s] with
particularity the circumstances of the alleged fraud in order to
place the defendants on notice of the precise misconduct with
which they are charged, and to safeguard defendants against
spurious charges of immoral and fraudulent behavior.” Lum v. Bank
of America, 361 F.3d 217, 223-24 (3d Cir. 2004)(internal
quotations and citations omitted).

A plaintiff may do this by

“pleading the date, place or time of the fraud, or through
alternative means of injecting precision and some measure of
substantiation into their allegations of fraud.” Id. at 224
(internal quotations and citations omitted).

Lastly, in addition

to alleging the “general content of the misrepresentation,” it

9

must be alleged who made the misrepresentation and to whom it was
made. Id.

When fraud is not pled with the required

particularity, it is proper for the court to dismiss those
claims.
Discussion
(A) Personal Jurisdiction
Pursuant to Fed. R. Civ. P. 4(e), a district court may
assert personal jurisdiction over non-resident defendants to the
extent permissible under the law of the state where the district
court sits.

Eurofins Pharma U.S. Holdings v. Bioalliance Pharma,

623 F.3d 147, 155 (3d Cir. 2010); Remick v. Manfredy, 238 F.3d
248, 255 (3d Cir. 2001)(internal quotations and citations
omitted).

“Whether a district court has personal jurisdiction

over a nonresident defendant is a two-part inquiry.

First, there

must be a statutory basis for exercising jurisdiction over the
nonresident defendant in accordance with the law of the forum
state.”

Eurofins, supra,(citing Metcalfe, supra.).

“Second, the

nonresident must have minimum contacts with the forum state
sufficient to satisfy constitutional due process.”

Id.

Stated

otherwise, “[u]nder the Due Process clause, the exercise of
personal jurisdiction over a non-resident defendant is
appropriate when the defendant has ‘certain minimum contacts with
the forum state such that the maintenance of the suit does not
offend traditional notions of fair play and substantial

10

justice.’”

Fesniak v. Equifax Mortgage Services, LLC, Civ. A.

No. 14-3728, 2015 U.S. Dist. LEXIS 66238, *6, 2015 WL 2412119 (D.
N.J. May 21, 2015)(quoting Int’l Shoe Co. v. Washington, 326 U.S.
310, 316, 66 S. Ct. 154, 90 L. Ed. 95 (1945) and Milliken v.
Meyer, 311 U.S. 457, 463, 61 S. Ct. 339, 85 L. Ed. 278 (1940)).
Pennsylvania’s long-arm statute permits the exercise of
personal jurisdiction over non-residents “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.”
§5322(b).

42 Pa. C. S. A.

In determining whether a court’s exercise of

jurisdiction comports with due process, the court must consider
“the relationship among the defendant, the forum, and the
litigation.”

Shaffer v. Heitner, 433 U.S. 186, 97 S. Ct. 2569,

2570, 53 L. Ed.2d 683 (1958).

For sufficient minimum contacts to

exist, a defendant must “purposefully avail[] 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, 78 S. Ct. 1228, 1240 (1958).
Additionally, it must be reasonably foreseeable that the
defendant would be haled into court in that forum.

World-Wide

Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S. Ct. 559,
567, 62 L. Ed.2d 490 (1980).

11

Finally, there are two types of personal jurisdiction: (1)
general jurisdiction, which is based upon the defendant’s
“continuous and systematic” contacts with the forum and which
exists even if the plaintiff’s cause of action arises from the
defendant’s non-forum related activities; and (2) specific
jurisdiction, which is present only if the plaintiff’s cause of
action arises out of a defendant’s forum-related activities.
Fatouros v. Lambrakis, 627 Fed. Appx. 84, 87, 2015 U.S. App.
LEXIS 16839, 2015 WL 5574413 (3d Cir. Sept. 18, 2015); Remick,
238 F.3d at 255.
Here, Plaintiff asserts only that this Court has specific
jurisdiction and we therefore only assess whether specific
jurisdiction can properly be exercised over the Defendants.1
Determining whether specific jurisdiction exists involves a
three-part inquiry.

Kehm Oil Co. v. Texaco, Inc., 537 F.3d 290,

300 (2008)(citing O’Connor v. Sandy Lane Hotel Co., 496 F.3d 312,
317 (3d Cir. 2007)).

First, the defendant must have

“purposefully directed its activities” at the forum.

Id.(quoting

Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472, 105 S. Ct.
2174, 85 L. Ed. 2d 528 (1985)).

Second, the litigation must

1

Although Plaintiff’s Complaint is silent as to jurisdiction, it is
apparent from the face of the pleading that jurisdiction is premised upon
diversity pursuant to 28 U.S.C. §1332. In response to this motion, Plaintiff
argues only as to specific jurisdiction and neither avers nor produces any
evidence that Defendants have maintained the requisite systematic and
continuous contacts with this forum such as would give rise to a finding of
general jurisdiction in this matter. It thus appears that Plaintiff concedes
that general jurisdiction is lacking.

12

“arise out of or relate to” at least one of those activities.
Id.(quoting Helicopteros Nacionales de Colombia, S.A. v. Hall,
466 U.S. 408, 414-415, 104 S. Ct. 1868, 1872, 80 L. Ed. 2d 404
(1984)).

And third, if the prior two requirements are met,

“courts may consider additional factors to ensure that the
assertion of jurisdiction otherwise comports with fair play and
substantial justice.”

Id.

What’s more, “even when the

defendant’s contacts with the forum alone are far too small to
comport with the requirements of due process under [this]
traditional analysis,” a plaintiff may demonstrate personal
jurisdiction if he or she shows:
(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;
(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.
Remick, 238 F.3d at 259 (citing Calder v. Jones, 465 U.S. 783,
789, 104 S. Ct. 1482, 79 L. Ed. 2d 804 (1984) and IMO Industries,
Inc. v. Kiekert AG, 155 F.3d 254, 265-66 (3d Cir. 1998)).
In applying the foregoing legal principles to the matter now
before us, we observe that the Plaintiff’s complaint contains six
counts against the defendants: for fraud, fraudulent concealment,
breach of contract, breach of express warranties, breach of
implied warranties and negligent misrepresentation.

13

“While it

may not be necessary to do so in every multiple claim case, ...
because there are different considerations in analyzing
jurisdiction over contract claims and over certain tort claims,”
we believe a claim specific analysis is necessary here.

Remick,

238 F.3d at 255-256.
(i) Claims for Breach of Contract and Breach of Warranties
“Under Pennsylvania law, ‘contract formation requires (1) a
mutual manifestation of an intention to be bound, (2) terms
sufficiently definite to be enforced, and (3) consideration.”
Tax Matrix Technologies, LLC v. Wegmans Food Markets, Inc., 154
F. Supp. 3d 157, 172 (E.D. Pa. 2016)(quoting Kirleis v. Dickie,
McCamey & Chilcote, P.C., 560 F.3d 156, 160 (3d Cir. 2009)).
“[A] contract may manifest orally, in writing, or as an inference
from the acts and conduct of the parties.”

Meyer, Darragh,

Buckler, Bebenek & Eck, P.L.L.C v. Law Firm of Malone Middleman,
P.C., 137 A.3d 1247, 1258 (Pa. 2016).

To maintain a cause of

action for breach of contract, the plaintiff must show: (1) the
existence of a contract, including its essential terms; (2) a
breach of a duty imposed by the contract, and (3) resultant
damages.

McShea v. City of Philadelphia, 606 Pa. 88, 97, 995

A.2d 334, 340 (2010); Hart v. Arnold, 2005 PA Super 328, 884 A.2d
316, 332 (Pa. Super. 2005).
“In determining jurisdiction over a breach of contract
claim, we must consider the totality of the circumstances,

14

including the location and character of the contract
negotiations, the terms of the contract, and the parties’ actual
course of dealing.”

Remick, 238 F.3d at 256(citing Mellon Bank

(East) PSFS, National Association v. Farino, 960 F.2d 1217, 1223
(3d Cir. 1992)).

And, given that express warranties arise from

the representations of the parties and are made as the basis of
the bargain between them, and because under Pennsylvania law,
claims for breach of implied warranties such as for good faith
and fair dealing are subsumed in breach of contract claims, we
find that these same considerations apply to Plaintiff’s claims
for breach of express and implied warranty as set forth in Counts
IV and V.

See, Davis v. Wells Fargo, 824 F.3d 333, 352 (3d Cir.

2016)(“A claim arising from a breach of the covenant of good
faith must be prosecuted as a breach of contract claim as the
covenant does nothing more than imply certain obligations into
the contract itself”); Bentzley v. Medtronic, Inc., 827 F. Supp.
2d 443, 445 (E.D. Pa. 2011)(“Because express warranties are
specifically negotiated [rather than automatically implied by
law],... the seller must expressly communicate the terms of the
warranty to the buyer in such a manner that the buyer understands
those terms and accepts them.”); Goodman v. PPG Industries, Inc.,
2004 PA Super 151, 849 A.2d 1239, 1243 (Pa. Super. 2004)(same);
Davenport v. Medtronic, Inc., 302 F. Supp. 2d 419, (E.D. Pa.
2004)(citing Mitchell v. Collagen Corp., 126 F.3d 902, 915 (7th

15

Cir. 1997))(“Express warranties arise from the representations of
the parties and are made as the basis of the bargain between
them”).
Here, it appears from the allegations in the Complaint and
the exhibits attached thereto, and from the affidavits attached
to both Defendants’ Brief in Support of Motion to Dismiss and
Plaintiff’s Brief in Opposition that the business relationship
between the parties was initiated when Plaintiff’s principal Paul
Pysh contacted Defendants in the hopes of initiating just such a
relationship.

(Pl’s Compl., ¶ 12).

The complaint alleges that

Mr. Pysh spoke with an unidentified representative of Defendants
and scheduled an appointment to meet with them at their offices
in Vancouver, British Columbia, Canada.

Mr. Pysh thereafter met

with Defendants Ariel and Segoly in Vancouver in August, 2014 at
which time he explained that he was new to the jewelry industry
and that he was seeking guidance and advice on how to become a
successful diamond dealer.

(Compl., ¶s 13-16).

At that meeting,

Defendant Ariel told Mr. Pysh that not only would the defendants
sell diamonds to Plaintiff at prices that Plaintiff’s competitors
could not match, but that he would guide and teach Plaintiff the
necessary aspects of the jewelry business to enable it to become
a successful jewelry merchandiser.

(Compl., ¶s 17-19).

Thereafter, it appears that the parties’ communicated with one
another via phone and email from their respective locales in

16

Pennsylvania and Canada and that various diamonds were shipped
from Vancouver to Plaintiff at its address in Brookville,
Pennsylvania with Plaintiff’s payments therefor being wired from
Pennsylvania to the Royal Bank of Canada in Vancouver.
Exhibits “A,” “B,” “D” - “J”).

(Compl.,

Although Mr. Pysh apparently

returned several times for personal meetings with Defendants, it
appears that these meetings likewise took place in Vancouver.
(Exhibit 3 to Declaration of Paul Pysh, annexed to Pl’s Response
in Opposition to Motion to Dismiss).

The individual defendants

Segoly and Ariel are and at all relevant times have been
residents of Vancouver - neither has ever been a resident of the
United States, nor has either of them ever solicited business in
or traveled to Pennsylvania in the time they have been employed
by the corporate defendants (6 and 11 years, respectively) and
never traveled to Pennsylvania in connection with any business
relationship or transaction involving Plaintiff Cala Diamonds.
Although HRA Group USA is an American corporation, incorporated
in the State of Washington, it is alleged that Defendants HRA
Group Holdings and Crossworks are headquartered and have their
principal places of business in Vancouver. (Pl’s Compl., ¶s 2 6; Exhibits “A,” and “B” to Defendants’ Brief in Support of
Motion to Dismiss).
Generally speaking “informational communications in
furtherance of a contract between a resident and a nonresident

17

does not establish the purposeful activity necessary for a valid
assertion of personal jurisdiction over the non-resident
defendant.”

Vetrotex Certainteed v. Consolidated Fiber Glass, 75

F.3d 147, 152 (3d Cir. 1996).

Further, “it is well established

that a nonresident’s contracting with a forum resident, without
more, is insufficient to establish the requisite ‘minimum
contacts’ required for an exercise of personal jurisdiction over
the nonresident.”

BabyAge.com, Inc. v. Center for Environmental

Health, 90 F. Supp. 3d 348, 355 (M.D. Pa. 2015)(quoting Sunbelt
Corp. v. Noble,Denton & Assocs., Inc., 5 F.3d 28, 32 (3d Cir.
1993)).

In contract cases, however, “federal courts may exercise

specific jurisdiction if the defendant’s contacts with the forum
were instrumental in either formation of the contract or its
breach.”

Streamline Bus Services, LLC v. Vidible, Inc., Civ. A.

No. 14-1433, 2014 U.S. Dist. LEXIS 118657 at *22 (E.D. Pa. Aug.
26, 2014)(citing Mendelsohn, Drucker & Assocs. v. Titan Atlas
Manufacturing, 885 F. Supp. 2d 767, 773 (E.D. Pa. 2012)).
In this case, while there is no evidence that a written
contract was ever negotiated or consummated, it is obvious that
an oral agreement resulted from the Plaintiff’s having contacted
Defendants in and then traveling to Vancouver such that it may be
concluded that this contract (to teach Plaintiff about the
jewelry business and to sell diamonds to it) was formed in
Canada.

That fact notwithstanding, however, it appears that the

18

subsequent course of dealing between the parties involved both
Plaintiff and Defendants having contacted one another via phone
and/or email on multiple occasions and that many of these
contacts were initiated by Defendants seeking to sell diamonds to
Plaintiff and to otherwise further their business relationship
by, inter alia, editing informational handouts and advertising
materials.

There is also evidence that in the ordinary course of

their business dealings, Defendants regularly shipped their
diamonds to Plaintiff at Plaintiff’s address in Brookville, PA
along with the invoices for payment for those shipments.

In so

doing, we find that Defendants did, in fact, “purposely avail
themselves of the privilege of conducting activities” within
Pennsylvania, thus “invoking the benefits and protections of its
laws,” and making it “reasonably foreseeable that it would be
haled into court” here.

Hanson v. Denckla, and World-Wide

Volkswagen, both supra.

We likewise find that through their

course of dealings, Defendants’ contacts with this state were
instrumental in their alleged breach of their agreement with
Plaintiff.

We therefore find that sufficient minimum contacts

exist to justify the exercise by this Court of specific
jurisdiction over Plaintiff’s claims for breach of contract and
breach of express and implied warranties.
(ii) Claims for fraud, fraudulent concealment and negligent
misrepresentation

19

We likewise find that sufficient, minimum contacts exist
between Defendants and the Commonwealth of Pennsylvania to
warrant the exercise of personal jurisdiction with regard to
Plaintiff’s tort claims.

In Pennsylvania, “fraud consists of

anything calculated to deceive, whether by single act or
combination, or by suppression of truth, or suggestion of what is
false, whether it be by direct falsehood or by innuendo, by
speech or silence, word of mouth or look or gesture.”

Rohm and

Haas Co. v. Continental Casualty Co., 566 Pa. 464, 781 A.2d 1172,
1179 (2001)(quoting Moser v. DeSetta, 527 Pa. 157, 589 A.2d 679,
682 (1991)); Sarpolis v. Tereshko, 26 F. Supp. 3d 407, 419 (E.D.
PA. 2014).
deceive.”

“That is, there must be a deliberate intent to
Rohm and Haas, supra.

“To prove fraud in

Pennsylvania, a plaintiff must prove six elements: 1) a
misrepresentation, 2) material to the transaction, 3) made
falsely, 4) with the intent of misleading another to rely on it,
5) justifiable reliance resulted, and 6) injury was proximately
caused by the reliance.”

Santana Products v. Bobrick Washroom

Equipment, Inc., 401 F.3d 123, 136 (3d Cir. 2005)(citing Viquers
v. Philip Morris USA, Inc., 2003 PA Super 446, 837 A.2d 534 (Pa.
Super. 2003).
In similar fashion, “the concealment of a material fact can
amount to a culpable misrepresentation no less than does an
intentional false statement.”

Rohm and Haas, supra,(quoting

20

Moser, supra, at 682).

“In order to state a cognizable claim for

fraudulent concealment under Pennsylvania law, a plaintiff’s
claim must rest on a duty to disclose as ‘there can be no
liability for fraudulent concealment absent some duty to speak.’”
McLaughlin v. Bayer Corporation, 172 F. Supp. 3d 804, 825 (E.D.
Pa. 2016)(quoting City of Rome v. Glanton, 958 F. Supp. 1026,
1038 (E.D. Pa. 1997)).

A duty to disclose does not typically

arise unless there is a confidential or fiduciary relationship
between the parties.

Id.

Negligent misrepresentation, in turn,

“requires proof of: (1) a misrepresentation of material fact; (2)
made under circumstances in which the misrepresenter ought to
have known of its falsity; (3) with an intent to induce another
to act on it; and (4) which results in injury to a party acting
in justifiable reliance on the misrepresentation.”

Telwell Inc.

V. Grandbridge Real Estate Capital LLC, 2016 PA Super 159, 143
A.3d 421, 430 (2016)(quoting Bilt-Rite Contrs., Inc. v.
Architechtural Studio, 581 Pa. 454, 866 A.2d 270, 277 (Pa.
2005)).

Inasmuch as all three of these claims involve the

element of intent, analysis of the sufficiency of Defendants’
minimum contacts for purposes of determining the existence of
specific personal jurisdiction may properly be conducted jointly
under both the traditional tests and under the so-called “effects
test” first articulated in Calder v. Jones, supra.

21

In so doing, we again note that the evidentiary materials
annexed to the Plaintiff’s complaint and in support of both the
motion to dismiss and the response in opposition evince that
while the business relationship between the parties may have been
initiated by the Plaintiff in Canada, it could not have been
continued without Defendants’ having offered diamonds for sale to
Plaintiff in Pennsylvania over the course of a nearly-two year
period, which offers were accepted by Plaintiff resulting in the
diamonds being shipped to Pennsylvania and subsequently paid for
by Plaintiff from its Pennsylvania bank account.

It was in the

course of these dealings that Defendant made a number of
allegedly intentional and/or negligent misrepresentations about,
inter alia, the quality, origins and value of the diamonds which
it was offering and selling to Plaintiff and/or fraudulently
concealed the true quality, history and nature of its jewelry in
order to induce Plaintiff to purchase it.

By these alleged

actions then, we find that Defendants expressly aimed their
tortious conduct at and committed an intentional tort in and the
brunt of which was felt by Plaintiff in Pennsylvania.

So saying,

we find that the exercise of personal jurisdiction over
Defendants with regard to Plaintiff’s claims for fraud,
fraudulent concealment and negligent misrepresentation is also
proper.
iii) Corporate Defendants

22

In their Memorandum in Support of the Motion to Dismiss,
Defendants do not dispute whether Crossworks maintained minimum
contacts with Pennsylvania. (Doc. No. 12, at 12-13).

Instead,

Defendants argue that Crossworks’ contacts cannot be imputed to
the remaining Corporate Defendants.

Plaintiff alleges that both

the Pink Diamond and the Diamond Rings were shipped to, and
received in, Pennsylvania.

The two invoices that correspond to

these transactions are on Crossworks’ letterhead and,
additionally, list Plaintiff’s Pennsylvania address as the
location where the items were to be shipped. (Compl., Ex. B, D).
Here, these items purchased by Plaintiff, from Crossworks, were
purposely shipped to Pennsylvania and received by Plaintiff,
without the unilateral activity of a third-party; accordingly,
these contacts cannot be said to be fortuitous.
Volkswagen, 444 U.S. at 297.

See, World-Wide

Since each of Plaintiff’s claims

arise from these transactions, the intentional delivery of these
items into Pennsylvania establishes the necessary contacts with
this forum for the purposes of exercising specific jurisdiction.
Id., See, Van Buskirk v. Carey Canadian Mines, Ltd., 760 F.2d
481, 492 (3d Cir. 1985).
Finding that certain minimum contacts are present for
Defendant Crossworks, it is necessary for us now to determine
whether these contacts may be imputed to the remaining Corporate
Defendants.

It is already established that, “[a] parent-

23

subsidiary relationship is by itself an insufficient reason to
pierce the corporate veil in the jurisdictional context.” Dutoit
v. Strategic Minerals Corp., 735 F.Supp. 169, 171 (E.D. Pa.
1990).

While no definitive test has been established for

determining when contacts may be imputed to a parent entity, the
Third Circuit has provided some factors to be considered, such as
“whether the subsidiary corporation played any part in the
transactions at issue, whether the subsidiary was merely the
alter ego or agent of the parent, and whether the independence of
the separate corporate entities was disregarded.”

Lucas v. Gulf

& W. Indus., Inc., 666 F.2d 800, 806 (3d Cir. 1981).
Furthermore, “contacts should be imputed when the subsidiary was
either established for, or is engaged in, activities that, but
for the existence of the subsidiary, the parent would have to
undertake itself.”

Action Mfg. Co. v. Simon Wrecking Co., 375 F.

Supp. 2d 411, 421 (E.D. Pa. 2005); See, Arch v. Am. Tobacco Co.,
984 F.Supp. 830, 836 (E.D. Pa. 1997).
Plaintiff argues that a handout referencing the Pink
Diamond, which stated that the particular showcase was “being
presented by CALA Diamonds and HRA/Crossworks,” was evidence of
Defendants’ affiliation with one another.

(Doc. No. 16, at 20).

Plaintiff also points to an invoice that is unrelated to the
three transactions at issue here, which lists all three Corporate
Defendants as the sellers and Plaintiff as the buyer.

24

(Doc. No.

16, Ex. B).

It is worth noting that, on the invoice, both HRA

Group and Crossworks have the same address, telephone number, and
fax number listed. Id.

Lastly, Plaintiff asserts that Ariel and

Segoly’s association with the remaining Corporate Defendants
connects the three Corporate Defendants in such a way that
permits Crossworks’ contacts to be imputed to the others.
Here, we find that a majority of the factors suggest that
Crossworks contacts must be imputed to HRA Group.

First,

Plaintiff alleges that Segoly, as Brand Manager for HRA Group,
had been involved with the Pink Diamond transaction from the
onset and asserts that it was Segoly who made the
misrepresentations in regards to this item. Thus, HRA Group, by
way of its agent Segoly, allegedly played a part in this
transaction.

Moreover, with all things considered, it appears as

though HRA Group and Crossworks performed as though they were one
entity in the course of the Pink Diamond transaction, suggesting
a lack of separation and independence between the two corporate
entities.
In addition, the handwritten invoice, listing all three
Corporate Defendants as sellers, and Ariel’s declaration, stating
that he is the Group Executive for HRA Group, HRA USA, and
Crossworks, are a strong indication that Crossworks is merely an
alter ego of HRA Group, such that Crossworks could “be said to be
a mere department of” HRA Group.

25

See, Arch, 984 F. Supp. at 837.

Try though as we might, we cannot find such a relationship
between HRA USA and Crossworks as there simply is no evidence
aside from Ariel’s statement that he is the Group Executive for
all three and the one, unrelated invoice which merely contains
the names of all three entities but no other information as to
which was shipping the materials referenced.

Given that we

cannot find this to be sufficient evidence of HRA USA’s
involvement in this controversy, we find that HRA USA lacks the
required minimum contacts with this forum so as to warrant the
exercise of personal jurisdiction over it.

Consequently, the

motion to dismiss shall be granted as to HRA USA only.
(iv) Individual Defendants
Defendants argue that this Court may not exercise personal
jurisdiction over Segoly and Ariel for three reasons.

One, they

contend that the Individual Defendants lack the required minimum
contacts with Pennsylvania. (Doc. No. 12, at 11).

Two, they

maintain that jurisdiction cannot be imputed from a corporate
Defendant to an individual employee.

Id., at 15-17.

And third,

they argue that the exercise of personal jurisdiction over the
Individual Defendants would not comport with the notions of fair
play and substantial justice.

Id., at 13-15.

“Generally, a court does not have personal jurisdiction over
an individual defendant whose only contact with the forum state
are those taken in his corporate capacity.”

26

Continental

Materials, Inc. v. Robotex, Inc., Civ. A. No. 14-6941, 2015 U.S.
Dist. LEXIS 50708 at *4, n.4 (E.D. Pa. April 17, 2016)(citing
United Products Corp. v. Admiral Tool & Mfg., 122 F. Supp. 2d
560, 562 (E.D. Pa. 2000)).

“The general rule does not apply when

the corporate officer is charged with ‘(1) committing a tort in
his corporate capacity or (2) violating a statutory scheme that
provides for personal, as well as corporate, liability for
corporate actions.’” Id.(quoting Id.)

“However, ‘in

Pennsylvania, corporate officers and directors are liable for the
tortious acts the corporation commits under their direction or
with their participation.’” Id.(quoting Advanced Fluid Systems,
Inc. v. Huber, No. 13-3087, 2014 U.S. Dist. LEXIS 62799, 2014 WL
1808652, *12 (M.D. Pa. May 7, 2014)).
In resolving this issue, we once again look to the averments
contained in the plaintiff’s complaint, the exhibits attached
thereto and the exhibits annexed by Defendants to their Motion to
Dismiss and by Plaintiff to its Memorandum of Law in opposition.
In so doing, we note that the complaint alleges that Segoly and
Ariel were acting “at all times relevant herein ... within the
scope of [their] employment and/or agency with Crossworks, HRA
Group and/or HRA USA,” (Complaint, ¶s 6, 8) and that the
fraudulent, negligent and other representations which form the
basis for this action are all alleged to have been made by these
two individual defendants on behalf of the corporations.

27

(Pysh

Declaration, Exhibit 3 to Doc. No. 16, Ex. A, at 71-79).

See,

e.g., Calder, supra; J.G v. C.M., Civ. No. 11-2887, 2013 WL
1792479, at *4 (D.N.J. April 26, 2013)(holding that a defendant
who makes tortious statements to a party in a different state can
foresee that the harm from the tortious statement will be felt
there, and, consequently, should foresee being haled into court
in that forum).

Thus, we find that these alleged tortious

communications by Ariel and Segoly, regarding the Pink Diamond,
the Diamond Rings, and the Riviera Necklace, caused harm to be
felt in Pennsylvania, “such that the forum can be said to be the
focal point of the harm suffered by the plaintiff.” IMO
Industries, 155 F.3d 254, 265-66.

Further, as the exhibits

attached to the pleadings and motions evince that Ariel and
Segoly knew that Plaintiff resided in Pennsylvania, and,
therefore, that when they made these tortious statements they
were “expressly aiming” their conduct at Pennsylvania so that
Pennsylvania would “be the focal point of the tortious activity,”
we find that these communications are sufficient contacts for the
purpose of personal jurisdiction over the individual defendants
as well.
B.

Economic Loss and Gist of the Action Doctrines

Defendants next contend that Plaintiff’s claims for fraud,
fraudulent concealment and negligent misrepresentation are barred

28

by operation of the economic loss and/or the gist of the action
doctrines.

We agree.

Generally speaking, “[t]he economic loss doctrine ‘prohibits
plaintiffs from recovering in tort economic losses to which their
entitlement flows only from a contract.’” Werwinski v. Ford Motor
Co., 286 F.3d 661, 671 (3d Cir. 2002)(quoting Duquesne Light Co.
v. Westinghouse Elec. Corp., 66 F.3d 604, 618 (3d Cir. 1995)).
Thus, under the economic loss doctrine, “no cause of action
exists for negligence that results solely in economic damages
unaccompanied by physical injury or property damage.”

Excavation

Technologies, Inc. v. Columbia Gas Co., 604 Pa. 50, 52, 985 A.2d
840, 841, n.3 (2008)(quoting Adams v. Copper Beach Townhomes
Communities, L.P., 2003 PA Super 30, 816 A.2d 301, 305 (Pa.
Super. 2003)); Donaldson v. Davidson Bros., 2016 PA Super. 150,
144 A.3d 93, 101 (Pa. Super. 2016).
The gist of the action doctrine similarly bars a plaintiff
from re-casting ordinary breach of contract claims into tort
claims.

Knight v. Springfield Hyundai, 2013 PA Super. 309, 81

A.3d 940, 952 (Pa. Super. 2013).

“This doctrine does not

preclude an action in tort simply because it resulted from a
breach of a contract.

Id. “‘To be construed as in tort, however,

the wrong ascribed to defendant must be the gist of the action,
the contract being collateral.’” Id.(quoting Mirizio v. Joseph,
2010 PA Super 70, 4 A.3d 1073, 1079 (Pa. Super. 2010) and eToll,

29

Inc. v. Elias/Savion Advertising, Inc., 2002 PA Super. 347, 844
A.2d 10, 14 (Pa. Super. 2002)).

A claim arises from contract,

(rather than social policy), when it is one: (1) arising solely
from a contract between the parties; (2) where the duties
allegedly breached were created and grounded in the contract
itself; (3) where liability stems from a contract; or (4) where
the tort claim essentially duplicates a breach of contract claim
or the success of which is wholly dependent on the terms of a
contract.

MRL Development I, LLC v. Whitecap Investment Corp.,

823 F.3d 195, 207 (3d Cir. 2016); Addie v. Kjaer, 737 F.3d 854,
866 (3d Cir. 2013).

Thus, “[i]f the facts of a particular claim

establish that the duty breached is one created by the parties by
the terms of their contract - i.e., a specific promise to do
something that a party would not ordinarily have been obligated
to do but for the existence of the contract - then the claim is
to be viewed as one for breach of contract.”

Dixon v.

Northwestern Mutual, 2016 PA Super 186, 146 A.3d 780, 788 (Pa.
Super. 2016)(quoting Bruno v. Erie Ins. Co., 630 Pa. 79, 106 A.3d
48, 68 (2014)).

“If, however, the facts establish that the claim

involves the defendant’s violation of a broader social duty owed
to all individuals, which is imposed by the law of torts and,
hence exists regardless of the contract, then it must be regarded
as a tort.”

Id.

30

In application of the foregoing doctrinal principles to the
case at hand, it appears from the facts pled in the Complaint
that Plaintiff is seeking solely economic damages as the result
of the failure of Defendants to sell them diamonds and jewelry
which had the quality and value which Defendants represented they
had and for which Plaintiff handsomely paid.

These losses were

not the result of any physical injuries or damage to property and
arose out of Defendants’ purported breach of the agreement at
issue pursuant to which Defendants’ offered to sell and Plaintiff
agreed to buy what was purported to be high-end jewelry.

As a

consequence, we find that the tort claims for fraud, negligent
misrepresentation and fraudulent concealment are barred by
application of the gist of the action and economic loss doctrines
and those claims shall be dismissed from the Complaint.
C.

Statute of Frauds

Defendants next seek the dismissal of Plaintiff’s claim for
breach of contract on the grounds that it is barred by operation
of the Statute of Frauds, which has been codified in the Uniform
Commercial Code, and adopted by Pennsylvania at 13 Pa. C. S. A.
§2201.

We reject this assertion.

Specifically, Section 2201 states as follows in pertinent
part:
(a) General rule. - Except as otherwise provided in this
section a contract for the sale of goods for the price of
$500 or more is not enforceable by way of action or defense
unless there is some writing sufficient to indicate that a
31

contract for sale has been made between the parties and
signed by the party against whom enforcement is sought or by
his authorized agent or broker. A writing is not
insufficient because it omits or incorrectly states a term
agreed upon but the contract is not enforceable under this
subsection beyond the quantity of goods shown in such
writing.
(b) Writing confirming contracts between merchants. Between merchants if within a reasonable time a writing in
confirmation of the contract and sufficient against the
sender is received and the party receiving it has reason to
know its contents, it satisfies the requirements of
subsection (a) against such party unless written notice of
objection to its contents is given within ten days after it
is received.
(c) Enforceablity of contracts not satisfying general
requirements. - A contract which does not satisfy the
requirements of subsection (a) but which is valid in other
respects is enforceable:
(1) if the goods are to be specially manufactured for
the buyer and are not suitable for sale to others in
the ordinary course of the business of the seller and
the seller, before notice of repudiation is received
and under circumstances which reasonably indicate that
the goods are for the buyer, has made either a
substantial beginning of their manufacture or
commitments for their procurement;
(2) if the party against whom enforcement is sought
admits in his pleading, testimony or otherwise in court
that a contract for sale was made, but the contract is
not enforceable under this provision beyond the
quantity of goods admitted; or
(3) with respect to goods for which payment has been
made and accepted or which have been received and
accepted (section 2606).
...
The main purpose of the writing required by the statute of
frauds is to afford a basis for believing that the offered oral
evidence rests on a real transaction.
32

Eastern Dental Corp. v.

Isaac Masel Co., Inc., 502 F. Supp. 1354, 1363 (E.D. Pa. 1980).
It is not required that a writing in confirmation of an oral
contract “expressly state that it is sent in confirmation of the
prior transaction.”

Woodward & Dickerson, Inc. v. Yoo Hoo

Beverage Co., Inc., 502 F. Supp. 395, 402 (E.D. Pa. 1980)(quoting
Doral Hosiery Corp. v. Sav-A-Stop, Inc., 377 F. Supp. 387, 389
(E.D. Pa. 1974).

Further, to satisfy the statute of frauds, it

is not necessary for the contract to consist of a single writing
“entire within itself.” Brister & Koester Lumber Corp. v.
American Lumber Corp., 356 Pa. 33, 50 A.2d 672, 676 (1947).
Rather, the writing requirement may be satisfied where there are
several writings which bear connecting reference to one another
or have an undisclosed but actual relation.

Id.

Whether the

writing or memorandum relied upon is a single document or
consists of several related or connected writings, the complete
terms of a valid contract must be ascertainable therefrom with
certainty and an intention on the part of the vendee to be bound
by the asserted contract must be disclosed.

Id; Linsker v.

Savings of America, 710 F. Supp. 598, 601 (E.D. Pa. 1989).
Here, we find that Plaintiff has pled sufficient facts to
establish the existence of a contract for the sale of diamonds
and jewelry to satisfy the statute of frauds.

For one, we find

that the parties here are merchants within the meaning of 13 Pa.
C. S. A. §2104 and that the transactions at issue were therefore

33

“between merchants.”2

Accordingly, the invoices, emails, shipping

and promotional materials which are alleged to have been
exchanged between the parties (numerous copies of which are
annexed to the Complaint) are, we find, definite enough to
reflect the terms of the parties’ oral agreements and to in and
of themselves constitute a written contract.

We therefore deny

the motion to dismiss on the basis of the statute of frauds.
D.

Parol Evidence Rule

Next, Defendants move for dismissal of Plaintiff’s claims
for fraud, fraudulent concealment and breach of contract on the
basis of Pennsylvania’s parol evidence rule, asserting that
because parol evidence cannot be considered, the complaint fails
to state such claims upon which relief may be granted.

Inasmuch

as we have already determined that the fraud and fraudulent
concealment claims are appropriately dismissed, we need only now
address the claim for breach of contract.
Again, we look to the Pennsylvania Uniform Commercial Code
which provides the following with regard to parol evidence:
2

§2104 defines “merchant” as “[a] person who:
(1) deals in goods of the kind; or
(2) otherwise by his occupation holds himself out as having
knowledge or skill peculiar to the practices or goods involved in
the transaction or to whom such knowledge or skill may be
attributed by his employment of an agent or broker or other
intermediary who by his occupation holds himself out as having
such knowledge or skill.

“Between merchants” means in any transaction with respect to which both
parties are chargeable with the knowledge or skill of merchants, 13 Pa.
C.S.A. §2104.

34

Terms with respect to which the confirmatory memoranda of
the parties agree or which are otherwise set forth in a
writing intended by the parties as a final expression of
their agreement with respect to such terms as are included
therein may not be contradicted by evidence of any prior
agreement or of a contemporaneous oral agreement but may be
explained or supplemented:
(1) by course of performance, course of dealing or
usage of trade (section 1303); and
(2) by evidence of consistent additional terms unless
the court finds the writing to have been intended also
as a complete and exclusive statement of the terms of
the agreement.
13 Pa. C.S.A. §2202.
Although generally parol evidence cannot be used to
contradict the provisions of a written, integrated contract,
Pennsylvania law and §2202 allow parol evidence to be taken into
consideration when attempting to discern the meaning of a written
contract.

QVC, Inc. v. MJC Am., Ltd., Civ. A. No. 08-CV-3830,

2011 U.S. Dist. LEXIS 77289 at *20 (E.D. Pa. July 18, 2011);
Sundlun v. Shoemaker, 421 Pa. Super. 353, 617 A.2d 1330, 1334
(1992).

Section 2202 thereby permits the following principles to

be considered in construing agreements: (1) a writing which is
final on some matters may not include all matters agreed upon;
(2) the language used in a written agreement has the meaning
which arises out of the commercial context in which it was used;
(3) parol evidence may be considered even if the court has not
determined that the language used in the written agreement is
ambiguous and (4) the course of actual performance by the parties

35

is the best indication of what they intended the writing to mean.
Getty Petroleum Marketing, Inc. v. Shipley Fuels Marketing, LLC,
Civ. A. No. 07-CV-340, 2007 U.S. Dist. LEXIS 73070 at *44 (E.D.
Pa. Sept. 27, 2007).

The Code is for the most part in keeping

with Pennsylvania common law insofar as under common law, after
consideration of the text of a written contract in light of any
evidence of trade usage and performance of the parties the intent
of the parties remains unclear, evidence concerning the precontract negotiations of the parties may also be considered in
reaching a conclusion concerning the intention of the parties.
Astenjohnson, Inc. v. Columbia Casualty Co., 562 F.3d 213, 220
(3d Cir. 2009)(citing Resolution Trust Corp. v. Urban
Redevelopment Authority of Pittsburgh, 536 Pa. 219, 225-226, 638
A.2d 972, 975-976 (1994)); General Refractories Co. v. First
State Insuranced Co., 94 F. Supp.3d 649, 660 (E.D. Pa. 2015).
Given that parol evidence addressing what the parties’ intended
when they entered into the agreements for the purchase and sale
of the various rings, diamonds and other items at issue is
permissible, we decline to dismiss the claim for breach of
contract on this basis.
E.

Sufficiency of Pleading - Breach of Express
and Implied Warranties

Defendants similarly submit that Plaintiff’s Complaint fails
to adequately plead claims for breach of express and/or implied
warranties upon which relief can be granted.
36

With respect to

these claims, the motion shall be granted in part and denied in
part.
At the outset, we observe that Pennsylvania law holds that
“a claim for breach of the implied covenant of good faith and
fair dealing is subsumed in a breach of contract claim” such that
such claims cannot be maintained “separate and distinct from a
breach of contract claim.”

Davis v. Wells Fargo, supra(quoting,

inter alia, Burton v. Teleflex, Inc., 707 F.3d 417, 432 (3d Cir.
2013), LSI Title Agency, Inc. v. Evaluation Services, Inc., 2008
PA Super 126, 951 A.2d 384, 392 (Pa. Super. 2008) and JHE, Inc.
v. SEPTA, No. 1790, 2002 Phila. Ct. Com. Pl. LEXIS 78, 2002 WL
1018941, at *5 (Pa. Com. Pl. May 17, 2002)); Aaron v. State Farm
Fire & Casualty Co., Civ. A. No. 17-2606, 2017 U.S. Dist. LEXIS
128994, *6, 2017 WL 3484087, *6 (E.D. Pa. Aug. 14, 2017).
Accordingly, Plaintiff’s claim for breach of the implied covenant
of good faith and fair dealing is dismissed as duplicative.
As to the remaining express and implied warranty claims, the
Pennsylvania Uniform Commercial Code again has application.

In

particular, 13 Pa. C. S. A. §2313 reads:
§2313. Express warranties by affirmation, promise,
description or sample
(a) General rule. - Express warranties by the seller are
created as follows:
(1) Any affirmation of fact or promise made by the
seller to the buyer which relates to the goods and
becomes part of the basis of the bargain creates an

37

express warranty that the goods shall conform to the
affirmation or promise.
(2) Any description of the goods which is made part of
the basis of the bargain creates an express warranty
that the goods shall conform to the description.
(3) Any sample or model which is made part of the basis
of the bargain creates an express warranty that the
whole of the goods shall conform to the sample or
model.
(b) Formal words or specific intent unnecessary. - It is not
necessary to the creation of an express warranty that the
seller use formal words such as “warrant” or “guarantee” or
that he have a specific intention to make a warranty, but an
affirmation merely of the value of the goods or a statement
purporting to be merely the opinion of the seller or
commendation of the goods does not create a warranty.
A successful claim for breach of express warranty must plead
the substance of the seller’s statements, reliance on behalf of
the buyer or consumer which presumes an awareness of the warranty
and, finally, damages that were proximately caused by the alleged
breach.

Yurcic v. Purdue Pharma, L.P., 343 F. Supp. 2d 386, 394

(M.D. Pa. 2004); Price v. Chevrolet Motors Division of GMC, 2000
PA Super 410, 765 A.2d 800, 809 (Pa. Super. 2000).

Indeed,

“[a]bsent a demonstration that a promise or affirmative statement
was made, how or by whom the promise was made, or what was in
fact promised, a claim for breach of express warranty is not
sufficiently pled.”

Incubadora Mexicana, SA de CV v. Zoetis,

Inc., 310 F. R. D. 166, 173 (E.D. Pa. 2015)(citing Gross v.
Stryker Corp., 858 F. Supp. 2d 466, 501-02 (W.D. Pa. 2012)).

38

In examining the Complaint under the lens of these
requirements, we find that Plaintiff alleges that in offering the
pink diamond, the diamond rings and the Riviera necklace for
sale, Defendants Segoly and Ariel represented to Paul Pysh,
inter alia, that the pink diamond was one of only two diamonds in
the pink color grade larger than one carat to come out of Canada,
that the five colored diamond rings were not clarity or colorenhanced and that the Riviera necklace had been designed by
award-winning designer Reena Ahluwalia and worn on the red carpet
at the Academy Awards by actress Kate Hudson and that all of
these pieces had much greater resale values than Plaintiff was
eventually able to realize.

The Complaint further avers that

Plaintiff relied on these statements in deciding to purchase the
jewelry and that because the items were not of the same quality,
origins or value as had been represented, Plaintiff lost
significant amounts of money when it tried to re-sell them.
These allegations are we find, sufficient to plead a claim for
breach of express warranty.

We therefore deny the motion to

dismiss Count IV.
Implied warranties are implied by law to protect buyers from
loss where goods purchased are below commercial standards.

Barton

v. Lowe’s Home Centers, Inc., 2015 PA Super 203, 124 A.3d 349, 357
(Pa. Super. 2015).

The implied warranties of merchantability and

fitness for a particular purpose are also codified in the

39

Pennsylvania Uniform Commercial Code at 13 Pa. C. S. A. §§2314 and
2315, which sections provide as follows:
§2314.

Implied warranty: merchantability; usage of trade

(a) Sale by merchant. - Unless excluded or modified (section
2316), a warranty that the goods shall be merchantable is
implied in a contract for their sale if the seller is a
merchant with respect to goods of that kind. Under this
section the serving for value of food or drink to be consumed
either on the premises or elsewhere is a sale.
(b) Merchantability standards for goods. - Goods to be
merchantable must be at least such as:
(1) pass without objection in the trade under the
contract description;
(2) in the case of fungible goods, are of fair average
quality within the description;
(3) are fit for the ordinary purposes for which such
goods are used;
(4) run, within the variations permitted by the
agreement, of even kind, quality and quantity within
each unit and among all units involved;
(5) are adequately contained, packaged, and labeled as
the agreement may require; and
(6) conform to the promises or affirmations of fact made
on the container or label if any.
(c) Course of dealing or usage of trade. - Unless excluded or
modified (section 2316) other implied warranties may arise
from course of dealing or usage of trade.
§2315.

Implied warranty: fitness for a particular purpose

Where the seller at the time of contracting has reason to
know:
(1) any particular purpose for which the goods are
required; and

40

(2) that the buyer is relying on the skill or judgment
of the seller to select or furnish suitable goods;
there is unless excluded or modified under section 2316
(relating to exclusion or modification of warranties) an
implied warranty that the goods shall be fit for such
purpose.
To recover for breach of the implied warranty of
merchantability, Plaintiff must plead and prove both that the
seller was a “merchant” and that the goods were not “merchantable”
at the time of the sale.

Killen v. Spine, Civ. A. No. 11-1508,

2012 U.S. Dist. LEXIS 141639 at * 31 (W.D. Pa. Aug. 21, 2012).
“Whether goods are merchantable within the meaning of the U.C.C.
is not a function of whether there is a consumer demand for the
product, unless that diminished consumer demand is a result of a
defect in the product.”

M. Leff Radio Parts, Inc. v. Mattel,

Inc., 706 F. Supp. 387, 395 (W.D. Pa. 1988).

Stated otherwise,

“there is no breach of implied warranty of merchantability where
the product was not ‘defectively manufactured or any way
substandard in construction and performance.’” Id.(quoting, inter
alia, Lesnefsky v. Fischer & Porter Co., 527 F. Supp. 951, 957
(E.D. Pa. 1981) and Sessa v. Riegle, 427 F. Supp. 760, 769 (E.D.
Pa. 1977), aff’d, 568 F.2d 770 (3d Cir. 1978)).

Further, “[t]he

concept of merchantability does not require that the goods be of
the best quality or the best obtainable but it does require that
they have an inherent soundness which makes them suitable for the
purpose for which they are designed, that they be free from

41

significant defects, that they perform in the way that goods of
that kind should perform and that they be of reasonable quality
within expected variations and for the ordinary purpose for which
they are used.”

Barton v. Lowe’s, 124 A.3d at 357-358 (quoting

Gall by Gall v. Allegheny County Health Department, 521 Pa. 68,
555 A.2d 786, 789 (1989)).
“The implied warranty of fitness for a particular purpose
‘arises by operation of law and serves to protect buyers from loss
where the goods purchased are below commercial standards or are
unfit for the buyer’s purpose.’” Incubadora Mexicana, 310 F.R.D.
at 175(quoting Altronics of Bethlehem, Inc. v. Repco, Inc., 957
F.2d 1102, 1105 (3d Cir. 1992)).

To establish a breach of the

implied warranty of fitness for a particular purpose, a plaintiff
must show that the seller had reason to know of the buyer’s
particular purpose at the time of sale and that the buyer was
relying on the seller’s expertise, as well as that the goods
purchased were defective.

Id.

In reviewing the facts alleged in the Complaint and in
particular those contained in Count V for breach of implied
warranties, we do not find that such a cause of action has been
adequately pled.

To be sure, Plaintiff avers only that its

representative (Paul Pysh) contacted and eventually met with
Defendants at their office in Vancouver, Canada at which time he
solicited advice and guidance on how to become a successful

42

diamond dealer.

(Pl’s Compl., ¶s 12-16).

Plaintiff alleges that

Defendants, through Ariel and Segoly, not only provided assurances
that they would sell diamonds to Plaintiff, but also that they
would “provide guidance and teach Plaintiff the aspects of the
jewelry business needed to become a successful jewelry
merchandiser.”

(Pl’s Compl., ¶s 17-18).

Thereafter, Defendants

are alleged to have reached out and offered for sale to Plaintiff
various articles of jewelry such as the five diamond rings, the
Riviera necklace and the pink diamond which subsequently turned
out to not have the values or the pedigrees which Defendants had
represented.

Noticeably absent from the complaint are any facts

that the items which were sold by Defendants to Plaintiff were
defective or not of the general kind described or reasonably fit
for the general purposes for which jewelry is typically sold or
used.

Inasmuch as the only issue with the items sold are that

they did not have the value that they were represented to have
had, we cannot find that they were either unmerchantable or not
fit for a particular purpose.

So saying, we shall grant the

motion to dismiss Count V.
Conclusion
In light of all of the foregoing, Defendants’ Motion to
Dismiss shall be granted with respect to Counts I, II, V and VI
and Defendant HRA USA.

In all other respects the Motion shall be

denied in accordance with the annexed Order.

43