KISANO TRADE & INVEST LIMITED et al v. LEMSTER et al

Filing 22

ORDER denying 15 Motion to Stay. Signed by Judge Robert C. Mitchell on 9/19/2011. (spc)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
KISANO TRADE & INVEST LIMITED and
TRASTECO, LTD.,
Plaintiffs,
vs
DEV LEMSTER and STEEL EQUIPMENT
CORP.,
Defendants.

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Civil Action No. 11-852
Judge Schwab
Magistrate Judge Mitchell

MEMORANDUM ORDER
On September 5, 2011, Defendants, Dev Lemster and Steel Equipment Corp., filed a
motion to stay, arguing that Plaintiffs Kisano Trade & Invest Limited (a Cypriot corporation) and
Trasteco Ltd. (a Maltese LLC) had failed to obtain a “certificate of authority” from the
Pennsylvania Department of State pursuant to 15 Pa. C.S. § 4121(a) and thus cannot maintain
this case until they do so, 15 Pa. C.S. § 4141(a). The state law requirement would apply even in
federal court to state law claims. See Empire Excavating Co. v. Maret Dev. Corp., 370 F. Supp.
824 (W.D. Pa. 1974).
Plaintiffs have filed a response to this motion, in which they argue that: 1) the statute
expressly excludes its application to foreign corporations that are “transacting any business in
interstate or foreign commerce,” 15 Pa. C.S. § 4122(a)(9), which covers them; and 2) if the
statute did not contain this exception, it would be unconstitutional as a violation of the
Commerce Clause, as the United States Supreme Court held in Allenberg Cotton Co. v. Pittman,
419 U.S. 20 (1974); see also Arab African Int‟l Bank v. Epstein, 10 F.3d 168, 173 (3d Cir. 1993)
(“a state „door closing‟ statute may not impede a diversity action concerning interstate or foreign

commerce”) (citation omitted).
Having reviewed the allegations of the complaint, it is clear that the Kisano/Winding Gulf
and Trasteco/Winding Gulf coal contracts, pursuant to which Defendants allegedly provided
advice and obtained secret commissions as Plaintiffs‟ agents, involved transactions in “interstate
or foreign commerce,” including Pennsylvania (where Defendants are based and provided
advice), Cyprus (where Kisano is organized), Malta (where Trasteco is organized), Ukraine
(where Kisano and Trasteco maintained their principal place of business, Mr. Svishchov was
located and the coal was to be shipped), North Carolina (where Winding Gulf maintained its
principal office), Virginia (where the coal was to be delivered), and West Virginia (where
Winding Gulf was organized and the coal sourced). Thus, § 4122(a)(9) applies and Plaintiffs do
not have to obtain a certificate of authority in order to maintain this suit.
Defendants cite Hoffman Construction Co. v. Erwin, 200 A. 579 (Pa. 1938), in which an
out-of-state contractor sued on a contract related to sending his agents and employees to
supervise and do landscaping, grading and road construction in Pennsylvania over a four-month
period and the court held that this activity was sufficient to constitute “conducting its corporate
business in the state” or “having part of its capital invested in the state.” Id. at 580. However,
Hoffman concerned a prior statute that did not contain an exception for interstate commerce and
was decided before Allenberg.
Defendants also cite numerous acts in Pennsylvania by Lemster and SEC (meetings, calls
and communications), as agents for Kisano and Trasteco, to support an argument that Plaintiffs‟
business in Pennsylvania was “localized.” However, the factors to be considered in determining
whether a foreign corporation‟s business is “localized” are “the permanence and scope of [the]
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relationships between the foreign corporation and the forum state” and “whether the intrastate
transaction is an essential element of the interstate transaction.” Arab African, 10 F.3d at 173
(quoting S & H Contractors, Inc. v. A.J. Taft Coal Co., 906 F.2d 1507, 1511 (11th Cir. 1990)).
Plaintiffs contend that they had no offices in Pennsylvania, purchased no coal from
Pennsylvania, sold no coal in Pennsylvania or did anything in Pennsylvania other than receiving
advice by email and telephone from Defendants related to transactions in interstate and foreign
commerce. Defendants focus on activity by them (that is Lemster and SEC) as agents of Kisano
and Trasteco. Even by Defendants‟ own characterization, however, all of the activity engaged in
by Lemster and SEC in Pennsylvania was “integral to” the foreign sale of metallurgical coal by
Kisano and Trasteco and thus their business in Pennsylvania was not “localized.”
AND NOW, this 19th day of September, 2011,
IT IS ORDERED that the a motion to stay (ECF No. 15) filed on behalf of the defendants
is denied.

s/Robert C. Mitchell_________________________
ROBERT C. MITCHELL
United States Magistrate Judge

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