GENERAL NUTRITION CORPORATION v. NATROL, INC.
Filing
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MEMORANDUM OPINION AND ORDER finding that the exercise of personal jurisdiction over Defendant Natrol by this Court is appropriate.Signed by Judge Terrence F. McVerry on 04/30/2012. (bsc)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
GENERAL NUTRITION
CORPORATION d/b/a NUTRA
MANUFACTURING,
Plaintiff,
v.
NATROL, INC.,
Defendant.
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02:11-cv-01566
MEMORANDUM OPINION AND ORDER OF COURT
On December 29, 2011, the Court ordered the parties to show cause as to why this matter
should not be dismissed for lack of personal jurisdiction (Document No. 5). In response,
Defendant Natrol, Inc. (“Natrol”) filed a MEMORANDUM IN SUPPORT OF LACK OF
JURISDICTION (Document No. 6) and General Nutrition Corporation (“GNC”) filed
PLAINTIFF’S BRIEF IN OPPOSITION TO DEFENDANT’S PERSONAL JURISDICTION
DEFENSE (Document No. 7). The parties thereafter filed reply memoranda (Document Nos. 10
and 11). Upon review of the applicable law and the filings in this case, the Court finds that it
may exercise personal jurisdiction over Natrol.
Factual and Procedural Background
This case arises out a contract dispute between the parties. GNC is a Pennsylvania
corporation with its principal place of business in Pittsburgh, Pennsylvania. Compl. ¶ 1. Natrol
is a Delaware corporation with its principal place of business in Chatsworth, California. Compl.
¶ 3. On or about February 28, 2011, the parties entered into an agreement whereby Natrol agreed
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to purchase from GNC its requirement of certain dietary supplements, nutraceuticals, and food
products, which it had formerly manufactured itself (the “Supply Agreement”). Compl. ¶ 6. The
Supply Agreement was executed in Pittsburgh, Pennsylvania by David Berg, GNC’s Chief
Operating Officer, and Manmohan Patel, Natrol’s Chief Executive Officer. Compl. ¶¶ 7-8.
The gravamen of GNC’s Complaint is that Natrol breached the Supply Agreement by (1)
continuing to produce the products covered by the Supply Agreement and (2) failed to purchase
from GNC any of the products it had agreed to purchase. Compl. ¶ 19. GNC alleges that it
advised Natrol of its alleged breach and that Natrol responded by denying that the Supply
Agreement had ever been finalized. Compl. ¶ 21-23.
GNC originally filed this lawsuit in the Court of Common Pleas of Allegheny County on
November 8, 2011, seeking a declaratory judgment that the Supply Agreement is valid and
enforceable and asserting claims for breach of contract and promissory estoppel/detrimental
reliance. On December 9, 2011, Natrol filed a timely notice of removal to this Court (Document
No. 1). Thereafter, Natrol filed an Answer (Document No. 4), in which it avers that this Court
cannot exercise personal jurisdiction over it.
Upon consideration of Natrol’s Answer and Affirmative Defenses, the Court ordered
each party to brief the issue of the Court’s personal jurisdiction over Natrol (Document No. 5).
In response, Natrol argues that personal jurisdiction is lacking because (1) it does not have
systematic and continuous contacts with Pennsylvania; (2) it did not purposefully contact
Pennsylvania, or otherwise create a substantial connection with Pennsylvania, so as to give the
Court specific jurisdiction over this matter; and (3) there is no significant state interest in
adjudicating the dispute in Pennsylvania and doing so would be unconstitutionally burdensome
to Natrol. For its part, GNC contends that the Court can exercise both general and specific
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jurisdiction over Natrol and that doing so would not offend traditional notions of fair play and
substantial justice.
Legal Analysis
Once a jurisdictional defense is raised, the plaintiff bears the burden of proving, through
affidavits or other competent evidence, sufficient contacts with the forum state to establish
personal jurisdiction. IMO Indus., Inc. v. Kiekert AG, 155 F.3d 254, 257 (3d Cir. 1998). Rather
than relying on the general averments in the pleadings, the plaintiff must establish those contacts
with reasonable particularity. Mellon Bank (East) PSFS, Nat’l Ass’n v. Farino, 960 F.2d 1217,
1223 (3d Cir. 1992); Dayhoff Inc. v. H.J. Heinz Co., 86 F.3d 1287, 1302 (3d Cir. 1996).
Furthermore, “[t]he Court must accept the plaintiff’s allegations as true and construe disputed
facts in his favor.” Stillwagon v. Innsbrook Golf & Marina, LLC, 2012 WL 501685, at *2 (W.D.
Pa. Feb. 12, 2012).
Under Fed. R. Civ. P. 4(e), a federal district court may assert personal jurisdiction over a
non-resident defendant in accordance with the law of the state in which it sits. Eurofins Pharma
Holdings v. BioAlliance Pharma S.A., 623 F.2d 147, 155 (3d Cir. 2010). Pennsylvania’s longarm statute provides that a court may exercise personal jurisdiction over non-residents “to the
fullest extent allowed under the Constitution of the United States.” 42 Pa. Cons. Stat. § 5322(b).
Therefore, the court must consider “the relationship among the defendant, the forum, and the
litigation” in order to determine if personal jurisdiction exists under the precepts of the Due
Process Clause of the United States Constitution. IMO Indus., 155 F.3d at 259 (citing Shaffer v.
Heitner, 433 U.S. 186 (1977)).
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Due process requires that the defendant have “minimum contacts” in the forum state.
International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). The Supreme Court has
explained that “minimum contacts must have a basis in ‘some act by which the defendant
purposefully avails itself of the privilege of conducting activities within the forum State, thus
invoking the benefits and protections of its laws.’” Asahi Metal Indus. Co., Ltd. v. Superior
Court of California, 480 U.S. 102, 109 (1987) (quoting Burger King Corp. v. Rudzewicz, 471
U.S. 462, 475 (1985)).
Personal jurisdiction may be exercised under two distinct theories. See Remick v.
Manfredy, 238 F.3d 248, 255 (3d Cir. 2001). General jurisdiction is based upon the defendant’s
“continuous and systematic” contacts with the forum and exists even if the plaintiff’s claim
arises from the defendant’s non-forum related activities. Id.; see also Vetrotex Certainteed Corp.
v. Consol. Fiberglass Products Co., 75 F.3d 147, 151 n.3 (3d Cir. 1996). Specific jurisdiction,
however, exists only “when the claim arises from or relates to conduct purposely directed at the
forum state.” See Kehm Oil Co. v. Texaco, Inc., 537 F.3d 290, 300 (3d Cir. 2008). In examining
whether specific jurisdiction exists:
a court generally applies two standards, the first mandatory and the second
discretionary . . .
First, a court must determine whether the defendant had the minimum contacts
with the forum necessary for the defendant to have reasonably anticipate[d] being
haled into court there . . . .
Second, assuming minimum contacts have been established, a court may inquire
whether the assertion of personal jurisdiction would comport with fair play and
substantial justice. Although the latter standard need only be applied at [the]
court’s discretion, . . . [the Court of Appeals for the Third Circuit] generally [has]
chosen to engage in this second . . . analysis . . . .
Pennzoil Products Co. v. Colelli & Assocs., Inc., 149 F.3d 197, 201 (3d Cir. 1998) (citations
omitted).
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As a threshold matter, Natrol contends that the Supply Agreement in actuality was with
an entity known as Nutra Manufacturing (“Nutra”), which is allegedly a GNC subsidiary
corporation based in South Carolina. Natrol further contends that any proposed agreement
between Natrol and Nutra was to be effectuated in South Carolina, where Nutra’s manufacturing
plant is located, and not in Pennsylvania. According to Natrol, Nutra is improperly implicating
GNC to establish a jurisdictional basis for bringing suit in this Court. In support of this
argument, Natrol has attached several public documents purporting to show that it was dealing
only with Nutra and not GNC, including an SEC 10-K filing outlining GNC’s corporate
structure; a printout of a page from Nutra’s web site; and a record from the South Carolina
Secretary of State reflecting that Nutra was once a separate corporate entity but merged into
GNC in 2008.
Natrol’s argument is unavailing for several reasons. First, the Supply Agreement itself
was executed by GNC’s chief operating officer and makes clear that Nutra Manufacturing is
merely a “doing business as” name for GNC. See Trustees of Constr. Indus. and Laborers
Health and Welfare Trust v. C & W, 298 Fed. Appx. 566, 567 (9th Cir. 2008) (“The designation
‘d/b/a’ is merely descriptive of a corporation that does business under some other name and does
not create a distinct corporate entity.”). In addition, GNC has provided ample evidence to
establish that Natrol understood that it was dealing with GNC. For example, Natrol executives
made visits to GNC’s offices in Pittsburgh to discuss the proposed business arrangement and
exchanged other communications with GNC attorneys and other personnel in Pittsburgh over an
extended period of time. These communications, which include emails from Natrol’s CEO,
Manmohan Patel, plainly indicate that Natrol believed it was entering an agreement with GNC.
See, e.g., Plaintiff’s Ex. 4 (email from Patel to Berg stating that “[Natrol’s parent company]
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Plethico is very interested in the joint venture between they and GNC”); Plaintiff’s Ex. 19 (email
from Patel to Berg stating “[Plethico] is very interested in doing business with GNC”).
Therefore, based on the evidence presented, the Court finds that Natrol knew that it was dealing
with Pittsburgh-based GNC, and it is Natrol’s dealings with GNC that control the jurisdictional
inquiry.
Turning to the nature of Natrol’s contacts with the forum state, it is well-settled that the
act of entering into a contract with a resident of the forum is alone insufficient to justify the
exercise of specific jurisdiction over a non-resident defendant. Farino, 960 F.2d at 1223.
Nevertheless, “courts should inquire whether the defendant’s contacts with the forum were
instrumental in either the formation of the contract or its breach.” General Elec. Co. v. Deutz
AG, 270 F.3d 144, 150 (3d Cir. 2001) (emphasis added). As the Supreme Court has
emphasized, “parties who ‘reach out beyond one state and create continuing relationships and
obligations with citizens of another state’ are subject to regulation and sanctions in the other
State for the consequences of their activities.” Burger King Corp., 471 U.S. at 462. In such
case, it is not unreasonable to require a contracting party who “‘deliberately’ [] engaged in
significant activity within a State . . . or has created ‘continuing obligations’ between himself and
residents of the forum,” to submit to suit in that forum as well. Id. at 475-76 (citations omitted).
A non-resident defendant’s physical presence in the forum during pre-contractual
negotiations, performance, and resolution of post-contract difficulties should be factored into the
jurisdictional determination. General Elec. Co., 270 F.3d at 150. However, physical presence
within the forum “is no longer determinative in light of modern commercial business
arrangements; rather, mail and wire [contacts] can constitute purposeful contacts when sent into
the forum.” Telcordia Tech Inc. v. Telkom SA Ltd., 458 F.3d 172, 177 (3d Cir. 2006) (citation
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omitted); Farino, 960 F.2d at 1223 (explaining that a court may find that sufficient contacts exist
when looking at the totality of the parties’ relationship, including their entire course of dealings
with each other); Grand Entm’t Group Ltd. v. Star Media Sales, Inc., 988 F.2d 476, 482 (3d Cir.
1993) (holding that “contract negotiations with forum residents can empower a court to exercise
personal jurisdiction over persons outside the forum”).
In this case, contrary to Natrol’s attempts to characterize the extent of the
communications between the parties as a “few isolated emails,” there is sufficient evidence to
support the conclusion that Natrol purposefully directed its activities at this forum, as is required
for the exercise of specific jurisdiction. In particular, on August 30, 2010, Patel and Patrick
McCullough, President of Natrol, met with David Berg in Pittsburgh to discuss the conceptual
framework of what would eventually become the Supply Agreement. Pl. Ex. 4. The August 30
discussions in Pittsburgh led to the creation of a concept sheet “covering the general principals of
the deal,” which was circulated among executives of both parties, including Patel, McCullough,
and Berg. Pl. Ex. 5. In October 2010, the parties began negotiating the final terms of the
agreement via email. Plaintiff’s Ex. 9. Over the next three months, Kevin Dwyer, Natrol’s inhouse counsel, and David Sullivan, one of GNC’s in-house attorneys based in Pittsburgh,
exchanged numerous emails and phone calls discussing proposed changes to the contract
language. See generally Pl. Ex. 9-15.
Natrol executives also continued to communicate directly with GNC executives in
Pittsburgh regarding the proposed agreement. For example, on January 26, 2011, Patel had a
telephone call with Berg, in which he attempted to resolve several open issues related to the
Supply Agreement. Pl. Ex. 16. One month later, Patel had a conference call with GNC CEO Joe
Fortunato to discuss the progress on the deal. Pl. Ex. 17. Later that month, Patel exchanged
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emails with both Berg and Fortunato in a final attempt to iron out the terms of the agreement. Pl.
Ex. 18.
After the Supply Agreement was executed, attorneys for GNC and Natrol continued to
exchange emails regarding the finalization of certain exhibits to be attached to the agreement.
Pl. Ex. 20. These finalized exhibits were transmitted in an attachment to an email sent by Dwyer
to Sullivan on June 13, 2011. Pl. Ex. 21. As our appellate court made clear in Telcordia Tech,
telephone and email contacts made in connection with the formation of a contract – in addition to
the actual visit paid to Pittsburgh by Patel and McCullough – “constitute purposeful availment”
for purposes of the jurisdictional analysis. 458 F.3d at 177; see also Quantum Plating, Inc. v.
Central Freight Lines, Inc., 2011 WL 673913 (W.D. Pa. Feb. 17, 2011) (holding that “numerous
contacts by [defendant] with this forum by telephone, email and fax in conjunction with the
finalization of the contract” constituted purposeful availment).
Defendant suggests that the fact that “Plaintiff Nutra initiated the first contact” belies a
finding of purposeful availment. However, as the United States Court of Appeals for the Third
Circuit has explained:
It is not significant that one or the other party initiated the relationship. Carteret
Sav. Bank, FA v. Shushan, 954 F.2d 141, 150 (3d Cir. 1992). In the commercial
milieu, the intention to establish a common venture extending over a substantial
period of time is a more important consideration.
General Elec. Co., 270 F.3d at 151. Based on the communications between high-level
executives from GNC and Natrol, GNC has demonstrated that Natrol intended to engage in such
a common venture, at least for the duration of the Supply Agreement.
Moreover, the requirement that the litigation “arises out of” at least one of Natrol’s
contacts is easily satisfied in this case, as this lawsuit focuses on the Supply Agreement which
arose from Natrol’s dealings with GNC in Pennsylvania. Because Natrol had sufficient
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minimum contacts with the forum, and GNC’s claim arises out of those contacts with the forum,
specific personal jurisdiction exists. It is therefore unnecessary to address GNC’s argument as to
the existence of general jurisdiction over Natrol.
The Court also finds that the exercise of personal jurisdiction over Natrol would not
offend traditional notions of fair play and substantial justice. At this stage of the jurisdictional
analysis, Natrol bears a heavy burden because the existence of minimum contacts makes
jurisdiction presumptively valid. O’Connor, 496 F.3d at 324. To that end, Natrol must come
forward with a “compelling case that the presence of some other considerations would render
jurisdiction unreasonable.” Grand Entm’t, 988 F.2d at 483. In deciding whether a defendant has
met its burden, the Court must weigh “the burden on the defendant [in litigating in an out-ofstate forum], the forum state’s interest in adjudicating the dispute, the plaintiff’s interest in
obtaining convenient and effective relief, the interstate judicial system’s interest in obtaining the
most efficient resolution of controversies and the shared interest of the several states in
furthering substantive social policies.” Burger King Corp., 471 U.S. at 477.
Here, Natrol has failed to present a compelling case that it would be unreasonable to
subject it to jurisdiction in this forum. While Natrol contends that the difficulty and expense of
forcing it to litigate in Pennsylvania would be unfair because it does not maintain offices, have
agents or employees, or own or lease property in Pennsylvania, inconvenience alone is
insufficient to demonstrate that litigating in Pennsylvania would impose an unconstitutional
hardship. See Burger King Corp., 471 U.S. at 483 (stating that “[i]nconvenience must be
substantial to achieve constitutional magnitude”); Carteret, 954 F.2d at 150 (concluding that
defendant must show that some burden, other than inconvenience, “will be visited upon [it]
should [it] be required to litigate”); TJF Assocs., LLC. v. Kenneth J. Rotman & Allianex, LLC,
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2005 WL 1458753, at *6 (E.D. Pa. June 17, 2005) (noting that “[i]nconvenience to the defendant
and potential inconvenience to witnesses are also important factors, but they are not sufficient to
defeat personal jurisdiction when minimum contacts have been shown to exist between the
defendant and the forum state”).
Pointing out that the Supply Agreement provides that New York law would govern any
disputes and that the real party in interest is a South Carolina-based company called Nutra
Manufacturing, Natrol further contends that subjecting it to personal jurisdiction would be unfair
because the parties did not intend to litigate in Pennsylvania. However, as the Court discussed
above, Nutra is merely a “doing business as” name for GNC. Further, Plaintiff has established
the Natrol’s executives knew that they were dealing with GNC and its Pittsburgh-based
executives and attorneys in the months leading up to the execution of the Supply Agreement.
Pennsylvania has a strong interest in adjudicating disputes involving its citizens, of which GNC
is one. See Burger King Corp., 471 U.S. at 473 (“A State generally has a ‘manifest interest’ in
providing its residents with a convenient forum for redressing injuries inflicted by out-of-state
actors.”); Willyoung v. Colorado Custom Hardware, Inc., 2009 WL 3183061, at *14 (W.D. Pa.
Sept. 30, 2009) (“The Plaintiff's interest in obtaining convenient and effective relief favors the
exercise of jurisdiction over [defendant] because Plaintiff resides in this forum and has obtained
counsel here.”). Accordingly, because it has not been established that litigating this matter in
Pennsylvania would violate notions of fair play and substantial justice, the Court finds that it
may exercise specific personal jurisdiction over Defendant Natrol.
An appropriate order follows.
McVerry, J.
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IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
GENERAL NUTRITION
CORPORATION d/b/a NUTRA
MANUFACTURING,
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Plaintiff,
v.
NATROL, INC.,
Defendant.
02:11-cv-01566
ORDER OF COURT
AND NOW, this 30th day of April, 2012, in accordance with the foregoing
Memorandum Opinion, it is hereby ORDERED, ADJUDGED, AND DECREED that the
exercise of personal jurisdiction over Defendant Natrol by this Court is appropriate.
BY THE COURT:
s/Terrence F. McVerry
United States District Court Judge
cc:
Gordon W. Schmidt
gschmidt@mcquirewoods.com
Kevin S. Batik
kbatik@mcquirewoods.com
Jon Hogue
jhogue@hoguelannis.com
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