Personal Jurisdiction Over A Foreign Defendant In Pennsylvania
Obtaining personal jurisdiction over a foreign defendant in Pennsylvania can be challenging. Defendants will often seek to dismiss a case at the outset if any argument can be made that the defendant does not maintain sufficient contacts with Pennsylvania to be haled into court there. Personal injury attorney John Mattiacci has extensive experience in defeating motions to dismiss based on challenges to jurisdiction. An extensive pre-suit investigation and a thorough knowledge of the law are invaluable in overcoming any challenge to jurisdiction.
In Merced v. Gemstar Group, Inc., John Mattiacci sued several defendants for injuries to Carlos Merced. Mr. Merced was seriously injured when marble slabs in a shipping container collapsed and crushed his leg. The marble slabs were sold by Margraf, an Italian company, to Gemstar, a Canadian broker. The slabs were shipped to the United States from Italy in a shipping container. The slabs arrived in New Jersey and the shipping container was loaded aboard a truck and driven to Philadelphia. The marble slabs collapsed inside the shipping container while workers, including Mr. Merced, were attempting to unload the slabs in Philadelphia.
After the suit was filed, the defendant Margraf filed a motion to dismiss the lawsuit. Margraf argued that it was a foreign company based in Italy that had virtually no contacts with Pennsylvania. Margraf further alleged that it had not availed itself of doing business in Pennsylvania. Margraf argued that it did not directly contract with anyone in Philadelphia for the sale of the marble slabs. Instead, Margraf sold the slabs to a Canadian company, Gemstar. Gemstar, in turn, sold the slabs to a customer in Philadelphia. Margraf alleged it had no direct contact with Philadelphia and did not know the slabs were being shipped there. Margraf also alleged that it did not do business directly with anyone in Pennsylvania, except one prior sale years prior to the accident. This one prior sale only accounted for less than 0.1% of its total sales that year. Margraf argued that its lack of contacts with Pennsylvania was patently insufficient to establish continuous and systematic contacts with Pennsylvania to support the exercise of jurisdiction.
John Mattiacci successfully defeated Margraf’s motion to dismiss. John was able to do so by exhaustively investigating Margraf and its ties to Pennsylvania and the northeastern United States. Even though Margraf argued it had one prior sale in Pennsylvania years before the accident, John Mattiacci pored through shipping and import records to show that Margraf sold marble products to several marble distributors in New Jersey and Virginia, states which border Pennsylvania. John further argued that these distributors, in turn, sold products in Pennsylvania. The investigation further showed that Margraf sold its trademarked “fior di pesco” marble to several marble dealers in New Jersey, which in turn were available for sale to customers from Pennsylvania. Finally, the investigation also disclosed two additional sales to Pennsylvania customers over the years.
John also argued that there was evidence that Margraf knew the marble slabs that injured Mr. Merced were being shipped to Philadelphia, even though Margraf’s direct customer was the broker in Toronto, Canada. From there, it was an issue of arguing Pennsylvania law to impose jurisdiction.
Pennsylvania’s Long-Arm Statute
Where a federal court has diversity jurisdiction pursuant to 28 U.S.C. § 1332, the federal district court may assert personal jurisdiction over a non-resident of the state in which the court sits to the extent authorized by that state’s law. AlliedBarton Sec. Servs., LLC v. Onyx on the Bay, 2009 U.S. Dist. LEXIS 117903 (citing Fisher v. Teva PFC SRL, No. 05-4238, 212 Fed. Appx. 72, 2006 U.S. App. LEXIS 31741, 4-5 (3d Cir. Dec. 22, 2006) (citing Provident Nat’l Bank, 819 F.2d at 436).
In Pennsylvania, the long-arm statute provides jurisdiction over a person for causes of action arising from that person transacting business in the state. The Pennsylvania long-arm statute, codified as 42 Pa.C.S.A. § 5322, provides broad power to obtain personal jurisdiction on people or companies outside of Pennsylvania. The act specifies that even a single act may be enough to satisfy the law that personal jurisdiction exists.
In the Merced case, John utilized the following portions of Pennsylvania’s long-arm statute:
§ 5322. Bases of personal jurisdiction over persons outside this Commonwealth
(a) GENERAL RULE.– A tribunal of this Commonwealth may exercise personal jurisdiction over a person (or the personal representative of a deceased individual who would be subject to jurisdiction under this subsection if not deceased) who acts directly or by an agent, as to a cause of action or other matter arising from such person:
(1) Transacting any business in this Commonwealth. Without excluding other acts which may constitute transacting business in this Commonwealth, any of the following shall constitute transacting business for the purpose of this paragraph:
(ii) The doing of a single act in this Commonwealth for the purpose of thereby realizing pecuniary benefit or otherwise accomplishing an object with the intention of initiating a series of such acts.
(iii) The shipping of merchandise directly or indirectly into or through this Commonwealth.
(2) Contracting to supply services or things in this Commonwealth.
(4) Causing harm or tortious injury in this Commonwealth by an act or omission outside this Commonwealth.
(b) EXERCISE OF FULL CONSTITUTIONAL POWER OVER NONRESIDENTS. — In addition to the provisions of subsection (a) the jurisdiction of the tribunals of this Commonwealth shall extend to all persons who are not within the scope of section 5301 (relating to persons) 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. 42 Pa.C.S.A. § 5322.
In addition to the long-arm statute, John also cited Pennsylvania law. Of note is case law that states that a foreign corporation “indirectly” ships merchandise into the Commonwealth, pursuant to section 5322(a)(1)(iii), when it “could reasonably foresee that its product would be sold . . . to outlets around the country, and that Pennsylvania would be one such market.” Testa v. Janssen, 482 F. Supp. 1195; 1980 U.S. Dist. LEXIS 9868 (citing Washington v. U. S. Suzuki Motor Corp., 257 Pa.Super. 482, 390 A.2d 1339, 1340 (1978)).
Additionally, John cited the case of Stokes v. Industrial Shredding Systems, Inc., et al., 2005 U.S. Dist. LEXIS 173; CCH Prod. Liab. Rep. P17, 275. In this case, the Honorable Judge John P. Fullam, Sr. denied a foreign defendant’s motion to dismiss for lack of personal jurisdiction. In Stokes, a Pennsylvania resident was injured by a paper shredder manufactured by a Canadian corporation. The record showed that the Canadian defendant did not have a sales agent in Pennsylvania, did not market or advertise in Pennsylvania, did not sell anything in Pennsylvania and that the product is manufactured for the subject paper shredder was an unfinished component made for use in the product of another foreign company.
John noted that Judge Fullam denied the Canadian defendant’s motion to dismiss and justified personal jurisdiction over the defendant because of the language contained in 42 Pa.C.S.A. § 5322(a)(1)(iii). This portion of the long-arm statute grants personal jurisdiction over a defendant when that defendant has shipped merchandise, directly or indirectly, into the Commonwealth of Pennsylvania. John argued that Stokes was actually a more challenging case than Merced, in that the defendant in Stokes did not even ship merchandise to Pennsylvania until after the plaintiff, in that case, was injured. However, the Court reasoned in Stokes that the fact that the defendant shipped replacement parts for the shredder directly to the United States and that several parts were shipped directly to Pennsylvania demonstrated knowledge on the part of the foreign defendant that the shredder was in use in Pennsylvania. This knowledge constituted sufficient business activity to bring it within the reach of the Eastern District.
John adopted Judge Fullam’s reasoning that the defendant realized some economic benefit from the sale of its component part in Pennsylvania and could reasonably be expected to be haled into court in Pennsylvania in order to make a similar argument against Margraf.
John Mattiacci used Pennsylvania’s long-arm statute and this case law in conjunction with his investigation into Margraf’s shipments to neighboring states to support personal jurisdiction. John also argued that Margraf had shipped a product to Pennsylvania that caused harm here. Even if the shipment was indirect, John argued that the long-arm statute and case law such as Stokes permitted jurisdiction.
The Court agreed. However, the fight for jurisdiction did not end there.
The Exercise Of Jurisdiction Must Not Offend The Due Process Clause Of The Fourteenth Amendment
In Merced, the Court accepted John Mattiacci’s argument that the Italian defendant was subject to specific jurisdiction under Pennsylvania’s long-arm statute. However, even when a state’s laws support jurisdiction over a defendant, that jurisdiction can only be exercised so long as it does not offend the notion of due process provided by the Fourteenth Amendment of the United States Constitution.
Determining whether jurisdiction violates due process is a two-step process.
First, the court must determine whether the defendant “purposefully avail[ed] itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985). In other words, the Court must determine whether the defendant had sufficient minimum contacts with the forum state to establish personal jurisdiction.
Second, the Court has to ensure that jurisdiction would be reasonable by addressing the issue of whether “the assertion of personal jurisdiction would comport with ‘fair play and substantial justice.'” Burger King Corp., 471 U.S. at 476 (quoting International Shoe Company v. Washington, 326 U.S. 310, 320 (1945)). See also Pennzoil Prod. Co. v. Colelli & Assoc. Inc., 149 F.3d 197, 201 (3d Cir.1998).
In Merced, John Mattiacci argued that first and foremost, defendant Margraf sold, packaged and shipped the marble slabs bound for Philadelphia that injured the Plaintiff. John argued that this contact alone was sufficient for Margraf to be haled into court here. John argued that Margraf could not be surprised at being sued in Pennsylvania when the products it knowingly sold, packaged, secured and shipped to Philadelphia caused injury to someone once the materials arrived in Philadelphia.
Next, John argued that Margraf shipped its trademarked “fior di pesco” marble to dealers and distributors in states neighboring Pennsylvania, who in turn sold products to Pennsylvania residents. John argued it was impossible for Margraf to claim they had no idea their products could be sold to Pennsylvania customers when Margraf sold thousands of tons of stone products in the states surrounding Pennsylvania to distributors that serve Pennsylvania residents. John also cited the decision of Judge Fullam in Stokes, in that the act of shipping materials directly into Pennsylvania satisfied the notions of fair play and substantial justice to exercise jurisdiction under the Fourteenth Amendment.
The Court agreed with John and found against Margraf. Judge Petrese Tucker, in her opinion, upheld jurisdiction against Margraf. Judge Tucker stated:
The evidence on the records leads the Court to conclude that the Margraf Defendants had sufficient minimum contacts with the Forum for the exercise of jurisdiction to be proper. The Margraf Defendants knowingly shipped their products into Pennsylvania on at least three occasions. By performing these acts for pecuniary gain, the defendant[s] purposefully availed [themselves] of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.” Burger King Corp., 471 U.S. at 475. Additional shipments were made by the Margraf Defendants to New Jersey, New York, Maryland, and other neighboring states. By disseminating their monopoly product throughout Pennsylvania and many neighboring states, the Defendants obtained an economic benefit in Pennsylvania and could thus have “reasonably anticipate[d] being haled into court here.” World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980).
Even though Judge Tucker agreed that Margraf had sufficient contacts with Pennsylvania and that it had purposely availed itself of doing business in Pennsylvania, the issue remained as to whether exercising that jurisdiction comported with the Fourteenth Amendment. Judge Tucker held that imposing jurisdiction was fair. In so holding, she stated:
Because minimum contacts have been established, this Court must also consider whether “the assertion of personal jurisdiction would comport with ‘fair play and substantial justice.'” Burger King Corp., 471 U.S. at 476 (quoting International Shoe Company v. Washington, 326 U.S. 310, 320 (1945)). See also Pennzoil Prod. Co. v. Colelli & Assoc. Inc., 149 F.3d 197, 201 (3d Cir.1998). In other words, the inquiry is whether jurisdiction in this forum would be reasonable. World-Wide Volkswagen. Corp. v. Woodson, 444 U.S. 286, 292 (1980). To determine reasonableness, a court considers the following factors: (1) the burden on the defendant; (2) the forum state’s interest in adjudicating the dispute; (3) the plaintiff’s interest in obtaining convenient and effective relief; (4) the interstate judicial system’s interest in obtaining the most efficient resolution of controversies; (5) and the shared interest of the several States in furthering substantive social policies. Id. A consideration of these factors indicates that personal jurisdiction in this forum is reasonable.
Judge Tucker found that all four of these factors weighed in favor of upholding jurisdiction. With regard to the burden on a foreign defendant to litigate the case in the United States, Judge Tucker stated, “It would be fundamentally unjust to allow a foreign corporation to reap the economic benefits of conducting business in this forum while leaving an injured plaintiff remediless.” The judge further held that the second factor supported jurisdiction because “Pennsylvania has a substantial interest in providing compensation for plaintiffs who are residents of this forum and who are injured in this forum by-products that were knowingly shipped to this forum… It would be unjust to force Plaintiff to litigate in Italy when the injury occurred in Pennsylvania at no choice by Plaintiff.”
The Court also found that applying the final factors also supported jurisdiction. As to the third factor, Judge Tucker held that upholding jurisdiction against Margraf would benefit logical judicial economy and convenience. As Judge Tucker stated, “It makes little sense to allow the litigation to proceed against every defendant except the one that produced, loaded, and distributed its monopoly product to this forum; indeed, the Margraf Defendants are probably the most indispensable defendants in this litigation.” As to the remaining factors, the Court found that upholding jurisdiction was reasonable despite the burden placed on the foreign corporation given their contacts with Pennsylvania and the surrounding states.
Ultimately, this complicated case against several international defendants was resolved in favor of Mr. Merced. However, no recovery would have been possible against Margraf unless this exhaustive investigation and knowledgeable application of the law was performed at the very outset of the case. Nothing less than hard work, time and dedication could have uncovered the information necessary to win this motion. Relying on information solely provided by a defendant is not enough. If a party wants to win a challenge to jurisdiction, going beyond the pleadings and disclosures and really investigating a defendant is necessary to find the evidence needed to win.