270 F.3d 144 (3rd Cir. 2001), 00-2387, General Electric Co. v Deutz AG

Docket Nº:00-2387
Citation:270 F.3d 144
Case Date:October 31, 2001
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit

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270 F.3d 144 (3rd Cir. 2001)




No. 00-2387

United States Court of Appeals, Third Circuit

October 31, 2001

Argued: June 26, 2001


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Michael E. Barry (argued), Evan S. Williams, Gardner, Carton & Douglas, 321 North Clark Street, Suite 3400 Chicago, Illinois 60610-4795 and Kenneth Wargo, Quinn, Buseck, Leemhuis, Toohey & Kroto, Inc., 2222 West Grandview Boulevard Erie, Pennsylvania 16506-4509, Attorneys for Appellant.

David W. Rivkin, Esq. (argued), Frances L. Kellner, Esq., Debevoise & Plimpton, 919 Third Avenue New York, New York 10022 and Roger H. Taft, Esq., MacDonald, Illig, Jones & Britton, L.L.P., 100 State Street, Suite 700 Erie, Pennsylvania 16507, Attorneys for Appellee.

Before: Nygaard, Weis, and REAVLEY,[*] Circuit Judges


Weis, Circuit Judge

In this breach of contract suit, the District Court found that the defendant, a German guarantor, had sufficient contacts with Pennsylvania to be subject to personal jurisdiction. After a jury determination, the Court also found that the defendant was not entitled to invoke the arbitration clause in the underlying contract signed by its subsidiary. We will affirm these rulings. The Court also enjoined the defendant from applying to the English courts to enforce the alleged right to arbitration.

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We will reverse the grant of that injunction principally on the grounds of comity.

In June 1993, plaintiff General Electric, a New York corporation with manufacturing facilities in western Pennsylvania, entered into a contract with Moteren-Werke Mannheim AG, a German corporation with headquarters in Mannheim, Germany. Essentially, the agreement provided that Moteren-Werke would design, and General Electric would manufacture, high horsepower diesel engines for locomotives. The contract also included a section in which Deutz AG,1 the parent company of Moteren-Werke, guaranteed the obligations of its subsidiary.

By late 1997, the joint venture was encountering difficulties, and General Electric eventually called upon Deutz to provide the additional funding necessary for the work to continue. The parties held extended discussions, but were unable to resolve their differences. In December 1998, General Electric filed suit in the United States District Court for the Western District of Pennsylvania, asserting breach of contract claims against Deutz. The complaint sought damages as a result of lost sales and diversion of resources toward tasks that were the contractual responsibility of Moteren-Werke.

Deutz moved to dismiss for lack of personal jurisdiction or, alternatively, to compel international arbitration as it alleged the contract required. In July 1999, while these matters were proceeding in the District Court, Deutz sought arbitration before a panel of the International Arbitration Association in London.

The District Court issued an Opinion and Order on December 29, 1999, holding that Deutz's contacts with the forum state, made in the course of pre-contract negotiations and post-contract visits by Deutz executives in an effort to resolve the parties' dispute, provided sufficient evidence to support a finding of specific jurisdiction. The Court also ruled that the language of the contract did not unambiguously include Deutz within the scope of its arbitration provisions. The issue was submitted to a jury, which found that Deutz was not entitled to arbitration.

In April 2000, before the arbitration panel issued a decision, Deutz petitioned the High Court in London to enjoin General Electric from further proceedings in the Western District of Pennsylvania. The High Court declined to issue an injunction.

On July 31, 2000, the District Court enjoined Deutz from resorting to the High Court in the future. It was not until November 14, 2000, that the arbitration Panel held that General Electric and Deutz had not agreed to arbitrate their contractual disputes. Deutz has appealed all of the orders of the District Court.


We first address our appellate jurisdiction. Generally speaking, an order finding personal jurisdiction is interlocutory and non-appealable. In this case, however, we have jurisdiction over the appeal from the injunction. 28 U.S.C. S 1292(a)(1). Interlocutory orders that are "inextricably bound" to an injunction may also be considered in the same appeal. Kershner v. Mazurkiewicz, 670 F.2d 440, 449 (3d Cir. 1982) (en banc); see also Marshak v. Treadwell, 240 F.3d 184, 190 (3d Cir. 2001) ("When we have jurisdiction to review an order relating to an injunction

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under S 1292(a)(1), our jurisdiction extends to matters inextricably linked to the appealable order.").

The order finding personal jurisdiction is essential to the validity of the injunction in this case. If jurisdiction does not exist, then the District Court necessarily lacked the power to issue the injunction. Accordingly, the personal jurisdiction matter is properly before us.

The ruling finding the arbitration clause inapplicable to Deutz is appealable under 9 U.S.C. S 16(a)(1). Again, there is an unmistakable overlap of issues between the injunction and the legitimacy of the order denying arbitration. We therefore have appellate jurisdiction over the orders presented in this appeal.


Due process shields persons from the judgments of a forum with which they have established no substantial ties or relationship. In order to be subject to personal jurisdiction, a defendant's conduct in connection with the forum state must be such that he may "reasonably anticipate being haled into court there." World-wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980).

Once it is challenged, the burden rests upon the plaintiff to establish personal jurisdiction. Mellon Bank (East) PSFS, Nat'l Ass'n v. Farino, 960 F.2d 1217, 1223 (3d Cir. 1992). A nexus between the defendant, the forum and the litigation is the essential foundation of in personam jurisdiction.

Personal jurisdiction may be either general or specific. A defendant is subject to general jurisdiction when it has continuous and systematic contacts with the forum state. Helicopteros Nacionales de Columbia, S.A. v. Hall, 466 U.S. 408, 414-16 (1984).

Specific jurisdiction is established when a non-resident defendant has "purposefully directed" his activities at a resident of the forum and the injury arises from or is related to those activities. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985); see also Dollar Sav. Bank v. First Sec. Bank of Utah, N.A., 746 F.2d 208 (3d Cir. 1984) (discussing personal jurisdiction).

Questions of specific jurisdiction are properly tied to the particular claims asserted. In contract cases, courts should inquire whether the defendant's contacts with the forum were instrumental in either the formation of the contract or its breach. Phillips Exeter Acad. v. Howard Phillips Fund, Inc., 196 F.3d 284, 289 (1st Cir. 1999). Parties who "reach out beyond [their] state and create continuing relationships and obligations with citizens of another state" are subject to the regulations of their activity in that undertaking. Burger King, 471 U.S. at 473 (quotations omitted). Courts are not reluctant to find personal jurisdiction in such instances. "[M]odern transportation and communications have made it much less burdensome for a party sued to defend himself in a State where he engages in economic activity...." Id. at 474.

Specific jurisdiction frequently depends on physical contacts with the forum. Actual presence during pre-contractual negotiations, performance, and resolution of post-contract difficulties is generally factored into the jurisdictional determination. Remick v. Manfredy, 238 F.3d 248, 255-56 (3d Cir. 2001); Farino, 960 F.2d at 1223-24. In modern commercial business arrangements, however, communication by

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electronic facilities, rather than physical presence, is the rule. Where these types of long-term relationships have been established, actual territorial presence becomes less determinative. Burger King, 471 U.S. at 476.

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.

The record here demonstrates both physical contacts and a deliberate assumption of long-term obligations. In 1993, when it began negotiations with General Electric, Moteren-Werke was one of several subsidiaries of Deutz. Both companies retained the same law firm in Philadelphia, Pennsylvania to represent their interests. After Moteren-Werke had reached an agreement with General Electric on most of the contract's terms, the document was reviewed by Dr. Gunther Wagner, Executive Vice-President of Deutz and a member of its Board of Directors.

Moteren-Werke began performing its contractual obligations in Pennsylvania shortly after the agreement was signed on June 15, 1993. The following year, Dr. Wagner, who was not only a Deutz executive but also a member of the Moteren-Werke management board responsible for its engine business, met with General Electric officials in Pennsylvania. The parties addressed Deutz's financial stability as well as other matters related to performance of the contract.

In 1996, Anton Schneider,...

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