Columbia Metal Culvert Co. v. Kaiser Industries Corp.

• Decision Date: 03 November 1975
• Docket Number: No. 75-1362.,75-1362.
• Citation: 526 F.2d 724
• Parties: COLUMBIA METAL CULVERT COMPANY, INC., Appellant, v. KAISER INDUSTRIES CORPORATION et al.
• Court: U.S. Court of Appeals — Third Circuit

526 F.2d 724

COLUMBIA METAL CULVERT COMPANY, INC., Appellant, v. KAISER INDUSTRIES CORPORATION et al.

No. 75-1362.

United States Court of Appeals, Third Circuit.

Argued September 19, 1975.

Decided November 3, 1975.

Henry T. Reath, Duane, Morris & Heckscher, Philadelphia, Pa., for appellant.

Jeanne Ward Ryan, C. Clark Hodgson, Jr., Stradley, Ronon, Stevens & Young, Philadelphia, Pa., for appellee Robert A. Kennedy.

Before SEITZ, Chief Judge, and ROSENN and GARTH, Circuit Judges.

OPINION OF THE COURT

ROSENN, Circuit Judge

The reach of Pennsylvania's "long-arm" statute has been expanded by successive amendments since 1968.¹ The last amendment in 1972, 42 P.S. § 8309(b) (Supp.1975), enlarged jurisdiction over foreign corporations to the broadest extent permissible under the United States Constitution. The case before us requires an interpretation of the law in its present form as it pertains to personal jurisdiction over non-resident individuals.²

Columbia Metal Culvert Company, Inc., ("Columbia"), a New Jersey corporation, instituted an antitrust suit in the United States District Court for the Eastern District of Pennsylvania³ against Kaiser Industries Corporation,⁴ a Nevada corporation, and several of its affiliated corporations (collectively referred to as "Kaiser"), Kennedy Culvert and Supply Company ("Kennedy Company"), a New Jersey corporation, and Robert A. Kennedy individually, a New Jersey resident.

Columbia alleged in its complaint that Kaiser conspired with Kennedy "to leave Columbia's employ, without notice, and to begin immediately thereafter, selling, in competition with Columbia, Kaiser Aluminum's products." Columbia asserted that Kennedy was transacting business in Pennsylvania and invoked Pennsylvania long-arm jurisdiction over Kennedy pursuant to Fed.R.Civ.P. 4(d)(7)⁵ and 42 P.S. § 8301 et seq. (Supp.1975). Substituted service was made by mail on the Secretary of the Commonwealth of Pennsylvania pursuant to 42 P.S. §§ 8304 and 8307 (Supp.1975).

Kennedy moved to dismiss the action for lack of jurisdiction and for lack of venue. The district court dismissed the action against Kennedy for lack of jurisdiction, concluding that there were insufficient activities by him within Pennsylvania to meet the requirements of the long-arm statute. Columbia timely filed a motion for reconsideration alleging that facts revealed in Kennedy's deposition in discovery proceedings, the transcript of which had become available only after the district court's order dismissing the action against Kennedy, established jurisdiction. The court denied the motion. Columbia appeals from both that order and the prior order of dismissal.⁶ We reverse the district court's judgment in favor of Kennedy.

Although the district court did not discuss venue in its memorandum decision dismissing Kennedy for lack of jurisdiction, Columbia raised the matter of venue on appeal. We believe that it is for the district court in the first instance to determine the propriety of venue in the Eastern District of Pennsylvania and thus do not reach this issue here.

I.

In our search to ascertain whether the district court acquired jurisdiction over Kennedy, we must determine whether service was effectively made under Pennsylvania's most recent amendment to its long-arm statute, 42 P.S. § 8304 (Supp.1975). That statute permits substituted service on any nonresident individual who was doing business in Pennsylvania on or after August 30, 1970, "at the time the cause of action accrued or the harm or financial loss occurred." 42 P.S. § 8304 (Supp.1975). The pertinent provisions of 42 P.S. § 8309 (Supp.1975) define "doing business" as follows:

(a) Any of the following shall constitute "doing business" for the purposes of this chapter:

(1) The doing by any person in this Commonwealth of a series of similar acts for the purpose of thereby realizing pecuniary benefit or otherwise accomplishing an object.

(2) 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.

(3) The shipping of merchandise directly or indirectly into or through this Commonwealth.

(4) The engaging in any business or profession within this Commonwealth, whether or not such business requires license or approval by the Commonwealth or any of its agencies.

The record reveals that Kennedy resigned from Columbia on March 23, 1973. Several months before his separation from Columbia, in late 1972, Kennedy in New Jersey telephoned Phil Buchy, Kaiser's district manager in Pennsylvania, and attended a meeting in Pennsylvania with Buchy and Van Newhyzen, Kaiser's credit manager, to explore the possibility of Kennedy's becoming a distributor for Kaiser. The conclusion of all participants in the meeting was that, in view of the transportation costs from Kaiser's plant in Baltimore, Maryland, it was not feasible for Kennedy to act as a distributor in Pennsylvania and New Jersey.

In January 1973 Kennedy was again in touch with Buchy in Pennsylvania by telephone to discuss possible employment with Kaiser and to arrange a meeting in New Jersey in early February. There Kennedy learned that Kaiser was opening a plant in New Castle, Delaware, and that the reduced transportation costs would allow him to be competitive as a distributor of Kaiser products in Pennsylvania and New Jersey. In late February, Kennedy made another telephone call to Buchy in Pennsylvania to set up a second meeting in New Jersey, which meeting he followed up during late February and early March by one or two telephone calls to Buchy, again in Pennsylvania.

During the first week in March, Kennedy met once more with Kaiser representatives in Pennsylvania and tentatively agreed to become a distributor. They also discussed territorial allocation, and Kennedy stated he was "interested in southern New Jersey and eastern Pennsylvania." Subsequently, Kennedy discussed credit arrangements on the telephone with Buchy in Pennsylvania, and on March 23, he telephoned Buchy in Pennsylvania to tell him that he had resigned from Columbia. The written distributorship agreement between Kaiser and Kennedy Company, identified as a New Jersey corporation, was signed in Pennsylvania on March 28, 1973. Kennedy signed his name under the legend "Distributor Kennedy Culvert and Supply Co., Inc." Kennedy Company, however was not then in existence, not having been organized until April 6, 1973. Kennedy became its president and acquired a 90% capital stock interest. In Appendix C to the distributorship agreement, the territory is designated as central and southern New Jersey and eastern Pennsylvania, and the agreement itself binds the distributor to "concentrate his sales efforts therein and . . . at all times maintain an organization sufficient to promote efficiently . . the sale of Products in said territory."

Even before the distributorship agreement was signed, Kennedy telephoned the Petroni Construction Company in Pennsylvania on March 27 to solicit business. He again telephoned Petroni on April 5 and made a bid which was accepted. Kennedy immediately ordered the materials from Kaiser to be shipped to Petroni's construction site in Hatboro, Pennsylvania, by April 11. Kennedy Culvert and Supply Co. was listed as the purchasing party on the quotation, the purchase order, and the acknowledgment, although the sale was consummated one day before the company was incorporated.

II.

The above activities constitute the sum of Kennedy's contacts with Pennsylvania as an individual. Before we consider which activities fall within the ambit of Pennsylvania's long-arm statute, we take up two contentions of Kennedy regarding the period of time we should consider and his relationship to Kennedy Company before its incorporation.

Columbia's complaint and written interrogatories span a time period longer than the two weeks from March 23, 1973, when Kennedy resigned from Columbia, to April 6, 1973, when Kennedy organized Kennedy Company. However, Kennedy, in the preface to his answers to the interrogatories, limited the period in question to those two weeks, allegedly by agreement of counsel. Columbia has not acquiesced in this limitation as evidenced by its memorandum opposing Kennedy's motion to dismiss and its argument in this court. Counsel for Kennedy informed this court that the alleged agreement between counsel was not in writing. As there is a dispute about the making of such an agreement, absent any writing evidencing the agreement, we will not be bound to the two-week time frame although the district court confined its analysis to that period.

Kennedy contends that his contacts with Pennsylvania were all on behalf of Kennedy Company, even though it was not incorporated until April 6, 1973. As previously noted, the distributorship agreement was signed by Kennedy on behalf of the nonexistent corporation. Because Kennedy was purporting to act as agent for a principal which both he and Kaiser knew to be then nonexistent,⁷ he personally became liable on the contract; he must be considered the real party to the contract, since Kennedy Company was only a nominal party. Restatement (Second) of Agency § 326 (1958).⁸

Further, Kennedy made a sale to Petroni Construction Company the day before Kennedy Company was formed. He points out that the shipment to Petroni's site was scheduled for April 11, five days after the incorporation of the company, but we believe the crucial date is that on which the contract of sale was executed.

We conclude that Kennedy cannot use a nonexistent corporation as principal to avoid individual responsibility for his activities in Pennsylvania prior to April 6.

III.

The district court reasoned that a "systematic course of conduct" is required under Section 8309(a)(1) and (2) just as under the identical language in former 15 P.S. § 2011(C). Rosen v. Solomon, 374 F.Supp. 915, 918 (E.D.Pa....