Klauder & Nunno Enterprises v. Hereford Associates

Decision Date25 October 1989
Docket NumberCiv. A. No. 89-5654,89-5129.
Citation723 F. Supp. 336
PartiesKLAUDER AND NUNNO ENTERPRISES, INC. v. HEREFORD ASSOCIATES, INC. KLAUDER AND NUNNO ENTERPRISES, INC. and Gerald J. Klauder v. HEREFORD ASSOCIATES, INC. and Bernard J. Murtaugh, Jr.
CourtU.S. District Court — Eastern District of Pennsylvania

Robert A. Korn, Korn, Kline & Kutner, Philadelphia, Pa., for plaintiffs.

David J. Cowhey, Hankin, Sandson & Sandman, Atlantic City, N.J., for defendants.

MEMORANDUM

CAHN, District Judge.

Plaintiff Klauder and Nunno Enterprises, Inc. ("K & N") filed an action, No. 89-5654, against Hereford Associates, Inc. ("Hereford") on July 31, 1989, alleging breach of contract, fraud, and reckless conduct stemming from a failed construction contract of September 18, 1987. K & N and Gerald J. Klauder ("Klauder") sued Hereford and Bernard J. Murtaugh, Jr. ("Murtaugh") in No. 89-5129 (filed July 13, 1989) for libel and reckless conduct arising from the same transaction.

The parties here are embroiled in a good deal of litigation in New Jersey state and federal courts on related matters, though the claims before this court have not yet been raised elsewhere. The foremost is probably a suit filed by Klauder against Hereford and two of its general partners in Cape May County Superior Court on July 17, 1989, alleging breach of an April 28, 1989 condominium purchase agreement. Hereford and a partner filed a third-party complaint against K & N and some John Doe subcontractors sometime between September 21, 1989, and October 4, 19891 for breach of the September 18 contract. K & N has sued Garden State Title Agency, Inc. in the United States District Court for the District of New Jersey, alleging, inter alia, negligent title transfer for units in the condominium project that is the subject of the disputes before this court. K & N has also used Camden County Superior Court to sue City Federal Savings and Loan for violating the terms of the September 18 contract that governed payment to a construction draw account. Finally, K & N has sued Construction Equipment Services, Inc., in Cape May County Superior Court for breach of its subcontract for work arising from the September 18 contract.

Hereford and Murtaugh have filed a motion to dismiss for lack of jurisdiction over the subject matter (Fed.R.Civ.P. 12(b)(1)), lack of jurisdiction over the person (Fed.R. Civ.P. 12(b)(2)), improper venue (Fed.R. Civ.P. 12(b)(3)), failure to join an indispensable party (Fed.R.Civ.P. 12(b)(7), 19), and forum non conveniens. In the alternative, they seek a change of venue under 28 U.S.C. §§ 1404 & 1406(a) to the District of New Jersey at Camden. For the reasons presented below, the motions are denied.2

I. Subject Matter Jurisdiction

The first argumentâ lack of subject matter jurisdictionâ is advanced only in the notice of motion. In any event, defendants do not challenge any of the predicates to this court's diversity jurisdiction. K & N and Klauder are Floridians, as stated by Klauder's uncontested affidavit. While defendant Murtaugh disputes Klauder's contention that Hereford maintains a presence in Pennsylvania, plaintiffs do state without dispute that Hereford is a New Jersey corporation and that Murtaugh is a New Jersey citizen. Even if Murtaugh's averments are accepted, diversity remains complete. Defendant also does not argue that this dispute is valued at under $50,000, the amount now required under 28 U.S.C. § 1332(a). This court thus has subject matter jurisdiction.

II. Personal Jurisdiction

Defendants challenge this court's personal jurisdiction more seriously, though with equal effect. They argue variously that (a) because neither Hereford nor Murtaugh maintained offices in Pennsylvania or otherwise subjected themselves to Pennsylvania's jurisdiction, that Pennsylvania courts can have no personal jurisdiction and b) because the matters in dispute in No. 89-5654 are under arbitration, this court is divested of jurisdiction. These shall be addressed in turn.

A. The Long-Arm Statute

It is clear that personal jurisdiction is a prerequisite to adjudication. Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 110, 89 S.Ct. 1562, 1569, 23 L.Ed.2d 129 (1969). Since this court sits in diversity, it must apply Pennsylvania's long-arm statute to determine whether it has in personam jurisdiction. The statute states, in pertinent part, that "the jurisdiction of the tribunals of this Commonwealth shall extend to all 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.Cons.Stat.Ann. § 5322(b) (Purdon 1981).3 Pennsylvania's reach is thus limited only by the strictures read into the Due Process Clause of the Fourteenth Amendment by the courts. Koenig v. International Bhd. of Boilermakers, 284 Pa.Super. 558, 567, 426 A.2d 635, 639 (1980).

The Supreme Court has long made clear that the Due Process Clause bars jurisdiction when the state "has no contacts, ties, or relations" with the defendant. International Shoe Co. v. Washington, 326 U.S. 310, 319, 66 S.Ct. 154, 159, 90 L.Ed. 95 (1945). This ensures that a defendant will be able to control, to a degree, its exposure to remote actions. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 567, 62 L.Ed.2d 490 (1980). To determine when a defendant has subjected himself to foreign suit, a court must first examine whether the action arises from or relates to the defendant's purposeful contacts with the forum state ("specific jurisdiction") or, instead, if jurisdiction must be bottomed on the defendant's unrelated contacts ("general jurisdiction"). Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472-73 & n. 15, 105 S.Ct. 2174, 2181-82 & n. 15, 85 L.Ed.2d 528 (1985); Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 & nn. 8-9, 104 S.Ct. 1868, 1872 & nn. 8-9, 80 L.Ed.2d 404 (1984); Provident Nat'l Bank v. California Fed. Sav. & Loan Ass'n, 819 F.2d 434, 437 (3d Cir.1987). For specific jurisdiction, the Due Process Clause's demands are met if the defendant has "carried on a `part of its general business'" in the forum state, which is sufficient to put the defendant on notice that it may find itself in court as a result of its activities there. Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 780, 104 S.Ct. 1473, 1481, 79 L.Ed.2d 790 (1984) (quoting Perkins v. Benguet Mining Co., 342 U.S. 437, 438, 72 S.Ct. 413, 414, 96 L.Ed. 485 (1952)); World-Wide Volkswagen, 444 U.S. at 297, 100 S.Ct. at 567. To secure general jurisdiction, the plaintiff must show that the defendant had "systematic and continuous" contacts with the forum state. International Shoe, 326 U.S. at 320, 66 S.Ct. at 160; see also Provident, 819 F.2d at 437; Beatrice Foods Co. v. Proctor & Schwartz, Inc., 309 Pa.Super. 351, 455 A.2d 646, 649 (1982).

Hereford and Murtaugh argue vigorously that they lack systematic and continuous contacts with Pennsylvania and hence that this court may not assume jurisdiction. As the statement of the law above indicates, this ignores the concept of specific jurisdiction. Even should Hereford and Murtaugh be correct, which this court need not and shall not address, they would not therefore have removed themselves from this court's reach.4

Turning first to the breach of contract action, we find the facts hotly disputed. Klauder avers that Hereford's stationery indicated that it maintained its office in Philadelphia, Pennsylvania; that he believes fraud to have occurred in Philadelphia; that he negotiated the contract and the change orders, in part with Murtaugh and always with Hereford officers, in Philadelphia, and often in Hereford's offices; that change orders were signed in Philadelphia; and that the contract (appended to the complaint in No. 89-5654) states that Hereford's office is in Philadelphia. In contrast, Murtaugh avers that Hereford "does not do business in the State (sic) of Pennsylvania" and at no time wished to subject itself to Pennsylvania's jurisdiction and that he has "not even minimal contacts" in Pennsylvania and never intended to bring himself within Pennsylvania's jurisdiction.

The Murtaugh affidavit and the representations of his and Hereford's counsel seem somewhat disingenuous. The letters appended to the complaint in No. 89-5129 and the contract appended to the complaint in No. 89-5654 clearly give Hereford's address as 830-A South Street, Philadelphia, Pennsylvania. Moreover, Murtaugh signed the letters, which certainly diminishes the value of his asseverations. In their reply, defendants assert only that the address on the letterhead was "an administrative mistake" and that "Hereford Associates at all times attempted to rectify that mistake by crossing out that address and indicating the correct address." First, the copies of the letters that have been made part of the record here show no such crossing out. Second, the contract attached to the complaint bears the Philadelphia addressâ typed on, with no elisions. These facts substantially vitiate the force of defendants' assertions. Since defendants have otherwise presented nothing save "bald and unconvincing narrative"5 to counter the specific, documented allegations of the plaintiffs, the evidence lists heavily toward the plaintiff. Whatever Hereford's intentions might have been, it is abundantly clear that Hereford acted in Pennsylvania on matters relating to this contract. This court must thus determine whether defendant's contacts with Pennsylvania qualify as the "minimum contacts" required by Keeton and World-Wide Volkswagen.

Following Judge Pollak's analysis in Strick Corp. v. A.J.F. Warehouse Distrib., Inc., 532 F.Supp. 951, 958 (E.D.Pa.1982), the most pertinent factors are "(1) the character of the pre-contract negotiations; (2) the location of these negotiations; (3) the terms of the ... agreement; and (4) the type of...

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