Mendelsohn v. Titan Atlas Mfg., Inc.

• Decision Date: 02 August 2012
• Docket Number: Civil Action No. 12–453.
• Citation: 885 F.Supp.2d 767
• Parties: MENDELSOHN, DRUCKER & ASSOCIATES v. TITAN ATLAS MANUFACTURING, INC., et al.
• Court: U.S. District Court — Eastern District of Pennsylvania

885 F.Supp.2d 767

MENDELSOHN, DRUCKER & ASSOCIATES

v.TITAN ATLAS MANUFACTURING, INC., et al.

Civil Action No. 12–453.

United States District Court,

E.D. Pennsylvania.

Aug. 2, 2012.

Kevin M. Drucker, Mendelsohn & Associates PC, Philadelphia, PA, for Mendelsohn, Drucker & Associates.

Zachary Scott Davis, Philadelphia, PA, for Titan Atlas Manufacturing, Inc., et al.

MEMORANDUM RE: DEFENDANTS' MOTION TO DISMISS

BAYLSON, District Judge.

I. Introduction

This case involves claims of breach of contract ¹ and common law fraudulent inducement arising out of a client's failure to pay legal fees. Plaintiff is the law firm Mendelsohn, Drucker & Associates (“Mendelsohn”) and Defendants are Titan Atlas Manufacturing (“Titan”) and its CEO Jeremy Blackburn (“Blackburn”). Mendelsohn brings claims of breach of contract and fraudulent inducement against Titan as well as a claim of fraudulent inducement against Blackburn in his individual capacity.

Presently before the court is Defendants' Motion to Dismiss for lack of personal jurisdiction, improper venue, and failure to state a claim upon which relief can be granted, under Federal Rules of Civil Procedure, 12(b)(2), 12(b)(3), and 12(b)(6), respectively. For the reasons discussed below, Defendants' Motion is denied.

II. Factual Allegations

Mendelsohn is a law firm located in Philadelphia. Compl. ¶ 2. Titan is a Delaware corporation located in South Carolina. Compl. ¶ 3. Blackburn is the CEO of Titan and resides part-time in New York and part-time in South Carolina. Compl. ¶ 4; Blackburn Aff. ¶¶ 3–4 (Ex. C to Defs.' Br.).²

The Complaint alleges that on February 4, 2011, Titan hired Mendelsohn as legal counsel through the execution of an Engagement Letter that detailed, in relevant part, Mendelsohn's billing requirements for all services. Compl. ¶ 11; Ex. A to Compl. On April 3, 2011, Mendelsohn entered a Joint Representation Agreement with Titan and its customer, Strata Mine Services (“Strata”). Compl. ¶ 16. Titan had previously entered a Purchase and Indemnification Agreement with Strata, indemnifying Strata against costs and attorney's fees arising from any conflict with Frank A. Sisk (“Sisk”) or his company, Precision Mine Repair, Inc. (“PMR”), relating to a particular patent. Compl. ¶ 12.

On January 17, 2011, Mendelsohn commenced action in the Western District of Virginia on behalf of Titan and Strata against Sisk and PMR. Compl. ¶¶ 14–15, 17–18; Pl.'s Br. at 6. Sisk and PMR filed a cross-claim in the Southern District of Illinois on April 5, 2011, and Mendelsohn represented Titan in that case as well. Compl. ¶¶ 19–21. The Illinois litigation was transferred to Virginia on September 8, 2011, and the two Titan cases were consolidated in Virginia on September 22, 2011. Compl. ¶ 22.

Throughout representation, Titan failed to provide timely payment for legal services rendered and Mendelsohn repeatedly contacted Titan to remedy the situation. Compl. ¶¶ 41–65. Blackburn repeatedly gave assurances to Mendelsohn attorneys that payment was forthcoming. Compl. ¶¶ 33–34, 46–52, 54, 56, 62. By September of 2011, Titan's unpaid legal dues totaled $244,563.78. Compl. ¶ 35. On September 8, 2011, Blackburn agreed by phone to pay Mendelsohn $10,000 per week towards Titan's balance. Compl. ¶¶ 3 5, 66. Pursuant to this agreement, Mendelsohn received a $10,000 payment from Titan on September 19, 2011. Compl. ¶¶ 35, 70–71.

On September 27, 2011, Blackburn sent an email to Mendelsohn that included a United States Postal Service (“U.S.P.S.”) Priority Mail tracking number for the second weekly $10,000 payment. Compl. ¶¶ 72–73. Relying on the September 27 email, Mendelsohn filed an Answer to an Amended Complaint in the consolidated litigation, instead of filing a Motion to Withdraw. Compl. ¶ 77. Mendelsohn never received the September 27 payment and the U.S.P.S. reported that the provided tracking number did not match any envelope sent. Compl. ¶¶ 74–76. Mendelsohn emailed Blackburn on September 30, 2011, requesting a replacement check and advising Blackburn that Mendelsohn would require compliance with the payment schedule in order to continue representation. Compl. ¶ 80. Blackburn replied that he understood and that payment would be forthcoming. Compl. ¶¶ 81. Blackburn repeated this promise of payment, though payment was never received by Mendelsohn. Compl. ¶¶ 82–105. On November 23, 2011, Mendelsohn filed a Motion to Withdraw in the Virginia Litigation. Compl. ¶¶ 106. Titan opposed this Motion, but failed to respond to Mendelsohn's further requests for payment. Compl. ¶¶ 107–10.

On December 5, 2011, Mendelsohn's Motion to Withdraw was granted. Compl. ¶¶ 25, 111. As of January 27, 2012,³ Titan owed Mendelsohn $402,511.06. Compl. ¶ 26.

Mendelsohn brings claims against Titan for breach of contract and fraudulent inducement.⁴ Compl. ¶¶ 112–119, 170–172. Mendelsohn also raises a claim of fraudulent inducement against Blackburn in his individual capacity. Compl. ¶¶ 131–169.

Titan moved to dismiss Mendelsohn's claims for lack of personal jurisdiction, improper venue, and failure to state a claim upon which relief can be granted. Titan filed a memorandum supporting this movement (ECF No. 21), to which Mendelsohn filed a response, (ECF No. 24). Titan then filed a reply brief (ECF No. 25), and, after requesting and receiving permission (ECF Nos. 25–29), Mendelsohn filed a sur-reply brief under seal (ECF No. 30). The Court heard oral argument on July 26, 2012.

III. Jurisdiction

This Court has subject-matter jurisdiction because Mendelsohn is a Pennsylvania company, Titan is a Delaware corporation located in South Carolina, Blackburn is a resident of New York and South Carolina, and the amount in controversy exceeds $75,000. See28 U.S.C. § 1332; Compl. ¶¶ 2–5; Blackburn Aff. ¶¶ 3–4.

IV. Personal JurisdictionA. Legal Standard

“Under Federal Rule of Civil Procedure 4(k), a District Court typically exercises personal jurisdiction according to the law of the state where it sits.” O'Connor v. Sandy Lane Hotel, Ltd., 496 F.3d 312, 316 (3d Cir.2007). Pennsylvania's long-arm 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. Ann. § 5322(b).

There are two types of personal jurisdiction: general jurisdiction and specific jurisdiction. See Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 nn. 8–9, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984). Mendelsohn conceded in its Brief that Titan lacks the contacts necessary to support general jurisdiction, see Pl.'s Br. at 2, so this Court only considers specific jurisdiction here.

The test for specific jurisdiction is satisfied where (i) a defendant purposefully directed activities at the forum state, (ii) the claim arises out of or is related to those activities, and (iii) the court's exercise of jurisdiction would not offend traditional notions of fair play and substantial justice. D'Jamoos ex rel. Estate of Weingeroff v. Pilatus Aircraft Ltd., 566 F.3d 94, 102 (3d Cir.2009) (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472, 476, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985); Helicopteros, 466 U.S. at 414, 104 S.Ct. 1868).

i. Purposeful Direction

In analyzing specific jurisdiction in the context of a breach of contract claim, district courts consider “whether the defendant's contacts with the forum were instrumental in either the formation of the contract or its breach.” Gen. Elec. Co. v. Deutz AG, 270 F.3d 144, 150 (3d Cir.2001). By creating “continuing obligations between [themselves] and residents of the forum,” parties may purposely avail themselves of the forum state. Burger King, 471 U.S. at 476, 105 S.Ct. 2174. The mere existence of a contract, however, “is insufficient to establish minimum contacts.” Metcalfe v. Renaissance Marine, Inc., 566 F.3d, 324, 333 n. 7 (3d Cir.2009). The court evaluates “the totality of the circumstances, including the location and character of the contract negotiations, the terms of the contract, and the parties' actual course of dealing.” Remick v. Manfredy, 238 F.3d 248, 256 (3d Cir.2001).

Jurisdiction may be asserted even when a party does not physically enter the forum state. Burger King, 471 U.S. at 476, 105 S.Ct. 2174. Although physical presence will generally enhance a party's contacts with the forum state, “it is an inescapable fact of modern commercial life that a substantial amount of business is transacted solely by mail and wire communications across state lines, thus obviating the need for physical presence within a State in which business is conducted.” Id.

In Remick v. Manfredy, a suit brought by an attorney for fees for his services, the Third Circuit found that the client-defendant had minimum contacts with the state in which his attorney-plaintiff worked because the client had knowledge of the attorney's location at the point of contract formation. Remick, 238 F.3d at 256. Specifically, the Third Circuit held that “[m]ost of the services performed by [the attorney] on behalf of [the client] were conducted at [the attorney's] Philadelphia office, and [the client] certainly should have expected as much as he knew that [the attorney's] home office is in Philadelphia.” Id. The Third Circuit further held that contacts between a client and his attorney regarding legal issues are “more entangling than the mere ‘informational communications' ” that might otherwise fail to support minimum contacts. Id. (distinguishing Vetrotex Certainteed Corp. v. Consol. Fiber Glass Prods. Co., 75 F.3d 147, 152 (3d Cir.1996) (“[I]nformational communication in furtherance of [a contract between a resident and a nonresident] does not establish the purposeful activity necessary for a valid assertion of personal jurisdiction over [the nonresident defendant].” (brackets in original) (quoting Sunbelt Corp. v. Noble, Denton & Assoc., Inc., 5 F.3d 28, 32 (3d Cir.1993)))).

ii. “Arising Out of” Contacts

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