Provident Nat. Bank v. California Federal Sav. & Loan Ass'n

• Decision Date: 04 June 1987
• Docket Number: No. 86-1622,86-1622
• Citation: 819 F.2d 434
• Court: U.S. Court of Appeals — Third Circuit
• Parties: PROVIDENT NATIONAL BANK v. CALIFORNIA FEDERAL SAVINGS & LOAN ASSOCIATION v. LEHMAN MANAGEMENT CO., INC. and State Street Securities Service Corporation. Appeal of CALIFORNIA FEDERAL SAVINGS & LOAN ASSOCIATION.

Page 434

819 F.2d 434

PROVIDENT NATIONAL BANK v. CALIFORNIA FEDERAL SAVINGS & LOAN ASSOCIATION v. LEHMAN MANAGEMENT CO., INC. and State Street Securities

Service Corporation.

Appeal of CALIFORNIA FEDERAL SAVINGS & LOAN ASSOCIATION.

No. 86-1622.

United States Court of Appeals Third Circuit.

Argued March 16, 1987.

Decided June 4, 1987.

J. Justin Blewitt, Jr. (argued), Robert John Jensen, Philbert E. Seals, William L. Callender, Los Angeles, Cal., for appellant.

William A. Slaughter (argued), Ballard, Spahr, Andrews & Ingersoll, Philadelphia, Pa., for appellee, Provident Nat. Bank.

Before HIGGINBOTHAM, MANSMANN, and ROSENN, Circuit Judges.

OPINION OF THE COURT

ROSENN, Circuit Judge.

This appeal in a diversity action between two large financial institutions, each having headquarters in opposite sections of the country, raises a not uncommon question of how much contact a modern lending institution must have within the forum state to confer in personam jurisdiction. The United States District Court held in the instant case that California Federal Savings & Loan Association (California Federal) had sufficient "continuous and systematic general business contacts" within Pennsylvania to confer personal jurisdiction over an action filed against it by Provident National Bank (Provident) to recover a claim for money due it under the terms of a certificate of deposit. The court therefore denied California Federal's motion to dismiss the complaint for lack of in personam jurisdiction. The parties tried the case before a panel of arbitrators, who awarded Provident the full amount of its claim, plus interest. The parties stipulated to entry of a final judgment in order that this appeal, limited to the jurisdictional issue, could be taken. California Federal accordingly now appeals from the judgment. We affirm.

I.

The plaintiff, Provident, is a national banking association with its principal place of business in the Commonwealth of Pennsylvania. California Federal is a savings and loan association federally chartered and headquartered in California with 138 branch offices in California, 37 branch offices in Florida, 13 branch offices in Georgia, and 6 branch offices in Nevada.

During the relevant period, between 700 and 1000 of California Federal's depositors resided in Pennsylvania, representing only about .066% of its almost one million depositors. The Pennsylvania depositors contributed about $10 million to California Federal's total of $14 billion in deposits (about .071%). Only about $10 million of California Federal's total outstanding loans of $12 billion (about .083%) were traceable to Pennsylvania residents.

California Federal maintained no Pennsylvania office, employees, agents, mailing address, or telephone number. It had not applied to do business in Pennsylvania, did no advertising in Pennsylvania, and paid no taxes there. Three Pennsylvania financial institutions, however, serviced $10.2 million of loans for California Federal.

California Federal also continuously maintained a "controlled disbursement account" with Mellon Bank in Pittsburgh. This account was a "zero balance" arrangement under which Mellon Bank notified California Federal every business day of the total amount of checks cleared through the account that day, and California Federal wired a transfer of funds for that amount to Mellon Bank the same day. There is also evidence that in 1985 California Federal sold certificates of deposit on sixteen separate occasions aggregating $144,500,000 to mutual funds for which Provident acted as custodian.

Although only properties in California, Nevada, Georgia, or Florida could be used to secure loans made by California Federal, California Federal purchased mortgages in the secondary market, and these mortgages could be secured by property located in Pennsylvania. The record does not disclose the total value of California Federal's security interest in property located in Pennsylvania.

In the transaction giving rise to this dispute, California Federal agreed to sell a $5 million negotiable certificate of deposit to Asset Management Fund for Savings Institutions, Inc., one of the mutual funds for which Provident acted as custodian. Under the terms of the agreement, Provident was to transfer funds for payment for the certificate to State Street Boston Securities Service Corporation, located in New York. California Federal was to arrange for physical delivery of the certificate by its transfer agent, Manufacturers Hanover Bank, also located in New York.

Provident provided the funds on January 9, 1985, but the certificate was not delivered. At the certificate's maturity, California Federal made a repayment which Provident asserted was $54,180.56 less than the amount due.

Provident brought this action for damages in the amount of $54,180.56 plus interest and costs in the United States District Court for the Eastern District of Pennsylvania. California Federal responded with a motion to dismiss for, inter alia, lack of in personam jurisdiction. The district court denied the motion and ordered the matter to proceed to arbitration. Provident Nat'l Bank v. California Fed. Sav. & Loan Ass'n, 624 F.Supp. 858 (E.D.Pa.1985). The district court entered judgment in accordance with the parties' stipulation and the arbitrators' award.

II.

A federal district court may assert personal jurisdiction over a nonresident of the state in which the court sits to the extent authorized by the law of that state. Fed.R.Civ.P. 4(e). The Pennsylvania Long-Arm Statute provides in relevant part that "the jurisdiction of the tribunals of this Commonwealth shall extend ... 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. Sec. 5322(b) (Purdon 1981). See Time Share Vacation Club v. Atlantic Resorts, Ltd., 735 F.2d 61, 63 (3d Cir.1984). The due process clause of the fourteenth amendment of the United States Constitution limits the reach of long-arm statutes so that a court may not assert personal jurisdiction over a nonresident defendant who does not have "certain minimum contacts with [the forum] such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.' " International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 342, 85 L.Ed. 278 (1940)). The nature of these contacts must be such that the defendant should be reasonably able to anticipate being haled into court in the forum state. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 567, 62 L.Ed.2d 490 (1980).

Once a jurisdictional defense has been raised, the plaintiff bears the burden of establishing with reasonable particularity sufficient contacts between the defendant and the forum state to support jurisdiction. Gehling v. St. George's School of Medicine, Ltd., 773 F.2d 539, 542 (3d Cir.1985). To meet this burden, the plaintiff must establish either that the particular cause of action sued upon arose from the defendant's activities within the forum state ("specific jurisdiction") or that the defendant has "continuous and systematic" contacts with the forum state ("general jurisdiction"). Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414, 416, 104 S.Ct. 1868, 1872, 1873, 80 L.Ed.2d 404 (1984); Gehling v. St. George's School of...