Time Share Vacation Club v. Atlantic Resorts, Ltd., No. 83-1576

• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
• Writing for the Court: Before SEITZ, Chief Judge, GARTH, Circuit Judge, and DIAMOND; GARTH; SEITZ
• Citation: 735 F.2d 61
• Parties: TIME SHARE VACATION CLUB, Appellant, v. ATLANTIC RESORTS, LTD. and Coastal Marketing Associates, Inc. and Schuman, Martin L., Jr. . Submitted Under Third Circuit Rule 12(6)
• Docket Number: No. 83-1576
• Decision Date: 28 February 1984

Page 61

735 F.2d 61 TIME SHARE VACATION CLUB, Appellant,
v.
ATLANTIC RESORTS, LTD.
and
Coastal Marketing Associates, Inc.
and
Schuman, Martin L., Jr. No. 83-1576. United States Court of Appeals,
Third Circuit. Submitted Under Third Circuit Rule 12(6)
Feb. 28, 1984.
Decided May 24, 1984. Rehearing and Rehearing En Banc
Denied July 9, 1984.

Page 62

Timothy J. Savage, Philadelphia, Pa., for appellant.

Before SEITZ, Chief Judge, GARTH, Circuit Judge, and DIAMOND, District Judge ^*.

OPINION OF THE COURT

GARTH, Circuit Judge:

This appeal is taken by plaintiff Time Share Vacation Club ("Time Share") from the dismissal of Time Share's breach of contract action against defendants Atlantic Coast Resorts, Ltd. ("Atlantic"), Coastal Marketing Associates, Inc. ("Coastal") and Martin L. Schuman, Jr. ¹ The district court dismissed the complaint under Fed.R.Civ.P. 12(b)(2) for lack of in personam jurisdiction. ² We affirm.

I.

Time Share, a Pennsylvania corporation with principal offices in Philadelphia, alleged that it entered into a contract with defendants Atlantic and Coastal on July 24, 1982. Under this contract, Time Share was to attract potential customers to purchase vacation "interval time shares" at the development known as "Atlantic Resorts," located in Ocean Pines, Maryland. Atlantic, Coastal, and Schuman were all citizens of Maryland. The contract allegedly provided that Time Share would receive a commission on all sales made through its promotional efforts, and was to receive reimbursement for costs and labor. This agreement was apparently signed by Martin Schuman as President and controlling shareholder of both Atlantic and Coastal, and was executed in Maryland.

The complaint alleged that Atlantic and Coastal breached this agreement when they failed to reimburse Time Share for various expenses, totalling $74,000. Time Share also sought $252,000 in lost profits

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and commissions. ³ The action was brought in the Eastern District of Pennsylvania, with jurisdiction based on diversity of citizenship.

In lieu of an answer, defendants filed a motion to dismiss for lack of in personam jurisdiction. Fed.R.Civ.P. 12(b)(2). The district court, without opinion, granted the motion and dismissed the action against all defendants. It is from this order that Time Share appeals.

II.

The sole issue before us is whether Time Share has established that defendants had sufficient contact with the Commonwealth of Pennsylvania such that a court may properly exercise personal jurisdiction over them. Once a jurisdictional defense has been properly raised, "the plaintiff bears the burden of demonstrating contacts with the forum state sufficient to give the court in personam jurisdiction." Compagnie des Bauxites de Guinee v. L'Union, 723 F.2d 357 (3d Cir.1983) (Seitz, C.J.).

A.

Rule 4(e) of the Federal Rules of Civil Procedure permits a district court to assert personal jurisdiction over a nonresident to the extent allowed under the law of the state where the district court sits. In turn, the Pennsylvania Long Arm Statute, Pa.Stat.Ann. tit. 42, Sec. 5322(b) (Purdon 1981) allows a court to exercise jurisdiction over a person "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." Thus, the reach of the Pennsylvania statute is coextensive with the due process clause of the United States Constitution.

Under the due process clause, a court may not exercise personal jurisdiction over a non-resident defendant unless there are certain minimum contacts between the defendant and the forum state. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980). Essentially, before hearing a case, a court must ask whether "the quality and nature of the defendant's activity is such that it is reasonable and fair to require [that it] conduct [its] defense in that state." Kulko v. Superior Court of California, 436 U.S. 84, 92, 98 S.Ct. 1690, 1696, 56 L.Ed.2d 132 (1978) (quoting International Shoe Co. v. Washington, 326 U.S. 310, 316-17, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1940)).

In interpreting this constitutional standard, the Supreme Court has determined that, in order for a non-resident defendant to be subject to the jurisdiction of the court, it must have purposefully availed itself of the privilege of acting within the forum state. World-Wide Volkswagen, 444 U.S. at 295, 100 S.Ct. at 566; Hanson v. Denkla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1239, 2 L.Ed.2d 1283 (1958). Pennsylvania courts have also articulated the constitutional standards of due process as they are incorporated into the Pennsylvania statute. In Proctor & Schwartz v. Cleveland Lumber Co., 228 Pa.Super. 12, 323 A.2d 11 (1974), the court developed a three step analysis to determine whether or not sufficient contacts are present for the exercise of jurisdiction. The court stated:

First, the defendant must have purposefully availed itself of the privilege of acting within the forum state thus invoking the benefits and protections of its laws.... Second, the cause of action must arise from defendant's activities within the forum state.... Lastly, the acts of the defendant must have a substantial enough connection with the forum state to make the exercise of jurisdiction over it reasonable.

323 A.2d at 15.

B.

In an attempt to satisfy the minimum contacts requirement, Time Share submitted

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an affidavit from its president alleging the following transactions by the defendants which took place within Pennsylvania and more particularly within the Eastern District of Pennsylvania: ⁴

Paragraph 11 of the agreement between the parties provides the following, 'The parites [sic] agree that this Agreement and all aspects of the relationships among the parties shall be controlled and interpreted unders [sic] the laws of the Commonwealth of Pennsylvania.'

All sales and promotional materials were to be and were in fact developed and designed at TVC's Pennsylvania office. The prospective purchasers to whom the promotional program was aimed were from the Baltimore and Philadelphia metropolitan areas. TVC's efforts were primarily intended to attract people from those two areas.

As agent for the defendants, TVC brought people from Pennsylvania to the defendants' development for the purpose of selling them time share units. The defendants also sent a private airplane to Philadelphia for transporting people from TVC to the project in Maryland.

To attract persons from the metropolitan Philadelphia area, the defendants advertised the time share units in the Philadelphia Inquirer.

In reliance upon the contract between the parties, TVC invested substantial sums of money for material and expended a substantial amount of labor during the period from July through September, 1982 .... the labor and material as required by the contract and their refusal to permit TVC to perform the contract has resulted in economic harm to TVC, its principals, its shareholders and its employees. Those harmed by the defendants' actions were all residents of the Commonwealth of Pennsylvania. In addition, as a result of the defendants' actions, TVC has been unable to pay its creditors, most of whom are Pennsylvania residents.

On September 17, 1982, the defendants Coastal and Schuman executed and delivered to TVC a $3,000.00 check which was subsequently dishonored for lack of sufficient funds. The check was deposited in TVC's Pennsylvania bank account. As a result of the bad check, TVC's account suffered losses.

The affidavit which contained these averments represents the entirety of the evidence submitted by Time Share in support of the proposition that in personam jurisdiction properly lay against defendants. ⁵

In examining whether Time Share has met its burden of proof, we must make some comment at the outset regarding the state of the record. Given that Time Share places central importance on its contract with Atlantic and Coastal in establishing the contacts of those defendants with Pennsylvania, one would have assumed that Time Share would have furnished a copy of that contract on which it relies for jurisdiction in the Eastern District. We have searched the appendix in vain for such a copy. See Fed.R.App.P. 30(a) ("The appellant shall prepare and file an appendix to the briefs which shall contain ... any other parts of the record to which the parties wish to direct the particular attention of the court"). Even more surprising, however, is the fact that the contract is likewise not to be found in the district court record. Indeed, all that we know about the contents of the contract comes from excerpts

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which Time Share has chosen to reveal to the district court and to us through the affidavits of its president.

Since Time Share has the burden of proof in establishing jurisdictional facts, it also would bear the burden of producing a copy of the entire contract, or at the least, proffering an explanation for its absence. See Fed.R.Evid. 1002, 1003, 1004 (requiring original or duplicate of document unless lost or destroyed, or otherwise unavailable). This is particularly pertinent in this case, where Time Share has relied wholly upon the contract to establish minimum contacts of the defendants with Pennsylvania.

C.

Even in...