In Frontier Ins. Co. v. Nat’l Signal Corp. et. al., Civ. Action No. 98-4265 (E.D. Penn. November 9, 1998), the Federal District Court for the Eastern District of Pennsylvania addressed the circumstances under which a party who is not domiciled in the forum state may overcome a motion to dismiss for lack of personal jurisdiction.
In that case, Frontier Ins. Co (“Plaintiff”) brought a diversity action seeking to recover monies paid and expended under the terms of a Performance and Payment Bond (“Bond”). It was filed after judgment was rendered against Plaintiff in a prior suit. The prior suit was filed against Plaintiff by a supplier of National Signal Corp. (“National”) seeking payment for equipment sold to National. National contracted with another company for “design, refurbishment, and construction work on several railroad grade crossing signals in Pennsylvania” Id. at 1, and Plaintiff issued a Bond as security for that work. Plaintiff had a General Agreement of Indemnity (“Agreement”) with National, Joseph S. Banasiak and Kimberly A. Banasiak (collectively “Defendants,” individually “Defendant”). The Defendants were the owners, officers, and directors of National. The Agreement held National and the Defendants liable for indemnifying Plaintiff from any claims, payments or judgments that Plaintiff may incur because of the Bond. Id. at 2. As a result, Plaintiff initiated a lawsuit and Defendants filed a motion to dismiss, for among other things, lack of personal jurisdiction.
The motion was denied for the following reasons. The Court noted that when a defendant raises the defense of the court’s lack of personal jurisdiction, the plaintiff bears the burden of showing that there are sufficient contacts between the defendants and the forum to justify proper jurisdiction. See id. at 3. Under Pennsylvania law, “a court exercises jurisdiction to the fullest extent permitted by the Due Process Clause of the Fourteenth Amendment to the Constitution of the United States.” Id. at 3; 42 Pa. Con. Stat. Ann. § 5322(b). Pursuant to the Due Process Clause, the Defendants were responsible for establishing minimum contacts with Pennsylvania, the forum state, to establish that allowing the suit to continue forward in Pennsylvania would not “offend traditional notions of fair play and substantial justice.” Id. at 3.
To do this, the Defendants needed to first show that they acted in Pennsylvania thereby purposefully availing themselves of the benefits and protections of Pennsylvania law. See id. The Court mentioned that establishment of minimum contacts came when the connection and conduct within the forum state was such that the Defendants could reasonably anticipate being brought into court there. The court found that the Defendants had minimum contacts with Pennsylvania because the Defendants entered into the Agreement in their individual capacities thereby “stepp[ing] into [Plaintiff’s] shoes and themselves guaranteed the Pennsylvania construction work performed by National. Serving as a guarantor may amount to minimum contacts where, as in the instant case, the guarantor has a financial interest in the business or person whose obligation it guarantees.” Id. at 5. The Court noted that “[t]he Agreement itself is a contact by both of [the Defendants] individually with the construction work and therefore with Pennsylvania, and is sufficient to establish specific jurisdiction on a lawsuit arising out of the Agreement.” Id. at 6. Further, because performance of the Agreement was centered in Pennsylvania, the very purpose of the Agreement focused on Pennsylvania, and the Bond that was issued to support the transaction between National and the other construction company came as a result of that transaction being for work to be performed in Pennsylvania, the Court found that it was reasonable for the Defendants to have anticipated being haled into court in Pennsylvania in a “dispute over the indemnity Agreement.” Id. at 7.
Once minimum contacts were established, the Court needed to address whether assertion of personal jurisdiction comported with “fair play and substantial justice.” Id. at 7. To do this, the Court evaluated the “burden on the defendants, the forum’s interest in adjudicating the dispute, the plaintiff’s interest in obtaining convenient and effective relief, the interstate judicial system’s interest in obtaining the most efficient resolution of controversies, and the shared interest of the states in furthering fundamental substantive social policies.” Id. at 7. The burden was on the Defendants to evince that rendering jurisdiction in the forum state would be unreasonable. It was found that the Defendants did not carry their burden and did not offer any reason why being subjected to jurisdiction in Pennsylvania would be “so burdensome or so offensive to the interstate judicial system as to offend fair play and substantial justice.” Id. at 7. Ultimately, the Court concluded that Pennsylvania had personal jurisdiction over the Defendants and dismissed the motion on that ground.
The contacts a defendant establishes with a state in which a plaintiff seeks to file a complaint is important when assessing that states jurisdictional right over that defendant. If a defendant purposefully conducts business in a state and avails himself of the benefits of that state’s laws, he may have difficulty later contesting that state’s jurisdictional power.
© 2012 Nissenbaum Law Group, LLC
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