Opinion
Civil Action No. 03-848.
October 18, 2004
MEMORANDUM AND ORDER
Via the motion now pending before this Court, Defendants Professional Products, Inc. (PPI), Trann Technologies, Inc. (Trann), and Bryan Kilbey (collectively, the "Trann Defendants") move to dismiss Counts III (misappropriation of proprietary information), IV (misappropriation and conversion of trade name), V (tortious interference with contract), and VI (tortious interference with prospective business relations) of Plaintiffs' Complaint for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6). Defendants Trann and Kilbey further move to dismiss the Complaint for lack of personal jurisdiction pursuant to Fed.R.Civ.P. 12(b)(2). For the reasons outlined below, the motion shall be granted as to Counts III, IV, and VI with respect to PPI, Trann, and Kilbey, and granted as to Count V with respect to Trann.
Discussion
We first address Defendants' request that Plaintiffs' response to their Motion to Dismiss be stricken as untimely because it was submitted ten days past the response deadline. Absent a showing of significant harm or prejudice, the interests of justice require that a motion to dismiss be decided on the merits. See Timberline Tractor Marine, Inc. v. Xenotechnix, Inc., No. 98-3629, 1999 WL 249644, 17 (E.D. Pa. 1999). This court is reluctant to grant Defendants' Motion to Dismiss as unopposed simply because Plaintiffs failed to respond in a timely manner. While we exercise our discretion in this instance to admit Plaintiffs' response, we strongly caution Plaintiffs' counsel that future violations of procedural deadlines will not be tolerated.I: Trann and Kilbey's Jurisdictional Challenge
Defendants Trann Technologies, Inc. and Bryan Kilbey move to dismiss Plaintiffs' claims against them for lack of personal jurisdiction pursuant to Fed.R.Civ.P. 12(b)(2). To survive a 12(b)(2) challenge of personal jurisdiction, the plaintiff must make a prima facie showing of sufficient contacts between the defendant and the forum state, using facts established by affidavits, sworn testimony, and other evidence of record.Resnick v. Manfredy, 52 F. Supp.2d 462, 466 (E.D. Pa. 1999). In deciding a motion to dismiss for lack of personal jurisdiction, a court is required to accept the plaintiff's allegations as true, and construe disputed facts in favor of the plaintiff. Directory Dividends, Inc. v. SBC Communications., Inc., No. 01-1974, 2003 U.S. Dist. LEXIS 19560, 4 (E.D. Pa. 2003).
Because Pennsylvania law extends jurisdiction to the fullest extent possible under the Due Process Clause of the United States Constitution, this Court need only determine whether Defendants have purposefully established "minimum contacts" in or purposely directed their activities toward residents of the forum state.Resnick 52 F.Supp.2d at 466 (citing Asahi Metal Industries Co., Ltd. v. Superior Court of California, 480 U.S. 102, 108 (1987)). There are two theories under which a defendant may be subject to personal jurisdiction. Where a defendant has maintained continuous and systematic contacts with the forum state, he will be subject to general jurisdiction; where, instead, the plaintiff's cause of action arises out of a defendant's more limited forum-related activities, the defendant may be subject to specific jurisdiction. Resnick 52 F.Supp.2d at 466 (citing World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980)). Under both theories, however, a plaintiff defending a motion to dismiss for lack of personal jurisdiction must show that the defendant has constitutionally sufficient "minimum contacts" with the forum.
The facts in this case, detailed below, do not suggest that either Trann or Kilbey's contacts with Pennsylvania were continuous or systematic enough to subject them to general jurisdiction. With respect to specific jurisdiction, we are guided by the Supreme Court's decision in Calder regarding specific jurisdiction over intentional tortfeasors. See generally Calder v. Jones, 465 U.S. 783 (1984). The Third Circuit has held that, in situations where a defendant's contacts with the forum state are otherwise insufficient, an intentional tort directed at the plaintiff and having sufficient impact upon it in the forum may satisfy the "minimum contacts" prong of the Due Process test. Imo Industries, Inc. v. Kiekert AG, 155 F.3d 254, 260 (3rd. Cir. 1998) (applying Calder to a claim of tortious interference with business relations). The Third Circuit interpreted Calder's "effects test" to require a plaintiff seeking specific jurisdiction over an out-of-state defendant to show the following: (1) The defendant committed an intentional tort; (2) The plaintiff felt the brunt of the harm in the forum such that the forum can be said to be the focal point of the harm suffered by the plaintiff as a result of that tort; (3) The defendant expressly aimed his tortious conduct at the forum such that the forum can be said to be the focal point of the tortious activity. Imo, 155 F.3d at 265-66. In order to make out the third prong of this test, the plaintiff must point to specific activity indicating that the defendant expressly targeted its tortious conduct at the forum. Imo, 155 F.3d at 266. Mere allegations that the defendant knew that the plaintiff's principal place of business was located in the forum, and that plaintiff felt the effect of the defendant's tortious conduct in the forum simply because of the plaintiff's location, are insufficient to ground personal jurisdiction. Imo, 155 F.3d at 265.
Trann and Kilbey's Contacts with Pennsylvania
Plaintiff contends that this Court can establish personal jurisdiction over both Kilbey and Trann based upon the following facts. Kilbey has testified that he has been to Pennsylvania "many times" over a period of eight years, primarily to meet with Defendant Goldstein, a Pennsylvania resident, while Goldstein was employed by Applied Technology International (ATI), a Pennsylvania corporation. Kilbey testifies that these visits and other contacts with Goldstein were not personal, but rather in Kilbey's capacity as an officer of PPI, a Florida corporation. At the time of Kilbey's initial contacts with Goldstein, PPI was doing business with ATI. Currently, PPI has customers in Pennsylvania and ships products there regularly.
In or around 2001 and 2002, Kilbey negotiated a consulting contract with Goldstein on behalf of PPI, which was signed by Kilbey and Goldstein in Texas on February 18, 2002. Among other things, the contract established that Goldstein would help develop wider widths and colors of a material similar to Fabrifoam; it also required that Goldstein break off his employment relationship with ATI, the creator of Fabrifoam. Kilbey testifies that he did not anticipate that Goldstein would move to Florida as part of the consulting arrangement.
The intended beneficiaries of this consulting agreement were to be PPI and Trann, a Florida corporation that came into existence only after the agreement was signed. Trann is currently owned by Kilbey, has no employees besides Kilbey, and pays Goldstein a salary for his independent consulting work pursuant to the terms of the PPI-Goldstein contract. Trann does no business in Pennsylvania, and has "literally no product line" because it is currently focused on perfecting the technology behind Deltafoam, a material similar to Fabrifoam.
Sufficiency of Trann and Kilbey's Contacts under Calder
To make a prima facie showing of minimum contacts underCalder (as interpreted by the Third Circuit in Imo), Plaintiffs must first show that Defendants Trann and Kilbey committed an intentional tort. Because this Court concludes below that Counts III, IV, and VI of Plaintiffs' Complaint must be dismissed for failure to state a claim, only Plaintiffs' claim for tortious interference with contract (Count V) requires further jurisdictional analysis. Plaintiffs, based in and operating out of Pennsylvania, satisfy the second step ofCalder, which requires a showing that Plaintiffs felt the brunt of Kilbey and Trann's alleged interference in Pennsylvania. The final and most central issue in this case is whether Kilbey or Trann "expressly aimed" their conduct at Pennsylvania when they allegedly interfered with ATI's contract with Ferris Manufacturing Corporation, such that Pennsylvania "can be said to be the focal point" of their activities. See Imo, 155 F.3d at 266. This Court finds that only Kilbey's contacts with Pennsylvania are sufficient to ground personal jurisdiction with respect to Count V.
The Third Circuit's decision in Imo establishes that jurisdiction in intentional tort cases will not lie automatically in the plaintiff's home state simply because the plaintiff feels the brunt of the harm there. Imo, 155 F.3d at 265. Defendants, however, cite Imo to suggest that jurisdiction in cases of tortious interference with contract will only be proper if the defendant's conduct is directed at a contract with a locus in the forum state, as in Remick, 238 F.3d 248. We believe this is a misreading. Imo holds that the third prong of Calder can be satisfied by "some type of 'entry' into the forum state by the defendant," and suggests that a plaintiff alleging interference with a non-forum contract can satisfy this prong by showing that the defendant initiated face-to-face meetings in the forum state.Imo, 155 F.3d at 265-67.
The contract with which Defendants allegedly interfered in this case was between a Pennsylvania corporation (ATI) and an Illinois corporation (Ferris). Though we have insufficient evidence before us to determine where the locus of this contract might have been, this issue is not dispositive in our jurisdictional analysis. We find that Kilbey made sufficient entries into Pennsylvania for purposes relating to the alleged tortious interference to be subject to personal jurisdiction in this state. Kilbey's deposition testimony establishes that he entered Pennsylvania for the purpose of contracting with Goldstein, a Pennsylvania resident; that he sought out Goldstein to obtain his assistance in developing a material similar to Fabrifoam; and that he met with ATI customers and manufacturers in Pennsylvania. Kilbey's negotiation of a consulting contract with a Pennsylvania resident, in particular, appears to be a prime example of "reach[ing] out beyond one state and creat[ing] continuing relationships and obligations with citizens of another state."Remick, 238 F.3d at 257 (internal quotations omitted). Viewing the facts in the light most favorable to Plaintiffs, these intentional entries into the forum state resulted in the diversion of a contract with Ferris from ATI to PPI. We find that Kilbey's contacts with this state in connection with the alleged tortious interference were sufficient to show targeting of the forum state, and thus to subject him to personal jurisdiction in Pennsylvania.
Defendants allege that Kilbey is not subject to personal jurisdiction because all his contacts with Pennsylvania were in his capacity as an officer of PPI. While the Third Circuit has never expressly adopted the corporate shield doctrine, it is well-established that corporate officers and directors are not insulated from personal jurisdiction where they have been charged with intentional torts. See Hodges v. Greiff, No. 00-5474, 2001 U.S. Dist. LEXIS 25039, 12-14 (E.D. Pa. 2001); D S Screen Fund II v. Ferrari, 174 F. Supp. 2d 343, 347 (E.D. Pa. 2001);Worldcom Tech., Inc. v. Intelnet Int'l, Inc., No. 00-2284, 2002 U.S. Dist. LEXIS 15892, 11 (E.D. Pa. 2002); Streamlight, Inc. v. ADT Tools, Inc., No. 03-1481, 2003 U.S. Dist. LEXIS 19843, 10-11 (E.D. Pa. 2003).
With respect to Trann, Plaintiffs offer no evidence of any direct contacts between Trann and the forum state of Pennsylvania. Trann's only link with Pennsylvania is that it pays Goldstein, a Pennsylvania resident, a salary for consulting work done pursuant to his contract with PPI. Trann, as a corporate entity, did not even exist when Kilbey entered into the contract on behalf of PPI, and is not named as a party to the contract. While Trann may indeed have an ongoing relationship with a Pennsylvania resident, this Court cannot in good faith find that this relationship arose because Trann "reached out" or "entered" the forum state, as required by Remick and Imo. Furthermore, we decline to impute Defendant Goldstein's contacts with Pennsylvania to Trann, because Goldstein's contract with the company is as an independent contractor. See Cecere v. Ohringer Home Furniture Co., 220 A.2d 350, 354 (Pa.Super. 1966) (finding that acts of an independent contractor could not be imputed to the associated corporation for purposes of personal jurisdiction); Meench v. Raymond Corp., 283 F.Supp. 68, 71 (D.C.Pa. 1968) (finding that acts of "agents or employees" will subject a corporation to personal jurisdiction); Rachelson v. E.I. DuPont DeNemours Co., 257 F.Supp. 257, 260 (E.D. Pa. 1966). Even viewing these facts in the light most favorable to Plaintiffs, we cannot find that Trann expressly targeted Pennsylvania or aimed its allegedly tortious conduct at this state. Therefore, we grant Defendants' motion to dismiss Count V for lack of personal jurisdiction with respect to Defendant Trann.
II: Trann Defendants' Motion to Dismiss for Failure to State a Claim
In considering a motion to dismiss filed pursuant to Fed.R.Civ.P. 12(b)(6), a court must consider only those facts alleged in the complaint and accept all of the allegations as true. ALA, Inc. v. CCAIR, Inc., 29 F.3d 855, 859 (3rd Cir. 1994). A motion to dismiss may only be granted where the allegations fail to state any claim upon which relief could be granted. Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997). The liberal requirements of federal notice pleading require only that a complaint put the defendant on notice of the claims against him. Fed.R.Civ.P. 8(a); see also Seville Indus. Mach. Corp. v. Southmost Mach. Corp., 742 F.2d 786, 790 (3d Cir. 1984) ("It is the function of discovery to fill in the details, and of trial to establish fully each element of the cause of action").
Counts III and IV:
The Trann Defendants move to dismiss, or, in the alternative, to strike Plaintiffs' requests for relief from these Defendants in Counts III and IV. While Plaintiff's demands for judgment under these Counts are directed at Defendant Goldstein, the wherefore clauses also seek relief in some degree from the Trann Defendants. To the extent that Plaintiffs intended, through Counts III and IV of their Complaint, to state a cause of action against the Trann Defendants, we find that they have failed to do so.
Count III, for "Misappropriation of Trade Secrets, Proprietary Information," alleges that Defendant Samuel Goldstein converted valuable trade secrets regarding the manufacture of Fabrifoam and provided these secrets to the Trann Defendants. Pennsylvania follows the First Restatement of Torts § 757 in establishing a cause of action for misappropriation of trade secrets, requiring a showing of: (1) the existence of a trade secret; (2) communication of the trade secret pursuant to a confidential relationship; (3) use of the trade secret in violation of that confidence; and (4) harm to the plaintiff. Moore v. Kulicke Soffa Indus., Inc., 318 F.3d 561, 566 (3rd Cir. 2003). Plaintiffs have not even attempted to establish that there was a confidential relationship between themselves and the Trann Defendants, and rest their claim for relief solely on the allegation that the Trann Defendants sought out and negotiated for the information Goldstein obtained from ATI. Even viewing these allegations in the light most favorable to Plaintiffs, Plaintiffs have not stated a cause of action for misappropriation of trade secrets or proprietary information against Trann Defendants.
Count IV, for "Misuse, Misappropriation, and Conversion of Trade Name, Trademark, and Conversion" alleges that Goldstein used the ATI name to carry on personal business, and misdirected corporate communications to personal electronic mailboxes, resulting in confusion among ATI customers and damages to ATI. The complaint does not, however, allege any improper actions by the Trann Defendants, but demands an accounting of all sales and contacts made by these Defendants with respect to the "new and improved [F]abrifoam" and disgorgement of any monies arising from these contacts. While the legal grounds for the charges against Goldstein are somewhat unclear from the face of the Complaint, this Court cannot identify any facts or allegations suggesting trade name misappropriation or conversion by the Trann Defendants. In Count IV, Plaintiffs have failed to state a valid cause of action against the Trann Defendants.
Counts V and VI:
The Trann Defendants move to dismiss Plaintiffs' claims of Tortious Interference with Contract (Count V) and Tortious Interference with Prospective Economic Advantage, Tortious Conversion of Goodwill (Count VI). In Count V, Plaintiffs claim that the Trann Defendants "conspired to induce" Ferris Manufacturing Corporation to terminate an existing agreement with ATI and place a valuable order with PPI instead. In Count VI, Plaintiffs allege that Kilbey and Goldstein met with ATI customers in an attempt to induce those customers to do business with Trann, and that Trann and PPI have solicited business from ATI using misrepresentations and confidential information converted from ATI.
To state a valid claim for tortious interference with existing or prospective contractual relations, a plaintiff must show: (1) the existence of an existing or prospective contractual relationship between the plaintiff and a third party; (2) intent on the part of the defendant to harm the plaintiff by interfering with this relationship; (3) the absence of privilege or justification for such interference; and (4) actual harm or damage to the plaintiff as a result of the defendant's conduct.Famology.com, Inc. v. Perot Systems Corp., 158 F. Supp. 2d 589, 592 (E.D. Pa. 2001).
Under Pennsylvania law, prospective business relations are "something less than a contractual right, something more than a mere hope." Alvord-Polk, Inc. v. F. Schumacher Co., 37 F.3d 996, 1015 (3d Cir., 1994) (quoting Glenn v. Point Park College, 272 A.2d 895, 898-99 (Pa. 1971). Where a plaintiff claims interference with prospective contractual relations, he must allege facts giving rise to an "objectively reasonable probability" that such a contract would arise from the parties' current dealings. Alvord-Polk, 37 F.3d at 1015; Schulman v. J.P. Morgan Inv. Mgmt., 35 F.3d 799, 808 (3rd Cir. 1994). Furthermore, the plaintiff's pleadings must identify specific business relationships suffering as a result of the defendant's interference. Brunson Communs., Inc. v. Arbitron, Inc., 239 F. Supp. 2d 550, 578 (E.D. Pa., 2002) (granting motion to dismiss for failure to state a claim where plaintiff could not identify "a single past, present or prospective customer" with whom it had a prospective contract that was not finalized because of defendant's actions). Because Plaintiffs ATI and Fabrifoam Products have not identified any discrete business opportunities with which Defendants have interfered, Count VI fails to state a claim for tortious interference with prospective business relations.
The Trann Defendants further claim that their conduct in this case, solicitation of ATI customers, is privileged because Trann, PPI, and Kilbey are legitimate competitors of ATI. A competitor defendant's actions are privileged if the conduct (1) concerns the subject of competition between the parties, (2) does not use wrongful means, and (3) has at least a partial goal of advancing an interest in competing with the plaintiff. See Intervest Fin. Servs., Inc. v. S.G. Cowen Secs. Corp., 206 F. Supp. 2d 702, 722 (E.D. Pa. 2002); Glaberman Assocs., Inc. v. J. Kinderman Sons, No. 98-3711, 1999 U.S. Dist. LEXIS 1931, 17-18 (E.D. Pa. 1999); Restatement (Second) of Torts § 768. "Wrongful means" may include "physical violence, fraud, civil suits and criminal prosecutions," as well as conduct that is independently actionable. Glaberman Assocs., 1999 U.S. Dist. LEXIS 1931, 17-18 (citing Restatement (Second) of Torts § 768, Comment E).
In Count V, Plaintiffs seem to allege that the Trann Defendants' conduct, "conspir[ing] to induce Ferris to terminate the agreement" with ATI, was not privileged because it was "wrongful" as defined by the Second Restatement. Viewing the facts of the Complaint in the light most favorable to Plaintiffs, and given the liberal pleading requirements of Fed.R.Civ.P. 8(a), we find these allegations of conspiratorial interference to be sufficiently suggestive of "wrongful means" to satisfy Plaintiffs' burden of pleading on the issue of competitive privilege.
An appropriate order follows.
ORDER
AND NOW, this day of October, 2004, upon consideration of Defendants' Motion to Dismiss (Doc. 16) and all responses thereto (Docs. 36, 37, 38, 39, 40, 41) it is hereby ORDERED that the Motion is GRANTED in part and DENIED in part, as follows:(1) The Motion to Dismiss Counts III, IV, and VI pursuant to Fed.R.Civ.P. 12(b)(6) is GRANTED as to Defendants PPI, Trann, and Kilbey;
(2) The Motion to Dismiss Count V for lack of personal jurisdiction pursuant to Fed.R.Civ.P. 12(b)(2) is GRANTED with respect to Defendant Trann and DENIED with respect to Defendant Kilbey.