Opinion
C.A. No. 04-4022.
March 30, 2005
MEMORANDUM OPINION AND ORDER
Utilities Materials and Controls Corporation, Inc. ("UMAC"), a Pennsylvania corporation, brought this suit against Aqua-Gas AVK LTD and Bryan Donkin Valves LTD (hereinafter referred to together as "Aqua-Gas"). Both defendant corporations are organized under the laws of the United Kingdom. The complaint seeks damages for an alleged breach of contract. The allegations surround licensing and distribution agreements entered into by UMAC and a third-party, Bryan Donkin Company, Inc. ("BD"), also a corporation organized under the laws of the United Kingdom. UMAC alleges that, by virtue of a later asset sale, Aqua-Gas assumed the UMAC — BD agreements, and is therefore responsible for an alleged breach. Aqua-Gas has responded with a motion to dismiss for lack of personal jurisdiction, pursuant to Fed.R.Civ.P. 12(b)(2). For the reasons which follow, this motion will be granted.
The facts relevant to the resolution of this motion revolve around two transactions. The first is a 1980 Licensing Agreement ("1980 Agreement") between UMAC and BD. Generally, the agreement gave a license to UMAC to sell a BD product within the United States and Mexico. The 1980 Agreement also gave UMAC the right to improve upon the product, and to market and sell the improved product in the United States and Mexico. Further, the 1980 Agreement gave BD a right of first refusal on any improved product that UMAC developed. That is, BD could negotiate with UMAC for a license back if it wished to sell the improved product. UMAC claims in its complaint that BD violated the 1980 Agreement by selling the UMAC improvement without UMAC's approval or license. As a result, UMAC alleges that it is owed royalties from the sales. Also in dispute is whether this contract has, at any point, been terminated.
In addition, the parties entered into a contract in 1990. Our analysis covers the entire relationship between BD and UMAC.
The second transaction relevant to this motion is a 1997 Asset Purchase Agreement ("1997 Asset Purchase") between BD and Aqua-Gas. In the 1997 Asset Purchase, Aqua-Gas purchased certain assets from BD related to the sales and manufacturing business of BD. This sale had certain enumerated exclusions, among which were the sale of BD's "Licensor Business Intellectual Property" as well as it's "Leased Assets." Specifically listed among the business elements included in BD's "Licensor Business Intellectual Property," and thus excluded from the sale, is the 1980 Licensing Agreement between UMAC and BD that is the basis of this lawsuit.
Subsequent to the 1997 Asset Purchase, both BD and Aqua-Gas sent form letters to all the customers of BD, including UMAC, informing them of the sale. At some point after this, UMAC contacted Aqua-Gas regarding the 1980 Agreement. Presumably, in the interest of fostering good relations with UMAC, Aqua-Gas entertained UMAC's concern about BD's alleged use of the improved product. A number of correspondences were exchanged between the parties and their representatives met on two occasions. Ultimately, their differences could not be overcome, and this suit resulted.
The defendants argue in their Rule 12(b)(2) motion that this court may not exercise personal jurisdiction over them, as non-residents of the Commonwealth of Pennsylvania. When a non-resident defendant challenges the assertion of in personam jurisdiction, it becomes the plaintiff's burden to come forward with sufficient facts to establish that jurisdiction is in fact proper. Gehling v. St. George's School of Med., 773 F.2d 539, 542-43 (3d Cir. 1985); Mellon Bank (East) PSFS, Nat'l Ass'n v. Farino, 960 F.2d 1217, 1223 (3d Cir. 1992). Under the Rules of Civil Procedure, district courts are authorized to exercise personal jurisdiction over nonresidents to the extent permissible under the law of the state in which the district is located. Fed.R.Civ.P. 4(e); North Penn Gas v. Corning Natural Gas, 897 F.2d 687, 689 (3d Cir. 1990). In exercising personal jurisdiction, the court must first ascertain whether jurisdiction exists under the forum state's long-arm jurisdiction statute and then determine whether the exercise of jurisdiction "comports with" the due process clause of the Fourteenth Amendment of the Constitution. Van Buskirk v. Carey Canadian Mines, Ltd., 760 F.2d 481, 489-90 (3d Cir. 1985). In Pennsylvania, the long-arm statute is "coextensive" with the due process clause, as it provides:
the jurisdiction of the Tribunals of this Commonwealth shall extend to all persons who are not within the scope of section 5301 (relating to persons) to the fullest extent permitted by 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. 41 Pa. Cons. Stat. Ann. § 5322(b); Van Buskirk at 490; North Penn Gas at 690. The inquiry thus turns to whether the exercise of personal jurisdiction is allowed within the constraints of due process.
Personal jurisdiction may be either specific or general. Specific jurisdiction applies where the plaintiff's cause of action arises from the defendant's forum related activities.Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985);North Penn Gas, 897 F.2d at 690. The plaintiff must show that the defendant purposefully established "minimum contacts" in the forum state "such that [the defendant] should reasonably anticipate being haled into court there." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980);Burger King at 472; North Penn Gas at 690. The contacts must not be "random, fortuitous or attenuated." Burger King at 475, n. 18. "Jurisdiction is proper . . . where the contacts proximately result from actions by the defendant himself that create a 'substantial connection' with the forum state." Id. at 475 (quoting McGee v. International Life Insurance Co., 355 U.S. 220, 223 (1957) (emphasis in original). Where the defendant has "manifestly . . . availed himself of the privilege of conducting business [in the forum state] . . . it is presumptively not unreasonable to require him to submit to the burdens of litigation in that forum as well." Burger King at 476.
General jurisdiction is implicated where the claim arises from the defendant's non-forum related activities. Helicopteros Nacionales de Columbia S.A. v. Hall, 466 U.S. 408, 414, n. 9 (1984); Gehling, 773 F.2d at 541. In such a case, the plaintiff "must show significantly more than mere minimum contacts." Provident National Bank v. California Federal Savings Loan Association, 819 F.2d 434, 437 (3d Cir. 1987). To assert general jurisdiction, the plaintiff must establish that the defendant's contacts with the forum state were "continuous and substantial." Id.; Gehling, 773 F.2d at 541. We find that UMAC has failed to establish that either specific or general jurisdiction exists.
UMAC asserts that Aqua-Gas had the requisite minimum contacts for specific jurisdiction through (1) its successor liability of BD's contacts with the Commonwealth and (2) its own communication with the plaintiff in Pennsylvania. Both of these assertions fail.
"[U]nder Pennsylvania law, the acts of a predecessor corporation may be attributed to its successor for purposes of determining whether [personal] jurisdiction over the successor is proper." Huth v. Hillsboro Ins. Mgt. Inc., 72 F.Supp.2d 506, 510 (E.D.Pa. 1999) (citing Simmers v. American Cyanamid Corp., 576 A.2d 376, 381 (Pa.Super. 1990)). Thus, in personem jurisdiction is established if the successor corporation may be held liable under the Commonwealth's law of successor liability. In Huth, Judge Katz determined that the general rule of successor liability is that "when a company sells or transfers all of its assets to a successor, 'the successor does not acquire the liabilities of the transferor merely because of its succession to the transferor's assets.'" Id. at 510 (emphasis in original).
Judge Katz went on to explain that this general rule does not apply in a variety of circumstances, only one of which is arguably applicable here, i.e., when "the successor undertakes to conduct the same manufacturing operation of the transferor's product lines in an essentially unchanged manner." Id. (citingDawejko v. Jorgenson Steel Co., 434 A.2d 106, 107, 110 (Pa.Super. 1981).
Here, like in Huth, we have a transfer of assets, and no suggestion that this transaction could be considered a merger. We do not even have a transfer of all of the predecessor's assets. Rather we have a transfer of only some assets (and only those liabilities arising from those transferred assets), with the 1980 License Agreement between UMAC and BD specifically excluded from the sale. We find, therefore, as a matter of law, that the asset transfer could not have transferred BD's minimum contacts with the Commonwealth, so as to make Aqua-Gas subject to the Pennsylvania long-arm statute. Because the asset purchase agreement specifically excludes the BD — UMAC agreement that is the source of UMAC's claims, the contracts between BD and UMAC were never transferred to Aqua-Gas, and Aqua-Gas did not "step into" the shoes of BD for the purposes of successor liability or specific jurisdiction in the Commonwealth arising from the contracts.
The Asset Purchase is concerned with the sale of "Transferred Assets." Asset Purchase at ¶ 2.1. Under the definition of "Transferred Assets" is listed "the Business Intellectual Property (excluding for the avoidance of doubt the Licensor Business Intellectual Property and the Leased Assets)."Id. at ¶ 1.1, p. 7. Paragraph 2.4 also refers to the exclusion of these assets: "For the avoidance of doubt it is hereby agreed that there shall be excluded from the sale and purchase referred to in Clause 2.1-2.4.3 the Licensor Business Intellectual Property". Id. at 2.4. "Licensor Business Intellectual Property" is then defined as "all Intellectual Property which is used in the Business . . . which licenses (whether written, oral, express, or implied) have been granted to or by [BD Company] . . . and which is listed in Part B of Schedule 3." Id. at ¶ 1.1, p. 5. Referring then to Part B of Schedule 3, the following is explicitly listed amongst three other enumerated license agreements: "An Agreement dated 18 July 1980 between the Vendor, [BD Company] and [UMAC] and an Agreement between the Licensor and UMAC on 1 April 1990." While it requires a close following of the contractual bouncing ball, there are few clearer examples of excluding specific assets, and by implication any related liabilities.
What are left then are Aqua-Gas's own contacts with Pennsylvania. These contacts consist of (1) a form letter sent to all of BD Company's customers alerting them of the sale of assets; (2) a visit to Pennsylvania by Graham Carson, Aqua-Gas's chairman and Managing Director, to discuss with UMAC the licensing dispute, made as a side-trip during Carson's vacation in New York; (3) a follow-up discussion concerning the licensing dispute with representatives of UMAC at an industry exhibition in Cleveland, Ohio; and (4) a series of phone calls and letters all surrounding the aforementioned visits.
We find that the form letter does not qualify as an effort by Aqua-Gas to purposefully avail itself of the benefits of doing business in Pennsylvania. Burger King Corp., 471 U.S. at 476. The form letter does not specifically mention the contracts with UMAC. Further, no business with UMAC was forthcoming from this letter or any other source.
In fact, it appears that no business has ever been transacted between Aqua-Gas and UMAC. UMAC's last order was placed with BD in 1996. Aqua-Gas has received no compensation from UMAC.
The other contacts constitute responses to unilateral actions by UMAC to engage Aqua-Gas in a resolution of this dispute. "The unilateral activity of those who claim some relationship with a nonresident defendant cannot satisfy the requirement of contact within the forum state." Hanson v. Denckla, 357 U.S. 235, 253 (1958). UMAC and Aqua-Gas dispute whether any resolution came from the two meetings between their representatives. It is not disputed, however, that the meetings and other contacts concerned the issues now in dispute and were a result of UMAC's allegation that Aqua-Gas was liable as BD's successor. We find that Aqua-Gas' willingness to contact and meet with UMAC to discuss the dispute cannot satisfy the "purposefully availing" test because Aqua-Gas could not have expected to be haled into court based on these limited responsive contacts. See Devault of Delaware, Inc. v. Omaha Public Power District, 633 F.Supp 374, 376 (E.D. Pa. 1986) ("we do not believe a defendant who attempts to resolve a contractual dispute should be penalized . . . where, absent such conduct aimed at resolution of the dispute, the defendant could not otherwise be subjected to the jurisdiction of the forum.").
Of course, the meeting in Ohio could not have established a contact with Pennsylvania.
UMAC does not appear to argue that this court could exercise personal jurisdiction over Aqua-Gas under a theory of general jurisdiction, except insofar as it is BD's successor. We have already resolved that Aqua-Gas did not adopt BD's contacts with Pennsylvania when it bought some of BD's assets in 1997. UMAC has not suggested, nor does it appear from the record before the court, that Aqua-Gas has such "continuous and substantial" contacts with the forum to warrant a finding of general jurisdiction. Provident Nat'l Bank, 819 F.2d at 437.
Since we find that the exercise of personal jurisdiction over defendants is not appropriate in this case, the defendant's motion will be granted.
ORDER
The motion of defendants Aqua-Gas AVK LTD and Bryan Donkin Valves LTD to dismiss the complaint of UMAC, Inc. pursuant to Fed.R.Civ.P. 12(b)(2) (Docket Entry #10) is GRANTED.The complaint of UMAC, Inc. is DISMISSED for want of personal jurisdiction over the defendants.
IT IS SO ORDERED.