MEMORANDUM OPINION AND ORDER
RUFE, District Judge.
Plaintiff Penco Products, Inc. ("Penco"), a manufacturer of metal lockers and related products, entered into exclusive distribution contracts with Wholesale Equipment Company ("Wholesale") in 2007 and 2009. Defendant WEC Manufacturing, LLC ("WEC") is allegedly the successor-in-interest to Wholesale, which went through bankruptcy and is now apparently defunct. Penco has sued WEC to recover money allegedly owed by Wholesale.
In its complaint, Penco asserted that the Court has both general and specific personal jurisdiction over Defendant. Specifically, it asserts "Defendant's alter ego and predecessor, [Wholesale], contracted with Plaintiff to transact business and, upon information and belief, Defendant regularly transacts other business within the Commonwealth of Pennsylvania."
I. FACTUAL BACKGROUND
A. The Parties' Business Relationship
Penco is a Delaware corporation with its principal place of business in Pennsylvania. Defendant WEC is a limited liability company organized under the laws of Tennessee, and its single member, Keith Dunham, is a resident of Tennessee.
Penco's business relationship with Wholesale arose from a networking opportunity at a trade show in Chicago, Illinois in 2007.
Over the next two years, Penco fulfilled Wholesale's purchase orders, delivering the ordered products to Wholesale or otherwise making them available to Wholesale, which resold them in the designated region. During the time period in which Penco and Wholesale were doing business, Wholesale frequently contacted Penco employees in Pennsylvania regarding payments, orders, and customer service, via thousands of emails and telephone calls.
In August 2009, Penco and Wholesale renewed the distribution agreement. Sometime after the contract was renewed, Wholesale fell behind on payments to Penco. By March 2010, Wholesale owed Penco $1.4 million in accounts payable. The parties negotiated a plan for repayment of this accounts payable balance, reaching an agreement ("settlement agreement") in March 2010. The settlement agreement was first discussed at an in-person meeting in Tennessee, and was later negotiated during telephone conversations between Wholesale personnel in Tennessee and James Benenson, CEO of Penco's parent company, in Ohio.
As one part of the settlement agreement, the parties agreed to a 42-month payment plan for the payment of $290,000 of the total amount owed. On April 22, 2010, Wholesale executed and delivered a promissory note (the "Note") to Penco, promising to repay $290,000 for value received. The parties agreed that Wholesale would make monthly payments of $6,904.76 against the principal from May 2010 though October 2013, at which time the unpaid principal balance and any accrued interest would be due.
It is alleged that Wholesale failed to make its required monthly payment on October 1, 2010, and Penco notified Wholesale that it was in default on October 12, 2010. Some subsequent payments were also missed, and additional default notices were sent in January 2011, February 2011, and February 2012. On April 10, 2012, Penco notified Wholesale that, given the history of default, it was seeking immediate payment of the entire unpaid balance of the Note and interest at 5% per annum from October 12, 2010. In that letter, Penco indicated that Wholesale owed $156,000 in principal, $14,262,50 in accrued interest, and that interest would accrue at the rate of $21.37 per day until the balance was paid. In addition, that letter indicated that Penco had agreed to forgive $160,000 of Wholesale's debt to it, as part of their settlement agreement, but as that forgiveness was contingent upon compliance with the terms of the Note, and Wholesale had defaulted on the Note, the $160,000 in forgiven debt was also due.
WEC was formed by Wholesale's vice president, Keith Dunham, in May 2011. Both WEC and Wholesale listed Dunham as officers on their 2011 Annual Reports to the Tennessee Secretary of State. Penco alleges that WEC "is operating the same business as [Wholesale] including but limited to the same ownership, management, personnel, physical location and general business operation as [Wholesale],"
B. Wholesale's and WEC's General Contacts with Pennsylvania
Wholesale and WEC sold no Penco products in Pennsylvania. However, Wholesale did occasionally sell its own products in Pennsylvania, and WEC continues to do so. Wholesale maintained, and WEC now maintains, a non-interactive website which indicated, among other things, that its products were available in Pennsylvania through an independent sales contractor for the mid-Atlantic region. Defendant's website is consistent with its allegation that the independent contractors solicit locker orders within designated regions, and that Atlantic Sales and Marketing Association, Inc. ("Atlantic")
II. STANDARD OF REVIEW
On a motion to dismiss, a court is required to accept a plaintiff's allegations as true and construe disputed facts in favor of the plaintiff.
A. General Personal Jurisdiction
WEC is not incorporated in Pennsylvania, and is not licensed or registered to do business here. As WEC has not consented to the Court's jurisdiction, to establish general personal jurisdiction based on contacts with the state that are unrelated to the cause of action, due process requires Penco to demonstrate that the company (or its predecessor-in-interest) had continuous and systematic contacts with the forum.
WEC makes no direct sales in the forum and there is no allegation or evidence that WEC employs any salespeople in Pennsylvania. Independent contractor Atlantic takes product orders for WEC in eastern Pennsylvania, but also in other mid-Atlantic states. And WEC is not Atlantic's only client. According to Defendant, the Atlantic and the independent contractors are permitted, by the terms of their contracts with WEC, to sell non-competing products for other entities as well. These factors mitigate against imputing Atlantic's contacts to WEC.
Penco points out that WEC maintains a product website accessible to citizens of Pennsylvania, as well as other internet users. Internet activity within a forum may subject an entity to general personal jurisdiction in that forum. The district courts within the Third Circuit generally apply a sliding scale approach to determine whether personal jurisdiction exists over a company with an internet presence in a given forum.
Here, the WEC website is alleged to contain information about the company's products, and telephone numbers to call for more information or to purchase the products. The website indicates that the company's products are available in eastern Pennsylvania (and other mid-Atlantic states) through Atlantic, and provides contact information for that independent dealer. Penco does not allege that customers, in Pennsylvania or elsewhere, are able to place product orders directly through the website. Rather, the website in question serves as an advertisement for the company's services, and merely provides contact information for consumers seeking additional service or information. It is not alleged that the website targets or is selectively directed at Pennsylvania,
Penco also argues that WEC has generated significant revenues from sales of storage lockers to consumers in Pennsylvania. For example, Penco points out that Defendant had over $30,000 in product sales in Pennsylvania in 2012, and predecessor Wholesale "likely" had even higher sales revenue in Pennsylvania in the years preceding its bankruptcy. However, Defendant points out that they made only five sales to buyers in Pennsylvania in 2012, accounting for only 2% of WEC's 2012 sales,
Based on the allegations and evidence before it, the Court notes that WEC did not make substantial sales in the forum and did not regularly solicit business through activities it targeted at the forum, and therefore the Court cannot find that WEC had sufficient business contacts with Pennsylvania to subject them to the Court's general jurisdiction.
B. Specific Personal Jurisdiction
Specific jurisdiction exists when the claim arises from or relates to contacts purposefully directed at the forum state.
Penco recognizes that the contracts at the center of this dispute were entered into and allegedly breached by Wholesale, and all relevant contacts with the forum were by Wholesale and not WEC. However, Penco argues that WEC is subject to the specific personal jurisdiction of the Court as Wholesale's successor-in-interest. "[U]nder Pennsylvania law, the acts of a predecessor corporation may be attributed to its successor for purposes of determining whether jurisdiction over the successor is proper."
To establish specific jurisdiction, the court must first determine whether the defendant purposely directed activities at the forum.
When examining specific jurisdiction over contract claims, courts consider whether the nonresident defendant solicited, negotiated, or executed the contract in the forum state.
Here, it is alleged that Penco and Wholesale began doing business together in 2007, after employees of both companies fortuitously met at a convention in Illinois. Wholesale negotiated the exclusive distribution contract with a high-ranking Penco employee located in Ohio. The contract, which provided that Penco would sell its products to Wholesale for resale within a defined geographic area, which did not include Pennsylvania,
The 2007 contract expired after two years, and the parties executed a modified distribution agreement in 2009. There is no allegation or evidence suggesting that the negotiation or execution of the 2009 contract occurred in Pennsylvania.
By 2010, Wholesale owed Penco $1.4 million for products received. Penco and Wholesale representatives met at Wholesale's offices in Tennessee and Penco proposed a resolution which was unacceptable to Wholesale. The parties continued to negotiate, and eventually Penco's employee, Mr. Benenson, who lives outside Pennsylvania, agreed to the settlement agreement terms set forth in a letter sent to him from Tennessee.
Accordingly, the Court finds that none of the three contracts between Penco and Wholesale were negotiated in Pennsylvania.
The Court turns next to contacts involved in performance of the contracts. Payment into the forum state is one indicator of purposeful availment.
It is also alleged that in the normal course of their business relationship from 2007 until 2011, Wholesale employees had ongoing, daily telephone and email contacts with Penco's Pennsylvania-based employees to place purchase orders, check on shipment status, confirm payments, and address customer service issues. All product orders were placed with Penco's Pennsylvania warehouse, and some of the products Wholesale received from Penco were shipped from the Pennsylvania warehouse, although most were shipped from North Carolina or Utah.
As the Third Circuit made clear in Carteret Savings Bank, a court can find sufficient minimum contacts to support personal jurisdiction over a nonresident defendant where the defendant makes a single visit to the forum.
The Court finds that Wholesale's contacts with the forum in connection with its business with Penco were not fortuitous or attenuated.
Next, the Court must determine whether the litigation arose out of or is related to one or more of the activities that the defendant purposely directed at the forum.
Here, it is alleged that Wholesale breached the distributorship contract, failing to pay for $1.4 million in inventory accepted from Penco, when its sales of Penco's products fell. The parties then negotiated and entered into a settlement agreement to resolve that debt.
Finally, the Court must examine whether jurisdiction of the Court would comport with fair play and substantial justice. The Supreme Court identified the following factors to consider in analyzing fairness: "the burden on the defendant, the forum State'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 several States in furthering fundamental substantive social policies."
WEC argues that the burden on it to defend in this Court is significant, but
WEC also argues that Pennsylvania has marginal interest in resolving the dispute, in light of the fact that Penco may move its headquarters out of Pennsylvania in the future. The Court disagrees. Pennsylvania courts have a strong interest in providing a forum for a Pennsylvania resident which is injured, and in having the responsible defendant held accountable in Pennsylvania.
As neither of WEC's arguments is persuasive, and assuming for the purpose of this analysis that Wholesale's contacts with Pennsylvania can be imputed to WEC, the Court finds that the exercise of jurisdiction over this case in Pennsylvania does comport with fair play and substantial justice.
C. Jurisdictional Discovery
The determination that the Court could exercise specific personal jurisdiction over Wholesale does not end the inquiry, because Wholesale is not a party to this litigation. Only WEC, its purported successor-in-interest, is a party. The Court cannot determine on the present record that WEC is, in fact, Wholesale's successor-in-interest. However, the Court will permit jurisdictional discovery on the issue of Wholesale's relationship to WEC, so that it may determine whether alleged predecessor-in-interest Wholesale's contacts with Pennsylvania may be properly attributed to Defendant WEC for the purpose of finding specific personal jurisdiction. The Court will allow 60 days from the date of this order for such discovery. At the end of that period, the Court will allow Defendant a period of 14 days to renew its motion to dismiss, and reassert lack of personal jurisdiction or raise any other basis for dismissal which is ripe for review.
The Court cannot, on the record before it, find that either WEC or Wholesale is subject to the general personal jurisdiction of this Court. With regard to specific personal jurisdiction, for the reasons set forth above, the Court finds sufficient evidence that Wholesale purposely directed activities at the forum. As Wholesale is now defunct and not a named defendant, the Court will allow 60 days of jurisdictional discovery regarding Wholesale's relationship to alleged successor-in-interest WEC. Accordingly, the Defendant's Motion
It is so