Vetrotex Certainteed Corp. v. Consolidated Fiber Glass Prod. Co. ( 1996 )

Opinions of the United
1996 Decisions States Court of Appeals
for the Third Circuit
1-26-1996
Vetrotex Certainteed Corp. v. Consolidated Fiber
Glass Prod. Co.
Precedential or Non-Precedential:
Docket 94-2058
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
------------
No. 94-2058
------------
VETROTEX CERTAINTEED CORPORATION,
Appellant
v.
CONSOLIDATED FIBER GLASS PRODUCTS COMPANY
----------
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civil No. 94-2947)
----------
Argued Monday, December 11, 19950
BEFORE: ROTH, LEWIS and GARTH, Circuit Judges
----------
(Opinion filed January 26, 1996)
----------
Jon A. Baughman, Esq. (Argued)
Pepper, Hamilton & Scheetz
3000 Two Logan Square
18th & Arch Streets
Philadelphia, PA 19103-2799
Attorney for Appellant
0
This matter was originally heard on June 27, 1995 before Judges
Hutchinson, Roth, and Garth. Because Judge Hutchinson died prior
to an opinion being rendered, the Panel was reconstituted to
include Judge Lewis, and the appeal was reargued.
1
2
Virginia H. McMichael, Esq. (Argued)
Dilworth, Paxson, Kalish &
Kauffman
3200 Mellon Bank Center
1735 Market Street
Philadelphia, PA 19103
Wesley G. Beverlin, Esq.
Knapp, March, Jones & Duran
515 South Figueroa Street
Suite 1400, Manulife Plaza
Los Angeles, CA 90071
Attorneys for Appellee
----------
OPINION OF THE COURT
----------
GARTH, Circuit Judge:
Plaintiff-appellant Vetrotex CertainTeed Corporation
("Vetrotex"), a Pennsylvania corporation, brought suit in the
federal district court for the Eastern District of Pennsylvania
against defendant-appellee Consolidated Fiber Glass Products
Company ("Conglas"), a California corporation. The issue
presented in this appeal is whether the district court properly
dismissed the complaint of Vetrotex for lack of personal
jurisdiction. Because it is not contested that general
jurisdiction does not lie, and because we find that Conglas has
not purposefully directed its activities toward Pennsylvania for
purposes of specific jurisdiction, we will affirm.
I.
2
Vetrotex is a Pennsylvania corporation engaged in the
manufacture and sale of various fiber glass reinforcement
products. Vetrotex, which was incorporated in March of 1991, is
a wholly-owned subsidiary of CertainTeed Corporation
("CertainTeed"), another Pennsylvania corporation. Vetrotex is a
national corporation with facilities and offices in several
states, including California. Conglas is a California
corporation engaged in the manufacture of fiber glass roofing
products, including fiber glass mats. Conglas has no offices,
employees or representatives in Pennsylvania, nor has it ever
sold any of its products in Pennsylvania, or engaged in sales to
distributors or other third parties who sell Conglas products in
Pennsylvania.
Between 1980 and 1989, Conglas and CertainTeed engaged
in sporadic contracts for fiber glass products, which culminated
in a letter dated May 19, 1989 from CertainTeed to Conglas,
stating that CertainTeed would not be able to supply all of
Conglas's needs for glass and urging Conglas to go to another
vendor for glass. The CertainTeed letter concluded by stating:
"Finally, Jack, I want to thank you for our business relationship
over the past years. I plan on continuing this contact for none
of us can foretell the future and its opportunities." After this
arrangement was terminated, Conglas had no further business
relationship with CertainTeed.0
0
Between May of 1989 and February of 1991, the record reveals no
relationship between Conglas and CertainTeed/Vetrotex. Indeed,
the prior relationship between the parties had ended by 1989 and
a new relationship began in 1991 when CertainTeed/Vetrotex
3
In February of 1991, CertainTeed again found itself
with a supply of chopped strands to sell, and it communicated
with Conglas to ascertain if Conglas would be interested in
purchasing "44E" chopped strand. During the week of February 11,
1991, CertainTeed met with representatives of Conglas in
California to solicit Conglas's purchase of CertainTeed's fiber
glass materials. On February 25, 1991, CertainTeed wrote and
forwarded an agreement to Conglas in California. Upon receiving
the letter, Conglas executed the agreement and returned it to
CertainTeed's headquarters in Valley Forge, Pennsylvania (the
"1991 Supply Agreement").
In March of 1991, Vetrotex was incorporated as
CertainTeed's wholly-owned subsidiary in charge of fiber glass
reinforcement products operations.
In January of 1992, representatives of
CertainTeed/Vetrotex flew to California and met with Conglas to
discuss a continuation of CertainTeed's agreement to sell chopped
strands to Conglas. At that meeting, the essential terms of a
solicited business from Conglas and entered into the 1991 and
1992 Supply Agreements. Those agreements, as discussed in text,
were initiated by CertainTeed/Vetrotex and all the contacts with
respect to those agreements were California contacts.
It was obviously for this reason that the parties joined
issue only with respect to specific jurisdiction rather than
general jurisdiction, the latter of which would have involved the
various pre-1989 matters with which Judge Roth is concerned and
which we read as the premise for the dissent.
In light of the new relationship initiated by Vetrotex in
1991 and the parties' acknowledgement that Burger King's specific
jurisdiction teachings control our disposition, we attach little
relevance to the general jurisdictional elements emphasized by
the dissent. General jurisdiction was not a theory urged by
Vetrotex.
4
new agreement were negotiated between Conglas and
CertainTeed/Vetrotex. Conglas did not send representatives to
Pennsylvania to meet with Vetrotex. Conglas did, however, place
some telephone calls to CertainTeed/Vetrotex's offices in Valley
Forge, Pennsylvania in the course of negotiating the renewal of
the 1991 Supply Agreement
On March 13, 1992, CertainTeed/Vetrotex and Conglas
renewed the 1991 Supply Agreement (now the "1992 Supply
Agreement"). The 1992 Supply Agreement was prepared by
CertainTeed/Vetrotex and sent to Conglas in California, where it
was executed. The 1992 Supply Agreement provided for a two-year
contract period that would automatically be renewed for an
additional one-year period commencing April 1, 1994, unless
canceled upon sixty-days notice.
Under the 1992 Supply Agreement, Vetrotex agreed to
ship fiber glass material directly from its plant in Wichita
Falls, Texas, to Conglas's manufacturing facility in Bakersfield,
California. Vetrotex's invoicing for the product sold under the
1992 Supply Agreement was handled by Vetrotex's Southern
California office, and all payments for the fiber glass material
were sent to Vetrotex's office in Los Angeles, California.
Conglas's primary contact at Vetrotex was Jerry Leland, a sales
representative working out of Vetrotex's Santa Ana, California
office.
In 1993, Vetrotex decided to withdraw from the fiber
glass chopped strand business and sought to terminate its
contract with Conglas. Vetrotex claims that it canceled the 1992
5
agreement by telephone on December 2, 1993, more than sixty days
prior to the April 1, 1994 deadline. According to Conglas, it
was only on March 23, 1994 that Vetrotex telephoned Conglas in
California with the information that Vetrotex would not sell any
more fiber glass chopped strand product to Conglas after March
31, 1994. Vetrotex ceased delivery of 44E strand, and Conglas
withheld payment on outstanding invoices.
On May 12, 1994, Vetrotex brought the present diversity
action against Conglas in the Eastern District of Pennsylvania,
seeking to recover $303,595.35 in withheld payments from Conglas.
Shortly thereafter, Conglas sued Vetrotex in California state
court, seeking damages for breach of the 1992 Supply Agreement.
Vetrotex then removed the California action to the Central
District of California, where it is currently stayed pending the
resolution of this appeal. Vetrotex has not yet counterclaimed
in the California action, but admitted at oral argument before us
that there is no impediment to its filing a counterclaim in that
action.
On July 5, 1994, Conglas moved to dismiss Vetrotex's
Pennsylvania action for lack of personal jurisdiction or,
alternatively, for improper venue. On October 18, 1994, the
district court for the Eastern District of Pennsylvania issued a
memorandum and order entered on October 20, 1994, dismissing
Vetrotex's complaint without prejudice for lack of personal
jurisdiction.
The district court found the relevant and dispositive
facts, which we recite in text, infra, to be undisputed.
6
Accordingly, the district court concluded that Conglas's contacts
with Pennsylvania were "marginal and were not directed at
Pennsylvania to benefit from its laws" and held that to exercise
jurisdiction over Conglas "would offend traditional notions of
fair play and substantial justice." Id. Vetrotex appealed.
II.
A.
"Whether personal jurisdiction may be exercised over an
out-of-state defendant is a question of law, and this court's
review is therefore plenary." Mellon Bank (East) PSFS, N.A. v.
DiVeronica Bros., Inc., 983 F.2d 551, 554 (3d Cir. 1993) (citing
Mesalic v. Fiberfloat Corp., 897 F.2d 696, 698 (3d Cir. 1990)).
We review any factual findings made by the district court for
clear error. Mellon Bank (East) PSFS, Nat'l Ass'n v. Farino, 960
F.2d 1217, 1220 (3d Cir. 1992).
A district court sitting in diversity applies the law
of the forum state in determining whether personal jurisdiction
is proper. Fed. R. Civ. P. 4(e). Pennsylvania's long-arm
statute provides that its reach is coextensive with the limits
placed on the states by the federal Constitution. 42 Pa. Cons.
Stat. Ann. § 5322(b) (1981). We therefore look to federal
constitutional doctrine to determine Conglas's susceptibility to
personal jurisdiction in Pennsylvania. The due process clause of
the Fourteenth Amendment places limits on the power of a state to
assert personal jurisdiction over a nonresident defendant.
Pennoyer v. Neff, 95 U.S. 714, 733 (1877).
7
The due process limit to the exercise of personal
jurisdiction is defined by a two-prong test. First, the
defendant must have made constitutionally sufficient "minimum
contacts" with the forum. Burger King Corp. v. Rudzewicz, 471
U.S. 462, 474 (1985) (the "constitutional touchstone" of personal
jurisdiction is "whether the defendant purposefully established
'minimum contacts' in the forum State"). The determination of
whether minimum contacts exist requires an examination of "the
relationship among the forum, the defendant and the litigation,"
Shaffer v. Heitner, 433 U.S. 186, 204 (1977), in order to
determine whether the defendant has "'purposefully directed'" its
activities toward residents of the forum. Burger King, 471 U.S.
at 472 (quoting Keeton v. Hustler Magazine, Inc., 465 U.S. 770,
774 (1984)). There must be "some act by which the defendant
purposefully avails itself of the privilege of conducting
activities within the forum State, thus invoking the benefits and
protections of its laws." Hanson v. Denckla, 357 U.S. 235, 253
(1958). Second, if "minimum contacts" are shown, jurisdiction
may be exercised where the court determines, in its discretion,
that to do so would comport with "traditional notions of fair
play and substantial justice." International Shoe Co. v.
Washington, 326 U.S. 310 (1945); Farino, 960 F.2d at 1222.
8
B.
Vetrotex alleged that the district court had specific
jurisdiction over Conglas. "Specific jurisdiction is invoked
when the cause of action arises from the defendant's forum
related activities," North Penn Gas Co. v. Corning Natural Gas
Corp., 897 F.2d 687, 690 (3d Cir. 1990), cert. denied, 498 U.S.
847 (1990); see Helicopteros Nacionales de Colombia v. Hall, 466
U.S. 408, 414 n.8 (1984); Dollar Sav. Bank v. First Sec. Bank of
Utah, N.A., 746 F.2d 208, 211 (3d Cir. 1984), such that the
defendant "should reasonably anticipate being haled into court
there." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286,
297 (1980). Vetrotex does not allege general jurisdiction.0
As is evident from the complaint, this action concerns
only Conglas's alleged breach of the 1992 Supply Agreement. The
1992 Supply Agreement, standing alone, is an insufficient ground
upon which to exercise specific personal jurisdiction over
Conglas. See Grand Entertainment Group, Ltd. v. Star Media
Sales, Inc., 988 F.2d 476, 482 (3d Cir. 1993) ("[A] contract
alone does not 'automatically establish sufficient minimum
contacts in the other party's home forum.'") (quoting Burger
King, 471 U.S. at 478); Mellon Bank (East) v. DiVeronica Bros.,
0
"General jurisdiction is invoked when the plaintiff's cause of
action arises from the defendant's non-forum related activities."
North Penn Gas Co. v. Corning Natural Gas Corp., 897 F.2d 687,
690 n.2 (3d Cir. 1990). To establish general jurisdiction, the
plaintiff must show that the defendant has maintained "continuous
and systematic" contacts with the forum. See Helicopteros
Nacionales de Colombia v. Hall, 466 U.S. 408, 414 n.9 & 416
(1984); Burger King Corp. v. Rudzewicz, 471 U.S. 462, 473 n.15
(1985).
9
Inc., 983 F.2d 551, 557 (3d Cir. 1993) ("Contracting with a
resident of the forum state does not alone justify the exercise
of personal jurisdiction over a non-resident defendant.") (citing
Mellon Bank (East) PSFS, Nat'l Ass'n v. Farino, 960 F.2d 1217,
1222 (3d Cir. 1992)).
In determining whether specific jurisdiction exists,
however, we consider not only the contract but also "prior
negotiations and contemplated future consequences, along with the
terms of the contract and the parties' actual course of dealing."
Burger King, 471 U.S. at 479.
III.
A.
The facts underlying the present case are not in
dispute. Vetrotex solicited Conglas to obtain the 1991 Supply
Agreement by telephone and by personal visits to Conglas
headquarters in California.0 Conglas did not solicit the 1991
Supply Agreement, and no Conglas personnel ever visited
Pennsylvania. Conglas signed the 1991 Supply Agreement in
California and sent it to CertainTeed in Pennsylvania. Similarly,
with respect to the 1992 Supply Agreement, officers of
CertainTeed flew to California to negotiate that contract. The
1992 Supply Agreement was prepared by CertainTeed and sent to
Conglas in California, where it was executed. No product was
0
Even though the complaint does not mention the 1991 Supply
Agreement, we find it to be relevant as a "prior negotiation" to
the 1992 Supply Agreement, which had renewed the 1991 Supply
Agreement.
10
shipped from, through, or to Pennsylvania. Instead, the chopped
strand was manufactured in Texas and shipped directly from
Vetrotex's plant in Texas to Conglas's facility in California.
Vetrotex handled all of the transportation arrangements and paid
the transportation costs. Vetrotex's invoicing for product sold
under the 1992 Supply Agreement was handled by Vetrotex's
California office. Conglas made all payments for goods to
Vetrotex's California office.
The district court found, among other things that the
following facts were not in dispute:
Vetrotex solicited Conglas to obtain the
1991-92 contract by telephone and by personal
visits to Conglas headquarters in California.
The parties engaged in telephone
communication prior to entering into the
1991-92 contract. Conglas signed the
disputed contract in California and sent it
to Vetrotex in Pennsylvania. Conglas made
all payments for goods to Vetrotex
CertainTeed's California office. Under the
disputed contract, Vetrotex did not deliver
any goods to Conglas in Pennsylvania.
(Memorandum and Order entered October 20, 1994 at 4).
Understandably, Vetrotex agreed at oral argument that none of
these findings of fact are clearly erroneous. See North Penn Gas
v. Corning Natural Gas, 897 F.2d 687, 688 (3d Cir. 1990) ("A
determination of minimum contacts is based upon findings of fact.
As such, the district court's factual findings will not be
disturbed unless clearly erroneous."). The district court also
found that Vetrotex "has not shown solicitation, advertisement,
or delivery by Conglas in Pennsylvania since 1989." Id. at 3.
11
The only contacts that Conglas had with Pennsylvania
consisted of some telephone calls and letters written to Vetrotex
in Pennsylvania. However, this Court has recognized that
"informational communications in furtherance of [a contract
between a resident and a nonresident] does not establish the
purposeful activity necessary for a valid assertion of personal
jurisdiction over [the nonresident defendant]." Sunbelt Corp. v.
Noble, Denton & Assoc., Inc., 5 F.3d 28, 32 (3d Cir. 1993)
(citing Stuart v. Spademann, 772 F.2d 1185, 1193 (5th Cir. 1985)
(stating that "an exchange of communications between a resident
and a nonresident in developing a contract is insufficient of
itself to be characterized as purposeful activity invoking the
benefits and protection of the forum state's laws")).
Thus, in the present case, Conglas was merely a
"passive buyer" of Vetrotex's product.0 We hold that the
undisputed circumstances attending Conglas's 1991 and 1992 Supply
Agreements with Vetrotex do not support the conclusion that
Conglas "purposefully availed" itself of the privilege of doing
business in Pennsylvania for purposes of the district court's
0
The Eighth Circuit has recognized that "reaching out" is
particularly difficult to find where the nonresident defendant is
a buyer, rather than a seller, of the resident plaintiff's
products. See Bell Paper Box, Inc. v. Trans Western Polymers,
Inc., 53 F.3d 920, 922 (8th Cir. 1995). This distinction is even
more telling when the defendant is a "passive" buyer, i.e. one
which has been solicited as a customer of the plaintiff. See
Stewart, A New Litany of Personal Jurisdiction, 60 U. Colo. L.
Rev. 5, 45-46 (1989). The First Circuit, for instance, requires
a showing that the defendant's forum-related activities in
contract cases were "instrumental in the formation of the
contract." United Elec. Workers v. 163 Pleasant St. Corp., 960
F.2d 1080, 1089 (1st Cir. 1992).
12
exercise of personal jurisdiction over Conglas. See Sunbelt
Corp., 5 F.3d at 32 (holding that a Pennsylvania corporation's
contract with a Texas corporation and post-contract telephone and
facsimile communications with the same were insufficient to show
"purposeful availment" of the privilege of doing business in
Texas, for purposes of the Texas long-arm statute, the latter of
which is co-extensive with the reach of the federal
constitution).0
The instant case is distinguishable from other cases
where jurisdiction over a nonresident defendant has been premised
largely on the defendant's contract with a resident of the forum
state. For instance, this is not a case where the defendant
solicited the contract or initiated the business relationship
leading up to the contract. Compare Mellon Bank (East) PSFS,
Nat'l Ass'n v. Farino, 960 F.2d 1217 (3d Cir. 1992). Nor is this
a case where the defendant sent any payments to the plaintiff in
the forum state, compare North Penn Gas v. Corning Natural Gas,
897 F.2d 687, 690-91 (3d Cir. 1990), or where the defendant
engaged in extensive post-sale contacts with the plaintiff in the
forum state. Compare Mesalic v. Fiberfloat Corp., 897 F.2d 696,
700 (3d Cir. 1990) (after selling a boat to New Jersey buyer,
0
Vetrotex also argues that the fact that the invoices as distinct
from the general Supply Agreements, provided as a term and
condition, that they (the invoices) were to be governed by and
should be construed in accordance with Pennsylvania law, is
relevant to personal jurisdiction over this case. We disagree.
The choice of law provisions pertain only to the individual sales
contracts for each shipment of fiber glass chopped strand, and we
do not find them relevant to our jurisdictional analysis of the
underlying Supply Agreements.
13
defendant sent written correspondence to the buyer's New Jersey
residence, delivered the boat to New Jersey, and attempted to
repair the boat in New Jersey).
B.
Vetrotex argues that the relationship that existed
between Conglas and CertainTeed in the 1980s are also relevant as
"prior negotiations" or "course of dealing" with respect to the
1992 Supply Contract under Burger King. Burger King's reference
to "prior negotiations," "future consequences," "terms of the
contract," and "course of dealing," however, clearly contemplates
dealings between the parties in regard to the disputed contract,
not dealings unrelated to the cause of action. In Burger King,
the Court found specific jurisdiction over a Michigan franchisee,
Rudzewicz, in the franchisor Burger King's home state, Florida,
where "Rudzewicz deliberately reached out beyond Michigan and
negotiated with a Florida corporation," id. at 479-80, to enter
into a "carefully structured 20-year relationship that envisioned
continuing and wide-reaching contacts." Id. at 480.
In the present case, the negotiations that occurred
between Vetrotex and CertainTeed in the 1980s are unrelated to
the 1992 Supply Contract and are not relevant to specific
jurisdiction.0 See International Shoe, 326 U.S. at 319 (the
cause of action must "arise[] out of" or "relate[] to" the
defendant's contacts with the forum); Helicopteros, 466 U.S. at
414 n.8; Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472
0
As earlier noted in text, Vetrotex has argued this appeal only
on the issue of specific, and not general, jurisdiction.
14
(1985); C.L. Grimes v. Vitalink Communications Corp., 17 F.3d
1553, 1559 (3d Cir.), cert. denied, 115 S. Ct. 480 (1994); Dollar
Sav. Bank v. First Sec. Bank of Utah, N.A., 746 F.2d 208, 211 (3d
Cir. 1984).
Vetrotex would characterize the "thirteen-month hiatus"
in the parties' dealings from 1989 to 1991 as a mere interruption
in an ongoing course of dealing. The district court did not
agree, nor do we. The relationship between the parties in which
CertainTeed supplied Conglas with fiber glass chopped strands was
terminated by CertainTeed's letter of May 19, 1989, which urged
Conglas to look elsewhere for suppliers. The 1991 Supply
Agreement (renewed by the 1992 Supply Agreement at issue here)
began a new relationship between the parties, separate and apart
from the prior relationship. There is no evidence in the record
that the parties understood the 1991 and 1992 Supply Contracts to
be merely a continuation of the relationship that the parties had
in the 1980s.0
Conglas has not "purposefully availed itself" of the
privilege of doing business in Pennsylvania for purposes of
establishing the "minimum contacts" required for specific
jurisdiction. Nor has Vetrotex established "minimum contacts" on
any other grounds between Conglas and Pennsylvania for purposes
0
Thus, we find Associated Business Telephone Systems Corp. v.
Greater Capital Corp., 861 F.2d 793, 797 (3d Cir. 1988), to be
distinguishable. In that case, we held that a district court in
New Jersey had specific jurisdiction over a California
corporation that had entered into a contract with a New Jersey
corporation. However, the contract there provided for a ten-year
life and created continuing obligations between the two
companies.
15
of specific jurisdiction.0 Accordingly, we hold that the
assertion of jurisdiction over Conglas would violate the
fundamental dictates of due process.
IV.
We will affirm the district court's dismissal of
Vetrotex's complaint for lack of personal jurisdiction.
0
Because we have concluded that Vetrotex has not made the
threshold showing of sufficient minimum contacts with
Pennsylvania to warrant the exercise of personal jurisdiction
over Conglas, we need not address the secondary issue of whether
exercising jurisdiction would comport with fair play and
substantial justice. See Bell Paper Box, Inc. v. Trans Western
Polymers, Inc., 53 F.3d 920, 921 (8th Cir. 1995) ("Due process
requires both minimum contacts with the forum state and accord
with the notions of 'fair play and substantial justice.'")
(emphasis added) (quoting Burger King Corp. v. Rudzewicz, 471
U.S. 462, 474 (1985)).
16
Vetrotex CertainTeed Corporation v. Consolidated
Fiber Glass Products Company
No. 94-2058
_________________________________________________
ROTH, Circuit Judge, Dissenting:
As I read the Supreme Court's decision in Burger King
Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985), a court determining
whether specific personal jurisdiction lies must consider prior
business dealings between the parties. The majority opinion in
this case, however, plays down the importance of a long business
relationship established between Conglas and CertainTeed/Vetrotex
during the 1980s. The majority focuses only on the final 1992
Supply Contract, see Majority Op. at ___ (slip op. at 14),
despite the fact that the 1992 contract grew out of and was
founded upon a thirteen-year-old working relationship.
I believe that the majority's narrow focus on the 1992
contract misinterprets the Supreme Court's rule in Burger King by
refusing to consider the entire "course of dealings" between the
relevant parties. The negotiations and dealings during the 1980s
are, in my opinion, both relevant and related to the present
cause of action. Because I would find that Conglas purposefully
availed itself of the privilege of conducting business within
Pennsylvania by virtue of its longstanding business relationship
with Vetrotex, I write in dissent.
I.
17
In its discussion of the facts, the majority opinion
emphasizes the 1991 and 1992 Supply Contracts and minimizes a
significant course of dealings that occurred between the parties
during the 1980s. These dealings affected the negotiation of the
1992 Supply Agreement and should not have been dismissed by the
court as irrelevant. The omitted facts demonstrate that Conglas
initiated and pursued a contractual relationship with CertainTeed
at its Pennsylvania office and made sufficient voluntary contacts
with Pennsylvania such that it should have "reasonably
anticipate[d] being haled into court there." World-Wide
Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980).
On April 30, 1980, Conglas sent CertainTeed a new
product announcement for Conmat-90, a fiber glass roofing mat,
expressly soliciting orders for the new product. In July 1981,
Conglas representative Tom Pessel followed up on Conglas's April
1980 solicitation letter by visiting CertainTeed's Blue Bell,
Pennsylvania office to discuss CertainTeed's requirements for
fiber glass mat and Conglas's ability to satisfy those
requirements. Following additional correspondence between
Conglas and CertainTeed's Pennsylvania offices, CertainTeed
placed an order for Conglas mats in November 1981.
In early 1982, Conglas and CertainTeed negotiated a
formal agreement pursuant to which Conglas agreed to sell fiber
glass mat to CertainTeed for the twelve-month period from
February 1, 1982 through January 31, 1983. After the execution
of the 1982 agreement, Conglas and CertainTeed began a
collaborative effort to resolve quality control issues raised by
18
CertainTeed's testing of Conglas's fiber glass mats. This
process resulted in regular communication between Conglas and
CertainTeed personnel located in Pennsylvania, as well as a
number of visits by Conglas representatives to the CertainTeed
facility located in Blue Bell, Pennsylvania.
Conglas and CertainTeed entered into sales agreements
similar to the 1982 agreement in February 1983 and May 1984.
Despite these successive agreements, the Conglas mats failed to
qualify for use in CertainTeed's roofing shingles. For this
reason, CertainTeed terminated the 1984 agreement. Conglas later
contacted CertainTeed in 1986 and 1989 regarding the sale to
CertainTeed of fiber glass mats, but no further agreements were
reached.
In addition to this business relationship involving the
sale of Conglas fiber glass mats to CertainTeed, the parties also
entered into a business relationship in which CertainTeed sold
chopped fiber glass strands to Conglas. Although the record is
devoid of any written agreements documenting sales of chopped
strands to Conglas during the 1980s, CertainTeed did produce
correspondence between the parties pertaining to such activities.
Correspondence in the record indicates that in 1987 and 1988
CertainTeed provided Conglas with a certain volume of chopped
strands each month. On December 8, 1987, representatives of
Conglas visited CertainTeed in Valley Forge, Pennsylvania. Among
the topics discussed was CertainTeed's supply to Conglas of
chopped strands.
19
CertainTeed's sale of chopped strands to Conglas was
interrupted, apparently at the end of 1989, when CertainTeed was
unable to meet Conglas's needs due to supply shortages. In
February 1991, however, CertainTeed again found itself with
chopped strands to sell. CertainTeed and Conglas entered into
negotiations regarding the terms of a sales agreement. David
Sharpe, a Vice President at CertainTeed, participated in these
negotiations from his office in Valley Forge, Pennsylvania, and
he forwarded a letter agreement (the "1991 Supply Contract") to
Conglas in California from Pennsylvania. The 1991 Supply
Contract is on CertainTeed letterhead with its Pennsylvania
headquarters address prominently displayed. Upon receiving the
1991 Supply Contract, a Conglas representative executed the
agreement and returned it to CertainTeed's Pennsylvania
headquarters.
On March 13, 1992, in anticipation of the expiration of
the 1991 Supply Contract, the parties entered into another
agreement (the "1992 Supply Contract"). By this time
CertainTeed's subsidiary, Vetrotex, had been incorporated.
Pursuant to the 1992 Supply Contract, Vetrotex agreed to continue
selling chopped fiber glass strands to Conglas. As noted in the
majority opinion, Dick Sharpe received several telephone calls
from Conglas at his Valley Forge, Pennsylvania, office in
negotiating the terms of the 1992 Supply Contract. Like the 1991
Supply Contract, the 1992 Supply Contract is printed on
Vetrotex/CertainTeed letterhead, displaying the company's
Pennsylvania address.
20
II.
A.
Because this case involves a contract between
interstate parties, the Supreme Court's opinion in Burger King is
the analytical keystone. See Mellon Bank (East) PSFS, N.A. v.
Farino, 960 F.2d 1217, 1222 (3d Cir. 1992). In upholding the
district court's exercise of specific personal jurisdiction in
Burger King, the Supreme Court noted that the minimum contacts
inquiry is a "fair warning" requirement of due process, which is
satisfied "if the defendant has 'purposefully directed' his
activities at residents of the forum, and litigation results from
alleged injuries that 'arise out of or relate to' those
activities." Burger King, 471 U.S. at 472 (citations omitted).
The Court explained:
[W]ith respect to interstate contractual obligations,
we have emphasized that parties who "reach out beyond
one state and create continuing obligations with
citizens of another state" are subject to regulation
and sanctions in the other State for the consequences
of their activities. . .. [W]here individuals
"purposely derive benefit" from their interstate
activities, it may well be unfair to allow them to
escape having to account in other States for
consequences that arise proximately from such
activities . . ..
Id. at 473-74 (citations omitted). Thus, under Burger King,
parties taking the affirmative step of negotiating and entering
into interstate contractual obligations will likely subject
themselves to specific personal jurisdiction in the other state.
The Court warned, however, that "an individual's contract with an
out-of-state party alone [cannot] automatically establish
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sufficient minimum contacts in the other party's home forum." Id.
at 478 (emphasis in original). Such a mechanical test has been
explicitly rejected.
Instead, when deciding the question of specific
personal jurisdiction, the Supreme Court favors a "highly
realistic" approach that takes into account factors such as
"prior negotiations and contemplated future consequences," and
"the terms of the contract and the parties' actual course of
dealing." Id. at 479. The reality of the situation in this case
is that CertainTeed/Vetrotex and Conglas were involved in a
business relationship spanning more than ten years. Over those
years, Conglas affirmatively solicited business with CertainTeed,
repeatedly made phone calls to Pennsylvania, sent employees to
visit CertainTeed's facilities in Pennsylvania, and mailed
contracts to Pennsylvania to be signed. Additionally, Conglas
deliberately involved itself in several contractual obligations
with CertainTeed/Vetrotex, fully aware that these corporations
were headquartered in Pennsylvania. Thus, the facts in the
instant case reveal that Conglas is not being brought into
Pennsylvania solely as a result of "random," "fortuitous," or
"attenuated" contacts, nor as a result of the "unilateral
activity of another party or third person." Id. at 475
(citations omitted). Rather, Conglas has knowingly and
deliberately engaged in a pattern of contacts with Pennsylvania
such that Conglas should have expected that it could be subject
to litigation there.
III.
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Until now, the question whether two parties' prior
business relationships should be taken into account in
determining the existence of specific personal jurisdiction has
not been addressed by this court. As in all issues of personal
jurisdiction, however, this question cannot be answered
mechanically. Instead, each case must be individually evaluated
in full to determine whether the parties' "actual course of
dealing" is such that the nonresident party was effectively on
notice that it might be haled into court in the other party's
home forum. In the instant case, it is clear that Conglas,
through its long history of dealing with CertainTeed and its
subsidiary Vetrotex, engaged in repeated contacts with
representatives and facilities located in Pennsylvania. By
virtue of these extensive contacts, Conglas was on notice that it
could be subject to litigation in Pennsylvania. Thus, the
longstanding relationship between these parties is relevant and
should have been taken into account in determining whether
Conglas established sufficient minimum contacts in Pennsylvania.
See, e.g., Reynolds Metals Co. v. FMALI, Inc., 862 F. Supp. 1496,
1498-99 (E.D. Va. 1994) (taking parties' continuing relationship
into consideration in finding that specific personal jurisdiction
was proper).
Accordingly, I dissent. I believe that, based on the
entire course of dealings between the parties, Conglas had
minimum contacts in Pennsylvania sufficient to allow the district
court to exercise personal jurisdiction over Conglas. I would
therefore reverse the district court's order dismissing
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Vetrotex's complaint and remand this case to the district court
for further proceedings.
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