Delta Health v. Companions and Homemakers ( 2019 )

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2019 PA Super 266DELTA HEALTH TECHNOLOGIES, LLC : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
:
v. :
:
:
COMPANIONS AND HOMEMAKERS, :
INC. :
: No. 1495 WDA 2018
Appellant :
Appeal from the Order Entered September 17, 2018
In the Court of Common Pleas of Blair County Civil Division at No(s):
2016 GN 2734
BEFORE: PANELLA, P.J., STABILE, J., and McLAUGHLIN, J.
OPINION BY McLAUGHLIN, J.: FILED AUGUST 30, 2019
Appellant Companions and Homemakers, Inc. (“Companions”) appeals
from the order overruling Companions’ Preliminary Objections to Appellee
Delta Health Technologies, LLC’s (“Delta”) Complaint, seeking dismissal for
lack of personal jurisdiction. We affirm.
The facts alleged in the pleadings are as follows. Delta is a Pennsylvania
limited liability company with a place of business located in Altoona,
Pennsylvania. Complaint, at ¶ 1. Delta is engaged in the business of
developing, licensing, and servicing software for the home health, hospice,
and private duty agencies in the United States and Canada. Id. at ¶ 3.
Companions is a Connecticut corporation with a place of business in
Farmington, Connecticut. Id. at ¶ 2. Companions provides home care services
and care management services to members of the public. Id. at ¶ 8.
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Among Delta’s products and services is “AppointMate,” which is
scheduling, billing, and payroll software for private agencies that provide in-
home services for their clients. Id. at ¶¶ 4-5. AppointMate is provided to
Delta’s customers on a “software-as-a-service” basis, whereby the software is
owned and operated by Delta and Delta’s customers can access AppointMate
from remote locations via the Internet on a subscription basis. Id. at ¶ 6.
There is no software licensed or delivered to Delta’s customers. Id. In
addition, the AppointMate software cannot be modified by customers. Id.
The parties’ relationship began in 2011 when Delta and Companions
began discussions about Companions’ search for a new computerized
scheduling system. Id. at ¶ 12. Negotiations between the parties continued
until October 2013, and included Delta providing Companions with a “test
account” to access AppointMate and demonstrating AppointMate to
Companions. Id. at ¶¶ 15, 17, 20. Companions’ access to the test account
continued uninterrupted from July 2011 until mid-2012, during which time
Companions loaded its own data into the test account, which was maintained
in Pennsylvania by Delta, for purposes of testing the features and functions of
AppointMate. Id. at ¶ 18. In October 2013, Companions informed Delta that
it was terminating their negotiations. Id. at ¶ 21. However, in October 2014,
Companions contacted Delta to re-start negotiations about becoming an
AppointMate customer. Id. at ¶ 22.
On April 10, 2015, the parties executed a written agreement (the
“Agreement”), whereby Delta provided Companions with a subscription to
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AppointMate. Id. at ¶¶ 24-25. The Agreement also provided that Delta would
create certain programming changes (the “Enhancements”) to modify
AppointMate to meet Companions’ requirements. Id. at ¶ 25. The Agreement
stated that the parties would work together after the execution of the
Agreement to finalize the specifications for the Enhancements and that
Companions would pay for the Enhancements on a time and materials basis.
Id. The contract provided for a duration of three and a half years but
Companions was free to terminate the agreement without cause within the
initial six-month period. Id.; Agreement, at ¶ 2. The Agreement also stated
that the laws of the state of Connecticut would govern the terms of the
contract. Agreement, at ¶ 16.5.
After the Agreement was made, between April 10, 2015 and July 21,
2015, both parties dedicated considerable resources, time, and effort via
telephone, email, and several in-person meetings to define Companions’
specific requirements for the Enhancements. Complaint, at ¶ 27. Delta then
performed professional services to develop the Enhancements for Companions
at its place of business in Altoona, Pennsylvania. Id. at ¶ 30. According to the
Complaint, Delta did almost all of the work it performed on the Enhancements
in Altoona, Pennsylvania. Id. at ¶ 44. Further, the Enhancements were loaded
onto computer servers at data centers in Pittsburgh, Pennsylvania and
Columbus, Ohio, and Delta operated them from its headquarters in Blair
County, Pennsylvania. Id.
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Delta sent invoices to Companions on September 9 and December 7,
2015 for the work it had done to develop the Enhancements. Id. at ¶¶ 31, 39.
Companions notified Delta on November 30, 2015, that it was exercising its
option to early termination of the Agreement. Id. at ¶ 37. Delta alleges that
Companions failed to pay the invoices of September 9 and December 7, 2015,
in the total amount of $47,536.33. Id. at ¶¶ 35, 43, 46.
Delta brought the instant breach of contract action against Companions
on September 6, 2016 for failure to pay for work that it performed before the
Agreement’s termination. Companions filed Preliminary Objections seeking
dismissal for lack personal jurisdiction.1 At oral argument on the Preliminary
Objections, the trial court asked counsel if they wanted to take discovery on
the issue of personal jurisdiction. Counsel for Companions responded by
saying that he believed that the court could make a decision on the Preliminary
Objections without the taking of evidence, and could do so based solely on the
face of the pleadings and the fact that Companions is located in Connecticut.
N.T., 5/23/17, at 3-4. The trial court also inquired whether representatives
from Companions came to Pennsylvania. Counsel for Companions conceded
that Delta’s Complaint averred that Companions’ representatives came to
Pennsylvania, and agreed that the court must accept that fact as true, if it
ruled based on the pleadings. Id. at 13-14.
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1 Companions’ Preliminary Objections also argued that the Agreement was
subject to an alternative dispute resolution clause. By order dated September
17, 2018, the trial court deemed this issue moot after the parties underwent
an unsuccessful court-ordered mediation.
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On August 18, 2017, the court overruled the Preliminary Objections and
issued an opinion. Companions then filed a Motion for Reconsideration or in
the alternative, Motion to Certify for Immediate Appeal. The court denied the
Motion for Reconsideration but allowed Companions to take an appeal as of
right pursuant to Pennsylvania Rule of Appellate Procedure 311(b)(2), stating
in its order that the Preliminary Objections raised a substantial issue of
jurisdiction.2 Companions then filed the instant appeal, raising the following
issue:
Whether the trial court erred by overruling Defendant
Companions and Homemakers, Inc.’s Preliminary
Objections and finding that sufficient contacts existed for
the trial court to exercise jurisdiction over Companions and
Homemakers, Inc., a Connecticut corporation which
provides homecare services solely to Connecticut residents
in the state of Connecticut.
Companions’ Br. at 2.
Companions argues that the trial court erred in finding that it had
personal jurisdiction over it. Companions contends that it is a Connecticut
corporation that provides in-home care to Connecticut residents in the state
of Connecticut. It argues that it owns no property in Pennsylvania, has no
offices or employees in Pennsylvania, does not pay taxes in Pennsylvania, and
____________________________________________
2 Pennsylvania Rule of Appellate Procedure 311(b)(2) states: “An appeal may
be taken as of right from an order in a civil action or proceeding sustaining
the venue of the matter or jurisdiction over the person or over real or personal
property if…the court states in the order that a substantial issue of venue or
jurisdiction is presented.”
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has no customers in Pennsylvania. Companions further asserts that it is
registered to do business in Connecticut only and the Agreement between the
parties related solely to the software program that was to be used entirely
within the state of Connecticut to serve the needs of Connecticut residents.
Companions additionally contends that at no time did it purposefully avail itself
to the privileges of conducting business within the state of Pennsylvania.
Further, Companions asserts that the Agreement’s choice of law clause – that
the Agreement was to be construed under the laws of the state of Connecticut
– clearly was indicative of where the substance of the Agreement was to occur.
Delta responds that the software accessed by Companions is located in
Pennsylvania and stored and operated on computers in Pennsylvania. It
contends that access to that software could only be obtained by buying a
subscription from Delta and that only those businesses that had a subscription
with Delta could access their own data. Delta further argues that Companions
loaded its own data into its test account where it was processed in
Pennsylvania, and the results were stored in Pennsylvania. Delta asserts that
the contract’s billable professional services were performed by Delta in
Pennsylvania. In addition, Delta argues there were extensive contacts and
negotiations leading up to the execution of the Agreement, including by
telephone, email, and in-person meetings in Pennsylvania. Delta maintains
that it and Companions were two sophisticated businesses going through a
very detailed contract. Delta asserts that based on all of the significant
contacts between Companions and Pennsylvania between 2011 until 2015,
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Companions could have reasonably anticipated being called into Pennsylvania
to defend against harms it may have caused to Delta. Moreover, Delta
contends the Agreement contemplated that Delta would provide software and
services to Companions in Pennsylvania for a term of months and possibly
years, so this was a relationship intended to be ongoing in the future and not
a one-shot deal.
Our standard of review in an appeal from an order overruling preliminary
objections based on personal jurisdiction is as follows:
When preliminary objections, if sustained, would result in
the dismissal of an action, such objections should be
sustained only in cases which are clear and free from
doubt.... Moreover, when deciding a motion to dismiss for
lack of personal jurisdiction the court must consider the
evidence in the light most favorable to the non-moving
party.
N.T. ex rel. K.R.T. v. F.F., 118 A.3d 1130, 1134 (Pa.Super. 2015) (quoting
Gaboury v. Gaboury, 988 A.2d 672, 675 (Pa.Super. 2009)). In order to
evaluate the sufficiency of the facts averred, the appellate court must examine
the averments in the complaint, together with the documents and exhibits
attached thereto. Haas v. Four Seasons Campground, Inc., 952 A.2d 688,
691 (Pa.Super. 2008). “Generally, when considering preliminary objections, a
trial court is required to admit as true all material facts set forth in the
pleadings as well as all inferences reasonably deducible therefrom.” Calabro
v. Socolofsky, 206 A.3d 501, 507 (Pa.Super. 2019). Further, this Court will
only reverse the trial court’s decision regarding preliminary objections “where
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there has been an error of law or an abuse of discretion.” Gaboury, 988 A.2d
at 675. Additionally, “the burden of proof initially rests upon the party
contesting jurisdiction; once that party has provided proof, the burden then
shifts to the non-moving party to adduce evidence demonstrating there is a
basis for asserting jurisdiction over the moving party.” Haas, 952 A.2d at 691.
Moreover, “[c]ourts must resolve the question of personal jurisdiction based
on the circumstances of each particular case.” Gaboury, 988 A.2d at 675
(citing Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985)).
There are two types of personal jurisdiction: general and specific. Mar-
Eco, Inc. v. T & R & Sons Towing & Recovery, Inc., 837 A.2d 512, 515
(Pa.Super. 2003). General jurisdiction “is founded upon a defendant’s general
activities within the forum as evidenced by continuous and systematic contacts
with the state.” Id. (quoting Taylor v. Fedra Int’l, Ltd., 828 A.2d 378, 381
(Pa.Super. 2003)). Specific jurisdiction, which is at issue here, “has a more
defined scope and is focused upon the particular acts of the defendant that
gave rise to the underlying cause of action.” Id. (quoting Taylor, 828 A.2d at
381).
Whether a state may exercise personal jurisdiction over a non-resident
defendant is tested against both the state’s long-arm statute and the
Fourteenth Amendment’s Due Process Clause. Kubik v. Letteri, 614 A.2d
1110, 1112 (Pa. 1992). Under Pennsylvania’s long-arm statute, courts are
permitted to exercise personal jurisdiction over a nonresident defendant “to
the fullest extent allowed under the Constitution of the United States and may
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be based on the most minimum contact with this Commonwealth allowed
under the Constitution of the United States.” 42 Pa.C.S.A. § 5322(b). Due
process “is satisfied when the defendant has (1) purposefully established
minimum contacts with the forum state, (2) such that the maintenance of the
suit does not offend traditional notions of fair play and substantial justice.”
Schiavone v. Aveta, 41 A.3d 861, 869 (Pa.Super. 2012). A defendant
purposefully establishes minimum contacts where its
contacts with the forum state [are] such that the defendant
could reasonably anticipate being called to defend itself in
the forum. . .Random, fortuitous, and attenuated contacts
cannot reasonably notify a party that it may be called to
defend itself in a foreign forum and, thus, cannot support
the exercise of personal jurisdiction. That is, the defendant
must have purposefully directed its activities to the forum
and conducted itself in a manner indicating that it has
availed itself of the forum’s privileges and benefits such that
it should be subjected to the forum state’s laws and
regulations.
Id. (citing Aventis Pasteur, Inc. v. Alden Surgical Co., Inc., 848 A.2d
996, 1000 (Pa.Super. 2004)).
In the instant case, Companions knowingly entered into a contract with
Delta, a Pennsylvania company. This alone does not establish personal
jurisdiction over Companions in Pennsylvania. “It is well settled that an
individual’s contract with an out-of-state party alone cannot automatically
establish sufficient minimum contacts in the other party’s home forum.” Hall-
Woolford Tank Co., Inc. v. R.F. Kilns, Inc., 698 A.2d 80, 83 (Pa.Super.
1997) (emphasis in original; citations omitted). “Rather, the totality of the
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parties’ dealings, including the contract negotiations, contemplated future
consequences of the contract, and actual course of dealing must be evaluated
in order to determine whether the foreign defendant is subject to suit in the
plaintiff's chosen forum.” Id.However, the Complaint here includes significant, additional allegations
of Companions’ activities in Pennsylvania. Since Companions contends that
the issue of personal jurisdiction may be determined solely based on the face
of the pleadings, we treat all of the factual averments of the Complaint as
true. The Complaint details extensive negotiations between the parties
extending from 2011 to 2015, including numerous phone calls, emails, and
in-person meetings, some of which occurred in Pennsylvania. Importantly,
Companions concedes that representatives from Companions came to
Pennsylvania during the ongoing negotiations between the parties. Further,
after negotiations ceased in 2013, it was Companions who contacted Delta in
Pennsylvania to re-start discussions in October 2014 about becoming an
AppointMate customer. There were multiple contacts between Delta and
Companions in Pennsylvania and the entire point of the subscription service
was Companions’ repeated access to software residing on computers in
Pennsylvania. During the test account period, Companions had uninterrupted
access to AppointMate and repeatedly loaded its own data into the test
account, which was maintained in Pennsylvania.
Essentially, Companions purposefully availed itself of Delta’s services
and computers in Pennsylvania so that it could benefit by better scheduling
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appointments with its clients. Although it was undisputed that the contract
was rightfully terminated within the initial six-month period, the contract
contemplated “future consequences” in Pennsylvania, in that it included a
possible three additional years of information being sent into Pennsylvania to
be processed. None of these contacts were random, fortuitous, or attenuated.
Thus, these series of contacts meant that Companions purposefully availed
itself of the benefits of Pennsylvania such that personal jurisdiction is proper.
Further, it is well-established that “an Internet presence alone is
insufficient to establish either general or specific personal jurisdiction.” Moyer
v. Teledyne Cont’l Motors, Inc., 979 A.2d 336, 349 (Pa.Super. 2009) (en
banc). However, in Efford v. Jockey Club, 796 A.2d 370, 374 (Pa.Super.
2002), we established a “sliding scale” test of jurisdiction based on the degree
and type of interactivity on websites. In adopting this test from the United
States District Court for the Western District of Pennsylvania case of Zippo
Mfg. Co. v. Zippo Dot Com, Inc., 952 F.Supp. 1119, 1124 (W.D.Pa. 1997),
we stated:
[T]he likelihood that personal jurisdiction can be
constitutionally exercised is directly proportionate to the
nature and quality of commercial activity that an entity
conducts over the Internet. This sliding scale is consistent
with well developed personal jurisdiction principles. At one
end of the spectrum are situations where a defendant clearly
does business over the Internet. If the defendant enters into
contracts with residents of a foreign jurisdiction that involve
the knowing and repeated transmission of computer files
over the Internet, personal jurisdiction is proper. At the
opposite end are situations where a defendant has simply
posted information on an Internet Web site which is
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accessible to users in foreign jurisdictions. A passive Web
site that does little more than make information available to
those who are interested in it is not grounds for the exercise
personal jurisdiction. The middle ground is occupied by
interactive Web sites where a user can exchange
information with the host computer. In these cases, the
exercise of jurisdiction is determined by examining the level
of interactivity and commercial nature of the exchange of
information that occurs on the Web site.
Efford, 796 A.2d at 374 (internal citations omitted).
Here, the trial court was correct that the sliding scale test that we
introduced in Efford is not directly applicable to the present case. The sliding
scale test is generally used where a foreign defendant maintains a website
that a domestic plaintiff in Pennsylvania accesses. The trial court recognized
that this case is the inverse of Efford, namely that Delta maintains the
website, not Companions.
Nonetheless, Efford provides guidance. Delta’s business is a
commercial website for businesses and only those businesses that have a
subscription to AppointMate have access to their own data. In other words, it
is a restrictive site that requires a password for its use. Although Companions
was not the party creating the website, this case is akin to situations where a
defendant clearly does business over the Internet and “enters into contracts
with residents of a foreign jurisdiction that involve the knowing and repeated
transmission of computer files over the Internet.” Efford, 796 A.2d at 374.
Thus, we find that personal jurisdiction over Companions in Pennsylvania is
proper.
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Lastly, Companions incorrectly asserts that the Agreement’s choice of
law clause was a clear indication of where the substance of the Agreement
was to occur. It is well-established that “a ‘choice of law’ provision is not
conclusive in deciding the issue of personal jurisdiction in a multi-state
dispute.” Bancorp Group, Inc. v. Pirgos, Inc., 744 A.2d 791, 793
(Pa.Super. 2000). As the United States Supreme Court explained, a choice of
law clause, by itself, does not establish personal jurisdiction in the state whose
law the contract chooses:
[C]hoice of law analysis - which focuses on all elements of
a transaction, and not simply on the defendant’s conduct -
is distinct from minimum contacts jurisdictional analysis -
which focuses at the threshold solely on the defendant’s
purposeful connection to the forum. . . . [S]uch a provision
standing alone would be insufficient to confer jurisdiction.
Id. (citing Burger King, 471 U.S. at 481–82). Accordingly, Companions’
argument is without merit.
Order affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 8/30/2019
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