Delta Health v. Companions and Homemakers

2019 Pa. Super. 266, 218 A.3d 432

• Court: Superior Court of Pennsylvania
• Decided: August 30, 2019
• Docket: 1495 WDA 2018
• Status: Published

Opinion

J-A08043-19

2019 PA Super 266

DELTA 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. J-A08043-19

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. ____________________________________________

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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