Vetrotex Certainteed Corporation v. Consolidated Fiber Glass Products Company

75 F.3d 147, 1996 U.S. App. LEXIS 1051, 1996 WL 29314

• Court: Court of Appeals for the Third Circuit
• Decided: January 26, 1996
• Docket: 94-2058
• Status: Published

Opinions

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.

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 Certain-Teed.²

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 new agreement were negotiated between Conglas and Certain-Teed/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 18, 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 Agree-, ment 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 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, 1994 WL 583184, 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. 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, 24 L.Ed. 565 (1877).

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, 105 S.Ct. 2174, 2183, 85 L.Ed.2d 528 (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, 97 S.Ct. 2569, 2580, 53 L.Ed.2d 683 (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, 105 S.Ct. at 2182 (quoting Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 774, 104 S.Ct. 1473, 1478, 79 L.Ed.2d 790 (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, 78 S.Ct. 1228, 1240, 2 L.Ed.2d 1283 (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, 66 S.Ct. 154, 90 L.Ed. 95 (1945); Farino, 960 F.2d at 1222.

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, 111 S.Ct. 133, 112 L.Ed.2d 101 (1990); see Helicopteros Nacionales de Colombia v. Hall, 466 U.S. 408, 414 n. 8, 104 S.Ct. 1868, 1872 n. 8, 80 L.Ed.2d 404 (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, 100 S.Ct. 559, 567, 62 L.Ed.2d 490 (1980). Vetrotex does not allege general jurisdiction.³

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, 105 S.Ct. at 2185); Mellon Bank (East) v. DiVeronica Bros., 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 479,105 S.Ct. at 2185.

III.

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.⁴ 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 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.

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. Spademan, 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.⁵ 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 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).⁶

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, 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).

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, 105 S.Ct. at 2186, to enter into a “carefully structured 20-year relationship that envisioned continuing and wide-reaching contacts.” Id. at 480, 105 S.Ct. at 2186.

In the present ease, the negotiations that occurred between Conglas and Vetrotex in the 1980s are unrelated to the 1992 Supply Contract and are not relevant to specific jurisdiction.⁷ See International Shoe, 326 U.S. at 319, 66 S.Ct. at 159-60 (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, 104 S.Ct. at 1872 n. 8; Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472, 105 S.Ct. 2174, 2181, 85 L.Ed.2d 528 (1985); C.L. Grimes v. Vitalink Communications Corp., 17 F.3d 1553, 1559 (3d Cir.), cert. denied, — U.S. -, 115 S.Ct. 480, 130 L.Ed.2d 393 (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.⁸

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 of specific jurisdiction.⁹ 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.

2 . Between May of 1989'and Februaiy 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 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 mátters 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.

3 . "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, 104 S.Ct. 1868, 1872 n. 9 & 1873, 80 L.Ed.2d 404 (1984); Burger King Corp. v. Rudzewicz, 471 U.S. 462, 473 n. 15, 105 S.Ct. 2174, 2182 n. 15, 85 L.Ed.2d 528 (1985).

4 . 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.

5 . 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).

6 . 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.

7 . As earlier noted in text, Vetrotex has argued this appeal only on the issue of specific, and not general, jurisdiction.

8 . 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 con1 tract there provided for a ten-year life and created continuing obligations between the two companies.

9 .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, 476, 105 S.Ct. 2174, 2184, 85 L.Ed.2d 528 (1985)).