UNITED STATES OF AMERICA
FAMOUS ARTISTS CORPORATION
HOSPITALITY CORPORATION, INC.,
CIVIL ACTION NO. 95-5240
1996 U.S. Dist. LEXIS 3043
March 14, 1996,
COUNSEL: [*1] For UNITED STATES OF AMERICA, PLAINTIFF: JEANNINE R.
LESPERANCE, [COR LD NTC], U.S. DEPT. OF JUSTICE, CIVIL DIVISION, WASHINGTON, DC.
For FAMOUS ARTISTS CORPORATION, FAMOUS HOSPITALITY, INC., DEFENDANTS: JOHN E. MC
KEEVER, [COR LD NTC], SCHNADER, HARRISON, SEGAL & LEWIS, PHILA, PA. KAREN L.
TOMLINSON, [COR LD NTC], SCHNADER, HARRISON, SEGAL & LEWIS, PHILA, PA. For
COMMUNICORP, INC., DEFENDANT: JOHN E. MC KEEVER, [COR LD NTC], SCHNADER,
HARRISON, SEGAL & LEWIS, PHILA, PA.
JUDGES: JUDGE LOUIS C. BECHTLE
OPINIONBY: LOUIS C. BECHTLE
OPINION: MEMORANDUM AND ORDER
Presently before the court are Defendant Communicorp, Inc.'s Motion to Dismiss for Lack of Personal Jurisdiction or, in the Alternative, to Transfer Venue to the Middle District of Georgia, and Defendants Famous Artists Corporation's and Famous Hospitality Corporation, Inc.'s separate Motions to Transfer Venue to the Middle District of Georgia. Plaintiff United States of America has responded to these motions. For the reasons set forth below, the three motions will be denied.
Between December 9, 1986, and January 29, 1990, Famous Artists was a wholly owned subsidiary of Communicorp. (Compl. P 28, FA Answer P 28 n1 ; Howard Aff. P 3 n2 .) On January 29, 1990, Communicorp sold the vast bulk of Famous Artists' assets to Famous Hospitality through an Asset Purchase Agreement. n3 (Compl. P 29; FA Answer P 29; Howard Aff. P 10; see Communicorp's Mem. Supp. Dismissal or Transfer Ex. 3.) Plaintiff alleges that after Famous Hospitality purchased Famous Artists' assets, the business of Famous Artists continued as a division of Famous Hospitality. n4 [*3] (Compl. P 31.) On May 31, 1993, Famous Hospitality sold some of its Famous Artists division to Barton & Cotton, Inc., a Maryland corporation. (FH Answer P 31.) On July 14, 1995, Famous Artists was dissolved. (Compl. P 32; FA Answer P 32.) Plaintiff seeks relief for postal rate deficiencies by Famous Artists between 1987 and January 29, 1990, and by Famous Hospitality between January 29, 1990, and December 17, 1990. n5 (Compl. PP 76-77.)
From 1987 through 1990, Famous Artists was in the business of helping nonprofit organizations solicit charitable contributions by designing gifts such as greeting cards and return-address labels and mailing them on behalf of the nonprofit group to individuals on a mailing list. (Compl. P 35; FA Answer 35.) The mailings by Famous Artists included these gifts, a personalized appeal letter, and an envelope for returning donations to the nonprofit group. (FA Answer P 35(c), (d).) As part of its relationship with the nonprofit clients, Famous Artists paid the initial design, printing, and mailing costs. (Compl. P 35(e), (f); FA Answer P 35(e), (f).) In exchange for assuming this responsibility, Famous Artists had the right to take all incoming contributions until its costs and profits relating [*5] to the mailing program were paid in full. (Compl. P 35(e), (f); FA Answer P 35(e), (f).) Famous Artists also offered to its nonprofit clients, at a nominal charge, a full processing service that included banking and periodic reporting. (Compl. P 35(g); FA Answer P 35(g).) At the client's option, Famous Artists would establish a bank account in which all contributions would be deposited. (Compl. P 35(g); FA Answer P 35(g).) No withdrawal from the account could be made without the signature of both the nonprofit client and a Famous Artists officer. (Compl. P 35(g); FA Answer P 35(g).) In the event that contributions were insufficient to pay Famous Artists' costs and profits, Famous Artists reserved the right to mail gifts to and solicit donations from persons on the mailing list until Famous Artists' loss was zero. n6 (Compl. P 35(i); FA Answer P 35(i).) Famous Artists had the duty to track incoming contributions and report the results of the mailing program to the nonprofit client. (Compl. P 35(j); FA Answer P 35(j).) Famous Artists mailed its customized greeting cards and return-address labels at the nonprofit postal rate. (Compl. P 36; FA Answer P 36.)
In a nutshell, Plaintiff alleges that Famous Artists' mailings between 1987 and December 19, 1990, did not qualify for the nonprofit rate because its mailings for its nonprofit clients were " cooperative. " (See Compl. PP 38-74.) Under federal regulations, only nonprofit organizations authorized by the United States Postal Service ("USPS") may mail at the nonprofit rate ("Authorized Organizations"). (Compl. P 20; FA Answer P 20; FH Answer P 20.) n7 An Authorized Organization may mail only its own materials at the nonprofit rate and may not delegate or lend the use of its authorization to any other person or organization. (Compl. P 22; FA Answer P 22; FH Answer P 22.) An Authorized Organization, however, may hire a for-profit company to perform the ministerial task of mailing materials belonging to the Authorized Organization, and the materials may be mailed at the nonprofit rate only if the Authorized Organization has a principal-agent relationship with the for-profit mailer. (Compl. P 23; FA Answer P 23; FH Answer P 23.) If, however, an Authorized Organization contracts with an outside service to mail materials, and the relationship is not a principal-agent relationship, the USPS [*7] deems the mailing to be " cooperative, " and the material may not be mailed at the nonprofit rate unless all parties to the arrangement are Authorized Organizations. (Compl. P 24; FA Answer P 24; FH Answer P 24.)
Plaintiff alleges that two clauses in Famous Artists' contracts with its nonprofit clients created a " cooperative" relationship between Famous Artists and its nonprofit clients, which precluded Famous Artists from mailing its fundraising material at nonprofit rates. First, Famous Artists' agreements provide that the nonprofit client would not be financially responsible except to the extent of the money received as a result of the fundraising program (the "no-risk clause"). (See Compl. P 45; FA Answer P 45; FH Answer P 45.) Second, the same contracts provided that donors would forward payments directly to the nonprofit group, but the money was to be deposited daily in a bank account held jointly by Famous Artists and the nonprofit client (the "joint account clause"). n8 (See Compl. P 45; FA Answer P 45; FH Answer P 45.)
In 1988, the USPS audited Famous Artists' relationship with a nonprofit entity called "The Tall Cedars of North America" ("Tall Cedars") and determined that Famous Artists was sending cooperative mailings on behalf of Tall Cedars at a nonprofit rate. n9 (Compl. P 50; FA Answer P 50; FH Answer P 50.) Plaintiff avers that the Tall Cedars audit led to a more comprehensive USPS review of Famous Artists' relationships with all of its nonprofit clients. (Compl. P 51.) After the broader USPS investigation, the agency concluded that Famous Artists' contracts created " cooperative" mailings for many nonprofit clients. (Compl. P 55; FA Answer P 55.) Plaintiff alleges that the USPS found that nearly 31.3 million pieces of mail were improperly mailed at the nonprofit rate, representing a $ 2,814,091.13 deficiency in postage, as compared with the regular bulk third class rate. (Compl. P 66.)
On May 15, 1991, the USPS sent a letter to Famous Artists demanding payment of the deficiency. (Compl. P 68; FA Answer P 68; FH Answer P 68.) On September 20, 1991, Famous Artists and Famous Hospitality filed an appeal, which the USPS denied on August 16, 1994, stating that its denial was the agency's final decision. (Compl. P 70; FA Answer P 70; FH Answer P 70.) On May 2, 1995, the USPS sent to Famous Artists a second demand letter for payment of the deficiency. (Compl. P 71; FA Answer P 71; FH Answer P 71.) On June 30, 1995, Famous Artists and Famous Hospitality asked the USPS to mitigate the revenue deficiency. (Compl. P 72; FA Answer P 72; FH Answer P 72.) The record does not disclose whether USPS responded to this request.
On August 16, 1995, Plaintiffs filed this civil action against Famous Artists, Famous Hospitality, and Communicorp, alleging seven claims that generally fall into three categories. Count One alleges a claim to enforce the USPS assessment of the deficiencies in postage against Famous Artists and Famous Hospitality in the amounts of $ 2,314,000 and $ 500,091.13, respectively. Count Six is Plaintiff's request, as a principal creditor of Famous Artists, for an [*11] accounting of all assets as of July 14, 1995, the date of Famous Artists' dissolution. In Counts Two, Three, Four, Five and Seven, Plaintiff seeks to recover the alleged deficiency against Communicorp under the federal priority statute, 31 U.S.C. @ 3713, the Federal Debt Collection Procedures Act, 28 U.S.C. @ 3001 et seq., and various provisions of Pennsylvania common law.
On October 23, 1995, Communicorp filed a
Motion to Dismiss for Lack of Personal Jurisdiction or, in
the Alternative, to Transfer Venue to the Middle District of
Georgia. On the same day, Famous Artists and Famous
Hospitality filed separate Answers and motions to Transfer
Venue to the Middle District of Georgia. Plaintiffs filed
timely opposition papers. For the reasons set forth below,
the court will deny Defendants' motions.
II. COMMUNICORP'S MOTION TO DISMISS
FOR LACK OF PERSONAL JURISDICTION
A. The Applicable Standard
Before a court can exercise personal jurisdiction over a defendant, there must be a basis for the defendant's amenability to service of summons. Omni Capital Int'l, Ltd. v. Rudolf Wolff & Co., Ltd., 484 U.S. 97, 104, 98 L. Ed. 2d 415, 108 S. Ct. 404 (1987). Unless otherwise provided by federal law, federal courts must follow the methods prescribed by the state [*13] in which the court is located to determine whether a defendant is amenable to service. Id. at 105; Fed. R. Civ. P. 4(e). Thus, a federal district court must look either to a federal statute or to the long-arm statute of the state in which it sits. Omni Capital, 484 U.S. at 105. This rule also applies to service upon corporations. See Fed. R. Civ. P. 4(h).
In this case, Plaintiff has alleged a claim against Communicorp under the FDCPA, which provides for nationwide service of process. This federal statute n10 triggers a special rule that is essential to the court's determination of whether it can constitutionally exercise personal jurisdiction over Communicorp: Where Congress specifically authorizes nationwide service of process, a federal district court's jurisdiction encompasses the boundaries of the United States, and due process requires that a defendant have minimum contacts only with the United States. See Go-Video, Inc. v. Akai Elec. Co., Ltd., 885 F.2d 1406, 1414 (9th Cir. 1989) (stating that federal statutes permitting service of process beyond the boundaries of the forum state broaden the authorized scope of personal jurisdiction and that the question becomes [*14] whether the party has sufficient contacts with the United States, not any particular state); Dent v. Cunningham, 786 F.2d 173, 175 (3d Cir. 1986); Max Daetwyler v. R. Meyer, 762 F.2d 290, 297 (3d Cir.), cert. denied, 474 U.S. 980, 88 L. Ed. 2d 336, 106 S. Ct. 383 (1985) ("In the absence of some provision authorizing nationwide service of process, the district court's power to exercise in personam jurisdiction is limited by Fed. R. Civ. P. 4(e) and by the Pennsylvania long-arm statute, whose incorporation by reference, Rule 4(e) requires."); American Trade Partners, L.P. v. A-1 Int'l Importing Enters., Ltd., 755 F. Supp. 1292, 1302 (E.D. Pa. 1990); Ethanol Partners Accredited v. Wiener, Zuckerbrot, Weiss & Brecher, 617 F. Supp. 300, 307 (E.D. Pa. 1985) (holding that, even though defendants had no significant contacts with the forum state, the court had personal jurisdiction over the defendants "because the action here is brought under a statute which provides for nationwide service of process"); 4 Charles A. Wright & Arthur L. Miller, Federal Practice & Procedure @ 1067.1, at 83-84 (Supp. 1995) ("The Supreme Court never has ruled on the issue of reconciling the minimum contacts doctrine [*15] with nationwide service of process authorized by federal statute, but all of the lower federal courts that have addressed the issue have applied a national contacts standard when process is served under an applicable federal service provision.") (footnote omitted). In nondiversity cases such as this one, n11 the Due Process Clause of the Fifth Amendment governs a district court's exercise of personal jurisdiction.
Having determined that the relevant forum is the United States, and not the Commonwealth of Pennsylvania, the court will proceed with its due process analysis, which involves two steps. Vetrotex CertainTeed Corp. v. Consolidated Fiber Glass Prods. Co., 75 F.3d 147, 150 (3d Cir. 1996); Grand Entertainment Group v. Star Media Sales, 988 F.2d 476, 481 (3d Cir. 1993). First, the court must determine whether the defendant has constitutionally sufficient minimum contacts with the relevant jurisdiction, in this case, the United States. See Vetrotex, 75 F.3d at 150; Grand Entertainment, 988 F.2d at 481. Minimum contacts exist when the defendant has "purposefully directed" its activities towards residents of the forum. Vetrotex, 75 F.3d at 150 (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474, [*17] 85 L. Ed. 2d 528, 105 S. Ct. 2174 (1985)). Second, if the court finds sufficient minimum contacts with the forum, "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.'" Id. at 150-51 (quoting International Shoe Co. v. Washington, 326 U.S. 310, 316, 90 L. Ed. 95, 66 S. Ct. 154 (1945)); Grand Entertainment, 988 F.2d at 481.
The United States Supreme Court and the
United States Court of Appeals for the Third Circuit have
discussed the two methods by which minimum contacts can
arise. "General jurisdiction" is invoked when the
"'plaintiff's cause of action arises from the defendant's
non-forum related activities.'" Vetrotex, 75 F.3d at 151 n.3
(quoting North Penn Gas Co. v. Corning Natural Gas Corp.,
897 F.2d 687, 690 n.2 (3d Cir.), cert. denied, 498 U.S. 847,
112 L. Ed. 2d 101, 111 S. Ct. 133 (1990)). A plaintiff
establishes general jurisdiction if he shows that the
defendant has "maintained 'continuous and systematic'
contacts with the forum." Id. (citing Burger King, 471 U.S.
at 473 n.15; Helicopteros Nacionales de Colom., S.A. v.
Hall, 466 U.S. 408, 414 n.8, 80 L. Ed. 2d 404, 104 S. Ct.
1868 (1984)). "'Specific jurisdiction is invoked when the
cause of [*18] action arises from the defendant's
forum related activities' such that the defendant should
reasonably anticipate being haled into court there." Id.
(internal quotations and citations omitted). Communicorp
alleges that this court lacks both general and specific
jurisdiction over it.
B. Minimum Contacts
C. Fair Play and Substantial
The court believes that the boundaries of the United States, and not the boundaries of Pennsylvania, is the relevant jurisdiction framework for this fairness inquiry. It is beyond dispute that Communicorp [*20] can reasonably be haled into a United States court because Communicorp is incorporated in and transacts business in the United States. Communicorp has not presented compelling reasons for the court to find that defending this action in the United States would be unreasonable. n12 Therefore, this court's exercise of personal jurisdiction over Communicorp as to the FDCPA claims does not offend the right to fair play and substantial justice that is at the heart of the Due Process Clause.
D. Pendent Personal Jurisdiction
Usually, a plaintiff raising separate claims must have personal jurisdiction over the defendant with respect to each claim. Anglo Am. Ins. Group, P.L.C. v. CalFed, Inc., 1996 U.S. Dist. LEXIS 2112, No. 92 CIV. 9137(RLC), 1996 WL 79856 at * 13 n.17 (S.D.N.Y. Feb. 26, 1996). However, the Third Circuit has held that where the defendant is properly before the court pursuant to the extraterritorial service provision of a federal statute, the court may, in its discretion, exercise personal jurisdiction over him in connection with pendent state claims. Robinson v. Penn Cent. Co., 484 F.2d 553 (3d Cir. 1973); Bowers v. NETI Technologies, Inc., 690 F. Supp. 349, 357 (E.D. Pa. 1988); Ethanol Partners, 617 F. Supp. at 307; [*22] see also IUE AFL-CIO Pension Fund v. Herrmann, 9 F.3d 1049, 1056-57 (2d Cir. 1993), cert. denied, 130 L. Ed. 2d 38, 115 S. Ct. 86 (1994) (applying the same rule and citing cases). Some courts have labeled this doctrine "pendent personal jurisdiction." Herrmann, 9 F.3d at 1057; Bowers, 690 F. Supp. at 357.
The court will exercise "pendent personal jurisdiction" over Communicorp as to Plaintiff's remaining federal and state claims because all claims arise from a common nucleus of operative facts. See Herrmann, 9 F.3d at 1057. All of those claims allege that Communicorp stripped Famous Artists of its assets and failed to make provisions for Plaintiff as one of its creditors. As stated above, the court will exercise its discretion and subject Communicorp to personal jurisdiction in those other claims because doing so will enable the court and the parties to more efficiently resolve this dispute. Dismissing all but Plaintiff's FDCPA claim against Communicorp would likely force two trials in two courts and would result in two presentations of the same witnesses and documents.
Thus, the court need not consider whether
personal jurisdiction as to the other federal and state
[*23] law claims is available because it has
personal jurisdiction over Communicorp under the FDCPA, and
the other four claims against Communicorp derive from a
common nucleus of operative facts. Accordingly, the court
has personal jurisdiction over Communicorp as to all claims
in the Complaint.
III. DEFENDANTS' MOTIONS TO TRANSFER
A. Applicable Standard
B. Propriety of Bringing this Action
in the Middle District of Georgia
1. Location of the Events Giving Rise
to the Claims
b. Claims vs. Famous Artists & Famous
2. Residency of the Defendants
In federal question cases that arise under a federal statute that is silent as to service of process, Federal Rule of Civil Procedure 4(e) requires a federal court to gauge its assertion of jurisdiction and the service of process by state amenability standards, that is, the state's long-arm statute. Max Daetwyler Corp. v. R. Meyer, 762 F.2d 290, 295, 297 (3d Cir.), cert. denied, 474 U.S. 980, 88 L. Ed. 2d 336, 106 S. Ct. 383 (1985). The Georgia long-arm statute provides, in relevant part:
A court of this state may exercise personal jurisdiction over any non-resident as to a cause of action [*27] arising from any of the acts, omissions, ownership, use or possession enumerated in this Code section, in the same manner as if he were a resident of the state, if in person or through an agent, he: (1) Transacts any business within this state
Ga. Code Ann. @ 9-10-91. This statute extends the state courts' jurisdiction over nonresident defendants as far as permitted by the Due Process Clause of the Fourteenth Amendment. Francosteel Corp. v. M/V Charm, 19 F.3d 624, 627 (11th Cir. 1994). Thus, this court need only inquire as to whether Georgia's exercise of jurisdiction over Famous Artists and Famous Hospitality satisfies the due process requirements imposed by the Fourteenth Amendment. The court will apply the same due process standard that it set forth in the section of this memorandum discussing Communicorp's motion to dismiss under Rule 12(b)(2).
Famous Artists and Famous Hospitality allege that they are subject only to specific jurisdiction in the Middle District of Georgia. (Communicorp's Mem. Supp. Dismissal or Transfer at 15-16.) They argue that their "participation" in the Asset Purchase Agreement is tantamount to a purposeful availment "'of the privilege [*28] of conducting activities within the forum state, thus invoking the benefits and protections of its law,'" and that such activities are sufficient to confer specific jurisdiction when a claim arises out of the defendant's forum-related contacts. Id. at 16 (quoting Francosteel, 825 F. Supp. 1074, 1078 (S.D. Ga. 1993), aff'd, 19 F.3d 624 (11th Cir. 1994)).
Plaintiff's claims against Famous Artists and Famous Hospitality, however, do not arise out of their roles as parties to the Asset Purchase Agreement, which is their only contact with Georgia. As stated supra, Plaintiff's enforcement claims seek to enforce the USPS administrative action imposing the postage deficiency against Famous Artists and Famous Hospitality, and the evidence submitted by the parties shows that the events giving rise to those claims involved contacts only with Pennsylvania. For this reason, Famous Artists and Famous Hospitality cannot be subject to specific personal jurisdiction in the Middle District of Georgia. n13 This conclusion precludes them from being residents of Georgia, which prevents venue from being laid there, which therefore rules out the Middle District of Georgia as a place where [*29] the action could have been brought under 28 U.S.C. @ 1404(a), which, finally, blocks transfer to that forum.
Famous Artists and Famous [*30] Hospitality also emphasize that the Asset Purchase Agreement, to which they are a party, is governed by Georgia law. The choice of law in a contract, however, is insufficient, without more, to vest jurisdiction. Time Share Vacation Club v. Atlantic Resorts, Ltd., 735 F.2d 61, 65 (3d Cir. 1984) ("A choice of law provision, by itself, is merely a shorthand incorporation into the contract of rules which, for the most part, could have been explicitly written into the agreement by the parties without reference to any particular state or its law.").
Therefore, because all three defendants
do not reside in Georgia for purposes of the federal venue
statute, this court concludes that Plaintiff may not have
brought this civil action against Famous Artists and Famous
Hospitality in the Middle District of Georgia. Thus, and the
Eastern District of Pennsylvania is the appropriate venue
for this civil action.
An appropriate Order follows.
Upon consideration of Defendant Famous Artists Corporation's Motion to Transfer Venue to the Middle District of Georgia, and Plaintiff's response thereto, IT IS FURTHER ORDERED that said motion is DENIED.
Upon consideration of Defendant Famous Hospitality Corporation, Inc.'s Motion to Transfer Venue to the Middle District of Georgia, and Plaintiff's response thereto, IT IS FURTHER ORDERED that said motion is DENIED.
IT IS FURTHER ORDERED that Famous Artists and Famous Hospitality shall file Amended Answers that comply with the Federal Rules of Civil Procedure within twenty (20) days of the date of this Order.
LOUIS C. BECHTLE, J.