Shanghai Chestnut Oak v. Catskill Timber

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NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
SHANGHAI CHESTNUT OAK IMPORT & IN THE SUPERIOR COURT
EXPORT CO., LTD. OF PENNSYLVANIA
Appellant
v.
CATSKILL TIMBER INDUSTRIES, INC.
Appellee No. 1315 MDA 2019
Appeal from the Order Entered July 3, 2019
In the Court of Common Pleas of Lycoming County
Civil Division at No: CV-2018-0001859-CV
BEFORE: STABILE, J., DUBOW, J., and PELLEGRINI,* J.
MEMORANDUM BY STABILE, J.: FILED AUGUST 10, 2020
Appellant, Shanghai Chestnut Oak Import & Export Co., Ltd., appeals
from the July 3, 2019 order sustaining the preliminary objections of Appellee,
Catskill Timber Industries, Inc., and dismissing Appellant’s complaint with
prejudice. We reverse and remand.
Appellant is a Chinese business located in Shanghai, China. Appellee is
a Delaware Corporation with its principal place of business in New Jersey. The
parties entered a contract whereby Appellee was to ship to Appellant ten
containers of ash logs at a price of $96,187.50. Appellant claims the logs
were supposed to come from northern Pennsylvania trees. Appellee denies
this, noting that the contract does not specify the place of origin of the lumber.
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* Retired Senior Judge assigned to the Superior Court.
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Appellant filed this action in the Lycoming County Court of Common Pleas on
December 13, 2018, alleging causes of action in breach of contract and unjust
enrichment. On February 8, 2019, Appellee filed a preliminary objection under
Pa.R.C.P. No. 1028(a)(1),1 alleging that the court lacked personal jurisdiction.
The trial court heard argument on March 19, 2019, and subsequently
permitted each party to submit a brief and affidavit. After consideration of
the parties’ briefs and affidavits, the trial court sustained Appellee’s
preliminary objection. It also denied Appellant’s request for limited discovery
on the jurisdictional issue. This timely appeal followed.
Appellant raises a single issue: “Did the trial court err when it refused
to allow the Appellant to conduct limited discovery into the jurisdictional issues
raised by Appellee in its preliminary objection?” Appellant’s Brief at 8.
We review an order granting preliminary objections as follows:
In reviewing an order sustaining preliminary objections, our
standard of review is de novo and our scope of review is plenary.
We must determine whether the trial court committed an error of
law. When a defendant challenges the court’s assertion of
personal jurisdiction, that defendant bears the burden of
supporting such objections to jurisdiction by presenting evidence.
The burden of proof only shifts to the plaintiff after the defendant
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1 Rule 1028(a)(1) provides, in relevant part:
(a) Preliminary objections may be filed by any party to any
pleading and are limited to the following grounds:
(1) lack of jurisdiction over the subject matter of the action
or the person of the defendant, improper venue or improper form
or service of a writ of summons or a complaint;
Pa.R.C.P. No. 1028(a)(1).
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has presented affidavits or other evidence in support of its
preliminary objections challenging jurisdiction.
Trexler v. McDonald's Corp., 118 A.3d 408, 412 (Pa. Super. 2015) (internal
citations and quotation marks omitted). “This Court will reverse the trial
court’s decision regarding preliminary objections only where there has been
an error of law or abuse of discretion.” Excavation Techs., Inc. v. Columbia
Gas Co. of Pennsylvania, 936 A.2d 111, 113 (Pa. Super. 2007), aff’d, 985
A.2d 840 (Pa. 2009). “When sustaining the trial court’s ruling will result in
the denial of claim or a dismissal of suit, preliminary objections will be
sustained only where the case if free and clear of doubt.” Id.
Rule 1028(c)(2) provides that when “an issue of fact is raised, the court
shall consider evidence by depositions or otherwise.” Pa.R.C.P. No.
1028(c)(2)(emphasis added). Objections to in personam jurisdiction under
Rule 1028(a)(1) are among the preliminary objections that cannot ordinarily
be determined from the facts of record. Pa.R.C.P. No. 1028(c)(2), note.
Indeed, where preliminary objections based on personal jurisdiction are at
issue, “[t]he court may not reach a determination based upon its view of the
controverted facts, but must resolve the dispute by receiving evidence thereon
through interrogatories, depositions, or an evidentiary hearing.” Schmitt v.
Seaspray-Sharkline, Inc., 531 A.2d 801, 803 (Pa. Super. 1987).
Where an essential factual issue arises from the pleadings
as to the scope of a defendant’s activities within the
Commonwealth, the plaintiff has the right to depose
defendant as to his activities within the Commonwealth,
and the court must permit the taking of the deposition
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before ruling on the preliminary objections. Where neither
party presents evidence by which the court can properly resolve
the issue, it is appropriate to remand with directions that an order
be entered allowing the parties a reasonable period of time in
which to present evidence by deposition, interrogatories or
otherwise.
Id. at 803 (emphasis added).
The trial court relied in part on Slota v. Moorings, 494 A.2d 1, 3-4 (Pa.
Super. 1985), wherein the plaintiffs sued a company organized under the laws
of the British West Indies for injuries the plaintiffs allegedly sustained at the
defendant’s hotel. The defendant had no place of business in Pennsylvania,
and it filed preliminary objections to jurisdiction. The defendant submitted
affidavits explaining its basis for disputing jurisdiction. The plaintiffs alleged
the contract for lodging was entered into in Pennsylvania and that the
defendant conducted business continuously and systematically in
Pennsylvania. Slota, 494 A.2d. at 3. The trial court decided, based on
affidavits from the defendant, that Pennsylvania did not have personal
jurisdiction over it. This Court observed that “this is not a recommended
procedure,” and that “[i]t would have been preferable to proceed by
depositions or written interrogatories.” Id. Nonetheless, because the plaintiff
countered defendant’s affidavits with a deposition amounting to nothing more
than “rumor, surmise, and conjecture,” we affirmed the order sustaining the
defendant’s preliminary objections.
In Stern v. Prudential Fin., Inc., 836 A.2d 953 (Pa. Super. 2003), the
defendant filed preliminary objections alleging that the plaintiff’s complaint
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should be dismissed because of an arbitration provision in the parties’
contract. The trial judge, “based solely on affidavits, found that the arbitration
provision was valid and enforceable and not waived by [the defendant].” Id.
at 953-54. This Court noted that the plaintiff’s affidavit alleged that the
defendant agreed to waive the arbitration provision when plaintiff threatened
to pull his account from defendant. Id. at 954. The defendant’s affidavit
disputed the fact of waiver. Id. In Stern, unlike Slota, the affidavits did not
present a case of clear, specific, and undisputed facts. Id. at 955. We
therefore reversed the order sustaining preliminary objections and remanded
for the development of additional evidence by depositions, interrogatories, or
other discovery. Id.
Instantly, as in Stern and Slota, the trial court decided the preliminary
objections based on competing affidavits. Appellant’s affidavit, from its
owner, Thomas Han, reads as follows:
1. From my knowledge and familiarity with the timber
import/export business, Ulrich von Hollen and his company,
[Appellee], regularly buys and sells ash trees from the
Commonwealth of Pennsylvania. This is a significant portion of
his business.
2. The contract I entered into with [Appellee] was for the
purchase and shipment of ash logs from Northern Pennsylvania.
While this provision was not in the written agreement, this term
was discussed and agreed with Mr. von Hollen.
3. The ash logs delivered late and without proper
documentation were from southern and western Pennsylvania. I
know this from Mr. von Hollen’s statements to me.
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4. I wanted Norther Pennsylvania ash logs because their
quality is higher and their value higher.
Thomas Han Affidavit, 4/8/19, at ¶¶ 1-4.
In his affidavit, Ulrich von Hollen, Appellee’s owner, averred in pertinent
part as follows:
2. [Appellee] has its principal place of business located
at P.O. Box 615, Oldwick, Hunterdon County, New Jersey.
3. [Appellee] does not have an office or bank account in
Pennsylvania.
4 [Appellee] does not have a telephone number in
Pennsylvania or otherwise maintain a business presence in
Pennsylvania.
5. [Appellee] is in the business of purchasing logs from
suppliers and then shipping those logs based upon customer
demand.
6. [Appellee] purchases the logs directly from its
suppliers “F.O.B.” or at the port from which the logs will ship
already loaded in shipping containers.
7. [Appellee] has not purchased any logs from a supplier
located in Pennsylvania for many years.
8. The last logs I purchased in Pennsylvania were
purchased between ten (10) and twelve (12) years ago through a
different business I then owned.
9. All logs [Appellee] presently buys are purchased from
suppliers located in Ohio, Indiana, Kentucky, West Virginia, the
New England states, and Ontario, Canada.
10. None of [Appellee’s] suppliers are located in either
Pennsylvania or New York at present.
11. The origin of the logs that my suppliers provide are
from all over and, while some logs may originate from
Pennsylvania, as logs are shipped across state lines all the time,
[Appellee] does not control the origin of the logs its suppliers
purchase.
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12. In a given transaction, [Appellee] may purchase logs
from a supplier located in Indiana with logs that originated in
Kentucky or Indiana, or [Appellee] may purchase logs from a
supplier in Ohio with logs that originated in Kentucky, Indiana,
Pennsylvania or sometimes West Virginia.
13. The written agreement at issue in [this litigation] was
entered into between a New Jersey company and a Chinese
company.
14. The written agreement does not specify Pennsylvania
ash and there is no reference to Pennsylvania at all in the written
agreement.
15. At no time relevant to the transaction at issue in [this
litigation] did [Appellee] purchase logs from a supplier in
Pennsylvania.
16. [Appellee] does not regularly do business within the
Commonwealth of Pennsylvania or with business located within
Pennsylvania.
17. The logs at issue in [this litigation] were not
purchased from a supplier located in Pennsylvania and did not
originate from Pennsylvania.
18. Any partial webpage screenshot attached to
[Appellant’s] briefing […] is many years outdated and the
webpage has not been updated to reflect the current nature of
[Appellee’s] business.
19. That being said, even if logs sold originated in
Pennsylvania, they were not purchased from a supplier located in
Pennsylvania.
20. If I were deposed in connection with [this litigation],
my testimony regarding the nature of [Appellee’s] business and
its lack of contacts with Pennsylvania would be consistent with my
statements contained herein.
Ulrich von Hollen Affidavit, undated, at ¶¶ 2-20.
In summary, Appellant alleged that Appellee regularly buys and sells
logs from Pennsylvania, and that Appellee expressly agreed to provide
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Pennsylvania logs in this case. Appellant also documented that Appellee’s
website advertises the selling of Pennsylvania lumber. Appellee denies having
any control over the state of origin of the lumber it sells, and denies promising
to provide Pennsylvania lumber. These affidavits directly contradict one
another, and therefore give rise to a dispute of fact. Appellee could not
advertise Pennsylvania lumber for sale on its website and promise delivery of
Pennsylvania lumber in this case unless it could direct the activities of
suppliers within this state. Thus, Appellee’s averments—that it has no control
over the source of the lumber—directly contradict Appellant’s in its affidavit.
As explained above, the Pennsylvania Rules of Procedure provide that a trial
court “shall” consider evidence by depositions or otherwise where a
preliminary objection raises an issue of fact. Pa.R.C.P. No. 1028(c)(2).
Further, this Court in Schmitt held that the plaintiff has the right to depose
the defendant as to its activities in the Commonwealth when the pleadings
raise issues of fact. Schmitt, 531 A.2d at 803. This case, unlike Slota, does
not involve clear, specific, and undisputed facts that are apparent from the
parties’ affidavits. The trial court erred in finding that the affidavits did not
conflict.
In closing, we note that the trial court did not cite to applicable
precedent when addressing the jurisdictional issues. The Due Process Clause
of the Fourteenth Amendment to the United States Constitution limits a state’s
authority to exercise personal jurisdiction over a non-resident defendant,
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depending on the extent of the defendant’s contacts with the state.
Hammons v. Ethicon, 190 A.3d 1248, 1261 (Pa. Super. 2018) (citing
Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985)), appeal granted,
206 A.3d 495 (Pa. 2019). A state may exercise general jurisdiction over a
corporation, i.e. all-purpose jurisdiction, where the company is incorporated
or has its principal place of business in that state. Id. (citing Daimler AG v.
Bauman, 571 U.S. 117, (2014)).2 The Daimler Court noted that existing
jurisprudence did not “hold that a corporation may be subject to general
jurisdiction only in a place where it is incorporated or has its principal place of
business.” Daimler, 571 U.S. at 138 (emphasis in original). Rather, the
places in incorporation and principal place of business are “paradigm all-
purpose forums.” Id. In the case before it, the Daimler Court declined to
look beyond those paradigm forums, deeming an analysis of the company’s
“substantial, continuous, and systematic course of business” within the forum
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2 Section 5301 of the Pennsylvania Judicial Code permits general jurisdiction
over a corporation as follows:
(2) Corporations.--
(i) Incorporation under or qualification as a foreign corporation
under the laws of this Commonwealth.
(ii) Consent, to the extent authorized by the consent.
(iii) The carrying on of a continuous and systematic part of its
general business within this Commonwealth.
42 Pa.C.S.A. § 5301(a)(2).
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to be “unacceptably grasping.” Id. The Supreme Court allowed that, in an
“exceptional case,” a corporate defendant’s operations “may be so substantial
and of such a nature as to render the corporation at home” in a state in which
it is not incorporated and does not have its principal place of business. Id. at
139 n.19.
In our recent decision in Fulano v. Fanjul Corp., ___ A.3d ___, (Pa.
Super. July 10, 2020), this Court considered whether the plaintiff had
established an “exceptional case” for general jurisdiction over a defendant
incorporated and with its principal place of business in Tennessee. Fewer than
20 of the defendant’s 100 distributers were licensed to do business in
Pennsylvania, and less than 3% of its total sales revenue came from products
shipped directly to Pennsylvania. Its only physical presence in this
Commonwealth was a leased warehouse in Bucks County. This Court declined
to find general jurisdiction over the defendant in these circumstances. We
relied on BNSF Ry. Co. v. Tyrell, 137 S. Ct. 1549 (2017), wherein the United
States Supreme Court declined to find an exceptional case for general
jurisdiction in Montana over a railroad company that had more than 2,000
miles of track and more than 2,000 employees in that state. The BNSF Court
wrote that the inquiry as to general jurisdiction “calls for an appraisal of a
corporation’s activities in their entirety; a corporation that operates in many
places can scarcely be deemed to be at home in all of them.” Id. at 1559.
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In addition, a state may exercise specific jurisdiction over a corporation
where the action arises from the corporation’s activity within the state’s
borders.3 Hammons, 190 A.3d at 1262 (citing Bristol Myers Squib Co. v.
Superior Court of California, San Francisco County, 137 S. Ct. 1773
(2017)).
In its brief, Appellant argues for general jurisdiction based on its
allegation that Shanghai conducts a “continuous and systematic part of its
general business within this Commonwealth.” Appellant’s Brief at 12 (quoting
42 Pa.C.S.A. § 5301(a)(2)(iii)). Appellant disavows any argument for specific
jurisdiction in light of the trial court’s refusal to accept parol evidence on
whether the parties agreed to logs sourced from Pennsylvania. Id. Appellant
has not challenged the trial court’s application of the parol evidence rule.
Moreover, Appellant does not argue that Appellee consented to jurisdiction in
Pennsylvania.
As noted above, Appellee is incorporated in Delaware and has its
principal place of business in New Jersey. Neither party addressed Daimler,
BNSF, or Hammons in its brief. Fulano post-dated the filing of this appeal.
Thus, we have no advocacy on those case and the implications they have for
the general jurisdiction over Appellee under § 5301(a)(2)(iii) on the facts of
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3 Pennsylvania’s Long Arm statute lists the circumstances under which this
Commonwealth will exercise specific jurisdiction over corporations from
outside of the Commonwealth. 42 Pa.C.S.A. § 5322.
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this case. On remand, Appellant can establish general jurisdiction over
Appellee if and only if the exercise of such jurisdiction meets the constitutional
criteria set forth in the jurisprudence of the United States Supreme Court and
the applicable binding precedent from Pennsylvania courts.
For the foregoing reasons, we reverse the order sustaining Appellee’s
preliminary objections and remand for further proceedings consistent with this
memorandum.
Order reversed. Case remanded. Jurisdiction relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 08/10/2020
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