MEMORANDUM OPINION AND ORDER
I. Introduction
Plaintiff National Precast Crypt Co., (“Precast”), an Illinois corporation, brought this contract action against defendants Dy-Core of Pennsylvania, Inc. (“Dy-Core”) and Romani Industries, Inc. (“Romani”), both of which are Pennsylvania corporations, pursuant to this court’s diversity jurisdiction. Defendants filed an answer and counterclaim along with a third party complaint against First Construction Corporation (“First Construction”), and against its President Adam Pientka individually, and also against National Concrete Pipe Co. (Concrete Pipe), and John Esposito (“Espo-sito”) individually. Esposito is the President of plaintiff Precast. The case is currently before the Court on 12(b)(2) motions brought by Esposito and Concrete Pipe for lack of personal jurisdiction. See Fed. R.Civ.P. 12(b)(2). The Court will grant Es-posito's motion and will deny Concrete Pipe’s motion without prejudice. 1
II. Facts
Precast is in the business of marketing mausoleum crypts for use in cemeteries across the United States. John Esposito owns a patent protecting both the design of the crypt and certain lifting equipment used in the manufacturing process. Espo-sito has given Precast a nonexclusive license to exploit this technology. (Defendants’ Reply Brief, Ex. C) Precast does not, however, actually manufacture the crypts. Instead, Precast contracts with other entities to manufacture the patented crypts by using the patented equipment. Once Precast executes a contract, it provides the manufacturing contractor with the forming equipment and the patented lifting apparatus necessary to make the crypts. The contract authorizes the contractor to use this equipment to compléte the contract and requires the contractor to return the equipment to Precast upon completion. Once the crypts are completed, Precast sells them to independent installation contractors, who in turn sell and install the crypts in cemeteries across the country.
The complaint alleges that Precast and Romani executed two contracts under which Romani agreed to manufacture a specific number of crypts. Romani denies that the contracts identified a specific number of crypts and alleges that the parties agreed in a subsequent contract that defendant Dy-Core would actually manufacture the crypts instead of Romani. The complaint further alleges that Precast and Dy-Core executed two contracts under which Dy-Core would manufacture a specified number of crypts. Precast had already agreed to sell the crypts in question to third-party defendant First Construction, which was planning to install the crypts in cemeteries in New York, New Jersey and Pennsylvania.
The terms of these contracts were essentially the same. The contracts required defendants to use the patented equipment to manufacture the crypts, and to do so in accordance with the patented design. The contracts further required the defendants to adhere to Precast’s production schedule. The parties agreed that although Precast retained ownership of the equipment, Ro-mani would be responsible for the care of the equipment and would return the equipment to Precast upon completion of the crypts.
Count I of Precast’s complaint alleges that defendants breached the contracts by delivering defective crypts. Precast contends it incurred substantial expenses to
In their counterclaim and third party complaint, defendants allege that third-party defendants, Concrete Pipe, First Construction, Adam Pientka and John Esposi-to, all of whom are residents of Illinois, were parties to the contracts between Precast and defendants. Defendants allege that Precast and the third-party defendants have wrongfully withheld payments due for the crypts that defendants actually manufactured and for labor costs that defendants incurred in manufacturing the crypts.
Third-party defendants Concrete Pipe and John Esposito filed a 12(b)(2) motion to dismiss, contending that this Court cannot assert personal jurisdiction over them. Concrete Pipe argues that it has had no contact with the Commonwealth of Pennsylvania, and that consequently it is not subject to the jurisdiction of this Court. Esposito contends that this Court cannot assert personal jurisdiction over him in his individual capacity because he has had no contact with Pennsylvania other than that which he has had while acting in his capacity as President of Precast. Those contacts, Esposito argues, cannot be relied upon to subject him individually to the personal jurisdiction of this Court.
This Court is in agreement with Esposito, and for the reasons set forth below, will grant his motion to dismiss. I find, however, that defendants have made a prima facie showing, for purposes of this motion, that Concrete Pipe is merely the alter ego of Precast and therefore is subject to this Court’s jurisdiction. Its motion to dismiss will therefore be denied.
III. Analysis
A.
When ruling on a motion for judgment on the pleadings, the Court ordinarily assumes the truth of the allegations of the complaint and views the record in the light most favorable to the plaintiff. However, if the defendant contests the jurisdiction of the Court, “ ‘the plaintiff bears the burden of demonstrating contacts with the forum sufficient to give the Court
in personam
jurisdiction.’ ”
Time Share Vacations Club v. Atlantic Resorts, Ltd..,
The question of the quantum of evidence defendants must produce to establish that Esposito and Concrete Pipe have sufficient minimum contacts with the forum to support jurisdiction over them is, in this case, somewhat more complicated than usual. This complexity derives from defendants’ theory of jurisdiction, which involves a factual dispute that is enmeshed with one of the ultimate issues in this case, namely, whether this Court should ignore the separate corporate existence of Precast and impute Precast’s forum contacts to Esposito as an individual and to Concrete Pipe.
The first task before me is to resolve the tension “between two accepted maxims of federal civil procedure.”
Kyle v. Continental Capital Corporation, supra
n. 1,
The Court of Appeals for the Third Circuit has recognized that although a “12(b)2 motion cannot be treated as one for summary judgment [,] [tjhere are situations ... where 'the question of the district court’s jurisdiction [is] entwined with the ultimate question on the merits.’ ”
Patterson by Patterson v. FBI,
In recognition of the procedural and evidentiary difficulties posed by such a situation, one district court in this circuit has adopted “a graduated burden of proof on the issue of jurisdiction against which the sufficiency of a plaintiff’s evidence may be measured at various stages in the development of the factual record.”
Kyle,
As a federal court sitting in diversity, this Court may exercise personal jurisdiction over a nonresident defendant to the extent permitted under Pennsylvania law.
See
Fed.R.Civ.P. 4(e). The Pennsylvania Long Arm Statute specifies certain circumstances under which a court may exercise jurisdiction, 42 Pa.C.S.A. § 5322(a), and allows a court to exercise jurisdiction “to the fullest extent allowed under the Constitution of the United States.” 42 Pa.C.S.A. § 5322(b). This Court’s jurisdiction pursuant to that statute, then, is coextensive with the due process clause of the United States Constitution.
Time Share,
The due process clause provides this Court with two separate theories which would support assertion of personal jurisdiction over a party. The Court may invoke its general jurisdiction over a nonresident defendant if the defendant’s contacts with the forum are continuous.
See Van Buskirk,
Dy-Core and Romani do not explicitly inform the Court whether they are relying upon this Court’s powers of general or specific jurisdiction to compel Concrete Pipe’s and Esposito’s presence in this action. Their brief, however, generally alleges that both National Concrete and Esposi-to have had “extensive and continuous contact ... with the forum state.” (Defendant’s Brief in Response at 5) This language seems to suggest, albeit with something less than total clarity, that Romani and Dy-Core are asserting that Esposito and Concrete Pipe have sufficient contacts
B.
I will first consider whether Romani and Dy-Core have produced sufficient evidence to support asserting jurisdiction over Precast’s President, John Esposito, in his personal rather than corporate capacity. The evidence in the record indicates that Esposito is a domiciliary of Illinois. It also reveals that he does not, within Pennsylvania: (1) personally own property or real estate; (2) personally maintain bank accounts; (3) transact business in a personal capacity. Thus, Esposito’s only contacts with this forum result from the fact that he is the president of Precast.
As a general rule, “[individuals performing acts in a state in their corporate capacity are not subject to the personal jurisdiction of the courts of that state for those acts.”
Bowers v. NETI Technologies, Inc.,
Courts will ignore the fiduciary shield rule in two circumstances, both of which have their roots in substantive legal theories that ignore the general corporate law rule of limited liability. First, a corporate agent may be held personally liable for torts committed in the corporate capacity.
See Donsco, Inc. v. Casper Corp.,
Second, if the corporate officer is charged with violating a statutory scheme that provides for personal, as well as corporate liability, courts have held that contacts with the forum stemming from corporate actions should be considered when evaluating whether the officer, as an individual, has minimum contacts with the forum which would support the assertion of personal jurisdiction.
See Davis v. Metro Productions, Inc.,
The complaint against Esposito is purely commercial in nature. It sounds in contract. There is no allegation that Esposito
Romani and Dy-Core contend that this Court may assert jurisdiction over Es-posito personally because plaintiff Precast is merely the alter ego of Esposito. They assert that Esposito has not observed the requisite corporate formalities and therefore cannot rely upon the doctrine of limited liability to avoid the jurisdiction of this Court. In effect, Romani and Dy-Core are asking this Court to pierce the corporate veil and hold Esposito personally liable for the contractual undertakings of Precast. In theory, this is a valid method of obtaining jurisdiction over a corporate agent individually based upon his/her corporate contacts with the forum.
See Savin Corp. v. Heritage Copy Products, Inc.,
Courts will pierce the corporate veil only in exceptional circumstances.
Clemens v. Gerber Scientific,
1989 WEST-LAW 3480 (E.D.Pa.) (O’Neill, J.). The factors relevant in deciding whether the veil should be pierced are Esposito’s control over Precast, his ownership of Precast’s stock, a lack of separation of daily operations and facilities, a commingling of funds and the failure to observe corporate formalities.
Clemens, Supra; Savin Corp.,
In support of their claim that Precast is merely the alter ego of Esposito, Romani and Dy-Core have proffered only the affidavit of Romani’s in house counsel, David Romani, Esq. Romani contends that he was personally involved in the contract negotiations between Precast and defendants. He claims that third party defendant, Adam Pientka, President of third party defendant First Construction, informed him that Pientka and Esposito were “partners” in the marketing of the crypts. Romani further states that Esposito presented himself as “the sole or controlling shareholder” and the President and CEO of both Precast and Concrete Pipe. (Romani Affidavit at ¶¶ 4,5). Romani further alleges that Precast, Concrete Pipe and Esposito all share the same office and fax number. (Id. at 1Í1T 7,10). Esposito also appeared at the facilities of Dy-Core to instruct Dy-Core regarding the manufacture and transportation of the crypts. (Id. at 1112). Finally, defendants assert in their brief that Esposito held the patents protecting the lifting apparatus and the crypt design, and that there was no formal agreement between Esposito and Precast regarding Precast’s right to exploit this technology.
The Romani affidavit establishes that Esposito owned and controlled Precast. However, the fact that one shareholder controls a closely held corporation is not enough to support piercing the corporate veil. Similarly, the fact that Esposito discussed aspects of contract performance is not persuasive because a corporation can act only through its agents. Nor is it surprising that Esposito himself “shared” the same facilities with Precast. Most chief executive and chief operating officers
The only assertion in Romani’s affidavit that tends to support a finding that Precast is merely the alter ego of Esposito is the contention that there was no agreement between Esposito and Precast regarding Precast’s right to exploit Esposito’s patents. Esposito contends, however, that he has granted Precast a non-exclusive right to exploit the patented technologies. In support of his assertion, Esposito has proffered a letter agreement between Precast and Concrete Pipe. (Reply Brief, Ex. C). In that document, Esposito asserts that he “developed this pre-cast crypt technology and patent as [his] own personal, proprietary project and not as an agent for National Concrete or any other person.” (Id. at p. 1).
This document is not, however, the embodiment of a license between Esposito and Precast. Instead, it is an agreement between Precast and Concrete Pipe. Altho.ugh Esposito contends that Precast uses his patented process pursuant to a nonexclusive license, he has not produced a written agreement evidencing that license. Moreover, in the letter agreement, Esposito states that he incorporated Precast “for the purpose of owning assets and operating the business of manufacture, distribution, and/or erection of concrete burial crypts and mausoleums.” Thus, the record suggests that Esposito and Precast may have failed to observe the requisite corporate formalities with regard to use of the patented technology.
Nevertheless, the absence of a written license agreement is not enough to warrant piercing the corporate veil.
See Parker v. Bell Asbestos Mines, Ltd.,
Because this Court has concluded that defendants are relying on the theory of specific jurisdiction, defendants must establish that Esposito had minimum contacts with the forum which gave rise to this litigation.
See Helicopteros Nacionales de Columbia, S.A. v. Hall,
Nor can defendants rely upon the doctrine of general jurisdiction to support their claim that Esposito is amenable to this Court’s jurisdiction. A court may rely upon the doctrine of general jurisdiction only if the party maintained continuous and substantial affiliations with the forum.
See Dollar Savings Bank v. First Security Bank of Utah, N.A.,
C.
I turn finally to defendant Concrete Pipe’s motion to dismiss for lack of personal jurisdiction. Concrete Pipe contends that this Court cannot exercise jurisdiction over it because it has no contacts with the forum. Defendants argue, however, that although Concrete Pipe was not a signatory to the contract, it acted as Precast’s agent with regard to some issues of performance. Defendants contend that as a result of these actions, Concrete Pipe has minimum contacts with the forum. They further argue that this Court may exercise personal jurisdiction over Concrete Pipe because Concrete Pipe and Precast are under the common control of Esposito.
Defendants perfunctorily assert without explanation that a variety of legal theories support a finding that this Court has personal jurisdiction over Concrete Pipe. They place primary reliance on the single enterprise theories discussed in
American Bell Inc. v. Federation of Telephone Workers of Pennsylvania,
The Court’s independent research has revealed a line of cases that allow a court to obtain personal jurisdiction over a nonresident corporation based upon its relationship with a related corporation
(i.e.
parent or subsidiary) that has contacts with the forum.
See Clemens v. Gerber Scientific, Inc.,
1989 WESTLAW 3480 (E.D.Pa.);
Savin Corp. v. Hervage Copy Products,
Whether a nonresident corporation is subject to the jurisdiction of a Court because it is the alter ego of another corporation which has minimum contacts with the forum is dependent upon a number of factors. These factors include, but are not limited to: common officers and directors; one corporation’s ownership of the stock of the other; one corporation’s supervision of the other; consolidation of tax returns and financial records, common use of employees; common use of business equipment and office facilities; common business purposes, and finally, the failure to observe corporate formalities.
See Savin Corp.,
Defendants rely primarily upon the Ro-mani affidavit to meet this burden. Several of the allegations of Romani’s affidavit support a finding that Precast and Concrete Pipe are merely alter egos of each other. For example, Romani alleges that Esposito is the sole shareholder and president of both Precast and Concrete Pipe. Thus, both companies are apparently controlled by Esposito. Both companies also share office and communications facilities. Moreover, the corporations operate in complementary businesses. In fact, the Roma-ni affidavit alleges that Concrete Pipe sent Dy-Core correspondence regarding the manufacturing specifications. The Romani affidavit also alleges that Concrete Pipe made transportation arrangements. Finally, it appears that there was some commingling of financial obligations of the corporations. Although Concrete Pipe was not a signatory of the contract between Precast and defendant, the Romani affidavit alleges that Concrete Pipe reimbursed Dy-Core for the cost of some raw materials. Thus, there does appear to be, prima facie, a significant commonality in the ownership, control, supervision, business purpose, operations and finances of the two companies.
Concrete Pipe does not deny the material allegations of the Romani affidavit, but instead attacks the persuasiveness of defendants’ legal theories. Although the Court did not find defendants’ brief to be much more than a summary incantation of several legal theories, the Romani affidavit establishes a sufficient factual basis for concluding, prima facie, that Concrete Pipe and Precast have failed to maintain distinct corporate identities. Accordingly, this Court may, for purposes of the instant motion, impute Precast’s contact with the forum to Concrete Pipe to determine whether Concrete Pipe is subject to the jurisdiction of this Court.
D.
The only question remaining is whether Concrete Pipe has sufficient contacts with the forum to allow this Court to exercise jurisdiction over it. The instant cause of action arises out of Concrete Pipe’s forum related activity and this Court may therefore, assuming minimum contacts, assert jurisdiction pursuant to the doctrine of specific jurisdiction. Defendants’ burden, then, is to demonstrate that Concrete Pipe has such minimum contacts with the Commonwealth of Pennsylvania that “[it] reasonably should anticipate being haled into court [here].”
Snyder International, Inc. v. Tap Equipment,
To determine whether Concrete Pipe has minimum contacts with the forum, I must consider three factors. First, has Concrete Pipe purposefully availed itself of the privilege of acting in the Commonwealth, thereby invoking the benefits and protections of its laws? Second, does the cause of action arise from Concrete Pipe’s forum related activities? Finally, do Concréte Pipe’s actions have a sufficiently substantial connection with the forum to make the exercise of jurisdiction reasonable?
Time Share Vacation Club v. Atlantic Resorts, supra,
I begin my analysis by considering the second question. It cannot be disputed that the cause of action arises out of the forum related activities of Concrete Pipe and its alleged alter ego, Precast. Precast executed contracts with defendants, who are citizens of Pennsylvania, with the specific understanding that the work would be done in Pennsylvania. Precast thereby became obligated to perform under several contracts involving a substantial amount of money.
Moreover, the complaint alleges that the Pennsylvania defendants breached the contract by supplying defective crypts. Significantly, Concrete Pipe itself sent correspondence to the Pennsylvania defendants regarding manufacturing specifications. Concrete Pipe also reimbursed defendants for the cost of raw materials. I therefore conclude that Concrete Pipe itself engaged in forum related activities, independent of activities nominally undertaken by Precast, that are related to the cause of action.
Finally, I must determine whether Concrete Pipe’s “actions have a substantial enough connection with the forum to make the exercise of jurisdiction reasonable.”
Snyder International,
Precast contracted with two Pennsylvania residents for the manufacture of crypts worth more than $300,000.00. Precast entered into these agreements with the understanding that the work would be done in the Commonwealth of Pennsylvania, and shipped its own equipment here to further that end. Moreover, Concrete Pipe reimbursed defendants for raw materials that were used in Pennsylvania and sent correspondence to the Pennsylvania residents regarding the manufacturing specifications. Thus, the acts of Precast and Concrete Pipe were directed at the Commonwealth and residents of the Commonwealth, sufficient to make the exercise of this Court’s jurisdiction over Concrete Pipe reasonable.
Notes
. As will be discussed
infra,
defendants have made out a
prima facie
case of personal jurisdiction over Concrete Pipe. However, I express no opinion herein as to whether the evidence adduced by defendants in responding to the instant motion would be sufficient to meet the graduated burden of proof which will apply at later stages in the development of this case. The parties, of course, may revisit this issue after conducting appropriate discovery.
See Kyle
v.
Continental Capital Corporation,
. The district court relied upon cases from the Ninth Circuit in articulating this graduated burden of proof. It also noted that the Third Circuit has established a flexible burden of proof for establishing subject matter jurisdiction.
Kyle,
. Interestingly, although the cases are in agreement that the rule is not based upon the requirements of due process, many of the opinions recognize exceptions to the rule because, under the circumstances, personal liability was foreseeable.
See Calder v. Jones,
. Once the Court concluded that defendants failed to demonstrate that the corporate identity was a sham, defendants actually lost any claim to the theory of specific jurisdiction to support their argument that this Court has personal jurisdiction over Esposito individually. A party can only rely on specific jurisdiction if the activities in the forum gave rise to the litigation. The Court has concluded that all of Esposito’s activities in connection with the underlying contract were undertaken in Esposito’s capacity as president of Precast. This obviously precludes a finding that Esposito engaged in activities in the forum in a personal capacity that were related to the cause of action. Accordingly, defendants would need to show that Esposito was amenable to this Court’s jurisdiction pursuant to the doctrine of general jurisdiction.