Judges Opinions, — August 16, 2017 10:14 — 0 Comments

Solar Innovations, Inc. v. Sunmodo Corp., Jun Liu and Clifford Schrock No. 2015-02048

Civil Action-Law-Breach of Confidentiality Agreement-Violation of Pennsylvania Trade Secrets Act-Preliminary Objections-Foreign Corporate Defendant-Personal Jurisdiction-Specific Jurisdiction-General Jurisdiction-Long Arm Statute-Purposeful Availment-Sufficient Minimum Contacts-Jurisdiction over Foreign Agent-Corporate Shield Doctrine-Calder Effects Doctrine

Plaintiff, which manufactures various products at its plant in Pine Grove, Pennsylvania and holds exclusive rights to a standing seam clamp, lodged a Complaint against Defendants Sunmodo Corp. (“Sunmodo”) and Jun Liu (“Liu”) and Clifford Schrock (“Schrock”), shareholders and employees of Sunmodo Corp. Plaintiff alleges that Defendants breached a confidentiality agreement and violated the Pennsylvania Trade Secrets Act when Liu and Schrock pursued a business relationship with Plaintiff, obtained confidential information about Plaintiff’s technology for development of a clamp, used that information to develop their own clamp and assigned the patent for the clamp to Sunmodo. Defendants Liu and Schrock, who reside in Washington and Oregon, respectively, filed Preliminary Objections to the Complaint on the basis that the Court lacks personal jurisdiction over them.

1. The Due Process clause of the Fourteenth Amendment to the United States Constitution limits the authority of a state to exercise in personam jurisdiction over a non-resident defendant. The extent to which jurisdiction is proscribed by the Due Process clause is dependent upon the nature and the quality of the defendant’s contact with the forum state. Where a defendant purposefully has directed activities at the residents of the forum state, the defendant is presumed to have fair warning that he or she may be called to suit there.

2. A defendant’s activities in the forum state may give rise either to specific or general jurisdiction. Specific jurisdiction is based solely upon single or occasional acts purposefully directed at the forum, and it limits the cause of action to the extent that it arises out of or relates to the very act establishing jurisdiction. General jurisdiction involves circumstances or a course of conduct from which it is proper to infer an intent to benefit from and an intention to submit to the laws of the forum state.

3. A foreign defendant who does not have sufficient contacts with Pennsylvania to establish general jurisdiction nevertheless may be subject to specific jurisdiction through 42 Pa.C.S. § 5322, Pennsylvania’s Long Arm statute. Once it is determined that jurisdiction is authorized pursuant to the Long Arm statute, the party seeking relief must demonstrate that the exercise of jurisdiction conforms with the Due Process clause, which requires that the plaintiff demonstrate that the defendant purposefully established minimum contacts with the forum state and the maintenance of the suit does not offend traditional notions of fair play and substantial justice. A defendant purposefully establishes minimal contacts with the forum state when its contacts are such that the defendant reasonably could anticipate being called to defend itself in the forum. The defendant must purposefully have 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 subject to the forum state’s laws.

4. The finding of purposeful availment is influenced by the presence of economic impacts on the forum state and the parties’ relationship. In determining whether an individual reasonably can anticipate being hailed into court, courts have placed an emphasis upon the parties’ communications and the party who initiated contact. The fact that a defendant has reached out beyond the boundaries of its home state to negotiate and to contract with a Pennsylvania corporation is sufficient to justify the exercise of personal jurisdiction.

5. Section 5322 permits the exercise of jurisdiction over an out-of-state individual who acts directly or by an agent in transacting any business in the Commonwealth or in causing harm or tortious injury by an act or omission in the Commonwealth.

6. In light of the fact that Liu and Schrock held important decision making positions at Sunmodo, were active in initiating, pursuing and establishing the business relationship and entering into a License Agreement with Plaintiff, signed a confidentiality agreement with Plaintiff that contained a forum selection clause specifically providing that all disputes would be resolved by Pennsylvania courts and Liu visited Plaintiff’s facility in Pennsylvania and held discussions regarding clamp design that were reviewed with Schrock, Liu and Schrock played a significant role in causing the harm alleged by Plaintiff such that Liu and Schrock had sufficient minimum contacts in Pennsylvania so as to confer personal jurisdiction over them pursuant to § 5322.

7. Generally, pursuant to the corporate shield doctrine, an individual’s contacts as an agent of a corporation are not attributable to that individual for purposes of establishing specific jurisdiction. However, if a 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 the corporate actions should be considered when evaluating whether the officer as an individual has minimal contacts with the forum that would support the assertion of personal jurisdiction. To determine whether there is jurisdiction over a corporate officer or director whose only contacts with Pennsylvania are allegedly tortious acts taken as corporate officer or director, it is necessary to examine factors such as the officer’s role in the corporate structure, the quality of the officer’s forum contacts and the extent and the nature of the officer’s participation in the alleged tortious conduct.

8. Liu and Schrock are not entitled to the protection of the corporate shield doctrine due to the nature of their positions within Sunmodo, their initiation and participation in the establishment of the contractual relationship with Plaintiff in which the majority of the same occurred in Pennsylvania and their alleged misappropriation of information obtained during visits and contacts with Plaintiff in Pennsylvania.

9. The Calder effects test as established in Calder v. Jones, 465 U.S. 783 (1984), which has been used by federal courts in Pennsylvania to determine whether a foreign defendant is subject to a forum’s jurisdiction for the commission of an intention tort, requires that to show sufficient minimum contacts, a plaintiff must allege facts sufficient to show that the defendant committed an intentional tort, the plaintiff felt the brunt of the harm in the forum and the defendant expressly aimed his or her tortious conduct such that the forum can be said to be the focal point of the tortious activity.

10. There is no requirement that the alleged activity of an out of state defendant constitute illegal activity in order to satisfy jurisdictional requirements on the basis of an intentional tort.

11. Even if sufficient minimum contacts had not been found on the part of Liu and Schrock in order to confer specific jurisdiction upon them pursuant to § 5322, all prongs of the Calder effects test have been met, as Plaintiff has alleged an intentional tort, the brunt of the harm caused by that intentional tort was felt in Pennsylvania where Plaintiff conducts its business and the substantial acts taken by Liu and Schrock of obtaining information in Pennsylvania that was used in producing their own clamp renders Pennsylvania the focal point of the dealings and the harm suffered.

L.C.C.C.P. No. 2015-02048, Opinion by John C. Tylwalk, President Judge, January 24, 2017.

Timothy J. Huber, Esquire, and David Warner, Esquire, for Plaintiff

Gina Stowe, Esquire, and Mark E. Beatty, Esquire, for Defendants

IN THE COURT OF COMMON PLEAS OF LEBANON COUNTY

PENNSYLVANIA

CIVIL DIVISION NO. 2015-02048

SOLAR INNOVATIONS, INC.

v.

SUNMODO CORP., JUN LIU, AND CLIFFORD SCHROCK

ORDER OF COURT

AND NOW, this 24th day of January, 2017, upon consideration of the Preliminary Objections of Defendants Jun Liu and Clifford Schrock, Plaintiff’s response thereto, the Briefs submitted by the parties, and Oral Argument, it is hereby Ordered that said Preliminary Objections are OVERRULED.

BY THE COURT:

JOHN C. TYLWALK, P.J.

APPEARANCES:

TIMOTHY J. HUBER, ESQUIRE FOR SOLAR INNOVATIONS, INC.

DAVID WARNER, ESQUIRE

BUZGON DAVIS LAW OFFICES

GINA STOWE, ESQUIRE FOR SUNMODO CORP. AND

STRADLEY RONON STEVENS

& YOUNG, LLP

and

MARK E. BEATTY, ESQUIRE

RYLANDER & ASSOCIATES, PC

OPINION, TYLWALK, P.J., JANUARY 24, 2017.

Plaintiff Solar Innovations, Inc. (“Solar Innovations”) brought this action against Defendants Sunmodo Corp. (“Sunmodo”), Jun Liu (“Liu”), and Clifford Schrock (“Schrock”) alleging breach of a confidentiality agreement and violation of the Pennsylvania Trade Secrets Act. Solar Innovations charges that the Defendants obtained and disclosed confidential information regarding Solar Innovations’ technology for the development of a two-piece clamp to third parties and used that technology to develop their own clamp.

Sunmodo’s facility is located in the State of Washington. Defendant Liu resides in Washington and Schrock resides in Oregon. Liu and Schrock are representatives of Sunmodo, having acted in various capacities prior to and during the timeframe relevant to this litigation. Solar Innovations alleges that these individual Defendants were active in pursuing a business relationship with Solar Innnovations, obtained confidential information from Solar Innovations, personally developed their own clamp using that information, and then assigned the patent for that clamp to Sunmodo. Liu and Schrock have filed Preliminary Objections asserting that this Court lacks personal jurisdiction over them. Because the Preliminary Objections raise factual issues, the parties proceeded with depositions of Liu and Schrock and have submitted affidavits on the issue of jurisdiction pursuant to Lebanon County Local Rule 52-1028(c)(D). Both parties have filed Briefs, we have had the benefit of Oral Argument, and the matter is before us for disposition.

Solar Innovations manufactures various products at its plant in Pine Grove, Pennsylvania and holds exclusive rights to a standing seam clamp. In 2011, its representatives attended the PV America Trade Show in Philadelphia where they met representatives of Sunmodo. After the trade show, the parties engaged in negotiations for Solar Innovations’ grant of a nonexclusive license for the clamp to Sunmodo. As a condition of the negotiations and Solar Innovations’ disclosure of information regarding the standing seam clamp, Liu and Schrock signed a Confidentiality Agreement on behalf of Sunmodo. The Confidentiality Agreement provided, in part:

… Potential/Existing Customer consents to the jurisdiction of the Courts of the Commonwealth of Pennsylvania shall (sic) be the sole and exclusive jurisdiction for resolving any such disputes. Potential/Existing Customer consents to the jurisdiction of the Courts of the Commonwealth of Pennsylvania for any claims or disputes arising out of this Confidentiality Agreement or any commercial relationship between the parties. Potential/Existing Customer further agrees that the Courts of the Commonwealth of Pennsylvania shall be the sole and exclusive jurisdiction for resolving such disputes.

(Confidentiality Agreement, Exhibit “A” to Complaint, at ¶ 7)

After execution of the Confidentiality Agreement, representatives of the parties, including Liu and Schrock, engaged in mutual communications which included telephone conversations and emails. Liu and Schrock requested copies of Solar Innovations’ patent documents for the clamp via email. These negotiations and communications culminated in the parties entering a License Agreement for the clamp.

After the execution of the License Agreement, Gregory Header, President of Solar Innovations, disclosed to Liu, Schrock, and other Sunmodo representatives, that Solar Innovations was in the process of developing a two-piece clamp for use on standing seam metal roofs. On December 12, 2012, Sunmodo employees Karry Yoerger and Jeff Greene attended a meeting with Header at Solar Innovations’ facility in Pine Grove. During that meeting, Header disclosed to Yoerger and Greene several concepts for improvements to Solar Innovations’ standing seam clamps. Liu discussed this visit with Yoerger and Greene prior to December 12, 2012 and also received a report from them after the meeting. The information divulged at the meeting was also related to Schrock. Solar Innovations claims that the information divulged during this meeting, along with other information provided by Solar Innovations, was later used by Liu and Schrock in developing their own clamp.

In his deposition, Liu testified that he founded Sunmodo in 2008 and has been the majority shareholder and has served on the Board of Directors since that time. He has also been a full-time employee since 2009. He currently serves as the CTO and President.

In April 2011, Liu attended the trade show in Pennsylvania where the initial contact between the parties took place. In 2012, he arranged to tour Solar Innovations’ facility in Pine Grove for the purpose of observing and learning about Solar Innovations’ clamp manufacturing process and to explore the possibility of entering into a business relationship with Solar Innovations. Prior to his visit, he had telephone and email contact with Solar Innovations representatives, some of which he initiated. During his March 8, 2012 visit, he was given a tour by Header and was shown the clamp manufacturing equipment and mock-ups of the clamps. Liu and Header also discussed Solar Innovations’ clamp manufacturing and production processes.

After the parties entered the License Agreement in March 2012, Liu also participated in telephone conversations with representatives of Solar Innovations. The frequency of these conversations varied from once or twice per week to several per month. From March 2012 through April 2013, Liu also exchanged emails with Solar Innovations representatives on a “sometimes more, sometimes less” basis. Liu acknowledged that he may have initiated some of these contacts. In some of these communications, Liu requested drawings and other technical information regarding Solar Innovations’ clamp.

Schrock currently acts as a consultant for Sunmodo. In the past, he has served as an employee, stockholder, member of the Board of Directors, and officer. When he held the position of Vice-President of Operations, he was responsible for engineering, warehouse management, employee management, organization, and assisting with sales and marketing. Schrock was involved in the negotiations which led to the License Agreement between the parties through emails with Solar Innovations representatives and also reviewed a summary of Yoerger and Greene’s visit to Solar Innovations and discussed it with them. It is alleged that he conducted the reverse engineering of the Solar Innovations clamp which led to his development of the new clamp with Liu.

Liu and Schrock invented a clamp for which they submitted a patent application in March 2013. Header’s Affidavit indicates Solar Innovations’ position that this clamp design incorporated much of Solar Innovations’ own technology which was disclosed to these two individuals and other Sunmodo representatives. Liu and Schrock subsequently assigned their invention to Sunmodo. A month after the patent application was filed, Sunmodo cancelled its five-year commitment pursuant to the parties’ License Agreement. Solar Innovations claims that Liu and Schrock negotiated and executed the License Agreement, thereby gaining access to Solar Innovations’ technology, and then reneged on their contractual obligations once they had obtained the desired information.

[W]hen 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. … Once the moving party supports its objections to personal jurisdiction, the burden of proving personal jurisdiction is upon the party asserting it. Courts must resolve the question of personal jurisdiction based on the circumstances of each particular case.

The Due Process Clause of the Fourteenth Amendment to the United States Constitution limits the authority of a state to exercise in personam jurisdiction over non-resident defendants. The extent to which jurisdiction is proscribed by the Due Process Clause is dependent upon the nature and quality of the defendant’s contacts with the forum state. Where a defendant “has established no meaningful contacts, ties or relations” with the forum, the Due Process Clause prohibits the exercise of personal jurisdiction. However, where a defendant has “purposefully directed” his activities at the residents of the forum, he is presumed to have “fair warning” that he may be called to suit there.

A defendant’s activities in the forum State may give rise to either specific jurisdiction or general jurisdiction. “Specific jurisdiction … depends on an ‘affiliation between the forum and the underlying controversy,’ principally, activity or an occurrence that takes place in the forum State and is therefore subject to the State’s regulation.” Because due process may permit specific jurisdiction based solely on “single or occasional” acts purposefully directed at the forum, it is narrow in scope, limiting a cause of action to the extent that it “arises out of or relates to” the very activity that establishes jurisdiction.

Alternatively, general jurisdiction involves circumstances, or a course of conduct, from which it is proper to infer an intention to benefit from, and thus an intention to submit to, the laws of the forum State. For an individual, the paradigm forum for the exercise of general jurisdiction is the individual’s domicile; for a corporation, it is an equivalent place, one in which the corporation is fairly regarded as at home. Thus, general jurisdiction may be exercised against foreign corporations when their affiliations with the forum State are so ‘continuous and systematic’ as to render them essentially at home there. In contrast to specific jurisdiction, a state that has general jurisdiction may adjudicate “both matters that originate within the State and those based on activities and events elsewhere.

General jurisdiction in Pennsylvania is governed by section 5301 of the Judicial Code. Section 5301(a) authorizes jurisdiction over a foreign corporation that carries on a “continuous and systematic part of its general business within this Commonwealth.” 42 Pa.C.S.A. § 5301(a)(2)(iii). When jurisdiction over a defendant is based on section 5301(a), any cause of action may be asserted against the defendant, whether or not it arises from the defendant’s conduct in Pennsylvania. 42 Pa.C.S.A. 5301(b). However, the propriety of such exercise must be tested against the Due Process Clause.

A foreign defendant who does not have sufficient contacts with Pennsylvania to establish general jurisdiction may nevertheless be subject to specific jurisdiction in Pennsylvania pursuant to the Pennsylvania Long–Arm Statute, 42 Pa.C.S.A. § 5322 (Bases of personal jurisdiction over persons outside this Commonwealth). Section 5322(a) contains ten paragraphs that specify particular types of contact with Pennsylvania deemed sufficient to warrant the exercise of specific jurisdiction. 42 Pa.C.S.A. § 5322(a). In addition, section 5322(b) operates as a “catchall,” providing that jurisdiction may be exercised over persons who do not fall within the express provisions of section 5322(a) to the fullest extent permitted by the Due Process Clause of the United States Constitution. 42 Pa.C.S.A. § 5322(b). Regardless, if a defendant’s activities in Pennsylvania only give rise to jurisdiction under section 5322(a) or (b), the plaintiff’s cause of action is limited to those activities which formed the basis of jurisdiction. See 42 Pa.C.S.A. § 5322(c).

Once it is determined that jurisdiction is authorized by the Long–Arm Statute, the party seeking relief must demonstrate that the exercise of jurisdiction conforms with the Due Process Clause. [T]wo requirements necessary for specific jurisdiction in Pennsylvania: (1) jurisdiction must be authorized by state Long–Arm Statute; and (2) jurisdiction must comport with constitutional principles of due process). Whether specific jurisdiction is proper under the Due Process Clause requires a two-part analysis: first, the plaintiff must demonstrate that the defendant purposefully established minimum contacts with the forum state; and second, the maintenance of the suit must not offend “traditional notions of fair play and substantial justice.”

A defendant purposefully establishes minimum contacts with the forum state when its contacts 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.

If the defendant has purposefully established minimum contacts in the forum State, these contacts must be considered on a case-by-case basis to determine whether they “are such as to make it reasonable and fair to require him to conduct his defense in the state.” Factors to be considered include (1) the burden on the defendant, (2) the forum state’s interest in adjudicating the dispute, (3) the plaintiff’s interest in obtaining convenient and effective relief, (4) the interstate judicial system’s interest in obtaining the most efficient resolution of controversies and (5) the shared interest of the several states in furthering fundamental substantive social policies.

Mendel v. Williams, 53 A.3d 810 (Pa. Super. 2012) (citations omitted).

The finding of a purposeful availment is influenced by the presence of economic impacts on the forum state as well as the parties’ relationship. Eastern Continuous Forms, Inc. v. Island Business Forms, Inc., 513 A.2d 466, 469 (Pa. Super. 1986). In determining whether an individual can reasonably anticipate being hailed into court, cases have placed an emphasis on the communications between the parties and on who initiated contact. Id. For example, refusal to make contractually-required payments due in Pennsylvania has been found to cause foreseeable injuries making it reasonably likely that a defendant would be held accountable by a Pennsylvania court. Id.

The fact that a defendant has reached out beyond the boundaries of its home state to negotiate and contract with a Pennsylvania corporation is significant to justify the exercise of personal jurisdiction. Eastern Continuous Forms, Inc. v. Island Business Forms, Inc., 513 A.2d 466 (Pa. Super. 1986). While entering into a contract is not in and of itself sufficient to establish minimum contacts, negotiations prior to the contract, its contemplated future consequences, the terms of the contract, and the parties’ actual course of dealing must be evaluated to determine whether the non-resident purposefully availed itself of the privilege of acting within the forum state. Crown-Globe, Inc. v. Grenoble Mills, Inc., 593 A.2d 906 (Pa. Super. 1991). A court should evaluate the totality of the parties’ dealings. Paul-Bulford Tank Company, Inc. v, R. F. Kilns, Inc., 698 A.2d 80, 82 (Pa. Super. 1997).

Pennsylvania’s long-arm statute permits the exercise of jurisdiction over an out-of-state individual who acts directly or by an agent in “(1) [t]ransacting any business in this Commonwealth” or in “(3) [c]ausing harm or tortious injury by an act or omission outside this Commonwealth.” 42 Pa.C.S.A. §5322(a)(1), (3).

Solar Innovations concedes that general jurisdiction is not applicable with regard to Liu and Schrock, but asserts these provisions of the Long Arm statute as a basis for specific personal jurisdiction over them by virtue of their activity in pursuing and obtaining Solar Innovations’ proprietary information and trade secrets and using them for their own benefit in breach of the Confidentiality Agreement.

Solar Innovations’ theory of recovery is based on conduct involving both the transaction of business within Pennsylvania and the commission of an intentional tort with resultant harm directed at this forum. As pointed out by Solar Innovations, the conduct of Liu and Schrock was similar defendant’s to those of the defendant in Kenneth H. Oaks v. Josephson, 568 A.2d 215 (Pa. Super. 1989), a case in which the court overruled the defendant’s challenge to the exercise of personal jurisdiction:

In the instant case, the facts, viewed in the light most favorable to the non-moving party, show that The Josephson Company solicited quotations from Oaks for the printing work for which the parties eventually contracted. In connection with the contract, Josephson mailed and “faxed” bid specifications to Oaks at its place of business in Northampton County, Pennsylvania. Oaks prepared its bid quotation in Pennsylvania in response to Josephson’s solicitation, and purchase orders by Josephson were mailed to Oaks in Pennsylvania. Numerous telephone calls between the parties’ offices in Pennsylvania and New Jersey were exchanged, and an employee of Josephson visited the Oaks plant in Pennsylvania on at least one occasion to review proofs in connection with the parties’ contract. All of the work on the contract was performed in Pennsylvania. In our view, these facts are sufficient to establish personal jurisdiction of appellee in the Pennsylvania courts. Appellee’s initiation of contact with appellant which eventually yielded a contract between the parties, the continuing telephone and mail communication between them, and appellee’s visit to Pennsylvania to review the work in progress, all point to the conclusion that appellee “purposefully availed” itself of the privilege of conducting its business activities within Pennsylvania. Appellee’s contacts with the forum were thus sufficient to meet the due process “minimum contacts” test.

568 A.2d at 217-218.

Here, both Liu and Schrock have held important decision-making positions at Sunmodo, both in the past and at present. Both were active in initiating, pursuing and establishing the business relationship and in entering the License Agreement with Solar Innovations. Both signed the Confidentiality Agreement, which included the choice of law clause.

Once their activities resulted in the establishment of the business relationship between the two corporate entities, Liu and Schrock were active in requesting and obtaining confidential proprietary information regarding Solar Innovations’ technology, research and patents for its clamp designs. Liu visited the Pine Grove facility and held discussions regarding clamp design with Header. Schrock reviewed the information obtained by Yoerger and Green regarding Solar Innovations’ clamp designs when they returned from their visit. Schrock was involved in the reverse engineering of Solar Innovations’ clamp for the purpose of developing a clamp for Sunmodo. After developing their own clamp utilizing the information derived from their dealings with Pennsylvania, both individuals were involved in using the information to develop their own clamp and in the assignment of the patent to Sunmodo.

Through all of this conduct, both Liu and Schrock played a significant role in causing the alleged harm suffered by Solar Innovations, a Pennsylvania entity and all of this conduct was directly related to the causes of action advanced by Solar Innovations in this suit. We therefore believe the facts established by the affidavits and depositions indicates the existence of sufficient minimum contacts of Liu and Schrock

These contacts with Pennsylvania were not attenuated, but were purposeful and continued to the degree that these Defendants could reasonably anticipate that they would be required to resolve any disputes in Pennsylvania. In addition to the aforementioned conduct, both Liu and Schrock signed the Confidentiality Agreement with the forum selection clause providing that all disputes would be resolved by the Pennsylvania Courts. Even nonsignatory third parties who are closely related to a contractual relationship have been bound by forum selection clauses contained in the contract underlying the relevant contractual relationship if the totality of the circumstances indicates that it was foreseeable to them that they would become involved in a contract dispute. See, Skold v. Galerma Labs, L.P., 99 F. Supp. 3d 585 (E.D.Pa. 2015).

It is alleged that the new clamp was developed by Liu and Schrock in their own right prior to the assignment to Sunmodo. Due to their positions with Sunmodo, these two individuals had extensive control over the execution of this Agreement. By undertaking to establish business ties for Sunmodo with Solar Innovations, using information gained through that relationship for their own purpose of developing their own clamp, and then passing ownership to Sunmodo, Liu and Schrock could reasonably be expected to foresee both the potential harmful effect of their misuse of the information on Solar Innovations in Pennsylvania, the possibility that they would be involved in litigation between the two corporate entities, and the possibility of being forced to defend their actions in Pennsylvania. See, Forum Publications, Inc. v. P.T. Publishers, Inc., 700 F. Supp. 236 (E.D.Pa. 1988), citing Calder v. Jones, 56 F. Supp.2d 552 (E.D.Pa. 1999).

Liu and Schrock claim that they cannot be subject to personal jurisdiction in Pennsylvania because all of their actions were taken on behalf of Sunmodo and not in their individual capacity. We recognize that, generally, an individual’s contacts as an agent of a corporation are not attributable to him for purposes of establishing specific jurisdiction. J. C. Snavely & Sons, Inc., 600 A.2d 972 (Pa. Super. 1991). However, “if a 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.” National Precast Crypt Company v. Dy-Core of Pennsylvania, Inc., 785 F.Supp. 1186, 1191 9W.D.Pa. 1992).

Courts have recognized an exception to this rule when a corporate officer has been personally involved in a corporation’s tortious conduct and have rested jurisdiction on that basis. Maleski by Taylor v. DP Realty Trust, 653 A.2d 54 (Pa. Commw. 1994). This exception recognizes that the purpose of the “corporate shield” doctrine is to protect corporate officers and directors from being hailed into court and exposed to personal liability in each state where the corporation does business based solely upon their status as corporate officers and directors while giving credence to the fact that in Pennsylvania, corporate officers and directors are liable for the tortious acts the corporation commits under their direction or with their participation. Id. To determine whether there is jurisdiction over a corporate officer or director whose only contacts with Pennsylvania are allegedly tortious acts taken as corporate officers or directors, it is necessary to make a case-by-case analysis to examine factors such as the officer’s role in the corporate structure, the quality of the officer’s forum contacts and the extent and nature of the officer’s participation in the alleged tortious conduct.

The conduct alleged, misappropriation of trade secrets and technology, is an intentional tort and a violation of the Pennsylvania Trade Secrets Act which allegedly caused damages to Solar Innovations business in Pennsylvania. However, Liu and Schrock argue that they cannot be held accountable for their commission of an intentional tort because there are no allegations that they directed any illegal conduct at Pennsylvania under the Calder effects test.

The Calder effects test has been used in Pennsylvania federal courts for determining whether a defendant is subject to a forum’s jurisdiction for the commission of an intentional tort. IMO Industries, Inc. v. Kiekert AG, 155 F.3d 254 (3d Cir. 1998); CDI v. Marck, 2005 WL 146890 (E.D.Pa. 2005).

Because, however, CDI has alleged that Marck committed intentional torts, CDI’s failure to establish that Marck has the requisite minimum contacts with Pennsylvania does not end the jurisdictional inquiry. See Calder v. Jones, 465 U.S. 783, 104 S.Ct. 1482, 79 L.Ed.2d 804 (1984). In the realm of intentional torts, a plaintiff may make an alternative showing against defendant and thereby “enhance otherwise insufficient contacts with the forum such that the ‘minimum contacts’ prong of the Due Process test is satisfied.” Imo, 155 F.3d at 260. The Calder “effects test” recognizes that the “unique relations among the defendant, the forum, the intentional tort, and the plaintiff may under certain circumstances render the defendant’s contacts with the forum-which would otherwise not satisfy the requirements of due process-sufficient.” Id. at 265.

In Imo, the Third Circuit set forth a three-prong test, known as the Calder “effects test,” to determine whether plaintiff has satisfied the “minimum contacts” inquiry required before a federal court may assert personal jurisdiction over an out-of-state defendant accused of an intentional tort. Under Imo, the plaintiff must allege facts sufficient to show that: (1) the defendant committed an intentional tort; (2) the plaintiff felt the brunt of the harm in the forum, such that the forum can be said to be the focal point of the harm suffered by the plaintiff as a result of the tort; and (3) the defendant expressly aimed his tortious conduct at the forum such that the forum can be said to be the focal point of the tortious activity. Id. at 265-66. To meet the third prong, plaintiff must be able to “point to specific activity indicating that the defendant expressly aimed its tortious conduct at the forum, i.e., that defendant “manifested behavior intentionally targeted at and focused on the forum.” Id. at 265.

CDI v. Marck, 2005 WL 146890 at pp. 2-3.

 

We believe that Liu and Schrock are not entitled to the protection of the corporate shield doctrine due to the nature of their positions within Sunmodo, their initiation of and participation in the establishment of the contractual relationship with Solar Innovations, most of which occurred in Pennsylvania, and their alleged misappropriation of information obtained during visits and contacts with Solar Innovations here. Moreover, even if we did not find sufficient contacts on the part of Liu and Schrock, we believe all prongs of the Calder test is satisfied such that the exercise of jurisdiction over them is appropriate. Solar Innovations has alleged an intentional tort, and the brunt of harm caused by that intentional tort is felt in Pennsylvania where Solar Innovations conducts its business. Both Liu and Schrock were involved in substantial acts in furtherance of the alleged goal of obtaining the confidential information in Pennsylvania and the use of that information enabled them to produce their own clamp which caused the harm. We therefore conclude that Pennsylvania is the focal point of the dealings and the harm suffered. We find no requirement that the alleged activity of an out-of-state defendant constitute illegal activity in order to satisfy jurisdictional requirements on the basis of intentional tort.

We find no reason why traditional notions of fair play and injustice would be offended by our exercise of jurisdiction over these individuals. For these reasons, we will overrule the Preliminary Objections lodged by Liu and Schrock.

1) The two corporate entities are involved in separate litigation before this Court with regard to the License Agreement, Solar Innovations, Inc. v. Sunmodo Corp., at No. 2013-00825.

2) See Calder v. Jones, 465 U.S. 783 (1984).

 

About the author

Ben has written 1030 articles for Lebanon County Legal Journal

Search