SNYDER BROTHERS, INC. v. EAST OHIO REGIONAL HOSPITAL AT MARTIN'S FERRY, INC.

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF PENNSYLVANIA

SNYDER BROTHERS, INC., )

)

Plaintiff, )

)

v. ) Civil No. 19-1238

)

EAST OHIO REGIONAL HOSPITAL )

at MARTIN'S FERRY, INC. and )

ALECTO HEALTHCARE SERVICES )

MARTIN'S FERRY, LLC dba )

EAST OHIO REGIONAL HOSPITAL, )

)

Defendants. )

OPINION and ORDER

On September 26, 2019, Plaintiff Snyder Brothers, Inc. filed this Breach of Contract

action against Defendants East Ohio Regional Hospital at Martin’s Ferry, Inc. and Alecto

Healthcare Services Martin’s Ferry, LLC doing business as East Ohio Regional Hospital

(“Alecto Healthcare”) (collectively “Defendants”). ECF No. 1. Defendants have filed separate,

but practically identical, Motions to Dismiss for lack of personal jurisdiction. ECF Nos. 10 & 14.

Plaintiff filed a Brief in Opposition to the Motions, to which Defendants’ filed a joint Reply.

ECF Nos. 21 & 22. Plaintiff then filed a Sur-reply Brief. ECF No. 25. For the following reasons,

Defendants’ Motions to Dismiss will be denied.

I. BACKGROUND

A. The Parties

Snyder Brothers, a Pennsylvania Corporation, located at 409 Butler Road, Kittanning,

Pennsylvania 16201, is “an independent producer of natural gas in Pennsylvania”. It supplies

natural gas to clients in Pennsylvania, Ohio, and West Virginia. Compl. ¶¶ 1, 14.ECF No. 1. The

East Ohio Regional Hospital at Martin’s Ferry, Inc., a non-profit Ohio Corporation, formerly

owned and operated the East Ohio Regional Hospital located at 90 N 4th Street, Martins Ferry,

Ohio 43935. Id. at ¶ 2; The hospital facility provided inpatient and outpatient medical care until

September 27, 2019, when it ceased operations. Alecto’s. Br. Supp. 1, ECF No. 12. Alecto

Healthcare, a for-profit, limited liability Delaware Corporation, is also located at 90 N 4th Street,

Martins Ferry, Ohio 43935. Compl. ¶ 3. The East Ohio Regional Hospital at Martins Ferry, Inc.

sold its assets, debts, and liabilities to Alecto Healthcare, which then became the owner and

operator of the East Ohio Reginal Hospital. Id. at 1, at ¶ 5. Defendant East Ohio Regional

Hospital at Martins Ferry, Inc. and Defendant Alecto Healthcare are affiliated corporations

sharing common management and control. Id. at ¶ 4. Neither the Plaintiff nor Defendants

distinguish between the relevant conduct of the two Defendants. Therefore, the two Defendants

will be collectively referenced as the “Hospital”.

B. The Agreements

On May 25, 2016, Plaintiff and the Hospital entered into a Natural Gas Agreement for

Plaintiff to supply natural gas to the East Ohio Regional Hospital. ECF No. 1-2. In two

successive Term Purchase Orders, the parties specified the monthly quantity and pricing for gas

to be supplied to the Hospital during each respective Term Purchase Order sales period. ECF

Nos. 1-3 & 1-4. The first Term Purchase Order, also executed on May 25, 2016, covered the

period of July 1, 2016 to December 31, 2018. ECF No. 1-3. The second Term Purchase Order,

executed by the Hospital on October 1, 2018 and by the Plaintiff on November 12, 2018, covered

the period of January 1, 2019 to December 31, 2021. ECF No. 1-4. The Natural Gas Agreement

provided that Plaintiff “agrees to sell and deliver, and [Hospital] agrees . . . to buy and take

delivery of all quantities of natural gas required at the Point of Delivery specified on purchase

order[s].” ECF No. 1-2, at ¶ 2. The “Point of Delivery”, as set forth in the Purchase Orders, was

to “Columbia Gas of Ohio City Gate,” located in Ohio. ECF No. 1-3, at ¶ 5 and ECF No. 1-4, at ¶

5. The Natural Gas Agreement provided that Plaintiff “shall obtain transportation to the Point of

Delivery,” and Defendants “shall obtain transportation from the Point of Delivery.” ECF No. 1-2,

at ¶ 3. The Natural Gas Agreement further provided that, “[t]itle to, and possession of, and risk of

loss of the Gas will pass from the Seller to the Buyer at the applicable Point of Delivery.” Id. at ¶

11. Plaintiff alleges that the Hospital breached the agreement by not paying for certain quantities

of natural gas the Hospital received and used during 2018 and 2019. Compl. at ¶¶ 21-23, 29.

C. Factual Averments in Support of Personal Jurisdiction

Plaintiff’s Complaint alleges that personal jurisdiction is proper, in part, for the

following reasons:

Defendants executed a contract with Plaintiff with full knowledge that Plaintiff was

a citizen of Pennsylvania; Defendants established a long-term relationship with

Plaintiff through their contract; Defendants purposefully invoked the benefits and

the protections of Pennsylvania law through the choice of law provision in the

parties’ contract Defendants repeatedly contacted Plaintiff in Pennsylvania

regarding the negotiations and the execution of the parties’ contract; Defendants

obligated themselves to remit payments to Plaintiff in Pennsylvania under the

parties’ contract in Pennsylvania and had done so; Defendants, by failing to remit

payment, knowingly inflicted financial harm on Plaintiff in Pennsylvania; and

Plaintiff’s claim arises out of and relates to Defendants’ contacts with Pennsylvania.

Compl. ¶ 7. Plaintiff retained T&F Exploration, LP, a Pennsylvania entity located in Pittsburgh,

Pennsylvania, as its agent to arrange for the sale of Plaintiff’s natural gas to potential clients.

Decl. of Frank Ross ¶ 4, ECF No. 21-4. The Hospital retained the services of Axis Energy

Solutions, LLC, from Wheeling, West Virginia, as their agent to locate, negotiate, and secure a

natural gas supplier. Id. ¶ 5. Plaintiff asserts that its agent responded to a February 25, 2016

inquiry from the Hospital’s agent seeking quotes for gas supply for the Hospital. Id. ¶ 7. The

parties’ Natural Gas Agreement was arranged through said brokers. Pltf. Br. Opp. 3, ECF No.

21. Following the agents’ emails and phone conversations between February 25, 2016 and May

16, 2016, initial agreements were reached. Ross Decl. ¶ 7 Both the Natural Gas Agreement and

the first Term Purchase Order were executed on May 25, 2016. From about July 5, 2017 through

November 6, 2018, the Plaintiff’s and the Hospital’s respective agents continued to communicate

with one another by email and telephone about the 2016 agreements, the Hospital’s past-due

payments, and they negotiated the second Term Purchase Order. Id. at ¶¶ 8-17, 19a-d, 19g. On

October 5, 2018, Plaintiff accepted Hospital’s oral offer to enter into a “payment plan

agreement.” Id. at ¶¶ 19a-c. Thereafter, on November 12, 2018, the parties signed their second

Term Purchase Order. After November 12, 2018, the agents continued to communicate by email

and telephone about the Hospital’s delinquent payments. Id. at ¶¶ 18,19e-f, 19h-l.

II. DISCUSSION

In accordance with the Federal Rules of Civil Procedure, a pleading may be dismissed for

lack of personal jurisdiction. Fed. R. Civ. P. 12(b)(2). Whether personal jurisdiction may be

exercised over an out-of-state defendant is a question of law for the court. Vetrotex Certainteed

Corp. v. Consolidated Fiber Glass Products Co., 75 F.3d 147, 150 (3d Cir. 1996). The plaintiff

bears the burden of establishing personal jurisdiction. O’Connor v. Sandy Lane Hotel Co., Ltd.,

496 F.3d 312, 316 (3d Cir. 2007). A federal court may exercise personal jurisdiction over a non-

resident defendant to the extent permissible under the law of the forum state. Fed. R. Civ. P.

4(k)(1)(A). Under Pennsylvania’s long-arm statute, the Court may assert personal jurisdiction

over a non-resident defendant “to the fullest extent allowed under the Constitution of the United

States.” 42 Pa.C.S.A. § 5322(b); Renner v. Lanard Toys Ltd., 33 F.3d 277, 279 (3d Cir.1994).

To determine whether there is personal jurisdiction, the court “must ask whether, under the Due

Process Clause, the defendant ‘has certain minimum contacts with. . . [Pennsylvania] such that

the maintenance of the suit does not offend traditional notions of fair play and substantial

justice.’” O’Connor, 496 F.3d at 316 (quoting International Shoe Co. v. Washington, 326 U.S.

310, 316 (1945)). Consistent with the requirements of due process, a District Court must ensure

that a defendant is subjected to personal jurisdiction only where that “nonresident Defendant has

‘certain minimum contacts [with the forum State] such that the maintenance of the suit does not

offend traditional notions of fair play and substantial justice’”. Helicopteros Nacionales de

Colombia, S.A. v. Hall, 466 U.S. 408, 414 (1984) (quoting International Shoe, 326 U.S. at 316).

Personal jurisdiction may be either general or specific, and both the quality and quantity of the

necessary contacts differs according to which sort of jurisdiction applies. Helicopteros, 466 U.S.

at 412.

General personal jurisdiction arises from a defendant’s contacts with the forum that are

unrelated to the cause of action being litigated. Goodyear Dunlap Tires Operations, S.A. v.

Brown, 564 U.S. 915, 919 (2011). Plaintiff does not allege that general jurisdiction exists over

the Hospital, therefore only specific jurisdiction is relevant.

Specific jurisdiction exists “when the plaintiff’s claim is related to or arises out of the

defendant’s contacts with the forum.” Mellon Bank (East) PSFS, Nat. Ass’n v. Farino, 960

F.2d 1217, 1221 (3d Cir.1992). Specific personal jurisdiction comports with due process as

long as the Defendant has sufficient minimum contacts with the forum state. See International

Shoe, 326 U.S. at 316. The due process inquiry must focus on “‘the relationship among the

defendant, the forum, and the litigation.’” Rush v. Savchuk, 444 U.S. 320, 327 (1980) (quoting

Shaffer v.Heitner, 433 U.S. 186 (1977)). First, the defendant must have “purposefully directed

[its] activities” at the forum. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985)

(quotation marks omitted). Second, the litigation must “arise out of or relate to” at least one of

those activities. Helicopteros Nacionales, 466 U.S. at 418 n.13; Grimes v. Vitalink

Communications Corp., 17 F.3d 1553, 1559 (3d Cir. 1994). Third, if the prior two

requirements are met, a court may consider whether the exercise of jurisdiction otherwise

“comport[s] with ‘fair play and substantial justice.’” Burger King, 471 U.S. at 476 (quoting

Int'l Shoe, 326 U.S. at 320 n. 2). It has long been recognized that minimum contacts exist

where the defendant “purposefully avails itself of the privilege of conducting activities within

the forum State, thus invoking the benefits and protections of its laws.” Hanson v. Denckla,

357 U.S. at 253 (1958). Put another way, when a defendant’s conduct is such that she

reasonably should have foreseen being hailed into court in the forum, the necessary minimum

contacts have been shown. See World–Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297

(1980). Even a single act can support specific jurisdiction, so long as it creates a “substantial

connection” with the forum. Burger King, 471 U.S. at 476.

When a defendant raises a lack of personal jurisdiction defense, the plaintiff bears the

burden of producing sufficient facts to establish that jurisdiction is proper. Mellon Bank (East)

PSFS, Nat'l Assoc., 960 F.2d at 1223. “In determining jurisdiction over a breach of contract

claim, we must consider the totality of the circumstances, including the location and character

of the contract negotiations, the terms of the contract, and the parties’ actual course of dealing.”

Remick v. Manfredy, 238 F.3d 248, 256 (3d Cir. 2001). “A contract may provide a basis for the

exercise of personal jurisdiction that meets due process standards, but a contract alone does not

‘automatically establish sufficient minimum contacts in the other party’s home forum.’” Grand

Entm't Grp., Ltd. v. Star Media Sales, Inc., 988 F.2d 476, 482 (3d Cir. 1993) (quoting Burger

King, 471 U.S. at 478).

Plaintiff argues that the Hospital has demonstrated sufficient minimum contacts in a

variety of ways, justifying this Court’s exercise of personal jurisdiction. Plaintiff argues in

favor of the exercise of personal jurisdiction by emphasizing the length of the parties’

relationship and contracts, the number and frequency of the parties’ communications, and the

complexity of the business relationship and resulting contracts. See Pltf. Br. Opp. 11-17.

Plaintiff also argues that personal jurisdiction exists because the Hospital sent payments into

Pennsylvania, and because the Hospital’s breach of contract caused injury in Pennsylvania. Id.

at 18-19, 20. Finally, the Natural Gas Agreement required that notices were to be sent to

Plaintiff in Pennsylvania and also designated Pennsylvania law as their choice of law provision

Id. at 19-20, 20-21. In response, the defense focuses on the ordinary nature of the parties’

agreement, arguing that the agreement required a Pennsylvania corporation to provide a single

product (gas supply) in Ohio to an Ohio resident (the Hospital). The defense argues that the

only significant connection the Hospital had with Pennsylvania was its purchase of a

Pennsylvania commodity (gas supply), and that the Hospital did not possess title to the gas until

it was in Ohio.

In considering the issue of whether the Hospital directed purposeful activity to

Pennsylvania, the Plaintiff argues that the Hospital solicited business from Pennsylvania. The

Natural Gas Agreement and first Purchase Order were arranged through agents acting on behalf

of each agent’s respective party. An agent’s actions are attributed to the principal, just as

though the principal had negotiated the agreement directly. See General Elec. Co. v. Deutz AG,

270 F.3d 144 (3d Cir.2001) (one aspect of analysis is whether defendant’s contacts with the

forum were instrumental to the contract formation) Here, Plaintiff asserts that the Hospital’s

agent, who was located in West Virginia, initiated communications with the Plaintiff’s agent,

who was located in Pennsylvania. Pltf. Br. Opp. 24. The defense does not refute this assertion.

In addition, the Complaint sufficiently alleges facts that numerous and essential

communications and negotiations occurred between the parties through their agents during the

initial formation and throughout the duration of the parties’ relationship until the alleged breach

at issue in this litigation. Thus, this factor supports Pennsylvania jurisdiction.

The terms of the contracts at issue are also relevant to the jurisdiction analysis. The

Natural Gas Agreement designated Pennsylvania law as the parties’ choice of law provision. In

addition, said Agreement provided that any notices were to be sent to Plaintiff in Pennsylvania.

Pursuant to the Agreement, the Hospital remitted payments to Pennsylvania. And, the Hospital’s

alleged breach of contract by non-payment caused damage in Pennsylvania. All of these factors

favor Pennsylvania Jurisdiction.

The length of the parties’ relationship and connection with the forum jurisdiction are

also relevant considerations. The “length of the contractual relations between parties residing in

different states is a major consideration in deciding personal jurisdiction matters.” Novacare,

Inc. v. Strategic Theracare All., No. CIV. A. 98-6205, 1999 WL 259848, at *9 (E.D. Pa. Apr.

30, 1999). Here, through several agreements, the parties contracted for gas supply over a 5 year

period. The contemplated length of the relationship, although not determinative, weighs in favor

of establishing personal jurisdiction. In addition, the extensive communications between the

parties from 2016 through 2019 also supports the exercise of Pennsylvania personal jurisdiction

over the Hospital.

The parties’ course of dealings is also instructive to the jurisdiction analysis. After

their initial agreement and Purchase Order, the parties negotiated and entered into a second

Term Purchase Order agreement for the supply of gas to the Hospital. Before that could

occur, the parties had to resolve the Hospital’s ongoing delinquent payment problems. The

resolution came by way of a separate “payment plan agreement” proposed by the Hospital.

The payment plan agreement and the Second Purchase Order evidences a course of

conduct that the parties intended to continue their long-term business relationship. These

transactions created a longer-term relationship and provided for the Hospital’s continuing

and extended obligations to the Plaintiff in Pennsylvania. Such conduct supports the

conclusion that the parties purposefully availed themselves of the benefits and protection of

Pennsylvania law and it favors Pennsylvania personal jurisdiction over the Hospital.

As regards the minimum contact analysis in this case, the Hospital attempts to distinguish

this case from Plaintiff’s cited cases that support Pennsylvania jurisdiction.1 Defense argues that,

because the Natural Gas Agreement provided for delivery of the gas from Pennsylvania to Ohio,

Plaintiff’s cited cases do not apply. However, in Thrivest Legal Funding, LLC v. Gilbert, the

District Court for the Eastern District of Pennsylvania found that defendant’s contacts with

Pennsylvania were sufficient to enable the exercise of specific personal jurisdiction. 2017 WL

1208064 (E.D. Pa. Apr. 3, 2017). In Thrivest, the defendant, Gilbert, entered into several

contracts with plaintiff for advance funding of lawsuits he hoped to settle, after which he would

pay a fee to plaintiff. 2017 WL 1208064, *1. Gilbert never personally entered Pennsylvania. He

communicated with plaintiff on numerous occasions, including after Gilbert failed to make

payments. Id. In finding the necessary minimum contacts, the District Court noted that Gilbert’s

continuing communications into Pennsylvania beyond the negotiation phase, the choice-of-law

provision, and Gilbert’s payments by check mailed into Pennsylvania supported Pennsylvania

Jurisdiction. 2017 WL 1208064, *3-*4. The District Court also noted that Gilbert’s contracts

required a continuing obligation to repay plaintiff for advanced fees that lasted until Gilbert’s

underlying lawsuits resolved. 2017 WL 1208064, *4.

1 Plaintiff cites the following cases, among others, to support specific jurisdiction. O’Connor v. Sandy Lane Hotel

Co., Ltd., 496 F.3d 312 (3d Cir. 2007) (defendant directed mailings and phone calls into Pennsylvania in hopes of

getting Pennsylvania residents to buy its goods Remick v. Manfredy, 238 F.3d 248, 256 (3d Cir. 2001) (defendant

solicited a Pennsylvania attorney to provide legal services in Pennsylvania pursuant to the Pennsylvania Rules of

Professional Conduct); Mellon Bank (East) PSFS, Nat. Ass’n v. Farino, 960 F.2d 1217 (3d Cir. 1992) (defendants

obtained three loans from a Pennsylvania bank governed by Pennsylvania law); N. Penn Gas Co. v. Corning Nat. Gas

Corp., 897 F.2d 687 (3d Cir. 1990) (plaintiff gas company was required to and did reserve storage space in gas

company’s storage fields located in Pennsylvania); JDTech Industries v. Mortech Manufacturing Company, Inc., 2018

WL 5300400 (W.D. Pa. Sept. 27, 2018) (defendant shipped, or directed, its merchandise into Pennsylvania over a

period of time); Vizant Technologies, LLC v. Whitechurch, 97 F.Supp. 3d 618 (E.D. Pa. 2015) (out-of-state defendants

entered into employment agreements requiring the provision of professional services to a Pennsylvania employer,

which also required travel to and work in Pennsylvania); Guzzi v. Morano, 2011 WL 4631927 (E.D. PA. Oct. 6, 2011)

(defendants conducted meetings in Pennsylvania to recruit a Pennsylvanian to sell insurance policies to Pennsylvania

residents); and Bizarre Foods Inc. v. Premium Foods, Inc., 2003 WL 21120690 (E.D. Pa. May 16, 2003) (defendant

Here, the contacts between the parties extend beyond bare minimal contact. The parties

engaged in extensive, ongoing communications that lasted beyond the initial negotiation phase.

The Hospital also demonstrated a desire to engage in a long-term business relationship with

Plaintiff through successive agreements and transactions. Pursuant to their long-term supply

agreements the Hospital established continuing obligations to pay Plaintiff. The Hospital

initiated the payment plan negotiations for agreement, which further established the Hospital’s

continuing obligations and contract with Plaintiff, a resident Pennsylvania corporation. The

Natural Gas Agreement contained a choice-of-law provision in favor of Pennsylvania and

required notices to be sent to Plaintiff in Pennsylvania. Finally, the Hospital sent payments into

Pennsylvania and its breach of contract caused damages in Pennsylvania. All of the above arise

from and relate to the Hospital’s contacts and contracts with the Plaintiff in Pennsylvania. They

also relate to the Plaintiff’s Breach of Contract claim in this litigation. Helicopteros Nacionales,

466 U.S. at 418 n.13. Accordingly, there are sufficient minimum contacts for the exercise of

specific personal jurisdiction over the Hospital within the Western District of Pennsylvania.

Finally, the Hospital is located in the Southern District of Ohio, which is in relatively

close proximity to the Western Districtof Pennsylvania. Given the increasing use of electronic

communications and exchanges of documents, discovery over the geographic distance is not

burdensome. Pennsylvania also has an interest in adjudicating a dispute that concerns a

Pennsylvania corporation, where the parties have dictated that Pennsylvania law will apply. As

such, litigation in this forum would impose minimal burden upon the Hospital. Accordingly, in

the totality of circumstances, exercising Pennsylvania jurisdiction over the Hospital in this case

does not offend traditional notions of fair play and substantial justice.

III. CONCLUSION

Defendants’ Motions to Dismiss, ECF Nos. 10 & 14, are hereby DENIED. Defendants shall

file an Answer to the Complaint within 14 days of the filing of this Opinion and Order.

IT IS SO ORDERED.

DATE

Marilyn J. Horan

United States District Judge