# Powerhouse Communications, LLC v. Midstate Communication Contractors, Inc.

> District Court, M.D. Pennsylvania · September 20, 2024

URL: https://www.frixlaw.com/law-library/cases/10667776

## Case

- **Court:** District Court, M.D. Pennsylvania
- **Decided:** September 20, 2024
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10667776

## How later opinions describe it (automated extraction)

- noting Section 766A “has not been recognized by a Pennsylvania appellate court as the law of this Commonwealth”
- finding claims for breach of non-compete and confidentiality provisions related to defendants’ securing employment with plaintiff
- emphasizing that “all of the essential functions that allowed [d]efendants to earn a living”—such as employee benefits, timekeeping, and pay— “were channeled through Pennsylvania”

## Opinion text

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
POWERHOUSE COMMUNICATIONS, : Civil No. 1:24-CV-00565
LLC, :
:
Plaintiff, :
:
v. :
:
MIDSTATE COMMUNICATION :
CONTRACTORS, INC., and :
CLAYTON LAWRENCE, :
:
Defendants. : Judge Jennifer P. Wilson
MEMORANDUM
Before the court is a motion to dismiss the amended complaint or, in the
alternative, to transfer venue filed by Defendants Midstate Communication
Contractors, Inc. and Clayton Lawrence (collectively, “Defendants”). (Doc. 11.)
Defendants seek to dismiss the entire amended complaint, pursuant to Federal
Rules of Civil Procedure 12(b)(2) and (b)(3), and to dismiss Counts VI and VII
pursuant to Rule 12(b)(6). The court finds the facts alleged in the amended
complaint justify exercising personal jurisdiction over Defendants as to all claims.
The court further finds that the Middle District of Pennsylvania is the proper venue
for this action. Finally, the court determines that Count VI of the amended
complaint fails to state a claim, but Count VII survives the 12(b)(6) challenge.
Thus, for the reasons that follow, the court will grant in part and deny in part
Defendants’ motion to dismiss or, in the alternative, to transfer venue. (Doc. 11.)
FACTUAL BACKGROUND
A. Powerhouse’s Business Operations Generally
Plaintiff, Powerhouse Communications, LLC (“Powerhouse”), is a

Pennsylvania-based contractor in the business of “constructing and installing fiber-
optic networks throughout Pennsylvania and other states.” (Doc. 9, ¶ 8.) While
Powerhouse operates in multiple states, Powerhouse has only one office—located

in New Cumberland, Pennsylvania—which serves as its “operational
headquarters.” (Id. ¶ 1.) Powerhouse’s headquarters houses all company
departments, including, e.g., human resources, operations, and personnel. (See id.)
Accordingly, all Powerhouse personnel are centrally managed from its

Pennsylvania headquarters. (Doc. 17-3, ¶ 8.) For instance, its Pennsylvania
headquarters is where Powerhouse makes hiring decisions. (Doc. 9, ¶ 1.) So, too,
Powerhouse administers all employee benefits from its headquarters such that all

employees must contact headquarters “to resolve administrative issues.” (Doc. 17-
3, ¶¶ 9–10.)
B. Powerhouse Hires Lawrence
In early 2021, Defendant Clayton Lawrence (“Lawrence”)—an Arkansas

resident—sought employment with Powerhouse and completed a Powerhouse job
application. (Doc. 17-3, ¶ 15.) Powerhouse did not contact Lawrence about
potential employment before he completed the job application; rather, Lawrence
initiated contact with Powerhouse through his application.1 (Doc. 17-2, ¶ 46.)
Powerhouse subsequently hired Lawrence. (Doc. 9, ¶ 12).

At the outset of Lawrence’s employment, Powerhouse issued certain
company property to Lawrence, and he signed several policy documents in turn.
Powerhouse issued Lawrence a company credit card, for which he signed a “Credit

Card Policy” bearing Powerhouse letterhead and its Pennsylvania headquarters
address. (Doc. 17-3, pp. 15–16.)2 Powerhouse also issued Lawrence a company
fleet truck registered in Pennsylvania and bearing Pennsylvania license plates for
“work-related travel.” (Id. ¶ 19.) In connection with the fleet truck, Lawrence

signed a “Policy on Fleet Safety” and a “vehicle maintenance procedure,” both of
which bore Powerhouse letterhead and Powerhouse’s headquarters address. (Id.
pp. 18–22, 28.) To pay for his fleet truck’s gas, Powerhouse issued Lawrence a

“company gas card,” and Lawrence signed a “Fuel Card Policy,” also bearing
Powerhouse letterhead and Powerhouse’s headquarters address. (Id. p. 24.)
Powerhouse also issued Lawrence a Pennsylvania-registered RV, which Lawrence
physically picked up at Powerhouse’s headquarters during a visit in September

2022. (See Doc. 17-2, ¶ 49.) This was Lawrence’s sole visit to Powerhouse’s

1 Lawrence disputes Powerhouse’s factual assertion. He claims that he “did not contact
Powerhouse” but, rather, he received an application from Powerhouse after his former boss
reached a supposed agreement with Powerhouse about staffing a project in Iowa. (Doc. 12-1,
¶¶ 4–6.) Factual disputes at this stage of litigation must be resolved in favor of Powerhouse.

2 For ease of reference, the court uses the page numbers from the CM/ECF header.
headquarters. (Doc. 12-1, ¶ 8.) His visit lasted “several days” and involved
attending meetings, picking up “materials,” receiving trainings, and enjoying

Powerhouse’s annual company picnic. (Doc. 9, ¶ 32; Doc 17-2, ¶ 48.)
Also as part of his employment, Lawrence signed a “Non-Solicitation
Policy.” (Doc. 9-4, p. 2.) The non-solicitation policy states, in relevant part, that

during his employment and “for a period of three years thereafter”:
[Lawrence] shall not, directly or indirectly, whether on behalf of
himself or anyone else: (i) induce or attempt to induce a business
associate of Powerhouse Communications to refrain from business with
Powerhouse Communications or its affiliates; (ii) use for his benefit or
disclose the name and/or requirements of any such business associate
to any other person or persons, natural or corporate; or (iii) solicit any
of the employees of [Powerhouse] to leave the employ of [Powerhouse]
or hire anyone who is any employee of [Powerhouse] or has worked for
[Powerhouse].
(Id.)
During his employment at Powerhouse, Lawrence worked as a project
manager on fiber optic installation projects in Iowa, Arkansas, and Nebraska.
(Doc. 9, ¶ 34; Doc. 12-1, ¶ 7.) Lawrence’s job responsibilities included, in part,
helping Powerhouse “prepar[e] bids for new business projects.” (Doc. 9, ¶ 35.) To
do so, Lawrence would estimate a proposed project’s cost using a variety of
internal Powerhouse data, such as subcontractor costs and pricing agreements,
supplier costs, and other project-related costs. (Id. ¶ 35.) This work involved
Lawrence regularly communicating with supervisors and other Powerhouse
employees based in Pennsylvania. (See Doc. 17-1, ¶ 43.) Lawrence also accessed
Powerhouse’s internal data to “negotiat[e] contracts between Powerhouse and

project owners, subcontractors, and suppliers.” (Doc. 9, ¶ 36.) Powerhouse
“developed and created” this internal, confidential data at its Pennsylvania
headquarters and stored the data on servers located there. (Doc. 17-2, ¶ 40.)

C. Midstate Becomes a Powerhouse Subcontractor
In February 2022, Defendant Midstate Communication Contractors Inc.
(“Midstate”), a Missouri corporation, completed an application to become a
Powerhouse subcontractor. (Doc. 9, ¶ 38; Doc. 17-2, p. 13.) Powerhouse claims

that it did not solicit Midstate’s business. (Doc. 17, p. 15.) Thereafter,
Powerhouse and Midstate executed several related contracts, including a
subcontractor agreement, two pricing addenda to the subcontractor agreement, and
a mutual nondisclosure agreement. (Doc. 9-5; Doc. 9-6; Doc. 17-2, ¶¶ 34–35.)

Both the subcontractor agreement and the mutual nondisclosure agreement contain
Pennsylvania choice-of-law provisions. (Doc. 9-5, p. 7; Doc. 9-6, p. 3.) The
mutual nondisclosure agreement prohibits the parties’ from using “Confidential

Information . . . for the benefit of the recipient or others.” (Doc. 9-6, p. 2.) The
agreement also contains a non-solicitation clause, which prohibits Midstate and
Powerhouse from “solicit[ing] eachother’s [sic] customers, vendors or licensers,
clients or employees or disclos[ing] the Confidential Information to anyone.” (Id.
p. 3.)

Midstate’s subcontractor work for Powerhouse was limited to projects in
Arkansas and Iowa. (See Doc. 9, ¶ 77; Doc. 17-2, ¶ 36.) Midstate has never done
any work in Pennsylvania, for Powerhouse or otherwise. (Doc. 12-1, ¶ 5.)

Nevertheless, Midstate’s communication with Powerhouse’s Pennsylvania
headquarters was important to its work as a subcontractor. As Powerhouse alleges,
its chief operating officer and co-owner, Jeremy Houck, “directed work, gave
instructions, and discussed bill payments and job pricing” with Midstate from

Powerhouse’s Pennsylvania headquarters. (Doc. 17-2, ¶ 36.) In general,
Powerhouse’s and Midstate’s working relationship involved regular
communication between Houck and Seth Barclay, Midstate’s president. (Id.)

D. Iowa Project with Windstream
In January 2023, Powerhouse entered a contract with Windstream Holdings,
Inc. (“Windstream”) to install fiber optic cables at an Iowa site (“Iowa Project”).
(Doc. 9, ¶ 73.) Windstream was one of Powerhouse’s regular business partners.

The two companies had worked together in other states, including Georgia, New
York, Nebraska, and Pennsylvania. (Doc. 9, ¶ 75.) For the Iowa Project, Midstate
served as Powerhouse’s subcontractor and Lawrence served as Powerhouse’s
project manager. (Id. ¶¶ 77–78.) Powerhouse had prepared Lawrence for
Windstream projects like the Iowa Project through trainings on Powerhouse’s
“confidential Windstream project management process,” which covered “all

aspects of managing Windstream projects—from start to finish.” (Doc. 17-2,
¶ 41.) These trainings occurred in person at Powerhouse headquarters, in person in
Iowa, and remotely over video conferencing software. (Id.)

A few months later, Midstate allegedly abandoned the Iowa Project after
completing approximately one percent of its work. (Doc. 9, ¶¶ 84–85.)
Powerhouse subsequently hired a replacement subcontractor to complete the Iowa
Project. (Id. ¶ 87.) Nevertheless, Powerhouse alleges that it felt downstream

effects from Midstate’s purported dereliction. It allegedly caused Powerhouse to
be unable to complete other Windstream projects in Iowa and “undermined
Powerhouse’s relationship with Windstream.” (Id. ¶¶ 89–90.) It also allegedly

caused Windstream not to award future contracts to Powerhouse. (Id. ¶ 91.) In
fact, Windstream instead apparently awarded a different Iowa project directly to
Midstate. (Id. ¶ 95.) This alleged solicitation of Windstream is at the heart of the
present dispute.

Powerhouse alleges that Midstate “solicited, encouraged, or otherwise
induced” Lawrence to work for Midstate and to misappropriate Powerhouse’s
confidential business information, including “confidential pricing information” and

“Powerhouse’s confidential Windstream project management process.” (Id. ¶ 82,
83.) Consequently, Lawrence allegedly began collaborating with and/or working
for Midstate before and after his employment with Midstate ended in July 2023.

(Id. ¶ 81.) Midstate and Lawrence then together allegedly used Powerhouse’s
confidential information to solicit Windstream’s business. (Id. ¶ 92–93.)
Powerhouse also alleges that Lawrence solicited two Powerhouse employees to

work for Midstate. (Id. ¶ 94.) As a result of Lawrence’s and Midstate’s alleged
actions, Powerhouse claims it lost future Windstream contracts throughout the
country that it reasonably expected to obtain. (Id. ¶ 96.)
PROCEDURAL HISTORY

Powerhouse initially filed a complaint in the Pennsylvania Court of
Common Pleas, and Defendants removed the state lawsuit to this court on April 3,
2024. (Doc. 1). Defendants then filed a motion to dismiss for lack of jurisdiction
or, alternatively, to transfer venue. (Doc. 6). On May 1, 2024, Powerhouse

responded with an amended complaint in which it alleges (1) breach of contract
against Midstate (Count I); (2) two breach of contract claims against Lawrence
(Counts II and III); (3) violations of the Pennsylvania Uniform Trade Secrets Act

against Midstate and Lawrence (Counts IV and V); (4) tortious interference with
existing business relations against Midstate (Count VI); (5) tortious interference
with prospective contractual relations against Midstate (Count VII); and (6) unfair
competition against Midstate (Count VIII).3 (Doc. 9.)

In response, on May 15, 2024, Defendants filed the present motion to
dismiss, along with a brief in support, for lack of personal jurisdiction, improper
venue, and failure to state a claim. (Docs. 11, 12.) Powerhouse opposed the

motion, and Defendants filed a reply brief. (Docs. 17, 22.) Powerhouse then
requested leave to file a sur-reply brief, which was granted, and filed said sur-reply
brief on August 9, 2024. (Docs. 25–27.) Thus, this motion is ripe for review.
JURISDICTION

This court has subject matter jurisdiction over this action pursuant to 28
U.S.C. § 1332, since there is complete diversity of citizenship among the parties
and the amount in controversy exceeds $75,000. This court is also the proper
venue, as explained below, pursuant to 28 U.S.C. § 1441(a).

MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION
Defendants seek to dismiss this action for lack of personal jurisdiction
pursuant to Federal Rule of Civil Procedure 12(b)(2). Defendants argue that this

court cannot exercise personal jurisdiction over them for any of Powerhouse’s
claims.

3 Powerhouse pleaded its unfair competition claim in the alternative to its Pennsylvania Uniform
Trade Secrets Act claim against Midstate.
A. Standard of Review
When a defendant moves to dismiss for lack of personal jurisdiction, the

plaintiff bears the burden of establishing the court's jurisdiction over the defendant.
Miller Yacht Sales, Inc. v. Smith, 384 F.3d 93, 97 (3d Cir. 2004) (citing Pinker v.
Roche Holdings, Ltd., 292 F.3d 361, 368 (3d Cir. 2002)). “However, when the
court does not hold an evidentiary hearing on the motion to dismiss, the plaintiff

need only establish a prima facie case of personal jurisdiction and the plaintiff is
entitled to have its allegations taken as true and all factual disputes drawn in its
favor.” Id.

A federal court sitting in Pennsylvania in a diversity suit exercises personal
jurisdiction according to the law of Pennsylvania. Fed. R. Civ. P. 4(k)(1)(A);
O'Connor v. Sandy Lane Hotel Co., 496 F.3d 312, 316 (3d Cir. 2007). The
Pennsylvania long-arm statute provides for jurisdiction “based on the most

minimum contact with th[e] Commonwealth allowed under the Constitution of the
United States.” 42 PA. CON. STAT. § 5322(b).
The Due Process Clause protects individuals from “being subject to the

binding judgments of a forum with which he has established no meaningful
‘contacts, ties, or relations.’” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 471–
72 (1985) (quoting Int’l Shoe Co. v. Washington, 326 U.S. 310, 319 (1945)). Thus,
a forum state’s ability to exercise personal jurisdiction over a defendant depends
on that defendant “hav[ing] 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.’” Int’l Shoe Co., 326 U.S. at 316 (quoting Milliken v. Meyer,
311 U.S. 457, 463 (1940)). From these principles, two theories of personal
jurisdiction have emerged: general jurisdiction and specific jurisdiction. Ford

Motor Co. v. Mont. Eighth Judicial Dist. Court, 592 U.S. 351, 358 (2021).
1. General Personal Jurisdiction
Defendants are subject to general personal jurisdiction “when their
affiliations with the State are so ‘continuous and systematic’ as to render them

essentially at home in the forum State.” Goodyear Dunlop Tires Operations, S.A.
v. Brown, 564 U.S. 915, 919 (2011). A state in which an individual is domiciled
may exercise general personal jurisdiction over that individual. Ford Motor Co.,
592 U.S. at 358–59. Apart from exceptional cases, a corporate entity is subject to

general personal jurisdiction in “its place of incorporation and principal place of
business.” Id. at 359.
There is no dispute that Midstate and Lawrence are not subject to general

personal jurisdiction in Pennsylvania. The amended complaint alleges that
Midstate is a Missouri corporation with a principal place of business in Missouri
and that Lawrence is domiciled in Arkansas. (Doc. 9, ¶¶ 1–2.) Accordingly, there
is no basis to subject Midstate or Lawrence to general personal jurisdiction in
Pennsylvania.

2. Specific Personal Jurisdiction
Specific personal jurisdiction, on the other hand, is more limited. A
defendant is subject to specific personal jurisdiction only when a “claim arises
from or relates to [the defendant’s] conduct purposely directed at the forum state.”

Marten v. Godwin, 499 F.3d 290, 296 (3rd Cir. 2007). Accordingly, the traditional
test for specific personal jurisdiction consists of a three-part analysis: (1) whether
defendants purposely directed their activities at the forum; (2) whether the claims

arise out of or relate to the activities directed at the forum; and (3) whether
assertion of jurisdiction “comports with ‘fair play and substantial justice.’”
O’Connor, 496 F.3d at 317 (3rd Cir. 2007) (quoting Burger King Corp., 471 U.S.
at 476). This analysis is generally claim-specific, because specific personal

jurisdiction arises from a relationship between a defendant’s forum-state contacts
and the claims. See Remick v. Manfredy, 238 F.3d 248, 255 (3rd Cir. 2001). Thus,
the court will analyze separately specific personal jurisdiction as to the contract

claims and the tort claims.4

4 Although specific personal jurisdiction is generally analyzed on a claim-by-claim basis,
“certain factually overlapping claims” need not be analyzed individually. O’Connor, 496 F.3d at
317 n.3. Given that Powerhouse’s tort claims all depend on the same alleged misappropriation
of confidential information, the court will not analyze those claims separately. See TorcUp, Inc.
v. Aztec Bolting Servs., Inc., 386 F. Supp. 3d 520, 525 n.2 (E.D. Pa. 2019).
i. Contract Claims
a. Defendants purposely directed their activities at
Pennsylvania.
The first inquiry is whether Lawrence and Midstate purposefully directed
contacts at Pennsylvania such that it can be said they purposely availed themselves

of the privilege of operating here and, thus, benefitted from the protection of
Pennsylvania’s law. Burger King Corp., 471 U.S. at 475–76. In contract cases,
the analysis considers the totality of the contractual circumstances, “including the

location and character of the contract negotiations, the terms of the contract, and
the parties’ actual course of dealing.” Remick, 238 F.3d at 256.
Here, Lawrence initiated the contractual relationship with Powerhouse when
he submitted his employment application. This weighs in favor of asserting

jurisdiction over Lawrence. See Remick, 238 F.3d at 256 (suggesting that reaching
into a forum state to solicit a business relationship supports exercising
jurisdiction); Mellon Bank (E.) PSFS, Nat’l Ass’n v. Farino, 960 F.2d 1217, 1223

(3rd Cir. 1992) (finding borrowers who initiated relationship with Pennsylvania
bank “purposefully availed themselves of the privilege of conducting business in
the Commonwealth”). In seeking employment with Powerhouse, Lawrence knew,
or should have known, that he was entering into a relationship with a Pennsylvania

company. Lawrence signed a variety of company policies all bearing
Powerhouse’s Pennsylvania headquarters address. The non-solicitation policy
Lawrence signed also bore this address. Moreover, he traveled to Powerhouse’s
Pennsylvania headquarters. During his visit there, he picked up company-issued

vehicles registered in Pennsylvania for his use. Lawrence’s employment with
Powerhouse was not transitory; he worked for Powerhouse from 2021 to 2023.
See Vizant Techs., LLC v. Whitchurch, 97 F. Supp. 3d 618, 631 (E.D. Pa. 2015)

(considering relevant to personal jurisdiction analysis the fact defendants worked
for Pennsylvania plaintiff for two and a half years and one year and seven months,
respectively).
Furthermore, contacts with Pennsylvania appear to have been critical for

Lawrence’s job. During his employment, Lawrence maintained “regular[], if not
daily,” communication with Powerhouse’s Pennsylvania-based employees. (Doc
17-2, ¶ 43.) Lawrence needed access to internal Powerhouse data that was housed

on Powerhouse’s Pennsylvania servers to carry out his job responsibilities. Also,
all administrative aspects of Lawrence’s employment, such as payroll and
employee benefits, were managed from Powerhouse’s Pennsylvania location,
making contacts with Pennsylvania essential to his continued employment. See

Numeric Analytics, LLC v. McCabe, 161 F. Supp. 3d 348, 355 (E.D. Pa. 2016)
(emphasizing that “all of the essential functions that allowed [d]efendants to earn a
living”—such as employee benefits, timekeeping, and pay— “were channeled

through Pennsylvania”); see also M3 USA Corp. v. Hart, 516 F. Supp. 3d 476, 494
(E.D. Pa. 2021) (considering relevant to personal jurisdiction analysis the fact
“many of [an employer’s] back-office functions occurred in Pennsylvania”).

Under these circumstances, it can be said that Lawrence “deliberately ‘reach[ed]
out beyond one state and create[d] continuing relationships and obligations’” with
Powerhouse so as to satisfy the purposeful availment requirement. Burger King

Corp., 471 U.S. at 473 (quoting Travelers Health Ass’n v. Commonwealth of Va.
ex rel. State Corp. Comm’n, 393 U.S. 643, 647 (1950)).
As to Midstate, it too initiated a business relationship with Powerhouse,
which it knew or should have known was a Pennsylvania company. Midstate’s

subcontractor agreement and the mutual nondisclosure agreement bore
Powerhouse’s Pennsylvania headquarters address. Both of those documents also
contained Pennsylvania choice-of-law provisions. See Burger King Corp., 471

U.S. at 482 (explaining choice-of law provisions should not be ignored when
analyzing purposeful availment).
In addition to initiating the business relationship, Midstate relied on regular
contacts with Powerhouse’s Pennsylvania headquarters to facilitate the

relationship. For instance, Powerhouse prepared in Pennsylvania the two pricing
addenda to the subcontractor agreement, which were the results of negotiations
between the two companies. (Doc. 17-2, ¶¶ 34–35.) So, too, Midstate’s work

appears to have depended on receiving directions from Powerhouse personnel in
Pennsylvania. Under these facts, Midstate’s contacts with Pennsylvania satisfy the
purposeful availment test.

b. Powerhouse’s contract claims arise out of or
relate to Defendants’ activities directed at
Pennsylvania.
The second inquiry is whether Powerhouse’s breach of contract claims arise
out of or relate to Lawrence’s and Midstate’s respective contacts with
Pennsylvania. In contract cases, “this test examines whether any of the
defendant’s contacts with the forum are relevant to the merits of the plaintiff’s
claim.” See O’Connor, 496 F.3d at 319–20. In other words, it examines “whether

the defendant’s contacts with the forum were instrumental in either the formation
of the contract or its breach.” Id. at 320 (quoting Gen. Elec. Co. v. Deutz AG, 270
F.3d 144, 150 (3rd Cir. 2001)).
Here, both defendants, on their own accord, each sought out a business

relationship with what they knew or should have known was a Pennsylvania
company. Thus, Lawrence’s and Midstate’s contacts with Pennsylvania were
instrumental in forming the contracts at issue in this case—Lawrence’s non-

solicitation policy and Midstate’s mutual nondisclosure agreement. Cf. Vizant
Techs., Inc., 97 F. Supp. 3d at 631 (finding claims for breach of non-compete and
confidentiality provisions related to defendants’ securing employment with
plaintiff). The second prong of the test is, therefore, satisfied.
c. Assertion of jurisdiction comports with fair
play and substantial justice.
Asserting personal jurisdiction over Defendants is “presumptively
constitutional” once the first two parts of the analysis are satisfied; it is then

Defendants’ burden to “present a compelling case that the presence of some other
considerations would render jurisdiction unreasonable.” O’Connor, 496 F.3d at
324 (quoting Burger King Corp., 471 U.S. at 477). Only in rare cases is it
unreasonable to assert jurisdiction over defendants who have “purposefully

engaged in forum activities.” Pennzoil Prods. Co. v. Colelli & Assocs., Inc., 149
F.3d 197, 207 (3rd Cir. 1998) (quoting Asahi Metal Indus. Co. v. Superior Ct. of
Cal., Solano Cty., 480 U.S. 102, 116 (1987) (Brennan, J., concurring)). Here,

Lawrence and Midstate do not present any argument as to why jurisdiction would
be unreasonable under this third part of the test. They have, therefore, failed to
present “a compelling case” to defeat specific personal jurisdiction.
ii. Tort Claims

In cases involving intentional torts, courts may exercise specific personal
jurisdiction over defendants if either the traditional three-part test or the Calder
effects test are satisfied. The Calder 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
otherwise would not satisfy the requirements of due process—sufficient.” IMO
Indus., Inc. v. Kiekert AG, 155 F.3d 254, 265 (3rd Cir. 1998) (quoting Keeton v.
Hustler Magazine, Inc., 465 U.S. 770, 780 (1984)). This is not to say that the

Calder test “imposes a universally lower jurisdictional hurdle.” Hasson v.
FullStory, Inc., No. 23-2535, 2024 WL 4049220, at *4 (3rd Cir. Sept. 5, 2024).
Rather, the Calder test focuses on whether “the defendant expressly aimed its

tortious conduct at the forum, and thereby made the forum the focal point of the
tortious activity.” Miller Yacht Sales, Inc, 384 F.3d at 99 (quoting IMO Indus.,
Inc., 155 F.3d at 265).
Specifically, the Calder test requires three showings: (1) “[t]he defendant

committed an intentional tort”; (2) “[t]he 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 that tort”; and (3) “[t]he 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.” IMO Indus., Inc., 155 F.3d at 265–66.
The Calder test is not the exclusive jurisdictional test for intentional tort
claims. See Hasson, 2024 WL 4049220, at *4 (3rd Cir. Sep. 5, 2024).

Nevertheless, both parties rely on the Calder test in making their jurisdictional
arguments, and neither presents argument as to why the traditional test is or is not
satisfied. Since the court finds the Calder test is satisfied here, it need not consider

the traditional test.
a. The torts alleged in Powerhouse’s amended
complaint are intentional torts.
In its amended complaint, Powerhouse alleges the following tort claims:
violations of the Pennsylvania Uniform Trade Secrets Act, tortious interference

with existing business relations, tortious interference with prospective contractual
relations, and in the alternative, unfair competition. It is clear that these claims are
intentional torts.
b. Powerhouse felt the brunt of the alleged harm
in Pennsylvania.
In analyzing the second part of the Calder test, district courts in this circuit

have focused on where the trade-secrets owner resides, since “trade secrets are
located . . . in the state where the owner resides.” PPG Indus., Inc. v. Jiangsu Tie
Mao Glass Co., Ltd., No. 2:15-cv-00965, 2020 WL 1526940, at *11 (E.D. Pa. Mar.
31, 2020) (citing Paolino v. Channel Home Ctrs., 668 F.2d 721, 721 n.2 (3rd Cir.

1981)). For instance, the court in Cabot Corp. v. Niotan, Inc. held that the brunt of
the harm caused by misappropriation of a company’s trade secrets was not
Pennsylvania since that company was incorporated in Delaware and had its

principal place of business in Massachusetts. No. 08-cv-01691, 2011 WL
4625269, at *14 (E.D. Pa. Sept. 30, 2011); see also, e.g., PPG Indus., Inc., 2020
WL 1526940, at *12 (finding Pennsylvania the focal point of the harm caused by
trade-secret misappropriation when the trade secrets were owned by a Pittsburgh-
headquartered company); Gov’t Emps. Ins. Co. v. Nealy, 262 F. Supp. 3d 153, 166
(E.D. Pa. 2017) (“[T]he ‘brunt of the harm,’ under Calder . . . occur[s] in the states

where the trade-secret owner is incorporated or headquartered.”); Eddie Kane Steel
Prods., Inc. v. Ala. Plate Cutting Co., No. 18-cv-15167, 2019 WL 3281623, at *7
(D.N.J. July 19, 2019) (finding New Jersey the focal point of the harm caused by

misappropriating trade secrets of New Jersey-incorporated company).
Here, Powerhouse is incorporated in Pennsylvania and stores the allegedly
misappropriated trade secrets on servers that are physically located in
Pennsylvania. Therefore, Powerhouse felt the brunt of Defendants’ alleged

tortious conduct in Pennsylvania.
c. Lawrence and Midstate expressly aimed their
tortious conduct at Pennsylvania.
To satisfy the third element of the Calder test, a plaintiff must show: (1) “the
defendant knew that the plaintiff would suffer the brunt of the harm caused by the
tortious conduct in the forum;” and (2) “point to specific activity indicating that the

defendant expressly aimed its tortious conduct at the forum.” Marten, 499 F.3d at
297–98 (quoting IMO Indus., Inc., 155 F.3d at 266). Here, Lawrence and Midstate
each had involved, continuous relationships with Powerhouse. Given this, it would

be unreasonable to think Lawrence and Midstate did not know Powerhouse would
feel the brunt of their alleged theft in Pennsylvania. Thus, the issue is whether
Lawrence and Midstate each expressly aimed their tortious conduct at
Pennsylvania.

District courts in this circuit have tended to find that defendants who steal
trade secrets aim their conduct at the forum state in which the trade-secrets owner
resides. For instance, in Eddie Kane Steel Products, an Alabama-based employee

and Alabama-based company were subject to personal jurisdiction in New Jersey
under the Calder test when they allegedly stole the New Jersey-based plaintiff’s
trade secrets. 2019 WL 3281623, at *7. That court reasoned that “if a defendant
steals trade secrets from a plaintiff, the defendant expressly aims his or her tortious

activity at the state where the plaintiff resides.” Id. at *6. The Cabot Corp. court
adopted similar reasoning. 2011 WL 4625269, at *15. That court explained the
focal point of defendant’s misappropriation of trade secrets “is where plaintiff’s

trade secrets are located and from where they were presumably stolen.” Id.;
accord PPG Indus., Inc., 2020 WL 1526940, at *11 (reasoning the focal point of
misappropriating trade secrets is where the trade secrets are located and, thus, the
forum where plaintiff resides).

So, too, district courts in this circuit have found that out-of-state, remote
employees who misappropriate their employer’s trade secrets aim their tortious
conduct at the employer’s forum state. In Vizant Technologies, LLC, for example,

the court found that Georgia-based employees expressly aimed their conduct at
Pennsylvania when they misappropriated a Pennsylvania-based company’s trade
secrets. 97 F. Supp. 3d at 632; see also, e.g., M3 USA Corp., 516 F. Supp. 3d at

498 (employee working remotely in New Jersey aimed tortious conduct at
Pennsylvania when she misappropriated her Pennsylvania-based employer’s trade
secrets).

Based on these principles, the court is persuaded here that Lawrence and
Midstate aimed their alleged tortious conduct at Pennsylvania. Lawrence and
Midstate both allegedly misappropriated confidential information and trade secrets
to which it had access through its business relationship with Powerhouse. Since

the situs of Powerhouse’s trade secrets is Pennsylvania, Defendants’ aimed their
tortious conduct at Pennsylvania when they allegedly stole the trade secrets.
Therefore, the third element of the Calder test is satisfied as to both Defendants,

and the court may assert specific personal jurisdiction over them as it pertains to
Powerhouse’s tort claims.
MOTION TO DISMISS FOR IMPROPER VENUE
Defendants also seek to dismiss this action for improper venue pursuant to

Federal Rule of Civil Procedure 12(b)(3), arguing that venue is improper under 28
U.S.C. § 1391(b). Defendants’ argument is unavailing, because that statue does
not govern cases removed from state court. Instead, venue in removed cases is
governed by 28 U.S.C. § 1441(a). Polizzi v. Cowles Magazines, Inc., 345 U.S.
663, 665 (1953); Chesapeake Thermite Welding, LLC v. R.R. Sols., Inc., 22-cv-
02004, 2024 WL 387687, at *5 (M.D. Pa. Jan. 31, 2024). Section 1441(a) states

that an action “may be removed . . . to the district court of the United States for the
district and division embracing the place where such action is pending.” 28 U.S.C.
§ 1441(a). This action was initially filed in the Pennsylvania Court of Common

Pleas of Cumberland County. Therefore, the Middle District of Pennsylvania is
the proper venue, and the court will not dismiss the amended complaint for
improper venue.
MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM

A. Standard
Defendants also seek to dismiss Powerhouse’s state law tortious interference
claims—Counts VI and VII—pursuant to Federal Rule of Civil Procedure 12(b)(6).
In order “[t]o survive a motion to dismiss, a complaint must contain sufficient

factual matter, accepted as true, to ‘state a claim to relief that is plausible on its
face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007)). A claim is plausible on its face “when the
plaintiff pleads factual content that allows the court to draw the reasonable

inference that the defendant is liable for the misconduct alleged.” Id. (quoting
Twombly, 550 U.S. at 556). “Conclusory allegations of liability are insufficient” to
survive a motion to dismiss. Garrett v. Wexford Health, 938 F.3d 69, 92 (3d Cir.
2019) (quoting Iqbal, 556 U.S. at 678–79). To determine whether a complaint
survives a motion to dismiss, a court identifies “the elements a plaintiff must plead

to state a claim for relief,” disregards the allegations “that are no more than
conclusions and thus not entitled to the assumption of truth,” and determines
whether the remaining factual allegations “plausibly give rise to an entitlement to

relief.” Bistrian v. Levi, 696 F.3d 352, 365 (3d Cir. 2012).
B. Tortious Interference with an Existing Contract (Count VI)
Defendants argue that dismissal of Count VI is necessary, in part, because
Powerhouse failed to allege that Defendants’ purported actions led Windstream to

breach or otherwise fail to perform under Windstream’s contract with Powerhouse
for the Iowa Project. (Doc. 12, p. 26.) Powerhouse responds that it is not required
to allege any such breach or failure to perform on Windstream’s part. (Doc. 17, p.
48.) Even if it were, Powerhouse’s argument continues, it has by alleging that

Midstate’s abandonment caused Windstream not to pay Powerhouse due to delays
in Powerhouse’s ability to complete other Windstream projects. (Id.)
Powerhouse’s argument misses the mark. To explain why, an overview of

Pennsylvania’s adoption of the Restatement (Second) of Torts is needed. Sections
766 and 766A of the Restatement (Second) of Torts concern tortious interference
with an existing contract. Abraham v. Thomas Jefferson Univ., No. 20-cv-2967,
2024 WL 1120987, at *56 (E.D. Pa. Mar. 14, 2024). Section 766 states, “[o]ne
who intentionally and improperly interferes with the performance of a contract
(except a contract to marry) between another and a third person by inducing or

otherwise causing the third person not to perform the contract, is subject to
liability to the other for the pecuniary loss resulting to the other from the failure of
the third person to perform the contract.” RESTATEMENT (SECOND) OF TORTS § 766

(Am. Law Inst. 1979) (emphasis added). Section 766A, on the other hand, states,
“[o]ne who intentionally and improperly interferes with the performance of a
contract (except a contract to marry) between another and a third person, by
preventing the other from performing the contract or causing his performance to

be more expensive or burdensome, is subject to liability to the other for the
pecuniary loss resulting to him.” Id. § 766A (emphasis added).
The difference between Sections 766 and 766A concerns whom the

defendant directs its conduct towards. As the Third Circuit has recognized,
“[s]ection 766 addresses disruptions caused by an act directed not at the plaintiff,
but at a third person: the defendant causes the promisor to breach its contract with
the plaintiff. Section 766A addresses disruptions caused by an act directed at the

plaintiff: the defendant prevents or impedes the plaintiff’s own performance.”
Gemini Physical Therapy & Rehab., Inc. v. State Farm Mut. Auto. Ins. Co., 40
F.3d 63, 66 (3rd Cir. 1994) (quoting Windsor Secs., Inc. v. Hartford Life Ins. Co.,

986 F.2d 655, 660 (3rd Cir. 1993)).
Pennsylvania has “adopted the Restatement (Second) of Torts § 766,” which
“defines the tort of intentional interference with existing contractual relations.”

Salsberg v. Mann, 262 A.3d 1267, 1270 (Pa. Super. Ct. 2021) (citing Adler,
Barish, Daniels, Levin & Creskoff v. Epstein, 393 A.2d 1175, 1182 (Pa. 1978)).
Pennsylvania has not adopted Section 766A, and the Third Circuit has predicted

the Pennsylvania Supreme Court would not. Gemini, 40 F.3d at 66; Phillips v.
Selig, 959 A.2d 420, 436 n.13 (Pa. Super. Ct. 2008) (noting Section 766A “has not
been recognized by a Pennsylvania appellate court as the law of this
Commonwealth”). Therefore, Pennsylvania does not recognize a tortious

interference claim arising from a defendant’s conduct directed at a plaintiff. So,
for instance, a defendant’s seizure of plaintiffs’ merchandise, which rendered
plaintiffs unable to fulfill certain contracts, could not be the basis for a tortious

interference claim. Safa v. City of Phila., No 13-cv-5007, 2014 WL 2011487, at
*5–6 (E.D. Pa. May 16, 2014).
Here, Powerhouse’s claim fits squarely within the scenario Section 766A
contemplates. Powerhouse claims that Midstate abandoned the Iowa Project,

“knowing that its abrupt work stoppage would interfere with the existing business
relationship between Powerhouse and Windstream.” (Doc. 9, ¶ 137.) Yet,
Midstate was Powerhouse’s subcontractor. Thus, Midstate’s alleged abandonment

would affect Powerhouse’s ability to fulfill its contractual obligations to
Windstream. Indeed, Powerhouse alleges it “had to hire a new subcontractor to
complete the [Iowa Project]” and its inability to finish other Windstream jobs

caused them to lose revenue, since Powerhouse is only paid for completed jobs.
(Id. ¶¶ 87, 89.) Powerhouse alleges no facts that would suggest Midstate directed
conduct at Windstream concerning the Iowa Project. Since Midstate’s alleged

conduct made it more difficult for Powerhouse to perform its contractual duties,
the court will dismiss Count VI.
The court now must determine whether to dismiss Count VI with prejudice.
Powerhouse is entitled to amend its complaint “unless such an amendment would

be inequitable or futile.” Phillips v. Cty. of Allegheny, 515 F.3d 224, 245 (3rd Cir.
2008). Here, Powerhouse already amended its complaint, which it filed in
response to Defendants’ first motion to dismiss. In their first motion to dismiss,

Defendants proffered nearly identical arguments as to why the court should dismiss
this claim. After reviewing this argument in Midstate’s first motion to dismiss,
Powerhouse still failed to plead a viable claim in the first amended complaint.
Moreover, neither of Powerhouse’s pleadings detail how conduct directed at

Windstream constituted tortious interference with the Iowa Project. Given these
considerations, a second amendment of this claim would be futile. See 44
Hummelstown Assocs., LLC v. Am. Select Ins. Co., 542 F. Supp. 3d 328, 342 (M.D.

Pa. 2021) (finding amendment futile when plaintiff already amended its complaint
in response to a motion to dismiss and the “clear import” of plaintiff’s allegations
made it clear its claim was legally deficient). Accordingly, the court will dismiss

Count VI with prejudice.
C. Tortious Interference with Prospective Contractual Relations (Count
VII)
Four elements comprise a tortious interference with prospective contractual
relations claim: “(1) a prospective contractual relation; (2) the purpose or intent to
harm the plaintiff by preventing the relation from occurring; (3) the absence of

privilege or justification on the part of the defendant; and (4) the occasioning of
actual damage resulting from the defendant’s conduct.” Kachmar v. SunGard
Data Sys., Inc., 109 F.3d 173, 184 (3rd Cir. 1997). Defendants argue only that

Plaintiff failed to allege sufficiently the first element—the existence of a
prospective contractual relation. The court disagrees.
The concept of a prospective contractual relation “has an evasive quality,
eluding precise definition.” Thompson Coal Co. v. Pike Coal Co., 412 A.2d 466,

471 (Pa. 1979). Nevertheless, “a mere hope” does not satisfy this element. See id.
Rather, a claim will survive a motion to dismiss only if the plaintiff’s allegations
“establish a reasonable probability that but for the defendant’s interference, a

contract would have materialized.” E. Frank Hopkins Seafood, Co. v. Olizi, No.
2:17-cv-01558, 2017 WL 2619000, at *5 (E.D. Pa. June 17, 2017).
Powerhouse has sufficiently alleged a reasonable probability that a contract
with Windstream would have come into existence but for Midstate’s alleged

interference. Powerhouse alleges that it had an involved business relationship with
Windstream that involved partnering on projects in “Georgia, Iowa, New York,
Nebraska, and Pennsylvania.” (Doc. 9, ¶ 75.) Yet, Powerhouse’s expectation of

future contracts with Windstream is not simply based on their past relationship.
Cf. Neopart Transit LLC v. CMB N.A. Inc., 314 F. Supp. 3d 628, 639 (E.D. Pa.
2018) (finding a “historical relationship” with clients insufficient to “establish a
prospective contractual relationship”). Powerhouse instead alleges that it had

conversations with Windstream about future projects for which Powerhouse would
install fiber-optic networks. Given the substantial working relationship between
the two companies, it is reasonable to infer at this stage of the litigation that these

communications were more substantive than speculative and gave rise to a
reasonable probability of future contracts materializing. In sum, Powerhouse’s
allegations establish that there was a reasonable probability of future contractual
relations between Powerhouse and Windstream. Thus, Powerhouse has carried its

pleading burden on the first element, and Count VII of the amended complaint will
proceed.
ALTERNATIVE MOTION TO TRANSFER VENUE
Defendants alternatively seek to transfer venue to the Western District of

Missouri or the Western District of Arkansas, pursuant to 28 U.S.C. § 1406(a).
(Doc. 12, pp. 29–30.) That provision permits district courts to transfer, rather than
dismiss, “cases laying venue in the wrong division or district.” 28 U.S.C. §
1406(a). Since venue is proper, as explained above, the court will not transfer the

case to another venue.
CONCLUSION
For the reasons stated herein, the court finds that it can exercise specific

personal jurisdiction over Defendants and that venue is proper in the Middle
District of Pennsylvania. Thus, the court will deny Defendant’s motion to dismiss
the amended complaint for lack of personal jurisdiction and improper venue. The
court will also deny Defendants’ alternative motion to transfer venue.

The court further finds that Powerhouse’s amended complaint fails to state a
claim for tortious interference with existing contractual relations but succeeds in
stating a claim for tortious interference with prospective contractual relations.

Therefore, the court will grant in part and deny in part Defendants’ motion to
dismiss Counts VI and VII for failure to state a claim. An appropriate order will
issue.
s/Jennifer P. Wilson
JENNIFER P. WILSON
United States District Judge
Middle District of Pennsylvania

Dated: September 20, 2024

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10667776. Public record. Not legal advice.