Case of the Day: Sugartown Worldwide, LLC v. Shanks, 2016 U.S. Dist. LEXIS 60239 (E.D. Pa. May 6, 2016)

Summary:

Plaintiff holds a judgment against a Hong Kong corporation called Outlook International Ltd. ("Outlook"), which is a partnership between defendants Kenneth Shanks and James Michael Glover. After having failed to collect the judgment against the corporation, the plaintiff sued Shanks and Glover directly to satisfy the judgment. In January 2016, the court held a jury trial which found Glover liable. Glover filed a motion to vacate the judgment under Rule 60(b)(4) of the Federal Rules of Civil Procedure, claiming the court never had personal jurisdiction over him.

The court granted Glover's motion. It was not disputed that Glover never had meaningful contact with the forum, i.e. Pennsylvania, as he moved to Asia in 1989 and has resided there ever since. Glover's only connection with the forum is indirectly through Outlook, and Glover was not involved with the Outlook's transaction with the plaintiff that gave rise to the litigation.

Initially, the court found jurisdiction over Glover based on the theory that Glover may be an alter ego of Outlook, which (according to the court) purposefully directed its fraudulent activity toward Pennsylvania. But after the trial, the court found that there was not enough evidence to show Glover was Outlook's alter ego. The court also found that, based on the Supreme Court's decision of Walden v. Fiore, 134 S. Ct. 1115 (2014), Glover's contact with plaintiff alone could not serve as the basis for the minimum contacts analysis, even if the plaintiff is located in Pennsylvania. The requirement is that there be general contacts between the party and the forum, and the plaintiff failed to establish that Glover had such contacts with Pennsylvania.

Takeaway:

The defendant in this case pulled off one of the rarest feats in litigation--vacating an adverse judgment based on procedural grounds. Hats off to the lead attorney George C. Werner from Barley Snyder LLP.

This is one of the first cases applying Walden, a significant Supreme Court case regarding personal jurisdiction. It is well-established that, for a court to have jurisdiction over a party, the party must have "minimum contacts" with the forum. Walden clarified that the contact must be a more general kind, not simply the contact with the plaintiff who resides in the forum--which is exactly the kind of contact that Glover had with Pennsylvania in this case.

Personal jurisdiction is one of the most significant issues involving parties in Asia, as it is the threshold issue that determines whether they can even be sued in a U.S. court. A more rigorous minimum contacts analysis under Walden would likely lead to less number of Asian parties appearing before a U.S. court.