Ralph J. Paolino, Appellant, v. Channel Home Centers and Air Control Industries, Inc, 668 F.2d 721 (3d Cir. 1982)

If a purchaser of property from a trustee knew, or should have known, that disposition of the property was a breach of trust, the purchaser is charged with the same trust. The rule is applicable both to express and to constructive trusts. Cameron v. People's Bank of Maytown, 297 Pa. 551, 556, 147 A. 657, 659 (1929). Notice need not be actual. It suffices that a person of ordinary prudence would inquire as to the existence of a trust. Curtis v. Serrill, 303 Pa. 267, 154 A. 487 (1931). In this case, Paolino could prove, at the very least, that Channel was put on notice of Air Control's alleged breach of trust as soon as the complaint was served. Channel nevertheless continued to market the device; indeed it vigorously asserts its continuing right to do so. If Paolino proves that distribution of the device is a breach of a constructive trust by Air Control he will be entitled to injunctive relief against Channel at least prospectively, and perhaps for an accounting with respect to sales made after service of the complaint. Whether he will be able to establish an earlier notice must await proof at trial. But a Rule 12(b) (6) dismissal was improper since he could, under the complaint, prove a set of facts which would support relief respecting post-complaint sales by Channel.

Air Control

Air Control does not urge that the complaint fails to state a claim on which relief can be granted against it.¹  It contends, instead, that it may not be subjected to in personam jurisdiction in the Eastern District of Pennsylvania. Affidavits establish that Air Control maintains a plant in Nashville, Tennessee, at which it manufactures the heat reclaiming device alleged to be Paolino's trade secret. This is Air Control's only facility. It sold the products to Channel through the solicitation of commissioned New Jersey sales representatives, and shipped them to Channel at its headquarters in Whippany, New Jersey. Channel, after acquiring title, reshipped the devices to Pennsylvania and advertised for their sale in that state. Air Control is not qualified to do business in Pennsylvania. It did, however, do business with a Pennsylvania resident with respect to a form of intellectual property-an alleged trade secret-recognized by Pennsylvania law, and signed an agreement with that resident agreeing to acquire details of that trade secret in confidence. In breach of that agreement it has manufactured and sold the devices for resale in Pennsylvania and elsewhere. Some of the devices have been advertised for sale and sold in Pennsylvania. Such manufacture and sale of the devices has eroded the value of Paolino's intellectual property.

Air Control concedes that the Pennsylvania long-arm statute, 42 Pa.C. § 5321 et seq., available in the federal courts by virtue of Fed. R. Civ. P. 4(e), provides for the exercise of jurisdiction to adjudicate "to the fullest extent allowed under the Constitution of the United States." Relying on World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S. Ct. 559, 62 L. Ed. 2d 490 (1980), it contends a lack of minimum contacts with Pennsylvania which would justify that state's adjudicatory authority to reach it. The district court accepted this argument. In doing so, however, the court failed to observe the settled distinction between personal jurisdiction in cases where the defendant's forum-related activities do not give rise to the claim, and personal jurisdiction in cases where the claim arises out of a specific forum-related act or series of acts. See Schwilm v. Holbrook, 661 F.2d 12 (3d Cir. 1981). General contact counting may be appropriate in the former situation, for the object is to establish that the defendant has such continuous and substantial affiliations with the forum that any lawsuit against it might be entertained. In this case Paolino is not interested in establishing such general amenability to process, but only amenability with respect to a claim growing out of a single transaction. The focus in such a case must be upon the relationship of the transaction to the forum.

In World-Wide Volkswagen v. Woodson the Court made the point that when dealing with transactional in personam jurisdiction interests of the other states in the federal union demand that the forum refrain from adjudicating disputes which affect its public policies only slightly and happenstantially. See Comment, Federalism, Due Process, and Minimum Contacts: World-Wide Volkswagen Corp. v. Woodson, 80 Colum. L. Rev. 1341, 1345-52 (1980). Plainly the Court did not intend to preclude a "tort out/harm in" exercise of long-arm jurisdiction when the forum as a place of harm was clearly and specifically foreseeable. See 444 U.S. at 297, 100 S. Ct. at 566. In this case, the allegations of the complaint suggest that Air Control, knowing that Paolino had an interest in intellectual property recognized by the law of Pennsylvania where he resided, obtained his property in confidence and set out on a course of action which would destroy it. Since Pennsylvania law created that property interest²  that state's interest in protecting the Pennsylvania resident from its willful destruction was clearly and specifically foreseeable. Inducing a Pennsylvanian to entrust that creature of Pennsylvania law to Air Control on a promise of confidentiality, and then misappropriating it, obviously would cause harm in Pennsylvania no matter where the misappropriation occurred. Moreover, since Tennessee and Pennsylvania both recognize trade secrets,³  no public policy of the only other state concerned with the transaction will be offended by litigation in a Pennsylvania forum.

Thus the federalism aspect of the rule of International Shoe Co. v. Washington, 326 U.S. 310, 66 S. Ct. 154, 90 L. Ed. 95 (1945), is fully satisfied. Nor does Hanson v. Denckla, 357 U.S. 235, 78 S. Ct. 1228, 2 L. Ed. 2d 1283 (1958), suggest otherwise. Florida's attempt in that case to exercise in personam jurisdiction over a Delaware trustee did not involve any action by the trustee at all, let alone action by the trustee causing foreseeable harm in Florida. If the Delaware trustee in Hanson v. Denckla had embezzled the res, leaving the Florida cestui que trust destitute, the power of the Florida court to exercise adjudicatory authority in the interest of a Florida resident would, we think, be clear. In determining when a state may exercise transactional rather than general personal jurisdiction it is essential to focus on the nature of the claim and the forum's particular interest in the person asserting it.

The other aspect of the International Shoe rule, besides that of federalism, is fairness to the defendant in choosing the forum. As we noted in another context, "(t)his limitation upon judicial power prevents a state of a plaintiff's choosing from coercing defense of a suit in a forum which, because of its remoteness from defendant's residence and from witnesses and proof, would be fundamentally unfair." Jonnet v. Dollar Savings Bank of New York, 530 F.2d 1123, 1140 (3d Cir. 1976) (Gibbons, J., concurring). In a United States District Court these forum non conveniens concerns, which in a state court may have serious procedural due process overtones, are of less weight because of the power to grant a transfer motion under 28 U.S.C. § 1404(a). We have held since United States v. Berkowitz, 328 F.2d 358 (3d Cir.), cert. denied, 379 U.S. 821, 95 S. Ct. 42, 13 L. Ed. 2d 32 (1964), that the transferor court need not have jurisdiction over the defendant in order to grant a plaintiff's transfer motion. See Schwilm v. Holbrook, supra, 661 F.2d at 15. Moreover, even in a state court, fairness to the defendant as to a forum must, in a case where the forum is that plaintiff's residence, take some account of the fact that the defendant's residence is inconvenient for the plaintiff. Due process, after all, is a two way street. The present record contains no suggestion that litigating in Philadelphia rather than in Nashville with respect to a relationship knowingly undertaken with a Pennsylvania resident would be fundamentally unfair to Air Control. Indeed since the claim against Channel will be litigated in Philadelphia, the proofs against Air Control and Channel will overlap, and Air Control may be obliged to indemnify its customer, the likelihood of any degree of unfairness is remote.

Conclusion

The judgment appealed from will be reversed and the case remanded for further proceedings.