Bean Sprouts LLC v. LifeCycle Construction Servs. LLC, No. 001268-CV-2021 (Pa. Super. Feb. 17, 2022)
The Superior Court of Pennsylvania recently raised the bar for state courts to assert jurisdiction over out-of-state defendants in actions brought by residents arising from out-of-state projects.
Bean Sprouts LLC, a Pennsylvania excavator, performed work on military bases in Alabama and California under contracts with LifeCycle Construction Services LLC, a Virginia prime contractor. The parties had repeatedly contracted with one another on out-of-state projects since 2017. While their contracts required submitting change orders in writing, the parties established an informal process whereby LifeCycle would verbally issue change orders, and Bean Sprouts would perform the work and submit invoices for payment. When disputes arose regarding Bean Sprouts’ entitlement to such payments, Bean Sprouts filed suit against LifeCycle in Pennsylvania state court.
In response, LifeCycle asserted that it did not have sufficient contacts with Pennsylvania to fall under its jurisdiction. The trial court agreed and dismissed Bean Sprouts’ complaint without prejudice. Bean Sprouts appealed, claiming that the trial court erred by finding it did not have personal jurisdiction over LifeCycle.
On appeal, Bean Sprouts claimed that LifeCycle made continuous, systematic contacts with Pennsylvania during the parties’ “long-term and ongoing contractual relationship” through, inter alia, its solicitation of bids from Bean Sprouts and its submission of communications and payments to Bean Sprouts’ Pennsylvania office. Bean Sprouts further asserted that it moved equipment from Pennsylvania to the worksites, that LifeCycle caused injury incurred in Pennsylvania, and that Pennsylvania had an interest in protecting its businesses against nonpayment for services. Bean Sprouts also pointed to a past Pennsylvania project on which LifeCycle had worked as additional evidence of its contacts with the state.
The Superior Court interpreted Bean Sprouts’ arguments as raising issues based on specific or “case-related” jurisdiction. The court explained that for such jurisdiction to lie over an out-of-state defendant, then (1) the plaintiff’s cause of action must have arisen out of or relate to the out-of-state defendants’ forum-related contacts; (2) the defendant must have purposely directed its activities, particularly as they relate to the plaintiff’s cause of action, toward the forum state or purposely availed itself of the privilege of conducting activities therein; and (3) the exercise of personal jurisdiction over the nonresident defendant must be reasonable and fair. Accordingly, the court considered LifeCycle’s connection with Pennsylvania and not merely with Bean Sprouts. For jurisdiction to lie, Bean Sprouts could not be the only link between LifeCycle and Pennsylvania. Rather, LifeCycle’s actions must have been “sufficient to establish that it intentionally relied on the machines of Pennsylvania justice in some fashion.”
The court concluded that Bean Sprouts’ evidence did not establish a relationship between LifeCycle and Pennsylvania. LifeCycle’s request for bid submission to Bean Sprouts was a narrow advertisement directed solely to Bean Sprouts and not a “purposeful contact with the state.” Nor did LifeCycle’s correspondence with Bean Sprouts constitute purposeful availment of Pennsylvania as a forum. Moreover, LifeCycle’s prior work in the state was “wholly irrelevant” to the issue of whether it breached its contract with Bean Sprouts. The court explained that LifeCycle’s contacts with Pennsylvania resulted from Bean Sprouts’ decision to locate its office there, not LifeCycle’s desire to further its business in the state. While some incidental labor may have occurred in Pennsylvania, the court determined that the “crux of the contractual duties” occurred elsewhere. On that basis, the court distinguished LifeCycle from previous out-of-state defendants over whom state courts had exercised jurisdiction on grounds that LifeCycle had no intentional desire to do business with Pennsylvania corporations in the state of Pennsylvania.
Accordingly, the Superior Court concluded that, despite the parties “long-term relationship,” the trial court did not err or abuse its discretion in finding that LifeCycle had insufficient contacts with Pennsylvania to justify the exercise of personal jurisdiction. Thus, the court affirmed the trial court’s dismissal of Bean Sprouts’ complaint.