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Witt v. Scully

argued: June 11, 1976.

HELEN M. WITT, RECEIVER OF PIONEER FINANCE COMPANY, A PENNSYLVANIA CORPORATION
v.
WILLIAM J. SCULLY, APPELLANT



Appeal from the United States District Court for the Western District of Pennsylvania (D.C. Civil Action No. 75-802).

Seitz, Chief Judge, and Aldisert and Garth, Circuit Judges. Garth, Circuit Judge

Author: Aldisert

Opinion OF THE COURT

ALDISERT, Circuit Judge.

We are to decide whether failing to act is tantamount to acting for purposes of Pennsylvania's long arm statute.*fn1 Defendant is an Ohio resident who was an officer and director of a Pennsylvania corporation. The district court denied his motion to quash service of process, holding that he was amenable to jurisdiction in Pennsylvania in an action alleging his failure to attend directors' meetings and his failure otherwise to involve himself in the management of the corporation. We reverse.

I.

Defendant was president and a director of the Pioneer Finance Company, a Pennsylvania corporation with its principal offices in Allegheny County. He served in these capacities until 1974. Following certain financial difficulties, Pioneer was placed in receivership by the state court upon the petition of the Pennsylvania Securities Commission. As receiver for Pioneer, plaintiff brought this action alleging that defendant had "failed to attend meetings of the board of directors, failed to see that meetings of the board of directors were held, failed to see that adequate corporate records were kept, and otherwise failed to exercise that control or management of the corporation's business and affairs required of him as a director and officer." (Complaint para. 4.) (5a). Defendant was served by certified mail in Ohio, pursuant to the provisions of the Pennsylvania long arm statute. He filed a motion to quash the service and dismiss the action for lack of jurisdiction over his person.

The essential factual allegations supporting the motion to quash and dismiss are not in dispute. Defendant "filed affidavits showing that he moved from Allegheny County to Cleveland in 1953, that he has resided in Shaker Heights, Ohio, ever since, that he has been employed by Bearings, Inc., a Cleveland company, that he was elected a director and president of Pioneer on July 6, 1963, that during the ensuing two years twelve directors' meetings were held, at seven of which, the last on August 12, 1965, he was present, that since January 1, 1966 he has been in Pittsburgh on business eight times, the last on April 27, 1972, all on the business of his Cleveland employer and none on the business of Pioneer Finance Company. He has also come to Pennsylvania on non-business matters, such as to attend a funeral. On May 24, 1974 he sent a letter to Pioneer resigning as president and director." Appellant's Brief at 4 (citations and footnotes omitted).

The district court reasoned that "defendant's failure to attend to the corporate business, which allegedly resulted in the financial harm to plaintiff corporation, is clearly that type of conduct which would fall within the statutory framework of the Pennsylvania long arm statute. The law in Pennsylvania is firm and definite that an act giving rise to liability may consist of the failure to perform legal duty." (34a.) Accordingly, the trial court denied defendant's motion to quash and dismiss.

The district court certified its order pursuant to 28 U.S.C. § 1292(b), and defendant appealed. We permitted the appeal as involving a "controlling question of law as to which there is substantial ground for difference of opinion."

II.

We believe the district court erred by confusing substantive legal precepts with jurisdictional ones. The law which must be applied to the issue before us is not the aggregate of legal precepts which substantively may impose liability on a defendant. Rather, the applicable legal precepts are jurisdictional ones, wholly statutory in this case. The result here turns solely upon whether defendant's conduct brings him within the terms of the Pennsylvania long arm statute.

We may quickly dispose of any suggestion that defendant was subject to jurisdiction on the basis of 42 Purd. Stat. Ann. § 8304 because, although a non-resident, he was doing business in Pennsylvania.*fn2 We conclude he was not. "Doing business" is specifically defined in 42 Purd. Stat. Ann. § 8309.*fn3 We cannot say that defendant's spasmodic trips to Pennsylvania since 1966 constituted conduct embraced by the statutory purpose. See Bork v. Mills, 458 Pa. 228, 329 A.2d 247 (1974). If there is to be legitimate long arm service, it must be found under § 8305, note 1, supra.

Section 8305 provides that a person "acting outside of this Commonwealth" who "shall have caused any harm within this Commonwealth" shall be subject to service of process in any case "arising out of or by reason of any such conduct." The precise question for decision is whether Scully's failure to act, his non-performance, in Ohio, which may have caused harm to Pioneer in Pennsylvania, comes within the statutory phrase ...


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