Alonzo D. Washington and Robert C. James win appeal in United States Court of Appeals for the Third Circuit

February 2024

In a February 2024 decision, the Third Circuit Court of Appeals affirmed the United States District Court of the Western District of Pennsylvania decision, remanding the matter for discovery and further proceedings. Alonzo Washington and Robert James were counsel for the Appellee. At issue on appeal was the District Court’s denial of the defendant’s motion to stay and compel arbitration and motion to dismiss for lack of personal jurisdiction. The issues decided on appeal were:

  1. ) Was an interlocutory order finding personal jurisdiction appealable?
  2. ) Was personal jurisdiction over the Appellants in the Western District of Pennsylvania proper?
  3. ) Whether the District Court properly issued a preliminary injunction enjoying arbitration.

This matter originated as a dispute over an alleged breach of a coal sales agreement. Specifically, the Appellants initiated arbitration with the American Arbitration Association (“AAA”), alleging that the Appellee breached a coal sales agreement. The coal sales agreement contained an arbitration provision requiring the parties to arbitrate matters with AAA. Appellee denied entering into the coal sales agreement. Therefore, in the U.S. District Court of the Western District of Pennsylvania, the Appellee filed a Petition for Temporary Restraining Order (“TRO”) to enjoin AAA from proceeding with arbitration and a Complaint for Declaratory Judgment to determine whether a valid and enforceable contract with an arbitration provision was formed. Appellant filed a motion to dismiss challenging the District Court’s jurisdiction, arguing: 1.) that the Appellant lacked sufficient minimum contact with the forum state for personal jurisdiction to be proper; and 2.) that the District Court lacked jurisdiction to proceed on the issue or contract formation because the coal sales agreement contains an arbitration clause. Appellants also moved to stay the District Court proceeding and compel arbitration. The District Court denied the Appellants’ motions, and an appeal was filed.

Generally, the Third Circuit would not have jurisdiction to review the District Court’s finding of personal jurisdiction over the Appellant. However, the Court may exercise jurisdiction over matters where the “validity of the injunction” was dependent on the district court’s finding of personal jurisdiction. Jurisdiction was unique in this case as the parties and the District Court referred to the relief in place as a temporary restraining order (TRO). In analyzing the relief issued, the Third Circuit determined that the District Court’s order issued a preliminary injunction, not a TRO because the TRO extended “far beyond” the fourteen-day period mandated by the Federal Rules of Civil Procedure. Therefore, the TRO became an appealable preliminary injunction and, thus, gave the Third Circuit appellate jurisdiction. 

The Third Circuit found that specific personal jurisdiction could be had over the Appellant because the Appellant had purposefully availed themselves of Pennsylvania’s jurisdiction by making “repeated and purposeful contacts with the Appellee over a period of years.” This contact included three different purchase agreements, communications with the Appellee’s Pennsylvania executives, and multiple trips to Pennsylvania to negotiate with the Appellee. While the Appellants contested personal jurisdiction on the grounds that it would be unduly burdensome on the foreign Appellant to litigate in the U.S, the Third Circuit was not swayed by this argument, specifically referencing the Appellants’ desire to settle the case in the United States through arbitration. 

As for the Appellants’ motion to stay and compel arbitration, the Third Circuit affirmed the District Court’s denial of the motion, reasoning that because the case centers itself on whether a contract between the parties existed, the arbitration clause contained in the questioned “agreement” cannot be used to compel arbitration without more factual evidence. Because the Appellants purposefully availed themselves of Pennsylvania’s personal jurisdiction and failed to establish that a contract containing a mandatory arbitration clause was in effect between the parties, the District Court did not err in denying both of the motions and as such, the judgment of the district court was affirmed in favor of the Appellees.

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