Phila. judge dismisses commerce action involving contractual dispute, says N.J. is better venue

A Philadelphia judge has dismissed a commerce action that had been filed at the Court of Common Pleas by a Southeastern Pennsylvania man against a New Jersey business, determining that the case would better play out in the Garden State.

The case involves a contractual dispute between Norman McMahon and Innovative Payroll Services LLC and its chief executive officer, John S. Scholtz.

McMahon resides in Newtown Square, Pa., while Innovative Payroll Services is based out of Pennsauken, N.J.

Scholtz, the CEO of Innovative, lives in Ambler, Pa., which is just outside of Philadelphia.

McMahon filed suit at Philadelphia’s Common Pleas Court in mid September 2012 over claims that the defendants breached an operating agreement between the parties, which would have entitled the plaintiff to 50 percent of the revenue of IPS Payall Solutions from the time of McMahon’s purported ouster, and for continuing various contracts and accounts that the plaintiff had brought to the joint business venture that ultimately went awry.

The operating agreement signed by both parties in January 2010 effectively formed the business titled IPS Payall Solutions, LLC, with each party holding a 50 percent interest in the company.

In response to the litigation, the defendants claimed that there was no breach of the operating agreement, as McMahon allegedly forged a business contract with a client, Capital One Bank.

The defendants also claim that under the operating agreement, Innovative and McMahon were free to compete with each other.

The defendants subsequently filed preliminary objections on the basis of improper venue or improper service of a summons or complaint, and in the alternative, under the doctrine of forum non conveniens.

In a Jan. 9 opinion and order, Philadelphia Common Pleas Court Judge Albert Snite, Jr., who sits in the court’s commerce program, wrote that he is sustaining the preliminary objections based on improper venue, ruling that the defendants successfully showed that Philadelphia County is not the proper venue for the litigation to play out.

Snite did not address any other objections by the defense, dismissing the case without prejudice to re-file in the State of New Jersey.

The judge wrote that McMahon brought suit in Philadelphia “for no apparent reasons stated in the complaint.”

The defendant’s principal place of business is in New Jersey, no alleged incidents occurred in Philadelphia, neither the plaintiff nor defendants reside in nor do business in Philadelphia, and no property involved in the case is located in Philadelphia, the judge wrote.

Only in a responsive pleading did the plaintiff allege certain incidents occurred in Philadelphia, Snite’s ruling states. Namely, McMahon asserted that the “overwhelming majority of the meetings of IPS” took place in the office of an Innovative member and attorney in Philadelphia.

But while it may have been more convenient to hold these meetings in Philadelphia, “convenience does not establish venue under Pennsylvania’s Rules of Civil Procedure," Snite wrote.

Snite wrote that the issue of whether a corporation regularly conducts business in a county is an issue of fact, and that the Pennsylvania Supreme Court has held that “regularly conducting business” shall be based on both “quality and quantity.”

In this case, the judge determined that the plaintiff has not been able to establish that Innovative met the standard in terms of quality and quantity that would warrant trial in Philadelphia.

“Plaintiff’s denial of these facts are ‘bald allegations’ and has offered no affidavits or other evidence to the contrary in support of its new venue claims made in the responsive pleadings,” the ruling states. “Alternatively, Defendants offered proof that no event relevant to this case occurred Philadelphia, and none of the parties is located in Philadelphia.

“In light of the facts presented to the court, Defendants’ assertion that venue is not proper is reasonable,” the ruling continues. “Defendants’ objections as for why Philadelphia County is the improper venue are compelling, and this court is within its discretion to sustain the preliminary objection.”

Snite’s dismissal of the case without prejudice grants the plaintiff leave to re-file the complaint in the proper New Jersey court.