UNITED STATES DISTRICT COURT 

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

WILLIAM S. JOHNSON :

: CIVIL ACTION

v. :

: NO. O5-cv-5555

EDWIN L. PHELPS, and :

SAM S. STEVENS :

SURRICK, J. MARCH 30, 2007

MEMORANDUM & ORDER

Presently before the Court is Defendants’ Motion To Dismiss Against Plaintiff William

S. Johnson (Doc. No. 2). For the following reasons, the Motion will be denied.

I. BACKGROUND

Plaintiff resides in Newtown Square, Pennsylvania. (Doc. No. 1 at Ex. 2 ¶1.) From 1992

until 2000, Plaintiff worked at IPS Associates, Inc. (“IPS” or “the Company”), a consulting

company incorporated and based in California. (Id. ¶ 5.) In 2000, a company named Epic Edge

acquired a majority ownership interest in IPS. (Id. ¶ 5.) At the time of Epic Edge’s acquisition,

Plaintiff was serving as IPS’s Chief Financial Officer (“CFO”). (Id. ¶ 6.) Shortly after the

acquisition, Plaintiff entered into negotiations with Epic Edge for an employment agreement that

provided for, among other things, a severance package consisting of one year’s salary and bonus

in the event Plaintiff was fired. (Id.) In January 2001, before Plaintiff’s negotiations with Epic

Edge were complete, IPS’s founder and then-Chief Executive Officer (“CEO”), Bill Kern,

repurchased IPS from Epic Edge. (Id.) 

Kern’s repurchase was financed largely by Red & Blue, Inc., a company owned and

controlled by Defendant Edwin Phelps. (Id.; Pl. Decl., Doc. No. 5 at Ex. A ¶ 3.) Phelps, the sole

shareholder of Red & Blue and a resident of Virginia, obtained a significant ownership interest

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in IPS through this financing agreement. (Doc. No. 1 at Ex. B ¶ 6.) Under the terms of the

agreement, Kern along with IPS’s other principals were required to meet certain sales goals and

revenue objectives by the end of 2001. (Id. ¶ 10.) In the event they failed to do so, majority

ownership and control of IPS would shift to Phelps. (Id.)

Shortly after Kern and Phelps repurchased IPS, Kern approached Plaintiff about returning

to work for IPS as their CFO. (Id. ¶ 7.) Plaintiff was concerned about the direction of the

Company and sought assurances from Kern that he would receive the same one-year severance

package that he had negotiated with Epic Edge. (Id. ¶ 8.) Kern assured Plaintiff that IPS would

honor the one-year severance agreement, and Plaintiff accepted IPS’s offer. (Id. ¶ 8.) From that

point forward, Plaintiff took advantage of IPS’s new “virtual office” concept, setting up an office

at his home in Pennsylvania. (Doc. No. 5 at Ex. A ¶¶ 6-7.) IPS provided Plaintiff with a stipend

to set up his home-office, paid for office supplies and paid his office phone bills and internet

charges. (Id.) Plaintiff worked approximately sixty percent of the time at his home-office, and

forty percent of the time at IPS’s California office. (Id. ¶ 13.) When home, Plaintiff

communicated daily with IPS officials and representatives, including Defendants, by fax and

phone. (Id. ¶¶ 10-16.) IPS also used Plaintiff’s home address and home-office phone number in

sales promotions. This enhanced the geographical coverage of the company for prospective

clients. IPS would match engagements to its nearest available consultant to minimize the travel

costs charged to the client. (Id. at ¶ 7.) In order to establish and maintain operations under the

virtual office concept, IPS was registered and licensed to do business in a number of states,

including Pennsylvania. (Id. at ¶ 8.) IPS paid Plaintiff’s salary by direct deposit to his

Pennsylvania Wachovia Bank account. (Id.) IPS also withheld Pennsylvania income tax from

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Plaintiff’s paychecks and paid Pennsylvania unemployment compensation fund contributions on

Plaintiff’s behalf, forwarding those monies to the appropriate Pennsylvania state agencies. (Id.

at ¶ 9.)

By the end of 2001, IPS was unable to meet the stated goals and revenue objectives set

forth in Phelps’s financing agreement. (Doc. No. 1 at Ex. B ¶ 10.) On January 1, 2002, Phelps

acquired majority ownership in and control of IPS and began making a series of personnel

changes. (Id. ¶ 12.) Phelps directed Defendant Sam Stevens, a California resident, to remove

Plaintiff as CFO and to reassign him to the position of Eastern Regional Manager of IPS. (Id. ¶¶

12-13.) Shortly thereafter, Kern resigned as CEO and President of IPS, but continued to serve

on its Board of Directors. (Id. ¶ 12.) Following Kern’s resignation, Stevens was named CEO

and President of IPS and served as Phelps’s point-man for IPS’s day-to-day operations. (Id.)

Plaintiff’s reassignment to Eastern Regional Manager did not last long. On January 25,

2002, Stevens and IPS’s then-CFO, Dennis Polk, called Plaintiff at his home and fired him. (Id.

¶ 15.) Plaintiff responded by informing Stevens and Polk of his one-year severance package. 

(Id.) Stevens denied the existence of the severance agreement and offered Plaintiff ten weeks of

severance pay, which Plaintiff rejected. (Id.) Shortly thereafter, Kern, still serving as an IPS

Board member, informed Phelps and Stevens of the agreement and encouraged them to honor it.

(Id.) They refused. (Id. ¶ 16.) 

On September 23, 2004, Plaintiff instituted the instant action against Phelps and Stevens

in their individual capacities in the Court of Common Pleas of Delaware County by filing a

Praecipe for Writ of Summons. (Doc. No. 1 at Ex. A.) More than a year later, Plaintiff filed a

Complaint in the same court alleging claims of (1) violation of the Pennsylvania Wage Payment

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and Collection Law, (2) breach of contract, and (3) detrimental reliance. (Id. at Ex. B.) On

October 25, 2005, Defendants filed a Notice of Removal with this Court pursuant to 28 U.S.C.

§§ 1441 and 1446, claiming that this Court has original jurisdiction over this matter because

complete diversity exists between the parties and the amount in controversy exceeded $75,000. 

(Doc. No. 1.) Those facts are undisputed. Plaintiff is a resident of Pennsylvania, Phelps and

Stevens are residents of Virginia and California, respectively, and Plaintiff’s claims exceed

$75,000. Defendants filed the instant Motion, asking the Court to dismiss this action under

Federal Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction and under Rule

12(b)(3) for improper venue. (Doc. No. 2.) 

II. LEGAL DISCUSSION

A. Personal Jurisdiction

Federal Rule of Civil Procedure 4(e) permits a district court to assert personal jurisdiction

over a non-resident to the extent allowed under the law of the state where the court sits. Remick

v. Manfredy, 238 F.3d 248, 255 (3d Cir. 2001) (citing Pennzoil Prod. Co. v. Colelli & Assocs.,

Inc., 149 F.3d 197, 200 (3d Cir. 1998)). Under Pennsylvania’s long-arm statute, 42 Pa. Cons.

Stat. § 5322(b), Pennsylvania courts may “‘exercise personal jurisdiction over nonresident

defendants to the constitutional limits of the due process clause of the fourteenth amendment.’” 

Remick, 238 F.3d at 255 (quoting Mellon Bank (East) PSFS, Nat’l Ass’n v. Farino, 960 F.2d

1217, 1221 (3d Cir. 1992)). When a plaintiff asserts specific personal jurisdiction over a

defendant, as in this case, due process requires that the defendant have “minimum contacts with

the forum necessary for the defendant to have ‘reasonably anticipate[d] being haled into court

there.’” Pennzoil, 149 F.3d at 201 (quoting World-Wide Volkswagen Corp. v. Woodson, 444

Case 2:05-cv-05555-RBS Document 13 Filed 03/30/07 Page 4 of 13
 “The plaintiff may not rest on the bare pleadings, but rather must establish these 1

jurisdictional facts by sworn affidavit, deposition, or other competent evidence.” Thypin Steel

Co. v. Murmansk Shipping Co., Civ. A. No. 96-1799, 1997 U.S. Dist. LEXIS 4454, at *5 (E.D.

Pa. Apr. 3, 1997) (citing Time Share Vacation Club v. Atlantic Resorts, Ltd., 735 F.2d 61, 66 n.9

(3d Cir. 1984)). Any factual disputes should be resolved in favor of the plaintiff. Western

Equities, Ltd. v. Hanseatic, Ltd., 956 F. Supp. 1232, 1238 (E.D. Pa. 1997). “This burden both

distinguishes a Rule 12(b)(2) motion from other motions to dismiss and engenders a particular

procedural posture: If the court neither conducts an evidentiary hearing nor permits limited

discovery to determine personal jurisdiction, the plaintiff ‘need make only a prima facie showing

of jurisdiction through its affidavits and supporting materials.’” Lexington Ins. Co. v. Forrest,

263 F. Supp. 2d 986, 992 (E.D. Pa. 2003) (quoting Kishi Int’l v. Allstates Textile Mach., Inc.,

No. 96-6110, 1997 WL 186324, at *2 (E.D. Pa. April 11, 1997)). 

5

U.S. 286, 297 (1980)). The required “minimum contacts must have a basis in ‘some act by

which the defendant purposefully avails itself of the privilege of conducting activities within the

forum State, thus invoking the benefits and protections of its laws.’” Asahi Metal Indus. Co., Ltd.

v. Superior Ct. of Cal., 480 U.S. 102, 109 (1987) (O’Connor, J., plurality opinion) (quoting

Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985)). Assuming minimum contacts have

been established, the court must next inquire as to whether “the assertion of personal jurisdiction

would comport with ‘fair play and substantial justice.’” Burger King, 471 U.S. at 476 (quoting

Int’l Shoe Co. v. Washington, 326 U.S. 310, 320 (1945)).1

The Third Circuit has adopted a “highly realistic” approach to analyzing minimum

contacts. Under this approach, “a court is required to make an independent factual assessment of

a defendant’s contacts with the forum when deciding whether it possesses jurisdiction over that

defendant. Each case must be judged on its particular facts.” Mellon Bank, 960 F.2d at 1124

(citing Burger King, 471 U.S. at 485)). “A contract alone is not sufficient to establish minimum

contacts. Instead, a court must evaluate prior negotiations; the terms of the contract; and the

parties’ actual course of dealing.” Pulse Techs., Inc. v. Dodrill, Civ. A. No. 06-4549, 2006 WL

Case 2:05-cv-05555-RBS Document 13 Filed 03/30/07 Page 5 of 13
 The Defendants’ Motion did not specifically mention the “corporate shield” doctrine. 

2

(Doc. No. 2.) In his response to Defendants’ Motion, Plaintiff’s Counsel pointed out that

although Defendants’ arguments were not “couched” as such, they appeared to be based on the

“corporate shield” doctrine. (Doc. No. 5 at 12.) Defendants responded by asserting that the

“corporate shield” doctrine was applicable to this case. (Doc. No. 7 at 5.)

6

3589028, at *3 (E.D. Pa. Dec. 7, 2006) (internal citations omitted). Further, a defendant’s

“physical presence in the forum is always a relevant indicator of minimum contacts,” but a lack

of physical connection with the forum is not outcome determinative. Id. (citing Mellon Bank,

960 F.2d at 1225). “Telephone, facsimile, and e-mail communications sent by the defendant into

the forum state may count toward minimum contacts.” Grand Entm’t Group, Ltd. v. Star Media

Sales, Inc. 988 F.2d 476, 482 (3d Cir. 1993) (finding specific personal jurisdiction appropriate

where defendant directed twelve communications into the forum and contemplated entering into

a contractual relationship that would create significant ties with the forum); Schnader, Harrison,

Segal & Lewis, L.L.P. v. Basic Capital Funds, Inc., No.99-4655, 2000 U.S. Dist. LEXIS 13501

at *7-8 (E.D. Pa. Sept. 21, 2000) (finding that plaintiff established minimum contacts for

personal jurisdiction through a number of telephone, mail, facsimile and electronic

communications). 

Defendants argue that personal jurisdiction is improper because they are protected by the

“corporate shield” doctrine. “The corporate shield doctrine protects officers and directors by 2

limiting the extent to which their actions performed in the corporate capacity may be used to

exercise jurisdiction over them individually.” Lautman v. Loewen Group, Inc., Civ. A. No. 99-

75, 2000 WL 772818, at *5 (E.D. Pa. June 15, 2000) (citing Maleski v. DP Realty Trust, 653

A.2d 54, 62-63 (Pa. Commw. Ct. 1995); Sneberger v. BTI Americas, Inc., No. 98-932, 1998 WL

826992, at *3 (E.D. Pa. Nov. 30, 1998); PSC Prof’l Servs. Group, Inc. v. Am. Digital Sys., Inc.,

Case 2:05-cv-05555-RBS Document 13 Filed 03/30/07 Page 6 of 13
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555 F. Supp. 788, 793 (E.D. Pa. 1983). The “corporate shield” doctrine evolved to address

concerns about forcing officers and directors either to “disassociate themselves from the

corporation or defend the propriety of their conduct in a distant forum,” PSC Prof’l Servs.

Group, 555 F. Supp. at 793, but its protections are not absolute, Fyk v. Roth, No. 94-3826, 1995

WL 57487, at *2 (E.D. Pa. Feb. 10, 1995). The courts have carved out two exceptions to the

“corporate shield” doctrine, refusing to allow a corporate officer to invoke its protections where

the officer was involved in tortious conduct for which he or she could be held personally liable,

Elbeco Inc. v. Estrella de Plato, Corp., 989 F. Supp. 669, 676 (E.D. Pa. 1997), or when a

corporate officer “has been charged with violating a statutory scheme that provides for personal,

as well as corporate, liability,” Lautman, 2000 WL 772818, at *5 (citing Huth v. Hillsboro Ins.

Mgmt., 72 F. Supp. 2d 506, 511 (E.D. Pa. 1999)). 

In this case, Plaintiff has alleged, among other claims, violation of the Pennsylvania

Wage Payment and Collection Law (“PWCL”), 43 P.S. § 260 et seq., which provides for

individual liability of officers and directors as well as for corporate liability. See 43 P.S. §§

260.2a-260.3. Thus, it may be appropriate to consider the corporate contacts of these Defendants

in determining the question of jurisdiction. Lautman, 2000 WL 772818, at *6 (refusing to

invoke “corporate shield” doctrine where Plaintiff alleged violations of PWCL for breach of oral

employment contract). In making the determination of whether corporate contacts are relevant,

the following factors should be considered: (1) “the defendant’s role in the corporate structure,”

(2) “the nature and quality of the defendant’s forum contacts,” and (3) “the extent and nature of

the defendant’s personal participation in the [allegedly wrongful] conduct.” Rittenhouse & Lee

Case 2:05-cv-05555-RBS Document 13 Filed 03/30/07 Page 7 of 13
 See also Elbeco Inc., 989 F. Supp. at 676 (applying the three factors from Rittenhouse 3

& Lee in determining whether to consider the defendant’s corporate contacts with the forum);

Royal Gist-Brocades N.V. v. Sierra Prods. Ltd., No. 97-1147, 1997 WL 792905, at *6 (E.D. Pa.

Dec. 22, 1997) (same); Beistle Co. v. Party U.S.A., 914 F. Supp. 92, 96 (M.D. Pa. 1996) (same);

Fyk, 1995 WL 57487, at *2 (same).

8

v. Dollars & Sense, Inc., C.A. No. 83-5996, 1987 WL 9665 at *4 n.6 (E.D. Pa. April 15, 1997). 

3

Both Phelps and Stevens are “high ranking corporate officials with a significant level of 

authority.” See Lautman, 2000 WL 772818, at *6. Phelps was the majority shareholder of IPS

and had control over the Company from January 1, 2002 onward, while Stevens served as its

President and CEO. Although Defendants had no physical contact with the forum, their

communications with Plaintiff at his home office were not “random, fortuitous, or attenuated,” 

Burger King, 471 U.S. at 475-76, nor were they merely “informational.” Toys “R” Us, Inc. v.

Two Step, S.A., 318 F.3d 446, 455 (3d Cir. 2003). Plaintiff’s employment with IPS changed

significantly when Phelps obtained majority control of the Company at the end of 2001. Shortly

after obtaining control, Phelps ordered Stevens to remove Plaintiff as CFO and to reassign him to

the position of Eastern Regional Branch Manager. To help orchestrate this change, Phelps called

Plaintiff twice at his home to arrange business meetings at Phelps’s home in Virginia. Stevens,

acting as Phelps’s “point man” at IPS, was in constant contact with Plaintiff at home via phone

calls and fax throughout Plaintiff’s employment. On January 26, 2002, Stevens called Plaintiff

at home and carried out Phelps’s orders to fire Plaintiff. When Plaintiff requested that IPS honor

his one-year severance package, Stevens offered him a ten-week severance package and prodded

him by phone and in writing to accept the package. 

Defendants’ contacts in Pennsylvania were numerous, they were aimed directly at

Plaintiff, and they were related entirely to Plaintiff’s employment with IPS. Defendants were

Case 2:05-cv-05555-RBS Document 13 Filed 03/30/07 Page 8 of 13
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fully aware that Plaintiff spent significant time at his office in Pennsylvania. In fact, IPS paid for

that office and the office supplies. Defendants frequently reached out to Plaintiff at his

Pennsylvania office by telephone, fax, and mail to discuss both general business matters and his

future employment with the Company. They paid Plaintiff by direct deposit in his Pennsylvania

bank account and registered IPS to do business in Pennsylvania. Defendants argue that we

should exclude any phone calls from our analysis because they were placed to Plaintiff’s

California office line and then rerouted to his home office line through IPS’s switchboard. (Doc.

No. 2 at Ex. A ¶ 10; Ex. B ¶ 10.) We reject this argument. Even if Defendants’ calls were

rerouted, Plaintiff received the calls in Pennsylvania. Defendants’ communications with

Plaintiff demonstrate a “deliberate” attempt to conduct business with Plaintiff in Pennsylvania. 

Burger King, 471 U.S. at 476. Finally, both Phelps and Stevens were “directly and personally

involved in the commission of the allegedly wrongful conduct . . . and because [they] had some

contact with Pennsylvania . . . [they] are not entitled to the benefit of the corporate shield.” 

Lautman, 2000 WL 772818, at *8. Under the circumstances, Defendants are not entitled to the

protection of the corporate shell doctrine. 

 By their frequent contacts and communications with Plaintiff in Pennsylvania,

Defendants “manifestly availed themselves of the privilege of conducting business [here].” Id.

Through their association with Plaintiff, Defendants enjoyed “the benefits and protections” of

Pennsylvania’s laws. Id. Therefore, “it is presumptively not unreasonable to require [them] to

submit to the burdens of litigation in [this] forum.” Id. We conclude that Defendants had

sufficient minimum contacts with the forum state to satisfy the jurisdictional requirements of due

process. 

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Addressing next the question of whether the exercise of personal jurisdiction over these

Defendants comports with “fair play and substantial justice,” Burger King, 471 U.S. at 476

(quoting Int’l Shoe, 326 U.S. at 320), we must weigh several factors including the burden on the

defendant in defending an action in this forum, the interest of the forum state, and the plaintiff’s

interest in obtaining relief. Mesalic v. Fiberfloat Corp., 897 F.2d 696, 701 (3d Cir. 1990). 

Defendants bear the burden of showing that jurisdiction is unreasonable. Mellon Bank, 960 F.2d

at 1227. 

Defendants claim that the geographical distance between Pennsylvania and their home

states of Virginia and Washington, respectively, renders this suit unreasonable. We disagree. 

These factors are present almost any time a person is forced to defend a lawsuit outside of his

own state. IPS created a complex “virtual office” system that permitted its officers and

employees to conduct business from “virtually” anywhere. If Defendants did not wish to defend

a lawsuit in Pennsylvania, they should not have permitted Plaintiff to have his office in

Pennsylvania, requiring constant communication with him in this state. For these reasons, we

conclude that personal jurisdiction over Defendants is proper under Pennsylvania’s long-arm

statute. Defendant’s Motion to dismiss under Rule 12(b)(2) will be denied. 

B. Improper Venue

Defendants also move to dismiss this action under Rule 12(b)(3) for improper venue. 

“Analysis of any motion to dismiss or transfer for venue purposes must begin with

acknowledgment of the well-settled principles that a plaintiff’s choice of forum is not to be

lightly disturbed and that the burden of establishing the need for transfer rests with the movant.”

Siegel v. Homestore, Inc., 255 F. Supp. 2d 451, 454-55 (E.D. Pa. 2003) (citing Jumara v. State

Case 2:05-cv-05555-RBS Document 13 Filed 03/30/07 Page 10 of 13
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Farm Ins. Co., 55 F.3d 873, 879 (3d Cir. 1995); Shutte v. Armco Steel Corp., 431 F.2d 22, 25 (3d

Cir. 1970). 

Initially, we note that Defendants have based their improper venue argument on the

wrong statutory provision. Defendants rely on 28 U.S.C. § 1391(a), which states:

A civil action wherein jurisdiction is founded only on diversity of citizenship

may, except as otherwise provided by law, be brought only in (1) a judicial

district where any defendant resides, if all defendants reside in the same State, (2)

a judicial district in which a substantial part of the events or omissions giving rise

to the claim occurred, or a substantial part of property that is the subject of the

action is situated, or (3) a judicial district in which any defendant is subject to

personal jurisdiction at the time the action is commenced, if there is no district in

which the action may otherwise be brought.

28 U.S.C. § 1391(a). Section 1391(a) governs venue issues only for diversity cases originally

filed in federal district court. It does not apply to actions removed from state court. See PT

United Can Co. Ltd. v. Crown Cork & Seal Co., Inc., 138 F.3d 65, 72 (2d Cir. 1998) (citing

Polizzi v. Cowles Magazines, Inc., 345 U.S. 663, 665-66 (1953) (holding that “the removal

statute [28 U.S.C. § 1441(a)] and not the ordinary federal venue statute, 28 U.S.C. § 1391,

governs venue in removed cases”). Venue in a removal action is governed by 28 U.S.C. §

1441(a). Section 1441(a) provides:

Except as otherwise expressly provided by Act of Congress, any civil action

brought in a State court of which the district courts of the United States have

original jurisdiction, may be removed by the defendant or the defendants, to the

district court of the United States for the district and division embracing the place

where such action is pending. 

28 U.S.C. § 1441(a). Under this provision, “a party may challenge removal as itself improper, or

having been made to the wrong district court if the case was removed to a district court other

than that ‘embracing’ the state court in which the action was brought, but one may not challenge

venue in the district court as of right, according to that district court’s venue rules, as if the case

Case 2:05-cv-05555-RBS Document 13 Filed 03/30/07 Page 11 of 13
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had originally been brought there.” PT United Can Co., 138 F.3d at 72 (citing Polizzi, 345 U.S.

at 665-66; see also Kerobo v. Sw. Clean Fuels Corp., 285 F.3d 531, 534 (6th Cir. 2002) (“Venue

in removed cases is governed solely by § 1441(a).”). Plaintiff filed his action in the Court of

Common Pleas of Delaware County. The Eastern District of Pennsylvania is “the district court .

. . for the district and division embracing the place where the state court action was pending.” 28

U.S.C. § 1441(a). Therefore, this Court is the proper venue for this action under § 1441(a).

An appropriate Order follows.

Case 2:05-cv-05555-RBS Document 13 Filed 03/30/07 Page 12 of 13
UNITED STATES DISTRICT COURT 

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

WILLIAM S. JOHNSON :

: CIVIL ACTION

v. :

: NO. O5-cv-5555

EDWIN L. PHELPS, and :

SAM S. STEVENS :

ORDER

AND NOW, this 30th day of March 2007, upon consideration of Defendants’ Motion To

Dismiss Against Plaintiff William S. Johnson (Doc. No. 2), and all documents filed in support

thereof and in opposition thereto, it is ORDERED that the Motion is DENIED. 

IT IS SO ORDERED.

BY THE COURT:

_______________________

R. Barclay Surrick, Judge

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