Wisconsin Metal & Chemical Corp. v. DeZurik Corp.

Citation222 F. Supp. 119
Decision Date26 September 1963
Docket NumberNo. 62-C-64.,62-C-64.
PartiesWISCONSIN METAL & CHEMICAL CORPORATION, Plaintiff, v. DeZURIK CORPORATION, Defendant.
CourtUnited States District Courts. 7th Circuit. United States District Court of Eastern District of Wisconsin

Daniel J. Weiss, Milwaukee, Wis., for plaintiff.

James C. Mallien, of Quarles, Herriott & Clemons, Milwaukee, Wis., for defendant.

TEHAN, Chief Judge.

This is an action for breach of warranty brought by Wisconsin Metal & Chemical Corporation, a Wisconsin corporation, against DeZurik Corporation, a Minnesota corporation, for damages in the amount of $139,132.62, for alleged defects in 34 valves purchased by the plaintiff from the defendant. Service of the summons and complaint was made at Sartell, Minnesota upon R. N. Wilcox, Treasurer of DeZurik Corporation. Jurisdiction is based on diversity of citizenship.

Defendant, DeZurik Corporation, has moved to quash the service of the summons and to dismiss the complaint on the ground that (1) DeZurik is a Minnesota corporation with its principal place of business in Sartell, Minnesota, and is not found in the District and is not transacting business in this District, (2) venue in this District is not proper, (3) the purported service on DeZurik in Minnesota was of no effect and the court acquired no jurisdiction over DeZurik by such purported service.

We will consider first defendant's contention that Rule 4(f) of the Federal Rules of Civil Procedure1 prohibits service of federal process beyond the boundaries of the state in which the District Court is sitting. It is plaintiff's position that Rule 4(d) (7)2 permits service of summons beyond the territorial limits of the District when the state where the District Court is sitting authorizes such extra-territorial service. Defendant concedes that this precise issue was considered by the Honorable Kenneth P. Grubb in Kappus v. Western Hills Oil Inc., D.C., 24 F.R.D. 123 and Koepp v. Peters, D.C., 193 F.Supp. 296, and decided adversely to the defendant. We have carefully considered the cases cited by DeZurik holding that such service is not authorized by Rule 4(d) (7) (Metropolitan Sanitary District of Greater Chicago v. General Electric Co. (D.C.1962) 208 F.Supp. 943, and Smith v. Alexandrian, D.C., 30 F.R.D. 553), but are not persuaded by them. Consequently, we adhere to the ruling in the Kappus and Koepp cases, supra.3

We look then to the Wisconsin Statutes to determine whether the extra-territorial service made in this case is valid. Plaintiff relies on § 262.05(5) Wisconsin Statutes, effective July 1, 1960. That section provides:

"Personal jurisdiction, grounds for generally. A court of this state having jurisdiction of the subject matter has jurisdiction over a person served in an action pursuant to s. 262.06 under any of the following circumstances:
* * * * * *
"(5) Local services, goods or contracts. In any action which:
* * * * * *
"(c) Arises out of a promise, made anywhere to the plaintiff or to some third party for the plaintiff's benefit, by the defendant to deliver or receive within this state or to ship from this state goods, documents of title, or other things of value; or
* * * * * *
"(e) Relates to goods, documents of title, or other things of value actually received by the plaintiff in this state from the defendant without regard to where delivery to carrier occurred."

The complaint alleges that on or about July 14, 1960, plaintiff through Dorr Sales and Engineering Company, its agent, ordered from defendant through the Dorner Company, its agent, 34 valves to be furnished by defendant and shipped to the plaintiff in Wisconsin, that after delivery and installation of the valves, said valves proved defective.

In support of its motion, the defendant has submitted an affidavit by R. N. Wilcox, its Treasurer, disclosing that DeZurik is a Minnesota corporation, having its principal place of business, maintaining its office, manufacturing plant and sales operation in Sartell, Minnesota. It is not qualified to do business in Wisconsin and has no authorized agent to receive service of process in Wisconsin. It maintains no stock of merchandise here, owns no leases or real property, does not maintain a telephone listing, advertise, prosecute litigation or hold any of its meetings of its directors or stockholders in Wisconsin. The affidavit discloses that the only contact it has with the State of Wisconsin is through one Jack Dorner, d/b/as The Dorner Company, who is permitted by defendant to solicit orders for DeZurik's products, and that Dorner is a manufacturer's representative for other manufacturers in addition to DeZurik. The Dorner Company is not authorized to sell DeZurik products nor does DeZurik sell its products to The Dorner Company. All orders received by Dorner are forwarded to DeZurik in Minnesota, and Dorner receives a commission on any valves or machinery DeZurik subsequently sells in Wisconsin. DeZurik has no financial interest in The Dorner Company, cannot and never has exercised any managerial or supervisory control over Dorner. Dorner at its own expense lists DeZurik Corporation and other manufacturers in the classified section of the Milwaukee telephone directory. Orders are sent to DeZurik offices in Sartell, Minnesota, and either accepted or rejected there. Products are shipped f. o. b. Minnesota, and all payments are sent directly by the customer to DeZurik at Sartell, Minnesota. Plaintiff does not contest the facts as set forth in this affidavit nor has it submitted counter-affidavits regarding the extent of the sales made by defendant in Wisconsin. It chooses instead to rely on § 262.05(5), as authorizing jurisdiction and asserts that under that section the scope of DeZurik's operation in Wisconsin is immaterial.

There is no doubt and defendant apparently concedes that the facts in the case at bar meet the requirements of § 262.05. The action arises out of the promise by defendant, DeZurik Corporation, to deliver to this state certain valves which were actually received by the plaintiff in Wisconsin. Under the statute the fact that the valves were shipped f. o. b. Minnesota is immaterial.

Defendant, however, contends that the Wisconsin Statute as applied to the facts of this case is a violation of the due process clause of the Fourteenth Amendment.

Wisconsin Statutes formerly provided for extra-territorial service of summons on foreign corporations either doing business in Wisconsin at the time of service or when the cause of action against it arose out of the doing of business in Wisconsin. (See former § 262.08 (4), Wisconsin Statutes, 1959) Defendant contends that the concept of "doing business" was coextensive with the limits of the due process clause of the Federal Constitution prior to the adoption of the new Chapter 262 and hence the basic constitutional question is no different now than before the adoption of the new Chapter. It asserts that cases under that section all require that the foreign corporation be present in the state either through maintaining an office, ownership of property or its own employees or agents, and that in the instant case none of these elements are present.

Although it is true that within the framework of the prior statute the Wisconsin Supreme Court had given a most liberal construction of "doing business" the present section specifically spells out the requirements for jurisdiction in single transactions without regard to the presence of the corporation within Wisconsin. The former requirement of "doing business" is preserved under § 262.05(1) which reads:

Sec. "262.05(1) Local presence or status. In any action arising within or without this state, against a defendant who when the action is commenced:
* * * * * *
"(d) Is engaged in substantial and not isolated activities within this state, whether such activities are wholly interstate, intrastate, or otherwise."

But jurisdiction in the instant case is not predicated on this section but on § 262.05(5). Our only question is, therefore, whether in the context of this particular litigation it is a denial of defendant's rights under the due process clause of the Fourteenth Amendment for Wisconsin to exercise in personam jurisdiction.

We do not propose to review the extensive body of legal writing evaluating the modern developments expanding state jurisdiction over nonresident defendants both by judicial decision and legislative enactment, since the case of International Shoe Co. v. State of Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95. We need only examine the Wisconsin Statute, § 262.05(5), as applied to the facts of the instant action to determine whether that standard has been met. The International Shoe Company case, supra, 326 U.S. at p. 316, 66 S.Ct. at p. 158, 90 L.Ed. 95, holds that due process requires only that the defendant "have certain minimum contacts with it such that the maintenance of the suit does not offend `traditional notions of fair play and substantial justice'" or, as Professor G. W. Foster, Jr. in the Revision Notes printed in the 1963 Cumulative Annual Pocket Part to Volume 30, Wisconsin Statutes, annotated at p. 20, says, "a state may exercise personal jurisdiction whenever, in the context of our federal system, it is reasonable for the state to try the particular case against the particular defendant."

The International Shoe Company case, supra, involved the question of whether the activities of International Shoe Company, a Delaware corporation in the State of Washington, rendered it amenable in the courts of that state to a suit to recover payments due to the state unemployment compensation fund. Necessarily, the extent and nature of the defendant's activity was important in determining whether in the context of that particular cause of action there were sufficient contacts or ties to render it reasonable and just to enforce the obligations incurred in the state.

However, in McGee v. International Life Insurance Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223, the ...

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