Temco, Inc. v. General Screw Products, Inc.

• Decision Date: 29 November 1966
• Docket Number: Civ. No. 4546.
• Citation: 261 F. Supp. 793
• Parties: TEMCO, INC. v. GENERAL SCREW PRODUCTS, INC.
• Court: U.S. District Court — Middle District of Tennessee

261 F. Supp. 793

TEMCO, INC. v. GENERAL SCREW PRODUCTS, INC.

Civ. No. 4546.

United States District Court M. D. Tennessee, Nashville Division.

November 29, 1966.

Cornelius, Collins, Neal & Higgins, Nashville, Tenn., for plaintiff.

Trabue, Minick, Sturdivant & Harbison, Nashville, Tenn., and Lindquist, Magnuson & Glennon, Minneapolis, Minn., for defendant.

ORDER

FRANK GRAY, Jr., District Judge.

This action for alleged breach of contract was originally filed on August 31, 1966, as Rule No. 89170 in the Chancery Court for Davidson County, Tennessee. On September 26, 1966, pursuant to the provisions of 28 U.S.C. §§ 1441 and 1446, defendant removed the action to this court. Temco, Inc. (plaintiff) is a corporation organized under the laws of Tennessee and has its principal place of business in Davidson County, Tennessee. General Screw Products, Inc. (defendant) is a corporation organized under the laws of Wisconsin and has its principal place of business in Wisconsin. The required jurisdictional amount appears on the face of the complaint.

On or about November 1, 1965, plaintiff entered into a contract with the Department of the Army, Ammunition Procurement and Supply Agency, Joliet, Illinois, by the terms of which plaintiff agreed to produce for the Army a certain quantity of artillery shells. On or about November 12, 1965, a sales representative of defendant, residing and doing business in Nashville, approached the plaintiff and offered to perform certain operations which would be necessary under this newly-acquired contract, for a price of $1.06 per unit. This price quotation was submitted on the defendant's stationery and bore the signature of defendant's vice-president, John D. Lehman. On November 19, 1965, Mr. Lehman and defendant's Nashville representative called on plaintiff and submitted another quotation. Again on November 23, 1965, Mr. Lehman and the local representative went to plaintiff's office in Nashville for the purpose of securing a contract. As a result of these negotiations, defendant's original quotation of $1.06 per unit was reduced to $1.03 per unit. There is a question, however, as to whether the actual contract was entered into at this time. On December 9, 1965, plaintiff mailed to defendant a detailed purchase order. The terms of this order called for 175,000 units to be furnished at a unit price of $1.03. The three-page order also contained a delivery schedule and other information such as specifications, tolerances, and a provision dealing with freight charges. It was also noted that the Aluminum Company of America would furnish extrusions to defendant, and following defendant's work the shells would be shipped to plaintiff's plant in Nashville, Tennessee.

The complaint alleges that defendant breached the contract by failing to carry out its operations according to agreed specifications, and that defendant also failed to meet required delivery schedules. The complaint further alleges that representatives of defendant came to plaintiff on April 21, 1966, and informed plaintiff that the defendant would not continue to perform under the contract. Plaintiff attempted to dissuade defendant from this alleged breach but was unsuccessful and, as a result, plaintiff only received 6,129 of the 175,000 units for which it had originally contracted.

Due to defendant's alleged breach it was necessary for plaintiff to contract the work with another company, but at the rate of $1.20 per unit. In addition to this increased processing expense plaintiff has allegedly incurred increased expenses in transportation, inspection, tooling and also expense for again placing the work and for the delay occasioned by defendant's conduct. For the above the plaintiff alleges damages in excess of $10,000.

On September 26, 1966, defendant filed a motion to dismiss, accompanied by the supporting affidavit of Mr. John D. Lehman, Vice-President of defendant. The motion urged two reasons why it was felt that plaintiff's action was not properly before the court. Defendant's first contention was that the facts presented by this case were simply not meant to have been covered by T.C.A. §§ 20-235 to 20-240, the statutes under which jurisdiction was asserted in the state court. The second reason advanced was that, if these statutes did in fact apply to the defendant in this case, then the statutes are void because in violation of the Fifth and Fourteenth Amendments to the United States Constitution. Under either theory the state court would have had no jurisdiction, and hence neither would this court in a removal proceeding.

Mr. Lehman's affidavit asserts that in June of 1965, John E. Pilkington, doing business as Production Components Company, of Nashville, Tennessee, contacted defendant about acting as its representative for a group of southern states, including Tennessee. On February 3, 1966, although it was dated December 1, 1965, an agreement was executed which appointed Pilkington as exclusive representative for this group of states. The affidavit further asserts that on December 10, 1965, the defendant received at its office in Wisconsin a purchase order for the parts concerning which the parties had been negotiating. The order contained a delivery schedule which was unsatisfactory to the defendant, because at that time it had not received needed raw materials. On December 13, 1965, the defendant received a letter from the plaintiff which contained a revised delivery schedule, the effect of which was to extend defendant's initial delivery time by one month. Mr. Lehman immediately detached the bottom portion of the order, which had printed on it a statement to the effect that acceptance of said purchase order must be shown by signing said detachment and mailing to to plaintiff, and proceeded to follow the instructions thereon.

On the basis of the above facts, it is plaintiff's contention that an oral contract was entered into at the November 23 meeting in Nashville. On the other hand, defendant maintains that there was no contract until it signed the confirmation portion of plaintiff's purchase order on December 13, 1965, in Wisconsin. Defendant's argument is that this signing was the last act necessary to effect a contract, and since it occurred in Wisconsin there are not sufficient contacts with the state of Tennessee to justify the courts of that state in assuming jurisdiction of a dispute arising out of such a contract. Although a determination of where the contract was actually finally executed would have considerable significance, it would not, standing alone, be dispositive of this motion.

The statute under which the jurisdiction was asserted in this case, T.C.A. § 20-235, is as follows:

"Persons who are nonresidents of Tennessee and residents of Tennessee who are outside the state and cannot be personally served with process within the state are subject to the jurisdiction of the courts of this state as to any action or claim for relief arising from:

"(a) The transaction of any business within the state;

"(b) Any tortious act or omission within this state;

"(c) The ownership or possession of any interest in property located within this state;

"(d) Entering into any contract of insurance, indemnity, or guaranty covering any person, property, or risk located within this state at the time of contracting;

"(e) Entering into a contract for services to be rendered or for materials to be furnished in this state.

"`Person' as used herein shall include corporations and all other entities which would be subject to service or process if present in this state. Any such person shall be deemed to have submitted to the jurisdiction of this state who acts in the manner above described through an agent or personal representative."

Subsequent statutes set forth the methods which may be employed for service of process. The parties are pretty well in agreement that if the state had jurisdiction it was based on subpart (a) of the statute.

Neither the search of the parties nor that of the court has revealed an interpretation of T.C.A. § 20-235 et seq. by the Tennessee courts. Therefore, this court can only apply the law as it feels the Tennessee courts would if faced with the instant set of circumstances.

When interpreting such a statute courts are faced with two problems. The first of these problems is to determine how much power the state has to assert jurisdiction over nonresidents who are not personally served within the state. To what extent may the state depart from the teachings of Pennoyer v. Neff, 5 Otto 714, 95 U.S. 714, 24 L.Ed. 565 (1878)? Once that is ascertained there remains the additional problem of deciding to what degree did the state assert its legitimate power by enacting this particular statute. Schmidt v. Esquire, Inc., 210 F.2d 908 (7th Cir. 1954). In many instances a state will not exercise all of the power which it has.

The power of a state to assert jurisdiction over a person is limited by the due process clause of the Fourteenth Amendment to the United States Constitution, as interpreted by the Supreme Court. In International Shoe Co. v. State of Washington, 326 U.S. 310, 315, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945), the state's jurisdictional power was stated in the following language: "Historically the jurisdiction of courts to render judgment in personam is grounded on their de facto power over the defendant's person. Hence his presence within the territorial jurisdiction of a court was prerequisite to its rendition of a judgment personally binding him. Pennoyer v. Neff, 5 Otto 714 95 U.S. 714, 733, 24 L.Ed. 565 572. But now that the capias ad respondendum has given way to personal service of summons or other form of notice, due process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend `traditional notions of...