Arrowsmith v. United Press International

• Decision Date: 11 June 1963
• Docket Number: Docket 27641.,No. 73,73
• Citation: 320 F.2d 219
• Parties: Harold Noel ARROWSMITH, Jr., Plaintiff-Appellant, v. UNITED PRESS INTERNATIONAL, Defendant-Appellee.
• Court: U.S. Court of Appeals — Second Circuit

320 F.2d 219 (1963)

Harold Noel ARROWSMITH, Jr., Plaintiff-Appellant, v. UNITED PRESS INTERNATIONAL, Defendant-Appellee.

No. 73, Docket 27641.

United States Court of Appeals Second Circuit.

Argued October 29, 1962.

Decided June 11, 1963.

Cornelius J. Barry, Jr., Valley Stream, N. Y. (Harold Noel Arrowsmith, Jr., pro se, on the brief), for plaintiff-appellant.

James L. Oakes (of Gannett, Oakes & Weber), Brattleboro, Vt., for defendant-appellee.

Before LUMBARD, Chief Judge, and CLARK, WATERMAN, MOORE, FRIENDLY, SMITH, KAUFMAN, HAYS and MARSHALL, Circuit Judges.

FRIENDLY, Circuit Judge.

On October 13, 1961, plaintiff, a resident of Maryland, brought this action for libel against United Press International (hereafter UPI), a New York corporation, in the District Court for Vermont. He alleged that a news dispatch, transmitted by defendant on October 17, 1958, under an Atlanta, Georgia, dateline, which reported the dynamiting of an Atlanta synagogue, contained a defamatory reference to him as a "'fat cat' financier" of anti-Semitic terrorist activity.¹ The complaint did not allege that the dispatch was printed or broadcast in Vermont, although we do read it as alleging the transmission of the dispatch to UPI's subscribers there. Neither did the complaint allege that Arrowsmith was known to anyone in Vermont, that he had any "reputation" in that state, or that such "Publication" as occurred in Vermont resulted in any injury to him in any state where he did have a reputation. The complaint sought "general damages" of $56,280,000, a sum calculated at $10,000 for each of UPI's 5,628 subscribers in the United States and foreign countries. Although the record does not reveal why the action was brought in Vermont, a quite sufficient explanation can be perceived by taking appropriate account of the dates recited in the first two sentences of this opinion, of Vermont's three-year statute of limitations for libel, 12 V.S.A. § 512(3), and of the much shorter ones of other states.²

UPI moved under F.R.Civ.Proc. 12(b) to dismiss on various grounds, including lack of personal jurisdiction, improper venue, and failure of the complaint (primarily because it alleged no special damages) to state a claim upon which relief could be granted. Judge Gibson sustained the last mentioned ground; he did not pass on the first two. 205 F.Supp. 56 (D.Vt.1962). Plaintiff appeals from the judgment of dismissal.

We all agree it was error for the district court to proceed as it did. Not only does logic compel initial consideration of the issue of jurisdiction over the defendant — a court without such jurisdiction lacks power to dismiss a complaint for failure to state a claim — but the functional difference that flows from the ground selected for dismissal likewise compels considering jurisdiction and venue questions first. A dismissal for lack of jurisdiction or improper venue does not preclude a subsequent action in an appropriate forum, whereas a dismissal for failure to state a claim upon which relief can be granted is with prejudice. We shall therefore vacate the judgment dismissing the complaint for failure to state a claim on which relief can be granted and remand the case for consideration of the issue of jurisdiction over the person of the defendant and, in the event that this be found, the issue of venue, prior to consideration of the merits.³ In so remanding it is incumbent on us to decide what standard should govern the judge's determination as to the jurisdiction of the District Court for Vermont over the person of the foreign corporation defendant — in particular, whether a "state" or a "federal" standard should here be applied. A summary will provide the needed background.

The affidavits submitted by UPI on the motion to dismiss showed the following facts relevant to the issues of jurisdiction and venue: UPI has eleven subscribers in Vermont (two newspapers, eight radio stations, and one radio-television station) to which it transmits news and news pictures over circuits leased from the Bell System, which owns all the equipment save for teletypewriters in the subscribers' premises, these being owned by UPI. UPI has one employee in Vermont, Isabelle McCaig, who is the 4( manager" of its Montpelier "news bureau" and upon whom service of process was made. UPI has no office in Vermont; Miss McCaig occupies desk space in a general news room in the State House in Montpelier. There she "punches out" Vermont news stories on a wire leading to UPI's Boston office, where her transmittals are rewritten, as well as to the nine broadcast subscribers in Vermont and fourteen in New Hampshire. With the exception of the dispatches received over this wire, all of UPI's transmissions to its Vermont subscribers originate outside the state, as was true of the allegedly libelous dispatch here. UPI's gross billings to its Vermont subscribers in 1960 represented less than 0.14% of its total gross billings to subscribers in the United States and foreign countries. Plaintiff's affidavit added nothing significant to his complaint; he indicated that he expected to be able to prove the transmission of the offending dispatch to some of UPI's Vermont subscribers, but said nothing as to its use by them or as to any injury suffered by him in Vermont or elsewhere as a result of the "publication" there.

I.

The issue of the standard to be applied in determining whether a federal court has jurisdiction over the person of a foreign corporation in a suit where federal jurisdiction is founded solely on diversity of citizenship, 28 U.S.C. § 1332, has arisen frequently since the late Judge Goodrich's penetrating opinion, written for the First Circuit and concurred in by Judges Magruder and Woodbury, in Pulson v. American Rolling Mill Co., 1 Cir., 170 F.2d 193 (1948). He analyzed the problem as follows:

"There are two parts to the question whether a foreign corporation can be held subject to suit within a state. The first is a question of state law: has the state provided for bringing the foreign corporation into its courts under the circumstances of the case presented? There is nothing to compel a state to exercise jurisdiction over a foreign corporation unless it chooses to do so, and the extent to which it so chooses is a matter for the law of the state as made by its legislature. If the state has purported to exercise jurisdiction over the foreign corporation, then the question may arise whether such attempt violates the due process clause or the interstate commerce clause of the federal constitution. Const. art. 1, § 8, cl. 3; Amend. 14. This is a federal question and, of course, the state authorities are not controlling. But it is a question which is not reached for decision until it is found that the State statute is broad enough to assert jurisdiction over the defendant in a particular situation."

Finding that the Massachusetts statute as interpreted by the Supreme Judicial Court did not purport to subject the defendant to suit in Massachusetts, the court affirmed Judge Wyzanski's dismissal of the suit, saying "we have no occasion to discuss how far recent decisions might allow a state to go in extending its jurisdiction in this field."

This conclusion, that a federal district court will not assert jurisdiction over a foreign corporation in an ordinary diversity case unless that would be done by the state court under constitutionally valid state legislation in the state where the court sits, has been reached in almost every circuit that has considered the issue:

First: Pulson v. American Rolling Mill Co., supra; Waltham Precision Instr. Co. v. McDonnell Aircraft Corp., 310 F.2d 20 (1 Cir. 1962);

Third: Partin v. Michaels Art Bronze Co., 202 F.2d 541, 542 (3 Cir. 1953) ("So the first question which comes up in a case like the one at issue is whether the State, here Pennsylvania, has, through legislation plus the judicial application thereof, asserted jurisdiction over the defendant");

Fourth: Easterling v. Cooper Motors, Inc., 26 F.R.D. 1, 2 (M.D. N.C.1960) ("There are two relevant North Carolina statutes dealing with jurisdiction over foreign corporations. * * * If service of process is to be sustained in this case, it must be under one of these statutes");

Fifth: Stanga v. McCormick Shipping Corp., 268 F.2d 544, 548 (5 Cir. 1959) ("The first part is to ascertain whether the state law means to encompass the challenged service. This question-at least as to diversity cases of which this is one-is wholly a matter of state law"); New York Times Co. v. Conner, 291 F.2d 492 (5 Cir. 1961), judgment vacated on the basis of a changed view of state law, 310 F.2d 133 (5 Cir. 1962);

Seventh: Canvas Fabricators, Inc. v. William E. Hooper & Sons Co., 199 F.2d 485, 486 (7 Cir. 1952) ("The primary contested issue is whether defendant was `doing business\' in the State of Illinois so as to be amenable to local process * * *. This being a diversity case, it can hardly be doubted but that the main question for decision is controlled by local law"); Rensing v. Turner Aviation Corp., 166 F.Supp. 790, 796 (N. D.Ill.1958); National Gas Appliance Corp. v. AB Electrolux, 270 F.2d 472, 475 (7 Cir. 1959), cert. denied, 361 U.S. 959, 80 S.Ct. 584, 4 L.Ed. 2d 542 (1960); Green v. Robertshaw-Fulton Controls Co., 204 F. Supp. 117, 127-128 and n. 9 (S.D. Ind.1962);

Eighth: Charles Keeshin, Inc. v. Gordon Johnson Co., 109 F.Supp. 939 (W.D.Ark.1952); Hilmes v. Marlin Firearms Co., 136 F.Supp. 307-308 (D.Minn.1955) ("where jurisdiction in a case is based solely upon diversity of citizenship, the power of the federal district court to entertain the case is dependent upon whether the case could have been brought in the state court of the state in which the federal district court is located"); see Electrical Equipment Co. v. Daniel Hamm Drayage Co., 217 P. 2d 656, 661 (8 Cir. 1954);

Ninth: Kenny v. Alaska Airlines, Inc., 132 F.Supp. 838, 842-849 (S.D. Cal.1955) ("Our first reference

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