Gkiafis v. Steamship Yiosonas

• Citation: 342 F.2d 546
• Decision Date: 02 February 1965
• Docket Number: No. 9586.,9586.
• Parties: Charilaos GKIAFIS, Appellant, v. STEAMSHIP YIOSONAS, her engines, boilers, boats, tackle, apparel and furniture, and Cia. Nav. Coronado, S. A., Panama, Owners and/or bareboat charterers, Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

342 F.2d 546 (1965)

Charilaos GKIAFIS, Appellant, v. STEAMSHIP YIOSONAS, her engines, boilers, boats, tackle, apparel and furniture, and Cia. Nav. Coronado, S. A., Panama, Owners and/or bareboat charterers, Appellees.

No. 9586.

United States Court of Appeals Fourth Circuit.

Argued November 16, 1964.

Decided February 2, 1965.

Henry E. Howell, Jr., Norfolk, Va. (Howell, Anninos & Daugherty, Norfolk, Va., and O'Connor & Preston, Baltimore, Md., on brief), for appellant.

Thomas W. Jamison, III, Baltimore, Md. (Randall C. Coleman, and Ober, Williams & Grimes, Baltimore, Md., on brief), for appellees.

Before SOBELOFF, Chief Judge, and BOREMAN and J. SPENCER BELL, Circuit Judges.

SOBELOFF, Chief Judge.

The question presented is as to the jurisdiction of the District Court over a foreign corporation in a libel filed by a seaman who sustained injuries while a member of the crew of the corporation's vessel. The injury occurred in the territorial waters of the district. This appeal is from the court's decision quashing service of process and dismissing the libel.

The S.S. YIOSONAS, a vessel owned by the respondent Panamanian corporation, Cia. Nav. Coronado, S.A., and registered under the Greek flag, arrived at the port of Baltimore, Maryland, on September 3, 1961. On September 5, the vessel began loading bulk scrap iron and continued to do so until September 13, when it departed. During this visit the vessel, through a local shipping agent, contracted for tug services, purchased stores and bought over $22,000 worth of bunker fuel.

The libellant, a seaman of Greek nationality, was injured on board the ship sometime on September 5 while the YIOSONAS was in Maryland. He was hospitalized in Baltimore until September 14, 1961. Proceeding under the Jones Act, 46 U.S.C.A. ? 688, and "the general admiralty law," he brought a libel for damages, alleging unseaworthiness of the YIOSONAS and the respondent's negligence.

The vessel is operated as a tramp steamer with no scheduled route. She is leased to voyage charterers who determine her destination. Instructions from various charterers brought the YIOSONAS to Maryland four times before the visit in question: January 13 to January 21, 1953; July 25, 1953; August 6 to August 15, 1955; and September 18 to September 19, 1955. The ship also visited Maryland once after the accident, to discharge cargo on May 23, 1962.

Jurisdiction over the respondent shipowner, Coronado, was purportedly obtained by serving process on the Department of Assessments and Taxation pursuant to Maryland Code Ann. Art. 23, ? 92(b) (1957). Coronado, appearing specially, filed a motion to quash service of process and to dismiss the libel on the ground that neither at the time of the service nor at any subsequent time had it been "doing business" in the state of Maryland, or qualified to do business there. Respondent also contended that the provisions of the Maryland Code providing for substituted service of process are constitutionally inadequate because they are not reasonably calculated to insure actual notice to a foreign corporation.

I

The jurisdiction of a court over a defendant foreign corporation is tested in the federal courts by a motion attacking the service of process. This indirect approach to questions of jurisdiction is understandable in the federal courts since there is no statutory provision which informs the courts when foreign corporations "are amenable to process so that in personam jurisdiction may be had over them in diversity and most non-diversity suits." Note, Jurisdiction of Federal District Courts over Foreign Corporations, 69 Harv.L.Rev. 508 (1956). Consequently, federal judges attempting to fill this statutory void have held that a federal court can obtain jurisdiction over a foreign corporation only when it is constitutionally and statutorily permissible to serve the corporation.

In federal courts service is generally made pursuant to the provisions of Rule 4 of the Federal Rules of Civil Procedure. For a plaintiff seeking to bring a corporation into a federal court the rule offers the federal route under Rule 4(d) (3)¹ or the state route under Rules 4(d) (7)² and (e).³ The libellant in this case has chosen to proceed as under Rule 4(d) (7),⁴ having attempted to utilize the substituted service provisions of the Maryland Code.

Recent decisions have held that the assertion of jurisdiction over foreign corporations by federal courts considering federal questions is limited only by the due process clause of the Fifth Amendment. Lone Star Package Car Co. v. Baltimore & Ohio R. Co., 212 F.2d 147 (5th Cir. 1954); Goldberg v. Mutual Readers League, Inc., 195 F.Supp. 778 (E.D.Pa.1961). See Green, Federal Jurisdiction In Personam of Corporations and Due Process, 14 Vand.L.Rev. 967 (1961). This approach rejects the argument made in this case by the shipowner that jurisdiction may be asserted only where the statutes of the forum state permit. In the cited cases it was possible to disregard state limitations on jurisdiction because in each instance service was made pursuant to the provisions of Rule 4(d) (3) on an agent of the corporation present in the forum state. Problems of applicable law become more complex when there is no such agent in the forum state, or, if there is one, he has not been served. In such cases a federal court may have the constitutional power to exercise jurisdiction over the corporation but there is no procedure available to bring it into court by process without resort to the mechanics of state law. See Arrowsmith v. United Press International, 320 F.2d 219, 242 (2d Cir. 1963) (Clark, J., dissenting). An anomaly in this approach is that the jurisdiction of federal courts dealing with federal questions will vary from state to state. Some plaintiffs will be unable to obtain service on foreign corporations while such service would be available to similarly situated plaintiffs in federal courts sitting in other states. United States v. Montreal Trust Co., 35 F.R.D. 216 (S.D.N.Y.1964). This happens when the cause of action is brought in a federal court located in a state that is more conservative in its statutes governing service of process than is constitutionally necessary. This anomaly causes no difficulty here for we find, contrary to the view taken by the District Court, that Maryland law authorizes the service attempted in this case.

The contact of the respondent with Maryland consisted of its ship's six unscheduled visits in a nine year period, one visit marked by the events giving rise to the libel in this case. The statutory provisions relied on by the libellant to authorize service in such a case read as follows:

"Every foreign corporation doing intrastate or interstate or foreign business in this State shall be subject to suit in this State by a nonresident of this State, (1) on any cause of action arising out of such business * * *." Md.Code Ann. Art. 23, ? 92(b) (1957).

"If * * * any foreign corporation subject to suit in this State under ? 92 of this article, (1) has not a resident agent, * * * such corporation shall be conclusively presumed to have designated the Commission as its true and lawful attorney authorized to accept on its behalf service of process * * *." Md.Code Ann. Art. 23, ? 96(d) (1957).

The shipowner argues, and the District Court held, that the "doing business" test set out in this statute is to be read as meaning "regularly doing business." We conclude, after reviewing the history of this provision, that the District Court's reading of this section is too restrictive.

Anyone attempting to unravel the intricacies involved in a state's assertion of jurisdiction over foreign corporations will soon discover that much unnecessary confusion stems from the occasional injudicious use by courts and legislatures of the phrase "doing business." Judge Haynsworth voiced this complaint for our court in Westcott-Alexander, Inc. v. Dailey, 264 F.2d 853, 856-857 (4th Cir. 1959). Many state legislatures define the scope of their courts' jurisdiction in terms of whether a foreign corporation is "doing business" in that state. This phrase may be defined in several different ways. It could refer to that body of constitutional law, then described as the "doing business" test, that was controlling before the Supreme Court's decision in International Shoe Co. v. State of Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L. Ed. 95 (1945). The standard resulting from such a static interpretation compels the disregard of the constitutional doctrine declared in that decision. Some states have so construed this phrase.⁵

Another possible reading of a state's use of the "doing business" standard is that the legislature intended to adopt a flexible measure that would be as expansive and dynamic as the due process clause of the Fourteenth Amendment will reasonably permit.⁶ The choice is the state's; it is our task to determine what meaning the Maryland General Assembly intended to adopt. Perkins v. Benguet Consolidated Mining Corp., 342 U.S. 437, 72 S.Ct. 413, 96 L.Ed. 485 (1952).

The earliest statute permitting suits in Maryland courts against foreign corporations was passed in 1868.⁷ It provided that any foreign corporation that "shall transact business" in Maryland shall be deemed to hold "franchises within this State," and a resident plaintiff could bring suit against any corporation "deemed to hold and exercise franchises herein" or against "any joint stock company or association doing business in this State." Nonresident plaintiffs could sue such defendants if the cause of action arose in Maryland. This statute incorporated the thinking and terminology of a then recent Supreme Court decision to the effect that a state could condition its grant of permission to a foreign corporation to "transact business" in that state upon the foreign corporation subjecting itself to the jurisdiction of the state's courts. Lafayette Ins. Co. v. French, 18 How. 404, 59...