360 F.Supp. 997 (D.Md. 1973), Civ. 70-1465, Egeria Societa Di Navigazione Per Azioni v. Orinoco Mining Co.

Docket Nº:Civ. 70-1465
Citation:360 F.Supp. 997
Party Name:Egeria Societa Di Navigazione Per Azioni v. Orinoco Mining Co.
Case Date:June 12, 1973
Court:United States District Courts, 4th Circuit, District of Maryland

Page 997

360 F.Supp. 997 (D.Md. 1973)



The ORINOCO MINING COMPANY, a body corporate.

Civ. No. 70-1465-K.

United States District Court, D. Maryland.

June 12, 1973

Page 998

James B. Carson, Baltimore, Md., for plaintiff.

Paul V. Niemeyer, Baltimore, Md., for defendant.

FRANK A. KAUFMAN, District Judge.

This case involves questions concerning the reach of a rather recent-1971-amendment to the Maryland Long Arm Statute, Md.Ann.Code art. 75, § 96(a)(4) (1969 Repl.Vol., 1972 Cum.Supp.), concerning which, as far as this Court is informed, no Maryland court has yet spoken. 1 The undisputed facts disclose that on December 6, 1970, the S. S. Sorrento, a freighter owned by plaintiff, ran aground in the Orinoco River in Venezuela as she was leaving the port of Palua in that country bound for Baltimore, Maryland with a cargo of iron ore. 2 The iron ore on board the Sorrento had neither been mined nor shipped by defendant Orinoco, a subsidiary of United States Steel Corporation, but rather by a subsidiary of Bethlehem Steel Corporation. The ore had also been loaded at a facility in Palua other than that of the defendant Orinoco. The ship remained fast aground until part of her cargo was off-loaded and tug boats pulled her free. 3 She then 4 proceeded to Baltimore where the remaining iron ore was delivered to the Bethlehem Steel plant at Sparrows Point. 5 On December 29, 1970, the Sorrento's owners filed suit in this Court alleging that the defendant Orinoco, its employees and agents negligently dredged, maintained and measured the depth of the ship channel in the Palua harbor and negligently cleared the ship for passage after loading, when they knew or should have known that the channel was not deep enough for the ship to pass through as so loaded. Plaintiff seeks $5,000,000 for damage to the ship, the cost of pulling the ship free, and loss of potential revenue from the operation of the ship during the time the latter was unable to operate in commerce.

Subject matter jurisdiction exists under 28 U.S.C. § 1333(1). In addition, there is diversity of citizenship between plaintiff, an Italian corporation, and defendant, a Delaware corporation with its principal place of business in Delaware. 28 U.S.C. § 1332(a)(2). Defendant has, however, moved pursuant to Federal Civil Rule 12(b)(2) to dismiss the complaint for lack of jurisdiction over the person of the defendant. Plaintiff, responding, contends that under Federal Civil Rule 4(e)(1), section 96(a)(4) of article 75 of the Annotated Code of Maryland, 1969, Replacement Volume 1971, lodges jurisdiction in this Court over the person of defendant. 6 That section provides in pertinent part:

(a) A court may exercise personal jurisdiction over a person, who acts directly or by an agent, as to a cause of action arising from the person's

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(4) Causing tortious injury in this State or outside of this State by an act or omission outside the State if he regularly does or solicits business, engages in any other persistent course of conduct in this State or derives substantial revenue from goods, food, services or manufactured products

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used or consumed in this State; ***. [Emphasis added.]

Before its amendment, effective July 1, 1971, that section did not include the words "or outside of this State." 7

In order for plaintiff successfully to rely upon article 75, § 96(a)(4) as a means of calling the defendant Orinoco to appear in this Court, plaintiff must satisfy the two-pronged test set out by Judge Goodrich in Pulson v. American Rolling Mill Co., 170 F.2d 193 (1st Cir. 1948). In that case, Judge Goodrich wrote (at 194):

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. [Footnote omitted.]

The first prong of Judge Goodrich's analysis, i. e., "has the state provided for bringing the foreign corporation into its courts under the circumstances of the case presented", involves, in this case, the threshold question of whether the 1971 amendment to section 96(a)(4) applies retrospectively. 8 The alleged tort occurred on December 6, 1970, this suit was filed on December 29, 1970, and the 1971 amendment became effective on July 1, 1971. The statute itself gives no clue to the answer. However, substantially similar procedural changes enacted by statute and expanding personal jurisdiction of state courts have been given retrospective

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effect. Liberty Mutual Ins. Co. v. American Pecco Corp., 334 F.Supp. 522 (D.D.C.1971); Hardy v. Rekab, Inc., 266 F.Supp. 508, 513-517 (D.Md.1967), in which (at 515) the Supreme Court of Illinois in Nelson v. Miller, 11 Ill.2d 378, 382, 143 N.E.2d 673, 676 (1957), is quoted as stating that the Illinois Long Arm Statute is retroactively applicable "without regard to whether [the cause of action] accrued before or after such change of law and without regard to whether the suit has been instituted or not, unless there is a saving clause as to existing litigation." Accordingly, the 1971 amendment will be retrospectively applied in this case.

Orinoco is a wholly owned subsidiary of United States Steel Corporation, with its principal place of business, and with an agent for service of process, in its state of incorporation, Delaware. Iron ore mined by Orinoco in Venezuela is sold to U. S. Steel F.O.B. Palua, Venezuela and then shipped in vessels owned by a subsidiary of U. S. Steel to U. S. Steel plants at Morrisville, Pennsylvania and Mobile, Alabama. Occasionally, when the port facilities in Pennsylvania are too congested, those ships are diverted to Baltimore where the subsidiary arranges with contractors to store the iron ore until it can be shipped by rail to Saxonburg, Pennsylvania or Morrisville, Pennsylvania. Approximately ten to twelve such shipments of iron ore pass through Baltimore every year. 9 In the past, Orinoco has also sold iron ore to a subsidiary of Bethlehem Steel. Those sales have taken place in Venezuela and the iron ore so sold has then been shipped by such subsidiary to Bethlehem Steel's plant at Sparrows Point in Baltimore. However, there were no sales of iron ore from Orinoco to that Bethlehem Steel subsidiary during 1970 or during the several years preceding 1970.

That subsidiary of Bethlehem Steel also mines its own iron ore in Venezuela, and, as was done in this case, loads that ore at its own facilities in Palua harbor onto vessels owned by others, in this case by plaintiff, destined for Sparrows Point or other Bethlehem Steel plants in the U.S.A.

All ships leaving the port of Palua sail down a channel in the Orinoco River owned by the Venezuelan Government. That channel, and all aids to navigation along that channel, are maintained by Orinoco under contract with the Venezuelan Government.

Orinoco has never had a resident agent in Maryland, never been qualified to do business, nor in fact done any business, in Maryland in any form, never owned real property located in Maryland, and has never advertised, solicited sales, or maintained telephone listings or bank accounts in Maryland. However, iron ore mined by Orinoco does pass through Maryland enroute to its final destination, 10 and some of Orinoco's ore has been sold to and processed in the past in Maryland by Bethlehem Steel. Additionally, plaintiff asks this Court to take judicial notice of the fact that many finished products, manufactured outside of Maryland but ultimately used in Maryland, are made from steel which itself was made from Orinoco ore. 11 Plaintiff contends that, in the words of present section 96(a)(4) Orinoco "derives substantial revenue from ... manufactured products used or consumed" in Maryland and for that reason can be served within the newly expanded coverage of Maryland's Long Arm Statute,

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even though both the alleged negligent act and the injury occurred in Venezuela.

The issue is thus posed as to whether the extended reach provided by the 1971 amendment to Maryland's Long Arm Statute was intended to reach a defendant whose sole contact with Maryland is by deriving substantial revenue from the...

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