361 F.2d 706 (4th Cir. 1966), 10248, Bowman v. Curt G. Joa, Inc.

Docket Nº:10248.
Citation:361 F.2d 706
Party Name:Jake Harold BOWMAN, Philip G. Griffin, A. Donald Brinton and Midland Industries, Inc., Appellants, v. CURT G. JOA, INC., Appellee.
Case Date:May 24, 1966
Court:United States Courts of Appeals, Court of Appeals for the Fourth Circuit

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361 F.2d 706 (4th Cir. 1966)

Jake Harold BOWMAN, Philip G. Griffin, A. Donald Brinton and Midland Industries, Inc., Appellants,


CURT G. JOA, INC., Appellee.

No. 10248.

United States Court of Appeals, Fourth Circuit.

May 24, 1966

Argued March 8, 1966.

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[Copyrighted Material Omitted]

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Harry DuMont, Asheville, N.C. (Uzzell & DuMont, Asheville, N.C., on brief), for appellants.

Roy W. Davis, Jr., Asheville, N.C. (Van Winkle, Walton, Buck & Wall, Asheville, N.C., and Foley, Sammond & Lardner, Milwaukee, Wis., on brief), for appellee.

Before HAYNSWORTH, Chief Judge, MARVIN JONES, Senior Judge, United States Court of Claims, [*] and BRYAN, Circuit Judge.

MARVIN JONES, Senior Judge:

This appeal concerns the jurisdiction of a Federal District Court over the person of a foreign corporation in a diversity action. The individual appellants are all residents of North Carolina and the corporate appellant is also located in that State, whereas the appellee is a Wisconsin corporation. In December 1963 appellants contracted for the purchase from appellee of a Cushion and Protective Pad Making Machine at a price of $153,500, f.o.b. appellee's manufacturing plant in Wisconsin. When appellee allegedly failed to perform the contract, appellants filed suit in the United States District Court for the Western District of North Carolina, requesting specific performance and claiming damages for delay in fulfilling the contract. Apparently, in the alternative, they claim $50,000 in actual damages and $20,000 allegedly paid by appellants to appellee after execution of the conditional sales contract in 1963.

Substituted service of process was made in the manner provided by the North Carolina long-arm statute, as is permitted by Rule 4(d)(7) of the Federal Rules of Civil Procedure. 1 Appellee then made a special appearance and moved to dismiss the action under Rule 12(b) for lack of personal jurisdiction over the appellee foreign corporation. After receiving affidavits and briefs from both sides, the District Court dismissed appellants' action, holding that the North Carolina long-arm statute did not allow in personam jurisdiction under these circumstances. This appeal followed. We affirm.

In order to determine this jurisdictional question, a review of the pertinent facts is necessary. Appellee is a Wisconsin corporation engaged, among other activities, in the manufacture of a patented machine which produces paper cushions and protective pads (macerated pads). The three individual appellants became

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interested in purchasing one of these machines for use in a prospective macerated pad business in North Carolina. Appellee was contacted concerning a possible sale. Negotiations followed between the parties in North Carolina during August of 1963. 2 Contract negotiations continued between the parties by mail and telephone, with one or two more short visits by an officer of appellee in North Carolina, and the final written conditional sales contract was executed in Wisconsin in December 1963. 3

By the terms of the contract, appellee promised to have the machine ready for shipment f.o.b. the manufacturing plant in Wisconsin within 120 days. The buyers (appellants) agreed to pay all freight and shipping expenses. The seller (appellee) agreed to provide limited supervision of installation in appellants' plant in North Carolina but appellants were to perform the installation and bear all the costs involved. The intention of the individual appellants was to form a corporation in North Carolina (appellant Midland Industries, Inc.) for the actual purchase and use of this machine.

Aside from the negotiation of this sales contract, appellee had almost no other contacts with the State of North Carolina. Between 1956 and 1962 it did have a contract to provide engineering services of a design, research, and development nature to a North Carolina furniture manufacturer. This contract to provide engineering services was executed in Wisconsin but, except for occasional visits by employees of appellee to North Carolina, the work was not found to have been performed in North Carolina. After 1962, the appellee had no business contacts with the State other than the negotiation of the instant contract in the fall of 1963. During the occasional visits of appellee's employees to North Carolina in relation to the engineering consultant work, appellee had joined the Lenoir Country Club, which is primarily an eating club.

Appellee has never maintained an office in North Carolina nor have any of its employees lived there. None of its salesmen have ever conducted any business from an office in that State; it maintains no manufacturing or other facilities there; and no telephone listing is kept there. Appellee is not licensed to do business in North Carolina and owns no property in that State.

In February 1965 the appellants filed this complaint in the Federal District Court in North Carolina, claiming that appellee breached the sales contract in refusing to manufacture and deliver a machine to appellants at appellee's plant in Wisconsin. Substituted service of process was had by serving the Secretary of State of North Carolina as provided for in N.C.G.S. § 55-146. Appellee received a copy of the Summons and the Complaint by registered mail in Wisconsin. On March 10, 1965, appellee made a special appearance in the District Court and moved to dismiss the action for lack of personal jurisdiction over it-- a foreign corporation.

After holding a pretrial conference, the District Court requested both parties to file affidavits, counter-affidavits, and briefs on the jurisdictional question. The lower court then proceeded to consider the motion on the affidavits and briefs filed and, on July 6, 1965, issued a memorandum opinion granting the motion and dismissing the action.

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An initial question we must consider is one raised by appellants during oral argument. It concerns the District Court's pretrial order wherein it requested affidavits and briefs be filed. A statement was made in the order that there would be further pretrial at June Term, 1965. The order was issued on April 13, 1965, and gave the parties until June 1 to submit the requested material. Appellants contended at oral argument, although no argument is made on this point in their brief, that they were misled by the order into believing that additional affidavits would be permitted on the jurisdictional question after the second pretrial conference referred to in the order.

We do not read the pretrial order as intimating that a further pretrial conference would be held on the jurisdictional question, or that additional affidavits would be called for after the court had studied the ample affidavits, counter-affidavits, and briefs already filed. It would be an unreasonable reading of the pretrial order to find otherwise. In addition, appellants failed to call this alleged misunderstanding to the attention of the District Court, either before or after its decision in July. Neither in their brief nor during oral argument did they allege any additional facts that might have been shown by further affidavits. We hold that appellants were not prejudiced by this alleged procedural error, and so affirm the action of the lower court on this phase of the case.

We come now to the primary question raised on this appeal: Whether the District Court had personal jurisdiction over the appellee, a foreign corporation. This question of a foreign corporation's amenability to service of process in a diversity action is not dealt with in any federal statute; nor is it covered in the Federal Rules of Civil Procedure. Gkiafis v. Steamship Yiosonas, 342 F.2d 546, 548 (4th Cir. 1965). 4 The Federal Rules do, however, provide the procedure for service of process on foreign corporations. Rule 4(d)(3) offers a federal route for service by delivery of a copy of the summons and the complaint to an agent of the corporation, 5 and Rule 4(d)(7) allows the District Court to utilize the process-serving procedures set up for the state courts of the state in which the federal court is sitting. 6 Again, these two federal rules pertain only to the manner in which the federal district court makes service of process and they do not tell us when a corporation is subject to service. Arrowsmith v. United Press International, 320 F.2d 219, 226 (2d Cir. 1963). 7

28 U.S.C. § 1391(c) does provide that '(a) corporation may be sued in any judicial district in which it is incorporated or licensed to do business or is doing business,' but this relates to venue and not to jurisdiction. Arrowsmith v. United Press International, supra, at 225. Certainly Congress has the power to define the limits of diversity jurisdiction for the federal district courts, 8 but,

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in the absence of any congressional guidelines, the courts have necessarily looked elsewhere for a determination of this question.

In Pulson v. American Rolling Mill Co., 170 F.2d 193, 194, (1st Cir. 1948), it was held that, where service is made under Rule 4(d)(7), a federal district court sitting in a diversity case shall apply the jurisdictional limits applicable to the state courts. Judge Goodrich, writing for the First Circuit, held that:

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...

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